HL Deb 31 October 1934 vol 94 cc25-56

LORD MELCHETT had the following Notice on the Paper—To draw the attention of His Majesty's Government to the unco-ordinated character of industrial organisation in this country, and to the fact that the principal industrial nations competing with us, in particular the United States of America, Italy, Germany, Japan and Russia, have introduced systems of rationalised industrial control, and to ask what plans His Majesty's Government have for rationalising the system of industrial control in Great Britain; and to move for Papers.

The noble Lord said: My Lords, I originally put this Motion down some little time ago, earlier in the year, but for one reason or another the discussion was postponed. For my part I am glad that it has been postponed, because I have found in practice that there has been a considerable development of opinion on this subject in the intervening months, and a far larger volume of opinion in favour of the idea that something in this direction is necessary than was the ease when I originally put my Motion on the Paper. I want to make it quite clear at the outset that the type of governmental assistance which I have in mind, and which the Government may have in mind—I am anxious to enquire what their views are—is of no particular interest to me from the point of view of those businesses and industries with which I am connected. They are already highly co-ordinated, perhaps the most highly co-ordinated in the country, without any assistance; and what I have to say will deal with industry as a whole and the advantages which I believe can be obtained by a greater measure of co-ordination than that which already exists.

In order to deal with this subject it is necessary to go a little way back into the history of the present Government in regard to industrial organisation and the actions which they have taken from time to time to assist the industries of the country. The two outstanding steps are the abolition of the gold standard and the introduction of tariffs. I think it would be pernickety and carping for any industrialist to complain too loudly to the present Government in regard to the condition of industry to-day. On the contrary, I think we should extend to them our congratulations for what they have done. Since these two steps have been taken we have seen a really unbroken industrial progress in England. We have seen a revival which has, in reality, led the whole world, and I think it is not in any way an exaggeration to say that the actions of the Government have made us the envy of the world so far as our present economic situation is concerned. The one point I might complain of is that these things were not done soon enough, and I should like to remind the House that these matters were discussed, sometimes upon resolutions of mine, sometimes upon resolutions of other members of this House, pressing the Government to take these two steps; but one is very glad to think they were taken and that they have proved to be unqualified successes.

Prior to the abolition of the gold standard and prior to the introduction of tariffs—and the second point is more important in this connection—there was continual discussion both in this House and in the other place, and in the country, in regard to the reorganisation of industry. It was a continual topic of discussion and a matter very frequently referred to. The argument that was continually advanced was: "Industry cannot reorganise in its present depressed condition. First of all we must have the tariffs, first of all we must have some protection, and then we shall reorganise." The Government made that point on more than one occasion, that they would see to it that industrial reorganisation took place under the shelter of the tariffs and in the prosperous conditions which they believed, and rightly believed, would follow. I want to make that point at this stage because the Government really have a large moral obligation to take some steps in that direction in view of the progress that has been made and in view of the steps previously taken in regard to currency and tariffs.

It is not necessary for me to stress the lack of co-ordination which exists to-day. Very few exceptions are sufficient to prove the point. The London Transport Board is an obvious exception. There you have a high degree of co-ordination brought about through the intervention of Government. Electricity is another on the same plane. Government policy in this respect has been signified on more than one occasion, particularly in regard to shipping and agriculture, where Government intervention and Government assistance were only granted as a result of reorganisation within the industry itself, and the Government made that a condition of their assistance. There is the very outstanding case of the great liner, the "Queen Mary," the No. 534, where the Government refused to assist until certain steps had been taken by the industry itself.

