HC Deb 12 February 1963 vol 671 cc1118-262

Order read for resuming adjourned debate on Amendment to Question [11th February]: That this House expresses its full confidence in the determination and ability of Her Majesty's Government to deal with the political and economic situation arising from the breakdown of the Brussels negotiations.—[The Prime Minister.]

Which Amendment was, to leave out from "House" to the end of the Question and to add instead thereof: has no confidence in the ability of Her Majesty's Government to formulate or to carry through a programme which would bring about the necessary changes in our policies for international trade and for economic and political co-operation; and does not believe that it has the capacity to arouse in Great Britain the sense of urgency and national purpose so necessary to meet the situation created by the breakdown in the negotiations in Brussels".— [Mr. H. Wilson.]

Question again proposed, That the words proposed to be left out stand part of the Question.

3.32 p.m.

Mr. James Callaghan (Cardiff, South-East)

I am not sure that hon. Members were fully attending to the words in the name of the Prime Minister which you read from the Order Paper, Mr. Speaker. Perhaps they should be repeated. That this House expresses its full confidence in the determination and ability of Her Majesty's Government to deal with the political and economic situation"—

Hon. Members

Hear, hear.

Mr. Callaghan

At least, I got a louder cheer when I read it than the Prime Minister got when he sat down yesterday. Perhaps I make it sound as though right hon. and hon. Members opposite are determined, as though they have some life in them. But, my goodness, after the day we endured yesterday, with the Prime Minister's speech at the begining and the funeral ode at the end from the Secretary of State for Commonwealth Relations, I cannot help wondering. The Secretary of State for Commonwealth Relations certainly felt deeply about the failure, and he conveyed the depth of his feelings to the House in the speech which he made.

The Secretary of State for Commonwealth Relations has, of course, been associated with many ill-starred ventures. Despite the massive nuclear deterrent strategy with which the right hon. Gentleman was associated, we are asked still to feel full confidence in him, in his determination and in his ability. We are asked still to feel full confidence in him after his ventures into Central Africa. We are asked still to feel full confidence in him after the way in which he messed up the negotiations in Malta. Now, as one of the columnists said in the papers this morning, the right hon. Gentleman is an embittered Common Marketeer.

I put it to the right hon. Gentleman that he should consider seriously whether he ought to resign as Secretary of State for Commonwealth Relations. I do not believe that he has ever, except in one speech which I heard him make on the subject of South Africa, felt about the Commonwealth the sentiments which unite most of us in the House. The Prime Minister was discussing at Question Time the possibility of raising the status of junior Ministers. One way in which he could do it would be by inviting the right hon. Gentleman to employ his talents in some other Department and promoting the Under-Secretary of State for the Colonies. In that way we should get someone—I hope that I am not embarrassing the hon. Gentleman—who speaks about the Commonwealth as though he really meant it. The present Secretary of State for Commonwealth Relations never does, and he should seriously consider whether he is doing the right job.

It is important that we should have the right Minister in his job if we are now to turn round and reverse our policies. I do not know whether we are to do that. After listening to the Prime Minister, I was undecided about whether he wished to resurrect the dead or was, in fact, turning to new and hopeful policies. He gave no indication in his manner or his approach that he was intending to do the latter. He seemed to be glancing nostalgically back over his shoulder the whole time. We cannot have a country which is divided in its leadership in this sense. If the Prime Minister still believes that we must do our best to get into Europe on the basis we were trying to get in on before, the alternative policies which he was laying down will fail. They will fail because his heart is not in them.

The Prime Minister could have done a greater service to this country yesterday if he had told us clearly that he is not ready to go into the Common Market on the terms which were agreed so far, but that he is prepared to associate with Europe on terms which are more consistent with our national interest as well as with the national interest of a great many other countries with which we have trading relationships today.

I find a great contrast between the attitude of a number of leading European statesmen when they are concerned with their interests and the attitude of the Prime Minister when he is concerned with this country's interests. I have no reason personally to have any feelings for the Prime Minister except those of friendship. I say that advisedly. But I must say that it would be difficult to imagine President de Gaulle or, perhaps, even Dr. Adenauer going to the country on the basis of coining a phrase such as—If I may put it in unidiomatic French—"Moi, je suis content, Jack." To show that I have it idiomatically right as well, perhaps I should say "Ça me va bien, merci". I did not have the education which the right hon. Gentleman enjoyed, but I have done my best to remedy the lack since.

I was depressed, as I think many hon. Members were, by the Prime Minister and, even more, by the Secretary of State for Commonwealth Relations. But let us try to set out some sort of balance sheet of where we stand at this turning point in our fortunes. Exports are critical for our health. This is agreed on both sides. It is one of the standard sermons which come out when no one can think of a different peroration. [An HON. MEMBER: "A good one."] It is a good one, I agree. But sermons oft repeated tend to lose their first sting. [HON. MEMBERS: "Hear, hear."] I promise the House that I shall do my best to avoid falling into that error.

What does the breakdown of the Common Market negotiations mean to Britain in terms of our world trade? Eighty-four per cent. of our world trade is unaffected by the breakdown of negotiations. Eighty-four per cent. of our trade will still depend on whether we can still sell goods at competitive prices, whether they are of the right design, whether the quality is good enough to compete with others, and, perhaps as important as anything else, whether we can provide the after-sales service.

Sixteen per cent. of our trade is affected by what has happened in Europe, but that 16 per cent. will not vanish. It will not, of course, grow as rapidly as the right hon. Gentleman and others—all of us, indeed—hoped that it would. The rate is bound to slow down. We shall have greater difficulties in getting over the tariff barriers, but, as we all know, our trade in Europe was growing, and there is no reason why it should not continue to grow even with the handicap of the tariff barrier over which we shall now have to jump.

Some work has been done on the effect of the tariff changes on flows of trade in manufactures, and I should like to convey to the House what I understand the conclusions to be. Had we entered the Common Market, imports into this country would have risen, initially, more than our exports to the Community. Now it will be harder to export to the European Common Market, and the tariff reductions with the Free Trade Association will also come into effect. It is estimated that the net result is that imports from the Free Trade Association will rise as fast as exports to it, mainly because we are a relatively high-tariff country.

The size of the immediate loss, and this I want to get across to the House—I only wish that the Prime Minister had done that yesterday—is small. The total loss resulting from all the changes that will take place as a result of the Free Trade Association negotiations and all the losses that would have taken place if we had entered the Common Market, can be made good in 1963 by additional exports of under £100 million. That is the short-term effect. Our total exports amount to about £3,800 million a year, and they grew last year at the rate of about 3 per cent. That would mean putting up our export rate by another 1 per cent., or 1½ per cent.

Is anyone telling me it is such a tragedy —I do not comment on whether or not it was right—that we cannot make up a loss of exports of £100 million? If the Government believe that, and come here with their funeral garb arrayed upon them and tell us that there is no alternative, and how tragic the whole thing is, they should not be in office, because clearly this problem is well within our grasp.

If we take the measures which are necessary, of course we can increase our exports. I do not say, and I do not want right hon. Gentlemen to misunderstand me, that it would not be easier if we were in the Common Market. Of course it would be, but we are not in, and the question is: what do we do now? I believe that it is quite within our compass to tackle the problem, and that not only is it within our compass but in our national interest to do so, and to get on better terms with our own economy and our own strength before negotiations are resumed.

I find fault, too, with the Government's approach, which has been instinct through every report we have had, that linking Britain with the Common Market countries is a matter of all advantage to us and none to them. It is a matter of very great advantage to the Common Market countries, too. If a link is not established—and this, in my view, is the case for a link—there will be the danger of a grave and growing split between the Common Market countries and the rest of the world, and that will be as much against the interest of the Common Market countries as it will be against the interests of the rest of the world.

We have never played this card in this way. It is not as though we had all the time—the Lord Privy Seal laughs; maybe he has taken a different attitude in the negotiations, but the impression that the Government have given publicly to someone like myself is that they have been on their knees.

Our task, and the Prime Minister said this in a half-hearted way yesterday, is to place our full weight behind the Kennedy round of tariff negotiations under the G.A.T.T. I think that we shall be up against great difficulties. In the same way, in the short run, it may appear to the Common Market countries that the Common tariff is the only symbol that unites them because, politically, they have reacted against some of the events that have surrounded the breakdown in our negotiations. It may, therefore, be more difficult for us to secure the lowering of tariffs that it is in our interests we should try to get, but we must place our full weight behind these negotiations when they start, and the United States, ourselves and the Commonwealth should be battering at the common tariff surrounding the Common Market countries.

It is a hopeful sign that instead of the product-by-product basis of negotiation and argument, we shall be discussing the tariff reductions across the board. It will make things easier in some ways, although I do not under-rate the difficulty we may have with the protectionism of United States industries as well as the protectionism of our own industries. The Government should seriously consider how we can ameliorate the very grave difficulties that will be felt by some of our own industries if we do pursue, as I suppose we shall—and it is in our interests and those of the world—the path of lower tariffs.

I should like to see the Government paying some attention to what can be done to ease the burden on some of our traditional industries at the same time as we go into this round of negotiations, because it would be a tragedy if, because of protectionism in American industry, or in our own industry, either President Kennedy's Government or our own were to find their own position undermined as the result of local pressure at home.

The story of agriculture of one of out and out protectionism, whether it be in Britain, in the United States, or in the Common Market. It is true, as, I think, was said in yesterday's debate—which, apart from one or two notable exceptions, I must say that I found extremely interesting and informative—that this is, and seems to be, endemic in all advanced industrial countries. There is no doubt that we seem to regard agriculture as an exclusively domestic matter quite unaffected by foreign trade considerations. I believe that the world, and especially the advanced countries, must try to break away from the habit of looking at their own agricultural systems. The Common Market is encouraging a system of subsidised exports at the expense of traditional exporting countries, and that was one of the grave objections I had to the system that was being negotiated.

For the moment, the world has been spared that—and so, I may say, has the British housewife. World food exporters, both those in the Commonwealth and those outside it, have been spared the crisis that would undoubtedly have been precipitated, had other arrangements not been made, once we got into the Common Market. Now we can take advantage of the breakdown—and I am looking for the advantages coming from that breakdown rather than weeping about what has happened. I can understand the depth of feeling there is on the Government Front Bench, but it is our job to look at what can be done about the current situation.

I gather from the Prime Minister that we shall start soon with negotiations, but we must remember that the countries concerned are not only the advanced industrial countries like the United States, Canada, Australia and New Zealand, but also some of the less advanced countries that are outside the tropical zones and whose balance-of-payments position is very much affected by what happens to their traditional food exports. I am relieved, to put it at its lowest, that at least they are not to be faced with a breakdown at a very delicate moment in world trade when we might—though I trust not—be going into a downward spiral of world trade. That would be an additional handicap to put on the backs of those countries—and I speak of the less advanced countries—which are less well able to bear such a burden.

It is sometimes assumed that it is only the consumer countries that have an interest in stable commodity prices, but both the developing countries and the consumer countries have an interest in securing commodity agreements, and I was glad to hear the Prime Minister say that the Government believe that there is something to be done here. I am sure that many of my hon. Friends recall the attacks that used to be made on the Labour Government, ten or twelve years ago, when we were trying to follow a similar policy. But they learn, these right hon. and hon. Members opposite, even though they learn late, and even though it costs the country a lot while they are learning.

Now we are coming to a system which was advocated a long time ago and which was successful. If we do not come back to this, the alternative for this country, if its export trade is to prosper, the alternative to good and stable prices and long-term agreements, is either soft loans or even giving away our exports. There is no alternative if we wish to develop our own trade.

May I say a word about semi-manufactures? This country—I say this for the Government—has taken the problem seriously. There is no doubt, perhaps because of political considerations, perhaps because of the links with the Commonwealth, that we have taken a good share of the semi-manufactures that have come from the developing countries. It is easy to say that this must be done. It is much more difficult to get it done. But the Government must press the problem. Once again, it is in the interests of the developed countries as of the developing countries that their semi-manufactures should be allowed to enter the traditional developed markets.

I know that it means awkward short-term adjustments for the advanced industrial nations. But it is in their interests. This question is not confined to textiles. It is becoming a growing problem in many other fields and we must be prepared to shift production in this country from consumer goods of that nature to consumer durables and capital goods. I can find good in the breakdown of these negotiations because in many ways I believe that it removes the danger which we face, which was shared by Ministers and by civil servants, of becoming immersed in regional trade agreements. We were putting our energies the whole time into Europe when there were far more things to be done in other countries.

I know that I shall not command universal support when I say that some of the Common Market countries' policies seemed to me to savour of claustrophobia. I am glad that the fresh wind of world trade may start to blow more freely, because I am certain it is in the interests of this country and the world as a whole that it should do so. In certain quarters—certainly, after listening yesterday to the speech of the Secretary of State for Commonwealth Relations one would think so—it would seem to be unpopular to believe in the virtue of trade with the Commonwealth.

But everyone who has visited the Commonwealth comes back with the same story about the natural advantages which we possess in this country. Men who have been educated here, and have their parents here, frequently live with their families in the Commonwealth countries. Anyone who has been in countries of the Commonwealth knows that the people there turn to us and say, "We want to buy British. Of course we should like to buy British. But you cannot supply us at the right price and at the time we want"—[HON. MEMBERS: "Oh."] Is anyone seriously saying that that is not a fact?

Sir Cyril Osborne (Louth) rose

Mr. Callaghan

The hon. Member for Louth (Sir C. Osborne) interrupted one of my hon. Friends three times yesterday and then made his own speech. Why does not the hon. Gentleman give someone else a chance?

Mr. Kenneth Lewis (Rutland and Stamford)

Surely the hon. Gentleman must know of occasions when the Commonwealth has got into difficulties. Frequently Commonwealth countries have cut down on, or stopped altogether, the quotas of manufactures from this country. While the Commonwealth countries may not necessarily be blamed, those are the facts of life, and the hon. Gentleman knows them perfectly well.

Mr. Callaghan

That, if I may say so, is a different point from the point which I am now making. It is a point with which we can deal on a different occasion.

I am astonished if it is denied by anyone that there is increasing trade among the Commonwealth countries and that this is being taken by Germans, by Italians and by Japanese—by everybody but Britain. Our share of this trade is falling and what I am saying to the House —surely this cannot be argued—is that if this additional trade is there, we have more advantages than any other nation in trying to get it. I do not see how that can be disputed.

If the hon. Member for Rutland and Stamford (Mr. K. Lewis) will excuse me, I shall not deal with the point which he raised now, as to do so would take me from my theme, which will be—

Mr. Geoffrey Hirst (Shipley)


Mr. Callaghan

The hon. Gentleman need not snigger. I have plenty of other things yet to say.

There was a very interesting proposal by Mr. S. C. Leslie in the Statist last week. He called for a Commonwealth Export Council to be set up as a counterpart to the European Export Council. The European Export Council has done -excellent work. I think that Sir William MacFadzen and his colleagues have served Britain well. If we are working on this policy—as I hope—to get a better posture and better treatment, so that we do not look like an overweight, rather flabby heavyweight boxer, why should not a similar piece of machinery be set up for the Commonwealth?

I have only one text around which I wish to range my remarks. I believe that our influence in the world, our policies in the world, our alliances in the world and the attitude of the rest of the world to us, will rest on one simple fact, and that is our economic strength at home. They will not rest on peevish gestures, such as we have seen recently, or upon whether we possess Polaris. They will not rest on the pictures of Beefeaters which are now bestrewn across journals and magazines They will rest on the economic strength here, and for that reason I should like to devote the rest of my speech to that proposition.

The Prime Minister said—the right hon. Gentleman was right and I agree with him, he often says these things, but we do not have any conviction that action will follow—that the most urgent need is to expand industrial production in this country. Ernest Bevin said it many years ago—"Give me 10 million tons of coal and I will give you a foreign policy"—and of course, he was right. It is right today. If we could have the exports—[Laughter.] Why should hon. Gentlemen opposite laugh at the failure of this country?

Mr. Stan Awbery (Bristol, Central)

Because they are ignorant.

Mr. Callaghan

Is it because they think it better to score party political points than to try to fact the situation?

The Prime Minister said—here, I wish to differ from the right hon. Gentleman because I believe that he has got his priorities wrong—that a vital condition is to adopt and make effective in practice a reasonable incomes policy. The right hon. Gentleman said that everything rested on this. I will claim this much for myself, that over the last eighteen months I have spent as much time as anybody in this House or outside not only in negotiating wage agreements but also in discussing with economists, trade unionists and employers the basis of an incomes policy; and I will return to this in a moment because I want to face the question.

I say to the Prime Minister that I believe his emphasis is wrong. We do not start with a wages policy. I use the term "wages policy". We can call it an incomes policy to disguise reality if we like, but when it comes down to rock bottom it is a wages policy that people are talking about. We do not start with that, and that has been the mistake of the Government all the way through, ever since that horrible day in July, 1961, when the former Chancellor of the Exchequer tore down the collective bargaining system without substituting anything in its place.

The need is recognised. I find that practically no one who accepts the position dissents from the need for a wages policy. The question is: how are we to get it? I will tell the Government this —they never seem to recognise it. It will result only from the general context of the Government's social and economic policies and their acceptance by the nation as being fair and reasonable. I will return to this later. My conviction is—and this was referred to by my right hon. Friend the Member for Huyton (Mr. H. Wilson) yesterday—that we want to start from a national industrial development plan. It is respectable for me to say this, because Mr. Paul Chambers said it in my constituency ten days ago, so I do not even get any jeers from hon. Members on the Government benches when I say it. This is where we should start.

I believe that we have a task to make British industry "age", to make it efficient and responsive to changing world demands by switching the emphasis to industries which demand highly technical skill. The first way that we will do this is by organising the collection of facts about industry—enough of them and in good time. We need to be able to compare the efficiency of firms in industry, their export performance, their costs, their profit margins and their potential expansion. I said this to some industrialists who came to talk to me the other day. I believe that they think that there will be a Labour Government next time. They said,"People will not give you that information." I said, "That is exactly what some trade unionists tell me when I ask them for a national incomes policy".

If industrialists start off on this basis we shall never get a national incomes policy and we shall never have real, steady and permanent expansion in industry. Everyone must give up some cherished beliefs; everyone must give up something. Therefore, I have no hesitation in saying that if we were the Government we would ask for the support of the Opposition in telling their friends that if they want Britain to succeed they must be prepared to make sacrifices in their own cherished freedom.

It is necessary to organise the collection of facts in the regions, in Scotland and in Wales. Industrialists need to forecast their skilled manpower requirements and to foresee the decline in industries. They need to take account of the public service requirements, the need for retraining and the drift of industry into and out of the regions. A great deal of this can be done on a regional basis. I referred to this in the recent debate on unemployment. I am sure that if we have planning along these lines with industry and the great regions of this country co-operating we shall have the beginning—it is only the beginning—of a policy for real expansion.

It is necessary to call in the employers, trade unions and skilled economists from the beginning and to ask their advice. The Government should place their information before them and should build up their plan with them. They should work out their targets together. This is the precursor to a wages policy. The Government must be ready to associate those who have to operate the policy with the antecedent decision which will determine whether they are ready to consider it or not. In this way we shall have a picture of Britain as it is and a picture of Britain as it could be. That is the start.

It would then be for the Government to make their own policy decisions—on exports, on social priorities, whether housing, hospitals, roads, or whatever it may be and on investment and its appropriate level. The trade unions and the employers are bound to have views about these matters. We cannot limit their view about what is right in a wages policy because the level of investment influences what is available for wages and the level of profits influences what is available for distribution elsewhere. That is why the attitude to wages will depend on the Government's attitude to social and economic policies. If the Government will only realise this, we shall be on the way to a sensible economic policy. Both sides of industry must be associated with the making of the plan right up to the decision which the Government must take.

The Government must make it clear that the purpose of the wages policy is not to restrain wages or to restrain increases in living standards, but to keep prices down. Indeed, that is its main function. Therefore, the Government's policy must have equal concern with the level of prices, the level of dividends and the level of rents and with monopolies. All these things must come under review and must be examined by the people concerned with them.

Our tax system needs to be revised. This artificial distinction between income and capital must go. The six months' capital gains tax was just another gimmick. It is as much a gimmick as the Government's nuclear-powered ship, which was announced by the Prime Minister yesterday—something stuffed into a speech to get a headline in some quarter or another. It is no use right hon. and hon. Members opposite looking aghast. When I was at the Admiralty, in 1950, we were discussing a nuclear-powered merchant ship. Unless I miss my guess a former Civil Lord, the hon. Member for Dorset, West (Mr. Wingfield Digby), was associated with those discussions. Yet not until 1959 did the Government place the contract. In 1961, they cancelled the contract. Now, at the beginning of 1963, the Prime Minister comes up with this "great new advance". The Americans already have the "Savannah" at sea. The Russians have had the "Lenin" in Arctic waters for years. Yet here we are, the greatest shipbuilding nation in the world, with the Prime Minister, to divert criticism, trying to get a headline out of our new nuclear ship.

The capital gains tax was much the same sort of gimmick and it is time that it went. I should be willing to reduce tax on earnings—and if it would attract hon. Members opposite, I should reduce tax on high earnings—if I could get permission to tax capital and wealth as well. This would be one way of getting a measure of equality and of encouraging earnings and those who wish to move ahead.

Against this background it would be possible, in my view, to agree with the trade unions on a general level of increase in wages which would be a real gain in standards, but would not involve a rise in prices—a kind of Plimsoll mark below which the boat should not be loaded with the various types of cargo which make it up. I have seen various detailed mechanisms at work. Skilled economists and others have produced very clever schemes showing how it is possible to evaluate jobs, to police breakdowns and to deal with wage drift. From such experience as I have had in wage negotiations and from the conversations that I have had, I do not believe that any of these things would work. The pay pause, of course, was a catastrophe and the National Incomes Commission is doomed to failure.

I will tell the Government what I think they should work for. I hope that they will do this. If they do not, we shall do it. First, there must be long-term agreements extending over periods of two or three years. I am glad to see that the Confederation of Shipbuilding and Engineering Unions and employers are working out a scheme along these lines. Secondly—and this will be very difficult —we must work to encourage the unions to take a general view of the problems of their workers and their move forward instead of a particular view. It is easy to take the general view on National Insurance or safety precaution matters, but it is very difficult to get an individual union to stand back when it sees another union moving forward.

But this is what they do in Sweden, although I know that the problem is different there. To all of us engaged in British trade unionism it is an astonishing feature of the Swedish system that a miner may be ready to say, "I will not take this increase this year so that the metal workers, the nurses, the public servants, or whoever it may be, shall get it". This is a striking feature of trade unionism which considers the workers as a whole. I should like to see us move towards this, and, given the leadership and the national will, we can. Alterations of rates to simplify wage structures or recruitment for unattractive or expanding industries and other considerations must be taken into account on a national basis.

I now come to an obvious point. The Government should abolish the National Incomes Commission before it gets them into deeper trouble and should set up in its place an industrial tribunal to which both sides can go and to which both sides can take the other. But the Government should keep out of it. I believe that this would be a much better means of tackling this problem than by having a National Incomes Commission which has no respect from one side and which is regarded as derisory by the other.

Again, I go back to what was said by Ernest Bevin, and I do not mind saying so. One of the things he was strongest on was the need to honour agreements on both sides. I believe that there has been a great weakening in this by both sides, employers as well as trade unionists on the shop floor. There is no basis for industrial discipline or for a real expansion of our industry unless agreements which are made are honoured and brought to an end only in accordance with the machinery which set them up.

The next point I make is to encourage the Government to make agreements on the basis of long-term comparability with the wage rates in the case of their own public servants. I believe that that would be an advantage. Public servants comprise 20 per cent. to 25 per cent. of the total employees. This would have an influence in other fields. This does not deal with wage drift which arises on the factory floor. I know of no means of dealing with that other than in a Communist or Fascist way. We cannot do that there; at any rate we cannot start there.

Nor does what I have said deal with the policing of breakdowns arising from the "rogue elephant" employer or trade unionist who breaks through an agreement. We cannot get there to start, so we have to start where we can. I believe that there are things which can be done because this is a problem which is recognised as something which has to be tackled. It is recognised as a problem which is holding up expansion and putting up prices unnecessarily. In the general recognition given to the social and economic background and framework of Government policies there will be a willingness on the part of those in industry to play their part, but we must not rely on exhortation.

Trade union leaders can do some exhortation at annual conferences and it might have some influence on the delegates, but delegates are the only people who hear it. It is on the shop floor in the factory that the real decisions to press for claims is taken. Exhortation is not enough. One has to have a policy which is clearly designed to be in the interests of the workers on the shop floor and in the factory, and which can be seen to be in their interests. Then one can ask the trade union leaders for confidence because they will know that they are serving the interests of their members as well as the interests of the nation. I deny the assumption constantly implicit in Government policies that the interests of the workers in the factories are contrary to those of the nation as a whole, and that if they are put in their proper context they will not be accepted as the same.

I have a number of suggestions about how to get stability in home policy. I do not know whether we shall hear the Chancellor's plans tonight, but I shall run over these suggestions because this is an occasion on which to examine what is wrong and see how we can put it right. Over-emphasis on monetary policy as a means of control has been one of the weaknesses of Government policy over the last few years. They have been doing too much too late.

The Chancellor is in danger of this at the moment. I am not saying that he has done it. That will rather depend on what he does in the Budget. If we have a give-away Budget—it will depend on what he does—there will be a very great danger once again of his doing too much too late, putting the engines into reverse at the time when the economy is moving in the opposite direction already. Then there would be great danger. If he is considering the future of the country, I ask him not to yield to his colleagues in the Cabinet to try to get a quick win for himself and his right hon. Friends.

Over-attachment to control of investment as a means of getting growth operates too lumpily and at the wrong period of the cycle. The Government should use consumption more as a regulator. It acts more quickly. What about the P.A.Y.E.? Why not use the regulator of P.A.Y.E.? I give the idea to the Chancellor. These ideas take about ten years to get through, so I am confident that we shall have to do it and the present Chancellor will not. Never mind, I put these ideas out to get them considered.

What about monopolies? We have not heard a word about that yet, but how can we take seriously a Government who refuse to deal with some of the scandals of monopoly in the country at the present time? One big company with a complete monopoly was investigated by the Monopolies Commission. I asked a Question about it last November, because recommendations had been made by the Commission. The Commission found that the prices of the company, to use the words of the Commission, were "unjustifiably high." The Commission went on to recommend that a review of the company's prices should take place at intervals of two, or at the most three, years.

I asked the President of the Board of Trade what was being done and I got the reply: There is nothing in the … undertakings which provides for the company's prices to be approved by the Board of Trade. Naturally, I got a little angry and I was rather expletive. In reply to a supplementary question, I got the answer: it was not accepted by the then President of the Board of Trade that the Board of Trade should control prices …"—[OFFICIAL REPORT, 27th November, 1962; Vol. 668, c. 193.] of this company. This was in the face of a finding that the company's prices were "unjustifiably high" and a recommendation that the prices should be reviewed at intervals of two or three years. The Board of Trade flatly refused to take any action in respect of this monopoly. I quote that as an example. This runs throughout other fields. Does the President of the Board of Trade wish to intervene? Perhaps he would like to correct me.

The President of the Board of Trade (Mr. F. J. Erroll)

I wish only to say that we took other action. It is not correct, 'therefore, to say that we took no action.

Mr. Callaghan

The right hon. Gentleman says that he took other action. In fact, he took no other action. The plain truth about this company is that its prices are unjustifiably high. My Question was prompted some years after the investigation of a complaint of a further increase in prices, a complaint made by the consumers of this company's products in South Wales. The right hon. Gentleman has taken no action at all either to control the profits or prices despite recommendations made by the Monopolies Commission. I shall not linger on this case, but I should like to go on to talk about tax reforms.

Before doing that, there is one other subject on which I should like to say a few words, but tax reforms are most important. We have talked about it long enough, but nothing has been done about separating personal Income Tax from the profits of companies, but if we got it translated into action I do not believe that that would be enough. I recommend the right hon. Gentleman to read an interesting lecture by Mr. Turvey, of the London School of Economics. The President of the Board of Trade may get some interesting ideas from it.

We ought to have a word or two about sterling, because it is of vital importance to the future of this country. It was argued, I think with some force, that entry to the Common Market would have given us backing for sterling as a reserve currency because of the large growth in the reserve currencies of those countries, but we would also have suffered strain from a higher import bill as well as the strain from the import and export of capital. We might have had additional American capital coming in, but additional British capital would be going out.

Sterling today is vulnerable. We must always recall, and not be frightened of discussing, the fact that sterling is vulnerable and will remain vulnerable so long as we have such a low level of reserves to finance the world's trade. It is vulnerable because we combine domestic trading with overseas balances. The effect of this, as is well known to the Prime Minister and the Chancellor of the Exchequer, is the constant risk of interference with our domestic expansion.

There has been a post-war failure over eighteen years, for which the Government must bear major responsibility, either to build up our reserves or to disentangle domestic sterling from banking and trading sterling. In a crisis, the City of London and the Chancellor of the Exchequer always put the banks' customers first—by which I mean Britain's customers—even though this has meant, as it did particularly in 1957, holding up British domestic expansion.

At present, both the United Kingdom and the United States are running deficits on their balance of payments. The Europeans are running surpluses. We have a common interest with the United States in this field that is not yet recognised fully by the United States, but which must be the responsibility of the Chancellor of the Exchequer to try to bring home. We need to transform sterling—indeed, the key currency system as a whole—so that every major nation has a share in supporting and supplying the world's international liquidity. We cannot afford balance of payment problems, because they interfere with our expansion.

What steps should, and could, the Chancellor take? He tried—I congratulate him on his effort, as I did in September—at the International Monetary Fund, but he did not get far, because the Americans expected and wished us to enter the Common Market and they were not ready to discuss the future of sterling in the context in which we would soon be mixed up with European currencies in any event.

The things at which the Chancellor should aim are, first, a unified interest-rate policy. I know that it will be difficult to isolate long-term from short-term rates, but every effort should be made to stop short-term money flowing across the exchanges. A unified interest-rate policy would obviously be a means of achieving this. We have heard renewed interest in the Organisation for Economic Co-operation and Development. This is a subject which should be taken up urgently by the Government so that we may safeguard our own expansionist policies as well as increasing world liquidity.

Next, exchange controls. If movements of capital hamper growth, exchange controls may be necessary and should be faced. Already, there are signs of one or two of our companies moving their capital across to Europe because of the breakdown in negotiations. It would be extremely unfortunate if the unemployed were to feel that capital was fleeing out of the country because of that aspect of the matter.

The Government and the Chancellor should tell companies that in the present state of affairs, they would be behaving in a way that would make for greater economic difficulties for the country, certainly in the short term, if any capital flees to Europe until the situation settles down. If they do not respond to that appeal, the Chancellor must be ready to take other action.

