PUBLIC EXPENDITURE

HC Deb 18 January 1968 vol 756 cc1955-2092

Order read for resuming adjourned debate on Amendment on Question [17th January]:

That this House approves the Statement made by the Prime Minister on 16th January.

Which Amendment was, to leave out from "House" to the end of the Question and to add instead thereof: ' while having no confidence in Her Majesty's Government whose mismanagement of the economy has led to the present situation, recognises that there is a need to curtail public expenditure, regrets that the Statement is purely negative in character, and deplores cuts in defence which involve breaking faith with friends and allies and will severely undermine our national security.

Question again proposed, That the Amendment be made.

3.37 p.m.

Mr. Speaker

Before I call the Leader of the Opposition, may I make one serious observation? Some of yesterday's speeches were rather long. Today, apart from the Front Benches, there are still 65 right hon. and hon. Members wishing to speak, including many who sat all through yesterday's debate and including seven Privy Councillors—[HON. MEMBERS: "Oh."] Order. Every hon. Member who seeks to catch my eye has his own special contribution which he wishes to make. My job is to protect minority opinions and I think that there are about 629 minority opinions in this debate.

However, all the efforts of the Chair to secure a full and fair expression of varying opinions can be frustrated if hon. Members who are called take up too much of the time of the House to the exclusion of other hon. Members who have sat through the debate and not been given time to make their contributions. In recent months, the Chair has often appealed to the House, stating the number of hon. Members who wish to contribute and asking for short speeches, to enable more hon. Members who wish to speak to have their chance.

I appeal today, that when the general debate begins, all hon. Members, including Privy Councillors, will try to co- operate so that we can have a fair and adequate debate.

3.40 p.m.

Mr. Edward Heath (Bexley)

This debate is really about the future of Great Britain after devaluation. Yesterday— and in his television broadcast—the Chancellor of the Exchequer described this as a very serious economic situation. This is his attempt to bring a new realism into economic discussion—something which I welcome, though I believe that he himself has still some way to go before the realism is complete.

If the right hon. Gentleman is to achieve his objective it is his duty to tell the people of this country that, as a result of devaluation, their standard of living must fall. It is his responsibility, and that of the Government, to show the people how, by their own efforts, within a new framework—which the right hon. Gentleman mentioned yesterday—they can, in fact, rebuild their own lives and positions.

This is a serious economic situation for the reasons which the Chancellor gave. There is the magnitude of the task facing us. Indeed, the surplus at which he now aims may, to some extent, invite disbelief in his own realism as to the possibility of it being attained. When we place this in an international setting, there are two points to which I must briefly draw attention; first, the importance of the statement of the President of the United States on the measures which the United States is taking, their impact on world trade and, therefore, on us at a most difficult time; and, secondly, the fact that the Chancellor is also facing, as a result of devaluation, a decline in, and the possible elimination of, the sterling area.

Members and depositors have made very heavy losses. For example, £130 million has been mentioned for Australia and £120 million for the Gulf States. Sums of that order have been lost proportionately elsewhere. The ties with the sterling area are undoubtedly about to be weakened by the defence measures, which the Government have also announced.

It is significant that so little money has returned to this country, even with an 8 per cent. Bank Rate. Unless Her Majesty's Government can show, and rapidly, that they can make devaluation work, there is a grave danger not of an orderly rundown of the sterling area balances—for which some have argued from below the Gangway—but of a disorderly breakup of the area itself, with all its damaging results for world trade, for the world monetary system and for Britain itself.

This, therefore, is the importance of the confidence factor today in the future of the economy. And this is the reason I put first, in the list of criteria which I gave following the Prime Minister's statement on Tuesday, the question of the extent to which it would restore confidence. It is now possible for us to make a judgment. It is clear that the Prime Minister's statement, and the Chancellor's speech, have not themselves restored confidence at home, in industry or among those abroad who are our creditors. It is, perhaps, particularly noticeable that the cuts in defence have had exactly the reverse effect and have been greeted with regret almost unanimously by our friends across the world and, in particular, by those holding sterling balances. The situation is, therefore, more serious as a result of the failure to regain confidence.

The reasons for this are, I suggest, not difficult to find, and they are reasons with which, I understand, the Chancellor has had to contend. The statement on Tuesday was the third on Government measures since devaluation. It is now two months since devaluation took place, yet only one-third of the problem arising in Britain after devaluation has been tackled. As more and more facts have emerged it has been shown that we were right when we said that devaluation had been carried through at the worst possible time and in the worst possible way.

However, leaving that aside, it has now become abundantly clear that there was no contingency planning of any kind by the Government as to the immediate actions which would be taken, and which would be required to be taken, in the event of devaluation—this in spite of the fact that, of all the arguments put forward by the last Chancellor of the Exchequer against devaluation, he specified clearly what the general consequences would be.

It is obvious that no planning was done to deal with Government expenditure, although the last Chancellor knew perfectly well—as did most members of the Government—that it would need to be cut, even without devaluation. Only now are the Government looking at the implementation of the measures which they have themselves just announced. But by dealing with only one-third of the package which is necessary after devaluation—and that the negative part; indeed, in the Chancellor's speech he created further uncertainty among both consumers and industry about future taxation—by dealing with only one-third of the task, I believe that the Chancellor has greatly imperilled the success of his operation. He has certainly made sure that the further measures which will be necessary will be more harsh than would otherwise have been required, because the gap in confidence which must be made up is greater as a result of the earlier failure.

But probably the most damning criticism of all is that, by failing to take all the measures at the right time, the Government have missed the greatest possible psychological opportunity of receiving a response from the people, who now will seem to be faced with only a depressing lot of measures, one after another, each bearing little relationship to each other.

I wish to look for a moment at the question of Government expenditure. My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) dealt yesterday in detail with this matter. I want to leave aside all the arguments about relative priorities—these have been dealt with and discussed in great detail here —and also to leave aside the phoney cuts. My right hon. Friend mentioned the £80 million for investment payments. I suppose that the phoniest of all was that in respect of not engaging more civil servants. There is, after all, virtually no limit to the number of civil servants one cannot engage. This could have provided an infinitely larger saving if the Prime Minister had so desired. The one remaining fact about Government expenditure is that, in this coming financial year, it will increase by 3¾ per cent, in real terms, and much more in financial terms, allowing for the increase in prices, particularly following devaluation.

That is the real position about Government expenditure and it is on that figure that opinion abroad will judge, as will industry at home. They will set it against the Chancellor's estimate of a 4 per cent, increase in growth, which he has not yet attained and which he cannot show he will attain. So he has gone against all the advice and the injunction which he has been giving to industry: that it should not have increases or spend more until it has produced the necessary amounts itself. This is the real problem of Government expenditure, and, in addition, the right hon. Gentleman has promised a hard Budget.

The Prime Minister, who much more enjoys debating points than putting forward arguments of substance, will, no doubt, try to play off the level of Government expenditure against particular items. He is perfectly willing to do that. But the proposals which were put forward yesterday by my right hon. Friend add up to very considerably greater reductions in Government expenditure than those which the Government have put forward. As an Opposition, we have done this responsibly and, I believe, rightly. We have told the country about the action which should be taken, even though it may be more unpopular than that being taken by the Government.

There has been no fundamental change in the attitude of the Government or of the Chancellor of the Exchequer towards Government expenditure. The Chancellor himself said yesterday that he wished to have more Government expenditure. He was inhibited only because of the additional burden of taxation on top of that which he has already in mind, which he thought would be completely unbearable. That is the only factor inhibiting him. Until this attitude of mind is changed by the Government, the right hon. Gentleman will not restore confidence either at home or overseas. It is this change of attitude which is lacking at so many different points in the speeches of the Prime Minister and the Chancellor of the Exchequer.

Now, the question of personal spending. The Chancellor of the Exchequer, it is now generally agreed by all commentators, has failed to tackle this. He spoke harshly about a Christmas spending spree. We all know that that spend- ing spree is still going on. It was the result of the minor boom induced by the last Chancellor in an attempt to avoid political unpleasantness of too high unemployment figures. It was also the result of failure to take effective action directly after devaluation to deal with consumer spending. But the Chancellor's statement that there will be further measures of taxation on 19th March is an incitement to people to spend, for shops and manufacturers to stock up, and, therefore, to influence imports adversely at the most critical juncture of this whole coming period when, as the Chancellor himself said, there are bound to be six months of bad trade figures.

The Chancellor of the Exchequer will not know very much more by 19th March about the state of the economy. Indeed, he will be denied some information which he would normally have for the Budget. This indecisiveness and vacillation in the present situation is dangerous for the national economy, and the Chancellor must act and act speedily. If he intends to use the regulator, he must do it. If he does not, he must say so and remove the cause for a spending spree. If he intends to deal with hire purchase, let him do it tonight, and not wait. By waiting he gains nothing, but he endangers the economy.

Equally important in the economy today is the need for savings. Taxation, the use of the regulator and hire-purchase controls are in themselves negative weapons. Saving is the only positive weapon which is available to the Chancellor and which can give people hope for the future, giving them the opportunity to build up for their future lives after this difficult period.

A major omission from the Government's statements so far is anything about the encouragement of savings. I understand the dilemma. The dilemma is that prices are bound to rise—this is the point of devaluation—and it is, therefore, difficult to induce people to save when they know, and they are being told, that prices will rise. But it is not an insuperable problem. It means that the advantages and the incentives which the Chancellor can give to saving must outweigh the disadvantages.

The right hon. Gentleman must stop looking at the matter from a restrictive and, if I may say so, Treasury point of view, and look at it from the substantive point of view of rapidly gaining savings. This calls for encouragement to savings of all kinds, not only National Savings but, particularly, those forms of savings in which the citizen can see that the value of his money will be preserved and protected if he employs it in that way. I say to the right hon. Gentleman, therefore, that this, also, is action which he must take speedily.

I have criticised the package for being entirely negative. Indeed, this was accepted by the Government, who said that they were concerned only with the particular item of public expenditure. But it is of the utmost importance that there is nothing positive either for individuals or for corporations. There is nothing positive about import saving, and, in this connection, the greatest omission both from the financial point of view and from the point of view of imports and the balance of trade is undoubtedly action on agriculture. If this action had been taken directly after devaluation, agriculture could have coped with it to a certain extent this season. I fear that now it is too late. This is another payment which we have to make for Government delay in effective action following devaluation.

The lack of anything positive for individuals or corporations goes to the heart of the matter. It is the reason for so many of the Government's past failures, and it is the key to leadership in Britain today. The present situation is serious politically, not only economically. Because the Government have failed— they have now acknowledged their defeat in devaluation, and openly done so through the Chancellor—the whole parliamentary system is under attack. The citizens of the country feel a wide gap between Government and governed, between Westminster and Whitehall and themselves. In the experience of most of us, this has never been more deeply felt, nor has the gap been wider, and it produces an air of artificiality in a great deal of the discussion which goes on even in this House.

I shall examine some examples. The Prime Minister has said that the purpose of devaluation is to have an export-led boom. This is treated as though it were purely automatic. In fact, it is not, but there has been no indication from the Government or action taken by them to encourage the export-led boom to come about. There is the opportunity for additional profitability in some overseas markets, but what was the first thing which the last Chancellor of the Exchequer did? He taxed the additional profitability, apart from having removed the export incentive and the premium. Immediately, therefore, the whole question of profitability is brought into account, and industrialists get the impression that, in fact, the Government do not want to encourage them to take part in an export-led boom. [Laughter.] I am sorry to hear the jeers from hon. Members opposite. I understood that we were trying to get to the roots of these problems in a realistic way.

It is this attitude which must change if the Chancellor is to achieve his purpose. He must acknowledge the essential nature of good profits in industry. He must stop paying subsidies to firms, shoring up dying industries and using the I.R.C. to provide capital for firms, when it is infinitely better that the profitable and successful firms should be left more of their own resources for investment or obtain them through the market.

Again, the making of resources available for exports and the redeployment of manpower and resources is treated by the Government as automatic. This is what happened in 1966. It was the theme of the 1966 measures. They were largely unsuccessful. Why? Because insufficient action was taken by the Government to produce the new skills required for redeployment and to bring about the fresh mobility which is essential if there is to be redeployment.

Mr. William Hamilton (Fife, West)

What did the right hon. Gentleman and his party do?

Mr. Heath

It was the present Government who were responsible in 1966.

This is a legitimate field for Government intervention. The Government ought to do more, for example, about training centres. They ought to look at the whole of the organisation for training people—[HON. MEMBERS: "Oh."] The responsibility is on the Government. Hon. Members opposite have already been told by their Leader that their fate will depend on the success of these measures. If they want to alleviate their own fate in some way, they had better pay attention to these measures. People who have been trained in Government training centres must, with their qualifications, be accepted in industry. It is intolerable that men and women should go to Government training centres, get qualifications, and then be refused employment by trade unions.

What is more, housing priorities must be altered to cope with this situation. I would go so far as to say that where there is a rapidly declining area the Government should help with those people who are left with houses and have to move. I am quite prepared to see that happen as well, to encourage mobility. There is no point in keeping manpower in uneconomic pits where it is not required, or on the railways, or where an industry is grossly overmanned, as in the steel industry, and then have to cut back on manpower elsewhere. This is a fundamental economic question of training and mobility, and in these fields only the Government themselves, to a very large extent, can cope. The Government should, therefore, look at these sources of manpower, deal with them quickly and provide mobility.

The Chancellor of the Exchequer has emphasised the essential urgency of this present year, in which we have to take full advantage of devaluation. I suggest that if he wants to get quick results he may need a temporary change in the development policy in the development districts, and allow a degree of expansion in those firms which can expand quickly and export, wherever they are in the country, and the necessary arrangements must go with that change. No one has fought harder for regional development than I have—[HON. MEMBERS: "Oh."] It was the department of regional development which took in the 4 per cent, of the Civil Service jeered at by the Chancellor of the Exchequer yesterday. In this situation, the Chancellor of the Exchequer and the President of the Board of Trade should look at this question of where they can get rapid expansion in export industries.

Next, we have "making room for exports"—another phrase that is used, but which I do not believe our citizens understand. Nor do they see how the changes in the social service charges contribute to making room for exports. This is one of the fundamental gaps in communication between the Government and the country, between the Government and the governed. This is where I suggest that the Government have based all their charges and changes, which we have supported, in the wrong way. What they are moving to is selectivity on the basis that those who can afford to pay should do so. This is an approach that our citizens understand. They believe that, as society improves its wealth, so more and more people should pay for those things for which they can afford to pay; and if the people are told that clearly and firmly they will respond, and will stand more and more on their own feet.

This, I believe, is a key example of the way in which the gap between Whitehall and Westminster and the citizens is to be bridged. Therefore, let the Government have the courage to say this, now that they have embarked on the process of selectivity, because more and more social services will develop in this way; and what I suspect is that the more the Government do the more pressure the citizens will bring on central and local authorities for more effective and efficient social services—and a very good thing, too. The money which the citizen knows will be saved by the Government can be used, as we have supported, by improving standards elsewhere—as in the extension of the school-leaving age, or in the hospital programme, or in incentives through direct taxation.

This is where we come to the next part, and the essential part, which was missing from the Government's package. I believe that the Chancellor of the Exchequer would, if he were wise, or, per haps, if he had been more experienced, have taken more than he required in the reductions in Government spending and in the other ways so that he would have had a margin to give at the earliest possible moment the incentives which are essential. What the people fear from the right hon. Gentleman's speech yesterday is that, as far as they can see, there is no possibility of incentives for them in the future—[HON. MEMBERS: "For whom?"] I am referring to everyone in the country who is engaged in industry and agriculture, because changes in direct taxation are urgently required—

Mr. Eric S. Heffer (Liverpool, Walton)

More for the poor and less for the rich.

Mr. Heath

I marvel at the way in which hon. Members opposite can so deceive themselves that the hon. Member for Liverpool, Walton (Mr. Heffer) can utter the phrase "just for the rich". Has he never talked to skilled craftsmen from the bench who are emigrating? [HON. MEMBERS: "Oh."] Has he never seen the statements of the young executives and scientists who are forming part of the brain drain? If he has, he knows perfectly well that the burden of direct taxation is a disincentive which runs right through British industry today.

Mr. Roy Roebuck (Harrow, East)

Can the right hon. Gentleman say what a reduction of 6d. in the standard rate of Income Tax will mean to a man of average earnings with two children?

Mr. Heath

It means that he has hope for the future—[HON. MEMBERS: "Oh."] This is a legitimate difference between the two sides of the House, but what I can tell the Chancellor of the Exchequer is that if he intends to pursue the policies which his hon. Friends are shouting about now he will never get the productivity that he requires, and he will never get the confidence overseas that is essential. I regret to say that from himself there has been no indication of any change in attitude whatever—indeed, the reverse.

I refer to two things that the right hon. Gentleman said yesterday. First of all, there is the argument about family allowances and selectivity. If the Prime Minister is arguing that there is no difference between the two techniques of employing or augmenting selectivity, I ask the Chancellor of the Exchequer to remember that if he seeks to do it by increasing taxation he will bring about a further deterrence to individual effort which can only be damaging to our economy. This is the essential difference between the way we have proposed and the way the Prime Minister and the right hon. Gentleman have been discussing.

The right hon. Gentleman went on to say that in the event of incomes increasing during the coming year more than he believed right, he would impose further taxation. This is, again, a further deter- rent—a deterrent against initiative, because the individual, whether or not he makes a response to the Prime Minister's exhortations, whether or not he gets increased productivity, will have to bear still greater taxation put on him by the Chancellor of the Exchequer. So that would not produce the response that we are told the Government need. I therefore deplore the right hon. Gentleman's statement that he will deal with incomes only in this way.

The basis of his policy should undoubtedly be that people should be allowed to keep more of what they earn; that they should be given the incentive to get it through their productivity schemes in firms and industries. Then they have the opportunity of paying taxation when they spend, or of saving their money, given the proper incentive. This is the fresh framework which the Chancellor of the Exchequer should be creating.

But these are only parts of the picture because, in many ways, management has the greatest possible responsibilities in this matter. It has to be subjected to pressures of competition as well as given the incentives of earning. I suggest to the President of the Board of Trade that monopoly legislation now needs looking at, so that British firms—now that Europe is closed to us for the time being—can get the advantages of scale. But, at the same time, if this is permitted—and it has been often stopped in the past—there must be a completely fresh look at the tariff system post-Kennedy, so that, where there is a monopoly situation, competition can be provided by using the tariffs. I suggest to both the Chancellor and the President of the Board of Trade that there should be a small but very speedy inquiry into both those spheres, changing monopoly legislation and a complete tariff review in those fields where monopoly is likely or possible.

The citizen wants to know how he personally can help. This is the greatest gap of all between economic policy and individual response. This, of course, was the objective of the five typists: to bridge this gap and to show how they could help. We all know that an extra half hour a day at work will not solve the economic problem and that there are many places where alternatives are much preferable.

Indeed, we ought not to be asking people to work longer hours; we ought to be asking them for more effective working in the hours they are working and to achieve this in capital investment and by the abandonment of restrictive practices. That is the best way to produce the answer, but the point about the five typists was that they demonstrated a spirit. It was a spirit which has produced an echoing response in the country and to which the Prime Minister has himself rightly referred.

This is a spirit which we want to encourage, but when Governments speak in the terms of the Chancellor of the Exchequer the men or women find it difficult to respond because they are part of an industrial machine with the organisations concerned. Surely it is wrong that those who work harder should be fined. This seems an intolerable situation, which must be put right. If organisations are involved it can be handled only through management and trade unions. This is where the positive part of the Government's package is lacking. It has to be in training and incentives and examples by Government for management. It has to be by incentives and the fresh framework of industrial relations for the trade unions.

I need not go into the details, but this is essential. [HON. MEMBERS: "Why not?"] The details have all been spelled out and are on the record; I can send to the Chancellor the details—but no action has been taken. Until it is taken the people cannot respond. The Chancellor himself said, and I emphasise, that a fresh framework was required. This is true. My criticism of him and of the Prime Minister is that they are doing nothing to provide that framework.

The Government can set an example. Cutting Government expenditure is not the only part of the example. No one believes that central or local government is efficient. [An HON. MEMBER: "What did the right hon. Gentleman's party do?"] I fully accept that when we were the Government there were many things which, from the point of view of efficiency of the machine, should have been improved, but I say to the Prime Minister that he ought to look at the organisation of Whitehall and to set an example. There is no need now—this is a suitable opportunity with the changes which are being made—for the Department of Economic Affairs to continue in its present form. I would hope that the Chancellor of the Exchequer himself would insist on that.

The Prime Minister should set up alongside his own office a department of cost effectiveness, with power at the highest level to deal with Whitehall and turn it upside down. This is not in the terms of reference of Fulton. It is a place where businessmen have a part to play in bringing this about and in which all the operations of Whitehall can be examined from the point of view of whether they are necessary and, if they are necessary, are they being carried out in the right way? This is a positive step which could be taken and its establishment would give a magnificent example to industry itself. It would remove criticism from the Government.

One other word about the home front. The Prime Minister said in answer to a supplementary question on Tuesday that he would consider whether there should be reductions in Minister's salaries, to give an example to the people. So far as other hon. Members are concerned, that is a matter for each of them. Both Front Benches agree about that. Members of the Government can reach their own conclusions. We are not asking any other part of the community to take reductions in salaries. The Government have not asked them to do that. They have asked for restraint and, I hope, for more effective work in what they are doing. There are very few examples which hon. Members can set in their own work. They can do it in their organisation. One of the few ways is in their own salaries.

I have had many letters from up and down the country about this. I am sure that the Prime Minister must have had many since devaluation. They are deeply moving. I have had one which I want to quote—[HON. MEMBERS: "Oh."] Yes, because it expresses the spirit of the people. It is from an old lady. [HON. MEMBERS: "Oh."] Yes. She says: I got this gold …

Hon. Members

Oh.

Mr. Heath

I do not see why hon. Members opposite should jeer. She says: I got this gold half sovereign as a keepsake many years ago from a dear friend, so as I have no near relations I am sending it to you, … I would like it to be used for the benefit of the country, as there has been "—

Hon. Members

Oh.

Mr. Heath

It is highly objectionable that hon. Members—[Interruption.]

Mr. Speaker

Order. We cannot debate against a background of noise. Mr. Heath.

Mr. Heath

The fact that hon. Members below the Gangway cannot recognise any patriotic spirit of any kind is deplorable. She said: I would like it to be used for the benefit of the country, as there has been so much in the papers about the country's gold reserves. This is a very simple letter from an old lady making the practical contribution of a half sovereign she has had for many years as a keepsake, and it will go to the Chancellor of the Exchequer.

Mr. Emrys Hughes (South Ayrshire)

rose—

Hon. Members

Give way.

Mr. Emrys Hughes

I thank the right hon. Gentleman for giving way. He has spoken about Cabinet Ministers offering reductions in salary. Is he aware that in a previous financial crisis the King offered a reduction in salary? Does the right hon. Gentleman advise that the Monarch should set an example?

Mr. Heath

I am not discussing the question generally, but so far as the Prime Minister discussed it in answering a supplementary question. I say to the Prime Minister that if it is a question of example there are only four hon. Members on this side of the House who are concerned with official salaries and that they are all prepared—however insignificant this may be—to join in such an example.

I wish, finally, to speak on overseas matters. The speedy withdrawal which the Prime Minister announced from the Near East and the Far East, the abandonment of commitments and the flagrant breach of pledges which have so recently been given, letting down friends and allies, and the humiliation of this country—all that has taken place in these last few days. The point I make is that this action is detrimental to British interests, particularly as they affect the Chancellor of the Exchequer. If one looks at the profit and loss account of investment and income from the Far East and the Near East one sees that what we stand to lose is so immense that I cannot believe that the sacrifice he is prepared to make set against what he will gain from a saving in overseas expenditure is justifiable. This is not so on a profit and loss basis.

There are some Socialists who always wanted to get out of defence. They had said so honestly and honourably. The hon. Member for Lewisham, West (Mr. Dickens) yesterday went much further than the Government have gone. Having had his triumphs, the hon. Member is not satisfied and wishes to go further. That view has been supported by powerful voices in the country who have not, I believe, weighed up the profit and loss account. They have not counted the cost. They have only taken into account what they see as the foreign exchange benefit.

I also think that hon. Members on the benches opposite, in their attitude to Asia, are now becoming out of date, in the same way as they are towards many of the movements in Africa which we discussed shortly before the Recess. Far from being disliked and unwanted in Asia, now that the period of decolonisation is over there is a regard and a deep requirement for us. All those who have travelled across Asia during the last two years know this to be true.

In the Gulf, stability is essential. Our losses there, with the present proof of Russian infiltration, can be very great indeed. There are others who benefit from stability there. It is true that the Germans, the Japanese and the French trade. They do so to the extent that they do because we maintain the stability, and in that they are indebted to us. It is not, however, a sound argument to say that if we withdrew, everything will go on just as before. The losses will be very largely ours.

The defence forces will be in disarray and demoralised for a long period to come. I do not know how the Secretary of State for Defence, in all honesty, as a man of integrity, can retain his present position. The Prime Minister proudly proclaimed Britain's position in the world. That will have disappeared. I need not quote the Prime Minister's words; they are too well known.

What is more, hon. Members below the Gangway on the benches opposite who spend, as they are entitled to do, a great deal of the time of the House dealing with world affairs must recognise that in future they will be but empty vapourings. They can have no influence on world affairs. Their Government can have no influence on world affairs.

Mr. Paul B. Rose (Manchester, Blackley)

rose—

Mr. Heath

I would say to the Prime Minister that one of the saddest events of this whole episode is that at this time following devaluation, before the rest of these policies have been settled, before confidence has been regained, he should be making a visit to Moscow at the precise moment at which he has announced our withdrawal from all Far Eastern and Gulf affairs. I would have thought that the Foreign Secretary would share this view.

And so, when the time comes—and on the Prime Minister's time schedule the opportunity will be open to us—we shall ignore the time phasing laid down by the Prime Minister and his Government for the Far East and the Middle East. We shall support our country's friends and allies and we shall restore the good name of Britain.

Mr. Christopher Mayhew (Woolwich, East)

Will the right hon. Gentleman give way?

Mr. Heath

I am sorry, but I have given way several times already.

Mr. Mayhew

rose—

Mr. Speaker

Order. The Leader of the Opposition is obviously not giving way.

Mr. Heath

I have given way a number of times and Mr. Speaker has asked Privy Councillors from the Front Benches to limit their speeches.

The Government's position, therefore, is that after three years of power they cannot carry through their own avowed social policy. Indeed, they are pursuing the opposite of everything which they have proclaimed and for which they stand. For this, they are condemned by their friends and supporters at home, many of them on the back benches behind them. After three years in power, the Government show no effective strategy for the future. When the Chancellor of the Exchequer says that it will come in instalments, we know that the reason is that the strategy is not there. After three years in power, they are unable to carry out their basic obligations to our friends and allies abroad which they themselves assumed in every case, and assumed so recently. It is not only that pledges have been broken and the country deceived: the pledges are innumerable and too well known.

I have quoted the Prime Minister's statement about "The £ in your purse", on television. I have said that I thought it was the most dishonest statement which had ever been made even by the Prime Minister. I was then rebuked by an ecclesiastical dignitary who wrote to me asking whether, on consideration, I did not think that I was exaggerating. So I carefully went through the Prime Minister's pledges. I saw the Prime Minister's pledge about "facilities for further borrowing" in 1964, when he said that we can advance without panic measures, without devaluation, without stop and go measures. At the election, he said: we see no reason why "— unemployment— should rise … apart from seasonal increases ". As to the freezing of wage claims, he said that this would be monstrously unfair ". On Britain's world rôle, he said: Our ability to fulfil that rôle must not be sacrificed in the necessary process … in relating our expenditure … to … the economic situation ". In his devaluation broadcast, the Prime Minister pledged that the priority programmes, in which he mentioned housing, will be safeguarded ". We see what has happened to housing. We well recall that the Prime Minister said that grammar schools would be abolished "over my dead body".

I therefore replied to the ecclesiastical dignitary that, on reflection, I would stand rebuked: that was not the most dishonest thing that the Prime Minister had ever said.

Those things, however, do not really matter. What really matters to the world and the country is that there is no Minister now sitting on the Government Front Bench whose word can be trusted, here or abroad. That is the reason why confidence, which was my first subject, cannot be restored by the present Government. They no longer have the power to make decisions on their merits, but only in the form of a package deal proclaimed by Ministers who announce their resignation and do not resign, and by the Prime Minister to his party meeting. It was the basis of his appeal: accept the package deal. The Government have lost the will and the means to carry through their own policies at home and abroad. They have very largely lost the will to govern, and they know it.

When there is all the argument about the difference between the two sides of the House today, the fundamental difference is that we on this side have the will to recreate a spirit of enterprise in the country and a determination to rebuild the respect for Britain overseas. For the sake of Britain, let that soon be put to the test.

4.28 p.m.

The Prime Minister (Mr. Harold Wilson)

You have told us, Mr. Speaker, and the Leader of the Opposition has just reminded us, of the large number of hon. Members who wish to take part in the debate. Accordingly, I do not propose to go over all the ground which I covered on Tuesday, the more so as I made a very full statement on that occasion and answered questions on it for 70 minutes. My right hon. Friend the Chancellor of the Exchequer yesterday dealt with the financial and other aspects of the proposals in more detail and my right hon. Friend the First Secretary last night dealt with questions that were in the minds of many hon. Members about the social services. I should, therefore, like to follow what my right hon. Friend did yesterday afternoon, and to a considerable extent what the Leader of the Opposition has tried to do this afternoon, in putting the statement in the wider post-devaluation setting, and I hope in the course of doing that to deal with some of the points which have been raised by the right hon. Gentleman.