Were it necessary in any way to stress what is to me obvious, the activities of our principal foreign competitors would be quite conclusive. There is not one of the important industrial competitors of this country which has not introduced some form or another of general Government action leading to better co-ordination of industrial enterprise. I think one can by study of various forms of activity, various schemes, arrive at certain common denominators and one can really set them out quite clearly. There are five. All these schemes take power to limit production, to fix prices, to prevent the erection of redundant plant, to fix minimum wages in very many cases, and to limit imports—in fact, one might say, all the pre-requisites of "the application of scientific organisation to industry, by the unification of the processes of production and distribution, with the object of approximating supply to demand." These were the words used by my predecessor in this House when he gave to the Nuttall Standard Dictionary in 1928 a definition of "rationalisation." These points which I have mentioned are really pre-requisites to such a scheme. It is not going too far to say that what was at that time the ambition of the most enlightened industrialists has become the vital necessity of all great industrial nations.

One might take each country separately and see what has been done. For instance, in the case of Italy there was an Act of 1932 which provided for the establishment of compulsory combines in industry at the request of 70 per cent. of the undertakings, and for a duration of not more than five years; the establishment of new industrial undertakings or the extension of existing equipment only to be undertaken with the permission of Government. Provision for capital is made by the Act of 1933 which created the Industrial Reconstruction Institute to raise the funds required by such industrial undertakings as in their opinion deserved help. Further than that, by the Corporations Act of 1934 corporations comprising as far as possible a single great branch of production were empowered to regulate economic relations, draft rules for centralised discipline in production, and fix prices in certain cases for commodities offered to the public under privileged conditions for public utility services. There one sees, in ideal broad general framework, how industrial enterprise falls very largely within the definition of the common factors which I set out to begin with.

One might turn to Germany. In Germany economic activity has been divided into twelve groups—coal, iron and steel; machinery, electro-technology, &c.; iron and metal goods stone, bricks, earth, wood and building; chemistry, oils, and paper; leather, textiles and clothing; foodstuffs, articles of consumption; handicrafts; trade; banking; insurance; and traffic. Of this scheme the Minister of Economic Affairs said: Formerly, every enterprise could do business as it liked. There was no means of compelling a business undertaking to join trade organisations, or to carry out their decisions. Nor was it possible for the State to influence the trade association itself except for its right of supervising existing cartels. This has been extended recently to enable the State to compel the formation of cartels, but a full and systematic organisation was still lacking. That was a speech of the Minister of Economic Affairs made in March of this year. In certain industries the installaton of new machinery or the restarting of idle machinery is prohibited, and the maximum working week of thirty-eight hours for machinery—not for men but machinery—was established in some cases. The labour situation was very seriously modified from anything previously existing by the setting up of industrial courts designed to prevent the outbreak of industrial disputes. As far as I am able to obtain information, the method of working in practice in Germany is that if any undertaking is not in its respective association, the Government sends for those responsible for the enterprise and asks them to show cause why they should not join their respective trade association and abide by its rules.

Since then there has been a very striking development which is announced in this morning's newspapers. In The Times there is the news that the same Minister for Economic Affairs leas carried through a great compulsory corporation for the production of petrol from coal. He has literally taken the industries concerned by the scruff of the neck, and compelled them to subscribe to this company. He has compelled them to come into it, and he is going to compel them to erect the necessary plant to make. Germany independent, so far as petrol is concerned, in a very short number or years—namely, by about 1937. I dare say most of your Lordships have read about that in the newspapers this morning, but there are one or two aspects of it that have a very real bearing on what we are discussing this afternoon. One particular point to which I would draw attention is this. It is stated that: Members of the compulsory association are chosen by the Economic Minister and can be removed by him. The company formed by the association can be represented in legal and other matters by the Commissioner, although all costs of organisation are borne by the shareholders in the company. The Commissioner can cancel resolutions and rulings of the general meeting if he thinks they are against the interests of Reich and people, and he and his representatives have the right to take part in the sittings of the controlling board of directors, the members of which are appointed and withdrawn by him. Most radical of all is the provision that the Commissioner may act as representative of the company and give opinions and conduct negotiations on its behalf. Of all the schemes that have come under my notice in the study I have made on this subject this is by far the most drastic and by far the most revolutionary and, in my judgment, by far the most improper. I merely draw attention to it as evidence of the fact that one more of cur great industrial competitors has got Government action to bring about the re- organisation and co-ordination of industries, and Government action in this case in its most violent form.