Next, growth of currency swap arrangements and more definite arrangements for short-term loans in times of crisis. There is every reason why the £ and the dollar should support each other, but there is need for a multilateral approach. I want these steps to lead to a genuine multilateral organisation in which I would hope to see each member depositing a proportion of his resources with the central body.

I have tried to discuss Britain's economic position. I do not believe that I have yet mentioned President de Gaulle. [HON. MEMBERS: "Yes, at the beginning."] I forgot. At least, he has not been a central theme running through what I had to say. Most of us believe that our salvation lies to a great extent in our own hands. I believe that the attitude of other countries to us, our attitude to them and our strength in the world depend upon what we do about these problems. We can have all sorts of gimmicks, arrangements and alliances, but unless we get this right they will all fail.

My opinions on relationships with Europe or with the United States are worth no more—but I hope no less—than those of any other hon. Member; that is not the field which I have been commissioned to study. When, however, Hugh Gaitskell asked me, about eighteen months ago, when my right hon. Friend the Member for Huyton went on to foreign affairs, to look after economic and financial affairs, I was delighted to do it because I believed that this is the whole key to the revitalisation and modernisation of Britain.

Once we get our economic and domestic arrangements right, once we follow social policies that will command the support and the overwhelming agreement of the nation, I have no doubt that the country can make what arrangements it pleases with its allies and that they will be delighted to make arrangements with us. It is ridiculous nonsense to talk about 52 million people being unable, because of certain technological developments, to do a great deal of these things. It may be true of the Concord—possibly, there are one or two things like that—but they are marginal in one sense. We have a great future as a nation. I only wish that we could have heard that from the Prime Minister yesterday.

4.26 p.m.

The Lord Privy Seal (Mr. Edward Heath)

On 10th October, 1961, I opened negotiations in Paris with the European Economic Community. In the reply which the Community made to my statement, the spokesman welcomed the statement which I had made and said that everyone sincerely hoped that the negotiations would be carried through to success. At six o'clock on 29th January, 1963, the chairman of the conference said that he was forced to record the fact, with great regret, that the member States of the Community were prevented from continuing the negotiations. I should like to tell the House what led up to this situation.

The hon. Member for Cardiff, South-East (Mr. Callaghan) has devoted the greater part of his speech to the future. Before I come to the lessons of the negotiations and to future policy, I should like to tell the House about the situation in Brussels in January. After the Commonwealth Prime Ministers' meeting we all recognised thas this was the last stage of the negotiations. We put forward proposals for speeding up the meetings and they were accepted. Everybody in Brussels foresaw that exactly as in July and August there had been a long meeting, so, at the end of this stage, another prolonged meeting would be necessary, at which we could survey the picture as a whole and reach the final settlements.

Shortly before Christmas, the two meetings in January were arranged. Their object, as everybody recognised, was to break the back of what remained. We had all been moving individual items into the position where that could be done. As a preliminary to the meeting, I had the usual contacts with all the delegations, including the French delegation in Paris. Let me now say what remained to be done.

The right hon. Member for Huyton (Mr. H. Wilson)—I am sorry that he has now left the Chamber—and the right hon. Member for Smethwick (Mr. Gordon Walker) both said yesterday that we were trying to create the myth that we were on the point of settling the remaining issues when the negotiations were broken up. There is no myth. The view that these negotiations could be settled reasonably in a comparatively short time was, and is, held by the five other countries in the Community and also by the Commission. They know full well the negotiating position of the United Kingdom and of their own Governments. [An HON. MEMBER: "Surrender."] The right hon. Member for Smethwick is fond of bandying the word "surrender" about the Chamber. It makes no sense whatever in the terms of the negotiations. Shortly, I shall tell him why.

Mr. J. J. Mendelson (Penistone)

The right hon. Gentleman has asserted that the other five countries shared his view about the conference being near to success. Does the Chancellor of the Federal Republic of Germany share that view?

Mr. Heath

The Government of the Federal Republic of Germany certainly share that view and it was Herr Schroeder who took the lead in putting forward this view in Brussels.

Let me, then, deal with the items which remained to be settled. First of all, on domestic agriculture there were the transitional arrangements and on these a great deal of work had been done before Christmas and during the Christmas Recess by the Mansholt Committee, on which the right hon. Gentleman the Minister of Agriculture was playing a very large part. The situation had been clarified and it was quite apparent that compromises were possible.

Secondly, the supplementary provisions for agriculture. The right hon. Member for Huyton said yesterday that the whole of the permanent arrangements for agriculture had to be settled. That is completely untrue. We had accepted the common agricultural policy and put forward supplementary proposals, namely, intervention in the special regulations for pigmeat and eggs, but these were discussed in the Mansholt Committee and the situation was clearly seen there.

Thirdly, there was the question of horticulture and on this, as I said last night, in interrupting the right hon. Member for Smethwick, there had been a great deal of discussion by working parties, officials and Ministers. The issues are quite clear—they were issues of timing, of the transitional period and of the arrangements for the continuation of tariffs and for grading.

The second item which we had to deal with was the completion of the agreement on temperate foodstuffs which included the infra-Community preference, on which the Community was going to make a further proposal to us, and the subject of New Zealand. I wish to make it plain that it has always been necessary to negotiate the arrangements for New Zealand because they could only be negotiated when it was seen what would happen to the products in which New Zealand was interested, in order that the special arrangements could be completed.

The third item was outstanding tariffs. Here, some 30 items remain and at that meeting I brought them together so that they could be considered across the board. When the Treaty of Rome was signed the Six themselves had 68 items unsettled which were put into the G list. In relation to that ours is a comparatively small number.

The other questions were the institutional arrangements and one or two smaller but still important questions such as Hong Kong and the Federation. The hon. Member for Huyton referred to the question of the African countries. That had already been settled and it remained for the countries to make their application if they wished to do so. He also referred to the Sugar Agreement; that had already been extended to 1970 and sugar would take its place in the common agricultural policy when we became members and we would have had our full rights there.

The remaining items were beef and veal, of our products, and rice and the financial regulation. On none of these had the Community itself got a position and, therefore, we could not negotiate. If they were not to be settled before the conclusion of the negotiations then, obviously, there had to be a participation arrangement in which our rights would be fully safeguarded. That, too, was known.

The last item mentioned by the hon. Member for Smethwick was that of E.F.T.A.

Mr. Frederick Peart (Workington)

Is it not a fact that the Government were quite prepared to jettison completely the main safeguards of the 1947 and the 1957 Acts and to accept fully the agricultural policy, even by 1970?

Mr. Heath

Really, the fatuous expressions used by the hon. Gentleman. I wish to describe later what is involved in going into an economic community.

Mr. Peart

Absolute surrender.

Mr. Heath

I now come to the question of E.F.T.A., to which the right hon. Gentleman referred yesterday. We have always made our position clear about E.F.T.A. in the negotiations, and it is on the record for anybody to see. The only point I wish to make is that it was quite possible for us to conclude our negotiations before other countries in E.F.T.A. concluded theirs, because the undertaking was that once they were all concluded they would come into operation on the same date. It is impossible to carry on seven negotiations of this kind simultaneously and bring them to a conclusion at the same time. Therefore, we would have been able to conclude our negotiations and to bring them into operation at the same time.

When we came to our first meeting in January we began to make progress. The Community put to us the proposal for the drafting of the necessary documents and a working party was set up. Then the Community said that they could accept the proposals we had made about the institutions. The right hon. Gentleman the Member for Huyton said yesterday that he was completely unable to accept this, that he did not in any way accept a total collapse of what should have been our position on voting rights and on the extent of the veto."—[OFFICIAL REPORT, 11th February, 1963; Vol. 671, c. 964.] I completely fail to understand what he means by this. The proposal on institutions which we put forward was that the principle behind the Treaty of Rome that qualified majorities should be two-thirds should be continued in the enlarged Community. The right hon. Gentleman and his hon. Friends seemed to take the view that the blocking power should remain one large and one small country regardless of the fact that the Community had been enlarged. It has never been the intention of the E.F.T.A. countries that they should try to maintain a veto in the enlarged community as a whole. Therefore, I cannot accept the argument that our institutional proposals were bad ones.

The Mansholt Committee completed its report and it was presented to the full conference. At this point I said if suitable transitional arrangements could be obtained we would accept 31st December, 1969, as the end of the transition period, provided that horticulture was exempt from that. I would ask the hon. Gentleman the Member for Workington (Mr. Peart) whether he would not consider these matters on their merits and ask himself whether British agriculture could not have made this change by 1969, because I believe it could.

Following this a compromise began on the particular items with which we were dealing in the transitional period. The next day we met we made proposals dealing with tariffs right across the board and the conference began shaping its decisions, but on the Thursday the leader of the French delegation intervened and asked for the suspension of the negotiations.

I hope that I have demonstrated to the House that the items which remained to be settled were important, but that, viewed in principle, the greater part of the work had already been done on them and that if the will had been there those negotiations could have been brought to a successful conclusion.

Let me now turn to the reasons given for interrupting the negotiations. They have been given at the Press conference in Paris, in the French Assembly, in the Brussels conference itself, and on television. When one analyses these reasons one sees that some are fundamental. One is that this country is an island—that cannot be denied—and that it has what is said to be a different background from some other European countries. That is a matter for dispute, but the answer to all of these fundamental points is surely this: that they were exactly the same when we began the negotiations.

There has been no change during the course of the negotiations, but they certainly fly in the face of the Treaty of Rome itself, which, in it preamble, says: Determined to establish the foundations of an ever closer union among the European peoples. It then goes on, in Article 237: Any European State may apply to become a member of the Community… The conditions of admission and the adjustments to this Treaty necessitated by it shall be the subject of an agreement between the Member States and the applicant State… Let me turn now to the actual reasons for asking that the negotiations should be suspended. First, it is said that we have not accepted the Treaty of Rome. This has become a parrot cry, unworthy of intelligent men. Article 237, which I have just quoted, says that the conditions of admission shall be the subject of an agreement, which obviously has to be negotiated. Therefore, any special arrangements had to be negotiated on the basis of the Treaty itself.

We accepted the Treaty on 10th October, 1961. Not only did we accept the Treaty, but we accepted all the protocols—the protocol which allows East German trade to be counted as West German trade, the protocol which excluded Luxembourg agriculture until 1970, and the protocol which was specially put in for France. Their balance of payments position was so weak when they signed the Treaty of Rome that it was necessary to maintain their export aids and their charges on imports. We accepted all these protocols. We had no dispute with them. We say that they were justified, and we believe that they were right. We accepted the Treaty of Rome, and it is pointless for anyone to go on saying that this is the cause of the breakdown.

It was said that we had not accepted the common external tariff, but we accepted this on 10th October. We did not ask for it to be averaged, as we were entitled to do. We accepted the rates. We put in a small number of applications for changes, and when the negotiations were suspended some 30 items were left, but there were difficulties over only four of them.

It is said that we accepted a common agricultural policy, but not the agricultural policy. When I made that statement in Paris there was no common agricultural policy, and I said, therefore, that I would accept a common agricultural policy, reserving the right to negotiate on it. When the common agricultural policy began to be formed, we accepted that with the supplementary points which I have mentioned, which, we believed, could improve the regulations as they were. But is there anything very strange in proposing intervention in those two regulations when intervention already exists in the regulations for cereals?

It has also been said that we would have tried to maintain our present world system and combine it with the Community system. That is quite untrue. As Dr. Mansholt has explained, we had accepted the whole of the mechanism of the Community itself during the transitional period and the Common Market period.

Then it is said that this is a developing club, and that it is very difficult, therefore, for us to join, but this was the position in 1961. Does this mean that no new member can join until 1970, the end of the transitional period, and is it not therefore strange that full membership should have been offered to Denmark a month ago in Paris?

It is said that we made no serious progress in the autumn. We had, in fact, covered a large amount of Commonwealth items, alternative arrangements for association, Aden, Malta, the High Commission Territories; we had dealt with Article 234; we had had discussions about E.F.T.A., tariff movements, processed foodstuffs, and done the groundwork on transitional arrangements for agriculture.

It is said that we had done nothing on aluminium. On aluminium, lead, and zinc, the Community had no position to put forward for negotiation. It is said that we had done nothing on three agricultural regulations. The Community itself had no position. We were, therefore, not able to negotiate on them.

It is said that we had done nothing about the political undertakings in the financial regulation. These political undertakings, if they exist, had never been presented to us when we were awaiting a further position from the Community on the financial regulation.

Finally, it is said that we had not made the position clear over E.F.T.A. At the last meeting but one before Christmas, which I reported to the House, it was stated by the Community that as regards E.F.T.A. it foresaw that if our negotiations were successful Norway and Denmark could speedily follow. The Community went on to say that it could not foresee the end of the negotiations with the other four members of E.F.T.A. by the end of 1963. We therefore agreed that no decision could be reached on this at the moment, and that we would have to wait and see how the negotiations went.

Our position about E.F.T.A. has always been absolutely clear It has been quite plain to the Community that we should apply the common external tariff to all other countries other than those who were members of, or associated with, the Community or for whom special arrangements were made in the negotiations.

Mr. Gordon Walker (Smethwick)

Is not the right hon. Gentleman now admitting that we could not have come to a final decision until 1964 when we would know what had happened to the E.F.T.A. neutrals, and that, therefore, it is not true that the whole thing was on the point of settlement, as he has been arguing for the greater part of his speech so far?

Mr. Heath

I nave been trying to explain that the negotiations could have been brought to a conclusion. The Prime Minister said yesterday, and I said in Brussels, that we were on the point of reaching a conclusion to the negotiations. I did not say that we were on the point of going into the Community.

Mr. Gordon Walker


Mr. Heath

"Ah", says the right hon. Gentleman. At last he understands. I am deeply moved to think that after 16½ months of negotiation we have reached the stage at which the right hon. Gentleman understands the E.F.T.A. position.

Mr. Gordon Walker

We for our part are glad that for the first time the right hon. Gentleman has admitted it.

Mr. Heath

So, with the intervention of the French Foreign Minister, we came to the end of these negotiations.

The right hon. Member for Huyton has often said that we entered into these negotiations to deal with a particular period of economic weakness. Lest he try to make another myth out of this point, I want to deal with it, because it has a bearing on the future of our relationships with the Community with which he dealt at some length yesterday.

This phase of the negotiations began in July, 1960. It began when this House passed a Motion which was very similar to the wording, I think quite unconsciously, of the hon. Member for Cardiff, South-East. The Motion was: That this House recognises the need for political and economic unity in Europe, and would welcome the conclusion of suitable arrangements to that end, satisfactory to all the Governments concerned. The hon. Member for Cardiff, South-East said this afternoon that he thought it was essential to find an arrangement between the economic groupings in Europe to achieve economic unity. I do not differ from him in that, but following on that my right hon. Friend the Prime Minister, in August—that Motion was passed in July, when my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) made a very distinguished and well-remembered speech—went to Bonn, where a communique was issued in which Chancellor Adenauer and the Prime Minister agreed that it is essential in the interests of European unity that a solution should be found of the problems arising from the existence of two economic groups in Europe. They undertook to study, in co-operation with their respective partners"— that was E.F.T.A. for our part, and the Community for their part— all possible solutions of these problems, and to exchange ideas. This process therefore began in July, 1960, and was continued until 29th January last, and it was not a decision which was suddendly taken in the economic circumstances of July, 1961.

The meeting at Bonn was followed by a series of bilateral discussions with the German, French, Italian and Benelux Governments, and what emerged from these discussions was this, and it is very important for the future. What emerged was that a group arrangement between the Community and E.F.T.A. was entirely unacceptable to the Community. The right hon. Gentleman yesterday suggested that we should consider a group arrangement between E.F.T.A. and the Community. What I am telling him is that this was examined more than two years ago and found unacceptable to the Community. He suggested that the Community should join E.F.T.A. as a single member. This, too, was examined at the same time and found unacceptable to the Community.

Mr. Harold Wilson (Huyton)


Mr. Heath

It was found unacceptable then, and I believe it to be unacceptable today. There has never been a suggestion in these discussions that the Community would accept a free trade area arrangement, a group arrangement, with E.F.T.A., or itself becoming a member of E.F.T.A.

What emerged was that each E.F.T.A. country could enter into its own relationship with the Community, and the fourth thing which emerged clearly from the bilateral discussions was that, if we were prepared to apply for negotiation for full membership, the difficulties previously encountered in the free trade area negotiations would disappear, and in that context we discussed the problem of the Commonwealth and of British agriculture.

This attitude was further endorsed by the speech of the French Foreign Minister, at Strasbourg, in 1961. He said that the idea of creating a free trade area appeared to have been abandoned, and he obviously approved of that. He went on to say: … we ourselves have always said that the Common Market was and would remain open for any other European country to join if they wished. We still believe that for some people at least this is a worthwhile prospect and probably the only satisfactory solution. We still hope that there will be a change of mind in certain quarters whence the response has so far invariably been negative. Obviously, an indirect reference to the United Kingdom itself.

So it is important to remember for the future that the Community has shown no desire and still shows no desire for a free trade area arrangement, or for the Six to join E.F.T.A., or for group arrangements between the two organisations. In this, I hope that the right hon. Gentleman and his hon. Friends, and, indeed, the whole House, will be realistic. We can never get our relations with Europe right unless we are realistic about what the Community is prepared to do and what it is not prepared to do.

Mr. H. Wilson

The right hon. Gentleman does not seem to have been very realistic about what the Community, at the end of the day, was prepared to do after eighteen months of negotiation. We understand his bitter feelings about this. He has shown great restraint. However, is it not a fact that the negotiations of the last eighteen months were all directed to one end, namely, of Britain going in? Naturally, all alternative propositions would be rejected.

The right hon. Gentleman has been travelling on one bus in one direction. Now that that bus has broken down, should he not look again at things which might have been rejected two years ago, or three years ago, or four years ago, to see whether there might not be a willingness to accept them—he may think as a second best, but at any rate better than the present outlook?

Mr. Heath

I quite appreciate the right hon. Gentleman's point. I hope that I was not showing any bitterness. I was merely stating this as a matter of fact.

Mr. H. Wilson

I did not mean that the right hon. Gentleman was showing bitterness, with us, but with them.

Mr. Heath

I hope that I am not showing any bitterness with them, because that is the view they have expressed.

I want to come later to the question of alternative arrangements and say something to the House about it. Before I do so, I should like now to indicate some conclusions from these negotiations. First, I believe that it was absolutely right to embark upon these negotiations. Yesterday, the right hon. Member for Huyton tried to discount this. I believe that for the reasons I have given—because of the preliminary investigations we made, for the political reasons which the hon. Member for Cardiff, South-East has completely ignored, and for economic reasons—it was right to enter into them. I would have thought that recent events have demonstrated more clearly than anything else the political importance of our endeavouring to become members of the European Economic Community.

The second conclusion about which want to say a few words is this. I believe that there is still in the minds of right hon. Members opposite a fundamental misunderstanding of the nature of the European Economic Community. What they entirely fail to appreciate, as far as I can understand, is that this is a Community based on a Treaty which is itself a Customs union, which believes in the Treaty and believes in the Customs union and is going to maintain both. Therefore, if one enters into negotiations with the Community one is entering into them for membership of a Community based on a Treaty which is a Customs union.

Mr. H. Wilson

And the agricultural policy.

Mr. Heath

Yes, and the agricultural policy, because that is the policy of the Community.

When considering the approach which one makes to the Community, it must be remembered that we did not go into the negotiations to change it from a Customs union. We did not go into the negotiations to wreck the Treaty of Rome. We went into the negotiations to endeavour to make suitable arrangements for the special interests of the Commonwealth and agriculture. That was the purpose of these negotiations.

Therefore, the right hon. Gentleman's phrases—"surrender" and "continuous concessions"—bear no relevance to a negotiation which is about becoming a member of a particular organisation. If the right hon. Gentleman applies to join an organisation and says that he proposes to stand by the rules, does he therefore say that he has made a surrender or an abject concession? It is a completely false approach to the whole problem of negotiating with the Community.

Mr. H. Wilson

Since the right hon. Gentleman, in his 10th October, 1961, speech, had no intention at all of accepting a final settlement for the Commonwealth, which he looked like accepting when the negotiations finally broke down, since at that time he had no idea of the crippling restrictions which would be forced on this country and the Commonwealth by an agricultural programme which, as he said, he could not have accepted then because he did not know what it was going to be, surely he is wrong now in saying that to have accepted the principle of the Treaty of Rome automatically involved accepting everything he has since accepted? His big mistake, as we told him at the time, was the acceptance of the agricultural programme, with all that it meant for the Commonwealth.

Mr. Heath

The right hon. Gentleman may argue that it was wrong to accept it. What I am saying is that if one is to become a member of a community the obligation is to accept the organisation of that community, except where one is able to negotiate special arrangements. This is what we have been doing. [Interruption.] If the right hon. Gentleman wishes to discuss the Commonwealth arrangements I will go on to that question now, because I think the House might well be reminded of what we have achieved in these negotiations in the way of special arrangements.

We reached agreement aver the whole field of economic union with the Community without difficulty. In agriculture, we were able to negotiate the additional factors of the Annual Review and the long-term assurance. For the Commonwealth, we were able to negotiate association for Africa, the Caribbean and the Dependencies. For the Asian Commonwealth, we were able to negotiate special arrangements of a very comprehensive kind. For Canada, Australia and New Zealand we were able to negotiate the whole complex for temperate foodstuffs which I have described frequently to the House. In addition, we were able to negotiate the special undertaking concerning New Zealand. Those were all special arrangements, in addition to which there were Malta, the High Commission Territories, Aden, and so on.

Last night, the right hon. Member for Smethwick said that we had broken our pledges to the Commonwealth. I challenge him openly on that point. There is no pledge we have given to the Commonwealth in these negotiations which has been in any way broken.

Mr. H. Wilson

Pledges were given and they have been broken.

Mr. Heath

The pledges we have given to the Commonwealth are to protect their special interests. The right hon. Gentleman has constantly gone back to 1957, 1958 and 1959. Those were not pledges in these negotiations. They were pledges concerned with the free trade area negotiations, which was an entirely different conception.

Mr. H. Wilson

The right hon. Gentleman is quite wrong. The 1959 pledge was the one on which the Conservatives fought the General Election. They cannot wriggle out of this. I quoted all these pledges. They are on the record—in HANSARD, 8th November. The right hon. Gentleman had better look them up. They were made by the Prime Minister and by the present Chancellor of the Exchequer. If the right hon. Gentleman is now saying that the decision to enter into negotiations meant that these had been repudiated, we should have been told that when they went into negotiation.

The right hon. Gentleman knows that the Prime Minister gave as a reason for not wanting to go into the Common Market his insistence that we should allow free entry to Commonwealth agricultural products. The Chancellor of the Exchequer said, "We cannot get rid of Commonwealth Preference". Will the right hon. Gentleman tell us when those pledges were repudiated before the ngotiations began?

Mr. Heath

The Prime Minister's pledge, when he explained that, was during the Free Trade Area negotiations, and the right hon. Gentleman knows that perfectly well. In August, 1961, the House authorised us to go into negotiation with a Customs union. In the statement I made in Paris on 10th October I said that free entry would not be possible. The right hon. Member for Smethwick, yesterday, also said that we had undermined the interests of the Commonwealth in these negotiations. There is no justification for that statement in what we had negotiated in Brussels.

The next conclusion I want to mention to the House is the impact of the negotiations on the Community.

Mr. George Brown (Belper) rose

Mr. Heath

No, I have given way so very much.

Mr. G. Brown

I think that the right hon. Gentleman should hear me.

Hon. Members

Sit down.

Mr. G. Brown

I am sorry, but I have to deal with this later. It would be useful to us both to know that we are talking about the same thing. The Lord Privy Seal said that he was authorised in 1961 by the House to go into a Customs union.

Mr. Heath

Into negotiation.

Mr. G. Brown

No. In fact, the right hon. Gentleman seemed to me to say that he was authorised to go into a Customs union. This will show hon. Members opposite why it is important to clear the matter up. As I understand it, the Prime Minister in August, 1961, asked only for authority to negotiate to see whether a basis for negotiation existed.

Mr. Peter Kirk (Gravesend)


Mr. G. Brown

I have sent for the quotation, so the hon. Gentleman had better be careful.

Mr. Heath

I said that we were authorised to enter into negotiations with the European Economic Community. That was the position. [HON. MEMBERS: "When?"] On the basis of the Resolution of the House of Commons and the House of Lords.

I would now like to say a word about the impact of all this on the Community itself. It is a fact that the Community, after these negotiations, will not be the same again, not only because of the way in which the negotiations were broken off but because of the impact of the arrangements we made on the Community; those for the reasonable price levels, reasonable outlets, world commodity agreements, comprehensive agreements and agricultural reviews and assurances. Many of these may not come to pass, but their impact has been made and will remain.

The next point to remember is that, for our part, we learned much about Community policy which is not in the Treaty of Rome or the regulations. The one particular thing to which I wish to call attention is this. The Community is fully prepared to have special and preferential arrangements towards the underdeveloped and developing countries of the world; and those we were able to negotiate to a large degree. The Community has decided as a matter of policy that it will not discriminate against the remaining countries of the world. This, therefore, was the problem which always faced us regarding Canada, Australia and New Zealand after the end of the transitional period. This argument was always fully and fairly put—that three highly-developed countries with standards of living above those of any European country or the United Kingdom were not entitled in a multilateral system of world trade to have preferential arrangements continuing after the transitional period. That was one of the most important items of policy we met at Brussels during the negotiations.

I turn now to the form of the negotiations. It was between the Six Governments, the Commission and ourselves. We understood the reason for this, but it was not a very happy arrangement. At times we got away from it. At the time of real negotiation there were seven Governments around the table—and the same applied in the Mansholt Committee. I believe that the same procedure would have worked well in the last stage.

We often discuss speed in the House of Commons. On every occasion the British delegation took upon itself the onus of pressing for the negotiations to move forward, commensurate with thoroughness, and we were able to achieve a considerable amount. In this connection, I would like to comment briefly on two things. The machinery in Whitehall and in the delegation, which was a new creation for this purpose, worked extraordinarily well, but even more important, the consultation which went on continuously in Brussels and London, with the Commonwealth and E.F.T.A. countries, worked most successfully. I can recall only one slip over one item in the whole of the negotiations and I believe that it is because that consultation worked so efficiently with all these countries that there has been no damage to the Commonwealth or to E.F.T.A. Indeed, I believe that we have come closer together in the course of these negotiations.

What about our own part? To obtain these special arrangements it was necessary to justify each item on its merits. We were negotiating with people who were looking at hard economic facts in a very realistic way—a salutary process which deserves to be continued. In particular, we had to apply it to individual items of Commonwealth trade and agriculture and it gave us an insight into the strength and weaknesses of our trading pattern and agricultural structure.

It is interesting to note the view of industry over these past two years. It started with many fears about many industries. It has now changed, not only to the general desire to enter the Common Market but to a deep anxiety that we should go in, with the realisation that the people who would have had difficulties would have been the marginal firms in particular industries. It was there that greater efficiency was required. In one or two places in agriculture a major effort would have been required, but I believe that it could have been achieved.

The next point I wish to make concerns the work of the Commission and this has been much discussed. It took a major part in the first stage, very little in the second and a prominent part in the last. It has a place in our modern technological society which is not just administrative. It has a major task to play in the putting forward of proposals. The power of decision rests with the Ministers and there is no doubt that more democratic control is required, and the Community is well alive to that fact. But the machinery was created for positive action in a modern technological world, no longer a world of the nineteenth century—of liberal administration and nongovernmental interference—but a world requiring creative, positive action based on a full knowledge of the facts, razor-edge analysis and constructive thought. Whatever one may say about the Commission, it is a notable attempt to deal with the problems of a changing world.

The last conclusion to be drawn from the negotiations is this. In making this application to enter the negotiations we were prepared to face up to the need for change in almost every aspect of our national life. We examined the whole basis of our policies and looked at all the assumptions on which they stood. The right hon. Member for Huyton and the right hon. Member for Smethwick yesterday said that we must have confidence in ourselves. They were the first to undermine that confidence in ourselves in the negotiations. [HON. MEMBERS: "No."] Yes, it was hon. Members apposite who played on fears and said that we would be outwitted by the other members of the Community. They made demands for complete and absolute safeguards on every item of our national life, not only now but for ever.

When the members of the Community heard this and heard hon. Members opposite talking about us being a great Power they thought that this was incompatible. In fact, they expected us to use a great deal of influence. They knew that we could do so. They wanted us to and in those negotiations, had we succeeded, we would have been able to use our influence in the Community for the good of the Community.

I now turn to the present position. We recognise that the way to full membership is at present barred. It is a great loss to the Community countries as well. The Five countries recognise that, but it is also a loss to France, and they recognise that their farmers will not be able now to obtain a share of the British market. They recognise, too, that the likelihood of getting world commodity agreements at good prices in cereals is much less. This was fully recognised throughout the negotiations.

The question asked was whether there could be some other relationship short of full membership. No alternative arrangements have been offered to us by the Community and it does not lie in the hands of one country to offer that. In particular, the French Government have never discussed this question with us, either privately or in the negotiations. They have never explained what President de Gaulle meant by "association", but they mentioned it to many other people as long ago as last spring. We recognised it then as a kite being flown to see whether we were prepared to accept just the economic arrangements, so that it could be said that we had no genuine interest in the political union of Europe. I have often explained our reasons, both the political and the economic ones. Those criteria were always before us during the negotiations and any alternative must be judged against those criteria; political and economic.

Some hon. Members have talked of association; broadly speaking, the position is this. Full membership gives one all one's rights in all the activities of the Community. As an associate one does not have such rights. One tries to use one's influence and these facts must be weighed in the balance if or when any alternative arrangement is put forward. I do not wish to go further into the details of this, but I think that we agree on three things.

First, if there is to be any alternative arrangement, whatever it may be, it must come from the whole Community. Secondly, it cannot involve another long set of negotiations; and that point was made by the Opposition Front Bench yesterday. Thirdly, the good faith of all those in the negotiations must be demonstrated from the beginning. The will to succeed must be there, as apparently it was not there in our negotiations for full membership. If any alternative is put forward in this way then, of course, it is bound to receive consideration.

What of future developments of another kind? The right hon. Gentleman the Leader—[Laughter.]—the right hon. Gentleman the Member for Huyton castigated my right hon. Friend yesterday for, as he said, not putting forward any alternative proposals. But what happened when he himself came to that point? He did not propose any alternatives. What he said was: What we are really discussing today is not a packaged alternative to the Common Market, but a plan for the future of Britain…"—[OFFICIAL REPORT, 11th February, 1963; Vol. 671, c. 967.] The right hon. Gentleman put forward a list of countries with which we could trade—incidentally, the list was already known to us—and various other minor proposals.