Neither Tuesday's statement nor the wider fiscal and other decisions which must follow are an end in themselves. They are an essential part, but they are still only a part, of the policies and actions needed to make devaluation work. Here, I think, we are in agreement. By making devaluation work I mean, as my right hon. Friend said yesterday, a move from the kind of payments deficit we have had for most of the past 10 years and more towards a substantial and continuing surplus on the balance of payments of the order of £500 million in 1969 and thereafter.

We need an assured surplus because only on that basis can we have continuing growth in production, continued full employment and an escape from the whole round of short-lived expansions in production, followed by lurches into balance of payments crises and renewed periods of deflation and cessation of growth, which we have had under successive Governments.

We need an assured surplus because what is at stake—and this is why the Government have the right to appeal for full support, however unpleasant some of the measures we put forward—is continued expansion and full employment. We need an assured surplus to repay as early as possible the debt we have incurred to finance the deficits of a decade.

We need an assured surplus because that is the only way to ensure a fair and rising standard of living for our people, based—once we are earning the means to pay for it, but not until—on higher family incomes and greater ability to spend those incomes in accordance with the individual wishes of each family.

We need an assured surplus so that we can realise the social ambitions and priorities we have set ourselves as a nation, and which the nation has shown it wants its Government to carry through to reality, whatever disappointments or postponements we must face in the present situation.

We need an assured surplus in order that, as one of the rich advanced countries of the world, as we are, we can make a rising contribution to the needs of others abroad, countries whose problems are not taxes or wage restraint but how to get the bare essentials of life, of food and shelter; not prescription charges, but how to get the most elementary forms of medical care, which they are not getting; not when to raise the school-leaving age but how to get even the minimum access to education and the escape it provides from mass illiteracy and poverty.

But we need an assured surplus particularly if we are to exert a real influence in the world and to be able effectively to play our part in maintaining the expansion of world trade and the world economy, now overshadowed as it is by a wave of national restrictionism—a point which was made by the right hon. Gentleman. We need it also to be able to play a still fuller part not only in sustaining for this purpose existing international monetary agreements and institutions but also to develop new ones.

Therefore, I think that there cannot be anywhere in the House any doubt or disagreement about the need for an assured surplus. [Interruption.] An hon. Gentleman asks what it means. I assume that he is talking about the surplus on our balance of payments. There cannot, I think, be any disagreement on either side of the House about the need for it.

Mr. Maurice Macmillan (Farnham)

rose—

The Prime Minister

I am sorry. The right hon. Gentleman the Leader of the Opposition gave way very little. I shall not give way now, unless it is really necessary.

Mr. Maurice Macmillan

Is the Prime Minister implying that he intends to finance all our overseas investments out of current surplus by an assured surplus?

The Prime Minister

I was not referring to that at all. I am not sure what the hon. Gentleman has in mind by that question. He will have seen—and it has been explained by my right hon. Friend —what our attitude is to direct investment as we move into a strong surplus. There is a difference between that and a situation where too much direct investment cannot be afforded.

Our restraints on domestic consumption, both public and private, are required to make room for industrial expansion and modernisation, for the full working out of the measures we have taken over the past three years to reorganise and restructure British industry, and speed the process of technical change. But I repeat that the restraints we are making —[Interruption.] I thought that hon. Members favoured these measures. I know that they voted against the Industrial Reorganisation Corporation Bill, but I think that they will, at any rate, applaud what the I.R.C. did in the announcement last night of the restructuring of our motor car industry.

The restraints we are making on public expenditure at home do not mean an absolute cut in social expenditure. What they mean is restraint in the increase in these programmes, restraint that is essential if the rising production and employment we already see are not to prevent export demands from being fulfilled. I explained on Tuesday, as did my right hon. Friend yesterday, that it would be wrong to seek to achieve the formidable reduction in total demand which is necessary solely by restraining the growth of personal consumption.

But I made it clear on Tuesday that personal consumption, too, must be sharply restrained, and I repeated what I said on 18th December, that the measures announced on Tuesday would be progressively reinforced by all appropriate measures, budgetary and non-budgetary, to hold back private consumption. I said again, in paragraph 57 of my statement: Other measures including budgetary decisions will be required."—[OFFICIAL REPORT, 16th January, 1968; Vol. 756, c. 1592.] This has not been in doubt.

There has been widespread, if not unanimous, agreement in the debate that severe cuts in public expenditure are a necessary part of this strategy. Whatever views have been expressed on individual measures, I think that there is agreement on both sides of the House that to provide the very formidable shift of resources which will be needed from home consumption to exports, to import replacement and to productive investment, and to try to get this purely by increases in taxation and other restraints on private consumption, would involve an unacceptable increase in taxation. If the whole burden were to be put on that, it would not only be socially unjust but might have serious effects on production and on the degree of restraint necessary to make the prices and incomes policy effective.

I shall come to defence later, as the right hon. Gentleman did. Of the cuts in civil expenditure, I think that those which have caused the greatest anxiety, particularly on this side of the House, were dealt with by my right hon. Friend the First Secretary last night. I would only add this: every one of the decisions involved a hard choice—indeed, repugnant decisions in choosing between priorities. They have not been easy. The whole House will recognise the difficulties which I and all my colleagues feel about the decision to reimpose prescription charges, even with the full list of exemptions I gave in Tuesday's statement. What we decided—and this was the clear choice of priorities with which not all my hon. Friends agreed—was that it was still more important—[Interruption.] At least, my hon. Friends in their resistance to this take much more seriously than hon. Gentlemen opposite, who are giggling about prescription charges, the real effect of these, which I do not for one moment underrate. [An HON. MEMBER: "Get on with it."] I will get on when I do not have serious matters of this kind dealt with by the frivolity shown by hon. Gentlemen opposite,

What we decided—and this was our choice of priorities—was that it was still more important to maintain the essential fabric of the National Health Service, and particularly the hospital building programme, That programme provides for 1he construction of a modern hospital system by the erection of many new hospitals, extensions to hospitals and the modernisation of others, with the provision of the most up-to-date facilities. The hospital building programme is not only being maintained after the cuts but will continue to increase. In 1963–64, four years ago, the figure of new hospital building was £56 million—itself an increase of 180 per cent, over the average of the preceding 11 years. That £56 million was the peak rate reached. In the current year, 1967–68, it is £103 million, and in 1968–69 it is expected that it will have risen to £110 million; in 1969–70 to £120 million; and in 1970–71 to £130 million— much more than double the figure of 1963–64.

It is, therefore, a sheer misreading of the facts to represent what is being done in the statement as an attack on the National Health Service. On the contrary, we are strengthening it, but we are doing so at a cost—distressing to many of us in this House—in terms of the prescription charges scheme.

Similarly, many right hon. and hon. Members on both sides have condemned the decision to postpone for two years the rise in the school-leaving age. Here again, this was a very difficult decision —indeed, as my right hon. Friends have made clear, a very repugnant decision. It was based on a choice of priorities. [Interruption.] The Government have decided here again—and as we are standing by this decision we are entitled to say why we are doing it—that, still more important in present circumstances than the highly desirable new reform of raising the school-leaving age at the date previously fixed, is the maintenance of the fabric of the education programme, including the school building and other priority programmes. To suggest that education, through the contribution it is making to the restrictions in expenditure, is being cut back cannot be justified on the facts. [Interruption.] I will give the House the facts.

Between this year and next— [Interruption.] Hon. Members are entitled to have the facts about expenditure projects, and if they are not, their constituents certainly are. Expenditure on education in real terms will rise by nearly 4 per cent, between this year and next—from £1,989 million now to £2,064 million; in 1969–70, there will be a similar rise to £2,147 million. The school building programme in the next two years will be maintained at the record level of over £150 million a year at which it has been running, which is half as much again as in 19634–64. To suggest that we are attacking education is also wrong.

Right hon. Gentlemen opposite, in opposing the decision to defer the raising of the school-leaving age, have put forward an alternative scheme for a further increase in the price of school meals. My right hon. Friend the First Secretary of State has explained that we do not accept their figures. A 6d. increase would save £13 million in 1968–69 as against £33 million saved by the deferment of the school-leaving age, and £14 million in 1969–70 as against £48 million by deferment of the school-leaving age in the second year.

I know that the right hon. Member for Enfield, West (Mr. Iain Macleod) and the right hon. Member for Birmingham, Handsworth (Sir E. Boyle) contest what my right hon. Friend said. They have done a very simple arithmetical calculation to get their figures. But if the calculation is done by the same methods which were used when they had responsibility—and it was not a simple arithmetical calculation, because all sorts of complicated things such as the level of take-up had to be taken into account— the yield would be only £13 million.

However, I do not want to bandy words with right hon. Gentlemen opposite about this. If they do not accept the figures I have given, I invite them to discuss the calculation with my right hon. Friend the Secretary of State for Education and Science. They will find that the figures I have given are the correct ones.

Mr. Iain Macleod (Enfield, West)

These are, of course, estimates, but the main difference between us is not the matter the right hon. Gentleman has put. It is on the question of the deterrent charge. If the Prime Minister will look at the original figures from which we started—a Written Answer given by the late Mr. Redhead in February, 1966, covering England and Wales, which we converted to a Great Britain figure— instead of making the ludicrous estimate of up to a 25 per cent, deterrent, for the last increase produced no falling off at all and there has been a steady increase, I think that he will find that our figures are right, and not those of the Secretary of State, although, this being an estimate, it is a matter of dispute.

The Prime Minister

The right hon. Gentleman will find himself refuted by my right hon. Friend the Secretary of State for Education and Science who does not accept either of the statements the right hon. Gentleman has just made. But, as I have said, let us not argue about it in the absence of all the figures that the experts can produce. I have suggested that he and his right hon. Friend should discuss the figures with my right hon. Friend. They have been checked and checked again. It is a waste of time to argue the matter now. I have given the invitation to discuss the matter with my right hon. Friend. [Interruption.] Yesterday we asked the Opposition, if they disagreed with our cuts, to sug- gest theirs. This was the most concrete of what they suggested and we are telling them that their calculations were wrong. [Interruption.] This is relevant to the debate. The hon. Gentleman can go, as he asks, and have a cup of tea. He is not contributing very much anyway.

The frivolity with which hon. Members opposite deal with questions affecting prescription charges, the cost of school meals and the position of poorer families makes me wish we did have television in the House so that their constituents could see how seriously they are taking subjects of importance, at least to their constituents if not to them.

I want to put to the right hon. Member for Enfield, West a more serious point about his proposals. On our calculations —which, admittedly, he does not accept— even if we raised the price of school meals by Is. it would still be less than half in terms of yield than the saving through postponement of the raising of the school-leaving age.

Mr. Iain Macleod

indicated dissent.

The Prime Minister

The right hon. Gentleman does not accept that calculation, but on his own figures, even if he were right, it would mean that the average family—a representative family where a man with three children earns between £14 and £15 a week—would have to fork out 7s. 6d. for school meals each week. This, of course, would perhaps be at a time when the family would be paying an increased council house rent—very high in some areas, as the right hon. Gentleman also knows. Nor is it just like an increase in prices in other goods. It is almost the same as a deduction from the take-home pay. The money has to be deducted before anything else can be paid for.

What effect would this sort of thing have on the prices and incomes policy? How does the right hon. Gentleman think that it would be possible in the situation the country faces to have reasonable restraint if we were to charge such extra sums for school meals—7s. 6d. on his calculations and 15s. on ours—for such a family—perhaps, as I have said, at the very time when councils he supports are increasing council house rents in many parts of the country? Whether the councils be Tory or Labour, if rents go up and such an increase in the price of school meals were imposed as well, such a situation would break the hopes of a prices and incomes policy.

Mr. Frank Hooley (Sheffield, Heeley)

Is my right hon. Friend aware that 1969–70 will be an historic year for education in this country because, for the first time in our history, our expenditure on education will exceed our expenditure on defence?

The Prime Minister

Yes, Sir. I have seen that calculation and, as I said on Tuesday, one of the big differences between now and 1951, which has been very much a subject of discussion this week, is that, by the end of the period covered in this statement, expenditure on the National Health Service will also be very close to total expenditure on defence.

The other day the right hon. Gentleman the Leader of the Opposition said —and I said that it was fair to say—that a statement of that kind was negative, but any statement related to Government expenditure must be essentially negative if it is a listing of the cuts. But all of us agree that the positive and challenging element in the new situation —because it is wrong to think that any monetary measures will solve our problems—lies in what must be done by industry and, more widely, by the whole nation.

The first requirement is that our exporting firms seize the opportunities which are there in overseas markets as a result of devaluation. There was a short period when some seemed very doubtful about it and for a week or two after 18th November there were suggestions that at least some of our industrialists were preoccupied with increases in some of their costs, with the costs of imported raw materials, the loss of the S.E.T. refund and export rebate, so that they could not seize the full opportunities and increase exports, and the full opportunities, which hon. Members opposite are missing in their arguments, of increased profits which are now possible because of the 14 per cent, change in exchange rates.

Some of our manufacturers got down to the job the very weekend of devaluation. [Interruption.] They did not listen to this defeatist talk; they got on with the job—reviewing prices, reopening markets which they had thought closed, contacting their agents abroad, sending salesmen abroad—and already the products of many industries, motor cars, for example—and there are others where there is a continuous flow production line and goods coming off the production line all the time—by now are reaching export markets in increased quantities as a result of their action taken the very weekend of devaluation.

Of course, with goods which take longer to manufacture, particularly custom-built goods many of which require months of negotiations about design and specification and a much longer period of production, the effect on our exports will come a good deal later. But I have been encouraged, as I suspect many hon. Members and right hon. Members have been, by industrialists who have talked to me about new inquiries which they are getting post-devaluation. [HON. MEMBERS: "Still only 6 per cent."] It varies very much in individual industries. Some manufacturers are perhaps a little to fast to assume that all these are additions to cost and that there is nothing on the other side, but many firms now, having calculated that they are able to work at a higher level of capacity will have that as an offset on the other side of the calculation.

Even at 6 per cent, there is a very valuable incentive with a chance of very much higher profits for those who take advantage of it. I have been encouraged— [Interruption.] Hon. Members must not try to talk our industrialists out of it; there is a job to be done. I have been encouraged, at any rate by those who have talked to me, by the inquiries which they are getting, particularly by the fact that some of our more enterprising firms are finding that markets which they thought we had lost, or which were outside any hope of our getting on a competitive basis, are now opening up to them again, and they are now evaluating the very much wider list of opportunities which they will have and which will greatly affect our export trade.

What is essential is that the momentary air of hesitancy and even defeatism which affected some of our industrialists, but not, I think, the majority, should now give way to a full realisation of the opportunities now open to them. This means small firms and medium-sized firms too. Many firms which have never thought of venturing into export markets, or who have not known how to set about it, should start to ask themselves whether some of their products, perhaps products developed in the last few years, could sell abroad. The Board of Trade with a series of services for exporters unparalleled at any time, including Export Intelligence, regional export offices and the services of B.N.E.C, highlighted now with the Action '68 Campaign, the help of the banks and other commercial institutions, and the chambers of commerce and all these supported by E.C.G.D. and our commercial offices abroad—[HON. MEMBERS: "And more civil servants."]—it has meant an expansion of the Civil Service to do it—all these give help and advice, as will, we all know, many private firms with a great deal of experience of overseas trade.

But winning export orders and, just as important, fulfilling them is not only a question of sales, marketing and overseas contracts. It is a question of the maximum production efficiency in our industries which is what we have been doing in the restructuring and reorganising of industry, and, although it is taking time for it to show up, it is of paramount importance. There is no more fitting industrial announcement to back the actions of the Government and Parliament than the decision announced yesterday of the major units of the British-owned motor car industry to become a single organisation with maximum opportunities for increasing efficiency through greater standardisation, greater scale of production and more integration of sales and after-sales servicing abroad.

But just as important as increased exports is the drive on which we must ask more of our manufacturers to embark— large and small—to replace imports of products on which we have allowed ourselves to become far too readily dependent on overseas supplies. A change in the exchange rate equivalent to a differential advantage in sterling terms here of over 16 per cent, provides a real incentive— yes, and a profitable incentive—to the British manufacturer. It is of the highest importance that British producers should meet the higher import prices in sterling of their overseas competitors by fixing their own prices so as to get an increasing share of our own home market. It is suggested sometimes that what too many of them do when they see the import prices of their competitors coming to Britain raised by devaluation is cynically to put up their prices here, to charge more even though costs have not gone up, in the hope of easy and unearned profit due to what they regard as a sheltered home market, and in this situation there is nothing more damaging to the national interest.

But the condition of remaining competitive in export markets and in the home market, the condition of not dissipating the opportunity given by devaluation, is a continued and indeed intensified restraint in prices and incomes. [Interruption.] If hon. Members are not interested in prices and incomes, they need not stay, but many people are very concerned and it is the whole issue under any Government. Right hon. Gentlemen opposite failed to get a prices and incomes policy, and heaven knows that we have had enough difficulty with it, but the success of any Government in balancing our accounts overseas depends on getting a satisfactory prices and incomes policy and at least some hon. Members opposite might realise that. [HON. MEMBERS: "You did not say so in opposition."] Indeed we did, but right hon. Gentlemen opposite did not go as I did on 8th July, 1963, to the Transport and General Worker's Conference and address its members on the need for a prices and incomes policy. We were giving full backing to that Government in trying to get it, while warning them that they would not get it if they did not have a policy for prices as well.

Mr. Reginald Maudling (Barnet)

If right hon. Gentlemen opposite were giving us their full backing, why did they sabotage the National Incomes Commission?

The Prime Minister

Because the National Incomes Commission was given terms of reference which required a wages freeze while doing nothing at all about prices, and it was given the impossible task of trying to get through a wages policy at a time when there were still such provocative elements in the tax system as tax-free capital gains and liberal business expenses charged to tax.

Mr. Maudling

If the Prime Minister will consult the White Paper which contained those terms of reference, he will find that he is entirely wrong.

The Prime Minister

I also remember as recently as 1954—and I think that the right hon. Gentleman wanted a forward policy on prices—having to give in to the then F.B.I, who refused to have one. We have one, and I am coming to that in a moment.

The Government have made clear that if there are increases in incomes beyond the very limited figures that can be afforded in present circumstances, what will already be a hard Budget will need to be reinforced by further action to deal with the danger of income inflation. The need for an incomes policy relates not only to the danger of a demand inflation, with all that that means. All the experience of the past 10 or 15 years shows that an even greater danger, most of all perhaps now, when we are fighting our way into the export markets, is the danger of a cost inflation through wage and other costs forcing up our prices abroad and on the home market.

It is important here that each side of industry should understand the other's problems. Employers, rightly conscious of the fact that prices to a large extent depend on wage costs, must recognise that failure to take all action in their power to restrain prices will make an incomes policy all that harder to achieve. Equally, trade unions, for their part rightly conscious that failure to restrain prices increases the pressure for wage increases, must recognise what failure on their side will mean in terms of higher costs and prices. Both are necessary.

On prices, the right hon. Gentleman likes to perpetuate one of his favourite legends. I repeat what I said in my broadcast the day after devaluation: Imports will cost more, and this means higher prices over a period for some of our imports, including some of our basic foods. It is vital that price rises are limited to those cases where increased import costs make this unavoidable. Our people will not tolerate traders who are not affected by import costs trying lo cash in by unjustifiable price increases. There is other pressure, also, on prices. But if price increases are to be made for any other reason than higher import costs following devaluation, they will have to be most strictly justified against existing and agreed criteria. The Government intend, in all appropriate cases reported to them, where prices appear to have been raised without a clear justi- fication, to refer these to the Prices and Incomes Board.

My right hon. Friend the Secretary of State for Economic Affairs and the other Departments concerned are closely studying reports of price increases, particularly where it is alleged that they cannot be justified in terms of import costs, and especially cases of the kind that I have mentioned, where there may be suspicions of exploiting the home market by following increased import prices rather than getting a higher share of the home market.

I turn now to wages. With my right hon. Friends I have had discussions with the Trades Union Congress about the incomes policy that it will be following in vetting pay claims. It has put forward proposals covering the year from 1st July next to the end of June, 1969. The T.U.C. has proposed, having regard to the probable trend in productivity, that over that year wage or salary increases of 3½ per cent, to 4 per cent, will be reasonable, expressed in terms of an average 14s. a week increase.

The Government have made their view clear to the T.U.C, first that present policy must continue—the White Paper policy—in the six months immediately ahead, and, secondly, that over the year ending June, 1969, provided the T.U.C. can hold wage settlements to the figure that it has proposed—provided that is, that 3½ per cent, is the outcome and not a minimum figure—this could be the basis of an agreed national prices and incomes policy.

But we have said that further discussions will be necessary, with the C.B.I, as well as the T.U.C, about the shape and application of the incomes policy. In this, we shall take account of developments in the economy and the pattern of wage settlements in the current phase. But this means, first, that if the lower-paid wage earners receive—and the House will feel that this is right—increases of around 14s. in the period ending June, 1969, this must not be used in the name of differentials for similar percentage increases to be applied to higher paid workers, meaning a bigger increase in the actual cash received. This clearly implies a narrowing of differentials. Secondly, this 3½ per cent, must not be regarded as a minimum— which practice has shown usually becomes an exceptional minimum—as occurred before the standstill, with most settlements involving figures higher than this. This is not a norm. It must not be regarded as a minimum, such as happened before when one figure was taken and all the other figures were forgotten.

The nation cannot afford a system of wage settlements which begin from a 3½ per cent, increase in wage rates, which as a result of shop floor bargaining and competitive poaching of labour, then becomes translated into an increase in earnings of considerably higher than 3½ per cent. The Government want a system of wage restraint based in the main on voluntary action. We have agreed with the T.U.C. that we are as concerned as it is to see that the voluntary system does not break down, but equally, while its figure, given the greatest degree of industrial statesmanship by T.U.C. and the member unions and co-operation by the C.B.I., could be realisable, we cannot afford more, and this we have told the T.U.C.

We have made clear that if this ceiling figure were to become a minimum, or to be substantially exceeded, then not only will it be necessary, as my right hon. Friend has made clear, for any excess beyond this figure to be taken back at a national level by increased taxation, but, also, that the voluntary system in which the Government, this House, unions and management generally have placed their trust, would have to be substantially strengthened, if need be, by new powers.

In this context, the right hon. Gentleman referred to training. I make one small point about training before turning to deal with the substantial point that he made. It is right to talk about one's record as well as one's speeches. In 1962, the Conservative Government, as an act of policy, reduced the number of training centres from 15 to 13, early in that year. In 1963, the number was increased again. When we came to power there were 17, and now there are 38 training centres, with a further 10 under construction or ready for starting. Most of them are in or near the development areas.

The right hon. Gentleman made a perfectly fair point—one that I think he knows I have made a number of times, to the T.U.C. and my own party conference this year. It is that it is an extremely difficult problem, not only a local training problem but a national training problem, if men who are retrained are refused an opportunity to use their new skills because of the veto by local shop stewards. We have been carrying on a campaign with the individual trade unions and have had the fullest support from the top, to see that these local considerations are removed.

We discussed this with the T.U.C. last week, when its members came to see me. I took this up with them again and we have now agreed with them that at every single place where we do run into difficulty of this kind we will give the T.U.C. the details, and work out how this opposition can be broken down. The right hon. Gentleman will know that it cannot be dealt with just by making a speech, like other speeches about ending restrictive and other practices. It cannot be done that way, as the right hon. Gentleman will know from his past experience at the Ministry of Labour. What we are doing is not to preach a general sermon. What we have done is to say to the T.U.C. that it should fight it out with the unions, on the conference floor as well as round the conference table.

While I am on this point, I should say very briefly that I was disturbed at what I thought I heard him say this afternoon about development areas. I was not very clear about what he was proposing. He did not work it out in detail, but he will understand that he cannot leave it where he left it this afternoon, and will have to spell out further exactly what is proposed. We are entitled to know, and above all development areas are entitled to know, exactly what the Opposition are proposing, because it sounded to us this afternoon as though they were proposing a substantial, perhaps economy in development area expenditure, with very grave results, I would feel, particularly for some of the areas facing the biggest difficulties, especially at this moment of time when there is a rundown in coal, railways and other industries.

Mr. Heath

I said that the Chancellor has emphasised that in most cases he wants urgent results in order, this year, to deal with the opportunities for increased exports offered by devaluation. We all know that this policy is administered by the Board of Trade, and the President of the Board of Trade has discretion in those cases where firms with a small expansion can product a rapid increase in production and exports. I believe that we would be well advised to use his discretion, because the possibility of getting the same result through the development districts is bound to take a much longer time. It is not a permanent change in development district policy; it is the use of the President of the Board of Trade's discretion.

The Prime Minister

That is a little more reassuring, if the right hon. Gentleman was talking about very small expansion programmes. If he is suggesting a major change in I.D.C. policy —[Interruption.] We have only the record of their Government on this. However, if he makes that clear, some of us would be more reassured about what we felt he was trying to say earlier this afternoon. I am glad that this matter has been raised and cleared up. Perhaps on some future occasion the right hon. Gentleman will tell us in more detail what he has in mind.

I have referred to two aspects of what is needed for success—maximum effort by our exporters and import replacement —and secondly what has to be done to release resources. There is a third requirement, and this is the one with which I wish to close. It is one of the main themes of the statement the House is asked to approve tonight, and it is what was raised by the right hon. Gentleman —the recognition of Britain's place in the world. My right hon. Friend will be dealing with this tonight.

Right hon. Gentlemen opposite, very fairly—the right hon. Members for Enfield, West and Wolverhampton, Southwest (Mr. Powell)—quoted a number of past statements of mine and of my other right hon. Friends. I do not complain about that. I should, however, like to refer to something which the right hon. Member for Enfield, West said yesterday about defence. I think that he qualified it, and he may have qualified it right out of existence, but it was stated more categorically this afternoon by the Leader of the Opposition. It concerned what right hon. and hon. Members opposite would do about the Far East if they had responsibility in these matters.

If I understood it aright—the right hon. Gentleman did not qualify it as did his right hon. Friend—the commitment which he seemed to be making would offend against the very first principle of defence policy: namely, he was engaging himself and presumably his party to commitments overseas without taking account of the capability. What this would mean—and it involves a principle which we are not prepared to accept— is committing the Services to carry out obligations on a basis of resources and equipment which would be inadequate for the commitment which he has so blithely undertaken. Perhaps the Leader of the Opposition, who is very often very precise in his language, will make clear exactly what these apparent commitments meant.

I turn to the speech of the right hon. Member for Wolverhampton, South-West, to whom I listened entranced last night, as I am sure the House did. He did not say anything on policy, but I sympathise with his difficulties, as I admire his ingenuity, in covering up the embarrassment which he and his party face on defence matters by a speech consisting largely of quotations from my right hon. Friend the Secretary of State for Defence. [Interruption.] My right hon. Friend will be addressing the House in the appropriate debate next week, if he catches your eye, Mr. Speaker.

I do not want to embarrass the right hon. Gentleman or his hon. Friends by quoting what he said on subjects outside defence, because on almost every subject his statements have been practically in total contradiction to everything which the Opposition Front Bench stands for. The Leader of the Opposition today was supporting the "Back Britain" campaign. The right hon. Member for Wolverhampton, South-West denounced it last night with all his customary eloquence, as he has denounced Conservative policy on everything—incomes policy, devaluation, co-operation between industry and the Government and the general question of planning by consent. On none of these subjects does there seem to be agreement between him and his right hon. Friends.

What is relevant today is what the right hon. Gentleman said on defence, because on this subject he is the Opposition's official spokesman and must be presumed to speak with the authority of his party. I limit myself to only three occasions on which, as official spokesman, he stated his views. These quotations should be set against the very fine and impressive histrionic performance which we had last night. On 3rd February, 1967, the right hon. Gentleman reviewed in the Spectator a book by my hon. Friend the Member for Woolwich, East (Mr. Mayhew). I wish to quote two short passages: The ' world rô1e east of Suez' was a piece of humbug; the reality had resolved itself into the ability to operate either as an American satellite or on a scale so limited that it could not in the worst case demand more than a very small exertion of force … Commitments—certainly the commitments for the most part highly imprecise and even implicit, which Britain has east of Suez—mean what you take them to mean, ranging from nothing to everything ". He went on: It would, for instance, be perfectly possible to prejudice the defence of Western Europe in the ostensible interest of ' peace-keeping east of Suez ' without contributing one jot to the peace and stability of the Orient. It would be perfectly possible to neglect the maritime defence of the United Kingdom without in return gaining a day's purchase of the base at Singapore. These are the sort of crazy bad bargains which governments and nations are capable of making when they get around to pretending ". His second statement was that to urge that Britain in 1967 can take a leading rôle in reinvigorating the military alliance in South-East Asia … seems to me not to be an act of imagination but … a symptom of hallucination."— He was addressing the Young Conservatives; I have the official text here. Rather like listening to Rip Van Winkle talking. One might … not be startled to hear that sort of phraseology … from Indian Army colonels who retired years ago … The reality which is relevant … is that we have and can exert virtually no military power in South-East Asia ". Then on the Middle East, particularly the Persian Gulf, he said: … it was just because we were physically present in the area that our oil and our reserves were in danger when other people's were not". It takes all sorts to make a world. That was a valuable contribution to what we are debating this week.

Mr. Peter Tapsell (Horncastle)

rose—

Mr. Speaker

The hon. Gentleman must not persist.