Then one comes to Japan. I found it very difficult to discover anything very precise about Japanese industrial legislation, but it is well known from experience that the Japanese Government are in a position to speak with authority on behalf of the whole or any part of Japanese industry, and in fact they do so, and bind industry without hesitation. They have, of course, a national industrial policy which includes a very large expansion of exports, even in types of industry where they are not yet able to satisfy their own domestic needs. The necessary agreements that come up from time to time enable such a policy to be easily developed and rapidly achieved by the direct intervention of the Government, who really compel the local industrialists to adopt a policy which suits the Governmental policy, although it may be quite contrary to their own immediate interests. It is not unfair to say that Japan has achieved a very great measure of national industrial co-ordination as a. result of less actual legislation than would be required in other countries. But their whole type of Government is, of course, very different from that of other countries.

Next one comes to Russia, one of the greatest industrial countries of the world, in spite of the difficulties which they experience in carrying on their business in any reasonable way. They have carried what might be called planning or co-ordination further than any other country, and their whole method of planning and production is quite different from that of other countries. They have classified industry into twenty-five main groups. There are certain industries which are detailed to work for export, and to get foreign balances with which to obtain the machinery to create the new industries that they require to provide for their domestic consumption, and they have a special banking system which enables them to provide funds for their domestic industries. The relative importance and effort of the domestic and the export industries are entirely controlled by the Government. If they want, for instance, to export coal, or wheat, or timber, they send these articles out of their country, and sell them at a price which is in no way at all concerned with the cost of production, but which is only concerned with the relative world market price at which they can dispose of their products. That is equated against the prices they obtain internally for those products which they make at home, and of course, they have the greatest possible measure of control of all such subjects as wages and prices. Then in Switzerland you have a recent decree prohibiting the erection of industrial plants without the consent of the Government, another step taken in order to prevent the creation of redundant industrial plants.

One comes last, but not least, to the United States of America, which shows perhaps the most recent and the most complete attempt that has ever been made to arrive at a planned industrial State by a single stroke. It is hardly necessary for me to go at great length into all the points of the N.R.A. because they are well known. It is sufficient to point out that (apart from what has been done in practice) in theory the National Recovery Act was designed to eliminate unfair competitive practices. It lays down conditions of fair competition, describes minimum prices, minimum wages, age of employment, maximum hours of labour, and gives power for the control of imports. Most important of all, power is given to industries to create their own codes by majority decisions of 80 per cent. of the members of a trade or industry. They have also in many cases power to prevent the construction of redundant plant. That is frequently quoted as a gigantic failure, and in many respects it has been, but it is a great mistake to think that that is entirely the case. Only the other day news was available in this country that, for instance, in the case of the coal industry N.R.A. had been a striking success and that the industry was asking the Government to extend the code for a further period or alternatively to give similar relief from the anti-trust laws. There was unanimous agreement in the industry that the code had brought about material improvement in the conditions and that there must be no return to the old system of violent competition.

So it is no use being frightened of what has happened in America or imagining that everything that has happened there has been evil. On the contrary, there have been cases where it has worked very well. Of course con- ditions are entirely different. One of the main causes of the failure of N.R.A. was not the design of the codes but the fact that labour in America was in no condition to take on the responsibilities very suddenly imposed upon it. Quite naturally and quite properly a part of the codes gave labour the right and the privilege of organisation. That has been resisted by many employers, not only in theory but in practice, because practically in America there were no really experienced trade union leaders such as we have in this country. Those who had experience had great obligations thrown on them and they were at once asked to go to Washington, so that all the experienced labour men were collected in the capital in a very few weeks. Outside, in the factories themselves, there remained a large number of young and inexperienced men rapidly promoted to positions of great responsibility which they were not able to handle. In many cases they made a great mess of affairs and got their industries into quite unnecessary difficulties. That is one of the main difficulties they have had in dealing with industrial organisation in America. But apart from that it must never be overlooked that the greatest achievement of N.R.A. was the destruction or counteraction of the Sherman Anti-Trust Acts which, next to prohibition, were, I suppose, about the worst piece of legislation ever passed by the Legislature of America.