Surely the important point is that we continue to develop trade on a multilateral basis. Everything that the hon. Member for Cardiff, South-East said confirms that the basis for our trade should be multilateral agreements. I know that some of my hon. Friends do not agree with this and would like to see increased development of a preferential area, but that is not the basis on which our trade has been developing since the war. It is interesting to note that whereas, in 1938, our exports and re-exports covered less than 60 per cent. of the cost of our imports, in 1955, under multilateral trading arrangements, they covered 75 per cent., and by 1962 88 per cent. That is in the multilateral trading world.

We have been asked to play our full part in the Kennedy Round. Of course, we shall do that. I did not quite understand the right hon. Gentleman's point about everyone sitting on one side of the table with the Community on the other. Surely the confrontation is bound to be between the United States and the Community, because they are the two major economic forces, and we play our part in addition—and the Commonwealth, of course. It would have been a better balance if we and the E.F.T.A. countries had become members of the Community —Norway and Denmark; but that has not come about.

I want to say one word about the effect of the Kennedy Round. It has never been our intention, although this has been said in European capitals, that Europe should be swamped by American goods or American goods dumped in Europe as a result of action taken under the Kennedy Round. There must be a fair balance. I do not wish to deal with trade in other parts of the world and the Commonwealth, because that was dealt with by my right hon. Friend the Prime Minister and my right hon. Friend the Secretary of State for Commonwealth Relations yesterday, but I want now to deal with E.F.T.A. and with the E.E.C. in particular.

Mr. Philip Noel-Baker (Derby, South)

Before the right hon. Gentleman leaves the subject of the Kennedy Round, he should not imply that we shall not take our full part in all these negotiations. Is it not a fact that as an exporting and importing nation we are much more important than the United States?

Mr. Heath

I am afraid that the right hon. Gentleman has missed my remarks. Of course we will play our full part in the Kennedy Round, but the two main groups are bound to be the United States and the Community.

Mr. P. Noel-Baker


Mr. Heath

Because of their size and their tariff structures. But that does not alter the fact that we shall play our full part.

I turn now to E.F.T.A. The right hon. Member for Huyton said that we should strengthen the links in E.F.T.A., but he did not explain what that meant.

Mr. H. Wilson

The right hon. Gentleman knows perfectly well.

Mr. Heath

I do not. It was a metaphorical description which seemed to bear no relation to reality.

I will tell the right hon. Gentleman what we should do in E.F.T.A. It is to expand the trade among E.F.T.A. countries and to build it up on the basis of the Stockholm Convention. British industrialists have never taken full advantage of the E.F.T.A. markets because of the lure of the Common Market itself, and it is now time that they did.

Mr. H. Wilson

What about the Commonwealth?

Mr. Heath

I had said that as my right hon. Friend has already dealt with the Commonwealth, I propose to deal with E.F.T.A. and the E.E.C.

At the E.F.T.A. meeting, we can discuss this development of trade. I hope that at least we shall continue to keep pace with the Community in tariff changes. I recognise, too, that Denmark and Norway will want to discuss agriculture and fisheries at these meetings and we have an understanding of the difficulties of these two countries. I believe, too, that there should be a greater appreciation in the E.F.T.A. countries themselves and not only in the United States, where it exists, of the opportunities available for trade there.

We must also recognise that, as a result of the break-up of the Brussels negotiations, businessmen will not gain the advantages of an immense home market, nor—and this was the point which was overlooked by the right hon. Gentleman—the advantages of certainty in that very large market. Therefore, the effort required will be all the greater.

I come to the question of our future relations with Europe. The European Economic Community will remain the largest and strongest grouping in Europe. It has sustained a severe blow to its confidence, but it will continue to develop according to its plan. Our desire has always been to join wholeheartedly in the building of a wider Europe and to do nothing to obstruct it, and this attitude will continue to govern our policy. We start with all the important assets which we gained in the negotiations. We have to keep open and enlarge the channels of communication and consultation and we shall seek to co-ordinate our policies with the Community as far as possible.

In the economic field, we shall expand and strengthen the permanent mission to the European Communities, not only with the Foreign Office element, but also with representatives from other Whitehall Departments. We shall maintain close contact with them, enabling both the Community and ourselves to take account of each other's interests. Secondly, we shall make more intensive use of bilateral machinery. Already, Anglo-German, Anglo-Italian and Anglo-French machinery exists. Thirdly, I hope that firms and trade associations in this country will strengthen and develop their contacts with the Commission and with their opposite numbers in Europe. Not only will that help exports, but it will help to safeguard our interests in the developing Community.

On the political side, since the breakup we have discussed political co-operation with the majority of members in the Community and they agree that it is urgent that there should be closer political arrangements between us. I described the Europe we would like to see in my speech to Western European Union in April, last year—strong and stable, a more equal partnership in N.A.T.O. with the United States, outward looking, associated with all its former friends and territories. We wanted to strengthen Europe, not to make it lose its distinctive European characteristics, but to enable it to play its part in the West as a whole.

The right hon. Gentleman asked how this should be done. He proposed a conference of the heads of all the European countries, and he brought in Yugoslavia, but missed out Spain. I am not arguing, but perhaps the right hon. Gentleman will not describe it as "all" the European countries. What are they to do when they meet? For many of them it would be embarrassing, for neutral countries who never wish to take part in general political cooperation.

However, where I do agree with him is that we can use O.E.C.D., not, as he seemed to suggest, on the political side, but on the economic side. This is not an original suggestion, of course.

We have begun to examine with our friends the question of the machinery to be used for political co-operation and I agree with the right hon. Gentleman that the first forum must be N.A.T.O. However, consultation in N.A.T.O. does not exclude a full measure of agreement between those in Europe who think alike on these questions.

At the W.E.U. meeting I said that a general view of European defence might emerge in a wider Europe. That is still our view. During the last few weeks the Nassau Agreement and the work which is now in train to give effect to that agreement have strengthened the Atlantic Alliance by giving it a nuclear capacity for the first time. They have also strengthened the European voice in the Alliance since N.A.T.O. forces are to be targetted in accordance with N.A.T.O. requirements.

Whatever is said elsewhere, the policy of Nassau is certainly not in contradiction with our European policy. Indeed, the Nassau Agreement has been warmly welcomed by the majority of our allies in Europe.

Side by side with N.A.T.O., we have other European organisations, exclusively European, of which we are members. Western European Union is the only formal point of political consultation between all seven Powers recently engaged in the Brussels talks.

There is much to be said for maintaining our relations with our friends through an existing organisation. I see that Dr. Schroeder, in the Bundestag last week, took the view that if there were to be a meeting in Western European Union it should be to seek more progress than could be achieved by bilateral talks. With that I agree. I believe that W.E.U. can contribute positively to the present situation. But we should also make use of all the opportunities available, including the Council of Europe for cultural matters. Our attitude is widely reciprocated in Europe. We are encouraged by this, and we shall do everything possible to move closer to the European countries and to work with them to create the sort of Europe that we want to see.

To sum up. The work on which we have been engaged, and in which we have been trying to get a wider unity in Europe between the Community and E.F.T.A. countries, with far-reaching connections with the Commonwealth and the associated States, has had an immense appeal for our people. Why should that have been so? It is because it seemed to them, in some way—with all its imperfections—to be looking towards a better society in Europe as a whole, because it seemed to be working for something which was bigger than themselves and, above all, because it gave them a sense of purpose.

Of course there have been divisions in the country. There have been many honourable opponents, and there have been others who, alas, have played upon the people's natural fears of change. They have played upon these fears and upon old national hatreds. But it has been the great debate of modem times, and the debate will continue, because the relationships between ourselves and Europe are bound to be of the greatest concern both to ourselves and to the Continent.

What the House has been discussing is what our sense of purpose is today. Many have spoken of the need for this, but few have ventured to define it. The hon. Member for Pembroke (Mr. Donnelly), however, in a speech which I admired, did endeavour to do so. Our purpose must be to develop the potentialities we have along the lines that we have been discussing in this debate and to do so with determination, with clear thinking and with far-sightedness—to strip away pretence, and to live up to the standards of our own integrity. That must be our purpose in the phase which is now opening before us.

Right hon. Gentlemen opposite say that after the breakdown in Brussels Her Majesty's Government cannot tackle this task. In fact, the reverse is the case. We can do it the better, knowing that we did everything possible to achieve success in the venture on which we embarked in Brussels. We have nothing with which to reproach ourselves. It was through no fault of ours that the venture was brought to nought. Thus we can go forward, with a clear heart and mind, and with determination and ability, to deal with the tasks which lie ahead.

5.23 p.m.

Mr. Austen Albu (Edmonton)

Both sides of the House will agree with the Lord Privy Seal that this has been perhaps the greatest political debate in modern times—a debate which, as he said, is still continuing, and will probably continue for the rest of most of our lifetimes. We can also probably agree that the right hon. Gentleman made a brave attempt, with his usual clarity, to defend the negotiations that he has been conducting and the position of Her Majesty's Government.

If the Government are to blame for the situation in which they now find themselves I suggest that it is because they rushed into these negotiations without diplomatic preparation, and with all the appearance of entering them not as a matter of policy but for the sake of expediency and, almost, in desperation.

I agree that my party may have missed a great opportunity some years ago. Possibly we failed to realise the growing public opinion in Europe for European unity and, particularly, the degree of success that would come in the economic recovery of the European countries, based as it was—to an extent which we did not all recognise—on a high degree of purposive planning in most if not all countries. I changed my own mind about this question when I realised the essentially pragmatic nature of the Community which had been set up. In fact the Community is so pragmatic that its advance will now be delayed by the action of one man.

As has been said by hon. Members on both sides of the House, the end of the negotiations is not the end of our relationship with Europe. I believe that Europe will remain the area of the world which, in the future, will have the most direct effect upon our lives, and in which the policies of this country can have the most direct political effect. It may be that the giant Powers which now dominate the world with their nuclear weapons will be influenced by the combined opinions of a group of nations, but they are hardly likely to take seriously the opinion of any one of that group.

I also agree that the Commonwealth is not an alternative to the European Economic Community, because all the political tendencies of the Commonwealth are towards a loosening rather than a strengthening of the ties between its members. This tendency exists for well understood historical reasons. Those who are in the minority, which perhaps on occasions exercise some influence—generally back benchers who are Privy Councillors —who believe that there is some future in a sort of Commonwealth free trade area, or in any sort of free trade area within a group of such nations, fail to understand that a policy of free trade is not one for developing countries. Such countries must maintain for themselves the right to protect their growing industries.

This consideration applies to the vast majority of the people of the Commonwealth, and to every single Commonwealth country, whether its standard of living is above or below our own. Even countries like Australia and Canada, whose standards of living are above ours —although I am sometimes not sure about Australia—will continue to protect their industries until they have built up a much larger industrial structure than at present.

But the main danger of the present situation is not an economic one; it is a political one. At present, all the signs are that the main objectives of policy in both the United States of America and the Soviet Union are to prevent the use of nuclear weapons. We must all welcome this, as a first priority in foreign policy, without any feelings of hurt pride, because it inevitably takes place over our heads with ourselves playing only a minor part.

I wonder whether hon. Members have read the remarkable article in last week's L'Expresse by Mr. Servan-Schreiber. He used to be generally considered to be anti-American, and his newspaper to be a neutralist newspaper. But Mr. Servan-Schreiber writes that the slogan "Yankee Go Home" is now an out-dated expression of both the Stalinists, on the one hand, and the reactionaries of "Algérie Francaise", on the other; that any further development of these anti-American policies, especially in France— the policies now being pursued by President de Gaulle—can only encourage a resurgence of isolationism in the United States before any agreement has been reached with the Soviet Union, and that this would be nothing but disastrous for Europe and the whole world.

Although any movement towards isolationism would be resisted by the present Administration in the United States, such developments in Europe are undoubtedly of great danger for us and the rest of the world. The idea that Western Europe can be defended without the United States, now or in the foreseeable future, is completely and absolutely ridiculous.

It is, therefore, extremely important —and this is nothing new; practically every hon. Member has mentioned it—that we should maintain the closest ties with Europe, centred, as it largely is, round the European Community, so as to maintain the unity of Europe and to assist Europe and all our friends there who wish to maintain an outward-looking policy, and the Western Alliance. But as my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) said in a memorable speech, our influence in Europe, as in the world, is entirely in proportion to our economic strength.

I am not ashamed, as my hon. Friend indicated that he was not, towards the end of his speech, of appearing to be a materialist. I do not like questions of national economic revival being expressed in moral terms. There is a great deal to be said for moral attitudes towards the distribution of the product, but not much to be said for a moral attitude in its generation. In a democratic, industrial country like this, liberal, outward-looking and generous policies are possible only on the basis of economic expansion.

Economic stagnation or contraction only lead to bitterness between groups, xenophobia and racial prejudice, and to every decent worth-while project, such as better hospitals, the regeneration of our cities, the building of a national theatre, higher old-age pensions, enlarged universities and better education, being held down because we have not the money.

In such circumstances all we get is bitterness and frustration the sort of xenophobic mood which one felt in the country in the week after Suez. That is a mood which I never want to feel in our country again, but it is one which might return if we had another round of economic stagnation or contraction. That is the recipe for national decline. National morale is dependent on a feeling of national purpose, which, in present conditions, is inseparable from economic expansion. This does not mean just giving people more money to spend, for that neither stimulates their feeling of national purpose nor does anything to stop the underlying sickness of our economy.

My hon. Friend started his speech—and I am glad that he did so—by emphasising what most hon. Members have been saying, that the basic problem is increasing exports or reducing dependence on imports. I presume that there is nothing much more to be done about the latter without lowering our standard of living. Therefore, the question basically is: how can we increase exports? It seems a dreadfully mundane question, but so much hangs upon it. Indeed, our whole future hangs on it. I am, therefore, not ashamed to come to some more detailed matters

First, are the Government doing all they can in the short term? For instance, there is the question of terms of credit. I have always been sceptical about greatly extending credit terms. If one has not a surplus one cannot lend money, and extended credit is a form of lending money to people who are buying one's goods. But if the future of our export trade is increasingly to be in capital goods, as I believe it will be, then something more will have to be done.

After all, after a few years of extended credit terms the payments will begin to balance out any adverse factor caused immediately in the balance of payments. Are the Government satisfied that the banks are providing adequate services for exporters of capital goods? Are they prepared to discount bills sufficiently far in advance? I am told by manufacturers that this is not the case at the moment.

I doubt whether the banking system or the Government have faced up to the changing nature of our exports—from consumer goods, for which credit terms can reasonably be short, to capital goods for which the credit terms must inevitably be longer. The Government should find out whether it is necessary to set up alternative sources of finance if the banks are unwilling to provide them. This is quite apart from the credit insurance made available through the Export Credits Guarantee Department.

Reference has been made to the rather disturbing reports of the Government's attitude to trade with Russia and Eastern Europe. This is not only a question of credit facilities, but of the strategic list, which may well need looking at again. Industrialists believe that other Western European countries are less restrictive in their behaviour in this than we are. For instance, there is the wish of the Soviet Union to place orders for £20 million of ships, which is bound up with the question of whether this order should be bargained for by increasing the oil quota. Obviously, we must look at the economics of this type of deal. Have they been fully examined? I admit that they are complicated.

What are the present limits on the size of ships which can be built for Russia? According to the last report of Lloyd's Register of merchant shipbuilding, Denmark, West Germany, Italy and Japan together had 105,000 tons of ships building for registration in countries not named in the list. Named countries are all non-East European countries, and I presume, therefore, that the non-named countries are mostly Eastern European. We had none building. Why? Is it the case that other countries in Western Europe are not observing the rules which we insist that our shipbuilders should observe?

Now that the Common Market negotiations are temporarily delayed we must certainly try—again, I repeat what almost every other hon. Member has said in this debate—to get increased liberalisation of world trade. This will take some time. As my hon. Friend warned, we are not necessarily, despite the Kennedy Round, going to get very far with the United States. It is still a very protectionist country. There are not many signs that countries which still have very high tariffs will do much to reduce them except after hard bargaining, and we ourselves must engage in hard bargaining. We are not in a position to launch a free trade campaign of our own.

In the meantime, we must not be debarred from using perhaps unorthodox methods of encouraging the growth of exports. We must look at the problems of exchange rates and the sterling area. We must also look at the temporary use of import controls if necessary, although I would dislike that intensely. As my hon. Friend said, we must look again at the problem of capital exports. Now that the negotiations have broken down, we certainly cannot allow firms to transfer their manufacture from this country to Europe.

I believe that we may well have invested too much money abroad in recent years. It would have been better invested in this country so that the full return on our manufactured goods could have come here instead of the restricted profits one can generally transfer from a plant in another country. If we had any surplus on the current account of our balance of payments it would be better used to finance longer-term credit for British exports than for financing factories built in other countries by British firms.

The longer-term problem, however, is particularly tied up with the redevelopment of some of our older industrial areas and the need for regional planning to supplement national planning, which, we hope, will be based on the N.E.D.C. Part of our policy must be to make use of the natural advantages of each particular region.

For instance, this country has practically no factory more than 80 miles from the sea. This is an enormous advantage compared with many other industrial countries, many of whose factories are hundreds of miles from the sea. We should take advantage of this fact, as of the skilled labour and cheap fuel available in some areas. We must plan the redevelopment of these areas on scientific lines—for instance, by ensuring that our transport system provides the cheapest method of sending goods overseas, by the combined planning of our road, rail and port systems, which should also take in shipbuilding and consideration of the handling of goods in ships.

But the new factories to be built in these regions, and which they require if they are to play their part in our economic recovery, must be those in the growth industries based on research and development. I draw the House's attention to a very interesting maiden speech made by Lord Todd in another place. He is chairman of the Advisory Council on Scientific Policy. In a debate on the Scottish economy, Lord Todd pointed out that the establishment of satellite factories of firms whose research and development is located elsewhere is not the way to revive an area of traditional industries such as Scotland. The same applies to factories making consumer goods for highly competitive markets. If these areas are to be revived, and if the revival is to be securely founded, it must be done on the basis of technologically advancing industries.

I do not exclude the modernisation of some of the older industries, such as heavy engineering and shipbuilding. But the figures given by Lord Todd show that industry will not change by itself. The Government must either persuade new industries to come in or themselves establish new industries based on research and development. I suggest that we should look for some sort of extension of the National Research and Development Corporation into the field of manufacturing.

The problem of getting firms to move into these areas is one which needs more scientific investigation, investigation by the methods of the social sciences. The regional planning boards which ought to exist, but which so far do not, should be supported not only by economic research but also by operational research closely associated with the local offices of the Government Departments concerned. Operational research teams should work with the firms which are being persuaded to come to these areas, finding out the obstacles and helping them to overcome the problems and difficulties which prevent their doing so willingly.

All this requires a far more scientific approach to economic and regional planning that we have had so far or we see any sign of having. In my opinion—as hon. Members know, this is a personal, prejudiced view which I hold—we are unlikely to get this until the scientist and the technologist plays in our civil Departments a part as important as the one he plays already in our defence Departments.

These may seem rather mundane matters against the canvas of world politics which has been the background to this debate, but, as my hon. Friend said, the influence of this country will be proportional to its economic strength. "Selling Britain" in Europe or elsewhere by high-powered advertising is both undignified and a waste of money, so long as the rest of the world believes that we suffer from what is called, I regret to say, the "English disease", the main symptoms of which are lethargy and conservatism. A new sense of purpose is needed in this country to start our economic revival, and we are unlikely to get either sense of purpose or revival from this Government.

5.42 p.m.

Mr. Geoffrey Lloyd (Sutton Coldfield)

I entirely agree with what the hon. Member for Edmonton (Mr. Albu) said about the overwhelming importance of securing a good rate of national economic expansion on a broad front. As I see it, this means, in the immediate future, a wholehearted commitment by the Government and the country to making a success of the National Economic Development Council's growth plan of 4 per cent. per annum.

As hon. Members will agree, this rate will be very difficult to attain. It is twice the actual growth rate per annum achieved since the war, and it will stand or fall on our success in achieving the export target which is part of the plan. The export target itself, at about 5½ per cent. or a little more, is double what we have, in fact, achieved in recent years. Of course, if we had joined the Common Market and had a free run in a big market of about 170 million people, the job might have been easier. As the hon. Member for Cardiff, South-East (Mr. Callaghan) said, it will now be a good deal more difficult.

The Midlands are one of our big exporting areas. I have been in touch with some of the big exporting industries since the breakdown of the negotiations. There is no doubt that there is profound disappointment felt among them. Many have been preparing for going into the Common Market for a couple of years or so. Some had developed new products. Some had set up selling organisations in Europe which are actually operating today.

The hon. Member for Cardiff, South-East will be pleased to know that the present intention is to go ahead. They mean to "have a go". They mean to try to jump over the Common Market barrier, even when it starts to rise in some of our best markets, for instance, in Germany. Nevertheless, our industrialists will have to work very hard indeed to reach the export target and so make the growth plan as a whole possible.

I was very glad to hear what the Prime Minister said yesterday about the possibility of finding export incentives. I am sure that it will not be easy to do so, as he himself indicated, but it would be worth a great deal to us as a nation if we could find a sound and effective method of giving fiscal encouragement to exporters. I ask the Government, therefore, to search vigorously for tax changes which would encourage exports and, in particular, I ask them to consider seriously a proposal which is the result of just such a search by a number of hon. Members on this side of the House, under the chairmanship of my hon. Friend the Member for Somerset, North (Sir E. Leather). It is that we should introduce in this country the so-called added value tax, or turnover tax, giving a rebate of tax in respect of goods exported.

This plan has two great advantages. First, it is not just a bright idea. It is a tax actually operating in France, and it has been recommended by the Fiscal and Financial Committee of the Common Market Commission, under Professor Neumark, for general introduction throughout the European Economic Community. The second great advantage is that the giving of a rebate of such a tax in respect of exports does not contravene the G.A.T.T. or our other international trade obligations.

I will sketch briefly how the scheme works. As we proceed from the raw material, the value added by the operations of each firm is shown clearly on the invoice, and so is the tax. When the final stage is reached, and the article is ready for sale, the businessman has to consider the tax alternatives before him. They are these. If he sells on the home market, he has to pay tax on the final value he himself has added to the article. If he exports it, he himself pays no tax, and, moreover, he is able to reclaim the total tax previously paid on all the earlier processes of manufacture.

I will not weary the House with details, but hon. Members will see that this scheme provides a distinct differential financial advantage in favour of exporting. This is all the more important because selling abroad is nearly always more expensive than selling at home and, very often, small profit margins have to be accepted.

Mr. Callaghan

All these taxes, including this kind of cascade tax, have their disadvantages as well as advantages. One of the economic consequences of such a tax is vertical integration where there is no economic necessity for it. I hope that the right hon. Gentleman will not tie himself to this tax, but will ask the Treasury to look at other types of tax which could be even more effective.

Mr. Lloyd

If I may say so, the hon. Gentleman has not understood my proposal. This is not the cascade type of tax as practised in Germany. In fact, that type of tax was specifically rejected by Professor Neumark and his committee of the Common Market Commission in favour of the French added value tax, one of the advantages of which is that it does not have the defect to which the hon. Gentleman has rightly called attention in the cascade tax.

There are two proposed variants of the added value tax for this country. One approach assumes that the tax would be substituted for the Purchase Tax and would be levied at a rate of, say, 5 per cent. In this form, it would pervade the economy more widely than does the Purchase Tax and, although at a lower rate, would produce more revenue. The second approach assumes that the tax would be substituted for the Profits Tax and be levied at a lower rate, say, 21½ per cent.

I do not propose to examine these variations in detail because the arguments are intricate and would be more appropriate to a purely financial debate. Nor do I want to exaggerate the case for the turnover tax. No one tax scheme is likely to prove a panacea. It is the combined incidence of the various taxes which fall upon the exporting business which is the most important feature of all.

Here I should draw attention to the strong body of opinion, including the F.B.I., which holds that exporting would be helped if there were a shift of the burden of taxation from direct to indirect taxes, especially if these taxes were subject to rebate for exports. I hope that my right hon. Friend the Chancellor of the Exchequer will examine this case very carefully, and judge it strictly from the point of view of its possible contribution to our export efforts. It is in this context that I ask him to consider also the turnover tax and its attendant export rebate.

About one thing I am quite sure, and it is that if we find, after thorough investigation, that this is a sound and effective export incentive, no considerations of administrative convenience should be allowed to stand in the way of its adoption—

Mr. Gilbert Longden (Hertfordshire, South-West)

Has my right hon. Friend or anyone else made any calculation of the additional numbers of Inland Revenue staff necessary for the operation of this tax?

Mr. Lloyd

No. That is important, but I would hold that if administration could be held to a reasonable proportion, and there was a really practicable export incentive, it would be well worth while.

I should like to refer to the interesting and blunt statements made by the hon. Member for Cardiff, South-East about the incomes policy, and what he bluntly called a wages policy. The hon. Member, of course, speaks with the authority of a trade union leader, and I approach the subject with considerable diffidence. My only excuse for doing so is that, as some hon. Members may know, the Mines Department and the Ministry of Power, because of its origin under the original Lloyd George scheme, performs the function of the Ministry of Labour for the mining industry, and I have had an opportunity to meet a number of famous trade union leaders.

It is recognised throughout the House and the country that the subject to which the hon. Gentleman referred is one of the fundamental matters that will decide whether we succeed in, as the hon. Member for Pembroke (Mr. Donnelly) said, modernising our economy in the way we all want. We all know the difficulties involved, but it is as well that we should start by recognising other people's difficulties, and I think that many of those who propose some all-embracing formula to solve this problem in particular forget the position and the difficulties in which the trade union leaders are placed.

We have to remember that these men are the professional representatives of their members, and that it is their duty to look after the interests of their members. They can often guide and influence, but they are responsible to their members. Incidentally, most of them are elected, and we all know what they means. It is, therefore, very important that we should recognise their difficulties—as, indeed, I hope that they, in turn, recognise the difficulties of the employers under the stern discipline of the competitive system.

I was, therefore, particularly interested this afternoon when the hon. Gentleman brought forward a very important practical suggestion. As I must confess it had been my intention to make it myself, I was delighted to hear him do so. The hon. Gentleman thought that the practical method of progress in this matter was to go for longer-term settlements. That may seem to some people to be a relatively unimportant piece of progress, but it is not.

If we could get back to the longer-term settlements like that, for example, recently made in the electricity industry—running for three years, and incorporating within it a provision for a reasonable annual increase, and also a let-out in case the cost of living rises, but otherwise a binding agreement—accepted by both sides, we might make a practical advance. We would be doing something that is not against the philosophy and policy of the trade union movement because, in fact, longer-term settlements were accepted as an object of trade union policy before the war.

That could help us in our progress towards the modernisation of our economy, and avoid the price increases that would wreck our chances in the export markets. It would certainly be very important from the practical point of view to employers and industrialists, because one of their most important needs is the ability to quote firm prices, and longer-term wage settlements would help very much in that respect.

5.55 p.m.

Mr. Julian Snow (Lichfield and Tamworth)

The right hon. Member for Sutton Coldfield (Mr. G. Lloyd) touched on a fundamental issue when he referred to a fiscal incentive to aid exports. What bothers me is that this matter has recently been raised several times in the House. I was reading a debate that took place on 30th May last, which I did not attend but in which my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) participated, in which the Government undertook to examine this question most urgently. Yet here we are, still discussing it, and still, apparently, no nearer to a solution.

I will not conceal from the House that I am extremely sad that the Common Market negotiations failed, and I feel that we are probably in for a pretty thin time during the next two years. My hon. Friend the Member for Cardiff, South-East said this afternoon that the Government will have to take steps—if they remain in power long enough, which is doubtful; and certainly we shall have to take steps when we come to office—to prevent the transfer of capital to Europe that may be undertaken by companies in this country that wish to hedge against the increased tariff barriers with which, sooner or later, we are bound to be confronted.

The sorry thing is that these transfers of capital, or the disposal of licensing agreements, have in too many cases already taken place, with the result that whether new factories or branch factories have already been established by British companies in Europe or whether licensing arrangements have been made on behalf of British companies to function in Europe, the work to he done on the production of the goods in question is work that has been lost to this country and, in the light of the present unemployment figures, it is work we can ill afford to lose. I understand that the Government are acting on the advice that, allowing for the extra unemployment caused by the recent bad weather, there is a hard core monthly increase in unemployment of 20,000 a month. That being so, every step has to be taken to try to stop the rot, let alone to seek the alternative to the Common Market entry.

I believe that we are in for a period of quite a number of bilateral trade agreements, since it seems to be quite impossible for any large-scale improvement in our exports to be achieved quickly by taking advantage of an amended Trade Expansion Act, or any increase of East-West trade, or any increase in Commonwealth trade. I regard much of the discussion we have so far had in this debate about the Commonwealth as wildly sentimental. The idea seems to be retained in the minds of the public, aided and abetted by certain organs of the Press and what I will call the anti-Market lobby on both sides of the House of Commons, that the Commonwealth as a whole is still economically viable.

That is the impression in the public mind, but it is a false impression, and is based on an absolute ignoring of the economic facts of life. Year by year we see, if not hesitation, at any rate excuses being found for non-attendance at the Commonwealth Prime Ministers' conference. Almost monthly we see evidence that countries of the Commonwealth, whether they have achieved independent status, Dominion status or are still dependent territories, looking at their economic future in terms of nationalism. In my judgment, it would be absolutely wrong for us to continue to think in terms of Commonwealth conferences which would produce a common policy outside the general provisions either of G.A.T.T. or O.E.C.D.

Mr. Brian Harrison (Maldon)

While I agree in part with the thesis of the hon. Gentleman about the Commonwealth countries, surely it would be extremely stupid not to investigate this line.

Mr. Snow

I do not know what the hon. Gentleman means by "this line".

Mr. Harrison

The line of Commonwealth trade, and to have conferences of Trade Ministers.

Mr. Snow

I do not at all disagree with a conference of Commonwealth Trade Ministers. I am pleading that we should be realistic about this and realise that they are not talking in terms of sentimentality inspired by an old type close-knit Commonwealth, but in terms of nations looking after their own interests. Since I think that the hon. Member for Maldon (Mr. B. Harrison) hails from Australia, may I tell him this—Australia is one of the greatest protectionist elements within the Common- wealth. In my constituency there is a company which produces specialised forms of tape and fabric binding. This company has to pay a higher tariff to get its goods into Australia than into the Common Market at the present time. How can we still believe in Commonwealth sentimentality under such circumstances? I am not blaming the Commonwealth countries. But I believe that when we discuss matters we should not jeopardise our chances of success by thinking in sentimental terms which are long out-of-date.

While these negotiations with the Common Market have been going on, countries like Australia and Canada have been negotiating bulk contracts for wheat with China, a trade pattern which I consider highly desirable. But those countries are not looking to help us but to their own national interests, and who shall blame them? I should have thought that we might consider whether we can pick up something from the Continent and the industrial organisation as it seems to be developed in such countries as France. Why is it that ever since the Labour Party went out of office, and indeed even before, nationalisation, for instance, has been a matter for everyday criticism and niggling by the Press and by hon. Members opposite? That is not the case in other countries where there are successful nationalised industries. I cannot in this matter see any successful achievement of an amalgamation between nationalised industries and private enterprise in this country such as exists in France.