The Prime Minister

I have given way rather a lot. The right hon. Member for Wolverhampton, South-West was very slow to give way to my right hon. Friend the Secretary of State for Defence last night, having devoted the whole of his speech to my right hon. Friend.

I turn to the other question which was mentioned in his speech last night, and which has been mentioned again today, about the Government breaking with past policies, especially when they involve relations with friends or allies. It is not only a Government's right, it is its duty, sometimes to review policies and renegotiate commitments where the interests of the country dictate it. The right hon. Gentleman has referred to changes of policy which involve changes in relations and agreements and commitments to other countries. I am not prepared to take this from right hon. Gentlemen opposite on the question, not only of renegotiated agreements, but of broken commitments. I could match everything which the right hon. Gentleman said about election promises: Election 1955; there would be no Rent Act. The right hon. Gentleman introduced it within a year and rejoiced in doing so.

On overseas affairs, right hon. Gentlemen opposite made the most solemn and binding obligations, including on the Charter itself. They broke every one of those obligations in 1956 and conspired to keep the fact from the House, and it came out only 10 years later. We knew 10 years later that there had been a prior conspiracy to break those agreements and the Charter. Even last summer we were still facing, in the Middle East crisis, the difficulties of the action of right hon. Gentlemen opposite—the right hon. Member was in it up to the neck himself—in breaking our word under the Charter and to Middle Eastern countries. We got the most savage reaction against this country barely six months ago as a result of that action.

There are, of course, other cases. There was the decision of the party opposite on the tripartite agreement. It has never been de-negotiated, but they said that it was no longer binding. As to Europe— I do not complain about this concerning the position in Europe—their solemn pledge was to keep 90,000-odd troops in Germany to the end of the century. They then negotiated it down to 55,000 and did not fulfil that. So it is not—[Interruption.] We now know that they never intended to carry out the agreement. We had full authority for that statement long afterwards.

On defence, therefore, I have been trying to add up what right hon. Gentlemen opposite offer in place of the statement which we have put forward, because they have condemned the defence cuts that we have made. That, I think, was the purpose of the speech last night of the right hon. Member for Wolverhampton, South-West. Right hon. and hon. Members opposite have taken the line they have about the raising of the school-leaving age, but for three years they have been saying that we must cut down expenditure. Then they promised the most sweeping reductions in taxation. Today, we have had the statement by the Leader of the Opposition that no one in the country, in industry or agriculture, would have any incentives until we cut taxation.

Therefore, to maintain any credibility which right hon. Members opposite may think they have on this subject, they would either have to accept the whole of our statement and put forward a lot more ideas besides or, in rejecting any part of our statement, they must replace it by new and alternative economies and, having done that, go beyond it if there was to be any reduction. If they cannot do that, no one will believe that there is anything in their proposals.

At least, the right hon. Member for Enfield, West yesterday tried to add up some kind of package of his own. I have dealt with part of it. We have had it costed as fully as possible. I hope that we shall get more details from the right hon. Gentleman, because, again, we re peat our invitation from the last General Election, when right hon. Members opposite promised to cut £800 million or something, to come and work out their proposals with ours. [Interruption.] If the House is bored with the answer to this—

Mr. Sandys (Streatham)

rose

The Prime Minister

I will not go through the individual details from the right hon. Gentleman if the party opposite are too bored to hear them. I merely say that at the end of it the summary is that in 1969–70—in 1968–69 the savings would be lower—the net effect would be savings of between £50 million and £100 million as against our £400 million, but this would be offset by losses of revenue of over £200 million, producing a net loss for the Exchequer in the year of between £100 million and £150 million. Right hon. Members opposite must, therefore, do a good deal better than that. I would, however, be very glad to let the right hon. Member for Enfield, West—if his backbenchers do not want to have this information—have details of the costing of each individual item which he gave yesterday.

Therefore, far from replacing our £400 million, the right hon. Gentleman's proposals would cause a net loss to the Exchequer of about £150 million—in other words, a £500 million worse package than the one we announced on Tuesday.

Mr. Sandys

Before the Prime Minister leaves the question of defence, will he clear up one important point? Last night, the Secretary of State for Defence alleged that the former Conservative Government had considered closing down our base in Singapore. Will the Prime Minister either substantiate that wholly false allegation or withdraw it?

The Prime Minister

My right hon. Friend made that statement and I will be glad to inquire into it. If my right hon. Friend succeeds in catching your eye, Mr. Speaker, he will be addressing the House next week. That might be the time to follow up this matter. My right hon. Friend the Foreign Secretary, who will be replying to the debate tonight, will, however, have taken note of the point made by the right hon. Member for Streatham (Mr. Sandys).

Mr. Jeremy Thorpe (Devon, North)

May I ask the Prime Minister a question on defence before he leaves the subject? Whatever may be the views on our withdrawal, the Prime Minister will be aware that many people regard it as a reversal from the undertakings which were given in July, 1967. Are we to take it for the record that the Prime Minister would wish his main justification for reversing a promise which has been given to be the fact that, in his view, a previous Conservative Administration also breached their obligations and that, therefore, that is the justification?

The Prime Minister

I thought that the Leader of the Liberal Party was pressing us in July to do what we are doing now and would feel in those circumstances that we were justified. [Interruption.] I said that I was not taking that kind of stuff from those kinds of hon. Members.

Finally, I want to say a few more words. [Interruption.] I have given way a great deal. I have dealt with a large number of interruptions, otherwise I could have sat down a good deal earlier.

I conclude by saying this. [Interruption.] Some of us are talking about our country in this debate. We are talking about our people, about employment for British industry and about Britain's rôle in the world. Hon. Members opposite, not prepared to face the facts of the situation, have spent the whole of the last hour tittering and making frivolous noises on subjects on which they disagree with the assessment from this side of the House. We are trying to deal with extremely serious questions affecting the whole future of the country. I have been appalled by the conduct of some hon. Members opposite.

There are, therefore, three conditions of success. One, which I have dealt with, is redefining Britain's rôle in the world. The second is restraint, as a national imperative, in incomes, in prices and in the distribution of profits which result from prices. The third is the acceptance by every industrial organisation of the need to accept and fulfil every possible order in export markets and every possible opportunity of reducing our dependence, on a competitive basis, on imports.

Yesterday, the right hon. Member for Enfield, West rightly referred to our Parliamentary democracy and to things which have been said about it. I believe that under the leadership of Parliamentary democracy we have to achieve a new conception of industrial democracy, not only at national level, but at factory level through the export committees and the production committees for which we have called, because this has to be a combined operation. It cannot just be done by those who sit on those benches preaching.

Management and trade unions, production engineers and shop stewards, can, if they are willing—and many of them are—make the winning of export orders and their fulfilment in factory terms a matter of real constructive confrontation. Industrial democracy, like Parliamentary democracy, works only if confrontation leads in the end to the acceptance of a great deal which, taken by itself, involves sacrifices.

That includes, in our context here, as it will in the factory setting, policies and projects on which various people have sincerely held views and which are very hard to accept. That is what our industrial task is about. Equally, however, it is involved in the decision that we have to take tonight when Parliament itself is asked to accept policies which, for so many of us, on both sides, require the sacrifice of cherished projects.

I believe that the House will be prepared to accept this sacrifice in order, at last, to secure a degree of economic strength which will enable this House to make a reality of the mandate which the nation has laid upon us.

5.29 p.m.

Mr. Nigel Birch (Flint, West)

I was listening to the one o'clock news today and my heart rose when I heard that the Prime Minister was to speak for only 30 minutes. I thought that I would at any rate be able to congratulate him on having made the shortest speech he ever did make; but we have been disappointed; and all I can say to the Prime Minister is that his speech was not a Prime Ministerial performance.

One point on defence before I get on to the economy. What the House ought to realise is that the Navy is emasculated by losing its carriers; the Air Force is emasculated by losing its F111s and its modern long-range strike potential; the Army is being run down and likely not to be given modern weapons. All that means a great many things, not only in the Far and Middle East, but a great many things in Europe. For example, people were talking very glibly, at the time of the Israeli war, about opening up the Gulf of Aqaba. We could not do that now if we wanted to, and what are we going to say to the Spaniards if they get rough over Gibraltar—with our present state of arms?

We have run down our conventional forces, but we have still got our atomic ones. We have still got our Polaris submarines. So we are in this position, that we can fight a skirmish, or we can cause a mega-death: we can do nothing in between. Thus we risk standing between humiliation and disaster.

Of course, we know that our position in the world has declined; we know that decolonisation is almost complete. What now is our position? I often call to mind the prayer of Charles of Anjou after the Sicilian Vespers. He said, "Lord God, since it has pleased you to ruin my fortune, let me only go down by small steps." These are not small steps. This is rushing down a steep place into the sea, and how the Secretary of State for Defence can in honour hold his office I cannot imagine. I am sure that the Chiefs of Staff are right not to resign, but it might be their duty to spit in his face.

Are hon. Members below the Gangway opposite sure that it will pay? I believe that my right hon. Friend the Leader of the Opposition is right, and that The Times is right, that the risks we run are enormous, and if anything is only marginally wrong we shall lose far more than the foreign exchange we are now seeking to save.

I thought that the Prime Minister was extraordinarily cavalier about broken faith. It is one of the most important things there is. I believe that, on the whole, our reputation in the world is better than that of most of it—better than that of most countries. We do usually stand up to our obligations. But what has happened now? A Minister was sent round the States in the Gulf to give undertakings and then sent round two months later to unsay and repudiate everything he had said before—a matter of weeks. If we break our word in a matter of weeks who will trust us again? Trust is something which grows slowly; it is the product of the modest years, the gift of sire to son, and, once gone, it takes a long time to build up again.

Now I turn to economic matters. These decisions were taken by tired and frightened Ministers, and they were tired and frightened because they were caught without any plans. I think myself that the sign which really ought to have warned everybody that the Government were in a panic was this, that they took loans from private bankers in Switzerland—loans of fairly trivial amounts, £30 million or so. Why did that happen? I cannot believe that the Swiss bankers were starting the "I'm backing Britain" movement. What had happened was that we had sent touts round to Switzerland and other banking countries to borrow money. For the managers of a reserve currency to borrow small loans from private bankers was not the sort of thing to inspire confidence, and, as we saw, money started pouring out of this country. The biggest sums went on the very day when the Chancellor of the Exchequer made his inept statement on the Thursday before devaluation. Every foreign bank took money out, including Iron Curtain countries—now classed, I suppose, as speculators.

The loss was enormous. I must ask hon. Members below the Gangway opposite to bear in mind that the loss of foreign exchange was far greater in amount than any foreign exchange we may gain over the next three or four years by withdrawing from the Far East.

Surely, the lesson which every foreign exchange crisis always teaches is that if there is a crisis of confidence we must try to draw our measures together, put a bold front on it, and do everything at once. There have been eight devaluations in France since the war. This is a thing which can happen more than twice—eight devaluations. There was only one which stuck, and that was the last one, and it stuck because a stern package was announced at the same time as devaluation—and drawn up, I believe, by Pierre-Paul Schweitzer.

We had a package with devaluation— two months later another package, and we are told there will be another in two months' time. All the shouting from Downing Street was like a football match, with everybody joining in. Everybody knew which side his favourite Minister was on, and everybody was cheering on his partisans all the time. That is the negation of leadership.

Everybody's pocket is stuffed with quotations from the Prime Minister. I am not going to go in for it. I find it rather boring, like shooting from two yards at a haystack. I find the Prime Minister is getting increasingly like Billy Bunter. The right hon. Gentleman will remember that Billy Bunter was accused of stealing a currant cake. Billy Bunter said, "I never even saw the cake. And it hadn't got any currants in it, anyway". If we analyse the Prime Minister's answers we see that he almost always adopts the master's technique. For example, "Me take a loan with strings? Never. And in any case I have already signed on the dotted line".

Well, we have had this mismanagement. What will happen now? Of course, we have not got the whole package, and we cannot judge it, but there are some points to be made. It is the fashion nowadays to talk about costs in real terms and costs at 1964 prices and costs at constant prices, and ordinary money. It is very useful for Ministers because if they are quick enough they can confuse any issue by switching from one to another. But what really matters is actual money.

It matters particularly for this reason, because the most substantial of Pierre-Paul Schweitzer's strings was that we should undertake not to have a borrowing requirement in the next Budget of more than £1,000 million. At present, money expenditure will up next year by just that amount, by about £1,000 million— in ordinary money. There will be an enormous increase in expenditure of ordinary money. I do not think we shall find it very easy to deceive Mr. Pierre-Paul Schweitzer by shifting round, by talking about real costs.

What are we to do? I want to expand on a point made by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) yesterday about manpower. He said, quite rightly, that since this Government got in there has been an increase of 52,000 in the non-industrial Civil Service—that is, central Government. That figure did not include the Post Office. I think I am right—it is rather difficult to classify the figures—that the increase in the non-industrial staff of the Post Office was about 25,000. All this does not include local government. Unfortunately, one cannot break down into industrial and non-industrial the staffs of local government.

The increase in industrial and non-industrial staff in local government has been 250,000, so part of the extra manpower employed in national and local government since this Government came into office has gone up by 327,000. Even if we disbanded all the Services, we should not release anything like that number. Some of it is necessary, of course. It is admirable to have more teachers, for example. However, a great deal is not, and it arises from Government legislation.

One of the most depressing events recently was the meeting of N.E.D.C. after devaluation, presided over by the Prime Minister. The paper presented said that we cannot do anything about manpower, and it ended up by saying, "If anyone has any ideas for economies, I hope that he will put them forward." The right hon. Gentleman is fond of referring to Wellington at Waterloo. His words to the N.E.D.C. were rather as if the Duke had mounted Copenhagen and ridden round the ranks at Waterloo saying, "I have never fought Napoleon. I have not a clue what to do. If anyone has an idea, I hope that he will let me know through the usual channels."

Take the Corporation Tax and the Capital Gains Tax. These are grossly wasteful in terms of manpower. They were brought in because it was thought that they would restrain the unions. I would abolish the Corporation Tax and substitute the old Profits Tax system, which was much better, and I would greatly simplify the Capital Gains Tax on the American basis.

Then we have the Selective Employment Tax. Does anyone really believe in it? The Prime Minister's point was absurd. If one sort of tax is abolished it has to be replaced by another existing tax. In fact, the Selective Employment Tax is grossly wasteful in manpower, and so are the regional employment premiums and the investment grants. The old system of investment allowances was run by the Inland Revenue. A new staff has had to be set up in the Board of Trade to deal with investment grants which, in any case, were misconceived. Finally, we have the wretched Land Commission. All of them were established by legislation and they can be abolished by legislation. They are not sacred cows, but cows bred from stock infected with foot-and-mouth disease.

To go further with the principle of people paying rather more for what they get, I have always believed that there ought to be tolls on the main stretches of the motorways. We shall never get our road system right unless we have them. Many other countries operate such a system, and I do not understand why we cannot do it here. I think, too, that we should encourage fair rent schemes for council houses—

The Prime Minister

The right hon. Gentleman has referred to tolls on motorways. The rest of his argument is fanciful, but this is a serious proposal. I should like him to know that we have studied this with very great care as, I think, did the previous Government. We would like seriously to consider it. The trouble in this country is that, being a small crowded island, with a large number of approaches and access points to the motorways, the cost of running such a scheme in terms of the staff required to man the necessary kiosks would absorb a very high proportion of any possible yield. We have considered it. I am sorry to have to say that we have ruled against it.

Mr. Birch

I should have thought that the simple answer to that one was to cut down the number of access roads. The motorways are intended to be long distance trunk routes. One travels on a motorway to cover a long distance. The number of access points is enormous, of course, but it is odd that other countries are able to operate a toll system. Of course, it is the right answer.

The main trouble in our finances comes from the nationalised industries, and the latest Transport Bill is yet another foolish example. A further £70 million must be raised, and all of it has to go on Mr. Schweitzer's list. In this coming year, steel will lose many times the £25 million which is to be raised by prescription charges, and the nationalisation of steel was imposed on the Government by the Left wing. All the other nationalised industries are getting into trouble, with coal and gas losing money heavily.

Whenever anything happens which puts the Government in a panic, as most things do, they refer it to the Prices and Incomes Board. Surely the efficiency and pricing policies of the nationalised industries are the direct responsibility of the Government. They cannot hide behind Aubrey Jones. He cannot be expected to deal with council house rents and with a whole mass of other matters for which he is not equipped.

Every time the Government get into a panic, we have the spectacle of little Bunter quivering like a prune jelly behind the body of poor Aubrey Jones. That is not leadership. If we are to get out of our troubles, what we want is not only courage but foresight. A poet described the happy warrior as one … who through the heat of conflict keeps the law, In calmness made, and sees what he foresaw. We want a happy warrior. What we have is little Bunter.

5.45 p.m.

Mr. E. Shinwell (Easington)

The House will be grateful for a little comic relief on what is a very dull subject. However, the right hon. Member for Flint, West (Mr. Birch) is losing his grip. He has made hardly one nasty remark about the Government. He cannot compete with his right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell).

The speech to which we have just listened has been heard in this House on innumerable occasions. The right hon. Gentleman made it with some variations in the theme when he resigned from a Tory Government about proposed increases in expenditure. Moreover, he then made what was a dastardly, miserable and squalid attack on his own Prime Minister, Harold Macmillan.

This is the custom of the right hon. Gentleman, and it passes in this House for wit. It is a shame that he should be so renowned for his wit. Recently, I have had an opportunity to read about the great English wits in the sixteenth, seventeenth, eighteenth and nineteenth centuries. Even John Wilkes could not speak with more vindictiveness than the right hon. Gentleman, and he was infamous for objectionable and obnoxious epithets against his friends.

If hon. Members on this side of the House and some of the new intake opposite, who are all hon. Members with considerable talent and qualifications, will take the opportunity of reading back copies of the OFFICIAL REPORT, they will discover that what I have said about the right hon. Gentleman is an accurate description of what happened. I dismiss him with the contempt that he deserves. In all my experience in this House, I have never listened to such disgraceful language, so many squalid epithets directed against my right hon. Friends on the Government Front Bench, the principal offenders coming from the Opposition Front Bench.

I am not certain whether right hon. and hon. Members are acquainted with gardening matters. If so, they will know that there is all the difference in the world between a plant that grows naturally out of the soil and one that is forced. I use that analogy because of the two right hon. Gentlemen now residing on the Opposition Front Bench. What a contrast!

The right hon. Member for Enfield West (Mr. Iain Macleod) is one of the ablest debaters in this assembly. He made a speech yesterday, with much of which I agreed—particularly his references to those quasi-pseudo political interlopers who want to reconstruct this assembly. I hope one day to catch Mr. Speaker's eye to say what I think about Parliamentary reform. However, that is not the subject under review.

The right hon. Member for Enfield, West is very clever. Without intending any offence, he is diabolically clever. That is a very useful qualification in this Assembly. He is a politician who is gradually building up a reputation for himself. I contrast him with his right hon. Friend the Member for Wolverhampton, South-West, who is a great authority on defence. He has been perambulating over a period of time, pandering to the squalid tastes of ultra-Tories in various institutions—[An HON. MEMBER: "Asylums."]—engaged in what might properly be described as a bastard philosophy of meritricious metaphysics. The right hon. Gentleman should consult a dictionary for an accurate definition of what I have just said. I advise him, before he talks about defence, to do a little homework; not to play about on the surface of the problem, but to try to understand what it means and, in particular, to learn something about the history of defence in the past 40 or 50 years in the United Kingdom and elsewhere.

What is the argument about? The Prime Minister and my right hon. Friends the Chancellor of the Exchequer and the First Secretary of State dealt with many of the details of the package deal. It might have been more advisable if they had discussed the general strategy, the principles underlying the package deal, leaving many of the details to be debated subsequently. However, there it is.

I want to deal with what appears to be the vital issue arising from the package deal. First, have the Government dishonoured their pledges? That is the charge which is levelled against them. If it were so it would be a very unpopular thing for any Government to do, unless they could plead extenuating circumstances. It does not lie in the mouths of right hon. Gentlemen opposite to speak about dishonouring defence pledges. I cannot spend my time, or even seek to waste the time of right hon. and hon. Gentlemen, by indulging in many quotations, but let us consider the facts.

Several years ago a conference was held at Lisbon. Anthony Eden was Foreign Secretary at the time, and it was decided that, for the purposes of security in Western Europe, we would provide, in consultation with our allies, 60 to 80 divisions. When Winston Churchill heard about this he laughed it out of court. It was impossible. We did not possess the capabilities to make a formidable contribution.

But subsequently an agreement was reached—I repeat deliberately, an agreement—signed and sealed, to which we were a party, a Tory Government then in power, providing for 77,000 ground troops to be available for N.A.T.O. No sooner had the agreement been signed and sealed than it was discovered that this was far beyond our capabilities and the number was reduced, despite the agreement, despite the pledge, despite the treaty, from 77,000 to 55,000.

I have here a quotation from the hon. Member for Stroud (Mr. Kershaw)—I am not complaining that he is not here—who was Chairman of the Conservative Party Defence Committee. He complained bitterly about the position. I also have a quotation from the noble Lord the Member for Berwick-upon-Tweed (Viscount Lambton)—I make no complaint that he is not in his place, either—who complained about the reduction in our manpower and directed attention to the risks that were involved in the proposed reductions which were subsequently carried out.

That is not all. Search the pages of political history. I do not wish to be in the least offensive to those who have passed away, in particular, one outstanding personality for whom I had the greatest affection and admiration—I refer to Winston Churchill—but I remember what happened about the gold standard and the speeches that were made about the benefits to be derived in this country by returning to the gold standard and the consequences. Winston Churchill disclaimed any blame for what had happened and imputed blame to the Governor of the Bank of England, the late lamented Montagu Norman. Nevertheless, there was an understanding that this would lead to vast economic and financial improvement in this country. It failed.

I recall the agreements about the TSR2 which, by the way, cost this country about £300 million. I recall the efforts of successive defence Ministers in Tory Governments to produce something in its place—for example, the Skybolt. They paraded its virtues, only to discover that the Americans said that it was no longer feasible. I could go on repeating one incident after another about dishonouring pledges.

Let us consider the situation which has emerged from the Government's decision to make a phased withdrawal of our forces from South-East Asia. At a meeting with my hon. Friends yesterday, I said that I regarded it as a calculated risk. It is always a risk to withdraw forces, because one can never envisage with any accuracy the kind of situation that will arise thereafter.

Let us deal with what happened in that area. Immediately after the war, when the Attlee Government were in power, we found ourselves back in Singapore and Malaya, having previously been defeated by the Japanese. Malaya, and, indeed, the people of Singapore, were being affected by terrorism, inspired it was said, by the Communists. It was necessary for the British Government to take action. I was Minister of Defence at the time, having previously been Secretary of State for War. It was decided by the Attlee Government to appoint a committee, which became known as the Malaya Committee. I was chairman, and my right hon. Friend the Member for Llanelly (Mr. James Griffiths), who had become Colonial Secretary, was a member of it.

We discovered that military methods were of no avail. We therefore decided to send to Malaya General Templer, now Field Marshal Templer, who, in our opinion, was not only a great fighting General, but a political one. He used all the political experience at his command, and, with the assistance of Mr. Malcolm MacDonald, who was High Commissioner in the area, the conflict was brought to an end. Nevertheless, we remained there because of the fear of further terrorism, the advent of Communism. There was no treaty, but if anyone can produce a signed and sealed treaty which he thinks was necessary for us to remain there, and it shows that we dishonoured any pledges, I shall be glad to see it.

Sir Harmar Nicholls (Peterborough)

As a Privy Councillor, the right hon. Gentleman has a special responsibility. He has held high office as Minister of Defence, and he has a special responsibility to give clear evidence. He posed a clear question, "Have the Government dishonoured a pledge entered into as recently as last July and August?". What is his clear answer to that?

Mr. Shinwell

That is for the Government to answer. I am dealing with the present situation, and I pass from what I have said to something even more fundamental.

During the period of the Attlee Government a decision was reached to provide assistance in the area. I do not know whether hon. Members are aware of the ANZUS Pact. It was promoted with the support of the United States of America, and was to include Australia and New Zealand. This is a matter of history, but I protested because I thought that Great Britain ought to be included.

The members of the ANZUS Pact are responsible for providing security in that area. Great Britain is not. The responsibility rests on the United States, Australia, and New Zealand. I understand that the Australians have declared that they do not have the capabilities to fill the gap. This strikes me as remarkable. I do not want to introduce a note which has not so far appeared in the debate, but it occurs to me that if a small State like Israel, with a population of 2½ million, is able to stand up to the Arab States, with a population of about 48 million, Australia, with a population of more than 12 million, and with far greater capabilities economically, and potentially in a military sense, is quite capable, in concert with the United States and New Zealand—I recognise that the Vietnam obstacle is still there, but, as the right hon. Member for Enfield, West said yesterday, it will pass —of accepting responsibility for the area.

I wish that the Government had phased the decision in a not too accelerated sense, but what is the real problem affecting Singapore? Is it a matter of security? I do not believe that it is. It is a matter of the United Kingdom, because of her garrison there, and her naval forces in the area, employing about 40,000 people in Singapore. Naturally, the Prime Minister of Singapore is consumed with anxiety about what will happen if we leave. I understand that, and we must render every possible assistance.

Reference was made yesterday to the need for conventional forces. I was amazed to hear the right hon. Member for Wolverhampton, South-West talking about the need for security in the West. He emphasised and exaggerated it. I know that there are differences of opinion on this side of the House about whether we should support N.A.T.O., and retain our connection with it. I think that for the purposes of security, to avoid any undue risks, we have to associate ourselves with Belgium, France, Italy, Germany, and the Netherlands, although any contribution made by France would be negligible. I have said this many times; I said it when I was Minister of Defence. The idea that we can withdraw from east of Suez in the way proposed, and leave our forces in Europe, appears to me to be completely absurd.

I venture to make one quotation which I think ought to be made. The right hon. Member for Streatham (Mr. Sandys) is involved in this, and I am sorry that he is not present. Yesterday, when there was a slight altercation between our Front Bench and the right hon. Gentleman, I ventured to interject, "You are in some way responsible". The right hon. Gentleman did not dissent, and for very good reason, because I have here the relevant part of the 1958 Defence White Paper. It makes interesting reading. We talk about changing the military situation. We talk about the reorientation of our military forces. Here was an example of reorientation. Here was an indication that conventional forces were no longer regarded as of any value.

Paragraph 12 of that White Paper said: The West, on the other hand, relies for its defence primarily on the deterrent effect of its vast stockpile of nuclear weapons and its capacity to deliver them. The democratic Western nations will never start a war against Russia. But it must be well understood that, if Russia were to launch a major attack on them, even with conventional forces only, they would have to hit back with strategic nuclear weapons. That was very mild, but the White Paper went on to say: In fact, the strategy of N.A.T.O. is based on the frank recognition that a full-scale Soviet attack could not be repelled without resort to a massive nuclear bombardment of the sources of power in Russia. In that event, the rôle of the allied defence forces in Europe would be to hold the front for the time needed to allow the effects of the nuclear counter-offensive to make themselves felt. There was also the famous pause which was referred to at the time as "the tripwire strategy". It was of no value whatever. That was the change that took place at the time.

I am not enthusiastic about the nuclear deterrent—far from enthusiastic about its possible or actual use. It is the opinion of many military chiefs—who would get up and say so publicly—that if anything happened our forces in Germany would be liquidated in a day or so. What is the use of talking about using conventional forces in the circumstances? In any event, we cannot afford the foreign exchange. That is putting it as bluntly as it can be put.

There are many things that I dislike about this package. I wish that it had been otherwise. I wish that there had been an alternative. I waited with eager expectancy to hear the speech of the Leader of the Opposition. I have never attended a Tory conference, and I have never heard a speech made at a Tory conference until today, but the speech of the Leader of the Opposition was the kind of speech made at Tory conferences. It was not addressed to us, or to the country, or to this side of the House. It contained only one constructive proposal. which came at the end. The right hon. Gentleman suggested that if Ministers were prepared to have a reduction in their salary the Opposition would follow. There was nothing original in that. I suggested it on the radio last Sunday. That was the right hon. Gentleman's only constructive suggestion.

I want to tell the House about something that gets down to the root of the problem. The Leader of the Opposition said, "Let us get down to the roots". What are the roots? I remember speaking from the Opposition benches in 1937, moving a Motion, on behalf of the Labour Party, demanding meals for school children. The Tory spokesman said that that would be demoralising, and would interfere with thrift, besides which the country could not afford it. What are the facts about social welfare? When Lloyd George introduced a 5s. a week pension for people over 70 it was opposed by the Tories. They nearly always oppose any advance in social welfare.

When the Beveridge Report came before the House during the war—in 1943 and at the beginning of 1944—it was not opposed by the Tories, but that was because there was a Coalition and it would have been dangerous and even suicidal for anybody in the House to oppose the Beveridge proposals, in view of what was likely to happen after the war. Generally speaking, however, the Tories are against any advance in social well-being.

What is the choice? It is either social welfare, properly advanced, regulated and directed, or reduction in defence. What is the choice for hon. Members on this side of the House? How in the world can anybody pretend that we have no rôle in the world, simply because we have not the military capabilities? Of course we have a rôle. I do not want to indulge in hackneyed language, but we have character and quality; we have the will and the potential energy. All these qualities should be directed to proving to the world that we have a great world rôle, even if we have no aircraft carriers and vast forces.

I speak as an experienced member of the Labour Party, one of long standing, who is concerned about the survival of the party. I am even more concerned about the survival of the party than I am about the survival of the Government, because democracy cannot be sustained without a Labour Party. I advise my hon. Friends to criticise as much as they like, but, at the end of the day, to support the Government, even if they dislike many of the items in the package deal. That advice will not suit hon. Members opposite. They would love to see this party split, but the party will not be split because of them.