One of the things which has become so apparent over the years since the party opposite has been in office is its utter neglect of small business. Time after time we hear speeches made by hon. Members opposite on behalf of large-scale industry. But do we ever hear anyone talking about the small business man? I have asked questions time after time of the Board of Trade concerning the statistics relating to small industries. I have been told that the collection of the information asked for would be too expensive, or that it was not at the disposal of the Board of Trade. Yet the mainspring of our industry is the small business man. In my judgment, the party opposite has sacrificed its historic rôle in this respect recently because now its paymasters are among those people in heavy industry who are afraid of being nationalised.

Why cannot we achieve some sort of organisation whereby small productive engineering firms, for example may have a share of the world's business? We might think in terms of some form of British export commission which could act on behalf of the thousands of small enterprises by receiving large orders, marshalling them and farming them out, and delivering as one organisation, taking account of the publicity and credit and banking requirements and of co-ordination of production. In my judgment, it is only in this way that we shall use the energy and inspiration of small business.

Mr. William Yates (The Wrekin)

I have never heard a criticism from this side of the House of any form of pari-Statal organisation like those in Italy or France to help small businesses.

Mr. Snow

I am sorry, I did not catch what the hon. Gentleman said.

Mr. Yates

I was saying that I have never heard a criticism on this side of the House against any form of pari-Statal organisation—that is Government helping small businessmen—as they do in France or Italy.

Mr. Snow

I wish that that kindly inspiration had been evidenced in speeches to which I have listened over all these years. But, in my judgment, it has been absent.

I am saying that if we could coordinate the efforts of small industries in this country we might make considerable progress. I do not believe—certainly outside the special areas of this country —that there is a real requirement for a vast number of Industrial Development Certificates to be provided. The real requirement is to mop up the unused capacity in hundreds of existing factories up and down the land. I challenge any hon. Member to go to his constituency and be unable to find a live, up-to-date, modern factory without any surplus capacity. That is the tragedy of the present situation

I wish to ask two questions of the Government about the curious way in which they go about trying to obtain more export trade. It will be recalled that two or three months ago the Government invited the Vice-Minister of Trade of the People's Republic of China to visit this country. Then there occurred the dispute between India and China and at two or three days' notice the visit of the Vice-Minister was cancelled. Of course, we had to support India in this matter. But we should also have recognised how important is the whole question of "face" in China. It seems to me that here was an invaluable opportunity not just to discuss trade, but to let the Chinese know, in such a way that they would not lose face, exactly where we stood on the Indian question. Thereby we should have gained not only their respect in the matter but enhanced the trading possibilities. It seems incomprehensible to me that action should have been taken in the way it was.

Why cannot we do a little more to make use of new ideas to achieve exports with Government backing? I reported to the Minister of State, Board of Trade, on the visit to Tunis recently of a Japanese floating trade fair—a ship. I reported that this ship had arrived at the port of Tunis. It was a vessel of under 13,000 tons designed for the purpose. Invitations to attend the exhibition were distributed most efficiently. I met the captain of a small fishing vessel who had received an invitation. In this ship the Japanese exhibited a whole range of their industries, from heavy industry through electronics and radio, and so on, down to small manufactures.

The Minister of State informed me that the Board of Trade knew about this floating exhibition. The idea had been put out to British industry but had not appealed to British industrialists. I was not satisfied with this, and I made inquiries and obtained further details about these Japanese exhibition ships. I found that in recent years no fewer than four of these ships had been sent from Japan to Central and South America, to the Mediterranean and to South-East Asia. The ships are designed to act either as floating exhibitions or for use for emigration or ordinary cargo purposes. I am advised that there is a basic staff to took after maintenance and so forth and that the technical staff fly from port of call to port of call. The financing is done on a 50–50 basis by the Japanese Government and individual members of the floating fair association. We must think of new ways of exporting our goods. We read in the local Press of new small nations like Tunisia signing contracts with Italy, Germany and Sweden, and, now and again, like a little bit of manna from Heaven, we see a mention of Great Britain.

I will tell the House a story about Tunis, which buys more from this country than we buy from it. The other day a technician came from Tunis charged, I understand, with the task of establishing contact with architects and designers who would work out a steel plant for that country. This was being negotiated when he became aware of the availability on the British market of extremely cheap women's clothing, and he placed on behalf of his country, which is involved in a certain amount of collective economy purchasing, an order for a vast quantity of women's clothing which is now on its way to that country. This order was secured casually and without any forethought or idea by our manufacturers that there was this potential. This is the sort of thing into which the Government might look.

Take the staffing of the commercial elements in our embassies and trade commissioners' offices abroad. Cannot we do with fewer Service attaches and many more commercial attaches? These days many countries are thinking of having defence attaches. With the transfer of military, naval and Service responsibility generally to N.A.T.O. and to other international organisations where we have vast staffs, cannot these gentlemen, who do a good job according to their briefs, be usefully replaced by commercially-trained attaches or secretaries who will go into the market and try to secure orders, because this country needs customers like it has never needed them before?

I conclude by asking the House to consider this matter. In our endeavour to find new markets, we must kill off some of our sacred cows. We must think of new ideas. We must realise that the Commonwealth is a vast market, whether it is made up of old white dominions or newer emerging territories, or countries which have not always been in the Commonwealth which have purchasing power. The worst possible service we could do ourselves, to put it in the least generous way, would be if we conspired to depress the commodity prices of the raw materials which those countries produce. If we cannot help them, in this matter we shall in the end cut our own economic throats.

6.13 p.m.

Mr. R. H. Turton (Thirsk and Malton)

The hon. Member for Litchfield and Tamworth (Mr. Snow) made a rather lugubrious remark when he said that we were looking forward to a rather thin time. On the other hand, he and, I think, every other speaker today, with possibly one exception, have looked forward and not backward. Yesterday I felt at times as though I was attending a funeral service. There was so much talk of the body which was dead but which must not be buried. This is surely the wrong attitude on which to found a new international policy. I take no exception to the very full account of the last illness given by my right hon. Friend the Lord Privy Seal. No one could have been more able in his care of the patient, the negotiations, than my right hon. Friend. All of us, whether we agree or disagree with him, admire the way in which he carried out those negotiations. However, I think that we should now look ahead and not backward.

As the House knows, I have never been able to see how this country could merge with the Community on terms which were satisfactory to the Commonwealth, to E.F.T.A. and to British agriculture. I thought that that was quite impossible. But now that we are at the end of the negotiations we have a really great opportunity.

I wish to concentrate on four points in dealing with the future for this country. The Times leader on the moral crisis was right. The two best speeches that we had yesterday were those of my hon. Friend the Member for Cambridge (Sir H. Kerr) and the hon. Member for Pembroke (Mr. Donnelly), who spoke to the same effect. We are now attacking this problem about eighteen months later than we might have done because of the negotiations. Thanks to my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), we have one advantage. We have the National Economic Development Council which has made its first announcement that we should aim at a 4 per cent. rate of growth.

We should follow this up. This is not a matter for party politics. It is not a matter for management on one side or labour on the other, and here I agree with what the hon. Member for Cardiff, South-East (Mr. Callaghan) said earlier. This is a great opportunity. This is the time when we should call a round table conference of both management and labour to discuss the implications of a 4 per cent. growth rate. People in this country, irrespective of their party, are feeling that bad labour relations and the sabotaging of productivity by extremists cannot be tolerated. A round table conference could do much good by inquiring into all the obstacles to growth and seeing whether legislation is required to remove them. So much for the moral side.

Secondly, we must expand our trade with the Commonwealth and with E.F.T.A. I welcome what my right hon. Friend the Prime Minister said yesterday. I am sure that it is right to start not with a Prime Minister's conference but with a conference of trade Ministers. I beg the hon. Member for Litchfield and Tam-worth to realise that this is not wild sentimentalism but hard material facts of trade. During the eighteen months of negotiations, Commonwealth preferences have been in jeopardy, and, rightly, the Commonwealth has looked for alternative markets. That was absolutely inescapable. It is right that Australia should look for markets in China and Japan.

Yet, notwithstanding this switchover in trade, our exports to the Commonwealth and E.F.T.A. preferential areas last year amounted to £2,000 million, and our exports to the Six Common Market countries amounted to £770 million, a ratio of three to one. That is why it is vital that this country should expand—or extend, as my right hon. Friend the Prime Minister said—our exports to the Commonwealth. What many hon. Members forget is that, in trading with the Commonwealth, preferences make a tremendous difference. The system of preference, which was started long before the coming into being of the bilateral agreements at Ottawa, has helped our trade.

Since I believe that there will be shortly Australian-British trade negotiations, I should like to refer to Australia's record and to deal with figures for 1960–61. In that year, our exports to Australia amounted to £A341 million. Australia sent to us exports amounting to £A232 million, a balance in our favour of £A109 million. Of our exports to Australia two-thirds entered duty free, 85 per cent. received some sort of preference, and the preference averaged 10 per cent. Of Australia's exports to us, 55 per cent. received a preference averaging 9 per cent. Those are the facts of the trade. Those who malign or minimise the value of Commonwealth trade, as I think the hon. Member for Lichfield and Tam-worth might have been interpreted as doing, should remember those facts.

How are we to help? Quite clearly we can help only if we can take more from the Commonwealth. We shall not be able to sell more to the Commonwealth—because these are developing countries—unless we can take more from the Commonwealth. Equally, we have to realise that one of the effects of the breakdown of these negotiations is to demonstrate that the Community is an inward-looking protectionist body which will make it more difficult for the Commonwealth to sell to Europe. In consequence, we and the E.F.T.A. countries must do what we can to remedy that state of affairs.

Can we take more? I have been examining our imports of food and comparing last year with ten years ago. Looking at the figures, it seems that in those ten years a considerable part of our market for food which we used to get from the Commonwealth has gone to foreign countries. Take the case of cereals. In 1952 55 per cent. of our cereal imports came from the Commonwealth. Last year that figure had dropped to 36 per cent. In 1952 48 per cent. of our meat came from the Commonwealth; last year it was 31 per cent. Our imports of butter were 62 per cent. from the Commonwealth in 1952 and 56 per cent. last year. In fruit and vegetables we imported 35 per cent, in 1952 and 25 per cent. last year.

Clearly we ought to remedy the switch which there has been in the last ten years. Last night my right hon. Friend the Secretary of State for Commonwealth Relations said that it is the expansion of British agriculture which has caused this switch, but that is not so. The switch has been from the Commonwealth to foreign countries.

Mr. John Mackie (Enfield, East)

Has the right hon. Member taken into consideration the tremendous amount of imports of maize, fruit and so forth which we used to get from South Africa when it was in the Commonwealth?

Mr. Turton

That might possibly have had a marginal effect on cereals, but it would not have had any effect on meat or vegetables or butter. There was, in fact, not a great difference in the switch caused by that change, but there has been a very large switch comparing ten years ago with last year. My right hon. Friend said that this was all due to British agriculture, but that is not so. Butter was New Zealand's greatest export from pre-war days to today, but there has been an increase of less than 1 million cwt. in home production, whereas she usually exports to us 4½ million or 5 million cwt. a year. We should remember that we are eating more.

How are we to put this right? I was very worried when my right hon. Friend the Lord Privy Seal said that bilateral arrangements are out. I think the argument for the revision of G.A.T.T.—which was put extremely ably by my right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith) yesterday—is completely non-rebuttable. G.A.T.T. may have been perfectly all right in 1947. It was devised for the postwar trading pattern, but directly we have the rise of common markets and free trade areas, G.A.T.T., with the most-favoured nation clause, if operated, precludes any world-wide reductions of tariffs. We want to try to get reduced tariffs and to reduce them reciprocally, which means that countries or groups of countries should be allowed to reduce tariffs without that spreading across the world, because it is the most-favoured nation clause which will prevent such operations as the Kennedy Round being very successful at present.

The second point which arising from this question of expanding Commonwealth trade is the danger of dislocation of trade through balance of payment crises. I ask the Government in their consideration and talks with the trade Ministers to consider whether the time has not come to establish a Commonwealth payments union on the lines of the European Payments Union which has been so successful. If we had such a union I believe it would solve many of the trading difficulties we have had in the Commonwealth, especially with New Zealand, through her having balance of payment problems. While on this point I also suggest, as another hon. Member suggested, that now we have a European Export Council and the Western Hemisphere Export Council, surely the time has come to have a Commonwealth export council to boost trade in the Common-wealth.

Turning from the Commonwealth, my third point is on domestic agricultural policy. I should like the Chancellor of the Exchequer, who I gather is to reply to the debate tonight, to make quite clear what the Prime Minister was alluding to when he talked about ending the open-ended commitment in agricultural policy. As I see it, an agricultural policy that does not deal with the question of imports and give the guarantee without any question of any control of imports is bound to be unduly expensive to the taxpayer. I think there is an unanswerable case for dealing properly with the problem of dumping and subsidised imports. That is the more necessary because under the Common Market agricultural policy which we have all been studying so studiously in the last few weeks, one thing with which this country will be faced is the threat of a large quantity of subsidised exports from French agriculture, subsidised by the European Agricultural Commission.

At the moment our anti-dumping legislation is not satisfactory to deal with agricultural commodities. I beg the Government to devise a system of adequate dumping deterrents in the interests both of the taxpayer and of British agriculture as well as the long-term interests of the Commonwealth.

The fourth and final point to which I draw attention is the problem of primary producers and the problem of emerging countries with developing manufacturing industries. It is clear that if we pour in aid and there is at the same time a radical fall in the prices of primary produce, the whole of the aid will be wasted. This point was made yesterday from the benches opposite. For this reason, I was delighted to hear my right hon. Friend the Prime Minister again endorse the policy of commodity agreements.

We must, however, go rather further. We must try now to get all industrial countries to remove obstacles against the manufactures of primary producing countries. If we believe in developing world progress, I do not see how we could advance loans to a country such as India and, at the same time, raise obstacles against the export of the manufactures that India needs to sell for the servicing of her loans. I regard this as one of the biggest problems of today.

We have been reading in all the reports from the G.A.T.T. year by year that the rich countries are growing richer and the poor countries poorer. Whether we are in the Common Market or outside it, unless that trend can be halted, the world will reach economic chaos. It is in this direction that Britain's most important rôle lies.

I believe that our rôle is to be the link between the industrial countries and the developing countries. That is the meaning of the Commonwealth, of the Union Jack. It is what our influence throughout the world has meant. Of course, Mr. Dean Acheson was perfectly right in suggesting that our rôle had to some extent changed. Nevertheless, if that remains our main rôle, I do not. believe that there is a more important one in the twentieth century. Equally, having that rôle, it would be impossible for us to enter a tight, protectionist inward-looking European community.

My right hon. Friends were quite right to specify their safeguards and to say that we had to retain that rôle. The rôle was quite well described when President de Gaulle said England is insular, she is maritime, she is linked through her exchanges, her markets, her supply lines to the most diverse and often the most distant countries. That sums up our position. It also sums up the reason why the negotiations broke down.

Let us not look back in anger on those facts of life and the facts arising from our rôle. We have a great opportunity, but it requires inspired leadership. It also requires great determination from the people. This is something above all party politics. It is something that Members of Parliament, on both sides, have to teach the people of England, that this opportunity will only lead to success if in our interdependence we are ready as a people to make sacrifices. The hon. Member for Pembroke was perfectly right in that. Our interdependence is not across the Channel, not across the Atlantic Ocean, but throughout the world. For that, there must be a readiness to accept priorities that are often in favour of people in the Commonwealth and not necesarily of our own material prosperity at home.

If we can teach that lesson, I am certain that the sacrifices will be well worth while, because by that means we will be raising the standard of living of millions of people throughout the world and making a contribution towards the peace of the world.

6.36 p.m.

Mr. John Stonehouse (Wednesbury)

As a persistent critic of the Lord Privy Seal, I congratulate the right hon. Gentleman on the energy with which he pursued the negotiations. I understand his great chagrin that they have been brought to an end. The right hon. Gentleman was, however, misguided in his enthusiasm. It is a great pity that his tremendous energy during the last 18 months was not applied in a more constructive direction.

The whole Tory Administration stands condemned on two counts. The first is that they applied to join the European Economic Community on what were bound to be humiliating terms. As the Chancellor of the Exchequer said in the House of Commons after the last election, the Treaty of Rome would be unacceptable both to this House and to opinion in the United Kingdom. The Government's policy was thoroughly wrong and the Conservative Party has only itself to blame that the negotiations have failed.

The Government also stand condemned because during the long period of negotiations they made no preparation for an alternative if the negotiations broke down. Time after time we have asked the Ministers concerned what arrangements were being made in case the negotiations broke down. We were told that there was no need for this and that all energies had to be spent on bringing the Common Market negotiations to a successful conclusion. That was misguided. Alternative arrangements should at least have been discussed between the officials concerned so that the opportunity that arises from the breakdown of the negotiations would not leave the Ministers in this state of indecision and unpreparedness.

I believe that the Conservative Party, and Ministers particularly concerned, decided to enter Europe because they were appalled by the enormity of the economic failure for which they had been responsible in the United Kingdom. They thought that their decision to enter Europe was a way out and would divert the attention of public opinion to Europe. With everybody's gaze upon the negotiations in Brussels, Paris, Bonn and elsewhere, people would forget what was going on here at home. The Government hoped by skilful propaganda to make this out to be a progressive move on the part of the great adventurers, the pioneers in the new development of Europe, towards the breaking down of sovereignty and creating new world understanding.

Those of us who advised caution, who said that the European Economic Community was not all that it was cracked up to be, who said that there was danger that it would be inward-looking and restrictive in outlook, were called Little Englanders. Scorn was poured upon us. Now, however, we have been proved to be right. The European Community is a tight, protectionist community that is selfish, interested in protecting industrial producers against the primary producers, interested in safeguarding inefficient agriculture and putting up tariff walls against low-cost food produced elsewhere in the world, interested in protecting textile manufacture in Europe as against the lower cost manufactures of India and elsewhere. We were right. But this selfish outlook in Europe was clothed in a fantasy of progressive idealism. Help to the under-developed areas was advocated as though this was the genuine interest of the Community, but in fact as has been shown in the detailed negotiations, all that Community is prepared to give to the newly developed States is worth little. In fact they are not even going to be given the means of servicing the loans which they would obtain.

I think the Tory Party looked to Europe because of the psychological impact of the collapse of the Empire. The Commonwealth seemed to be disintegrating. Many members of the Commonwealth said and did things of which the Mother Country did not approve; so the Tory Party turned against the Empire and the Commonwealth and looked to a new association in Europe to get away from this psychological shock of seeing a new Commonwealth growing up which they themselves did not understand. They also resented the evolution of colonial countries towards independence; the Tory Party were aghast indeed that this development which has gone on in the last few years. They look to Europe to build up a psychological barrier against this emergence in the colonial world.

There are some Conservatives whom I would absolve from blame in this, but the Tory Party as a whole has this outlook. It is one of the reasons why it changed almost overnight from being a sentimental Empire party into a pro-Europe party. The Administration which this country has suffered in the last ten years is, therefore, to be blamed for wasting an enormous amount of time and opportunities to put our own house in order. The energy which has been expended on negotiations in Europe could have been spent on building up our economic relations with the rest of the world, and in particular the Commonwealth trade connection. We should have been in a very much stronger position today had that been done.

General de Gaulle decided eventually to veto our efforts because many Europeans were shaken by the hypocrisy with which this country, and in particular the Conservative Party—but it is not confined to that party—approached these negotiations. I have myself heard in Paris, Strasbourg and elsewhere, where I have attended European assemblies, the reaction of members of the E.E.C. when they found that we wanted to keep links with E.F.T.A., with the Commonwealth and with the rest of the world. They were shaken that we wanted to keep these links in any form at all, because they had the impression from the speeches which had been made by the Lord Privy Seal and others concerned in the negotiations that we were accepting wholeheartedly political union in Europe and that we would not expect to keep our Commonwealth ties. I have heard from the mouths of speakers from the Netherlands, as well as from France, Belgium and Germany, that the Commonwealth had been dismissed as a psychological problem.

Members of the European Economic Community do not understand the importance, politically as well as economically, of the Commonwealth ties to this country, and I feel that the Lord Privy Seal and his colleagues have tailed to make this clear in Europe.

We have given the impression in Europe that we would accept the union but we are not honest about it in Britain. So many Ministers, when asked in this House as well as in the country whether we would accept the political integration of Europe, just avoided the question. They never told the British public exactly what was involved in our application to join Europe. No wonder the Europeans were exasperated when they could see that we were being hypocritical in our approach.

I also find in the replies which we have had today in the House, particularly on the guarantees to our E.F.T.A. partners, a good deal of evasion. We are told that the guarantees to the E.F.T.A. States were simply that we would not go into the Common Market until their position had been satisfied. The negotiations would be completed, but we would wait until the actual implementation of the decision to go into the Common Market until every one of the E.F.T.A. countries had made satisfactory arrangements.

That does not tie up with other questions and answers we have had in this House. Time and time again, we have asked for a guarantee that we would have a general election before going into Europe. We have always had that question fobbed off. Yet if the Lord Privy Seal is sincere in his guarantee that all the E.F.T.A. countries would be safeguarded before we actually went into Europe it is quite obvious that it would not have been achieved until the end of 1964 or the beginning of 1965, even assuming the negotiations went along smoothly. There would have been adequate time for a general election, and I believe it would have been necessary, quite apart from these negotiations, for an election to have been held.

This is another sign of the hypocrisy of the Tory Party. They go into Europe and say that we are making our application and that we accept the Treaty of Rome, but Europeans at the Western European Union and the Council of Europe and elsewhere have expressed to me the view that they know very well the Tory Party does not have a mandate for this action. No wonder they have no respect for it.

At the last General Election it was not in the Conservative Party's manifesto. The only reference was to industrial free trade. There was no reference to joining Europe. Indeed, after the election the Chancellor of the Exchequer and other Ministers stood up in the House and condemned the Economic European Community—

Mr. David Webster (Weston-super-Mare)

Could the hon. Gentleman give an instance of one single treaty which was signed after receiving a mandate from the country at a general election?

Mr. Stonehouse

This goes far further than any normal treaty which we have negotiated in the past. This is in fact a jettisoning of our soverignty over a whole range of our responsibilities. This House would itself he turned from a law-making body into an administrative organ of the European Community. We would become a sort of county council administering the United Kingdom part of the E.E.C. because the major decisions would he made by the European Commission and by the European Parliament if adequate powers of supervision had been given to it.

This application to join the Common Market and the acceptance of the Treaty of Rome went much further than any treaty which this country have ever signed in the past, and it would have been quite wrong for the Conservative Party, even with its majority of 100 in this House, to have taken Britain into the Common Market without an adequate mandate from the country.

Mr. F. M. Bennett (Torquay)

If the hon. Gentleman is right that we could not have managed to complete this arrangement until the end of 1964, then, on his argument, we would have had to have an election before then, in which case the second part of his argument falls.

Mr. Stonehouse

I am demonstrating that the Ministers concerned have been hypocritical about this because they have given Europeans the impression that we could go into the Common Market fairly soon; that there would have been no need for any delay. They should have been honest with them, and with us, and said that we could not join Europe until there had been a General Election in this country, and until they had a clear mandate to join. That sort of honesty would have earned much more respect for this country in Europe than has been earned by the evasive way in which the negotiations have been conducted.

It is a great pity that all this country's eggs have been put into one basket during the last eighteen months. We have neglected oportunities elsewhere because the attention of the Ministers concerned has been directed to this one aim. I believe that we now have to take advantage of the fact that the negotiations have failed. There are many advantages which we can gain because this application has now quite clearly failed. I believe that it is essential at the outset to withdraw the application so that we can destroy the myth which is still being fostered in some quarters that there is still an opportunity for us to join, that if we are good boys, if we behave ourselves, and if perhaps General de Gaulle is replaced by somebody else, eventually we can get into the Common Market.

I think that it would be foolish to behave in that way. It would mean that there would still be indecision in this country with regard to investments and so on. It would mean that we would approach the task of negotiating new arrangements with the Commonwealth and elsewhere with a certain reluctance, hoping perhaps that eventually we would get into Europe. I hope, therefore, that it will be made quite clear that we are allowing our application to lapse, that we are not expecting it to be furthered, that we wish the E.E.C. well, and that we are not going to try to break into their club again.

I believe that only in that way shall we establish a strength and firmness which will be good for the E.E.C. as it will be for us, because with that firmness we shall be able to negotiate arrangements for trade with the E.E.C. which will give us many of the advantages which we would have obtained in terms of trade if we had gone in, as well as giving much better opportunities to Commonwealth exporters both to this country and to Europe.

One of the advantages which we now have, but which we would not have had if we had gone into the Common Market, is that food prices can be kept low. It is apparent that if we had gone in the price of food in this country would have risen considerably. Take only one example, the price of wheat. The British market price is about £20 a ton, but it was expected that by 1970 the price would jump to between the French price of £34 and the German price of £41. What a dramatic increase that would have been, and it would have affected the price of other foodstuffs in this country, apart from considerably increasing the price of bread.

Again, we would have had to accept French dairy produce in place of New Zealand produce. We would have had to accept more expensive fruit in place of the cheaper fruit which we import from elsewhere. All this would have made for higher prices in food and led to increased wage demands which would have considerably weakened our competitive position. I think, therefore, that we must retain our policy for the importation of cheaper food from the Commonwealth, and thus give ourselves a competitive edge over European producers.

I think it has also the advantage that we can now engage in State planning without overall direction from the Community. This matter was the subject of some discussion and dispute, but there is no doubt that if we had gone into Europe we would have given a great deal of our planning powers to the Commission, and we would correspondingly have given away some of our own opportunities to plan here. I think that we must now take advantage of the fact that we are completely free to plan our own resources without worrying about what the E.E.C. or the Commission may think.

The question of Commonwealth trade development has been dealt with during the debate, and I will not go over this in detail. I think, however, that we now have many opportunities of increasing our trade with Commonwealth countries. Consider India for instance. In 1961 we exported £152 milion worth of goods to that country. In 1962 we exported £116 million worth, a drop of £36 million, but Indian imports as a whole went up. They were buying goods elsewhere. We have lost opportunities in India, and I think that we should now attempt to get those back. India, with a population of 400 million, has a tremendous potential market especially if they can be helped to break through their subsistence level to a reasonable standard of life.

Australia, even with the uncertainty caused by Britain's application to join the Common Market, increased its purchases from us from £202 million in 1961 to £229 million last year, an increase of £27 million. There is, therefore, considerable scope there as well.

New Zealand imported £124 million worth of goods from us in 1961. This is a tremendous figure when one remembers that it has a population of only 2½ million. One New Zealander buys as much from us as 20 Germans and 30 Frenchmen. There is not quite so much scope there to increase our trade, but those figures show the kind of export figures we can achieve in proportion to the population if we go about things in the right way. This is an example of what could be achieved, for instance, in Australia.

I think that the good suggestions which were made during the debate concerning the development of Commonwealth trade must be closely examined, and of course overall world trade must be increased and attention paid to the suggestions made by the National Farmers Union, and other bodies, with regard to world commodity agreements to ensure stability.

I also think that we must prepare for effective participation in the United Nations world trade conference which is due to be held next year. I think, too, that the action of the Forward Britain Movement in calling a conference to discuss the economic problems arising from Britain's failure to join the Common Market and to call attention to the need for world trade discussions, a conference which is to be held next month, should be applauded and supported so that we can pay attention to the constructive alternatives which we must consider in view of the failure of these negotiations.

The Conservative Party, having vacillated from its antagonism to Europe to all-out enthusiasm for it, and now having been rebuffed in the way it has, has shown its instability, and has shown, not only through Ministers like the Secretary of State for Commonwealth Relations, but as a party its inability to serve the people of this country. It has not only been inefficient, but wrong and misguided in its policy. It has been hypocritical to the European Community and to the electorate here. I believe that it has outstayed its welcome and the sooner we have a General Election to get rid of this Government the better it will be for this country.

6.59 p.m.

Mr. H. A. Price (Lewisham, West)

I am one of those who favoured our joining the Common Market, not so much because I was dazzled by the economic prospects, but because I did not much like the look of the economic consequences of staying out. That decision has now been made: we are out. I do not take the view that that need necessarily be a bad thing. In fact, in the end it might prove to be, like the Great Fire of London, a blessing in disguise.

Whether we had gone in or not, in the end the basic problem is the same. Had we gone in, the markets of Europe would have been open to us, but our home market would have been equally wide open to them. To have taken advantage of the opportunity and to have protected ourselves against the danger, we would have needed the maximum efficiency and the greatest possible imagination and adaptability from our industry.

Now we are not in, the situation is roughly the same. It is true that our home market will be protected from European imports, but we have to face in the other markets of the world exports from a large and expanding European economy, which, based upon enormous and growing consumption, will be able to export at little more than run-on costs. Again, the solution for us is the same—maximum efficiency and the greatest possible inventiveness and ingenuity in our home industry. It is to some aspects of this problem that I propose to direct my remarks.

It has been said that the door into Europe has been slammed in our face, but not locked, bolted and barred. This may be true, but I cannot think that it would be wise to allow ourselves at such a time to divert our energies from the immediate problem. Industry in this country has already suffered from the delays and uncertainties of the long-drawn out negotiations. To prolong that uncertainty further could do nothing but harm. We have been holding our breath too long already. While we must bear in mind the possibility that one day, maybe, we shall be able to get in, we must now concentrate on the certainty that at the moment we are out.

There has been a positive flood of what I will call conventional suggestions as to what we should do about it—expand Commonwealth trade; greater co-operation with E.F.T.A.; talks with America; the liberalisation of trade; the reduction of tariff barriers, and so on. Let no one think that I minimise the contribution that these can make. However, if we delude ourselves into thinking that the complete solution lies there, we shall be making the greatest mistake of all. It is rather like a man taking an aspirin to cure a headache which is caused by eye strain. We shall be treating the symptom and not the basic cause.

All these measures lead in the same direction. In or out of the Common Market, liberalise trade as much as you like, reduce tariff barriers as much as you like, in the end we must have a home industry which is capable of meeting world competition and beating it on equal terms. This has always been so, but for too long now we have allowed ourselves to forget it.

My right hon. Friend the Prime Minister has often been criticised for something he said four or five years ago, that we had been having it so good. I cannot think why. It seemed to me to be a simple statement of truth. But note what he did not say. He did not say that we have never had it so easy. The truth of the matter is that we had been having it good and easy, but that could not last. We can go on having it good. We can see to that. But we cannot go on having it easy. The cruel world outside will see to that.

The problem now is to revitalise our industry and, as my right hon. Friend the Minister of Labour said so rightly a few days ago, this is a problem for the whole nation. In the end, whether we succeed or not depends upon the 22 million or so men and women employed in industry at all levels. The Government cannot do it. The most the Government can do is to create a climate in which those 22 million people are willing to do it and conditions in which they are able to do it.