I advise my hon. Friends to pay no attention to the demands made last night for the resignation of my right hon. Friend. On the other hand, I hope that the Leader of the Opposition will not resign. Let him remain where he is.

6.15 p.m.

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

The right hon. Member for Easington (Mr. Shinwell) accused my right hon. Friend the Member for East Flint (Mr. Birch) of "losing his grip." After hearing him express his reminiscences I will not repeat that accusation against him, but I would remind the House that some years ago he and the late Lord Winterton were described as "Arsenic and Old Lace"— and nobody would describe the right hon. Member for Easington as "Old Lace".

For most of the debate I have been waiting for an analysis or diagnosis of what is wrong with Britain today. It is the failure of the Prime Minister to make that diagnosis that has made the remedies that he has proposed both inadequate and inappropriate. Our export performance is reasonably satisfactory. I am certain that there is a determination by our people to back Britain by every means in their power to surmount the difficulties. But our real problem is a lack of confidence abroad in Britain because the expenditure in the public sector has grown so fast in recent years that it has outstripped the growth of the economy, outstripped revenue, and outstripped our overseas earnings, with the result that we now have a Government-inspired inflation. That is our trouble today.

I want to quote two figures to show what I mean. In the last full year of Conservative Government—1963–64— Government expenditure above and below the line, amounted to £7,977 million. Government expenditure this year, according to the White Paper, amounts to £14,387 million. Next year, after the cuts proposed by the Government, it will be £15,078 million. That is the real trouble about the economy. I was mystified by the Chancellor's statement yesterday, when he said: Contrary to a great deal of ill informed criticism, it is not so much our public consumption as our private consumption which is out of line."—[OFFICIAL REPORT, 17th January, 1968; Vol. 756, c. 1789.] I have taken the trouble to examine the Chancellor's own statistics on this point. I find that, comparing the October, 1964, figures with those for the second quarter of this year, the total of domestic expenditure rose by 16.8 per cent. The total of private sector expenditure on current account rose by only 15.4 per cent. But public authority expenditure on current account rose by 27.3 per cent. That backs up my analysis of what is wrong. I hope that the Foreign Secretary will explain what the Chancellor meant when he gave figures which are highly misleading both here and abroad.

These figures deal with current account and but one of the most grievous features in our economy is the huge increase in borrowing by nationalised industries, public authorities and local authorities. In the last full year of Conservative Government, this borrowing amounted to £1,160 million, but in the current year it is already £1,580 million. This large increase on the capital account can no longer be financed by savings or by any gilt-edged market operations and this has been the prime cause of inflation.

It is against this background that I view the Government's proposals—a cut of £300 million in the next year and £416 million in the year after. Quite clearly, they are ridiculously inadequate. Indeed, the very day after they were announced, the Government tabled revised Supplementary Estimates which showed extra Estimates for this year of £462 million. In my view, and in that of my right hon. Friend the Member for Flint, West, the kernel of this matter is paragraph 10 of the Letter of Intent of 27th November. How are we to keep our borrowing requirement to not more than £1,000 million? We cannot accomplish this unless we return to a level of public expenditure near what it was when we left power in October, 1964—both above and below the line.

We must also give more thought to the methods of financing capital expenditure by the nationalised industries and local authorities to see that it is not financed merely by the quasi-automatic creation of money, which inflates demand. In one of his last speeches as Governor of the Bank of England, on 18th May, 1966, Lord Cromer said: We unfortunately have a system under which Exchequer financing can and does lead to the creation of money quasi-automatically to the extent that the requirements of the Exchequer are not met by genuine savings in taxation. That is the position on the civil side.

I want now to turn to the cuts in defence. They also come from a faulty diagnosis of what is wrong with the economy. They will not enhance confidence in sterling and I cannot think that they arise from a true diagnosis of what is happening, which is really the failure of the Government to encourage the private sector to earn overseas.

First, we have the breach of pledges and treaty engagements which the Government have committed towards our allies and partners in Australia, New Zealand, Malaysia and Singapore. That must make those countries, which hold large sterling balances in this country, doubt the wisdom of their present policy and will therefore decrease confidence in this country.

Second, the declaration of complete withdrawal of our military presence from an area in which our trading possibilities and investments are so large will result in a danger to the whole of our overseas earnings from that area. That is an area of great growth and strategic importance. The solution is that the Government must reconsider their decision. They should call together at a very early date the Prime Ministers of the Commonwealth countries in the area to discuss how our balance of payments there can be improved in the context of a continuance of our military presence in line with our treaty engagements and pledges.

This is the whole of our problem. Our money is not honest. People fear that we are not keeping our engagements to our Commonwealth partners in the Far East. It is a return to honest money and honest dealing which will restore the confidence of this country rather than any other means.

6.26 p.m.

Sir Dingle Foot (Ipswich)

During the few minutes that I propose to occupy the House, I want to express the deep anxiety felt by some hon. Members on this side about the proposed withdrawals from east of Suez I find it difficult to resist the conclusion that there has been a breach of faith. Last July, the Governments concerned were given clearly to understand that we would retain a military presence in the area until about 1975. It is perfectly true that, since devaluation, that commitment has become more onerous, but that does not entitle us to cancel it. After all, devaluation has been considered again and again. Everyone knew last July that it was a possibility. So far as I know, there was no contingency clause covering it in the agreements which we made with the countries concerned.

My second complaint is that this was done with no adequate consultation. My right hon. Friend the Prime Minister spoke about renegotiating treaties, but renegotiation involves a process of consent on both sides. There was no renegotiation on this occasion. My right hon. Friend the Commonwealth Secretary spent a few hours in each of the capitals involved. No doubt he brought back the views expressed—I gather very vigorously—to him, but he was merely presenting the Prime Ministers whom he met with decisions which had, in effect, already been made. The only concession which has been made was obtained not as a result of what was said to my right hon. Friend in the capitals which he visited, but by the Prime Minister of Singapore, Mr. Lee Kuan Yew, on his visit to London.

No one suggests, I think, that British troops should stay in South-East Asia indefinitely, but, in my view and that of some at any rate of my hon. Friends, they should remain until the countries concerned can provide for their own defence. Three years is almost certainly too short a time, and that is why I hope that the Government will seriously consider the particular requests made to them in the last few days by Mr. Lee Kuan Yew which, as they know, refer not just to general employment but particularly to certain types of defence.

On Tuesday—this links up with the remarks of the right hon. Member for Thirsk and Malton (Mr. Turton)—the Prime Minister told me that he was pre- pared to consider a conference of the five Powers to consider the defence of the area. I understood from him, however, that the conference would have only a very limited purpose because the decisions announced would have to be accepted in advance. A conference of that kind would, it seems, be of little use to any of those concerned and I strongly urge that the conference should be able to consider the extent and timing of our withdrawal from South-East Asia. If it did, it might repair some of the damage that has been done to Commonwealth relations.

The Prime Minister referred to economic aid to under-developed countries of the Commonwealth. I was glad to hear the reference and I hope that there will be no cut in that form of aid. It is one of the measures to which my hon. Friends and I attach the greatest importance. One of our greatest problems today is to try to remove the gulf between the rich and the poor nations.

But there are, of course, occasions when developing countries need not merely economic but military aid as well. On 10th December, 1963, I attended the independence celebrations in Zanzibar. There at that time existed a constitutional monarchy, a Cabinet Government, a Legislature which had been elected by universal suffrage, independent judges and the rule of law. Within just over a month all those things were swept away— not by any popular uprising but because a few hundred armed men, mostly originating from elsewhere had handed in Zanzibar, and there was nothing to stop them. Only a modest force would have been needed.

The same thing could easily have happened a few days later in the three countries of Kenya, Tanganyika and Uganda. It did not happen because there were British troops readily available and able to step in to restore law and order.

Mr. William Molloy (Ealing, North)

My right hon. and learned Friend has given the example of Zanzibar. Is he aware that that is precisely the sort of lesson which some of my hon. Friends and I are trying to urge Britain and the rest of the world to appreciate? Surely the problem was not that there were no British troops to help to defend Zanzibar but that somebody had, in the beginning, given arms to those people. The root of the trouble in that case, and in all similar cases, is the provision of arms and the need to prevent them from being supplied.

Sir D. Foot

I do not see how that intervention touches my argument. It may be wrong to provide arms, but as long as they are available this sort of problem will arise. The tragedy of Zanzibar could easily have been repeated— indeed, probably would have been repeated—in the other three East African countries if British troops had not been there.

In this connection, I must particularly refer to the Persian Gulf. What I have said about South-East Asia applies equally to the Gulf States. We have commitments and we have substantial interests. It seems that the cost—I understand that it is between £10 million and £20 million a year—is a small insurance to pay for the benefits which we receive from that area. I wish to stress that the sheikhdoms of the Persian Gulf are particularly vulnerable to the Zanzibar type of aggression.

We are not going to leave tomorrow. We are still committed to remain in both areas for the next three years. A great deal can happen in three years. It may be a period of increasing tranquility in the Middle East, the Indian Ocean and the Pacific, but it may not. The question I put to Her Majesty's Government is this: if, when we reach the second or third year, it becomes clear that the situation in any of these areas is seriously deteriorating, will Her Majesty's Government then reconsider the decision to withdraw their forces by the end of 1971?

Some of us do not accept that Europe must always have priority. I do not for a moment underrate our obligations to N.A.T.O., but for 22 years in Europe there has been no external war across the frontiers. There have been risings against Communist tyranny—such as there was in Hungary in 1956—but there have been no international conflicts, something almost unparalleled in the history of Europe. This may be due, in some small measure, to the presence of troops, to which my right hon. Friend the Member for Easington (Mr. Shinwell) referred. But I suggest that it is due far more to the balance of nuclear terror. That will remain whatever the number of troops we have in Western Europe.

This view, which I hold, is, after all, the view taken by Ministers. I almost hesitate to add to the quotations which have been made today, but I have always agreed with the view taken, at any rate until recently, by my right hon. Friend the Prime Minister, who said in January, 1964: If we are to deploy our full influence in the world, I would myself at the margin regard 1,000 men east of Suez, with the fullest provisions for mobility, with all that that means, not least in terms of cost, as preferable to another 1,000 in Germany ". That was right then and it is right now. I heard my right hon. Friend speak at the Nehru Memorial Service on the South Bank in London, when he said that our frontier was on the Himalayas. I would like to know whether it is still on the Himalayas and, if so, how we propose to guard it.

I am concerned not only with our relations with the Commonwealth, but also, in this connection, with our relations with the United States. The term "special relationship" has, perhaps, been used too often. Nevertheless, since 1941 —that is, since Pearl Harbour—there has been a close understanding between London and Washington. That has been one of the major factors in preserving the peace of the world. The only time that it was interrupted was at the time of Suez, owing to the folly and duplicity of the party opposite. One of the main counts in the indictment against the Tory Government of that day was that they acted without any prior consultation with our American allies. Here our proposed withdrawal from the Persian Gulf and South-East Asia also appears to have been decided without any consultation with Washington.

I have only a few words to say about defence, I agree with my hon. Friend the Member for Edmonton (Mr. Albu), who said in his speech yesterday that the impression should not get out that hon. Members on this side of the House are not concerned with defence. Our last debate on defence was held on 27th November last. A speech was made by my right hon. Friend the Minister of Defence, in which he spoke of the economies which had already been agreed upon. He made it clear that, in his view, we were cutting things pretty fine. He said: As I have made clear, we will always have one carrier for operations anywhere in the world. We will often have two available; but my hon. Friend will not expect me to give him a list of the months in which there will be two carriers available and when only one will be available. I frankly admit that there is an element of risk here, an element of risk which I would be reluctant to take in normal circumstances. As I said last week, the circumstances are not normal and I believe that the degree of risk is one which, in the current situation, is acceptable ".—[OFFICIAL REPORT, 27th November, 1967; Vol. 755, c. 67.] My right hon. Friend was saying that there was a greatly increased degree of risk, but that it was still acceptable, whatever the standard of "acceptability" then was.

In the reference to the Navy in the statement made by the Prime Minister on Tuesday, we read: The aircraft carrier forces will be phased out as soon as our withdrawal from Malaysia, Singapore and the Gulf has been completed".—[OFFICIAL REPORT, 16th January, 1968; Vol. 756, c. 1583.] That is to be coupled with the loss of the F111K, a weapon which the Secretary of State for Defence thought absolutely essential as recently as November.

What is the test of acceptability? Why is something which was utterly unacceptable in November acceptable now in January? I raise these matters not because I wish in any way to attack the Government, but because I believe that on these issues every Member in every part of the House has his own special personal responsibility.

I have spoken of defence and foreign affairs, but I have the utmost sympathy with my hon. Friends who have protested against the cuts in the social services and education. Why is it that we have to have this package deal now? Why must we go back on our obligations, accept a degree of risk which we formerly held to be unacceptable, cut down our social services and postpone educational advance? There is one explanation and one only. The Treasury has won all along the line.

The Treasury includes a number of civil servants of the highest distinction and ability. But I always remember the words of John Bright, when he said that the worst of these great thinkers is that they so often think wrong. The great thinkers in the Treasury have often been wrong. My right hon. Friend the Mem- ber for Easington referred to the occasion when they persuaded the then Chancellor of the Exchequer, who was Winston Churchill, to return to the gold standard. That was a ghastly blunder. It produced a great deal of misery, unemployment and stagnation in this country. But it was done on the best advice of the Treasury. They were wrong then. I think that they were probably wrong in 1931. I believe that they are wrong today.

I do not say that it is entirely the fault of the Treasury advisers, but the picture which has been painted over the last few days is, I believe, a false one. We are represented as though as a nation we are somehow in liquidation. A national newspaper, the other day, printed an article on the front page saying almost in every three lines that we must do this and that because we are bankrupt. We are not bankrupt. We are a great creditor nation.

I shall read an extract from an article which recently appeared in the Listener, written by Mr. A. R. Conan, who was formerly Assistant Secretary of the Commonwealth Economic Conference. He recalled a statement made in 1950 by Mr. Chuter Ede, whom some of us remember. Mr. Ede had said: We have to face the loss of all our overseas investments. We now have to pay by the current products of this country for all the goods we require. Mr. Conan comments that This was not perhaps a very convincing statement in a year when our income from overseas investments amounted to nearly £300 million ", and he went on: Thus the myth became established and in addition it was hardly realised that during the 1950s wartime losses were rapidly being made good by new investments. In other words, even if during or just after the war Britain became a debtor country, it was now beginning to regain its former status as an international creditor. The full extent of the recovery was not definitely known until 1964 when the Bank of England published an estimate of external assets and liabilities, both short-term and long-term: this showed a net surplus of nearly £2,000 million. I shall not inflict any other quotations on the House, but I recommend hon. Members to read the speech made last summer at Sydney by Mr. Bowden, as he then was—he has been translated to another place—when he went there as Commonwealth Secretary. He addressed the Australians on our economic position and showed by what an enormous sum our assets in the world exceeded our liabilities.

I do not, therefore, accept the premises upon which this argument is based. It is a package deal, but it is a Treasury package deal. It should be regarded with the greatest suspicion, and I for one would find it extremely difficult to support it.

6.44 p.m.

Mr. John Boyd-Carpenter (Kingston-upon-Thames)

I am glad to have the opportunity of following the right hon. and learned Member for Ipswich (Sir Dingle Foot), though, for reasons which he will fully understand, I do not completely follow him in his clearly expressed opinions about the Treasury as an institution.

The right hon. and learned Gentleman was the first Member opposite —I have listened to the greater part of this two-day debate so far—to say firmly and explicitly that we could not honourably run out of our obligations to our friends in the Far and Middle East. I echo that. We have had relations with some of the countries concerned for over a century. We have obligations to them, many of them, as has been said already, confirmed by Ministers from that Front Bench a matter of months ago. I wholly agree with the right hon. and learned Gentleman that it would be shamefully dishonourable for this country, because of its financial embarrassments, simply to repudiate these obligations and say that they no longer stand.

I heard the right hon. and learned Gentleman put to the Prime Minister on Tuesday the point which he put so well today—the desirability of a conference of the countries concerned in the Far East—but I recall, as I am sure he does, that, although the Prime Minister did not dismiss the possibility of a conference, he concluded his answer by saying: but we cannot postpone any longer the decision which has been announced today."— [OFFICIAL REPORT, 16th January, 1968; Vol. 756, c. 1610.] If that stands, I see little purpose being served by a conference.

I was reminded also by something the right hon. and learned Gentleman said of the brilliant operation by which, under the previous Government, British forces saved three newly-independent East African countries from chaos. I recall, rightly, I think—I was in the Government at the time—the circumstance, significant in this context, that it was our possession of a base at Aden, where the troops concerned were stationed, which allowed us to intervene with the speed which all but eliminated bloodshed. Thanks to the action of the present Government, that base at Aden no longer exists, and the action which the right hon. and learned Gentleman so rightly praised could not be repeated.

I am glad that the Foreign Secretary is here now, though I do not think that he was present when his right hon. and learned Friend put a question to him. It is important to have an answer when the right hon. Gentleman winds up, and I put the question again. What is to happen if, in any of these territories from which the Government say we are to withdraw by 1971, there is danger from external threat or internal trouble, when 1971 comes? Do the Government now take the view that, come what may, they will pull our forces out of these places in 1971, even if it means leaving them and the people who have trusted us there to murder and bloodshed? Does it mean that?

As the right hon. and learned Member for Ipswich said with truth, this is not a part of the world in which, on past form, one can expect prolonged tranquility. What is to happen, the Government having named the date? What is to happen? Is there, for example, to be a fighting withdrawal to the ships and an abandonment of the people who have served us, our friends and allies in these areas?

I hope that the Foreign Secretary realises that many of us who are desperately unhappy about this whole proposal would be at least in some measure reassured if he could tell us that the date of 1971 is not immovable and that, in the unlikely event of his being in his present office at that time, he will see to it, as his personal responsibility—may I say that we trust an assurance from him a great deal more than we trust one from the Prime Minister—that the troops will not be withdrawn in such circumstances. I should be very grateful, as, I am sure, would the hon. and learned Member for Ipswich, for such an answer tonight.

Mr. Roebuck

Will the right hon. Gentleman give way?

Mr. Boyd-Carpenter

No. Mr. Speaker has urged that we do not take up too much time. I hope that the hon. Gentleman will forgive me.

I turn now to the challenge which the First Secretary threw out last night. He said—I think that it was to some extent a debating trick—that those of us who disagreed with some economies the Government proposed to effect were bound to put something into the package in return for what they want to take out. As the House knows I was concerned with public expenditure in the late Conservative Government and I should like to respond to that appeal, although I do not know whether all that I propose will be wholly acceptable to the Government.

First, I would demolish the Land Commission, thereby saving annual expenditure on administration of £7 million, 2,000 highly qualified staff and the expenditure of a capital sum of up to £75 million. That is well worth considering.

Second, I suggest deferment of expenditure designed to facilitate the advance of comprehensive secondary education. That is a controversial subject into which I do not desire to enter, save to say that it is one on which opinion in the country as a whole is deeply divided. [Interruption.] If hon. Members opposite doubt that, let them await the results of the London borough elections in May. If we are looking for economies surely that is a better direction than the mean little action of reducing the capitation grants to the direct grant schools.

Next, I suggest that we should suspend aid to those 10 countries whom the Minister of Overseas Development told me in answer to a Question the other day have either broken off relations with us or taken British property without compensation. Those who do not wish to associate with us need not be worried with our money. It is ludicrous that among those countries in the list the right hon. Gentleman gave me was Egypt, at a time when Egypt by her own act in keeping the Suez Canal blocked, is both impoverishing herself and inflicting great economic damage on us. Only a few days ago the former Chancellor of the Exchequer gave mat as one of the reasons for our troubles. In those circumstances, it is absurd that the British taxpayer should find a penny for the assistance of a country which is so conducting itself.

I do not spare defence in seeking economies. I ask the Secretary of State for Defence to consider whether economies are not easily to be found in the command structure of our forces in Germany. I do not believe that to command 50,000 men it is necessary to have an Army headquarters, a corps headquarters, three divisional headquarters and—it was seven but I think it is now six—brigade headquarters. When I recall that in the last war a single headquarters could command 50,000 troops, not without effect on the enemy, I do not believe that in time of peace this elaborate hierarchy is required. One must remember, when comparing costs in Germany with those in the Far East, that a large part of the expenditure in Germany falls in Deutsch-marks, whereas expenditure in the Far East is almost exclusively in sterling.

Although the cost of the static headquarters in this country is in sterling I suggest that the right hon. Gentleman should also look at their rôle. They command virtually no troops, and I very much doubt whether they are worth the money spent on them.

That was my response to the First Secretary's challenge. I now come to the only point on which I really want to say something tonight, and that is about the major defence cuts. They are distinguishable from the civil cuts by two factors. One is that they are largely irrevocable. I was delighted to hear my right hon. Friend the Leader of the Opposition say that he and my other right hon. Friends would not regard themselves as bound by them, but the House knows that once one has withdrawn from a base or destroyed an arm of the service like the Fleet Air Arm it is very difficult either to go back to the base or to revivify that organisation. Therefore, the first point is that the cuts in defence are very nearly irrevocable, unlike the civil cuts.

The Chairman of the Labour Party, the right hon. Member for Cannock (Miss Jennie Lee), was absolutely right when she said the other day that the defence cuts were "real, drastic and permanent". That was apparently the reason why she has not resigned.

The second fact is that the defence cuts provide no saving in expenditure in the coming year. The appendix to the White Paper shows the cost continuing simply at the same level, but a small note—note (2) —shows that this is vitiated by the fact that cancellation charges are wholly excluded. Therefore, the second fact is that whatever may be the longer-term effect, in the crucial year ahead changes all but irrevocable in nature are proposed to be made without effecting any saving in public expenditure for 18 months after devaluation. If Ministers really believe in the efficacy of the measures they are taking it seems a little curious that our defence forces should be mutilated, as they are being, for the sake of a saving that cannot operate during the crucial period of the coming year.

It is shaming that we should run out on our firm obligations to many of our friends and on our moral obligations to others who have not been mentioned. I particularly have in mind Australia. I had the privilege of being in that great country only a few weeks ago. Even then, in the light of the Government's foreshadowed later withdrawal from the Far East there was deep unhappiness in Australia—not bitterness, but a rather more moving emotion of the hurt incomprehension of someone who has been let down by an old and dear friend. Not only people in public positions but ordinary private citizens said to me, "Look, twice in this century when war has started in Europe in which you have been involved and which seemed a hell of a long way from us we have come across the world to fight in your cause."

One has only to look at the length of the lists on the war memorials of the little Australian towns to understand the stark reality of that. Australians say that now that they are in what the Foreign Secretary recently described as the dangerous part of the world, now that the danger is on their doorstep, that is the moment we move out. I found it difficult then, and I find it even more difficult tonight, to answer any Australian who says that.

The Secretary of State for Foreign Affairs (Mr. George Brown)

I am deeply moved by that sort of sentiment. But is not the answer to any Australian or any New Zealander that when they did that they did not need to keep permanent bases in Britain or Europe in days when movement was slow and by ship? Does it follow that we need to have bases in Asia in days when movement is by aeroplane and is much faster?

Mr. Boyd-Carpenter

The right hon. Gentleman will first appreciate that Australia had no bases in Europe and did not need to have them because this country had then command of the seas and could carry those who came to our help right across the oceans of the world. The right hon. Gentleman said in a sentence what is said in paragraph 13 of the White Paper, that we have assured the people concerned that we shall retain a general capability based on the United Kingdom which can be deployed overseas as circumstances demand. I think that that is what the right hon. Gentleman has in mind.

But those are mere words. How will any Government in this country do this? The Suez Canal is closed, apparently indefinitely; Aden is gone; Simonstown is jeopardised; there is the Arab barrier to air trooping; and there will be no heavy equipment in the area. What will be the use of putting a few unhappy soldiers into transport aircraft and flying them across the world to areas where the airfields may not be secured and where there is no heavy equipment? One of the worst aspects—and I am grateful to the Foreign Secretary for recalling it to my mind—is that this dishonourable sham should be put in the White Paper and that it should be suggested that this is an adequate alternative to what we are in a position to do now.

It is wrong deliberately to break up the Commonwealth Brigade in Malaysia. It is a splendid fighting force, a fine example of British and Commonwealth co-operation. Why destroy it? Why virtually wreck the Brigade of Gurkhas? This is the kind of thing which people not only in Australia but here find difficult to understand and justify, especially when it is done like this, without proper consultation—indeed, as the right hon. and learned Gentleman said, without any consultation.

If the honour of the pledged word does not appeal to the Government, perhaps economics could. How long do the Government think that we shall be drawing sterling oil from the Persian Gulf after British troops have withdrawn? A matter of weeks? This is not fanciful. It is only a few years since British forces using the airfield in Kuwait held off the threat from Iraq. Russian influence in the area is powerful and growing. What will be the effect on us? We saw the effect last summer of even a few weeks of the cutting off of this oil on our economy. This was one of the reasons which the Home Secretary gave then for our difficulties. And this is leaving aside the massive investment we have in the Far East as well.

We are getting the worst of both worlds. We are dishonouring ourselves and all we stood for and probably ruining ourselves financially into the bargain. This is all, I am afraid, a political manoeuvre of the Prime Minister. The real purpose behind this exercise, when one remembers that there are no savings but increased expenditure next year, is that the Prime Minister thinks that it will be easier if he mutilates defence to secure the adherence of hon. Members opposite to the civil cuts which he and the international bankers know to be necessary. That may be so. The Chairman of the Labour Party is a case in point.

But if it is thought that this is the mood of the country, then the Prime Minister is misjudging things. When it is known outside that the announcement of the castration of our Armed Forces and the repudiation of our obligations was greeted by successive cheers from the Government benches, I believe that the reaction will be cold anger. I believe that the people of this country are "fed up" with retreat and dishonour, the patronising sympathy of friends and the contempt of our enemies abroad. The mood is exemplified by those who are prepared to work for nothing for their country, to work for nothing out of a pure and rather touching patriotism. That is much more the mood of the country than all this sordid political dealing and the abandonment of Britain's rôle in the world.

I believe that the Government very much underrate the feeling of the country and the alarm and nervousness of the country about all this. The Prime Minister referred to Kipling's Recessional, characteristically with a sneer. I do not know what he has to sneer about. In the days of Kipling, we balanced the books and kept our word. There has been an adaptation of that Recessional and it is bitterly true of us under this Government. '' Far-called our navies melt away On dune and headland sinks the fire. We are too jolly near today. To being with Nineveh and Tyre.

7.5 p.m.

Mr. Frederick Willey (Sunderland, North)

The right hon. Member for Kingston - upon - Thames (Mr. Boyd-Carpenter) is an old adversary of mine, but I trust that he will forgive me if I do not follow his remarks, because I am anxious to be brief.

Since leaving the Government, I have been able to take a more objective view of my colleagues and this has not been altogether reassuring. For example, there is the case of my right hon. Friend the Home Secretary who, until recently, was Chancellor of the Exchequer. During the debate on the Address in November— which turned out to be the month of devaluation—he spoke with incredible optimism. To adapt his own words, the pessimists took a real clobbering. If it was not the millenium, at any rate we were over the hump. Yet within a couple of weeks we had devaluation.

Unfortunately, there has been a great deal of this pattern over the last few years. Whenever "sunny Jim" has bobbed up, the worst has not been far behind. Why? The Home Secretary is an excellent politician and a cautious one. I share the view of my right hon. and learned Friend the Member for Ipswich (Sir Dingle Foot), that he has been badly advised, and that if we are discussing economies we might as well start off with the Government's advisers.

What we have to recognise is that there is a scepticism abroad. We took similar deflationary measures in July, 1966. I know that the argument is that these present measures are not deflationary but we said precisely the same thing in 1966. We said that they were not deflationary, but diversionary—that we would not have unemployment but redeployment. What was to be the result of the 1966 measures? The Home Secretary said that we would have a surplus at the end of the year, that we would swing from deficit to substantial surplus over the next twelve months. The Prime Minister told the T.U.C., which was vitally concerned, that the July measures were the only guarantee against unemployment.

But we did not swing into surplus, substantial or otherwise. As the right hon. Member for Enfield, West (Mr. Iain Macleod) delights in pointing out, we have had the most prolonged unemployment since the end of the war.

The Government must recognise, in view of all this, that there is a scepticism which is not confined to myself, and this is an important factor in the present political situation. I do not want to over-emphasise it. Devaluation has brought a new situation. I approve of devaluation, but we have to recognise that it has come very late—at the very last hour—and that, once again, we have tended to muffle it. I do not only refer to the Prime Minister's broadcast, but to many other Government statements made at the time and since.

We have two objectives which are extremely difficult to achieve. We have still to provide a surplus and we have to hold costs, especially labour costs. I approved of devaluation, but it is nothing to be euphoric about. As the Home Secretary said when he warned of the effects of devaluation, it means "a reduction in the wage levels and real wage standards of every member of the working class." That is what we have to recognise as inherent in the present situation. But at the moment, we are only considering the cuts in public expenditure. My complaint is that we are confined to them. We talk a good deal about a package. I would much have preferred to have the whole package to consider at the same time. But, certainly, some of the cuts will contribute towards a surplus. Cuts in the cost of overseas defence clearly makes sense. They will help us in our present difficulties, but, as the right hon. Member for Kingston-upon-Thames said, there are no reductions in 1968–69.

I know that some of my hon. Friends feel that policy decisions should not be taken as policy decisions in relation to economy, but on their own merits. For myself, I do not complain. To economise often concentrates the attention. It clears the mind and often gives us the resolution to do what ought to be done. My only regret, and it has been expressed many times, is that we have not afforded enough opportunity for decent consultations with the Commonwealth.

My major concern is with the civil programme in which there are two items which I find unacceptable. I do not understand the argument about a package. If I buy 1 lb. of apples from a greengrocer and he gives me a bag in which there is a rotten apple, I cannot appreciate the argument that, because it is 1 lb., I must accept it as a whole. It is especially true in the present context, because when we are considering public expenditure we have to realise that in public expenditure, even in expenditure on the social services, we lag behind many countries which with whom we are competing in world markets.

The first of the rotten apples is the prescription charges. I beg my colleagues to recognise that this is not a matter for logic chopping. Ever since we threw in our teeth and spectacles to save the war in Korea, there has been a passionate emotional argument within the Labour Party and the trade unions about prescription charges. We have defined them as a tax on the sick. This was not only before the 1964 Election, for the Minister of Health has convinced us subsequently that there is every possible argument against the reintroduction of prescription charges.

I can say this without expressing myself in a doctrinaire way. For a good time now I have argued that there should be a re-examination of the financing of the National Health Service. I have done so for a particularly important reason—because I have been dissatisfied with the amount which we have devoted to our national health services compared with many other countries.

Mr. John Rankin (Glasgow, Govan)

Will my right hon. Friend expand that statement and ask not merely for a re-examination of the finances of the Health Service, but for a re-examination of the Service itself?

Mr. Willey

I am not expressing myself as one who has had doctrinaire views about the financing of the Health Service. I accept the Prime Minister's view that most important of all in the present situation is the incomes policy, and what we are doing with prescription charges will cause very great difficulty. The job of the trade unions in holding down labour costs will be very difficult if not impossible. To do this they need to appear to be working within a climate of social justice and, in view of what we have said so evocatively about prescription charges, it will be extraordinarily difficult for them to do this in the next few months.

Apart from that, it is taxation. We ourselves have defined it as taxation on the sick. Coupled with it is the poll tax on the insurance stamp. I object to being asked to agree to these without knowing what other proposals for taxation there are to be. I object to the sick being singled out first and to having to agree to this without knowing what the package is to contain for taxation.

I remind the Government of what the President of the Board of Trade said, not when he was a callow youth before the 1964 Election, but as recently as last summer, when he said: We cannot sacrifice priorities … to redistribute wealth from rich to poor, to encourage greater social equality, to create a more just and civilised society, we must continue to give a significantly higher priority to social spending than the Tories would give. It must appear that we are patently sacrificing our priorities and patently accepting Tory priorities.

The other rotten apple is the postponement of the raising of the school-leaving age. I concede at once that this provides an actual saving. But I am absolutely certain that, in practice, this saving will be very limited, because the only areas of saving are in teachers and school buildings.

Teachers now have three years' training, so that the teachers who went into the training colleges last autumn will be coming out in 1970. Apart from this, I do not believe that the Government dare say in view of the acute teacher shortage that they will take any steps which would mean that we did not take full advantage of the facilities which we have for training teachers. The previous Secretary of State provided for the long-term planning of school building, so that we have to consider not only buildings at present under construction, buildings out to contract, but what concerns the long-term programme, and no economy can be more wasteful than the disruption of a long-term programme.

Apart from these practical considerations, this is a thoroughly reactionary proposal. It is not only a matter of the Crowther and Newsom Reports. We had the Spens Report in 1938 and the Education Act in 1944 and if ever there were an overwhelming case for a specific reform, it was that provided by the Crowther Report. We talk about the reorganisation of secondary education, but the raising of the school-leaving age is pivotal to the reorganisation of secondary education, which makes sense only if the school-leaving age is raised. I recognise the Government's concern about the development areas, but in the past I have bitterly complained about the disparity educationally between the development areas and the rest of the country, and that disgraceful disparity will be removed only by raising the school-leaving age.

We talk about the return on the investment in school education—and it is an enormous investment—but when we talk of returns what we are talking about are the pupils leaving school. In view of our enormous investment in education, nothing could be more wanton than to sacrifice the children who will leave school in these two years, children to whom irreparable damage will be done. What the Government completely ignore is the crucial argument in the Crowther Report, the significance of the years laid down, for the raising of the school-leaving age in the schools engulfed by the bulge. It is those children who have suffered most who are called on to pay the sacrifice again, because the bulge is now reaching school-leaving age. Far more children will be leaving school in 1973 than in 1971, and the right hon. Member for Birmingham, Handsworth (Sir E. Boyle) knows that I criticised him when he announced 1970–71, because it was just outside the Crowther period.

I could have understood this decision if the Government had been in some difficulty, if they had said that, in spite of the preparations, they did not regard the raising of the school-leaving age as feasible. But the contrary is the truth. Very recently the Secretary of State said that progress was completely satisfactory. We would introduce the raising of the school-leaving age on time; and I recognise this is a great tribute to the Government. I am personally involved in all this. I moved a Motion of censure on the right hon. Member for Handsworth in 1964 and in response he announced that the Conservative Government would raise the school-leaving age. I got great personal satisfaction out of that, because I thought that with all-party agreement and all-party commitment this was a pledge which could not be broken.

All this has important contemporary relevance. As some of my hon. Friends know, I was a very harsh critic of Lord Eccles. I thought that, in return, it would be a charitable exercise to find out whether Lord Eccles ever said anything worth while on education. This research was profitable. I have often quoted some of the things he has said and I do so now. It was Lord Eccles who said: The Russians put their red shirts on education. And it was Lord Eccles who said: The pre-war system of British education was woefully inadequate for a great industrial nation entering on the scientific age. By comparison with (say) the United States or Germany, our education was definitely inferior. We are in the process of filling those gaps but the price we pay now for the pre-war, narrowly based top level education, combined with insufficient education for all is the basic reason why our exports are not increasing as fast as those in some other countries. That is absolutely true and this issue is absolutely relevant to our present difficulties. Even in the 'seventies this country will bitterly regret the decision that has been taken now. I fully recognise the courage of the Government in taking some of the steps that they have, but I bitterly regret that they have not shown equal courage, to have compassion for the sick and ambition for the young.

7.20 p.m.

Colonel Sir Tufton Beamish (Lewes)

I have heard three right hon. Gentlemen opposite speaking from the back benches during this debate so far. The right hon. Member for Sunderland, North (Mr. Willey) and the right hon. Member for Bassetlaw (Mr. Bellenger) both damned the Government with very faint praise, whereas the right hon. and learned Member for Ipswich (Sir Dingle Foot) merely damned the Government.

The right hon. Gentleman has now made a good suggestion when he said that the Government should sack their advisers. I could not help wondering whether this was not coloured by some personal experience in the light of the views he must have had about the introduction of his Land Commission Bill. I can assure the right hon. Gentleman that his scepticism about the Government is by no means confined to himself, as he thought might be the case.

This debate has sadder and graver implications for the country than any that I can remember since I was first elected to this House. I wish to speak only about the defence cuts. Whatever the state of the economy, we cannot afford to take what the Secretary of State for Defence described as something which would have an "element of risk" that he would be reluctant to take in normal circumstances." —[OFFICIAL REPORT, 27th November, 1967; Vol. 754, c. 67.] Still less can we afford those still further risks that the Prime Minister told us the day before yesterday "must be accepted". Why must they be accepted? We have not been told. By whom must they be accepted? Not by right hon. Gentlemen sitting on the Front Bench opposite. They must be accepted by men and women in the Services, now and in future, and by the nation at large, and by our children, because the Government say so.

No Secretary of State for Defence can be a party to the ruin of his country's defences and the disruption of the services he represents and honourably stay in office. Like the Leader of the Opposition, I am astonished and shocked that the right hon. Gentleman has not resigned. The Government seem to have their priorities haywire. How ironic it is that hardly an hour after we had heard that the small Territorial Army of 22,000 men—men who want a chance to "back Britain" in a practical way costing the nation only some £3 million a year—was to be "disbanded", we were being asked to vote £70 million in order to nationalise private bus companies. If that is not getting one's priorities wrong, I do not know what is.

The Chancellor said that there were certain things which could not be cut because the Government were under certain moral obligations. As to the Transport Holding Company Bill, I presume that the moral obligation is to Mr. Karl Marx. The White Paper speaks clearly of "disbanding"—I use the exact word —the Territorials. I beg the Government to have second thoughts and to keep the Territorials in being, at least in skeleton form, rather than risk destroying for ever not only this invaluable force, with such long and fine traditions behind it, but also the spirit which has fired it through so many ages.

The cost of keeping this force in being one way or another, would be trifling, and the spirit of service is beyond price. I must ask the right hon. Gentleman who is to reply, who I hope is making notes, to ensure that I get an answer to that question. Is the Territorial Army to be disbanded, or can it be kept in being at least in skeleton form so that it can be re-formed when it can be afforded?

Mr. Julian Ridsdale (Harwich)

Does my hon. Friend know that one of the Army chiefs has resigned and that the Secretary of State will not resign? He has to let his staff resign.

Sir T. Beamish

I did notice that, and it is a very honourable course. Like a number of hon. Members elected in 1945, I was a Regular soldier and I brought to the House vivid recollections of the lack of preparedness in Britain in 1939—when I was a junior subaltern— which so nearly brought defeat as well as being a contributory cause of the war.

I succeeded my father in 1945 who, after a long and distinguished naval career, came to this House in 1924, with similar memories of the unpreparedness of this country in 1914 about which he warned Parliament in several very good speeches in the late 1930s. They were warnings which went unheeded by his own Government. This little piece of family history, which I hope the House will forgive me for mentioning, colours my views about the cuts made in the country's defences.

It was Marlborough who said that "England is famous for negligence". That has been borne out over and over again in history. It seems that history is repeating itself today with a vengeance. In 1945 it seemed inconceivable that this could happen again. It was not only those of us who had been in the Services who knew the agony of war. Few Members of this House, few families in Britain, came through the war without suffering. The agony and the warning surely would not be forgotten in my lifetime, or so I thought. But I was wrong, dead wrong.

I have always favoured, and fought for, a bipartisan approach to defence questions and I am greatly saddened by the knowledge that any prospect of such an approach has been broken in smithereens through the announcement of the cuts to be made in the nation's defences.

I will not weary the House with many sayings and writings of the Prime Minister, the Secretary of State for Defence, the Foreign Secretary and other leading members of the Government, about defence policy overseas before taking office and since. They have been hammering home the message that the real danger to peace lies outside Europe and that Britain has commitments in the Middle and Far East that must be met until well into the 1970s to ensure reasonable stability and to guard her interests and honour her obligations. These assurances were given in both of the Labour election manifestos, in 1964 and 1966.

In 1964, the Labour Party promised: Our stress will be on the strengthening of our conventional regular forces so mat we can contribute our share to N.A.T.O. defence and also fulfil our peace-keeping commitments to the Commonwealth and the United Nations. In 1966, the Labour Party, in its election manifesto, warned the country that the world outside Europe presented the greatest challenge and the greatest danger to mankind and that China was embittered and distrustful of the West and menacing to her neighbours. On those warnings, and similar warnings, and promises, the Labour Party was twice returned to power. The country now knows only too well that each time it was fooled by a completely false prospectus.

How suddenly the assumptions on which these warnings were based have been stood on their head. How abruptly the Government have changed their tune. In November last year we had the Foreign Secretary telling us that it was safe to withdraw our military presence east of Suez because he was confident in the independent future and stability of South-East Asia."—[OFFICIAL REPORT, 2nd November 1967; Vol. 753, c. 336.] Shortly afterwards, the Minister of Defence justified his third savage cut in defence expenditure with the assurance that there was no risk of general war in Europe and very little risk of major operations overseas during the period in which the cuts will be effective. For how long will they be effective—while they are being made, or after they have been made? How has the situation changed in the last few months to enable these somersaults to be turned?

As I see it, the Vietnam war shows no sign of abatement; I wish it did. Instead, the fire threatens to spread perhaps across the borders. China, with her imperialist ambitions, nuclear attainments and internal convulsions, poses an ever-increasing threat to stability. The strategically vital Middle East is still in a state of turmoil. The Soviet Union now has her military, economic and political hooks firmly in several Arab countries Nothing has changed to justify an entirely new assessment of the risks to British security and British interests overseas.

In his personal election address in 1966, the Prime Minister told his constituents: Your Labour Government has restored Britain to her rightful leading place among the nations of the world. That is a sad laugh. In Moscow, in Washington, Britain's voice is once again heard with respect. What a hollow ring those words have today, just over 18 months later.

What is the truth today? Washington is appalled to see her closest and strongest ally leave the field with her tail between her legs at this critical time. The new Prime Minister of Australia has expressed in the strongest terms his concern at Britain's withdrawal. New Zealand and Malaysia are fearful of the implications of these panic measures. The Prime Minister of Singapore, Mr. Lee Kuan Yew, has spoken about China and Russia exercising their muscles in the Pacific and asked for more time to allow his country and Malaysia to develop sinews of their own. He said that on "Panorama" on 15th January. But in Moscow and Peking, where, as usual, the Communists have nothing but contempt for Socialism, there is relief and rejoicing. I hope that the Prime Minister gets the Order of Lenin when he goes to Moscow. There is not a word of evidence to back up the new assumption that all is safe and well, which to any thinking person must surely sound as false and as dangerous as the assumption made in 1928 and adopted by successive Governments well into the 1930s that there would be "no war for ten years".

What really lies behind the decision to slash defence expenditure yet again and to run these acknowledged risks? Do the Government hope to blame it on the so-called Tory mess which they inherited, as the Prime Minister did on Tuesday, although the Prime Minister himself assured us six weeks after he first took office that there were reserves and borrowings more than adequate to meet"—[OFFICIAL REPORT, 23rd November, 1964; Vol. 702, c. 933] the trade gap. Towards the end of 1966, the Prime Minister was happily talking about our being in balance next year and piling up a sizeable surplus. The Foreign Secretary said in Belper on 30th March, 1966: This time we cannot claim to have inherited a Tory mess. We cannot come back in 1971 with any excuses. It is no good the Labour Party blaming us for the Socialist mess into which the Socialist Government have got this country.

Or perhaps the Government believe that it is comfortable assurances about the world now being safe for heroes to live in which the country really wants to hear. If so, as my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) said, they have seriously misread the mood of the nation. The public memory is not so short as the memory of many hon. Members opposite. This country is not asking for wishful thinking. It is not asking for peace on the cheap. It demands honest and courageous leadership. It demands right priorities. It wants Britain to come first, not one man, or one party, or fly-blown Socialist doctrines.

If these are not the reasons for the savage defence cuts, what is the real reason for so ruthlessly cutting the armed forces yet again? I believe that the right lion. Member for Leyton (Mr. Gordon Walker) for once hit the nail on the head when he warned his party as long ago as I960 that if the right hon. Member for Huyton (Mr. Harold Wilson) were ever elected Leader of the Labour Party he would be the prisoner of the Left wing. As a leading Left winger said in reply to the Prime Minister's "every dog being allowed one bite" remark, I think that Harold has got it wrong. It is we who license him, not he who licenses us. How true. And how feeble, foolish and unconvincing the attempts to deny that, although the defence cuts which have been promised do not go nearly far enough to satisfy the Left wing of the Labour Party and have merely whetted their appetite for more, the Prime Minister is indeed their prisoner and dances to their tune.

If ghosts exist, there must be many listening, thinking bitterly of their own unheeded warnings. Let me remind the House of the words of the late Mr. Hugh Gaitskell: There are some of us who will fight and fight and fight again to bring back sanity and honesty… The fight that Mr. Gaitskell was talking about was not about prescription charges, or nationalisation, or any other Socialist shibboleths. It was the fight against the unilateralists on the Left wing of the Labour Party who had gained the whip hand in the Labour Party at its Scarborough conference in 1960. They have got the whip hand again today.

To sum up, in my opinion, the defence cuts involve taking completely unjustifiable risks with the nation's safety. The panic nature of the unilateral decisions made about them has done grave and lasting harm to the nation's honour. The cuts are based on false assumptions which the Government well know to be thoroughly dishonest. The cuts have been made under extreme pressure from the Marxist-pacifist wing of the Labour Party, which includes several Members whose loyalty was highly suspect to the leaders of their own party in 1961 and presumably still is.

Nothing that this distastrous Government do can re-establish their credit or their credibility at home or abroad. These are the painful reasons why I shall vote for the Opposition Amendment with utter conviction.

7.39 p.m.

Mr. W. T. Williams (Warrington)

The House knows that the hon. and gallant Member for Lewes (Sir T. Beamish) brings to matters of defence considerable emotional involvement and great sincerity. I regret that the hon. and gallant Member, as many of his right hon. and hon. Friends have done, has chosen, not from principle, I think, but from habit and lack of imagination, to spend so much of the time of this valuable debate in denigration of his opponents.

It is idle and absurd to pretend that in a situation such as we are in, we can avoid major changes of policy. It is lunatic to talk as though Britain is still in a position to be able to police the world and to look after everybody's peace in the way in which the Opposition—and, indeed, some members of my own party— have suggested during the debate.

Clearly, to be effective the Government's policies have to be credible and, at the same time, the opposition to them has to be credible. The reaction of the Opposition to the defence cuts has been like that of Pavlov's dogs. The time has surely come for all hon. Members to seek to avoid doctrinaire judgments based on prejudice and to ask themselves seriously whether it is at all possible in the present-day world, with Britain in her present financial strait, to be able to do all the things that the Opposition have continually insisted we ought to do in our world rôle. Just how dishonest and insincere the Opposition's case on this has been is to be seen in the fact that in one speech their Front Bench spokesman for defence last night talked about the necessity of cutting taxation and of returning to our world rôle.

However much one may regret the lost glories of the Kipling era, those glories have gone. The price of them is too great. No Government, in this day and age, could continue to bear the burden that has been borne in Britain's world rôle in recent years.

At the same time as the Government have rightly made their attack upon the Defence Estimates—I say this for no doctrinaire reasons; it was the right hon. Member for Enfield, West (Mr. Iain Macleod) who, many years ago, paid me the dubious compliment of saying that if every member of the Labour Party was like me, he would have more confidence in the Labour Party—

Mr. Quintin Hogg (St. Marylebone)

He did not know the hon. and learned Member.

Mr. Williams

Perhaps not. It is in no doctrinaire sense that I try to approach the situation in which we are and the way in which the Government have dealt with it. The Government seem to me to have taken the right decision, with all the risks, bearing in mind that this task must pass to hands more able to bear it than our own.

Captain Walter Elliot (Carshalton)

Has the hon. and learned Member ever considered that we are in those bases, not for the benefit of the indigenous inhabitants, not because we are shouldering the white man's burden, but purely for our own benefit? These are real and solid assets which are vital to the security of the country.

Mr. Williams

I understand that argument. All I am saying is that nobody can bear a burden that is too expensive and too heavy. The time really has come when the burden must be borne by other hands than ours. We cannot afford it. The price which we are paying for it is too high and the burdens which we have to bear are too great.

If that is true of our international burden, it is cheap and ungenerous to suggest that we are actuated by doctrinaire reasons or are lending ourselves to Lenin or submitting ourselves to Marxist masters. Since there are good and adequate reasons for the action which the Government have taken, it would have been more profitable for real debate to have taken place on the consequence of those actions and how Britain can play its new rôle in the world at a time when there have to be major changes of policy.

If that is true of the world rôle of Britain, clearly it is equally true that Britain has to consider again, in the light of the same situation, in face of the same problems and burdens, the nature of the Welfare State that we have to have at home.

The Government have said that they regard this debate as a matter of confidence, and they are probably right to do so. I suppose that this whole situation has arisen from a failure of confidence which is much wider than this House.

There is a good deal that can be said in defence of the Government. They have had a good deal of bad luck, so much so that sometimes I am almost inclined to believe that God must be a Conservative. But if the Government are on trial, the people of Britain are equally aware that little contribution has been made in the present situation by an Opposition who have nothing to give save that of narking criticism.

It remains true, however, that Governments are elected by the people to look after their interests when the storms rage. I have no doubt that the growth of disenchantment and disillusion which prevails in the country, and which extends to all parties and to most politicians, is a crisis of confidence that the Government can overcome, only if they present honestly and fairly to the country, however burdensome the consequences of that presentation may be, a strategy that clearly will provide us with the opportunity of escaping from the miserable treadmill that we have trodden for so many years when we have overcome crisis after crisis by staggering from one expedient to another.

Clearly, the country wants things to be done that can overcome these un-creasing conflicts. In these circumstances, we can no longer keep our options open. Therefore, the package that is being presented to the country this week is crucial. To be effective, it has to be credible. To be credible, it has to be coherent and comprehensive.

When that has been said, however, and while there is little profit in kicking over the dead leaves of past mistakes, it is right that in looking at that package one should look at it critically to see whether, in the judgment of those of us, certainly on this side of the House, who have to support it, we are satisfied that in doing what they are, the Government are dealing with the situation at home with the same courage and integrity as, I believe, they are in dealing with the defence cuts which they have made.

I have no wish to foul my own nest. In the past, when I have thought the Government wrong, in my modesty and in my loyalty I have continued to support them, but I am bound to say that when one examines the tasks which are before the Government in home affairs and in the structure of the Welfare State that we can enjoy in this country, I have a feeling of despair.

If the Government have to cut their expenditure abroad, then it makes sense to make the defence cuts which are forced upon them. If the Government have to cut their expenditure abroad it seems that they can make no real contribution in this field by prescription charges and housing cutbacks and postponing the school leaving age. If they want to take steam out of the economy it can be done by tax changes or hire purchase changes, and it would be better, perhaps, if that could be done and the whole package could be seen, but I find it difficult to understand how the Government think they can take steam out of the economy by charges which are laid for the most part upon, and liable to injure most, those who are least able to bear them. Again, I have no doctrinaire love for no prescription charges, but it seems to me, on general principals, that it is wrong, when the state of the economy is such that the Chancellor of the Exchequer is going to lay upon the people of this country new burdens, that the heaviest of those burdens should be laid upon the sick and the children of the poor.

I have always had the feeling, long growing, that Cabinet Government is a kind of swindle upon democracy. It enables decisions to be privately made and facelessly offered; decisions, often, which are made for reasons which may have no relevance, and into which we cannot inquire. In these days, when Cabinet resignations become increasingly rare, one often does not know who in the Cabinet stood up for what one believes in and who stood up for the things one does not believe in.

My particular criticism of these charges, however, is not merely of their incidence. I believe that they are not really the sort of matters which call for secret Cabinet decisions in this context. If it is true that the Health Service is outrunning its proper cost, then it would be better, in my judgment, to have an inquiry into the Health Service, to make a general examination of the whole system. This was done in part by Sainsbury, and how little notice, it appears, has been taken in this context of the Sainsbury Report.

In the same way, if it is right that education costs have to be saved, then rather than repudiate something which has been an article of faith, certainly for me, and for many of those who think like me, surely it would be better, rather than have these private decisions made, and which may cause irrevocable damage to the structure of our educational system, that inquiry should be made by those who have to run this service. The decision then reached could be reached clearly and openly, and the country could understand what are the real matters which have to be considered.

It does not seem to me that these cuts help our economy. If it is right that Government expenditure should be cut in these fields, the intention to make this ceiling of expenditure should be announced. If the world has to be told because it cannot otherwise believe in our good will, then when the cuts are made, care should be taken to see they are made at the point where the least damage will be done to the structure of our Welfare State.

I have promised to be brief. I have made what appear to me proper criticisms. I have done it without ill will, and I have done it because I have been asked, with other members of my party, to support the Government, who have presented us with this package, at this time of crisis. I have supported the Government before when I have not altogether been persuaded of what they were doing. I have done so because I accept that, in government, compromise is inevitable. So long as the Government broadly carry out the things in which I believe, it would be wrong that I should rely on the loyalty of other people to keep the Government whom I do not want to destroy. But let me say this to the Government. I hope this time they have got their arithmetic right. I hope that this is the last time when we shall be asked to eat our own words.

Mr. R. Gresham Cooke (Twickenham)

The hon. Member is an optimist.

Mr. Williams

I hope that in the course of the next two years we shall be able to prove to this country that we are indeed capable of a strategy which can achieve the things to which we have set our hands. In the end the Conservatives were dismissed from government because people discovered that they were not competent to govern. We shall be judged by the same test, and if we have to swallow bitter medicine which does not seem to us in all its constituents to be directed to our disease, we will swallow that medicine in the hope that in the end the other constituents in it will help us to health.

In that confidence—if this is a crisis of confidence, then, like charity, confidence must be restored at home—I shall give the Government my vote.

7.59 p.m.

Mr. Richard Hornby (Tonbridge)

I think we all hope that on an occasion as serious as this the Government have got their sums right, and that all of us— this is certainly one of the themes I want to follow—would like to feel this will be the last measure which will be necessary, in the long series which we have had, to tackle our national economic problems, but, sadly, we know already that it is not the last measure, because there is more to come.

There are really three things I want to say to right hon. Gentlemen opposite tonight. One is about the damage which has been done and is still being done by the piecemeal approach to the problems, because although of course, there are administrative problems and difficulties in not following the piecemeal approach I think that the damage on that score has been very great. There was damage in the run up to the decision on devaluation which was forced upon them—catastrophic financial damage.

Very expensive damage has been done by the delay of two months between the date of devaluation and the measures which we have had this week, not least because of the high level of Bank Rate which has had to run throughout that time and not least because of the doubts and the lack of confidence both at home and abroad. This is part of the cost of the piecemeal approach, and the piecemeal approach is still with us.

My second reason for disliking the piecemeal approach is a psychological one and not an economic one. The national mood is very clear. People are crying aloud for efficient measures, however tough, which will solve the problems with which we are faced. They are ashamed of being near beggars in the world, and they do not like the prospect of bankruptcy ahead of them.

Thirdly, there is a real sign that a vast number of people are perfectly willing to face up to the realities of the position if the Government will give them the lead. A great deal depends on the preservation of this mood if the industrial, development and other problems are to be solved. I do not think that we have our best chance of preserving that mood if everything is done little by little and we are not given a clear view of what is involved for us.

If the Government rely on a series of decisions one by one, each time they have to go on from one decision to the next, they underline the fact that what they did last time was inadequate, and they make people wonder whether what now confronts them will be any good, either. We need to tie up the package as quickly as possible, otherwise the mood which is essential to the righting of our difficulties will not be with us for very long.

It may be exaggerated, but I believe that there is a real danger of disillusion about the effectiveness of Government in the country. When a country disagrees with its Government, that is democracy. When a country is contemptuous of its Government, society is in real danger, and I do not think that we are far away from that position today.

I now come to the typing up of the package or trying to get further towards giving the whole picture. My request to the Chancellor of the Exchequer is that he should use the regulator now, and I will try and explain why I should like to see the 10 per cent, increase used. As has been mentioned, whether we like it or not, we are in the midst of another consumer purchasing boom. It is considerable for this time of year, which is normally a slack period. It is not in our interests to delay the curtailment of that purchasing power.

I would prefer further cuts in current personal consumption to some of the cuts or postponements in essential national investment which are having to be made. If we are too charry of curtailment of consumption now, we shall be faced with some of the bottlenecks in our productive capacity which have held us back in the past. To take two examples, in the £70 million reduction in investment announced a short time ago, power and telephone exchanges were on the list. Those are precisely the items which are vital to an expanding Britain and an expanding industry.

My third reason for wanting the right hon. Gentleman to use the regulator now is that, as a general principle, we need to switch a greater proportion of our taxes from direct to indirect taxation. If he takes these measures now, there will be less temptation and need for him to consider applying increases in direct taxation when he comes to his Budget.

If, as I suspect, one of the reasons for his rejecting the regulator now is that he feels that it is unwise to hold back on consumer expenditure when we are still in the period of the seasonal high unemployment figures and that the need will come later on, my view is that to delay is to underestimate the risks which we face. The real danger to our employment figures lies in the runaway of confidence once again, and he would do far better to take these steps now rather than wait.

There has been a wide national acceptance of the need for a package of at least the sort of size that we have. On the details of the right hon. Gentleman's proposals, I want to make a couple of points about education and, in passing, one short comment on defence.

I share the view expressed by the right hon. Member for Sunderland, North (Mr. Willey) that the Government will not get the savings forecast by the postponement of the decision to raise the school-leaving age. I have two reasons for thinking that. The first is the one given by the right hon. Gentleman, that the building programme is already fixed. Unless the Government are to see a sharp decline of standards in our schools, they must leave the building programme as it is, because there will be a voluntary in- crease in staying on at school which will lead to overcrowding.

My second reason is that another consequence of the decision to postpone the raising of the school-leaving age will be a massive increase in the pressure on further education, which has taken a number of cuts in recent years. If the Government want to encourage further training, they will be faced with heavy pressures, and they will not get the savings for which they hope.

My other point about the Chancellor's educational measures is that he or his right hon. Friend the Secretary of State for Education and Science has a duty to tell the direct grant schools where they stand. Twice in recent months, this week and once before when the increased costs arising from the last Burnham award came out, the direct grant schools have been singled out for discriminatory treatment. When one asks questions about their future, one is told that it is a matter which has been referred to the Newsom Commission. But the Government cannot have it both ways. They have a duty to say where they stand.

Having said that, I will give the Government one bouquet. At last the necessary and belated decision has been taken to abolish free milk in secondary schools. There has been a great deal of waste.