There are many things the Government can do towards that end. Many of them come under the heading of fiscal measures, and I propose to leave those almost entirely to those of my hon. Friends who are expert in these subjects. I ask hon. Members to note that I say "almost entirely", because there is one thing I want to say on this aspect. I was very glad to hear the Prime Minister say yesterday that thought was being given to the question of export incentives. I had intended to say something on this topic.

We have just lost an order for a Norwegian liner, estimated at between £5 million and £6 million. I have my criticisms of the British shipbuilding industry, but it cannot be blamed for this one. The order went to France, which is hardly surprising, since the price was subsidised by a French Government subsidy amounting to £900,000. I have said that British industry must be prepared to meet and beat competition on equal terms. If it were possible in words, I would underline the words "on equal terms" three times in red. These cannot be called "equal terms". I believe that if the British shipbuilding industry will pull up its socks it can meet and beat foreign competition on equal terms, but it cannot beat the French shipbuilding industry plus the French Government. It will need the help of the British Government to do that.

Whether it be done directly in the form of subsidies or by some other fiscal device does not really matter in the end, so long as it is effective. However, it means that the British taxpayer will have to foot that bill. I submit that the British taxpayer is entitled, in return for the help which I think he will have to give to the shipbuilding and ship-repairing industries, to expect that those industries will render themselves efficient by the elimination of many of the harmful restrictive practices which have bedevilled the industry for so long.

Mr. Richard Marsh (Greenwich)

Would the hon. Gentleman accept that the British taxpayer, if he puts up the money, should also be entitled to some control over these industries and the way they spend the money?

Mr. Price

It depends what the hon. Gentleman means by "control".

Mr. Marsh

Effective control.

Mr. Price

If the hon. Gentleman means control in the Socialist sense, I say, "No." If he means what I am saying now, that the taxpayer is entitled to receive in return for that money the maximum efficiency of which the industry is capable, I agree. I am referring in particular—I make no apology for it—to the malpractices and the restrictive practices which have bedeviled the industry for so long.

Mr. William Warbey (Ashfield) rose

Mr. Price

Not again. Let me finish this part of my argument, anyway.

If the shipbuilding industry in the North-East and elsewhere wants to know why it has been having such a thin time lately, I suggest it sees what is happening in shipbuilding yards on the Continent. If the ship-repairers in Falmouth and Liverpool want to see where the tankers have gone which they should be repairing, but are not, I suggest that they visit the tanker repair yards in Palermo. The truth of the matter is that they are allowing the Continental workers to work them out of a job.

Mr. Warbey

The hon. Member has referred to restrictive practices in the shipbuilding industry. Does he recall the words of his right hon. Friend the Minister of Transport, who said some time ago that after he had considered the matter, and had studied shipbuilding methods on the Continent, what was wrong with our shipbuilding industry was that our shipbuilders were neglecting to modernise their plant, methods and lay-out?

Mr. Price

I have not the slightest doubt that that would make some contribution. I am certainly not blaming it all on to restrictive practices. I am merely finalising what I have said and making it clear that if the British taxpayer is to provide subsidies or other aids he is entitled to the maximum efficiency. We all know that we have certainly not been getting it to date.

So far, I have mentioned only the shipbuilding industry as an obvious example, but we all know that my remarks apply equally to other industries, including the docks, the building industry and an industry with which I am closely connected, the printing industry. It runs throughout industry throughout the land.

So far, we have followed a policy of leaving these problems to the trade unions and employers. That course has been too slow. It has achieved some results, but not enough, and I suggest that if we are effectively to face the problems before us we need to move much more quickly.

The time has come for the Government to intervene. The time is here when someone, perhaps the Minister of Labour, should draw up a catalogue of the most damaging restrictive practices in the most vulnerable industries, publish them, ridicule them, debunk them and then, perhaps, we will get action from the employers and trade unions.

I doubt whether many people realise just how much damage unofficial strikes have been doing. I wish to give a few examples from a report prepared by the London Chamber of Commerce on the consequences of the unofficial strike of tally clerks, just over two years ago. I suggest that every hon. Member obtains a copy and reads this document. It has been assembled on the basis of replies received from more than 1,000 members of the London Chamber of Commerce. I do not have time to give the entire list of cases mentioned, or quote the entire document. The House would not want me to, so I will merely quote a few examples.

It states that 196 vesels were diverted to Continental and other ports and that 125 sailed without being worked or having been only incompletely laden or discharged. The cost of each ship lying in port was £250 to £350 a day. The Port of London Authority lost £400,000 in dues alone. A quarter of the shipping companies, members of the London General Shipowners' Society, lost £1,300,000. The cost of the strike to a firm importing grain was £20,000, £12,000 to a timber importer and £12,000 to a meat importer—and this is only what I would call the domestic problem.

The most important damage was done to our export trade and the following are a few of the experiences of members of the London Chamber of Commerce. Six orders from South America were cancelled, £4,000 worth of frozen fish was cancelled, goods destined for Malaya and Burma for Christmas were cancelled, £5,000 worth of goods for Canada were cancelled, an order for weighing machinery was cancelled and placed with a German firm instead, orders were diverted from Canada to Austria; the list goes on and on. I have time to mention only a few of them.

Orders worth millions of pounds were lost to this country, many of them permanently. Sometimes the damage done can be repaired, sometimes it is permanent. Let us remember that this is a problem in which just a few men have held the nation to ransom in defiance of their own leaders. The policy so far has been to leave these matters to the trade unions, but I submit that the time has come when the Government must intervene. The trade union movement has suffered and its reputation today is much lower than it was when I first entered politics. The Government have a duty to protect the nation against the damage caused by irresponsible minorities of whatever kind.

I say that the Government should now deal with this problem. A magnificent opportunity exists for this to be done by way of what is being called the "workers' charter." By it workers are to have contracts of service, and I applaud that.

Mr. Marsh

Who else does?

Mr. Price

I do not know. I am giving my views and I hope that the hon. Member for Greenwich (Mr. Marsh) will have an opportunity of doing the same.

However, contracts work both ways. There are two parties to each. If the workers are to have the benefits of service contracts they must accept the responsibilities, too. If the employers are to be prosecuted for breach of contract, so should workers and, in my humble submission, support of an unofficial strike—the withdrawal of labour except in support of an official strike—should be defined as a breach of contract. I hope that that view will be accepted by the Government.

In Britain, we have long recognised the right of the worker to withhold his labour in support of an official strike. But what about the right of the worker not to withhold it if he does not want to? We all know that, generally speaking, strikes are decided by a show of hands. We equally know, if we are honest about it, that all too often many of those hands are raised unwillingly because the owner of the hand fears the consequences if he does not raise it.

It used to be argued that secret ballots were impracticable. I used to accept that argument, but I do not accept it now, It was disproved less than a year ago by, I think, the Confederation of Engineering Unions when, with 22 unions represented, a secret ballot was found practicable. After all, are the Opposition electing their new leader by a show of hands? Of course not. They are doing it by secret ballot, and quite rightly.

Mr. Marsh

How does the hon. Gentleman's party choose his?

Mr. Price

I was supporting such a method and was suggesting that it should be applied to strike action.

I now turn to what I consider to be probably the most important consideration of all, and I hope that I shall carry some hon. Members opposite with me. The most important issue facing us in the next year or two is likely to be that of leadership. If we are to solve the problems with which we are faced and achieve the maximum efficiency which is essential we must carry with us the 22 million people who are working in industry. We must explain to them with absolute clarity what the problems are, how we propose to tackle them and how they can help.

I represent a constituency which contains a substantial working-class population. Very few of them really understand the problems with which we are faced and very few of those who do think it has anything to do with them. They think that it is a matter for the Government. The reason for this is obvious. If a lawyer speaks to a layman in legal phraseology, he is not understood; if a doctor speaks to a layman in medical jargon, he is not understood; when a politician or an economist speaks to a layman in political or economic jargon, he is in danger of sharing the same fate. Yet that is exactly what we do all too often. If we want them to do what they must do, we must explain to them in words of one syllable what the problems, the considerations and the solutions are.

There was one man who could do this to perfection. "What sort of people do they think we are?" he cried. I am sure that the House will remember the reaction: heads went up, shoulders went back, chests went out and there was a grim smile on every face. Nine words; ten syllables; but they inspired a nation. I wonder what the response would have been if, instead, he had said, "To what classification of the genus homo sapiens do they consider we most closely approximate?" The question does not need answering. This is a very important factor in finding the answer to the problems which we face. Revitalise industry; inspire the nation; that is what we have to do; wake 'em up and get 'em cracking.

Where is the man who can do this? It is obvious to me that he is not sitting among the political pigmies of the Opposition. The question I ask myself is whether he is sitting here below me. If he is, now is the time for him to reveal himself and go into action. If he is not, we must find him and find him quickly.

7.22 p.m.

Mr. Richard Marsh (Greenwich)

This has been an unusual debate if for no other reason than that most of us, some weeks ago, would have thought that it would have been a very important debate, charged with drama and emotion, because it marked the end of what the Prime Minister claimed was to be the great historical adventure of the century.

But it was also made important by the speech of the hon. Member for Lewisham, West (Mr. H. A. Price). His was a speech which should be printed and circulated as widely as possible as a warning to all that there are dangers in a popular democracy and a warning of the sort of thing that can happen. In parts, it was one of the most irresponsible speeches which I have ever heard. When he dealt with industrial relations, which we would both agree to be of extreme and crucial importance, had the Minister of Labour been present he would probably have broken his heart to find that he had such colleagues behind him.

The hon. Member finished with a rhetorical flourish, "Is there a leader among us on the Government Front Bench?" This was no more than a flourish, because without the presence of Lord Salisbury nobody would be in a position to give him an answer. That is one of the fundamental differences between the two sides of the House.

The hon. Member's spew' was a classic example of what is wrong with the country economically and industrially. He accepts, as we all now accept, that although the last General Election was fought on the slogan "You've never had it so good"—and we all remember the stirring call made by the Prime Minister to the moral fibre of the country when he said on television that the good old British £ was stronger than ever before—we subsequently learned that there was a balance of payments deficit of €.500 million—what he and so many others have had to do is to seek a scapegoat. They say, "It was not our fault", and the hon. Member conjures up the classic red herring of the wicked strikers pushing Britain over the precipice into economic ruin.

It has been said many times by right hon. Gentlemen representing the Ministry of Labour that the dangers in overseas markets of exaggerating the effect of strikes in this country are incalculable. It is absurd for hon. Members opposite deliberately to exaggerate the effect of strike action on our trade, because every one of our overseas competitors has a vested interest in seeing that such statements get the maximum publicity.

I ask the hon. Member seriously to consider the facts and the comparison with other countries and then to cease making speeches of that sort. No one would want to justify strikes. They do enormous damage to the people involved in them. They leave an enormous residue of mistrust and damage in the industry concerned, but it is also absurd to lose sight of the fact that while, in a free society, some strikes and industrial disputes are inevitable, the number in this country is smaller than that in almost every one of our competitors.

Mr. Farey-Jones (Watford)

To a large extent I agree with what the hon. Member has said, but how would he relate his last few sentences to the recent electrical hold-up during the cold period? Did that do enormous harm to industry, or did it not; were the shop stewards who were responsible, and who were led by Mr. Doyle, working in the national interest, or sabotaging the interests of the nation as a whole? Would the hon. Member care to comment on that?

Mr. Marsh

Yes, I will not dodge that one. The recent unofficial strike in the electrical industry at the time it took place was monstrous and I would not attempt for a moment to defend it. But in a free society disputes of this type are inevitable. There is only one way out and that is to make the penalties so high when people withdraw their labour unofficially that everyone is terrified of doing it. That is something which neither the hon. Member nor I would accept. If it is accepted that there must be some disputes in a free society, we then have to consider how Britain's performance compares with that of other countries and to what extent our bad economic showing is conditioned by industrial disputes or by other factors.

Mr. H. A. Price

Does not the hon. Member agree that we should differentiate between official and unofficial strikes?

Mr. Marsh

I cannot see how one can differentiate between official and unofficial strikes. The effects of an industrial dispute on the economy are no less because it is sanctioned by the national executive of the union than when it is unofficial. There have been attempts in many countries to make unofficial strikes illegal, but the effect is that every union involved in the industry concerned with a dispute is forced deliberately to exacerbate relations between employees and employers to the maximum in order to make sure that it gets a vote in favour of the dispute.

Let me put some simple facts to the hon. Member. The French have lost more time through industrial disputes than we have. So have the Italians and the Japanese and the Canadians. The United States of America has had about five times more time lost in disputes than we have. Every country within the Common Market has had faster rates of wage increase than has this country. Every country within the Common Market, with the exception of Western Germany which has roughly the same number, works shorter hours than we do. The same sort of thing applies to holidays.

Our position is not so much worse than that of other countries because of industrial disputes. Many times there has been quoted the classic answer of the simple fact of the calendar that every seven years Christmas falls on a Wednesday and Boxing Day on a Thursday. Every time that happens, statistics show that Britain loses more time from men taking the Friday off to make up the week than through industrial disputes in any year since 1926, which was the year of the General Strike. If strikes do so much damage as is alleged, Britain's economy would grind to a monotonous halt every seven years merely because Christmas Day came on a Wednesday. Let us lose the idea that the problem which faces the British economy is the result of the activities of Mr. Charles Doyle and a group of unofficial strikers, or some other factor over which we have no control.

Mr. K. Zilliacus (Manchester, Gorton)

Perhaps the House will recall Lord Chandos's declaration that In 1958 increased productivity is not within the power, granted that it is within the will, of the work-people. It is the function of capital investment and of management. Increased productivity can be gained only by reducing the effort of the operative, by reducing the sweat and toil, and not, as in former times, by increasing them.

Mr. Marsh

I am happy to be unreservedly grateful to my hon. Friend for his support.

We all agree that one of the big arguments for entering the Common Market arose out of the appalling economic performance of this country. We were told that we faced many economic difficulties, and that we had to get into the Common Market to overcome them.

I know more about the shipbuilding industry than about other industries. Recently, I was in Morocco, talking to the Minister of Shipping and Commerce about an order placed by the Moroccan Government for five small ships. They were very small ships, but they were orders. Those orders have not gone to this country. I asked why, and the Minister said, "Because no British firm tendered for them." This was at a time of massive unemployment in the shipyards, and lack of production.

I was surprised to hear this, so I asked, at the British Consulate, in Casablanca, whether this was so. I was told that it was not only so, but that they had been checking up about it and I was further told that the Board of Trade had conducted an inquiry. It had gone to one of our big shipbuilding firms and asked why it had not tendered, and the firm had said that it did not know that the order was open to tenders. It was then asked, "Are not you on the Board of Trade's special list?" to which it had replied, "What is the Board of Trade's special list?" Experiences of this type can be found over and over again. One of our problems in exports is that we are not competing with our competitors in the fight for orders.

This is not something that the French, Germans and Italians will settle for us. That is one of the points that people missed in their scramble to get into the Common Market. Our competitors have a vested interest in Britain's poor economic performance. In shipbuilding there are things which the Government can do.

I do not believe that an expansion of East-West trade is an answer to our economic problems. There are severe limitations upon the extension of such trade, for many reasons. None the less, it is all grist to the mill, and we are not in a position to ignore the possibilities that may open up to us. But if we are to look at the East European markets at all we must be prepared, because of currency problems, to barter and to accept barter deals.

Recently, one of our shipping companies lost a Russian order to a Norwegian firm. We lost it because the Russians wanted to pay in machine tools. The Norwegians had Government assistance in the distribution of these tools, but the British firms had no Government assistance, and they could not afford to take the order because the responsibility for distributing the goods was too much for them. If we are to go in for bartering on a proper basis, Government support must be given.

The right hon. Member for Thirsk and Malton (Mr. Turton) said that we ought not to look back. If he means that we should not indulge in criticisms of the past for the sake of making a point, I agree. There is no point in this. We have had eighteen months of abortive negotiations, and that is now water under the bridge. But one problem that most of us face is that we still do not know exactly what is the Government's attitude to the E.E.C. They seem to be talking as though there has been a temporary lull or setback in the negotiations.

If that is so, they had better make up their mind rapidly whether we are trying to get into the Common Market or whether we are not. The one thing that has done enormous damage is the fact that, at a time when we needed economic growth, British industry has stood still for eighteen months, wondering whether we were going into the Common Market or keeping out.

My view is that it would be a mistake to go in, both for economic and political reasons, but, whether we go in or stay out, nothing can be worse than the uncertainty which our industries have faced for the last eighteen months. It is no good for a succession of Ministers coyly to hint that although, at the moment, negotiations have broken down, we might at some time in the not too distant future reopen them, and try to get in again. If we do that, we shall be faced once again with all the same problems.

I was opposed to the idea of our entry into the Six, and I should be opposed in the future, on the basis of anything like the Community in its present attitude and form. There are fundamental differences of opinion between their approach and ours. It is not merely the question of trade, and I am glad to know that the hon. Member for Lewisham, West accepts this. We were told that the markets of Europe would be thrown open to us, and that we would be able to sell our manufactured products to the Germans, the Italians and the French. But we must remember that they would have had free entry into British markets.

I am not sure that our industry is sufficiently competitive to be able to meet that challenge. In any event, the benefits that we would have derived from the European market, as compared with those that the Continental countries would have derived from the British markets, would have been marginal. It is very much a question of balance. It was a question not of economics, but of the fundamental differences of opinion between the Six and most hon. Members on both sides of the House.

Hon. Members opposite have tried to develop the myth that the only thing that has gone wrong is that a septuagenarian soldier has suddenly pursued a policy of his own and has stopped us going into Europe. The Prime Minister, adopting the Edwardian attitude of a man leading a great nation in this time of need, has left President de Gaulle in no doubt that Princess Margaret will not have tea with him. That was an absurd thing to do. But it is even more absurd to believe that the attitude of the French is merely the attitude of de Gaulle, or that the attitude of de Gaulle is not the basic attitude of the peoples of the Six. De Gaulle inherited the French attitude after Suez. From that time onwards it became clear that the French Government were committed to trying to build themselves up as an independent force, and to build Europe up as an independent military and economic force.

Those who believe that the source of our troubles is merely President de Gaulle must follow up with the argument—as some hon. Members have been hinting—that on the death of de Gaulle, which cannot be too far off—[Laughter.] That is a legitimate point to make. I was recently talking to two Germans, and I said "Chancellor Adenauer cannot live for ever", to which they replied, "What authority have you for making a statement like that?". It is sometimes essential to make the point that they cannot all be immortal.

Mr. H. A. Price

When the hon. Member spoke to those two Germans was he speaking in double-Deutsch?

Mr. Marsh

I was merely ascertaining their opinion. But it follows that if we accept that our problems stem only from de Gaulle, with the death of de Gaulle this country could again begin to try to obtain membership of the Six, on the ground that the major obstacle to its entry has been taken away. But nineteen months before de Gaulle came to power the present attitude of trying to remove American influence from Europe was already under way. It had been started by a well-known Socialist, M. Guy Mollet, and it became the policy of M. Felix Gaillard under the Fourth Republic. Before de Gaulle ever came to power this attitude had become the basis of French policy, and the basis of much European policy.

It is also true—though it should not be exaggerated because the other five Governments make sympathetic noises to us—that much of the Brussels bureaucracy was very much opposed to any attempt to change the central direction of the Commission. This is very important, because I think that a large number of hon. Members on both sides of the House would accept that we could not enter the Community unless its attitudes were fundamentally changed.

Indeed, some of my hon. Friends, as well as some hon. Members opposite, seemed to see British entry as a sort of extension of nineteenth-century colonialism. We are virtually to take the Six over and change their direction and fundamental attitudes, so that the Community would be acceptable to us. There is no possibility politically of achieving that, so we had better look elsewhere.

In what directions should we look? The first essential is that while it is necessary to get as many international agreements and connections as we can, this does not mean, as my right hon. Friend the Member for Battersea, North (Mr. Jay) once said, that we must sign any presented to us. I do not think, as he also pointed out, that we should join the Pan-African movement, or sign the Warsaw Pact. But we should reach any agreement that we can.

Basically, however, we cannot get a good agreement in any international treaty until this country is economically viable, is able to fight its own battles and is worth while admitting into partnership. We cannot go into such negotiations on the basis of Ministerial statements that we cannot afford to stay out of the organisation. I think that right hon. Gentlemen opposite were genuinely worried by the dangerous position of the British economy, but the moment they said that there was no alternative to British membership economically they could not negotiate from strength with the Six. To avoid having to accept poor terms it is essential that we build up our economy.

Obviously, there are many methods in which that can be done, but I do not want to develop that theme except to say that the part of the speech by my hon. Friend the Member for Cardiff, South-East dealing with industrial relations was one of major importance, because the big failure of the country's economy is its inability to plan ahead. One cannot plan ahead in any economy unless one can include wage planning and wage movement within that wider plan.

I do not suggest, and nor did my hon. Friend, that this is an easy thing to achieve, but I do say that until a Government can solve the problem of persuading organised labour to accept and to co-operate in long-term economic planning, no Government can solve the economic problems of the country.

I believe that it is possible to achieve this on the basis of the proposals put forward by my hon. Friend. One can argue whether it is right or wrong, but I think that there are certain trusts and confidences that trade unions have with some hon. Members on this side of the House, for historical reasons, which may make the task easier for a Labour Government.

Mr. Martin Maddan (Hitchin)

I sympathise with a great deal of what the hon. Gentleman is saying, but does he not agree that we should not read too much into these trusts and confidences of which he speaks, in the light of Sir Stafford Cripps's wage freeze?

Mr. Marsh

I have never believed that the problems between union leaders and Labour Party Ministers would be solved by one rousing chorus of the "Red Flag" and an exchange of party cards, but I do believe that the only way of achieving success in linking wage negotiations with long-term economic planning lies in the ability of union leaders to accept that they are being treated fairly by the Government of the day. I do not believe that we can pass an Act of Parliament to deal with this by legislation. Nor do I suggest that this is an easy problem to tackle. But the prerequisite of a real incomes policy is the belief of the unions that they will be treated fairly.

In a society such as this, in which organised labour represents nearly half the working population and is potentially more powerful than the Government— that, too, is something we must accept —unless this relationship exists, the job cannot be done. I do not say that it can be done simply by having a Labour Government instead of a Conservative Government, and I think that my hon. Friend, who made it clear that he is, as one of the people who, in the next few months, will be landed with this problem, aware of it. [Laughter.] Members opposite should read the Gallup poll published in the Daily Telegraph today. If they think that the prospect is unlikely then they are even worse mathematicians than politicians.

We must recognise that this country has to stand or fall by its own efforts. There is no easy way out by entry in the Community. There is no easy way out by saying that our problems will be solved by trading exclusively with the Commonwealth. That argument has always been put up and shot down by the fanatical pro-Common Marketeers. But it is one which I have never heard put by the anti-Marketeers.

I have attended meetings with anti-Marketeers, some of whom were quite extraordinary company. At none of these meetings did I ever hear anyone suggesting that our way out was to depend on Commonwealth trade. No one thinks that that is possible. All we have to depend on is our ability to trade with a lot of other countries.

If the breakdown of these negotiations shows that we cannot depend on others to help us out, then we shall do ourselves a great deal of good by learning the lesson. But if, on the other hand, we keep ourselves to the hope that in a few years time we may be able to go back to the negotiations and that ultimately somehow or other someone else will help us out, Britain will inevitably become but a third-class economic Power.

7.48 p.m

The Earl of Dalkeith (Edinburgh, North)

I could not agree with the hon. Member for Greenwich (Mr. Marsh) when he spoke disapprovingly of the speech of my hon. Friend the Member for Lewisham, West (Mr. H. A. Price), for I believe that the hon. Gentleman made one of the most constructive speeches in the debate. If I wanted someone to address my constituents on the subject of the excellence of trade unions and industrial relations under a Tory Government, I should ask the hon. Gentleman for Greenwich (Mr. Marsh) because he gave a most spirited praise to industrial relations in our country at present in relation to other nations. I am very sorry that he is not dissatisfied that they are not better than they are, even though they are better than among our competitors. I myself would like to see them a good deal better.

In these two days we have heard many speeches, large parts of them devoted to suggestions many of which have already been announced as part of the Government's policy. Surprisingly enough, a great many of these suggestions have come from hon. Members opposite, including the right hon. Member for Huyton (Mr. H. Wilson). A great deal of time has also been spent in wringing our hands and looking back, and while it is right that my right hon. Friend the Lord Privy Seal should have treated us to a factual account of what took place, I think that a great deal of time can be wasted by looking backwards too much, unless there are lessons we can learn as a result of the negotiations.

We have to try to answer the question of where we go from here. We can do this best by keeping our priorities right. In the first place, whether we like it or not, we must accept that the cold war is likely to go on for quite a long time to come. The Communists have the great advantage of being in one large geographical group, one big political and economic unit, with one boss. We know that the challenge of the future will be more and more a challenge of economics. It will be coupled, of course, with ideals, but mainly it will be an economic challenge.

The great obstacle in the West is nationalism, the besetting sin of all the Western nations. Europe itself counts for precious little. The United States by itself counts for precious little. Britain and the Commonwealth by themselves count for precious little. The key to the future solution of our problems lies in interdependence.

Different people have different ideas about what is meant by interdependence. President de Gaulle's idea is, perhaps, a little different from ours. My own belief is that interdependence can be either political or economic, but I am certain that political interdependence must flow from economic interdependence. I do not see how one can force it the other way. Political interdependence is something which comes naturally out of the economic necessity for interdependence.

Now that our first flush of disappointment at the failure of the Common Market negotiations is over, it is no use going on castigating President de Gaulle. We must try to understand him so that we may produce a closer alliance in some different form in the future. Only by understanding him shall we achieve better co-operation. I should like to remind President de Gaulle that at one time there was an old alliance between Scotland and France which was highly successful. When he indulges in diatribes about the Anglo-Saxons, he should, perhaps, be reminded that the United Kingdom today is, largely, run by Scotsmen, and there is no reason why we should not have the same sort of alliance that we used to have.

We must make the best of things now and find some new form of association. The wedding is off, but, to adopt the words which the newspapers so often use in speaking of film stars, there is no reason why we should not be just good friends. I think that we can do a great deal within these limitations.

We can do a great deal in collaboration with Germany in the future. Germany is one of the great economic pillars of the Common Market. We should consolidate the friendship which she has shown to us during the closing phases of the Common Market negotiations. Above all, let us remember that one of the things which we mean by interdependence is having our businesses and factories in one another's countries. This should be encouraged in every possible way, whether one is a member of the other organisation or not. At the same time, we must keep in mind that there is likely to be quite a run of industries from this country into Europe in an effort to get the benefit of the European market. This is a problem which the Government should face at once, and, if possible, they should have some sort of agreement with each member country of the Six whereby, for every factory which we build in their countries, they build a factory in this country employing an equal number of people. Otherwise, the difficulty of improving our employment situation in this country will be aggravated.

It would be very healthy for East-West relations if we could have not only more by way of trade with Russia but a chance to plant some of our businesses, factories or business bases behind the Iron Curtain. At the same time, it would be very nice to think that the Russians could unbend sufficiently to break away from their old idea of everything having to be run by the State and if they, too, could have some of their industries in our country.

Hon. Members have spoken about putting our own house in order. We have learned some lessons from the Brussels negotiations about our weaknesses. Some of them have been high-lighted. We have also, I think, learned a great many lessons in the course of our intensive conferences and talks with the Commonwealth countries. These should have led to a good deal of new understanding about how we can trade with each other in the future.

I criticise those who, in a sort of cloud-cuckoo world, pretend that the Commonwealth is the answer to all our problems. I absolve the hon. Member for Greenwich from any such criticism because he agreed that the solution to our problems did not lie only in that direction, but there have been hon. Members who thought that the Commonwealth was the one source of prosperity for us in the future. The hon. Member for Wednesbury (Mr. Stonehouse) criticised the Government for not having concentrated more time and attention upon improving Commonwealth relations and trade in the last eighteen months, but he rather destroyed his own argument by then quoting the latest trade figures which showed that we had been selling more to Australia and buying more back from Australia in the last year, than we had in previous years.

It is clear that the Commonwealth countries are, largely, the countries which we have been teaching to produce what we produce in this country. It is only natural that they will wish to continue to protect themselves against our factories. Therefore, we cannot aim at once at having a free trading partnership with them, with a particularly low tariff. They are all protectionist-minded and, however much we should like to see tariffs come down, it is not something which they would accept.

In order to put our own house in order, there is one thing we must tackle with a great sense of urgency. I do not see how this country can be politically or economically competitive in the world unless the whole nation is fully employed. We simply cannot afford, quite apart from the human problems, to have a wastage of manpower in great chunks of our country which varies between 3 and 8 per cent. We cannot afford to continue to spend in Scotland alone £9½ million, as we did last year, on unemployment benefits, that is, £9½ million paid to people to do nothing.

The Local Employment Act has been tried. As a result of our experience with it, and as a result of experience in our general economic situation during the past three or four years, the solution is becoming somewhat clearer. The Local Employment Act has done very well in helping isolated pockets of unemployment, but it has not begun to tackle the big regional problems. During the past eight years, there has been a pattern of alternate boom and recession. I am sure the Government will do their best to control these ups and downs, although I do not believe that it will ever be possible to have complete economic steadiness for any length of time because there are outside forces and pressures in the world which makes recessions and booms inevitable.

The trouble is that, whenever the country reaches a state of economic boom, this is the moment when we run into inflationary danger, and it is just at the time when the south of England is reaching the inflationary peak that the Scottish region is beginning to get on its feet. I do not see how we can cope with this situation unless we introduce fiscal discrimination. This is the only way by which we can stimulate the whole of the northern area and stimulate the whole economy of Scotland instead of just fiddling about with small pockets of unemployment.

I would be churlish not to recognise what my right hon. Friend the Chancellor of the Exchequer has already done to stimulate the economy by way of special deposits, repayment of post-war credits, allowances for industrial developments, reduction in Purchase Tax on motor cars, and so on. They will all help, but I am a little afraid that they will hasten the day when, once more, we approach the near-inflation line when he will have to reintroduce credit squeezes to damp down the economy. There are difficulties in these ideas about new forms of taxation made on a geographical basis, and I am quite sure that the Treasury officials will fight as hard as they can against them, but I can assure the Chancellor that there are several of us who will give him every support in the battle.

We are living in an age of facts, figures and statistics. We are all a little too apt to judge the state of a nation by the member of houses with television aerials rather than by the human beings inside them. The people of our tiny island have made a tremendous impact on the world solely because of their enormous strength of character, and it is on that character that our ability to thrive in the future depends. It is therefore worth urging the Government to pay as much attention as possible to the psychological aspect of Government.

There have been great changes in the country in the last few years. We have had the introduction of more and more automation, as a result of which millions of people daily gaze at thousands of objects going slowly past them. We must think of their psychological approach to life. There has also been the introduction of the Welfare State which, while it is unthinkable that it should ever be dismantled, has had a profound effect on people's thinking—the "What do I get for nothing?" idea.—[HON. MEMBERS: "Oh."]

Some people have been able to speak more eloquently than I can on the subject of the Welfare State, so I will quote just one sentence from Henry Fearon's Horder Memorial Essay for 1961, in which he says: For what the Welfare State has done is to pamper the worst characteristics within us —all those things which previous ages have condemned or frowned upon, and which the Church and State have tried desperately to eradicate on the national character"—

Mr. Marsh

The hon. Member will find similar sentiments in the 1834 Report of the Poor Law Commissioners.

The Earl of Dalkeith

We must recognise the problems that accompany changes like this and, through the Government, help people as much as possible to avoid the pitfalls that go with this sort of novelty in our lives. The Government have shown that they are taking the psychological approach by the intro duction of the Contracts of Employment Bill, but there is much else that can be done.

This is "National Productivity Year", and although I was delighted to hear on the B.B.C. yesterday an exultant voice announcing that triplets had been born to an Ayrshire cow by a Charollais bull —an excellent example of Anglo-French relations—I cannot help thinking that we should at present be concentrating more on a "National Sense of Purpose Year".

I could not help smiling when I saw that the Amendment on the Order Paper calling for … a sense of urgency and national purpose… came from the Labour Party. I cannot help feeling that the man most qualified in the country to rouse us is none other than my right hon. Friend the Prime Minister, when he chooses to do it. I am sure that his words, accompanied by the tune of "Land of Hope and Glory" would be a good deal more effective than the rabble-rousing nattering of the party opposite to the accompaniment of "The Red Flag".

Mr. Emrys Hughes (South Ayrshire)

Does not the noble Earl think that the Ayrshire cow is more productive than the Prime Minister?

8.5 p.m.

Mr. William Baxter (West Stirlingshire)

I do not wish exactly to follow the lines of the speech we have heard from the noble Lord the Member for Edinburgh, North (The Earl of Dalkeith), but I would suggest that some ex-Ministers of the Crown might have been prepared to put their names to the Opposition's Amendment. During the last eighteen months I have attended a number of debates on whether or not we should join the Common Market, but I have rarely heard an ex-Minister speaking in favour or praise of the Cabinet as at present constituted.

Yesterday, the right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith) made some criticism and spoke in a very flowery manner about what our future actions should be. Today, the right hon. Member for Thirsk and Malton (Mr. Turton) made a most able and likeable speech, and one to which I could subscribe almost 100 per cent., but was nevertheless somewhat critical of the Government. It seems that the Prime Minister hypnotises members of the Cabinet with his watchful eye and that only when out of office do they give very much better performances and express themselves more ably and in a more understandable manner. The moral of the story might be taken to heart by the members of the present Cabinet. The right hon. and learned Member for Hertfordshire, East referred to great leaders of the past. He spoke of Chatham and Churchill, but the omission he made was that he did not introduce the name of the present Prime Minister. Has he lost faith in the man who gave him an office of State?

As one who originally voted against the Government entering the Common Market negotiations, I think that I have a right and a duty to express my point of view. Very many people have spoken since that occasion when twelve of us voted against the opening of those negotiations and many have since expressed quite forcibly and freely their complete opposition to our entering the Community. Therefore, it is not only my colleagues and friends on the Opposition Front Bench but many hon. Members opposite who have come off the fence and have decided that to go into the Common Market would not be very good for the country.

Nevertheless, no one can deny that the whole nation has been disappointed and feels that it has been let down. By the actions of the present Government, the country has been put into the most humiliating position it has ever been in. But can we expect anything more from the present Government? I do not think that we have the right to do so. If we look back at their actions over the years we note that successive Tory Governments have been good at only one thing—procrastination. Not only procrastination, but they have not been able to make decisions. Apparently they were never able to bring in a proper plan for the industrial well-being of the country, and they have never made any real progress to put this country into the concept of a modern society.

There is no question, even after the Prime Minister's speech, that agriculturists will be reassured about its future. For a number of years there has been a growing feeling of uncertainty among agriculturists. I listened with respect to the Prime Minister, but I did not hear him present any tangible solution to this problem, other than to the effect that he proposed to cut down subsidies. That would be a difficult thing to do, and the right hon. Gentleman will have to be careful about the road which he seeks to travel.

Consider the problems of coal, of oil and of steel and power. Have this Government brought into being a comprehensive policy in respect of these things? The answer must be, "No". Consider the question of unemployment. No one can but agree that the state of affairs is deplorable. The noble Lord the Member for Edinburgh, North rightly said that this country cannot afford almost 1 million people unemployed. Consider the position of industry. We must all recognise that its future is most uncertain.

This Government, and Tory Governments since 1951, have enjoyed one great asset—the ability to coin a slick phrase. They have been able to work a confidence trick on the electors. Before there was a decision to negotiate to enter the Common Market we had phrases such as, "You never had it so good"—"The wind of change"—"Set the people free". And we were told that the standard of living of our people would be doubled within twenty years. We recall that shortly after the Tory Government came to power in 1951 there was propaganda in favour of this country becoming closely associated with America. Many people thought that we should become a State of America. While this propaganda was going on people became convinced that we had never had it so good and we would continue to have it so in the years ahead, and so the idea of becoming closely associated with America went out of the window.

Only about four years ago there was propaganda to the effect that the present Chancellor of the Exchequer was anxious to obtain a special agreement with the Common Market countries. But that idea fell through. What did we do in retaliation? We started negotiations and eventually created E.F.T.A. That mad idea could, in my opinion, result in a sensible agreement only if it was used at some time in the future as a bargaining counter by the Government to secure a good and sensible agreement with the Common Market countries.

I have said in the House before that if the E.F.T.A. agreement is not superseded by other agreements, certain of our basic industries will feel the draught in the years ahead. I will mention one upon which the Scottish economy depends to a great extent, namely, the paper industry. This industry depends on wood pulp from Canada and the Scandinavian countries, and also upon esparto grass from Africa. I make bold to say that it would be much more economical for the Scandinavian countries to produce paper and dump it in Britain than to supply the raw material to be made into pulp and used in the paper works in this country. The paper industry in Scotland has received considerable tariff assistance, amounting in terms of £'s a year to roughly £7 million. With a labour force of 19,000 people this Scottish industry will grind to a halt once the doors are fully opened under the terms of E.F.T.A. and new mills get started in the Scandinavian countries.

When the Americans pressed Britain to join the Common Market—there is no doubt that this happened 18 months ago —the Government discovered that E.F.T.A., instead of being an asset, was a millstone around their neck. Why did the Government attempt the impossible? Why did they attempt to go into the Common Market, accept the terms of the Treaty of Rome, still keep the Commonwealth, be true to E.F.T.A. and safeguard the agricultural interests of this country? That is the "fifty-dollar question".

I will remind hon. Members of the attitude of the Prime Minister when he addressed this House on the subject of entering the Common Market. He spoke of the economic benefits which would result. But the right hon. Gentleman did not then realise that in attempting to secure those economic benefits he was getting on to a slippery slope. But he began to realize—and it has been the burden of speeches made from the Government Front Bench—that we should not be able to accept only the economic advantages which would result from going into the Common Market. We should have to accept the political implications also. In simple terms it meant that the economic integration of Britain with the Common Market countries would have to become a reality, with all the political consequences which would follow.

Furthermore, agreements connected with the Commonwealth could be only of a temporary nature and gradually the Commonwealth as such would cease to exist. It is true that in any case the character of the Commonwealth would have to alter with the passage of time. But the present concept of the Commonwealth was not compatible with the idea of joining the Common Market. No one who has the least interest in the agricultural industry can be unaware that over the years the Conservative Party has always been prepared to sacrifice the interests of agriculture in favour of the interests of the industrialists. That cannot be refuted by any hon. Member. Right down our chequered industrial history agriculture has been sacrificed for industrial development. I need not say who introduced the Agriculture Acts of 1931 and 1947, but the present Government have introduced very few Acts of any consequence since.

Not only would all these things have to be done if we went into the Common Market, but the agreement which we have made with E.F.T.A. would have to go overboard. The many obligations which the Government have taken upon themselves would have to go. America wanted Britain to become part of Europe, because she wanted to keep the N.A.T.O. Alliance in being. N.A.T.O. had to become a political force backed up by a so-called independent nuclear deterrent controlled by the American Government. Because of that fundamental fact we were being forced to go into Europe—not for economical reasons, nor even for political reasons, but merely in order that a N.A.T.O. nuclear force could be built up.

But, as the national bard of Scotland said, The best laid schemes o' mice and men Gang aft a-gley. De Gaulle made it abundantly clear that he wants an independent Europe. In that, although it might not be very important, he has my support. But his desire to make Europe a nuclear force can never have my support because that is the act of stupidity. De Gaulle learned a lesson from Cuba, but it apparently has not been learned by our Government. It was a warning and lesson to France which de Gaulle has not forgotten and will never forget. He knows that it would be suicidal for France to put herself in the position of being dependent on the decisions of a power such as America or, for that matter, a power such as Russia. That would be the maddest thing, and this is one of the greatest mistakes that has been made by the Government. They have become so dependent on America for their so-called defence that if a war had broken out over Cuba there is no doubt that this country would have been in the first line of that conflict. If the Government do not learn this lesson quickly, the danger to our country is great.

I listened with great interest and pleasure to my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan). He made an excellent speech, giving us ideas about what this country should do in future. I should like to devote a few minutes to that subject. I agree that we need leadership, but it is impossible to get it from this Government. I have never heard anything like the two speeches that we had from the Government Front Bench yesterday. The speech of the Secretary of State for Commonwealth Relations and Secretary of State for the Colonies was a disgrace. He quoted my right hon. Friend the Member for Huyton (Mr. H. Wilson) as saying that we should keep an open mind. There is no doubt that the Minister's mind was exceedingly open: there did not appear to be anything in it.

What should we do? Hon. Members have a great responsibility. Since I came into Parliament, I have seen great wastage of time and energy, even in this assembly, and before we ask others to put their house in order we should put ours in order. I cannot see a modern democracy working on the basis of the horse and buggy period. The whole question of our Parliamentary procedure should be altered drastically. I would go so far as to say that we would be well served by half of the Members present now and let the rest go in order that they might do some good honest work.

I say with the greatest respect that if we do not put our own house in order the future of Britain will not be shaped in the manner that we want. The whole nation—employer and employee—must be brought to realise that the future greatness and prosperity of us all depends on a wide and virile industry and that any industry which is not playing its full part is not doing what the nation expects it to do.

Old ideologies must go out the window. We need a three-way partnership in industry between the Government, industrialists and workers. Old ideas must be altered and new ideas and new conceptions introduced. Great mistakes have been made in the past. Since the war, we have seen the practice of monopoly growing in our midst. We have seen industries growing in magnitude. Whenever a monopoly is created, be it in Government or private business, they add considerably to their overheads. One of the great problems of industry is that because of the lush years of the past it has added to the overheads to such an extent that it has priced itself out of the competitive market.

I have been taking stock of the overheads in my own industry. I was speaking to a member of a large industry the other day. This man belonged to a large undertaking in this country which was in the news not long ago. He told me that the overheads of his industry were 600 per cent. This is absolutely fantastic and disgraceful.

Not only must the Government realise this. Parkinson's Law works very effectively also in Government offices. I was chairman of a large hospital board before I came to this House. That was before the regional boards were brought into being. There was an old man there, a part-time worker who did clerical work. A new employee was appointed to his position and started at £350 a year. Two hospitals were joined tinder the new scheme and today that man is getting a salary of £3,000-odd and has a staff of almost fifty. This is fantastic and disgraceful. Responsibility lies on the shoulders of the Government to see that it is altered at the earliest possible moment.

Public money should be and must be used for the good of the people and of the nation. To what better purpose could public money be put than the industry of the nation? All the social services and all the improvements in our way of life depend on first-class and expanding industries of the country. Three things are required at the moment. There should be a complete survey of all industry in the land to see what the buildings are like, what the plants are like and what are the potentialities of growth. It should be used to find the interest which various industries have in the export market and whether that can be expanded. That survey should be made as quickly as possible.

Secondly, there should be co-ordination of all the scientific knowledge and development in the country under the control of one organisation working in unison with the universities. That should give impetus and show the need for expanding the small industries on which the nation so much depends. Another thing which is often forgotten is that there is a council for art in conjunction with universities. That could be directed to be used to get the best possible ideas in modern design. If we looked at what is done by the small nation, Denmark, we would see what is required in this respect.

I beg the Chancellor of the Exchequer to forget the spying and the secret diplomacy going on through the world in our embassies. This is not the time to find out what statesmen are thinking. They would be better employed in finding how much trade and commerce could take place with other countries. I respectfully suggest that there should be an encyclopædia provided in this country listing the needs and requirements of all the nations of the world so that industrialists, without any trouble, could get all necessary information about markets which they can use. I deplore the fact that when I went to some of our embassies on the continent, I found that the person responsible there for trade with Britain had never been in my native country. He was representing trade and commerce for my nation and he had not the foggiest idea of what was going on there.

Hon. Members on both sides of the House have said that N.A.T.O. is a permanent part of the nation's life. I have heard that often, but if that is the mind of hon. Members on both sides it is indeed a great tragedy. There may have been some justification in the past for N.A.T.O. being born, but it can never be looked upon as sacrosanct or as a permanent part of our lives. It can only be a stepping stone to a bigger conception. It would be foolish for any hon. Member to look on these military alliances, whether N.A.T.O. or others of that nature, as anything but a stepping stone to a bigger idea.

Two great issues present themselves in this debate. One is trade and commerce, whether we go into the Common Market or not. Interwoven with that is the N.A.T.O. Alliance and the peace of the world. They are two great issues which mankind, irrespective of political convictions, must look at in an unbiased way. If I had been speaking in the Canadian House of Commons I should have had my words echoed by the Conservative section of that assembly, and especially by the Canadian Prime Minister, who has been diametrically opposed to the conception of the Common Market and to nuclear arms being provided for his country. He would be no different from me in this respect although he is a Right-winger and I am called a Left-winger.

We have to get these ideas out of our minds, for there is little time to think of stupid phrases about Left and Right when these great issues are before us. They are great issues to which we have to make up our minds just as we shall have to answer on the great Day of Judgment. Do not be fobbed off by party Whips, but decide far yourselves whether the road we are travelling is the road for peace and prosperity of this country. I should like to see the Prime Minister changing his Cabinet immediately He would do well to put Roy Thomson in charge of the Foreign Office.

I have probably overstayed my welcome, but great issues face the country and the world. I ask and implore every hon. Member to transgress party allegiances. Let hon. Members come to conclusions on these two issues, as they would do on the great Day of Judgment, deciding them on whether they are interests of the country and of the world and forgetting the interests of their party.

8.36 p.m.

Mr. Robert Mathew (Honiton)

The hon. Member for West Stirlingshire (Mr. Baxter) will not expect me to follow him into the backwaters of party political controversy, or to comment on his stimulating suggestions on Cabinet reconstruction. Nor can I share his obvious satisfaction that one door to European unity has, for the moment at least, been closed.

It is a matter of regret that the Opposition should have tabled a censure Amendment, because it has led a number of hon. Members opposite to make what I can describe only as good General Election campaign speeches. The House of Commons has a duty at this grave moment, both politically and economically, which demands great decisions, challenging and at the same time stimulating—decisions in the economic field calling, as so many hon. Members have done, for a complete reinvigoration of industry and of business life, calling for the complete reform of our commercial and industrial life and for the reform of methods and, at the same time, offering us a political challenge in the free world, where we must take the initiative.

Therefore, this debate should be concerned with sending a message to the people of the country that we are possessed of an overwhelming sense of urgency and of challenge at this moment, which can be compared in the political and economic spheres with the military danger and challenge which faced us in 1940.

In one of the less endearing passages of his speech, the right hon. Member for Huyton (Mr. H. Wilson) referred to the Government being hack to square one. That is a complete misreading of the international situation. In the first place, the action of the President of the French Republic has changed all the rules of the game and probably the game itself. There is no question of going back to square one. The whole foreign affairs scene has changed as a result of President de Gaulle's decision to threaten the use of the veto in the European Economic Community.

Contrary to what some hon. Members opposite have said, Western Europe, during the last eighteen months, has come to realise the sincerity of this country's European policy. It was only in the early days that Continental statesmen and politicians were suspicious of the sincerity of this country, implying that we were coming in with all sorts of conditions for the Commonwealth, and so on, to break down what had already been achieved in the E.E.C. I was surprised to hear the hon. Member for Wednesbury (Mr. Stonehouse) suggest that Continental statesmen were still saying that the derogations, the special conditions for which we were asking, were unacceptable, because every single Foreign Secretary of the Five has spoken with regret at what has happened and suggested that the negotiations could have come to a successful conclusion if political action had not been taken by the President of France.

Secondly, the President of the French Republic has created a rift in the Western Alliance which, if action is not taken now to close the alliance, can be extremely menacing, and this is the first time that the rift has actually been seen to be opening wide before our eyes. This is a menacing situation, and perhaps one of the greatest moments of danger since 1945.

Thirdly, the E.E.C. itself has received a blow from which it may not recover, at any rate in the political sphere. Certainly, the Benelux countries and Italy will never again have the same faith in any purely E.E.C. political arrangement. That, I think, has gone for ever as a result of the action of the President of the French Republic.

The Benelux countries, Holland in particular, and Italy, believe in a political future in Europe based on partnership, on equality of the States, and on interdependence, but that concept does not come into the ideas of the present French Government. The truth is that because the Government of the United Kingdom believed in a liberal European solution, a gradual step by step move forward towards a genuine liberal European unity, a real unity, and because President de Gaulle did not believe in that, we were the better Europeans, because we believed in a Europe which could be realised, whereas General de Gaulle believes in a Europe which belongs to a past age, which is narrow, nationalistic, and nineteenth century.

That view is understandable. That view is logical, but is does not belong to 1963. It does not belong to the interdependent conception of the free world which is the only hope the world has for peace, menaced as it is by the growing and lasting strength of the Kremlin today, and tomorrow the certainty of a great military and political threat from Mao Tse-tung in the forbidden city. This is the world situation. General de Gaulle says that we were not realistic. Nothing could be less than realistic to think in terms of Europe independent of America in the military sphere, or, indeed, of America herself independent of her allies, against that background of military menace.

I have always thought that the political consequences of the failure of the negotiations would be greater than the economic, and, as we have heard today in speech after speech, it is clear that the economic consequences, if we do not face the challenge squarely, are grave enough in themselves.

In the political sphere there is a growing recognition in Western Europe of what we had to bring to European unity. What we had to bring, above all, was the reality of parliamentary democracy, the experience that we in the House of Commons have had over hundreds of years. This played some part in the way events went. The hon. Member for Greenwich (Mr. Marsh) said that we were all imagining things when we thought that we would change the spirit of the Community. If this country had gone into the E.E.C., and with us the Irish and the Scandinavian countries, with their sound democratic and Parliamentary tradition, I am firmly convinced that the members of this House who went to the European Parliament would not have been there very long before they had established Parliamentary control.

I have never feared the danger of the Continental idea of the huge bureaucracy, the danger of the Commission, about which so many enemies of the European idea have spoken in the last twelve months. Those of us, including the hon. Member for Wednesbury, who have served in European assemblies have noticed that there is one thing that the British do better and are respected for in Europe, and that is running Parliamentary institutions. Basic to the whole of our politcal life in this country for very many years indeed has been the principle of Parliamentary control.

It would have been a very short time before the British with their allies from the north of Europe who we would have taken into the E.E.C. would have established that principle. I have heard leading Dutch statesmen say openly in European assemblies and in international committees that for political reasons alone they wished to see us come in with the Danes, the Norwegians and the Irish so that proper Parliamentary control could be established and real teeth put into the European Parliament of the Six.

There is a very deep sense of frustration in Western Europe. Therefore, the challenge is the political vacuum which now exists as regards the future political unity of Europe. The initiative, in the words of the hon. Member for Devon, North (Mr. Thorpe) yesterday, is with us, and it is an initiative that we must seize. I believe that all the nations in the Six, other than the French, and the other nations in Western Europe who wish to see some concert of the free nations of Europe, some form of political co-operation in Europe, will now look to us. This is an opportunity we must not turn aside. We have been rebuffed by the Six, but we have not been rebuffed by democratic Europe.

On the economic side, many nostrums have been advocated including, as the hon. Member for West Stirlingshire said, turning out Members of Parliament to do what he described as a proper job of work. I am convinced that if the country can be made conscious of the sense of urgency which has arisen in this debate we can meet the challenge in the economic field without any qualms whatsoever. What we cannot do is allow the two great enemies—complacency and inaction—to drive us back to a position of treading water and waiting for something to come along. Micawberism in the economic sphere could now be fatal to this country. The moment is dangerous, but it is every bit as stimulating as some of the great challenges in our history.

Not only must we consider expanding trade within the existing Commonwealth organisation—including our Commonwealth Trading Treaties and E.F.T.A.— but we must look dynamically towards new markets in North America, Canada and other areas where there are untapped opportunities for British industry. That task must be faced with resolution and I would like to see teams from the Board of Trade and of businessmen looking at these opportunities because I believe that they have never been examined seriously by industry in this country. The same applies to the Far East—Japan, in particular—to South America and Eastern Europe. A dynamic approach now would open up markets which have never been contemplated before by British industry. This should be done especially now; in this supreme hour of need to increase our exports.

If the House of Commons can make the jolt felt throughout the country we will have nothing to fear. The only thing we have to fear is complacency, the "It-will-be-all-right-in-the-end" and "I-told-you-so"-ism, and so on. I particularly welcome the Government's attitude to Europe. We know that this door towards European unity is closed, but other doors are open. They must remain open. Whereas we should take the initiative on the political side we will have to reserve the maximum independence of action on the economic side. Of course we want to see the multilateral reduction of tariffs, the success of the Kennedy Round, and so on, but in view of what has happened —our rejection by one country of the Six —we have the right to look at every foreign trade agreement we have.

I recall the suggestion made by my right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith) yesterday to the effect that amendments of G.A.T.T. should be considered by the whole Commonwealth. We all know the practical difficulties involved, but with real resolution and concerted action by the Commonwealth as a whole I am certain that we could achieve something along those lines. We must tell Europe that, economically, we are reserving our position and that we feel that we have the right to look at all our international treaty obligations with the closest scrutiny. Above all, we must have a vigorous European policy because it is only on the basis of the maximum European unity that the Atlantic Alliance will survive. The present policy of France, if it is not checked by British political leadership in Europe, can destroy the prospects of European unity and, at the same time, damage the Western Alliance. Britain must use all her influence to lead Europe back to a stable, responsible and outward-looking policy.

8.54 p.m.

Mr. George Brown (Belper)

The speech of the hon. Member for Honiton (Mr. Mathew) reflects the sort of speeches we have heard all through the debate. Apart from the Government Front Bench, there has been in every part of the House an understanding that what we have been conducting is an inquiry into one of the gravest matters with which this country has been concerned. We are faced with the questions, "Where do we go from here?" and "What happens now?".

I have listened to most of the debate and have heard speeches from both sides of the House. All of them, like that of the hon. Member for Honiton, have been gravely concerned about this matter; all of them, that is, except the Ministerial speeches that we have heard. Because I have a great regard for the Chancellor of the Exchequer, who is to follow me, I hope that his speech will be more nearly addressed to the gravity which all our people outside feel about the situation at the moment than have any of those which we have heard from his colleagues so far.

The best definition of what the debate is about occurred in a leader in The Times on Monday, and I should like to make a short quotation from it. After an introductory passage, it said that the debate was about Britain's place in the world, her way of life, her standard of living, her influence, and her purpose. It is not about who went wrong and where and when. It is about our way of life, our purpose and our place in the world. Measured against that, I ask hon. Members on both sides of the House whether they do not agree with me that the speeches which we have had from the Prime Minister and from other Ministers who have supported him have been miserably inadequate. They have not been addressed to that at all.

The conclusion I draw from their speeches is that they literally do not have a clue about where we go from here. They are totally obsessed with what has happened, totally obsessed with their failure, desperately anxious to prove that it was not because of them that it went wrong. But they have no idea of what happens from here on.

Here I should like to say a word about the Lord Privy Seal. I have no doubt, nor is there any doubt anywhere in the House, that he conducted the operations in Brussels as a very good tactical commander, given his references, his orders, his instructions. I doubt whether anybody else on the Government Front Bench could have done it half so well. But the problem has not been the tactical conduct of the battle. That is why the right hon. Gentleman went wrong today—he was so anxious to prove that, tactically, the battle had been conducted properly. But what went wrong was the strategy.

I wonder whether the right hon. Gentleman would not agree with me—he will not do it here publicly, of course, but perhaps in the darkness of the night— [Laughter.] Well, between him and me it is perfectly safe; it is all right; it is not my problem, anyway; I do not know about the right hon. Gentleman. Anyway, some time when we are not on view, would he not agree with me that the real problem which he had to suffer was the strategist, the man in charge of the strategy, the man who was dealing with General de Gaulle? Was not that where it all went wrong? The right hon. Gentleman did his best with the tactics, but somebody higher up muddled the whole strategy. I feel that in fairness to the right hon. Gentleman we ought to understand that.

When I say that the Government do not have a clue about where to go from here, in a way it is not surprising. They have tried almost everything that they can try. The Chancellor of the Exchequer is identified with a tremendous effort to make a go of E.F.T.A. While trying to make a go of E.F.T.A., inevitably perhaps, he had to declare that E.E.C. was an absolute impossibility for this country. He is on record, as are some of his colleagues, as saying that at that time.

But then the right hon. Gentleman failed—I am not saying that it was his fault—to make a go of E.F.T.A. He and his colleagues then swallowed all their words of that time and turned to E.E.C. In the course of trying to make a go of E.E.C., they declared again and again that we had no alternative. They did this to build up a head of steam behind their application, and they failed. I am not saying whether it was or was not their fault, but they failed at that, too. They have now failed twice, and in each case they have said that the other course would not do.

On top of that, they have shown the Commonwealth, as they have shown the members of E.F.T.A., that to get there they were prepared to sell them short. They are, therefore, left with literally nowhere to turn without running into the very distrust that they have themselves created. Given this situation, which has been the one clearly overlaying every Ministerial speech, they are unable to summon Britain to action at this moment because they have nowhere to which they can summon it.

They are bewildered men; they are exhausted men, and they are desperately awash. They have been humiliated time after time, in a fashion that leaders of this country have not had to tolerate for 1,000 years. [HON. MEMBERS: "Oh."] Yes—a slap in the face in Paris, the order of the boot in Brussels, and a kick in the Bahamas just to make sure. Their only reply was to stop Princess Margaret going to Paris to raise funds for the British Hospital there. Only the most supine time-server could vote confidence in them after that.

The mood of the nation is quite different. Our people have sustained and resented every humiliation that the Prime Minister has suffered. But our people, unlike the Prime Minister and his colleagues, do not want to reply in the manner of one old man being rude to another old man about who led whom up the garden at Rambouillet. Our people want action to restore Britain's strength. They want to restore our place in the world and they do not believe that it cannot be done.

We have a working population of over 20 million people. They are equal to the best in the world. We have great industrial capacity. We have scientists who are coveted, appealed to and attracted all over the world. Yet none of these magnificent resources today is being anywhere nearly fully employed in this country. At the moment, Britain's great need—as the right hon. Member for Thirsk and Malton (Mr. Turton) said, in a speech that I much admired—is for inspired leadership. It is that and that alone that can put things right.

We must stop harking back to Brussels, which is all that any Minister, from the Prime Minister onwards, has yet done. We must give up this futile hope that Italy or Luxembourg can make General de Gaulle change his mind. Above all, we must stop messing about—as the Prime Minister so dangerously did yesterday—and angling for Dr. Adenauer to come to our aid. That way, the way which the Prime Minister chose yesterday, lies only yet more humiliation for our proud country. Let me tell Ministers if they do not understand it. Britain is "fed up" at being pushed around as we have been under their Administration for so long.

I have listened to most of this debate and there seem to be three main requirements for British policy now. First, a realistic and tough plan for industrial development, re-equipment and redeployment here at home. Secondly, an ability to co-operate with, and to obtain co-operation from, other nations which, like us, are now deeply worried about where they go from here. Thirdly, a capacity to summon from our people the mood and the will to accept and to undertake the necessary consequences of such a programme. It is our submission, borne out by their own speeches, that all these three principles are clearly beyond either the grasp or the competence of members of this Administration.

At the end of this great debate, let me look briefly at each of these principles. Yesterday, my right hon. Friend the Member for Huyton (Mr. H. Wilson) and today my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) spelt out in detail and with great clarity—for they both excel in this field—the plans that might well be followed, that should be followed, to put this country back on its feet. They are plans to achieve expansion at home and to achieve the loosening of the channels of international trade.

I shall not repeat those plans now. Anyone, who did not hear their great speeches can read them in HANSARD. We shall restate these plans again and again in the country during the weeks ahead. They represent, despite the jeers of right hon. Gentlemen opposite, who have nothing to offer of their own, a blueprint for action.

I say one thing about them, however. There is one issue above all that Ministers have not faced. That is that we must make a decision about our overriding priority. We consider that the overriding priority now must go to expansion. There are other dangers and other problems involved in expansion. The right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) gave overriding priority to one of the dangers and he was wrong. The present Chancellor is so terrified of picking between the dangers that he is not willing to pick a priority at all.

If he decides, as we think he should, that the overriding priority must be expansion, then it is easier to see the way ahead. The blueprint we have submitted offers a lead to which industrialists—and I have met many of them recently—management and labour can respond. Every one of my Conservative industrial friends tells me that the thing they are gravely lacking at the moment is a lead to which they can respond.

Our plans offer a way through for other nations of the Commonwealth and of E.F.T.A. as well, for they have their trade problems just as we have. They offer an assurance to the President of the United States that if he presses on with his bold initiative of liberalising and lowering the barriers to international trade he can expect support from a British strong enough to give it and to stand up to the consequences of giving it.

It is no use the present Prime Minister going to Camp David, or to Washington, and offering support to the President, because the President, whom I know, too, knows very well that at the moment we are in no position to live up to the protestations of support which the Prime Minister may offer. By any definition, the Administration in the United States is a good one. It is an Administration willing to do things which no previous Administration has been willing to do. We ought to put ourselves in a position to support, reinforce and help it because we do not know, the American electoral system being what it is, what may follow it later.

The House will have noted, although there have, of course, been the usual jeers when we put them forward, that, so far as any plans have been discussed during this debate, they have been our plans. It is easy for the Government to jeer at the Opposition's plans, but there has not been a single alternative from any of the three Ministers, who spoke for very nearly three hours between them. They did not put forward an alternative plan, yet they are the men with responsibility for the nation.