The only point that I make on defence is that many of my right hon. and hon. Friends have been accused of jingoism in their attitude to the withdrawal of Armed Forces. The point that we should consider is the timing of the decision. It is being taken at a time when America is very fully committed in the world and when Europe, alas, seems concerned with doing nothing except about Europe itself. If we are to have anything to say at some future date in the foreign policies of Europe, I should like to think that we have set a reasonably good example in caring for something other than Europe's own back garden. As a result of the decisions which have been taken and the way in which they have been taken without consultation with the peoples concerned, I fear that we shall set a poor example to Europe. I know that the right hon. Gentleman cares passionately about Europe. In my view, we want to have something creditable and valuable in the cause of peace behind us to be able to say to Europe that we want to join.

The last thing I say to the right hon. Gentleman and his hon. Friends is that we have had half the package. Some of it takes up suggestions from this side, which is perhaps one of the reasons why we have come in for so much criticism from below the Gangway. However, we would have liked to see more of the package here and now.

This package will not be complete unless it offers hope for the future as well as retrenchment at present. Retrenchment now is sadly necessary, but what the right hon. Gentleman must also do, if he is to make a success of his policies, is to sketch out to the people what is possible if they will accept these immediate measures. It involves incentives that have been spurned by many hon. Members opposite, it involves excitement about innovation, and it involves encouraging enterprise. If he will do that on top of his present policies of retrenchment, particularly in the domestic sphere, we shall be in sight of a national policy that can succeed. But, like others, I fear that, because of the pressures that are put upon him by his own party, he will find it difficult and will have instead to give way to hon. Members on his side.

8.11p.m.

Mr. Laurence Pavitt (Willesden, West)

I hope that the hon. Member for Ton-bridge (Mr. Hornby) will forgive me if I do not follow him in his remarks. This is a package debate and I wish to address my mind to another part of the package, namely, prescription charges. We have been urged to be precise. I hope to make my contribution quickly in the hope that some of my colleagues may be able to speak after me.

The only point in the previous debate which I should like to pick up is the suggestion being urged upon my right hon. Friends in various Ministries to resign. On the question of the National Health Service, I would urge my right hon. Friend the Minister of Health not to resign, although I know that this must have been a bitter package for him to swallow. The Minister of Health has a long record of fighting against prescription charges. He has had to concede this because of forces outside, but I hope that eventually he will be able to persuade his colleagues to change their minds.

I want to address myself to the principle underlying the debate which we are having on this part of the package. The whole basis of the Health Service was that those who were sick should be looked after by those who were well? If a man was sick or disabled or needed help, this was to be paid for by those who did not suffer his particular disability. It is the old tradition in the pit, in the factory and in the neighbourhood of East London, where I was brought up, that when one was in trouble the neighbours came in to help or if a workman was in difficulty his workmates went round with the hat.

This particular part of the package is totally unacceptable to me because it stands this principle precisely on its head. The Health Service is financed by taxation to 90 per cent. Any income from charges goes into taxation and because of that it will be the sick who will have to help the country out of its difficulties and pay the healthy. It is even worse, because the more sick one is the more one has to pay. It is an indirect tax that only the sick will pay and only the healthy will be completely exempt from. It is because of that that I find it totally unacceptable.

This principle was followed in the whole of the thinking of this side of the House about health in this country over the last 25 years. It has created a radical change in our approach to health. We established the National Health Service with a great deal of pride as the fifth freedom. We have it as a right, not a privilege. It was not a commodity that one purchased; it was not something one dealt with as consumer choice in the market place. Nobody chooses to be ill. If one was healthy, one was a normal person. If someone had the misfortune not to be healthy, then he needed to be brought up to the norm. The person who needs no medicine, no spectacles, or no hearing aids, is the one who is normal and enjoying his rights. Those who need these things are not getting extras and privileges with spectacles and hearing aids—who wants to wear a hearing aid? I do not—but they are being helped by their colleagues to get back to the norm.

Hon. Members will recall that since 1st February, 1965 an unprecedented campaign on this subject has gone on in the Press throughout the country. I find it difficult to understand the change in doctors. The B.M.A. opposed health charges consistently throughout until 1964. In 1956 and 1961 doctors said, "Put no barrier between the patient and the doctors. We want to treat sickness. We do not want a financial intervention between doctors and patients."

It was so bad that when health charges were first imposed and then increased the Health Service bill rose because doctors, objecting to the charges, prescribed 8 ozs. instead of 4 and 100 tablets instead of 20. The change occurred in 1964, not because of a change of Government but because of the trouble that was going on between the G.P.s and the Government over their pay charter, which has since been completed.

The case for prescriptions charges rests upon two points. One is that this is something which is abused by patients; Secondly, it is the weakness or irresponsibility of general practitioners in giving unnecessary medicines. This is the 1968 equivalent to the argument we had against decent houses for ordinary people which we on this side of the House called "coals in the bath." An odd person may have had coals in the bath, but very few. This argument is dead. People may abuse the Health Service, but I guarantee that every hon. Member knows far more people who are reluctant to worry their doctor and do not go early enough and as a consequence very often have an illness which could have been avoided by early diagnosis. To try to reorganise the way in which a doctor treats his patient on the basis of a few abuses is wrong. The majority of doctors do not prescribe unnecessarily or give expensive medicines without cause. They seek to do the best for their patients.

As a result of the campaign which has gone on I am well aware that the Chancellor can say that there is a wide acceptance that people should pay for their medicines. But why the sick? Some people can afford to pay for the police force and some can afford to pay for the fire brigade; and we subsidise the food we eat to the extent of about £250 million although some people can afford to pay more for that. So why choose the sick, who have already paid through taxation and through insurance stamps? We are, apparently, told, "Because you can afford to pay you pay again because you are sick. That is your crime."

There may be right hon. and hon. Members opposite who suffer from arthritis— a most painful and difficult disease to cope with. If I, because I do not suffer that pain, have to pay something for somebody who has, I do not mind doing so. It is the least compassionate thing I can do. I do not wish to argue about the money. Let him cope with his disability and let me not worry about whether it is costing me a few shillings, because I am grateful to the Almighty that I have not got arthritis.

The fact remains that sound finance has made this into a sacred cow for businessmen. "Sacrifice it, cut its throat in public, and we shall know you have renounced Socialism." Ian Trethowan, in The Times last week, said that the Minister of Health said that this is to be "the touchstone" of confidence; unless the Government do this we have no confidence in them.

Yesterday, in the Sun Mr. Paul Bareau said: Foreign opinion will, on second thoughts, give more credit to the domestic measures which sounds a major retreat from deeply and emotionally cherished Socialist principles. In other words, the demand on the Government is to depart from their principles if they are to have creditability.

I doubt the arithmetic. Ministry of Health figures given to me show that the half-crown prescription with no exemptions will lead on the present basis, assuming no decrease because of the new system, to £35 million at most. But my doctor colleagues know that the number of exemptions which are being put forward will make this figure very much less. My arithmetic tells me that if the exemptions are effective this is unlikely to yield much more than £12 to £15 million rather than £25 million, and it may be very much less. If we get the exemptions, we do not get the money; and if we get the money we lose the comprehensive exemptions. I think that it will be very much less. If it is, we shall be scrapping a principle which we have held for a generation for a matter of £12 million to £15 million.

My right hon. Friend the First Secretary, under whom I served as P.P.S., last night threw me a challenge which I gladly accept. He said, "Parts of the package are unacceptable, but if you accept the general principle what can you put in its place?". I left elementary school at 15, and I am hurt by the cut in education, and, in fact, by all the cuts. If my colleagues in the Government tell me that the economy needs to be cut back and that economies must be made in the National Health Service, let them take the money from the superstructure, from the outside. Let us not nibble away at the roots. Let us not take the money from the foundations.

Since 1965, there has been a 10 per cent, growth in the Health Service. A 1½ per cent, cut across the board, though difficult, would give the Chancellor the £25 million that he wants, and we shall still have an increase on what we spent last year. Last year, we spent £119 million more than we spent the year before, and in that year we spent £96 million more than in the previous year. We are scrambling about to scrub our principles for a matter of £10 million, £12 million, or £15 million.

The right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) put a ceiling on hospital expenditure. It was to increase by no more than 2 per cent, over the previous year's estimate. Since we have been in power the figure has gone up to 2¾ per cent. Difficult though it would be, I would be prepared to cut that back to 2¼ per cent, which would still be one-quarter per cent, more than the right hon. and learned Member allowed for, and this would raise about £12 million.

We are too hospital-minded. We still think in terms of a "National Illness Service". We are too concerned with bricks and mortar, with the chromium-plated palaces which we can open, and not sufficiently concerned with the people who serve within them. A plea has been made that whatever we do we should not touch the hospital service, but the fact is that it takes £873 million, or 60 per cent, of the total, while the general practitioner, who is the first line of defence, for keeping patients out of hospital takes only 7½ per cent.

If we must touch something it must include the hospital service, and if the First Secretary wants a shopping list I can give him one. Reduce the hospital building programme for the first quinquennium and build more at the end and not so much at the beginning. Expedite the closure of small hospitals, agreed to by hon. Gentlemen opposite and accepted by this Government, where we have about 40 per cent, bed occupancy. Close these quickly and use the resources elsewhere.

We should not merely implement the Sainsbury Committee's recommendations, but should take more powers to save £10 million from the present £160 million drug bill. At the moment, £15 million is being spent on representatives and glossy literature to persuade doctors what to prescribe. About £250 a year is being spent for every doctor. There is a possibility of making enormous economies in this sector.

Why not speed the elimination of duplicated work? Factory doctors are doing the same work as general practitioners, and so are school doctors. If my right hon. Friends in the Cabinet want £25 million, although it hurts I will find it for them, not from the base, but from the superstructure. To do it my way is, of course, more difficult than charging the sick, but since when has the Labour Party sacrificed principles because that is the easy way out? I am talking about millions, not candle ends.

This is a complete reversal of our policy made in 1952, when we voted solidly against the imposition of charges. At that time 266 members of the Labour Party, led by the late Lord Attlee, went into the Lobby and voted against them. The Prime Minister, in his resignation speech in 1951, put his finger on the reason for that. He said that once a breach is made in the principle the road is opened for a torrent.

I remember how many of us suffered during the first five years that I was in the House. Every time there was a debate on the subject, we were told, "You did it first". This party has always set its face against the likely torrent which may result from this decision, namely, a first and second-class service. Those who can pay get first-class treatment, and those who cannot get the second class service. The right hon. Member for Wolverhampton, North-West (Mr. Powell) knows better than anyone else the battles which were fought in 1961. Night after night we fought against the increases which were made at that time. I battled on in all seriousness. I thought that we believed what we said. What has altered the position? What difference is there now? Have our principles altered because of this economic crisis?

I remember the 13 difficult years which followed the making of that wrong decision in 1950–51. I plead with my colleagues in the Cabinet not to make us go through all that again. Let us not have another 10 years trying to get back what we have lost.

I welcome the exemptions, but even with these the people in South Wales will pay three times more than those in Surrey. The chronic sick are to be exempted, but when a person has a sudden illness after, say, 10 years of good health, it is then that he will find that he has to pay more.

I recall two deputations which I received in 1961 from pharmacists in my constituency. They asked "What does one do if a man says that he has four items on his prescription and wants to know which is the most important so that he can pay for it then and come back for the other three on Friday night?" The Chancellor of the Exchequer says that it is to be paid by those who are at work. What will happen to those suffering from the after effects of coronary thrombosis or bronchitis who remain at work? What will happen to the chronic bronchitic who needs expectorants?

We will place an impossible task on two Ministers and on doctors by asking them to work out the exemptions. I ask the Government to withdraw this part of the package, not using this as an excuse to reverse a wrong decision, but because it is the truth that one cannot work out a fair system of exemptions without causing considerable damage from the point of view of both health and equity. If the Government cannot do that, I hope that tonight my right hon. Friend will say that this is a temporary measure and that it will be withdrawn not only as soon as possible, but before the next Genera" Election.

I apologise for taking up the time of the House, but I feel that I must make a statement on what I am going to do tonight. Many of my hon. Friends have done me the honour, and I feel humble about it, of asking me what I am going to do when it comes to the vote, and I have been asked the same question by the Press. If I could reverse the imposition of this prescription charge by voting against my Government tonight, I would not only do so but would take the consequences and resign my seat. There would then be a by-election in West Willesden.

But I do not believe in gestures. It would not achieve what I hope to achieve. I am a Lansbury-type Socialist and a Gandhi disciple. When I take action, I do it because I want to achieve that which I have set out to do. If I abstain, I say, in effect, that I am prepared for a Tory Government, and if that were to come about this small breach may well lead to a torrent. I cannot accept that in any circumstances, so I remain. It may be that at the moment the Government are "a sorry thing but mine own". I have to make the decision for myself. I cannot make it for any of my hon. Friends. I propose to remain to fight this issue, both here and in the country, and I pledge myself so to do.

As chairman of my party's health group I have called a meeting for Monday, which the Minister will attend. We shall put our case to him. I am asking my colleagues who agree with me to form a working party to consider the ways and means by which we can get this decision reversed and get a speedy removal of the charges.

I am not prepared to jettison the faith of a lifetime for a temporary expedient. I shall continue doing all in my power, both inside and outside the House, to get this decision reversed.

8.29 p.m.

Mr. J. Bruce-Gardyne (South Angus)

I shall be brief, so I hope that the hon. Member for Willesden, West (Mr. Pavitt) will forgive me if I do not follow him in his cliff-hanger, from which we gather that he has wrestled with his conscience and won.

I entirely agree with all the criticisms which have been made from this side of the House about the motivation behind and irrelevance of, the defence cuts, but I am not entirely in agreement that the decision to withdraw from east of Suez in the 1970s, however irrelevant it is to what we are discussing, is necessarily a disastrous error in the circumstances that we shall be facing then.

I want to deal entirely with the internal side of the package. Representing a Scottish constituency, I have always been opposed to deflationary measures which I did not believe would work and which I knew would create hardship, additional unemployment and wasted opportunities in Scotland. We see the same thing happening today. Only yesterday I heard of a village in my constituency which has been waiting for a drainage system for several years, which had been expecting this drainage system to be installed, but which has seen it deferred because of Government cuts. That is the hard, bedrock substance under the rather dilettante lecture that we received from the Chancellor yesterday.

I accept that these things are bound to happen in these circumstances, because we must accept that they are necessary to make devaluation work. If devaluation does not work, the effects on my constituents and people throughout Scotland will be infinitely worse, because if the £ goes again the entire monetary system of the world will collapse and we shall be heading straight back to the 1930s. I accept that these measures, because of the self-indulgence of three years of Labour Government, have had to be taken. The only question is whether they are enough.

As I see it, the problem lies in the next eight months. Provided we can get over that period, I believe that at long last we shall see the surpluses about which we have heard so much, so often in the past, begin to materialise. I very much question whether what we have been discussing in the past two days will solve the problem of confidence during the months of difficulty and inevitably bad trading results and balance of payments out-turns about which the Chancellor warned us yesterday.

My reason for doubt arises basically from the fact that in July, 1967, the then Chancellor told us that public sector spending must be restrained to an average of 3 per cent, per annum between 1967 and 1971. That was in the pre-devaluation situation. Now, in an entirely different situation, we are told that public sector spending is to be allowed to rise by 33¾ per cent, in 1968-69. Whatever the sums may be, people abroad will make their comparisons and will see that they cannot add up.

The Chancellor told us that he aims at a 4 per cent, growth rate this year and next. O.E.C.D. has just told us that 3 per cent, is about the maximum that we should go for. We have had only the first part of the package and we have what are promised to be vicious increases in taxation to follow. Yet it was made clear by the Group of Ten in December that if we were to limit borrowing requirements to £1,000 million it must be done by cuts in public sector spending and not by increases in taxation. All this advice—and in our circumstances it is much nearer a command than advice—has been calmly disregarded by the Chancellor.

I used to believe that our difficulties sprang essentially from three things—an exchange rate which, thanks to the actions of this Government, had ceased to correspond with reality; a Prime Minister who was a sort of cross between Walter Mitty, Mr. Pooter and Toad of Toad Hall, and a Chancellor—poor old dumb Jim, the Cardiff workhorse, who never knew where he was going and why he was going there, who always had a grin on the end of his muzzle; who was always hoping for the best and could be relied upon to go in the same direction once he had been pointed in it.

So we have a brand new exchange rate, and a trendy and "ton-up" Chancellor. We put the Prime Minister into commission, and we were told that we should see a different situation. But I regret to say that, as I see it, we find that we have precisely the same situation as we had before. We start with statements that there is no need to worry. Then we are told, "There is an axe to come". Everyone goes on a spending spree, and we are then told, "The axe will be worse". Then the axe is presented, and it turns out to be a safety razor blade, so the £ crashes again, and then we are told, "There is more to come. There is a real axe coming", and so we go off on another spending spree.

It is the same old circuit. The only difference is that each circuit of the wheel of death seems to be getting shorter and shorter. I believe that the previous Chancellor would have done better than our trendy new one in present circumstances. He would have been firmer with his colleagues.

Why have we seen no change in the pattern, despite the change in circumstances? I believe that there are two reasons. First, we see that in the modern system of Cabinet Government we cannot put the Premiership into commission. All we get is a series of wrangles and bartering, with people saying, "All right, we shall let you have the Persian Gulf and lake prescription charges in exchange." The result is the lowest common denominator, and that is not enough.

Right hon. Gentlemen opposite and senior civil servants are punchdrunk from the disasters and accidents that they have encountered, and have been reduced to a situation almost to a kennel-ful of Pavlovian dogs who react automatically to stimuli and pressures wherever they may come from. This is a terrifying situation.

I can see only one possible chance of salvation and, strangely enough, it comes from Paris. I believe that there is a chance that if the French Government will continue to perform the great public service of publishing regularly the comments and reports of the Group of Ten and the Working Party of Three, whenever we have to make our reports on the state of the economy to our probation officers, at regular four- and five-monthly intervals, there is just a chance —I do not put it higher—that the kennel-ful of Pavlovian dogs will get the right stimuli and still do the right things. Otherwise I can see no prospect ahead of us but renewed disaster, despite the changed circumstances.

8.38 p.m.

Mr. John Rankin (Glasgow, Govan)

I would have liked to follow many of the avenues which have been pursued in a debate of this nature. Unfortunately, I am restricted in time, and by agreement I have accepted a limitation on what I have to say.

There is one question I must pose. I have been hearing a great deal about withdrawal from the Far East and I am still wondering why we can talk about leaving the Far East when we are to keep all the trappings of the military machine in Hong Kong. Is it because we have imposed on Hong Kong a Government and a legislation which makes everyone an actual criminal and because we fear the consequences which may lie ahead and so are keeping military forces there; or is it our way of helping the Americans in their war against North Vietnam?

I want to deal particularly with one problem which has been mentioned, that of the Health Service. Hon. Members will know that there is an English and a Scottish Health Service. I propose to deal with the latter. There is nothing sacrosanct in the Health Service as it is today because, from the beginning, it has applied only to part of Scotland in the same way that it applies to the whole of England. A different method of dealing with people's health is needed in one-third of Scotland, the Highlands.

Serious things are happening to Scotland's Health Service. I have tabled a Question today to the Secretary of State asking for an inquiry into the Service in Scotland. Twenty-one years after its establishment, the Health Service faces vitally changed circumstances. The number of general practitioners in Scotland's Health Service has fallen greatly since 1961. Then, there were 2,865, whereas, last December there were 2,687, a drop of 178 doctors, to administer a Service which demands greater time and caters for far more people than the greater number of doctors were dealing with in 1961.

I draw the attention of all hon. Members to this, because the interest of English Members must be directed to the Scottish position just as much as to the English, since they have demanded and have been conceded an admittedly limited inquiry into the functioning of the English Service. That is why I want their support in this demand. The Health Service in Scotland will crumple unless something is done now to save it.

The Scottish set-up is similar to the English, with a hospital service, a local authority service and a general practitioner service. But the conditions in which they work are fundamentally different. There are fixed hours of work and graduated salaries in both the hospital service and the local health service; but a general practitioner is bound to give 24 hours' service a day, seven days a week, 365 days a year. That is an impossible charter to fulfil in today's conditions.

Hon. Members may say that, to overcome these difficulties, practitioners can form into groups. That has been and is being done in many cases, but owing to the diminution in the numbers of practitioners in small towns in Scotland— many of which have outlying villages which function, though isolated, as part of the town service—it is not unusual to find four G.P.s handling 11,000 to 12,000 patients. This can be done only if each practitioner is prepared to work 24 hours straight through on two occasions during the week. Work of this nature is bound to lead to a breakdown in the Service. Indeed, such a breakdown has not occurred in the past solely because of the efforts of the doctors.

Hon. Members should realise that although Parliament is imposing these conditions on doctors, the House of Commons recently agreed not to work in the forenoon. We are doing our best to arrange our business so that we do not have to work at night. If we say that bad legislation is enacted when hon. Members are not fresh, is it not fair to agree that good medicine cannot be administered by doctors who are working 24 hours non-stop? In the interests of this great Service and those who benefit from it we must institute an inquiry into the way in which it is presently working.

It is obvious that in the large cities more doctors can be formed into groups in the Health Service than is possible in small towns. Yet, in many cities doctors are now refusing to work at night after having worked all day. Because of this, an emergency service has been formed in some areas. The public Health Service is being kept active by private effort because doctors in the big cities are able to pay for this emergency service which enables some doctors to work all night and to be called out on emergencies.

Private effort should not be responsible for keeping the Health Service going. If we believe in the Service and the general practitioner aspect of it, the Government should take over this responsibility and provide a proper emergency service which will enable doctors to work efficiently during the day, safeguarding the interests of their patients, and sleep at night while an adequate emergency service is functioning. I am sure that hon. Members desire the Service to function efficiently on behalf of the patients. I hope, therefore, that the Secretary of State for Scotland will institute an inquiry into these matters, and I hope also that it will be supported on both sides of the House. Increasing the cost of prescriptions is not the remedy.

8.50 p.m.

Mr. John Biffen (Oswestry)

I hope that the hon. Member for Glasgow, Govan (Mr. Rankin) will not think me discourteous if I return to the subject of debate, the White Paper on Public Expenditure. This document expresses at least two principles which have rightly exercised some of the deepest and most heartfelt emotions which can be expressed in the House.

First, there is the principle that our defence policy in future will eliminate a range of defence weapons, which must, it seems to me, increase our dependence upon nuclear weapons and, therefore, reduce our flexibility of response to any threat in the European theatre of war. Second—understandably this also has excited a great deal of passion—the White Paper invokes in the social services the principle of a charge at the point of consumption. That is precisely what the prescription charge is, and I shall return to it in a few moments.

As I am subject to external systems of severe restraint, I shall confine myself to one comment arising from the Chancellor's speech in opening the debate and one broader reflection on the situation in which the House now finds itself when debating matters of economic management. The Chancellor has promised that there is taxation yet to come. We understand that, of course. In the light of the Prime Minister's own words when he spoke about personal consumption having to be sharply restrained, we fully understand that there will be more taxation to come.

Many of my hon. Friends and some hon. Members opposite have asked why the regulator has not now been used. There is an assumption, perhaps a generous assumption or an ill-founded one, that the increase in taxation will come on indirect taxes. But if the Chancellor intends to increase direct taxation, to increase the Income Tax, he will, naturally, reserve that for the Budget. He could not do it now.

What lends particular force to this reflection is that the Government remain committed to an incomes policy. Any tax changes affecting the retail price index, therefore, if their professions of belief in an incomes policy are to be accepted, must be regarded with caution. Naturally, there will be a disposition on the Government's part, if they wish to woo trade union support, to move towards more Income Tax rather than more indirect taxes.

My second point is of more general significance. It relates to the extent to which we are now masters of debate when we discuss this subject. Obviously, when quotations from the political literature of the past are made, there comes to mind the famous phrase of Lord Shawcross, "We are the masters now ". But let the House be in no doubt that the masters today are the International Monetary Fund. The Chancellor was very casual and urbane when discussing the Letter of Intent. He remarked: ' What about the so-called ' strings'? … It is …the practice in arranging almost any form of financing. The lender wants to know the future intentions of the borrower for the management of his affairs. That is not unreasonable, and, indeed, it is in any event totally inevitable."—[OFFICIAL REPORT, 5th December, 1967; Vol. 755, c. 1198.] If we talk in terms of consumption and we think of the £25 million which will come out of consumption as a result of prescription charges, can anyone conceive of £25 million bought with more political anguish for the party opposite? Was it a belief in the principle of a charge at the point of welfare consumption which led right hon. Gentlemen opposite to recommend this to the House? No one believes it for a moment. They were obeying the dictates of the International Monetary Fund. They were responding to the indicated wishes of Mr. Pierre-Paul Schweitzer and his advisers.

It does not end there. I hope that no one will accuse me of lack of compassion if I say that the £25 million on health charges, though a matter of great substance, is possibly of less consequence to the economic management of the country when we consider some of the other paragraphs in that Letter of Intent. Above all, I want to refer to paragraph 13, on exchange control. I know that I shall have the hon. Member for Lewisham, West (Mr. Dickens) nodding assent. The paragraph says: The Government, moreover, intends to abolish all remaining restrictions on current transfers and payments as soon as the balance of payments allows. Similarly, as the balance of payments strengthens, the Government will consider what relaxations can be made in the present restrictions on capital transfers. Are not we seeing a situation where the Government are not only ceasing to be matters of their fate, but to be captains of their political souls? I am not convinced that a Government which takes orders from outside and loses its capacity to act by its own basic political instincts and inspirations are fit to carry on. I do not believe for one moment that they carry the conviction of their supporters, whatever may be the consequence of the vote tonight. People outside the House know that they do not carry that conviction and support. Therefore, the long haul to recover confidence will still elude the discredited Treasury Bench.

8.57 p.m.

Mr. Reginald Maudling (Barnet)

The Amendment we moved declares that we have … no confidence in Her Majesty's Government whose mismanagement of the economy has led to the present situation, recognise that there is a need to curtail public expenditure, regret that the Prime Minister's statement is purely negative in character, and deplore cuts in defence which involve breaking faith with friends and allies and will severely undermine our national security ". and in winding up for the Opposition I intend to devote myself to those main points in our Amendment.

The debate takes place at the end of a blaze of publicity for the Government's inability to reach decisions. Seldom, if ever, have a Government presented such a sorry spectacle of the apparent arguments between various Ministers being canvassed, usually accurately, in the columns of the Press. This is a lamentable way to conduct public business. It is not surprising that when the package was announced it came as a very severe anticlimax, as the Chancellor of the Exchequer will have noted in the initial reactions in financial centres in London.

The occasion for the debate is the cuts in public expenditure, but the debate has naturally widened far beyond that, because so much is still left unsaid about the Government's economic policy and how they intend to handle the post-devaluation problems. All they have done so far by their partial statement is to confirm very definitely the impression of total unpreparedness with which they faced the forced devaluation, and their total unpreparedness to deal with the spending spree which is now developing. The Chancellor must appreciate, as I know he does, that if people are told that by Government action things will get more expensive in the near future they all rush to turn money into goods as fast as they can. That was the inevitable consequence, and the further delay in announcing the Government's intentions on taxation is, I believe, causing serious damage.

As my right hon. Friend the Leader of the Opposition said this afternoon, we are really considering the consequences of devaluation, a step which is now being seen in its true colours as an act, first, of default on those who have placed their money with us, and, second, a deliberate act of self-impoverishment.

It is reasonable to spend a little time in examining why we have reached our present situation. That it is a serious situation indeed there can be no doubt. Ministers have been dining out pretty frequently in the past few years on the trade deficit in 1964. I doubt if they will be able to do that again because, after these years of Labour Government and despite an improvement in the terms of trade worth several hundreds of millions of £s, the trade deficit last year was bigger than it was in 1964.

This was also despite the fact that, whereas in 1964 we had rapidly increasing production, full employment, high investment and strong confidence, in 1967 in practically every particular we had exactly the opposite—stagnation in production, flagging investment, high unemployment—the figure today is over 630,000—vast increases in taxation running into many hundreds of millions of £s, and severe and repeated credit squeezes. Take all these things together, throw in the massive improvement in the terms of trade, and still, at the end of three years of Labour Government, our trading position is worse than the one they moaned about when they inherited it.

The reasons for this failure of the Government's economic policy are fairly easy to discern. In two of them, the Foreign Secretary was very much concerned. The first was the total collapse of his attempts at an incomes policy and the second was the patent absurdity of the National Plan—his belief that, by writing something on a piece of paper, he had an effective incomes policy and his concentration on trying to keep prices down while incomes were rising, thereby stoking the fires of inflation. All these things contributed considerably to our present national difficulties.

Another contributory factor is clearly the rapid growth of Government expenditure, both national and local. It was too fast in any case in the last two or three years for an economy which was itself buoyant and expanding, and it was manifestly much too fast for an economy suffering from three years of Socialist stagnation.

Then there was the new taxation—the Corporation Tax, the Capital Gains Tax, an enormous and complicated burden of excessive new taxation which possibly more than anything else has affected confidence here and abroad in the ability of the Government to run our economy.

Then there has been the repeated determination to continue with measures of nationalisation, irrelevant at best to our national economic policy and in many cases quite obviously calculated to depress morale and restrain the enterprise of the private sector of the economy, upon which the whole of the nation's economy depends. Finally and decisively, there was the total collapse of any belief in anything said by Ministers in this Government.

So we were, as a country, forced to the position of devaluation. There is no denial now that it was forced upon the Government. The Chancellor of the Exchequer candidly in his broadcast said that it was a defeat—rather different from the way the Prime Minister pictured it in his broadcast. Now the right hon. Gentleman is trying to say, and this is right, that devaluation is a defeat but that it is also to be seen as an opportunity. I am with him there. We must, from the national point of view, see it as an opportunity which can be seized. If the Government are trying, for the country, to snatch economic victory out of their defeat, we hope they will succeed but let us remember that the defeat will be theirs and the victory will be the country's.

I believe that the task to be faced is a very serious one indeed because the 14 per cent, devaluation is in itself not a very large devaluation. People have expressed surprise and sometimes criticism of British industry at home and abroad because British firms have not automatically reduced prices by 14 per cent. Of course, this was impossible. Up to half the 14 per cent, benefit is absorbed in additional costs of fuel and raw materials, the end of the export rebate and so on. Out of the remaining 7 or 8 per cent., manufacturers have to provide for some reduction in prices, increases in profitability, to which the Prime Minister referred, and further export sales promotion expenditure. All this is a great deal to try and get out of some 7 per cent, reduction in the valuation of sterling.

In the case of many products, price is not the decisive factor. Delivery and technical considerations come into it. If one is selling all one can, it is silly to reduce one's foreign exchange prices because the whole purpose of the exercise is not exports for their own sake but the earning of foreign exchange. When we look at the burden, it is important to remember that industry must earn 17 per cent, more by its exports in sterling value in order to get back to the foreign exchange we were earning before devaluation. We are glad to see that the motor industry may increase its exports by 20 per cent, or so, but, if it does, this will only put it a little ahead of the foreign exchange earnings which it was getting before. The motor industry is probably one of the best placed to take benefit out of the fact of devaluation.

Also on the other side—and I should like to say this seriously to the Chancellor of the Exchequer—one must set the effect of devaluation on our invisible income, because, although I agree that the position of sterling as a reserve currency is not essential to the invisible earnings of the City of London, there is no doubt that recent events have had a very bad effect, particularly in the commodity markets, and there is a real danger, as I think the Chancellor appreciates, that many of these activities may move to other overseas centres. As in the last 175 years on only seven occasions have we balanced our trade on visible account and on every other occasion we have relied on invisibles, we must realise how important it is to do all we can to counteract the bad effects which devaluation may have had on our invisible income.

The conclusion which I reach from these figures is that the Government are relying for the improvement in the balance of payments not so much upon devaluation itself as on a massive deflation of home demand. I do not believe the argument as put by the Chancellor that we are merely cutting back home demand to make room for the exports which will take place in the new surge of enthusiasm for devaluation. I do not believe that there is any advantage in devaluation to account for this. The fact is that the policy on which the Government are mainly relying is to squeeze out exports by cutting down on home demand.

We have not yet had made clear the calculations on which they reach their main figure. The Chancellor said that he wanted to shift £1,000 million into the balance of payments. This must mean a shift of a great deal more than £1,000 million out of other activities, because a lot must be lost on the way, If, therefore, their objective is to shift resources of more than £1,000 million, how far have they gone in that direction so far?

The cuts will not go very far. Certainly next year's cuts will go a very short way indeed. We should remember the wholly bogus nature of the largest so-called cut, the £80 million saved by taking it out of the cash flow of industry by delaying the payment of investment grants—by the way, a great encouragement to investment! There is a very small amount next year in comparison with the total left.

Therefore, it seems that the Government are relying on two things, on increased taxes and the credit squeeze and on holding incomes while prices rise, because holding incomes while prices rise is the only way, through the market, that money can be taken out of private consumption, which is the declared intention of the Government. I notice that in his broadcast the Chancellor clearly linked these two.

I come now to the wages and incomes policy. In his broadcast the Chancellor said that the two were linked, that the more the Government failed to get the restraint of incomes for which they were looking, the more they would be compelled to impose taxation on the public at large. In other words, the public will pay increased taxation for the failure of the Government's incomes policy.

We still have very little clear idea of the relative importance which the Government attach to these two elements in their policy, tax increases or an incomes policy, but this afternoon the Prime Minister said some extremely important things in one section of his speech about the incomes policy, and I hope that the Foreign Secretary will elucidate them this evening.

It is very important that we get this position clear. I entirely agree with the Government that the movement of incomes is crucial to the success of making a job of devaluation, because the amount of money, the sheer volume of money involved in a large increase in incomes, is so great. I understood the Prime Minister to say that in 1968–69 wage settlements—I presume that this means wage rates as opposed to earnings—must be held to 3½ per cent, in total.

He went on to say two things, first if lower-paid workers get more than that, this must not be the excuse for greater increases higher up, and therefore differtials must be reduced. Secondly, he said, if I understood him correctly, that we cannot afford anything on top of this 3½per cent.; we cannot afford any wage drift at all on top of this 3½ per cent. He went on to say that if that figure were substantially exceeded, taxes would be put up or new powers would be taken.

I want to ask the Foreign Secretary, very seriously, to make clear where the Government stand on this. Is it really feasible to do this? Is it really feasible to say that if the lower paid workers, in engineering, for example, get more than 3½ per cent., the only effect must be to reduce the differential for skill? If it were feasible, is it really wise in this country? Is it really in accord with our national economic interest that the differentials for skill should be reduced? There is often a strong argument for giving a greater encouragement to the acquisition and employment of greater skill.

How will this doctrine of the Prime Minister's be enforced on the unions? Secondly, is it conceivable that there will be no drift at all? Of course, it is not. We all know from experience that a 3½per cent, increase in basic rates normally brings up something like the same amount of increase in wage drift. What will happen on what the Prime Minister said if this happens, as it is bound to? He will impose taxation in order to recoup the money. But the taxes will not fall necessarily on the people who get increased wages. They will fall on the body of taxpayers as a whole, who in many cases, particularly those whose bargaining power is less, will find themselves suffering both the higher prices coming from higher wages and the higher taxes.

I do not know how much will be involved, but to add an additional 1 per cent, in incomes probably means about £200 million or so in purchasing power, so a 2 per cent, wage drift would mean another £400 million for the Chancellor to find on the Prime Minister's argument. These are formidable figures indeed. There was the other fork in his argument when he said that the alternative, a rather strange phrase, was to strengthen the voluntary system by taking new powers. I do not know quite what that means, I hope that the Foreign Secretary does, but I doubt it.

This is of the utmost importance to the whole success of devaluation, and I want the Foreign Secretary to say if he will give an undertaking to the House, in dealing with the current very important wage claims—the bus men and the engineers— which have been before the Prices and Incomes Board, that the Government will follow strictly the principles laid down by the Prime Minister this afternoon. It is very important that we should know this and that the unions should know where they stand.

I turn now to the extent of the cuts which, as the House will be aware, we received with mixed feelings. In some cases we agree. We agree with the selective reimposition of prescription charges, as we have argued for many years. I know that this is a difficult thing, and the speech made by the hon. Member for Willesden, West (Mr. Pavitt) put with great eloquence the strong and genuine feelings of many hon. Members opposite against this proposal. We believe that it is a right and proper way of achieving economy, but we do not understand why the same principle could not be applied further. If it is right to say, as we do, that it is not a priority form of Government expenditure to give free prescriptions to people who can afford to pay, why should we not increase the price of school meals to those parents who can afford to pay something nearer the economic price?

We have been having an argument as to how much exactly this would yield. That is not the point. My point is that whether the Government's views or ours are right, it would yield something considerable and it is better to do that than to put off raising the school leaving age. It is not right to argue that one must get a certain amount out of each activity with the idea that the load must be equally spread. That is nonsense, the negation of planning. My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) has put forward many suggestions as to how other economies could be achieved. Surely it would be better to have those and to find money in the way he suggested rather than to postpone the raising of the school leaving age which means so much to so many hon. Members who have spoken and who understand the educational realities of the country.

We think, too, that economies should be applied more widely, for example, to rents, as the Greater London Council is doing—and it is entirely right—thereby reducing the burden of expenditure on the ratepayer while concentrating help more specifically on those who need it most. Incidentally, while talking about selectivity, I find strange the totally nonselective proposal about student grants. I do not think that anyone has explained it. This is a matter which affects a lot of people and it appears, on the face of it, a particularly mean and niggardly economy to include in this package.

There are other examples such as the sharp cutback on the roads. Would it not be better to save the same amount or possibly more by cutting back on the overmanning which still exists on the railways? What is proposed in respect of the Civil Service stands in glaring contrast with many other parts of the package. While other things are being cut back, all that is proposed about the size of the Civil Service is that it is not to be further increased.

My right hon. Friend put forward a number of suggestions for alternative or additional economies. One of them was to remove the Regional Employment Premium because we believe that the same or greater benefits could accrue to the development areas for much less expenditure if we concentrated on different forms of spending and provided the infrastructure, services and improvements that those areas require. But two of the most substantial economies which could be made would be to drop the Government proposals for the nationalisation of transport and the Industrial Expansion Bill. The sums involved here are very large indeed.

I think that any visitor from overseas must have thought that the Government had gone raving mad to follow their economy proposals, which have caused so much anguish to their supporters, by proposing the expenditure of £70 million for further nationalisation of transport. I am sure that the Chancellor of the Exchequer is too sophisticated in economic matters to believe that he can pass this off by saying "There is no transfer of resources. Therefore, it does not matter. It is merely a shift of ownership." But this will pump very large sums of purchasing power into the monetary system of this country, and the inflationary effects of these activities will be very considerable, as I am sure the right hon. Gentleman understands. Why in heaven's name, when trying to scrape up a few millions of pounds to the dismay of one's supporters, break promises and pledges throughout the world and proceed with this profligate and idiotic act of Government expenditure?

Mr. Archie Manuel (Central Ayrshire)

rose—

Mr. Maudling

I promised to sit down at a particular time; I must keep that promise.

I turn to overseas and defence matters. Very strong views have been expressed and there has not been anything like total agreement among hon. Members opposite. I heard the very persuasive speech of the right hon. and learned Member for Ipswich (Sir Dingle Foot) on the folly of the Government's decisions about withdrawing from the Far East. Let me say two things about the defence problem. First, it is an issue of great seriousness, and the decisions should be debated on a calm assessment of their relative advantages and disadvantages for this country. These decisions should not be taken merely as a device to thrust a half-a-crown health charge down the throats of hon. Members opposite.

Secondly, let us be careful when, as a country, we say that we cannot afford something. Let us be sure that we do not mean that we do not want to afford it. In many cases, that is what we are saying. It is not that we cannot afford these defence commitments; it is that we do not want to afford them. A country which had a spending spree like we had over Christmas and where foreign travel is booming, as it is, will have some difficulty in convincing the world that it cannot find £20 million to maintain our position in the Persian Gulf. Incidentally, the last people who can make that argument are Ministers who turned down the South African arms order. I attach very great importance to the walking out on our obligations. I do not need to recapitulate the many things which have been quoted and the many undertakings which have been given, upon which people overseas have relied, believing that we intended to stay in accordance with what we said.

I want to talk particularly about the Gulf, which has not been mentioned much in this debate but which, I am sure, is very much the concern of the Foreign Secretary. We have very clear, definite and long-standing obligations as a country to afford protection to many of the small States in the Gulf. They are countries which, being small and relatively defenceless but having a large oil income, offer a tempting prize to many people. It was only a few months or weeks ago that the Minister of State was sent round the Gulf to reassure the Rulers there, who rely on our protection, that we had no intention of leaving the Gulf. Within a few weeks, the same Minister had to go and see the same people and say, "I am awfully sorry, my colleagues have decided to welch on all I told you". That was not an act of renegotiation. The Prime Minister loves the word "renegotiation". We had it all this afternoon. This was an announcement of a decision to break a pledge.

If I may declare a sense of personal interest, I have visited the Gulf many times in the last few years and I have often been asked for my advice. I have said consistently two things in reply. The first was that people should continue to keep their money in sterling in London, because the British Government meant what they said about not devaluing. Secondly, I have told people there that my advice was that they need not fear being deserted by the British, because the British Government meant what they said about not moving out of the Gulf. That was the advice I gave, because I felt it my duty to give it and because, heaven help me, I believed that it was true. I proved a very bad adviser. I shall not rely again on the word of this Government when giving advice.

The issues involved in Britains rôle east of Suez are very great indeed. The economic one is very much prominent in many ways, and rightly so, because of the scale of it. The vast £700 million British investment in Singapore, investments in oil in the Middle East, the balances held by those countries—these economic figures are staggering in size. When one sees the dependence, not only of this country, but of the whole of Western Europe, on the oil reserves of the Middle East, that is not a part of the world in which to take chances.

Of course, it is not a question of those countries taking out all their balances overnight or of having all the oil we need or no oil at all. The danger lies in between. The danger is there because political stability in those areas is of fundamental importance to us for our investments, for oil supplies and for much of our trade. The danger to stability, particularly in the Gulf, is very real, not only from the conflicting forces which arise, very often tempted by the large oil royalties which are available, but from the movement of Russian influence, which we see quite clearly moving through the Yemen and, probably, now moving into Aden and, if a vacuum is left by us, moving into the Gulf also.

These are not matters to take lightly or to be decided in a blaze of publicity in Downing Street and announced without warning to the Rulers by the unfortunate Minister of State. That is not the way to handle these matters, not only because of the economic situation, but because of the political significance. We must not believe that our political influence is played out east of Suez—at least, it was not until a few days ago. Certainly, our presence there was welcomed by our friends and allies, who wanted to see us help them to maintain stability.

I think of Australia and Singapore. Although our forces are very much smaller than those of the Americans, as the Foreign Secretary knows very well the Americans welcome very much indeed our political presence there, because our political presence east of Suez has added considerably to the prospects of stability in that area.

I remember so well the Prime Minister's much-publicised and much-quoted speech about confrontation eyeball to eyeball. He was dead right. [HON. MEMBERS: "Where is he?"] I think he was right on that. Today it would be bad for this country and bad for Europe to see America and China confronting themselves all alone in that part of the world. Yet this is what will happen and happen soon, because, as we have seen in Aden, once we announce a date for withdrawal our influence deserts us. Authority deserts the dying king. Now influence is deserting the British Government, the British people and the British tradition in all the broad miles of the Indian Ocean and farther East. It is not a decision to base on the narrow fulcrum of a health charge in order to appease other Ministers or other Members.

If I had had time—but I have not for I have promised to end soon—I would have dealt again with the effect on the Defence Services as a whole. It is lamentable—the emasculation of the Navy, as my right hon. Friend the Member for Flint, West (Mr. Birch) said, by removing its carriers, and by the other economies, either specified or hinted at in the course of the last few days, which will have an appalling effect on the Royal Air Force, as proved so conclusively by the words of the Secretary of State for Defence himself in speaking of the A.F.V.G. and the need for a bridge in between and the disappearance of the variable geometry aircraft. Now there is the disappearance of the Fills. Time and time again the Secretary of State has said that this aircraft is essential to any meaningful striking power for the Royal Air Force. I must add my voice to those who have said to the Secretary of State that they do not understand why he continues to hold that office.

I have endeavoured to cover the arguments in our Amendment. I have argued to point out how we think this Government's policies have led to such a drastic economic situation. I have pointed out that devaluation itself will not do the trick unless there is a massive restriction of home demand. I have pointed out that the holding back of the financial proposals will do great harm. I have tried to get some understanding about the damage done to Britain and Britain's reputation by this welshing on our commitments to so many parts of the world.

The Prime Minister this afternoon was a man who obviously had realised that he has been found out. [HON. MEMBERS: "Where is he?"] He is not to be seen. He has left it to the Foreign Secretary to restore the position of the Government. Perhaps he can restore their dignity but unless he changes the policies of his colleagues he cannot restore their credibility.

9.27 p.m.

The Secretary of State for Foreign Affairs (Mr. George Brown)

The first thing I would most like to do is to restore, if I can, the level of the debate. Whatever goes in this House, I am absolutely certain that the country is sick and tired of party political speaking from the Opposition benches.

I want to deal with the issues of foreign and defence policy which have arisen during this debate, and to deal with them as seriously and as solemnly and as solidly as I can. I told the right hon. Gentleman the Member for Barnet (Mr. Maudling), before he got up, that I would not make a party point during this speech. I told him and his right hon. Friend that I would not seek to score a personal point off anybody. I believe—I would say this to the party opposite—that this is how the country would wish us to end this debate.

Of course, there are issues here on which differences appear not only between the parties, but within the parties. The House of Commons tonight ought to be a place where we discuss our differences and, for the minute, leave the party points on one side. There will be much time for those in the future. I will try to pick up most of the points which have been made on foreign affairs and defence in what I have to say. Inevitably, because of the time available to me, I will not be able to deal with many detailed questions, but I undertake that in the two days which we are to have next week they will be dealt with.

Many hon. Members on both sides have spoken in moving terms of matters which they regard as essential to their political beliefs. There are those who are most concerned about social measures here in Britain, and others who are more concerned about how best Britain may play her rôle in the world.

Last Tuesday's statement set out measures which were bound to have a profound effect on our defence and foreign policies. Painful though those measures are, the fact is that we in Britain cannot continue to spend more than we are earning or can afford. To attempt to do so is to court disaster, not only for ourselves but also for our friends. Indeed, I would go further, because that path is the path of illusion for others and the path to bankruptcy for us.

We have been freely charged today with breaking faith—[An HON. MEMBER: "And will be again."]—but I believe that it is better to be plain with our friends about what we can do, when the situation is as clear as it is now, so that they can make their own dispositions accordingly.

Some hon. Members have criticised the Government's proposals on the ground that too much has been cut at home. I speak personally and frankly when I say that these cuts were very difficult to make and accept in a Government who believe in the right to education regardless of individual means and who believe that the healthy should take care of the sick. However, for reasons which my right hon. Friends have given, the cuts literally are unavoidable at the moment. Since 1964, we have tried every possible way of avoiding them. The position now is that we must face the facts of life—

Hon. Members

Resign.

Mr. Brown

Other hon. Members have criticised the Government's proposals on the ground that we have cut too much abroad. Again, this worries me—not the withdrawal as such, but the time scale and the consequences. However, again there comes a time when people have to face reality. Any other way leads to equivocation and misunderstanding.

Of course, the changes in our external defence policies involve great risks, but the risks of continuing as we have been doing are overwhelming. No one supposes that the risks involved in these changes of policy have disappeared. Many hon. Members have reminded us of them. There are risks which arise from turbulence and ambition in many parts of the world. There are risks in the spread of nuclear weapons. There are risks in great Power confrontations.

In this multitude of risks, with which we cannot possibly deal alone, we must put Britain's interests first. Those who have spent some time in this debate pleading the cause of this or that defence commitment must understand that our very first commitment is to our own people. We simply must concentrate on those things which are of prime importance to us, remembering that our resources are limited.

Ever since the war we have grappled with the problem of our balance of payments, and during the last six months other elements, such as the closure of the Suez Canal and the consequences of the Arab-Israel War, have presented us with a new economic situation—[Interruption.] Perhaps hon. Gentlemen opposite would listen. Policies which seemed right six months ago have had to be reviewed. Time scales have had to be readjusted. Through pressure of events, many beyond our control, commitments have had to be looked at again in the light of what we can afford.

For many years Britain has been bearing more than her fair share of the burden of security throughout the world. But, by the end of 1971, save for the obligations to our remaining dependent territories we shall have concentrated our defence effort here in Europe and the Atlantic. I believe this to be right. One of the paramount responsibilities of any Government is to ensure the security of the country.

I welcome very much what was said yesterday by my hon. Friend the Member for Edmonton (Mr. Albu) and this evening by my right hon. and learned Friend the Member for Ipswich (Sir Dingle Foot). Our national security depends upon the Atlantic Alliance. It is right, therefore, in my view, that our main contribution to world stability should be made in Europe. That is why we are maintaining our contribution in Europe and why the cuts have been made elsewhere.

As I have already said—and I give the point to anybody who wants to make anything of it—I deeply regret the time scale of these changes. I had hoped that we could have taken longer over it. But we cannot, and we must face it.

I have been asked about the United States reaction. The United States has with understanding and foresight, urged this country for many years to see our future primarily in conjunction with our partners in Western Europe. It has also valued the part we have played, parallel to its own, in helping to preserve peace and promote peaceful development in other parts of the world.

I think that they understand that we cannot continue to carry so much of the burden. I think that they must want, all the more, that Europe, acting in harmony, should play a greater rôle in carrying this burden. This is our wish, too. I believe that it is also the wish of others of our prospective partners in Europe. There is a common interest, therefore, in Britain joining other countries of Western Europe to form a cohesive and influential Europe which can maintain a harmonious relationship with the United States, and which can play an important and constructive part in helping with the problems of world stability and world poverty. [Laughter.] It does rot matter to me where the jeers come from. I know the message which I want to give to the House tonight.

Our contribution outside Europe and the Atlantic must lie primarily in fields other than defence. There is the whole complex of economic aid, of technical assistance and training, help in administration and in education, which is needed desperately in many parts of the world. But in the military field we shall still retain a general capability based in Europe—

Mr. Ronald Bell (Buckinghamshire, South)

Capability Brown.

Mr. Speaker

Order. During the winding-up speech for the Opposition we had no running commentaries from hon. Members who had not heard the debate.

Mr. Brown

I repeat that in the military field we shall maintain a general capability based in Europe, but which can be used elsewhere overseas if, in our judgment, circumstances demand it.

Mr. Victor Goodhew (St. Albans)

rose—

Hon. Members

Sit down.

Mr. Brown

I would like at this point to repeat something that I said when the House was very thin this afternoon. It was thin because many other hon. Members were absent. It was better because the hon. and gallant Member for Knutsford (Sir W. Bromley-Davenport) was not here. The point arose when the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) was speaking. He raised a question in which he is deeply interested, as I am. He raised the question of Australia and New Zealand, who have come to our help twice in my lifetime, and conic a long way to do it, and suffered a lot of casualties. We will have, as they had, a general capability. The fact that it is based here, and not based over there, will not make it any the less available should we, as they did, judge it right to go to their help. They did not need bases in Europe to come to our help in the days when ships were slow. Much less do we need bases in Asia to go to their help in the days when aeroplanes are fast.

Mr. Boyd-Carpenter

Would not the right hon. Gentleman agree that there is this great difference, that at the earlier stage to which he referred ships could go freely across British-protected seas carrying heavy equipment with the troops? How can the heavy equipment be taken by air now that most of our bases have gone?

Mr. Brown

Ships can still sail, and the seas were not all that guaranteed by Britain during the last war. Aeroplanes can still fly and can carry a lot of sophisticated material.

I must press on. Among other things, this means not only that we could—if we judged it right—go to the help of our allies, friends and partners; it also means that we could help in peace-keeping operations under United Nations auspices, and it would enable us to assist our remaining dependencies, our allies and our friends abroad. I would remind the House and the country, in the light of some exaggerations which have come from the other side of the House, that when these cuts become effective we shall still have a powerful Navy, Army and Air Force. [HON. MEMBERS: "Rubbish!"] Perhaps hon. Members will be good enough to listen to me before they shout "Rubbish".

The Navy will still have a wide range of fighting ships—cruisers, guided missile destroyers, nuclear-powered hunter-killer submarines—and it will still have a Polaris fleet. The Air Force will have the Phantom, Harrier and Jaguar aircraft —in their spheres comparable with any in the world. The Army, highly professional and intensively trained, will continue to be equipped, as it is today, with the most modern weapons that science and technology can provide—and all three Services will be highly mobile.

One right hon. Gentleman that I heard today said that we could quell a minor insurgency or deliver a nuclear broadside, but could do nothing in between. This is just not true.

I now want to consider the two areas most affected by our decisions in the defence field-South-East Asia and the Persian Gulf. I was interested that the right hon. Gentleman found it hard to say "Persian Gulf". Let me take South-East Asia first. Leaving aside Vietnam, in South-East Asia the roots of peace are growing. The nations of the area are coming together as the various regional groupings for mutual co-operation evolve and develop.

The contribution which the British troops in Singapore and Malaysia can make to the stability of South-East Asia is, in my view, becoming progressively less relevant. What is relevant is that the countries there should stand together on their own feet and that those of us outside the area should, in matters of economic help, do whatever we can, in co-operation with them, to make this possible.

As for Singapore, I take the point raised by the right hon. Member for Streatham (Mr. Sandys) this afternoon about what he regarded as an exchange last night between himself and my right hon. Friend the Secretary of State for Defence, which the right hon. Gentleman thought was not wholly fair to him. I have talked to my right hon. Friend and understand that he has sent the right hon. Gentleman a letter, which he has either received or will receive this evening. If it is not satisfactory, perhaps the right hon. Gentleman would like to raise the matter next week, when my right hon. Friend will be speaking.

I suggest that he sees the letter first and then decides whether he wants to go on with the argument.

Mr. Sandys

Can the right hon. Gentleman assure me that I will receive the letter tonight?

Mr. Brown

indicated assent.

Mr. Sandys

Thank you.

Mr. Brown

If the right hon. Gentleman has not already received it he will have it in 10 minutes' time, I assure him. Since my right hon. Friend will be speaking next week I did not want to lose time in presenting the case that I want to deploy, which the House ought to hear in respect of this matter.

I want to turn now to the Persian Gulf. Having thought about this as carefully as I can, I have come to the conclusion that the sooner the States in the area can look after themselves the better —[HON. MEMBERS: "Oh."] The other side may not agree, but I hope that they will let me explain why I think this. There comes a time when an alien military presence is a divisive and not a cohesive force. I have long thought that this time has come. As I said earlier, I would have taken longer over the transition period if I could, but I have no doubt about the need to go.

The question of our disengagement from the Gulf is thus one of timing and not one of principle. Whatever moment we choose, there is bound to be a sub-element of risk and an element of trusting that the self-interest of the States concerned in their continuing prosperity will ensure that peace and stability will survive. But we have now reached the point at which our economic position obliges us to put a term to the protective rôle which we have borne for so long.

The present situation in the Gulf is as calm as it has been for many years. To say that we shall withdraw by the end of 1971 is hardly precipitate. One can never predict with assurance, of course, about Middle Eastern affairs, but it is my belief that this time scale gives adequate time to make the transition to a new system not dependent on the presence of British troops. I would like to make it clear, also, that we have not lost our interest or our concern for the area. It is possible—I beg the party opposite to think about this—that without a military presence we may be able to help better.

I have been asked about our treaty obligations. There are many treaties, mostly dating from the 19th century, and their terms vary. It has been a matter for negotiation exactly how our assistance should be given. I have looked them up. It is only in recent years—indeed, oily since the last war—that we have had anything but naval forces in the Gulf. None of the treaties contains a clause compelling us to station forces there. As we modernise our relations with these States, the treaties would have needed to be reviewed anyway, irrespective of the defence aspect. We shall now aim to complete this process, in consultation with the States concerned, before the time comes for our military withdrawal.

At the start of my speech, I mentioned those who thought that the package cut too much at home and I have now dealt, I hope, with those who thought that it cut too much abroad. I have reserved to the end those who have criticised it because they thought that it has not cut enough at home. Many of those have talked about our commitments abroad, but seem to have forgotten the commitments which we have here to our own people who look to us to create the conditions which lift life from mere existence, which can be grim and comfortless, to something with dignity and hope. We on this side believe that this is what politics is about. It is a question of priorities.

The Labour Government of 1945 and 1951, and this Government since 1964, have scored tremendous achievements—[Interruption.]—in health, education, housing and social welfare. It is only because of compelling economic necessity that we have made the cuts we have. It is only because of grim economic facts that we are now postponing some cherished reforms. The overwhelming basic priority now is to ensure the economic health of the country. Once we have done that, we can go forward—[Interruption.]—and unless we do that we shall place in jeopardy all that we, as a movement, have fought for and achieved.

The decisions embodied in the Prime Minister's statement of Tuesday were hard and painful to reach. [Interruption.] This is not a party point. Every hon. Member who has served in Government will know the agonising choice that Ministers face on such occasions and the differing views that they must reconcile. There is, first, the overriding responsibility to the nation that we accept when we take office. Let no one minimise the weight of this responsibility and the anxiety which goes with it. All of us are heavily aware of what we hold in trust, especially when decisions must be taken on a narrow margin of judgment.

There is also the difficult personal struggle of conscience and conviction. Hon. Members on both sides of the House come here with a body of ideas and principles which they have acquired. Those outside who are currently showing a dangerous contempt for our Parliamentary institutions underestimate the real sense of duty and purpose that moves us. This is as true of Ministers as of back benchers.

Thus, in facing the current decisions, there have been for all of us in the Cabinet hard personal moments. Each of us has seen a cherished view threatened and has been obliged to reconcile himself to a course which, ideally, he would have sought to avoid. I have always recognised that redistribution of wealth, and opportunity, depended on economic growth. When, in October, 1964, I was given responsibility for economic planning, I welcomed my chance to contribute to all those wider social objectives—the derided National Plan, the productivity, prices and incomes policy, the steps which we took over the N.E.D.C. and the "little Neddies," the Industrial Reorganisation Corporation to promote efficiency and speed of modernisation in industry and the whole range of our regional policies. All these were related to the basic problem of economic reconstruction.

One other thing I have always held deeply. It is the need for collective security. I supported, and was proud to support, Ernest Bevin in the efforts he made just after the war to build N.A.T.O.

and strengthen Western defence. I have never changed my attitude. My enemies have called me many things—some of my hon. Friends, too—but they have never said that I was soft on defence.

I understand the views of both sides of the House. I understand those who have argued for this and for that. Today, the special pleading has to stop. Britain has to become strong by itself—[HON. MEMBERS: "Resign."]—and hon. Gentlemen opposite must accept their responsibility—[HON. MEMBERS: "Resign."]—as we accept ours.