Behind the economic problems there are human factors to be taken into account. We must rid ourselves of the legacy of ill will, doubt and suspicion which has been left throughout the world by the Government and, especially, the personal actions of the Prime Minister during the past two years. It is pointless for the Lord Privy Seal indignantly to deny, as he did today, that we were preparing to sell E.F.T.A. short in going into the Common Market.

It is ridiculous because, if the Prime Minister really meant what he said on television, and repeated in the House, that that brutal Frenchman—I am using his words—torpedoed the negotiations because they were on the point of success, it must follow that the Government were prepared to welsh on their pledges. [An HON. MEMBER: "Nonsense:"] I was hoping that somebody would say "Nonsense", but the Prime Minister was too wily, and he has now told the Lord Privy Seal to be quiet. I am not surprised.

I draw the Prime Minister's attention to the document which has been deposited by the Belgian Government in the Belgian Parliament. It was quoted extensively by The Times last Monday. If it is inaccurate, we shall be very glad if the Prime Minister will prepare a similar paper for this House, giving us what he thinks the situation is. I ask right hon. and hon. Members to read what is said in the Belgian document. It sets out the concessions which we had made at the point when the brutal Frenchman prevented us from going in.

According to this Belgian document, we had agreed to apply the Market's common external tariff, immediately on becoming a member, on 95 per cent. of imports from third countries, the remaining 5 per cent. being made up of aluminium, lead, zinc and newsprint. Hon. Members can work out for themselves which of the Dominions were covered by that.

We had accepted the principle and the mechanisms—I emphasise that—of the common agricultural policy and the regulations which the Six had agreed on. We had accepted the new association agreement between the Common Market and the 18 African States. We had admitted that the E.F.T.A. and the Common Market were incompatible and had expressed the hope that this problem would be solved.

I now turn to the Prime Minister's statement to the House on 31st July, 1961. Let the Lord Privy Seal work out whether it matches what I have just stated. In answer to my late right hon. Friend, the then Leader of the Opposition, the Prime Minister said: Of course, we have always made it clear that unless we can get terms satisfactory to British agriculture, satisfactory to our E.F.T.A. partners … or satisfactory to the Commonweath interests, well, then, this agreement cannot be made."—[OFFICIAL REPORT, 31st July, 1961; Vol. 645, c. 933.] Are those satisfactory to any single one of them?

The Prime Minister grins, other Ministers grin, but let them look behind them to those representing agricultural interests. Let them go to any representative of the agricultural interests in England and ask him whether that was satisfactory to them. I will come back to the Commonwealth in a moment, and we will find out why the Prime Minister is afraid to have, unable to have, a Commonwealth Prime Minister's conference.

The Government have, in fact, cheated on the undertakings that the Prime Minister gave. He can laugh them off, but other people do not. We now have, Britain now has—and this is the problem that faces any Government here—to repair our relations with our E.F.T.A. partners. We have to develop greater trade arrangements with them. We have to seek to expand the area of E.F.T.A. It is easy for the Prime Minister to say "Terrible", but, unhappily, whatever he has in his mind is not in keeping with what people in this country or outside it are thinking. This is the problem. Those whom the gods intend to destroy they first drive mad—and the Prime Minister is very nearly there.

This is not the moment to play that kind of politics. The job that the nation needs today requires at the head of affairs here new men, men who are untainted with the duplicity, with the deception and the double-dealing that are now universally regarded as the hallmark of this Administration and of the Prime Minister.

There is a similar, urgent job to be done on Commonwealth relations. Of course, the Prime Minister cannot call a Commonwealth Prime Ministers' conference. Which Commonwealth Prime Minister would be likely to come here again while the right hon. Gentleman and the Secretary of State for Commonwealth Relations are still in their present offices —after the experience they had last time, after the inspired Press stories, when they had to go home and issue papers in their own Parliaments to try to bring out the truth of what, in fact, happens when they meet these Ministers?

Yet it is an urgent necessity to have a Prime Ministers' conference if the obstacles to Commonwealth trade are to be overcome, and if the production of the industrialised members of the Commonwealth is to be geared not only to their own demands, but, much more importantly, to the demands of the underdeveloped parts of the Commonwealth. A Prime Ministers' conference is an urgent necessity if we are to solve the problems of financing trade between the under developed and developed members of the Commonwealth. Free gifts are not the answer, either for the people who give them or for those who receive them. Somehow or other we have to solve the financing problem. The fact that the Government are unable to take this particular urgent action is, I submit, another major disqualification for office at this critical time.

There is one other primary danger ahead. In doing all this—if, indeed, we can—we must avoid adding a new major trade division to the political division that already exists in Europe. It would be disastrous to split the Western forces in Europe on trade grounds when we have the East-West political division in Europe. Yet I say this. By the reckless policy, which the Prime Minister is currently following, of an insult a day to France, this is precisely the risk that he is running. Do not let the House underestimate the possible consequences of what the Prime Minister is doing. He is in an ugly mood. He is kicking out all round, and I beg the House to understand that N.A.T.O. could easily be the ultimate casualty of the policy which he is now pursuing.

When I heard the Prime Minister yesterday, as another instalment of the insult-a-day policy, rebuking France for defaulting on her N.A.T.O. obligations in relation to her naval and air forces, I remembered his own personal responsibility for the fact that, not only now but long before, Britain has been failing to carry out her own solemn obligations to N.A.T.O. And I am bound to say that I felt ill and I wondered why he was not. We were the first to welsh. We have been welshing for years and Britain is, unhappily, responsible in the end for the decisions that Ministers make. When the Prime Minister was Minister of Defence he was the first man to start the policy of pulling back on the solemn obligation which his then Prime Minister entered into, and we have been doing it ever since. We are doing it now, so it does not lie in his mouth to attack the President of France.

Our relations with France must be restored. President de Gaulle may go on acting in a way which we do not like. He may go on preventing things from developing in ways that would better suit our purpose. But we still have to live in the world as it is, and with the statesmen that it contains. We cannot make our foreign, our defence, or our trade policies contingent on liking particular nations or statesmen. I wish that we had been able to get into the E.E.C. I should still like to see the day come when we can get in. But the essential conditions are not available to us today. So let us maintain as much trade as we can with the area. Let us maintain the best relations we can with the area. Let us co-operate where we can in other fields and stop this ridiculous recriminating battle across the ether and via Parliament.

Finally, let me state my third requirement. We must change the mood at home. We must tell the people plainly that the bingo age is over. It is an age for which the Prime Minister, again, bears a heavy responsibility. If the right hon. Gentleman is ever remembered as a Chancellor what will it be for?—the introduction of the lottery. And in their hearts our people know that the bingo age is over. [An HON. MEMBER: "That is what the right hon. Gentleman lives on."] I am very content that that observation should be on the record. The hon. Member should not be making that kind of silly point.

I want our people to know what the Prime Minister is thinking of at this critical moment. Let him tell our people, or get out and let somebody else tell our people, that we now need a new economic policy which will involve priorities and selective concentration in terms of work to be done and places where the work is to be done. They need to be told frankly that from here on social value, social urgency and social need will determine the projects which will be undertaken and the services which will be developed rather than the profitability of those projects or those services.

Unlike some hon. Members opposite, people outside, in their hearts, understand this. They already know, for example, that the railways cannot be discarded in the fashion that Dr. Beeching and the Minister of Transport have tried to arrange, for the very reason that I have given—that their social need is so much greater and outweighs the question of profitability. The Government should be telling management at this time what its tasks are and should be calling on it to face its own weaknesses and inefficiencies —and they are many. But given a clear national need, given Government support and adequate consultation, I declare my belief that it will respond, and then we must be equally open and blunt with the trade unions, too. [Interruption.] That is exactly the thing which makes the whole operation so difficult while hon. Members opposite are in power.

We must take the trade unions fully into consultation from the outset. We must assure them that their negotiating and arbitration machinery will again be free. We must set the industrial and economic facts before them. We must demonstrate that the costs and rewards of the programme will be fairly apportioned. If this is done—and, hitherto, it has not been done—we can get the trade unions to participate in a genuine incomes policy and we can fairly ask them to face their own problems. There are problems of inter-union relationships. There are problems about the proper apportionment of functions and authority within each union. These problems they should face. They can and would face them if the other things which I have mentioned were first done.

I believe that the nation is "fed up to the back teeth" with the way that things have gone these last few years. We can blame whom we like for it. I believe that the nation wants to plan ahead for 1970 and is barely interested in what has happened between 1957 and now. The nation has no taste for elaborately contrived Edwardian lethargic poses. I am sure that the nation does not want to be regarded anywhere in the world as in need of baling out. I believe that today it would take strong, determined leadership.

Two weeks ago, speaking in the country, I challenged the Prime Minister, after what he had to say at Liverpool, to put the matter to the test. Yesterday, my right hon. Friend the Member for Huyton repeated the call. Go to the country, give the people the choice. We are ready and we are prepared to face the test. Are the Government?

9.30 p.m.

The Chancellor of the Exchequer (Mr. Reginald Maudling)

The right hon. Member for Belper (Mr. G. Brown) said, quite rightly, that in the course of the speeches of his right hon. Friend the Member for Huyton (Mr. H. Wilson) and his hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) many positive proposals were made, to which I intend to refer. He certainly himself went a long way towards restoring the average, for we had no positive proposals from him. If he wanted to help in this situation, I doubt whether he was really well advised to offer the British Government a short sermon—I think that was his phrase— on the Commonwealth and N.A.T.O. That was as unwise as it was untrue.

He said that my right hon. Friend the Prime Minister is afraid to call a Commonwealth Prime Ministers' Conference. That is describable only as unmitigated nonsense. The Prime Minister knows like the Prime Ministers of Australia and New Zealand that problems are not solved by calling conferences such as the party opposite seems to think. The right hon. Member talked once again about the E.F.T.A. pledge, which the right hon. Member for Smethwick (Mr. Gordon Walker) so distorted last night. I resent this very much. I had something to do with the founding of that and with the undertaking which was given, that when we had done our negotiations with the Six it was our intention that all the E.F.T.A. countries' problems would be solved simultaneously, an undertaking from which we have never in any way departed.

It does no good to this country, nor to our E.F.T.A. partners, to suggest the opposite. I dare say the right hon. Member for Smethwick did not mean to distort this matter, but he just did not understand. When the penny dropped this afternoon what a clang there was. Then the right hon. Member for Belper said, do not add new major trade divisions to the Western world. What does he think we have been trying to do for the last few years, to create divisions or avoid divisions? Are we creating divisions in the trading system of the Western world? Good heavens, has he hardly understood a thing that has happened in the last two years?

He talked about building up N.A.T.O. He is right; of course he is right. I do not know if he listened to the speeches of some of his hon. Friends today. Perhaps they are not his hon. Friends, but certainly some of the speeches from the other side of the Chamber did not suggest that the strength of N.A.T.O. was the main thought which was in the forefront of the minds of some hon. Members opposite.

In turning to the needs for action at present, he talked first about an industrial plan—a word we have heard very often. He described the proposals of the right hon. Member for Huyton and the hon. Member for Cardiff, South-East as a blueprint. Certainly they made many proposals, but I think that when we analyse them we shall find that so far as they were practical proposals they have already been adopted by the Government. [HON. MEMBERS: "Oh."] We shall run through some of them and see. I noticed during the speech of the right hon. Member for Huyton that time and time again the unusual phrase was used, "as the Prime Minister said this afternoon". That was about the sensible proposals.

The right hon. Member for Belper said that at the moment we want overriding priority for expansion. I think those words "overriding priority" extremely dangerous. "Overriding priority" is one thing, but I remember the right hon. Member for Huyton years ago saying an extremely good thing, namely, that above all things, we must place the strength of sterling. I hope the right hon. Member for Belper agrees with that. In this conflict which overrides which? I noticed, rather to my surprise, that the hon. Member for Cardiff, South-East today said that I might have done too much.

Mr. Callaghan

I said there was some danger.

Mr. Maudling

The hon. Member said there was some danger that I might do too much. I shall remember that when the next Budget comes. Of course, the hon. Member is right. There is always a danger of any Chancellor of the Exchequer doing too much. The judgments on these matters are exceedingly difficult.

I assure the hon. Gentleman, however, of one thing. If I do not think that the economy can stand it, I will not put more money into it than it can afford. Equally, if the economy can stand more stimulation I will not he frightened of being accused by the right hon. Gentleman of being popular.

The issues which we have been discussing in these two days are serious. I do not share the view of some right hon. and hon. Members who have a feeling of relief at the situation which we have reached. Nor do I agree with the right hon. Member for Smethwick that the nation is facing a very grave situation. That is just not true. [HON. MEMBERS "Oh."] We are facing a great disappointment, but not a disaster. It can only be turned into a disaster by our own folly or weakness. The sort of speech that we have just heard is an example of that.

We have seen a new stage in the continuing struggle to establish this country's new position in a rapidly changing world. The world scene is changing with the evolution of the super-Powers and the enormous military predominance of the United States. The Commonwealth is changing with industrialisation overseas, with the new political situation and the new diversity of the Commonwealth, which adds so much to its strength. Europe has been changing with the drive towards integration. Within these changes, we must remember, as my hon. Friend the Member for Cambridge (Sir H. Kerr) said yesterday and as my right hon. Friend the Member for Woodford (Sir W. Churchill) once said, that our foreign policy and attitude must be based upon the three intersecting circles—the United States, the Commonwealth and Europe—all of which are essential to us.

In our relations with Europe in recent years and in the future, we must always base ourselves upon that principle. The O.E.E.C. was an enormous strength to Europe because it contained the United States and Canada as well as European countries and because it was reconcilable with Commonwealth trade. The O.E.E.C. led to reduction of tariffs and the establishment of the European Payments Union. On top of that, there came the new development of the Treaty of Rome with the advance towards the complete abolition of tariffs among European countries and a completely new portent of political significance because of all that it meant to the relations between France and Germany, and of economic significance because of the possibility of a division of Europe.

It was against that background that we supported originally the idea of the free trade area. It was not designed, as the hon. Member for Devon, North (Mr. Thorpe) suggested yesterday, to undermine the Common Market, because it was agreed to by all the countries of the Common Market before the Treaty of Rome was ratified. Both Dr. Adenauer and the French Government agreed explicitly with us on ratification to form a free trade area. Then, the negotiations failed because the French Government decided that they could not continue with them. After that, we established the E.F.T.A., partly because any expansion of freedom of trade is valuable and partly to prevent a further disintegration of Western Europe and to provide a basis for a reconciliation and a full European system. We made our bid to join the European Economic Community because we believed that it could be done without vital damage either to the Commonwealth or to E.F.T.A. and because we believed, in the situation that had developed, that the strength of Britain was fundamental to the strength of the Commonwealth and that the strength of Britain would be greater within the Community than it would be outside it.

That attempt, too, like the previous one, has been defeated at the eleventh hour, but who can say that we were wrong to try? I am not clear where the Opposition stand. Do they think that we were wrong to try to form in Europe this vision which so many people of good will and imagination have had? If they consider that we were right to try, do they think that anyone could have tried harder and more successfully than my right hon. Friend the Lord Privy Seal? Their complaint against him has not been that he tried inadequately. They have complained that he tried too hard.

This collapse of the negotiations is, I am sure, not permanent. The whole logic of history means that we must see developing in the long run a united Europe within an Atlantic Community, and as science compresses our globe more and more, and as the Chinese millions storm across the Eastern world, more and more the world will see the folly of Europe being disunited.

We have reached a definite stage. One road is closed. We have now some certainty of a kind that is of importance to British industry. We must not undermine that, nor of course would we reject sensible, practical, ideas that may be put to us, but we must for the time being at any rate plan on the basis that we are not becoming members of the European Community.

I turn now to the plans we must make and the things we must do. What we want is not new policies, because our policies have been right, and no one in the party opposite can gainsay that to aim at a single European system, to aim at the maximum freedom of world trade, can be other than the right policy for this country. What we need in the new situation are new measures in a new spirit, and it is about these that I shall talk.

There are things that we would have to do whether or not we joined the Community, and there are others which now present themselves in a new light, new possibilities, and new requirements, in the light of the failure of the negotiations.

First, what we must do in any case is common ground. As the hon. Gentlemen the Member for Cardiff, South-East said, we must redouble our export effort. I think perhaps that the assessment of our export problem has been a little underestimated by some right hon. Gentlemen opposite, for example the right hon. Member for Huyton. It is not enough to think of the other markets that we have throughout the world and the fact that 84 per cent. of our trade throughout the world is not affected by the Common Market. What we must not forget is that we are facing across the Channel a giant new competitor with an economy on the scale of the United States, but with a wage level not three times ours but about the same level as our own. It is bound to make its position felt, and we must not underestimate it.

We shall be faced throughout the world with a new and very powerful competitor against whom we must stand. That means, above all, that in fighting for our export trade we must hold down our costs. This theme has run through a number of speeches, for example that of my hon. Friend the Member for Louth (Sir C. Osborne), who rightly and continuously reminds the House of the need for exports, and the importance of containing costs as the only sound basis for an export trade.

Then, as many hon. Members have said, we must work with other countries to stimulate the level of world trade in present conditions. For example, the O.E.C.D. is an organisation in which much important work can be done. Mention was made this afternoon of concerting monetary policies. There is a lot in this. We are all learning in the Western world that it is easier to expand together than for one country to expand at the expense of another. In O.E.C.D., with the presence of the United States and Canada, we have an effective instrument for concerting economic policies and advancing together towards expansion.

International liquidity was mentioned. Here, too, I think that the change in the situation with the ending of the Brussels negotiations re-emphasises once again the importance of the possessors of the two key currencies, sterling and dollar, working together to ensure that the liquidity of the world's financial system is adequate, without imposing on the key currencies themselves burdens they are not fit to carry, and which it is not right to impose on them.

Then, as everyone has said, we must persist with the Kennedy Round. I think it would be unwise to assume that this will move too quickly. There are many complications. It is in itself a very bold concept, and the bolder the concept the more practical difficulties that faint hearts in many countries may throw in the way. We certainly made quite clear our support for the United States Administration. Mr. Herter was good enough to come to London recently at my invitation. I took the opportunity of stressing to him with my right hon. Friend the President of the Board of Trade our determination to work with the United States as vigorously as we can to ensure that this round of tariff reductions is made as rapid, as effective, and as widespread as it possibly can be.

There has been much mention of commodity agreements. This point has featured in many speeches. This is not a new policy for us. Tin, sugar, cocoa, coffee, wheat—there are many international commodity agreements in which we have taken part, and in many cases we have taken a lead in them. However, it is not a thing which this country can do alone. We cannot carry the weight of the world commodity market on our shoulders. We cannot have an effective scheme, unless the bulk of the world producers and the bulk of the world consumers are in that scheme.

Frequent reference has been made to bulk contracts. I have no objection of doctrine to bulk contracts, though I fear that in practice they might often finish up with our carrying the burden of higher than world prices. It is dangerous for this country, particularly in this new situation, to carry higher prices for commodities than our competitors. [Interruption.] I quite agree that with sugar it is a burden which this country carries, and rightly and gladly carries, for the benefit of the Commonwealth.

Then we want all possible additional aids to exports, improving the Board of Trade services, and strengthening and expanding our credits. Anyone who looks at the matter objectively will realise that our system of export credits is the best of any in the Western world. I am prepared to push the length of credit and the terms we give to the extreme we can, but there are limits. There are international obligations. We are not over-scrupulous about international obligations. [HON, MEMBERS: "Hear, hear.") We believe in interpreting them. We believe in carrying them out fully, but in accordance with what we are obliged to do. I am often told that we are the mugs and that everyone else cheats in these matters. This is just not true. [Laughter.] The truth is that these obligations are observed by all the member countries and it would be no good for us or anybody else to try to break up these agreements.

I turn now to consider the gains and the losses that result from the failure of these negotiations. First, let me look at the gains. The two main gains that occur to us from the failure of these negotiations are, first, that we retain freedom of commercial and agricultural policy, and, secondly, that we retain our preferential position in the Commonwealth and in the E.F.T.A. We have heard a good deal about the E.F.T.A. situation. The buying power of our E.F.T.A. partners is very considerable, but I want to say something about our trade with the Commonwealth.

It is said by many people that the United Kingdom's share of Commonwealth trade has contracted and that preferences have fallen. This was inevitable. Our share of Commonwealth trade was extremely high in many cases. The share remains high and the preferences remain important. In Canada, Australia and New Zealand, as my right hon. Friend the Member for Thirsk and Malton (Mr. Turton) pointed out, 80 per cent. to 90 per cent. of our sales get a preference averaging from 10 per cent. to 15 per cent. It is important to have early discussions with these countries in particular about the new situation which has arisen. A single Commonwealth system, I think it is generally agreed, is impossible. Nor could the preferences be increased in accordance with the terms of the G.A.T.T., and I do not think that the Commonwealth as a whole has any desire to disturb the present arrangements under the G.A.T.T.

However, if the preferences cannot be increased in present circumstances, is it not possible to cease the erosion of them which has taken place over recent years? I believe that there are many practical ways in which we and the various Commonwealth countries can help one another. We must look at our level and methods of agricultural protection from the point of view of being as helpful as we can to our Commonwealth partners. Equally, they must look at the levels and methods of their industrial protection from the point of view of being as helpful as they can to us. We are entitled to protect our agriculture, just as they are entitled to protect their industry. We should, therefore, cooperate in these things to be as helpful to one another as we can.

I have heard some people suggest that the Commonwealth expects to take everything but give nothing. There are examples in which Commonwealth countries have caused difficulties to our trade, but such a description of our trade would be wholly unfair. We certainly cannot expect the Commonwealth countries to abandon the protection they give to their industries any more than they can expect us to abandon the protection we give to our agriculture. The essential thing is that they should import as much as possible, and this is precisely what they are doing. Despite quotas and tariffs, the Commonwealth countries are importing the maximum they possibly can—and this is our opportunity to seize, with the preferences we have, as much trade as possible.

I sometimes think that British industry tends to take the Commonwealth a little bit for granted. People think of the things they used to sell twenty years ago and which they cannot sell now because those countries are making them. But as the old markets disappear new ones emerge and the new ones are bigger than the old. It is said that the Commonwealth countries are less attractive as markets because they are industrialising themselves. What nonsense that is. The more they industrialise themselves, the better the market they become. What could be a better market for this country in ten or twenty years' time than, for example, an industrialised India?

We must recognise both the erosion of preferences that has taken place and the opportunities which remain. In this connection, the losses we have suffered from being excluded from the European Community may be described basically as three. Firstly, losing the opportunity of tariff-free entry to the growing market of the Community, secondly, losing the new competition and wider industrial base which would arise from membership and, thirdly, our position regarding incoming and outgoing investment has been considerably changed.

Concerning the market itself, it has been rightly said that we are selling an increased amount of goods over the tariff barrier. This will not, on balance, be increased against us. But many firms are selling goods at small profits, or even at a loss, doing so with the prospect before them of increased trade. But we should not under-estimate how great will have to be the efforts of our businessmen to sustain what they have been doing recently.

Then the question of competition and the basis of a wider market. With the absence of this new competition from Europe we must do more to stimulate new competition in our industry. On the other hand, we must be realistic about this. If our market is to be a smaller one than the market of our competitors, the structure of our industry must be such as to reflect the comparative size of our market. With a smaller market and faced with modern industrial competition, too many firms cannot share it. We mast strive against monopolies but, on the other hand, look upon mergers, consolidation and the growth of firms in a number of industries on the basis of what is practical and not the other way round.

We must make it clear that we welcome American investment with open arms and there can be no doubt that such investment has brought great benefit to many parts of this country, particularly the development districts such as Scotland. As for outgoing investment, we must be sensible and not clamp down on it. It would be very silly in a fit of emotion to say that we should stop British industry from investing in Europe, for that not only brings us investment on its own but can facilitate the development of our own exports in assembly, and the manufacture of components. We can and should invest in Europe to the extent limited only by our balance of payments and the strength of our reserves. There need be no basic conflict between investment in this country and investment in Europe. Investment in this country should be limited only by our physical resources; investment in Europe should be limited only by the availability of foreign exchange to finance it. It would be a very retrograde and short-sighted step to take this occasion of the failure of,the Brussels negotiations to cut down on the sort of investments—I agree that we must be selective—which in the long run will strengthen the economy of this country both in invisible income and the prospects of visible exports.

All the discussions of plans and possibilities have been based on the principle that essentially the efficiency of our own economy is fundamental to all that we are trying to do. The efforts which we must introduce for expansion, for redoubled expansion, without inflation add more than ever to the significance of the National Economic Development Council. I have heard many suggestions this afternoon about co-operation among Government, unions and employers to plan and work out ideas.

This is precisely what N.E.D.C. has been doing since my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) my predecessor established it. The Council—[Interruption.] If hon. Members opposite laugh at N.E.D.C. they will not find that the trade unions do. It is doing precisely what the hon. Member for Cardiff. South-East said should be done. It will be working on plans and targets for industry, discussing the problems and discussing the obstacles to growth before decisions are made.

The hon. Member said that decisions were made by the Government, but it is not only the Government. The Government have decisions to make in questions like taxation, tariff policy, monopoly policy, expenditure on education, expenditure on roads and so on.—[HON. MEMBERS: "And the pay pause."]—and the pay pause and an incomes policy as well. Surely one lesson which even the right hon. Member for Huyton should have learned in the last few years is that we cannot have expansion without a great increase in exports, that we cannot have an increase in exports unless we hold our costs steady, that we cannot hold our costs steady unless we have an effective incomes policy. Surely that lesson has been learned.

Of course an incomes policy holds good for all sorts of incomes. It is not just a question of singling out wages. I know that wages are the largest single element. [Interruption.] It is no good hon. Members opposite saying that N.E.D.C. will work and N.I.C. will not. It is no good agreeing with the general principles of N.E.D.C. without having some machine to make them work in practice. The trouble with hon. Members opposite is that they produce the most wonderful sentiments about what should happen and the most wonderful principles and the most wonderful theories, but when we produce practical machinery to make them work, they reject it every time.

The Amendment calls for necessary changes in our policy. In so far as the party opposite has produced suggestions for the changes, they have been impracticable, and have been shown to be im-

practicable. This is a situation not of crisis, not of disaster, but of challenge which cannot be met by the party opposite whose sole idea—[Interruption.] I know that the right hon. Member for Belper usually follows the principle of "Anything you can say, I can shout louder," but this has not been an occasion for shouting. This has been an occasion for assessment, an occasion for setting out policies. The Government have made it perfectly clear that the policies which we are pursuing are those which the country needs.

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

The House divided: Ayes 333. Noes 227.

Division No. 48.] AYES [10.0 p.m.
Agnew, Sir Peter Cleaver, Leonard Gower, Raymond
Aitken, W. T. Cole, Norman Grant-Ferris, R.
Allan, Robert (Paddington, S.) Cooke, Robert Green, Alan
Allason, James Cooper, A. E. Gresham Cooke, R.
Amery, Rt. Han. Julian Cordeaux, Lt.-Col. J. K. Grosvenor, Lt-Col. R. G.
Arbuthnot, John Corfield, F. V. Gurden, Harold
Ashton, Sir Hubert Costain, A. P. Hall, John (Wycombe)
Atkins, Humphrey Coulson, Michael Hamilton, Michael (Wellingborough)
Awdry, Daniel (Chippenham) Courtney, Cdr. Anthony Hare, Rt, Hon. John
Balniel, Lord Craddock, Sir Beresford (Spelthome) Harris, Frederic (Croydon, N.W.)
Barber, Anthony Crawley, Aidan Harris, Reader (Heston)
Barlow, Sir John Crosthwaite-Eyre, Col. Sir Oliver Harrison, Brian (Maldon)
Barter, John Crowder, F. P. Harrison, Col, Sir Harwood (Eye)
Batsford, Brian Cunningham, Knox Harvey, Sir Arthur Vere (Macclesf'd)
Beamish, Col. Sir Tufton Curran, Charles Harvey, John (Walthamstow, E.)
Bell, Ronald Currie, G. B. H. Harvie Anderson, Miss
Bennett, F. M. (Torquay) Dalkeith, Earl of Hastings, Stephen
Bennett, Dr. Reginald (GOB & Fhm) d'Avigdor-Goldsmid, Sir Henrv Hay, John
Berkeley, Humphry Deedes, Rt. Hon. W. F. Heald, Rt. Hon. Sir Lionel
Bevins, Rt. Hon. Reginald Digby, Simon Wingfield Heath, Rt. Hon. Edward
Bidgood, John C. Donaldson, Cmdr. C. E. M. Henderson, John (Cathcart)
Biffen, John Drayson, G. B. Hendry, Forbes
Biggs-Davison, John du Cann, Edward Hicks Beach, Maj. W.
Bingham, R. M. Duncan, Sir James Hill, Dr. Rt. Hon. Charles (Luton)
Birch, Rt. Hon. Nigel Duthie, Sir William Hill, Mrs. Eveline (Wythenshawe)
Bishop, F. P. Eden, John Hill, J. E. B. (S. Norfolk)
Black, Sir Cyril Elliot, Capt. Walter (Carshalton) Hirst, Geoffrey
Bossom, Hon. Clive Elliott,R.W.(Nwcastle-upon-Tyne,N.) Hobson, Sir John
Bourne-Arton, A. Emery, Peter Hocking, Philip N.
Box, Donald Emmett, Hon. Mrs. Evelyn Holland, Philip
Boyd-Carpenter, Rt. Hon. John Errington, Sir Eric Hollingworth, John
Boyle, Rt. Hon. Sir Edward Erroll, Rt. Hon. F. J. Hope, Rt. Hon. Lord John
Braine, Bernard Farey-Jones, F. W. Hopkins, Alan
Brewis, John Farr, John Hornby, R. p.
Bromley-Davenport,Lt.-Col.SirWalter Fell, Anthony Horneby-Smith, Rt. Hon. Dame P.
Brooke, Rt. Hon. Henry Fisher, Nigel Howard, Hon. C. R (St. Ives)
Brooman-White, R. Fletcher-Cooke, Charles Howard, John (Southampton, Test)
Brown, Alan (Tottenham) Forrest, George Hughes Hallett, Vice-Admiral John
Bryan, Paul Foster, John Hughes-Young, Michael
Buck, Antony Fraser,Rt.Hn.Hugh(Stafrord&Stone) Hulbert, Sir Norman
Bullard, Denys Fraser, Ian (Plymouth, Sutton) Hurd, Sir Anthony
Bullus, Wing Commander Erie Freeth, Denzil Hutchison, Michael Clark
Burden, F. A. Galbralth, Hon. T. G. D. Iremonger, T. L.
Butcher, Sir Herbert Gammans, Lady Irvine, Bryant Godman (Rye)
Campbell, Sir David (Belfast, S.) Gardner, Edward Jackson, John
Campbell, Gordon (Moray & Nairn) George, J. C. (Pollok) James, David
Carr, Compton (Barons Court) Gibson-Watt, David Jenkins, Robert (Dulwich)
Carr, Robert (Mitcham) Gilmour, Ian (Norfolk Central) Johnson, Dr. Donald (Carlisle)
Cary, Sir Robert Gilmour, Sir John (East Fife) Johnson, Eric (Blackley)
Channon, H. P. G. Glyn, Dr. Alan (Ciapham) Jones, Arthur (Northants, S)
Chataway, Christopher Glyn, Sir Richard (Dorset, N.) Joseph, Rt. Hon. Sir Keith
Clark, Henry (Antrim, N.) Goodhart, Philip Kaberry, Sir Donald
Clark, William (Nottingham, S.) Goodhew, Victor Kerans, Cdr. J. S.
Clarke, Brig. Terence (Portsmth,w.) Gough, Frederick Kerby, Capt. Henry
Kerr, Sir Hamilton Nugent, Rt. Hon. Sir Richard Stevens, Geoffrey
Kershaw, Anthony Orr-Ewing, C. Ian Steward, Harold (Stockport, S.)
Kimball, Marcus Osborn, John (Hallam) Stodart, J. A.
Kirk, Peter Osborne, Sir Cyril (Louth) Stoddart-Scott, Col. Sir Malcolm
Lambton, Viscount Page, Graham (Crosby) Storey, Sir Samuel
Lancaster, Col. C. G. Page, John (Harrow, West) Studholme, Sir Henry
Leather, Sir Edwin Pannell, Norman (Kirkdale) Summers, Sir Spencer
Leavey, J. A. Partridge, E. Talbot, John E.
Leburn, Gilmour Pearson, Frank (Clltheroe) Tapsell, Peter
Legge-Bourke, Sir Harry Peel, John Taylor, Sir Charles (Eastbourne)
Lewis, Kenneth (Rutland) Percival, Ian Taylor, Edwin (Bolton, E.)
Lilley, F. J. P. Peyton, John Taylor, Frank (M'ch'st'r, Moss Side)
Lindsay, Sir Martin Pickthorn, Sir Kenneth Taylor, Sir William (Bradford, N.)
Linstead, Sir Hugh Pike, Miss Mervyn Teeling, Sir William
Litchfield, Capt. John Pilkington, Sir Richard Temple, John M.
Lloyd,Rt.Hn.Geoffrey (Sut'nC'dfield) Pitman, Sir James Thatcher, Mrs. Margaret
Lloyd, Rt. Hon. Selwyn (Wirral) Pitt, Dame Edith Thomas, Sir Leslie (Canterbury)
Longbottom, Charles Pott, Percivall Thomas, Peter (Conway)
Longden, Gilbert Powell, Rt. Hon. J. Enoch Thompson, Sir Kenneth (Walton)
Loveys, Walter H. Price, David (Eastleigh) Thorneycroft, Rt. Hon, Peter
Lucas, Sir Jocelyn Price, H. A. (Lewisham, W.) Thornton-Kemsley, Sir Colin
Lucas-Tooth, Sir Hugh Prior, J. M. L. Tiley, Arthur (Bradford, W.)
McAdden, Sir Stephen Prior-Palmer, Brig. Sir Otho Tilney, John (Wavertree)
MacArthur, Ian Profumo, Rt. Hon. John Touche, Rt. Hon. Sir Gordon
McLaren, Martin Proudfoot, Wilfred Turner, Colin
Maclay, Rt, Hon. John Pym, Frances Turton, Rt. Hon. R. H.
Maclean,SirFitzroy(ButB&N.Ayrs) Quennell, Miss J. M. Tweedsmuir, Lady
McLean, Neil (Inverness) Ramsden, James van Straubenzee, W. R.
Macleod, Rt. Hn. Iain (Enfield, W.) Rawlinson, Sir Peter Vane, W. M. F.
MacLeod, John (Ross & Cromarty) Redmayne, Rt. Hon. Martin Vaughan-Morgan, Rt. Hon. Sir John
McMaster, Stanley R. Rees, Hugh Vickers, Miss Joan
Macmillan,Rt,Hn.Harold(Bromley) Rees-Davies, W. R. Vosper, Rt. Hon. Dennis
Macmillan, Maurice (Hallfax) Renton, Rt. Hon. David Wakefield, Sir Wavell
Macpherson, Rt. Hn. Niall (Dumfries) Ridley, Hon, Nicholas Walder, David
Maddan, Martin Ridsdale, Julian walker, Peter
Maginnis, John E. Rippon, Rt. Hon. Geoffrey Walker-Smith, Rt. Hon. Sir Derek
Maitland, Sir John Roberts, Sir Peter (Heeley) Wall, Patrick
Markham, Major Sir Frank Robertson, Sir D. (C'thn's & S'th'ld) Watkinson, Rt. Hon. Harold
Marples, Rt. Hon. Ernest Robinson, Rt. Hn. Sir R. (B'pool, S.)
Marshall, Douglas Robson Brown, Sir William Webster, David
Marten, Neil Rodgers, John (Sevenoaks) Wells, John (Maidstone)
Mathew, Robert (Honlton) Ropner, Col. Sir Leonard Whitelaw, William
Matthews, Gordon (Meriden) Royle, Anthony (Richmond, Surrey) Williams, Dudley (Exeter)
Maudling, Rt. Hon. Reginald Russell, Ronald Williams, Paul (Sunderland, S.)
Mawby, Ray St. Clair, M. Wills, Sir Gerald (Bridgwater)
Maxwell-Hyslop, R. J. Sandys, Rt. Hon, Duncan Wilson, Geoffrey (Truro)
Maydon, Lt.-Cmdr. S. L. C. Scott-Hopkins, James Wise, A. R.
Mills, Stratton Seymour, Leslie Wolrige-Gordon, Patrick
Miscampbell, Norman Sharpies, Richard Wood, Rt. Hon. Richard
Montgomery, Fergus Shaw, M. Woodhouse, C. M.
Moore, Sir Thomas (Ayr) Shepherd, William Woodnutt, Mark
More, Jasper (Ludlow) Skeet, T. H. H. Woollam, John
Morgan, William Smith, Dudley (Br'ntf'd & Chiswick) Worsley, Marcus
Morrison, John Smithers, peter Yates, William (The Wrekin)
Nabarro, Sir Gerald Smyth, Rt. Hon. Brig. Sir John
Neave, Airey Soames, Rt. Hon. Christopher TELLERS FOR THE AYES:
Nicholls, Sir Harmar Spearman, Sir Alexander Mr. Chichester-Clark and
Nicholson, Sir Godfrey Speir, Rupert Mr. Finlay.
Noble, Rt. Hon. Michael Stanley, Hon. Richard
Abse, Leo Bray, Dr. Jeremy Delargy, Hugh
Ainsley, William Brockway, A. Fenner Dempsey, James
Albu, Austen Brough ton, Dr. A. D. D. Diamond, John
Allaun, Frank (Salford, E.) Brown, Rt. Hon. George (Helper) Dodds, Norman
Allen, Scholefield (Crewe) Butler, Herbert (Hackney, C.) Donnelly, Desmond
Awbery, Stan (Bristol, Central) Butler, Mrs. Joyce (Wood Green) Driberg, Tom
Bacon, Miss Alice Callaghan, James Dugdale, Rt. Hon. John
Baird, John Carmichael, Neil Ede, Rt. Hon. C.
Barnett, Guy Chapman, Donald Edelman, Maurice
Baxter, William (Stirlingshire, W.) Cliffe, Michael Edwards, Rt. Hon. Ness (Caerphilly)
Beaney, Alan Collick, Percy Edwards, Robert (Bilston)
Bence, Cyril Corbet,Mrs. Freda Edwards, Waltor (Stepney)
Bennett, J. (Glasgow, Bridgeton) Craddock, George (Bradford, S.) Evans, Albert
Benson, Sir George Crosland, Anthony Finch, Harold
Blackburn, F. Crossman, R. H. S. Fitch, Alan
Blyton, William Cullen, Mrs. Alice Fletcher, Eric
Boardman, H. Dalyell, Tam Foot, Dingle (Ipswich)
Bottomley, Rt. Hon. A. G. Darling, George Foot, Michael (Ebbw Vale)
Bowden, Rt. Hn, H. W.(Leice, S.W.) Davies.G. Elfed (Rhondda, E.) Forman, J. c.
Bowles, Frank Davies, Harold (Leek) Fraser, Thomas (Hamilton)
Boyden, James Davies, Ifor (Gower) Calpern, Sir Myer
Braddock, Mrs. E. M. Davies, S. O. (Merthyr) Cinsburg, David
Bradley, Tom Deer, George Gooch, E. G.
Gordon Walker, Rt. Hon. P. C. MacColl, James Robinson, Kenneth (St. Pancras, N.)
Greenwood, Anthony MacDermott, Niall Rodgers, W. T. (Stockton)
Grey, Charles McInnes, James Ross, William
Griffiths, David (Rother Valley) McKay, John (Wallsend) Shinwell, Rt. Hon. E.
Griffiths, Rt. Hon. James (Llanetly) Mackie, John (Enfield, East) Silverman, Julius (Aston)
Griffiths, W. (Exchange) McLeavy, Frank Silverman, Sydney (Nelson)
Gunter, Ray MacMillan, Malcolm (Western Isles) Skeffington, Arthur
Hale, Leslie (Oldham, W.) MacPherson, Malcolm (Stirling) Slater, Mrs. Harriet (Stoke, N.)
Hamilton, William (West Fife) Mahon, Simon Slater, Joseph (Sedgefield)
Hannan, William Mallalieu, E. L. (Brigg) Small, William
Harper, Joseph Mallalieu, J.P.W. (Huddersfield, E.) Smith, Ellis (Stoke, S.)
Hart, Mrs. Judith Manuel, Archie Snow, Julian
Hayman, F. H. Mapp, Charles Sorensen, R, W.
Healey, Denis Marsh, Richard Soskice, Rt. Hon. Sir Frank
Henderson, Rt. Hn. Arthur (Rwly Regis) Mason, Roy Spriggs, Leslie
Herbison, Miss Margaret Mayhew, Christopher Steele, Thomas
Hewitson, Capt. M. Mellish, R. J. Stewart, Michael (Fulham)
Hill, J. (Midlothian) Mendelson, J. J. Stonehouse, John
Hilton, A. V. Millan, Bruce Stones, William
Holman, Percy Milne, Edward Strauss, Rt. Hn. G. R. (Vauxhall)
Houghton, Douglas Mitchison, G. R. Swain, Thomas
Howell, Charles A. (Perry Barr) Monslow, Walter Swingler, Stephen
Howell, Denis (Small Heath) Moody, A. S. Taverne, D.
Hoy, James H. Morris, John Taylor, Bernard (Mansfield)
Hughes, Cledwyn (Anglesey) Moyle, Arthur Thomas, George (Cardiff, W.)
Hughes, Emrys (S. Ayrshire) Neal, Harold Thompson, Dr. Alan (Dunfermline)
Hughes, Hector (Aberden, N.) Noel-Baker, Francis (Swindon) Thomson, G. M. (Dundee, E.)
Hunter, A. E. Noel-Baker, Rt. Hn. Phllip (Derby, S.) Thornton, Ernest
Hynd, H. (Accrington) Oliver, G. H. Tomney, Frank
Irvine, A. J. (Edge Hill) Oram, A. E. Wainwright, Edwin
Irving, Sydney (Dartford) Oswald, Thomas Warbey, William
Janner, Sir Barnett Padley, W. E. Weitzman, David
Jay, Rt. Hon. Douglas Pannell, Charles (Leeds, W.) Wells, William (Walsall, N.)
Jeger, George Pargiter, G. A. White, Mrs. Eirene
Jenkins, Roy (Stechford) Parker, John Whitlock, William
Johnson, Carol (Lewisham, S.) Parkin, B. T. Wigg, George
Jones, Rt. Hn. A. Creech(Wakefield) Pavitt, Laurence Wilkins, W. A.
Jones, Dan (Burnley) Pearson, Arthur (Pontypridd) Willey, Frederick
Jones, Elwyn (West Ham, S.) Peart, Frederick Williams, D. J. (Neath)
Jones, J. Idwal (Wrexham) Pentland, Norman Williams, Ll. (Abertillery)
Jones, T. W. (Merioneth) Plummer, Sir Leslie Williams, W, R. (Openshaw)
Kelley, Richard Popplewell, Ernest Williams, W. T. (Warrington)
Kenyon, Clifford Prentice, R. E. Willis, E. G. (Edinburgh, E.)
Key, Rt. Hon. C. W. Price, J. T. (Westhoughton) Wilson, Rt. Hon. Harold (Huyton)
King, Dr. Horace Probert, Arthur Winterbottom, R. E.
Ledger, Ron Proctor, W. T. Woodburn, Rt. Hon. A.
Lee, Frederick (Newton) Pursey, Cmdr. Harry Woof, Robert
Lee, Miss Jennie (Cannock) Rankin, John Wyatt, Woodrow
Lever, Harold (cheetham) Reid, William Yates, Victor (Ladywood)
Lever, L. M. (Ardwick) Reynolds, G. W. Zilliacus, K.
Lewis, Arthur (West Ham, N.) Rhodes, H.
Loughlin, Charles Roberts, Albert (Normanton) TELLERS FOR THE NOES:
Mabon, Dr. J. Dickson Roberts, Goronwy (Caernarvon) Mr. Short and Mr. Redhead.
McCann, John Robertson, John (Paisley)

Main Question put:

The House divided: Ayes 330, Noes 227.

Division No. 49.] AYES [10.13 p.m.
Agnew, Sir Peter Bingham, R. M. Carr, Compton (Barons Court)
Aitken, W. T. Birch, Rt. Hon. Nigel Carr, Robert (Mitcham)
Allan, Robert (Paddington, S,) Bishop, F. P. Cary, Sir Robert
Allason, James Black, Sir Cyril Channon, H. P. G.
Amery, Rt. Hon. Julian Bossom, Hon. Clive Chataway, Christopher
Arbuthnot, John Bourne-Arton, A. Clark, Henry (Antrim, N.)
Ashton, Sir Hubert Box, Donald Clark, William (Nottingham, S.)
Atkins, Humphrey Boyd-Carpenter, Rt. Hon. John Clarke, Brig, Terence(Portsmth, w.)
Awdry, Daniel (Chippenham) Boyle, Rt. Hon. Sir Edward Cleaver, Leonard
Balniel, Lord Braine, Bernard Cole, Norman
Barber, Anthony Brewis, John Cooke, Robert
Barlow, Sir John Bromley-Davenport, Lt.-Col. Sir Walter Cooper, A. E.
Barter, John Brooke, Rt. Hon. Henry Cordeaux, Lt.-Col. J. K.
Batsford, Brian Brooman-White, R. Corfield, F. V.
Beamish, Col. Sir Tufton Brown, Alan (Tottenham) Costain, A. P.
Bell, Ronald Bryan, Paul Coulson, Michael
Bennett, F. M. (Torquay) Buck, Antony Courtney, Cdr. Anthony
Bennett, Dr. Reginald (Gos & Fhm) Bullard, Denys Craddock, Sir Beresford (Spelthorne)
Berkeley, Humphry Bullus, Wing Commander Eric Crawley, Aidan
Bevins, Rt. Hon. Reginald Burden, F. A. Crosthwaite-Eyre, Cot. Sir Oliver
Bidgood, John C. Butcher, Sir Herbert Crowder, F. P.
Biffen, John Campbell, Sir David (Belfast, S.) Cunningham, Knox
Biggs-Davison, John Campbell, Gordon (Moray & Nairn) Curran, Charles
Currie, G. B. H. Johnson, Eric (Blackley) Price, David (Eastleigh)
Dalkeith, Earl of Jones, Arthur (Northants, S) Price, H. A. (Lewisham, W.)
d'Avigdor-Goldsmid, Sir Henry Joseph, Rt. Hon. Sir Keith Prior, J. M. L.
Deedes, Rt. Hon. w. F. Kaberry, Sir Donald Prior-Palmer, Brig. Sir Otho
Digby, Simon Wingfield Kerans, Cdr. J. S. profumo, Rt. Hon. John
Donaldson, Cmdr. C. E. M. Kerby, Capt. Henry Proudfoot, Wilfred
Drayson, G. B. Kerr, Sir Hamilton Pym, Francis
du Cann, Edward Kershaw, Anthony Quennell, Miss J. M.
Duncan, Sir James Kimball, Marcus Ramsden, James
Duthie, Sir William Kirk, Peter Rawlinson, Sir Peter
Eden, John Lambton, Viscount Redmayne, Rt. Hon. Martin
Elliot, Capt. Walter (Carshalton) Lancaster, Col. C. G. Rees, Hugh
Elliott, R. W. (Nwcaste-upon-Tyne, N.) Leather, Sir Edwin Rees-Davies, W. R.
Emery, Peter Leavey, J. A. Renton, Rt. Hon. David
Emmet, Hon. Mrs. Evelyn Leburn, Gilmour Ridley, Hon. Nicholas
Errington, Sir Eric Legge-Bourke, Sir Harry Ridsdale, Julian
Erroll, Rt. Hon. F. J. Lewie, Kenneth (Rutland) Rippon, Rt. Hon. Geoffrey
Farey-Jones, F. W. Lilley, F. J. P. Roberts, Sir Peter (Heeley)
Farr, John Lindsay, Sir Martin Robertson, Sir D. (C'thn's & S'th'ld)
Fisher, Nigel Linstead, Sir Hugh Robinson, Rt. Hn. Sir R. (B'pool, S.)
Fletcher-Cooks, Charles Litchfield, Capt. John Robson Brown, Sir William
Forrest, George Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield) Rodgers, John (Sevenoaks)
Foster, John Lloyd, Rt. Hon. Selwyn (Wirral) Ropner, Col. Sir Leonard
Fraser, Rt. Hn. Hugh (Stafford&Stone) Longbottom, Charles Royle, Anthony (Richmond, Surrey)
Fraser, Ian (Plymouth, Sutton) Longden, Gilbert Russell, Ronald
Freeth, Denzil Loveys, Walter H. St. Clair, M.
Galbraith, Hon. T. G. D. Lucas, Sir Jocelyn Sandys, Rt. Hon. Duncan
Gammans, Lady Lucas-Tooth, Sir Hugh Scott-Hopkins, James
Gardner, Edward McAdden, Sir Stephen Seymour, Leslie
George, J. C. (Pollok) MacArthur, Ian Sharples, Richard
Gibson-Watt, David McLaren, Martin Shaw, M.
Gilmour, Ian (Norfolk Central) Maclay, Rt. Hon. John Shepherd, William
Gilmour, Sir John (East Fife) Maclean, Sir Fitzroy (Bute&N, Ayrs) Skeet, T. H. H.
Glyn, Dr. Alan (Clapham) McLean, Neil (Inverness) Smith, Dudley (Br'ntf'd & Chiswick)
Glyn, Sir Richard (Dorset, N.) Macleod, Rt. Hn. Iain (Enfield, W.) Smithers, Peter
Goodhart, Phllip MacLeod, John (Ross & Cromarty) Smyth, Rt. Hon. Brig. Sir John
Goodhew, Victor McMaster, Stanley R. Soames, Rt. Hon. Christopher
Gough, Frederick Macmillan, Rt. Hn. Harold (Bromley) Spearman, Sir Alexander
Gower, Raymond Macmillan, Maurice (Halifax) Speir, Rupert
Grant-Ferris, R. Macpherson, Rt. Hn. Niall (Dumfrles) Stanley, Hon. Richard
Green, Alan Maddan, Martin Stevens Geoffrey
Gresham Cooke, R. Maginnis, John E. Steward, Harold (Stockport, S.)
Grosvenor, Lt.-Col. R. G. Maitland, Sir John Stodart, J. A.
Gurden, Harold Markham, Major Sir Frank Stoddart-Scott, Col. Sir Malcolm
Hall, John (Wycombe) Marples, Rt. Hon. Ernest Storey, Sir Samuel
Hamilton, Michael (Wellingborough) Marshall, Douglas Studholme, Sir Henry
Hare, Rt. Hon, John Marten, Neil Summers, Sir Spencer
Harris, Frederic (Croydon, N.W.) Mathew, Robert (Honlton) Talbot, John E.
Harris, Reader (Heston) Matthews, Gordon (Meriden) Tapsell, Peter
Harrison, Brian (Maldon) Maudling, Rt. Hon. Reginald Taylor, Sir Charles (Eastbourne)
Harrison, Col. Sir Harwood (Eye) Mawby, Ray Taylor, Edwin (Bolton, E.)
Harvey, Sir Arthur Vere (Macclesf'd) Maxwell-Hyslop R. J. Taylor, Frank (M'ch'st'r, Moss Side)
Harvey, John (Walthamstow, E.) Maydon, Lt.-Cmdr. S L. C Taylor, Sir William (Bradford, N.)
Harvie Anderson, Miss Mills, Stratton Teeling, Sir William
Hastings, Stephen Temple, John M.
Hay, John Miscampbell, Norman Thatcher, Mrs. Margaret
Heald, Rt. Hon. Sir Lionel Montgomery, Fergus Thomas, Sir Leslie (Canterbury)
Heath, Rt. Hon. Edward Moore, Sir Thomas (Ayr) Thomas, Peter (Conway)
Henderson, John (Cathcart) More, Jasper (Ludlow)
Hendry, Forbes Morgan, William Thompson, Sir Kenneth (Walton)
Hicks Beach, Maj. W. Morrison, John Thorneycroft, Rt. Hon. Peter
Hill, Dr. Rt. Hon. Charles (Luton) Nabarro, Sir Gerald Thornton-Kemsley, Sir Colin
Hill, Mrs. Eveline (Wythenshawe) Neave, Airey Tiley, Arthur (Bradford, W.)
Hill, J. E. B. (S. Norfolk) Nicholls, Sir Harmar Tilney, John (Wavertree)
Hirst, Geoffrey Nicholson, Sir Godfrey Touche, Rt. Hon. Sir Gordon
Hobson, Sir John Noble, Rt. Hon. Michael Turner, Colin
Hocking, Philip N. Nugent, Rt. Hon. Sir Richard Turton, Rt. Hon. R. H.
Holland, Philip Orr-Ewing, C. Ian Tweedsmuir, Lady
Hollingworth, John Osborn, John (Hallam) van Straubenzee, W. R.
Hope, Rt. Hon. Lord John Osborne, Sir Cyril (Louth) Vane, W. M. F.
Hopkins, Alan Page, Graham (Crosby) Vaughan-Morgan, Rt. Hon, Sir John
Hornby, R. P. Page, John (Harrow, West) Vickers, Miss Joan
Hornsby-Smith, Rt. Hon. Dame P. Panned, Norman (Kirkdale) Vosper, Rt. Hon. Dennis
Howard, Hon. G. R. (St. Ives) Partridge, E. Wakefield, Sir Wavell
Howard, John (Southampton, Test) Pearson, Frank (Clitheroe) Walder, David
Hughes Haliett, Vice-Admiral John Peel, John Walker, Peter
Hughes-Young, Michael Percival, Ian Walker-Smith, Rt. Hon. Sir Derek
Hulbert, Sir Norman Peyton, John Wall, Patrick
Hurts, Sir Anthony Pickthorn, Sir Kenneth Watkinson, Rt. Hon. Harold
Hutchison, Michael Clark Pike, Miss Mervyn Webster, David
Iremonger, T, L. Pilkington, Sir Richard Wells, John (Maidstone)
Irvine, Bryant Godman (Rye) Pitman, Sir James Whitelaw, William
James, David Pitt, Dame Edith Williams, Dudley (Exeter)
Jenkins, Robert (Dulwich) Pott, Pereivall Wills, Sir Gerald (Bridgwater)
Johnson, Dr. Donald (Carlisle) Powell, Rt. Hon. J. Enoch Wilson, Geoffrey (Truro)
Wise, A. R. Woodnutt, Mark
Wolrige-Gordon, Patrick Woollam, John TELLERS FOR THE AYES:
Wood, Rt. Hon. Richard Worsley, Marcus Mr. Chichester-Clark and
Woodhouse, C. M. Yates, William (The Wrekin) Mr. Finlay.
Abse, Leo Griffiths, Rt. Hon. James (Llanelly) Morris, John
Ainsley, William Griffiths, W. (Exchange) Moyle, Arthur
Albu, Austen Gunter, Ray Neal, Harold
Allaun, Frank (Salford, E.) Hale, Leslie (Oldham, W.) Noel-Baker, Francis (Swindon)
Allen, Scholefield (Crewe) Hamilton, William (West Fife) Noel-Baker, Rt. Hn. Philip (Derby, S.)
Awbery, Stan (Bristol, Central) Hannan, William Oliver, G. H.
Bacon, Miss Alice Harper, Joseph Oram, A. E.
Baird, John Hart, Mrs. Judith Oswald, Thomas
Barnett, Guy Hayman, F. H. Padley, W. E.
Baxter, William (Stirlingshire, W.) Healey, Denis Pannell, Charles (Leeds, W.)
Beaney, Alan Henderson, Rt. Hn. Arthur (Rwly Regis) Pargiter, G. A.
Bence, Cyril Herbison, Miss Margaret Parker, John
Bennett, J. (Glasgow, Bridgeton) Hewitson, Capt. M. Parkin, B. T.
Benson, Sir George Hill, J. (Midlothian) Pavitt, Laurence
Blackburn, F. Hilton, A. V. Pearson, Arthur (Pontypridd)
Blyton, William Holman, Percy Peart, Frederick
Boardman, H. Houghton, Doug'as Pentland, Norman
Bottomley, Rt. Hon. A. G. Howell, Charles A. (Perry Barr) Plummer, Sir Leslie
Bowden, Rt. Hn. H. W.(Leics, S.W.) Howell, Denis (Small Heath) Popplewell, Ernest
Bowies, Frank Hoy, James H. Prentice, R. E.
Boyden, James Hughes, Cledwyn (Anglesey) Price, J. T. (Westhoughton)
Braddock, Mrs. E. M. Hughes, Emrys (S. Ayrshire) Probert, Arthur
Bradley, Tom Hughes, Hector (Aberdeen, N.) Proctor, W. T.
Bray, Dr. Jeremy Hunter, A. E. Pursey, Cmdr. Harry
Brockway, A. Fenner Hynd, H. (Accrington) Rankin, John
Broughton, Dr. A. D. D. Irvine, A. J. (Edge Hill) Reid, William
Brown, Rt. Hon. George (Belper) Irving, Sydney (Dartford) Reynolds, G. W.
Butler, Herbert (Hackney, C.) Janner, Sir Barnett Rhodes, H.
Butler, Mrs. Joyce (Wood Green) Jay, Rt. Hon. Douglas Roberts, Albert (Normanton)
Callaghan, James Jeger, George Roberts, Goronwy (Caernarvon)
Carmichael, Neil Jenkins, Roy (Stechford) Robertson, John (Paisley)
Chapman, Donald Johnson, Carol (Lewisham, S.) Robinson, Kenneth (St. Pancras, N.)
Cliffe, Michael Jones, Rt. Hn. A. Creech (Wakefield) Rodgers, W. T. (Stockton)
Collick, Percy Jones, Dan (Burnley) Ross, William
Corbet, Mrs. Freda Jones, Elwyn (West Ham, S.) Silverman, Julius (Aston)
Craddock, George (Bradford, S.) Jones, J. Idwal (Wrexham) Silverman, Sydney (Nelson)
Crosland, Anthony Jones, T. W. (Merioneth) Skeffington, Arthur
Crossman, R, H. S. Kelley, Richard Slater, Mrs. Harriet (Stoke, N.)
Cullen, Mrs. Alice Kenyon, Clifford Slater, Joseph (Sedgefield)
Dalyell, Tam Key, Rt. Hon, C. W. Small, William
Darling, George King, Dr. Horace Smith, Ellils (Stoke, S.)
Davies, G. Elfed (Rhondda, E.) Ledger, Ron Snow, Julian
Davies, Harold (Leek) Lee, Frederick (Newton) Sorensen, R. W.
Davies, Ifor (Gower) Lee, Miss Jennie (Cannock) Soskice, Rt. Hon. Sir Frank
Davies, S. O. (Merthyr) Leaver, Harold (Cheetham) Spriggs, Leslie
Deer, George Lever, L. M. (Ardwick) Steele, Thomas
Delargy, Hugh Lewis, Arthur (West Ham, N.) Stewart, Michael (Fulham)
Dempsey, James Loughlin, Charles Stonehouse, John
Diamond, John Mabon, Dr. J. Dickson Stones, William
Dodds, Norman McCann, John Strauss, Rt. Hn. G. R. (Vauxhall)
Donnelly, Desmond MacColl, James Swain, Thomas
Driberg, Tom MacDermot, Niall Swingler, Stephen
Dugdale, Rt. Hon. John McInnes, James Taverns, D.
Ede, Rt. Hon. C. McKay, John (Wallsend) Taylor, Bernard (Mansfield)
Edelman, Maurice Mackie, John (Enfield, East) Thomas, George (Cardiff, W.)
Edwards, Rt. Hon, Ness (Caerphilly) McLeavy, Frank Thompson, Dr. Alan (Dunfermline)
Edwards, Robert (Bllston) MacMillan, Malcolm (Western Isles) Thomson, G. M. (Dundee, E.)
Edwards, Walter (stepney) MacPherson, Malcolm (Stirling) Thornton, Ernest
Evans, Albert Mahon, Simon Tomney, Frank
Finch, Harold Mallalieu, E. L, (Brigg) Wainwright, Edwin
Fitch, Alan Mallalieu, J.P. W.(Huddersfield, E.) Warbey, William
Fletcher, Erie Manuel, Archie Weitzman, David
Foot, Dingle (Ipswich) Mapp, Charles Wells, William (Walsall, N.)
Foot, Michael (Ebbw Vale) Marsh, Richard White, Mrs. Eirene
Forman, J. C. Mason, Roy Whitlock, William
Fraser, Thomas (Hamilton) Mayhew, Christopher Wigg, George
Galpern, Sir Myer Mellish, R. J. Wilkins, W. A.
Ginsburg, David Mendelson, J. J. Willey, Frederick
Gooch, E, G. Millan, Bruce Williams, D. J. (Neath)
Gordon Walker, Rt. Hon. P. c. Milne, Edward Williams, Ll. (Abertillery)
Greenwood, Anthony Mitchison, G. R. Williams, W. R. (Openshaw)
Grey, Charles Monslow, Walter Williams, W, T. (Warrington)
Griffiths, David (Bother Valley) Moody, A. S. Willis, E. G. (Edinburgh, E.)
Wilson, Rt. Hon. Harold (Huyton) Wyatt, Woodrow
Winterbottom, R. E. Yates, Victor (Ladywood) TELLERS FOR THE NOES:
Woodburn, Rt. Hon. A. Zilliacus, K. Mr. Short and Mr. Redhead.
Woof, Robert

Resolved, That this House expresses its full confidence Majesty's Government to deal with the political down of the Brussels negotiations.

in the determination and ability of Her and economic situation arising from the break-