Question put, That the Amendment be made:—

The House divided: Ayes 229, Noes 334.

Division No. 30]	AYES	[10.0 p.m.
Alison, Michael (Barkston Ash)	Dean, Paul (Somerset, N.)	Hornby, Richard
Allason, James (Hemel Hempstead)	Deedes, Rt. Hn. W. F. (Ashford)	Howell, David (Guildford)
Astor, John	Digby, Simon Wingfield	Hunt, John
Atkins, Humphrey (M't'n & M'd'n)	Dodds-Parker, Douglas	Hutchison, Michael Clark
Awdry,. Danief	Douglas-Home, Rt. Hn. Sir Alec	Iremonger, T. L.
Baker, W. H. K.	Drayson, G. B.	Irvine, Bryant Godman (Rye)
Balniel, Lord	du Cann, Rt. Hn. Edward	Jenkin, Patrick (Woodford)
Batsford, Brian	Eden, Sir John	Jennings, J. C. (Burton)
Beamish, Col. Sir Tufton	Elliot, Capt. Walter (Carshalton)	Johnson Smith, G. (E. Grinstead)
Bell, Ronald	Elliott, R.W.(N 'c'tle-upon-Tyne.N.)	Jopling, Michael
Bennett, Or. Reginald (Gos. & Fhm)	Emery, Peter	Joseph, Rt. Hn. Sir Keith
Berry, Hn. Anthony	Farr, John	Kaberry, Sir Donald
Bitten, John	Fisher, Nigel	Kerby, Capt. Henry
Biggs-Davison, John	Fletcher-Cooke, Charles	Kershaw, Anthony
Birch, Rt. Hn. Nigel	Fortescue, Tim	Kimball, Marcus
Black, Sir Cyril	Foster, Sir John	King, Evelyn (Dorset, S.)
Blaker, Peter	Fraser,Rt.Hn.Hugh(St'ford & Stone)	Kirk, Peter
Boardman, Tom	Galbraith, Hon. T. G.	Kitson, Timothy
Body, Richard	Gibson-Watt, David	Knight, Mrs. Jill
Bossom, Sir Clive	Giles, Rear-Adm. Morgan	Lambton, Viscount
Boyd-Carpenter, Rt. Hn. John	Gilmour, Ian (Norfolk, C.)	Lancaster, Col. C. G.
Boyle, Rt. Hn. Sir Edward	Gilmour, Sir John (Fife, E.)	Lane, David
Braine, Bernard	Glover, Sir Douglas	Langford-Holt, Sir John
Brewis, John	Glyn, Sir Richard	Legge-Bourke, Sir Harry
Brinton, Sir Tatton	Godber, Rt. Hn. j. B.	Lewis, Kenneth (Rutland)
Bromley-Davenport, Lt. -Col. Sir Walter	Goodhart, Philip	Lloyd, Ian (P'tsm'th, Langstone)
Brown, Sir Edward (Bath)	Goodhew, Victor	Longden, Gilbert
Bruce-Cardyne, J.	Cower, Raymond	Loveys, W. H.
Bryan, Paul	Grant, Anthony	McAdden, Sir Stephen
Buchanan-Smith, Alick(Angus,N&M)	Grant-Ferris, R.	Maclean, Sir Fitzroy
Buck, Antony (Colchester)	Gresham Cooke, R.	Macleod, Rt. Hn. lain
Bullus, Sir Eric	Grieve, Percy	McMaster, Stanley
Burden, F. A.	Griffiths, Eldon (Bury St. Edmunds)	Macmillan, Maurice (Farnham)
Campbell, Gordon	Gurden, Harold	Maddan, Martin
Carlisle, Mark	Hail, John (Wycombe)	Maginnis, John E.
Carr, Rt. Hn. Robert	Hamilton, Marquess of (Fermanagh)	Marples, Rt. Hn. Ernest
Cary, Sir Robert	Hamilton, Michael (Salisbury)	Marten, Neil
Channon, H. P. G.	Harris, Reader (Heston)	Maude, Angus
Chichester-Clark, R.	Harrison, Brian (Maldon)	Maudling, Rt. Hn. Reginald
Clark, Henry	Harvey, Sir Arthur Vere	Mawby, Ray
Clegg, Walter	Harvie Anderson, Miss	Maxwell-Hyslop, R. J.
Cooke, Robert	Hastings, Stephen	Maydon, Lt.-Cmdr. S. L. C.
Cooper-Key, Sir Neill	Hawkins, Paul	Mills, Peter (Torrington)
Costain, A. P.	Hay, John	Milts, Stratton (Belfast, N.)
Craddock, Sir Beresford (Spelthorne)	Heald, Rt. Hn. Sir Lionel	Miscampbell, Norman
Crouch, David	Heath, Rt. Hn. Edward	Mitchell, David (Basingstoke)
Crowder, F. P.	Heseltine, Michael	Monro, Hector
Cunningham, Sir Knox	Higgins, Terence L.	Morgan, Geraint (Denbigh)
Currie, C. B. H.	Hill, J. E. B.	Morrison, Charles (Devizes)
Dalkeith, Earl of	Hogg, Rt. Hn. Quintin	Mott-Radclyffe, Sir Charles
Dance, James	Holland, Philip	Munro-Lucas-Tooth, Sir Hugh
d'Avigdor Goldsmid, Sir Henry	Hordem, Peter	Nabarro, Sir Gerald
Neave, Airey	Ridsdale, Julian	Turton, Rt. Hn. R. H.
Nicholls, Sir Harmar	Rippon, Rt. Hn. Geoffrey	van Straubenzee, W. R.
Noble, Rt. Hn. Michael	Robson Brown, Sir William	Vaughan-Morgan, Rt. Hn. Sir John
Nott, John	Rodgers, Sir John (Sevenoaks)	Vickers, Dame Joan
Onslow, Cranley	Rossi, Hugh (Hornsey)	Walker, Peter (Worcester)
Orr, Capt. L. P. S.	Royle, Anthony	Walker-Smith, Rt. Hn. Sir Derek
Orr-Ewing, Sir Ian	Russell, Sir Ronald	Wall, Patrick
Osborn, John (Hallam)	Sandys, Rt. Hn. D.	Walters, Dennis
Page, Graham (Crosby)	Scott, Nicholas	Ward, Dame Irene
Page, John (Harrow, W.)	Scott-Hopkins, James	Weatherill, Bernard
Pearson, Sir Frank (Clitheroe)	Sharpies, Richard	Webster, David
Peel, John	Shaw, Michael (Sc'b'gh & Whitby)	Wells, John (Maidstone)
Percival, Ian	Silvester, Frederick	Whitelaw, Rt. Hn. William
Peyton, John	Sinclair, Sir George	Wills, Sir Gerald (Bridgwater)
Pike, Miss Mervyn	Smith, John	Wilson, Geoffrey (Truro)
Pink, R. Bonner	Stainton, Keith	Wolrige-Gordon, Patrick
Pounder, Rafton	Stodart, Anthony	Wood, Rt. Hn. Richard
Powell, Rt. Hn, J. Enoch	Stoddart-Scott, Col. Sir M. (Ripon)	Worsley, Marcus
Price, David (Eastleigh)	Summers, Sir Spencer	Wright, Esmond
Prior, J. M. L.	Tapsell, Peter	Wylie, N. R.
Quennell, Miss J. M.	Taylor, Sir Charles (Eastbourne)	Younger, Hn. George
Ramsden, Rt. Hn. James	Taylor, Edward M.(G'gow, Cathcart)
Rawlinson, Rt. Hn. Sir Peter	Taylor, Frank (Moss Side)	TELLERS FOR THE AYES:
Rees-Davies, W. R.	Teeling, Sir William	Mr. Jasper More and Mr. Reginald Eyre.
Renton, Rt. Hn. Sir David	Temple, John M.
Ridley, Hn. Nicholas	Thatcher, Mrs. Margaret
NOES
Abse, Leo	Crossman, Rt. Hn. Richard	Gray, Dr. Hugh (Yarmouth)
Albu, Austen	Cullen, Mrs. Alice	Greenwood, Rt. Hn. Anthony
Allaun, Frank (Salford, E.)	Dalyell, Tam	Gregory, Arnold
Alldritt, Walter	Darling, Rt. Hn. George	Griffiths, David (Rother Valley)
Allen, Scholefield	Davidson, Arthur (Accrington)	Griffiths, Rt. Hn. James (Llanelly)
Anderson, Donald	Davidson, James(Aberdeenshire,W.)	Griffiths, Will (Exchange)
Archer, Peter	Davies, Dr. Ernest (Stretford)	Grimond, Rt. Hn. J.
Armstrong, Ernest	Davies, G. Elfed (Rhondda, E.)	Gunter, Rt. Hn. R. J.
Atkins, Ronald (Preston, N.)	Davies, Ednyfed Hudson (Conway)	Hamilton, James (Bothwell)
Atkinson, Norman (Tottenham)	Davies, Harold (Leek)	Hamilton, William (Fife, W.)
Bacon, Rt. Hn. Alice	Davies, Ifor (Cower)	Hamling, William
Bagier, Cordon A. T.	de Freitas, Rt. Hn. Sir Geoffrey	Hannan, William
Barnes, Michael	Delargy, Hugh	Harper, Joseph
Barnett, Joel	Dell, Edmund	Harrison, Walter (Wakefield)
Baxter, William	Dempsey, James	Hart, Mrs. Judith
Beaney, Alan	Dewar, Donald	Haseldine, Norman
Bellenger, Rt. Hn. F. J.	Diamond. Rt. Hn. John	Hattersley, Roy
Bence, Cyril	Dickens, James	Hazell, Bert
Benn, Rt. Hn. Anthony Wedgwood	Dobson, Ray	Healey, Rt. Hn. Denis
Bennett, James (G'gow, Bridgeton)	Doig, Peter	Heffer, Eric S.
Bidwell, Sydney	Dunn, James A.	Henig, Stanley
Binns, John	Dunnett, Jack	Herbison, Rt. Hn. Margaret
Bishop, E. S.	Dunwoody, Mrs. Cwyneth (Exeter)	Hilton, W. S.
Blackburn, F.	Dunwoody, Dr. John (F'th & C'b'e)	Hooley, Frank
Blenkinsop, Arthur	Eadie, Alex	Hooson, Emlyn
Boardman, H.	Edelman, Maurice	Horner, John
Booth, Albert	Edwards, Rt. Hn. Nets (Caerphilly)	Houghton, Rt. Hn. Douglas
Boston, Terence	Edwards, Robert (Bilston)	Howarth, Harry (Wellingborough)
Boyden, James	Edwards, William (Merioneth)	Howarth, Robert (Bolton, E.)
Braddock, Mrs. E. M.	Ellis, John	Howell, Denis (Small Heath)
Bradley, Tom	English, Michael	Howie, W.
Bray, Dr. Jeremy	Ennals, David	Hoy, James
Brooks, Edwin	Ensor, David	Huckfield, Leslie
Broughton, Dr. A. D. D.	Evans, Albert (Islington, S.W.)	Hughes, Rt. Hn. Cledwyn (Anglesey)
Brown, Rt. Hn. George (Belper)	Evans, loan L. (Birm'h'm, Yardley)	Hughes, Emrys (Ayrshire, S.)
Brown, Hugh D. (C'gow, Provan)	Faulds, Andrew	Hughes, Hector (Aberdeen, N.)
Brown, Bob(N'c'tIe-upon.Tyne,W.)	Fernyhough, E.	Hughes, Roy (Newport)
Brown, R. W. (Shoreditch & F'bury)	Finch, Harold	Hunter, Adam
Buchan, Norman	Fitch, Alan (Wigan)	Hynd, John
Buchanan, Richard (G'gow, Sp'burn)	Fletcher, Raymond (IIkeston)	Irvine, Sir Arthur
Butler, Herbert (Hackney, C.)	Fletcher, Ted (Darlington)	Jackson, Colin (B'h'se & Spenb'gh)
Butler, Mrs. Joyce (Wood Green)	Foley, Maurice	Jackson, Peter M. (High Peak)
Callaghan, Rt. Hn. James	Foot, Michael (Ebbw Vale)	Janner, Sir Barnett
Cant, R. B.	Ford, Ben	Jay, Rt. Hn. Douglas
Carmichael, Neil	Forrester, John	Jeger,Mrs.Lena(H'b'n&St.P'cras,S.)
Carter-Jones, Lewis	Fowler, Gerry	Jenkins, Hugh (Putney)
Coe, Denis	Fraser, John (Norwood)	Jenkins, Rt, Hn. Roy (Stechford)
Coleman, Donald	Freeson, Reginald	Johnson, Carol (Lewisham, S.)
Concannon, J. D.	Galpern, Sir Myer	Johnson, James (K'ston-on-HuH, W.)
Corbet, Mrs. Freda	Gardner, Tony	Johnston, Russell (Inverness)
Craddock, George (Bradford, S.)	Garrett, W. E.	Jones, Dan (Burnley)
Crawshaw, Richard	Ginsburg, David	Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Cronin, John	Gordon Walker, Rt. Hn. P. C.	Jones, J. Idwal (Wrexham)
Crosland, Rt. Hn. Anthony	Gourlay, Harry	Jones, T. Alec (Rhondda, West)

Judd, Frank	Morris, Charles R. (Openshaw)	Short, Rt. Hn. Edward(N 'c' tie-u-Tyne)
Kelley, Richard	Morris, John (Aberavon)	Silkin, Rt. Hn. John (Deptford)
Kenyon, Clifford	Moyle, Roland	Silkin, Hn. S. C. (Dulwich)
Kerr, Mrs. Anne (R'ter & Chatham)	Mulley, Rt. Hn. Frederick	Silverman, Julius (Aston)
Kerr, Or. David (W'worrh, Central)	Murray, Albert	Skeffington, Arthur
Kerr, Russell (Feltham)	Neat, Harold	Slater, Joseph
Lawson, George	Newens, Stan	Small, William
Leadbitter, Ted	Noel-Baker, Francis (Swindon)	Snow, Julian
Ledger, Ron	Norwood, Christopher	Spriggs, Leslie
Lee, Rt. Hn. Frederick (Newton)	Oakes, Gordon	Steel, David (Roxburgh)
Lee, Rt. Hn. Jennie (Cannock)	Ogden, Eric	Steele, Thomas (Dunbartonshire, W.)
Lee, John (Reading)	Oram, Albert E.	Stewart, Rt. Hn. Michael
Lestor, Mist Joan	Orbach, Maurice	Stonehouse, John
Lever, Harold (Cheetham)	Orme, Staniey	Strauss, Rt. Hn. G. R.
Lever, L. M. (Ardwick)	Oswald, Thomas	Summerskill, Hn. Dr. Shirley
Lewis, Ron (Carlisle)	Owen, Or. David (Plymouth, S'tn)	Swain, Thomas
Lomas, Kenneth	Owen, Will (Morpeth)	Swingler, Stephen
Loughlin, Charles	Padley, Walter	Symonds, J. B.
Luard, Evan	Page, Derek (King's Lynn)	Taverne, Dick
Lubbock, Eric	Paget, R. T.	Thomas, George (Cardiff, W.)
Lyon, Alexander W. (York)	Palmer, Arthur	Thomson, Rt. Hn. George
Lyons, Edward (Bradford, E.)	Pannell, Rt. Hn. Charles	Thornton, Ernest
Mabon, Dr. J. Dickson	Pardoe, John	Thorpe, Rt. Hn. Jeremy
McBride, Neil	Park, Trevor	Tinn, James
McCann, John	Parker, John (Dagenham)	Tomney, Frank
MacColl, James	Parkin, Ben (Paddington, N.)	Tuck, Raphael
MacDermot, Niall	Parkyn, Brian (Bedford)	Urwin, T. W.
Macdonald, A. H.	Pavitt, Laurence	Varley, Eric G.
McGuire, Michael	Pearson, Arthur (Pontypridd)	Wainwright, Edwin (Dearne Valley)
McKay, Mrs. Margaret	Pentland, Norman	Walden, Brian (All Saints)
Mackenzie, Gregor (Rutherglen)	Perry, Ernest G. (Battersea, S.)	Walker, Harold (Doncaster)
Mackintosh, John P.	Prentice, Rt. Hn. R. E.	Wallace, George
Maclennan, Robert	Price, Christopher (Perry Barr)	Watkins, David (Consett)
MacMillan, Malcolm (Western Isles)	Price, Thomas (Wesmoughton)	Watkins, Tudor (Brecon & Radnor)
McMillan, Tom (Glasgow, C.)	Price, William (Rugby)	Weitzman, David
McNamara, J. Kevin	Probert, Arthur	Wellbeloved, James
MacPherson, Malcolm	Pursey, Cradr. Harry	Wells, William (Walsall. N.)
Mahon, Peter (Preston, S.)	Randall, Harry	White, Mrs. Eirene
Mahon, Simon (Bootle)	Rankin, John	Whitlock, William
Mallalieu, E. L. (Brigg)	Rees, Merlyn	Wilkins, W. A.
Mallalieu,J.P.W.(Huddersfield,E.)	Reynolds, G. W.	Willey, Rt. Hn. Frederick
Manuel, Archie	Rhodes, Geoffrey	Williams, Alan (Swansea, W.)
Mapp, Charles	Roberts, Albert (Normanton)	Williams, Alan Lee (Hornchurch)
Marks, Kenneth	Roberts, Coronwy (Caernarvon)	Williams, Clifford (Abertillery)
Marquand, David	Roberts, Gwilym (Bedfordshire, S.)	Williams, Mrs. Shirley (Hitchin)
Marsh, Rt. Hn. Richard	Robertson, John (Paisley)	Williams, W. T. (Warrington)
Mason, Rt. Hn. Roy	Robinson,Rt.Hn.Kenneth(St.P'c'as)	Wills, Rt. Hn. George
Maxwell, Robert	Robinson, W. 0. J. (Walth'stow, E.)	Wilson, Rt. Hn. Harold (Huyton)
Mayhew, Christopher	Rodgers, William (Stockton)	Winnick, David
Mellish, Robert	Roebuck, Roy	Winstanley, Dr. M. P.
Mendelson, J. J.	Rogers, George (Kensington, N.)	Woodburn, Rt. Hn. A.
Millan, Bruce	Ross, Rt. Hn. William	Woof, Robert
Miller, Dr. M. S.	Rose, Paul	Wyatt, Woodrow
Milne, Edward (Blyth)	Rowlands, E. (Cardiff, N.)	Yates, Victor
Mitchell, R. C. (S'th'pton, Test)	Ryan, John
Molloy, William	Shaw, Arnold (llford, S.)	TELLERS FOR THE NOES:
Moonman, Eric	Sheldon, Robert	Mr. Charles Grey and
Morgan, Elystan (Cardiganshire)	Shinwell, Rt. Hn. E.	Mr. Brian O'Malley.
Morris, Alfred (Wythenshawe)	Shore, Peter (Stepney)

Main Question put:—

The House divided: Ayes 304, Noes 9.

Division No. 31.]	AYES	[10.13 p.m.
Abse, Leo	Binns, John	Butler, Mrs. Joyce (Wood Green)
Albu, Austen	Bishop, E. S.	Callaghan, Rt. Hn. James
Alldritt, Walter	Blackburn, F.	Cant, R. B.
Allen, Scholefield	Blenkinsop, Arthur	Carmichael, Neil
Anderson, Donald	Boardman, H.	Carter-Jones, Lewis
Archer, Peter	Boston, Terence	Chapman, Donald
Armstrong, Ernest	Boyden, James	Coe, Denis
Atkins, Ronald (Preston, N.)	Braddock, Mrs. E. M.	Coleman, Donald
Bacon, Rt. Hn. Atice	Bradley, Tom	Concannon, J. D.
Bagier, Gordon A. T.	Bray, Dr. Jeremy	Corbet, Mrs. Freda
Barnes, Michael	Brooks, Edwin	Craddock, George (Bradford, S.)
Barnett, Joel	Broughton, Dr. A. D. D.	Crawshaw, Richard
Baxter, William	Brown, Rt. Hn. George (Belper)	Cronin, John
Beaney, Alan	Brown, Hugh D. (G'gow, Provan)	Crosland, Rt. Hn. Anthony
Bellenger, Rt. Hn. F. J.	Brown,Bob(N'c'fle-upon-Tyne,W)	Crossman, Rt. Hn. Richard
Bence, Cyril	Brown, R. W. (Shoreditch & F'bury)	Cullen, Mrs. Alice
Benn, Rt. Hn. Anthony Wedgwood	Buchan, Norman	Dalyell, Tarn
Bennett, James (G'gow, Bridgeton)	Buchanan, Richard (G'gow, Sp'burn)	Darting, Rt. Hn. George
Bidwell, Sydney	Butler, Herbert (Hackney, C.)	Davidson, Arthur (Accrington)
Davies, Dr. Ernest (Stretford)	Johnson, James (K'ston-on-Hull, W.)	Pearson, Arthur (Pontypridd)
Davies, G. fifed (Rhondda, E.)	Jones, Dan (Burnley)	Pentland, Norman
Davies, Ednyfed Hudson (Conway)	Jones,Rt.Hn.SirElv"yn(W. Ham,S.)	Perry, Ernest G. (Battersea, S.)
Davies, Harold (Leek)	Jones, J. Idwal (Wrexham)	Prentice, Rt. Hn. R. E.
Davies, Ifor (Cower)	Jones, T. Alec (Rhondda, West)	Price, Christopher (Perry Barr)
de Freitas, Rt. Hn. Sir Geoffrey	Judd, Frank	Price, Thomas (Westhoughton)
Delargy, Hugh	Kelley, Richard	Price, William (Rugby)
Dell, Edmund	Kenyon, Clifford	Probert, Arthur
Dempsey, James	Kerr, Dr. David (W'worth, Central)	Pursey, Cmdr. Harry
Dewar, Donald	Lawson, George	Randall, Harry
Diamond, Rt. Hn. John	Leadbitter, Ted	Rankin, John
Dobson, Ray	Ledger, Ron	Rees, Merlyn
Doig, Peter	Lee, Rt. Hn. Frederick (Newton)	Reynolds, G. W.
Dunn, James A.	Lee, Rt. Hn. Jennie (Cannock)	Rhodes, Geoffrey
Dunnett, Jack	Lee, John (Reading)	Roberts, Albert (Normanton)
Dunwoody, Mrs. Gwyneth (Exeter)	Lestor, Miss Joan	Roberts, Goronwy (Caernarvon)
Eadie, Alex	Lever, Harold (Cheetham)	Roberts, Gwilym (Bedfordshire, S.)
Edelman, 'Maurice	Lever, L. M. (Ardwick)	Robertson, John (Paisley)
Edwards, Rt. Hn. Ness (Caerphilly)	Lewis, Ron (Carlisle)	Robinson,Rt. Hn. Kenneth(St.P'c'as)
Edwards, Robert (Bilston)	Lomas, Kenneth	Robinson, W. O. J. (Walth'stow, E.)
Edwards, William (Merioneth)	Loughlin. Charles	Rodgers, William (Stockton)
Ellis, John	Luard, Evan	Roebuck, Roy
English, Michael	Lyon, Alexander W, (York)	Rogers, George (Kensington, N.)
Ennals, David	Lyons, Edward (Bradford, E.)	Rose, Paul
Ensor, David	Mabon, Dr. J. Dickson	Ross, Rt. Hn. William
Evans, Albert (Islington, S.W.)	McBride, Neil	Rowlands, E. (Cardiff, N.)
Faulds, Andrew	McCann, John	Shaw, Arnold (llford, S.)
Fernyhough, E.	MacColl, James	Sheldon, Robert
Finch, Harold	MacDermot, Niall	Shinwell, Rt. Hn. E.
Fletcher, Raymond (IIkeston)	Macdonald, A. H.	Shore, Rt. Hn. Peter (Stepney)
Fletcher, Ted (Darlington)	McGuire, Michael	Short, Rt.Hn.Edward(N'c'tle-u-Tyne)
Foley, Maurice	McKay, Mrs. Margaret	Silkin, Rt. Hn. John (Deptford)
Ford, Ben	Mackenzie, Gregor (Rutherglen)	Silkin, Hn. S. C. (Dulwich)
Forrester, John	Mackintosh, John P.	Silverman, Julius(Aston)
Fowler, Gerry	Maclennan, Robert	Skeffington, Arthur
Fraser, John (Norwood)	McMillan, Tom (Glasgow, C.)	Slater, Joseph
Freeson, Reginald	McNamara, J. Kevin	Small, William
Galpern. Sir Myer	MacPherson, Malcolm	Snow, Julian
Gardner, Tony	Mahon, Peter (Preston, S.)	Spriggs, Leslie
Garrett, W. E.	Matron, Simon (Bootle)	Steele, Thomas (Dunbartonshire, W.)
Ginsburg, David	Mallalieu, E. L. (Brigg)	Stewart Rt Hn Michael
Gordon walker, Rt. Hn. P. C.	Mallalieu, J. P. W.(Huddersfield, E.)	Stonehouse, John
Gourlay, Harry	Mallallieu,J.P.W.(Huddersfield,E.)	Stonehouse, John
	Manuel, Archie	Strauss, Rt. Hn. G. R.
Gray, Dr. Hugh (Yarmouth)	Mapp, Charles	Summerskill, Hn. Dr. Shirley
Greenwood,Rt. Hn. Anthony	Marks, Kenneth	Swingler, Stephen
Gregory, Arnold	Marquand, David	Symonds, J. B.
Grey, Charles (Durham)	Marsh, Rt. Hn. Richard	Taverne, Dick
Griffiths, David(Rother Valley)	Mason, Rt. Hn. Roy	Thomas, George (Cardiff, W.)
Griffiths, Rt.Hn.James (Llanelly)	Maxwell, Robert	Thomson, Rt. Hn. George
Gunter, Rt. Hn. R. J.	Mayhew, Christopher	Thornton, Ernest
Hamilton, James (Bothwell)	Mellish, Robert	Tinn, James
Hamling, William	Millan, Bruce	Tomney, Frank
Hannan, William	Miller, Dr. M. S.	Tuck, Raphael
Harper, Joseph	Milne, Edward (Blyth)	Urwin, T. W.
Harrison, Walter (Wakefield)	Mitchell, R. C. (S'th'pton, Test)	Varley, Eric G.
Hart, Mrs. Judith	Molloy, William	Wainwright, Edwin (Dearne Valley)
Haseldine, Norman	Moonman, Eric	Walden, Brian (All Saints)
Hattersley, Roy	Morgan, Elystan (Cardiganshire)	Walker, Harold (Doncaster)
Hazell, Bert	Morris, Alfred (Wythenshawe)	Wallace, George
Healey, Rt. Hn. Denis	Morris, Charles R. (Openshaw)	Walking, David (Consett)
Henig, Stanley	Morris, John (Aberavon)	Watkins, Tudor (Brecon &Radnor)
Herbison, Rt. Hn. Margaret	Moyle, Roland	Weitzman, David
Hilton, W.S.	Mulley, Rt. Hn. Frederick	Wellbeloved, James
Hooley, Frank	Murray, Albert	Wells, William (Walsall, N.)
Horner, John	Neal, Harold	White, Mrs. Eirene
Houghton, Rt. Hn. Doughlas	Noel-Baker, Francis (Swindon)	Whitlock, William
Howarth, Harry (Wellingborough)	Oakes, Gordon	Wilkins, W. A.
Howarth, Robert (Bolton, E.)	Ogden, Eric	Willey, Rt. Hn. Frederick
Howell, Denis (Small Heath)	O'Mailey, Brian	Williams, Alan (Swansea, W.)
Howie, W.	Oram, Albert E.	Williams, Alan Lee (Hornchurch)
Hoy, James	Orbach, Maurice	Williams, Clifford (Abertillery)
Huckfield, Leslie	Oswald, Thomas	Williams, Mrs. Shirley (Hitchin)
Hughes, Rt. Hn. Cledwyn (Anglesey)	Owen, Dr. David (Plymouth, S'tn)	Williams, W. T. (Warrington)
Hughes, Hector (Aberdeen, N.)	Owen, Will (Morpeth)	Willis, George (Edinburgh, E.)
Hughes, Roy (Newport, N.)	Padley, Walter	Wilson, Rt. Hn. Harold (Huyton)
Hunter, Adam	Page, Derek (King's Lynn)	Winnick, David
Hynd, John	Paget, R. T.	Woodburn, Rt. Hn. A.
Irvine, Sir Barnett	Palmer, Arthur	Woof, Robert
Jackson, Colin (B'hse &Spenb'gh)	Pannell, Rt. Hn, Charles	Wyatt, Woodrow
Janner, Sir Barnett	Parker, John (Dagenham)	Yates, Victor
Jay, Rt. Hn. Douglas	Parkin, Ben (Paddington, N.)	TELLERS FOR THE AYES:
Jeger,Mrs.Lena(H'b'n&St.P'cras,S.)	Parkyn, Brian (Bedford)	Mr. Alan Fitch and
Jenkins, Hugh (Putney)	Pavitt, Laurence	Mr. loan L. Evans.
Jenkins, Rt. Hn. Roy (stechford)

NOES
Bessell, Peter	Hooson, Emlyn	Thorpe, Rt. Hn. Jeremy
Davidson, James(Aberdeenshire, W.)	Johnston, Russell (Inverness)
Ewing, Mrs. Winifred	Pardoe, John	TELLERS FOR THE NOES:
Grimond, Rt. Hn. J.	Steel, David (Roxburgh)	Mr. Eric Lubbock and
		Dr. M. P. Winstanley.
Resolved,
That this House approves the Statement made by the Prime Minister on 16th January.