After reviewing the various countries it is interesting to come back and see what has been done in England. As a matter of fact a very great deal has been done in this country. The Ministry of Agriculture has passed the greatest industrial reorganisation schemes ever carried through in this country, almost the greatest ever carried through in any country. They are very sadly weakened by the absence of essential provisions for adequate control of imports, but apart from that they have been carried through with less difficulty than any one would have believed possible. We have had a declaration from the Government which is perhaps in its own way the most striking thing that has been uttered by any Government on this subject. In fact it is to my mind so much a charter of the liberty of industry that I have always described it to myself, and I am prepared to describe it to your Lordships, as "Hailsham on Hops." It is one of the most striking statements ever made on the question. Not long ago the noble Viscount who leads the House made a speech to which I should like to draw the attention of your Lordships in order to remind you of what he then said. Out of a long speech the whole of which is full of extraordinarily valuable points there is one passage which I would quote as being particularly important. The noble Viscount referred to the old-fashioned laissez-faire Radical who thought that the play of supply and demand was a law of God with which it, was almost profanity to interfere. The noble Viscount went on to say: That is not the view of this country, and it is not the view of this Government. We think that the producer has a right to reasonable protection at the hands of the community. We think the producer deserves at least as much consideration at the hands of the Government and of the people of this country as the consumer. We think that the right thing is to try and hold an even balance between the two. In the rest of his speech he pointed out how necessary it is to control industry, to give the producer the opportunity of controlling prices and preventing the construction of what in this case is the equivalent of the redundant plant, to prevent imports, and to do all the other things for which I have pleaded this afternoon.

I think one can very fairly claim so far as that is concerned that the principle of what I am asking for has been in fact admitted by the Government. Not only has the principle been admitted by the Government, but industry is finding it more and more necessary to come forward to the Government with schemes of this kind. We have the case of the cotton industry. As we know the cotton industry is in grave difficulty and it has formulated a scheme which in my belief it will be impossible to carry through without the assistance of Government. The dyers are bringing forward a similar type of scheme, the wool-combing industry, the coastal shipping industry and others are preparing voluntary schemes or are coming to the Government to ask for assistance in enforcing schemes. All the schemes embody the factors I have mentioned, and include also the power to write down redundant plant which it is decided to put out of operation. I think that is one of the really vital points in any consideration of this question. The writing down of redundant plant put out of action as the result of any scheme of rationalisation can only take place over a long time. It cannot be done quickly. It requires the stability and the continuity necessary for longterm finance.

In this connection there is one scheme which is of particular interest as showing how totally ineffective voluntary schemes can be. It is, I believe, the case that the milling industry adopted a voluntary scheme and that 90 per cent. of the industry came together and imposed upon themselves a voluntary levy of 3d. a sack. With this money they purchased and closed down old and inefficient mills, and for same years, by agreement in regard to production, they succeeded in fixing prices and they ran a very satisfactory scheme. At the end of some two or three years the whole industry was in a very much better condition. Large profits, or considerable profits, have accrued to the companies operating the scheme and there has been little rise in the price of the product to the consumer. But the 10 per cent, who remained out and did not impose upon themselves this levy of 3d. per sack were in a very much stronger position than any other section of the industry, and when it became necessary to consider the erection of new plant they were in a better position to raise capital and to embark on the erection of new plant than the 90 per cent. who had really brought about the returned prosperity of the industry. So one finds the scheme beginning to break down, and more and more of the larger producers comprised in the 90 per cent. going over and joining the 10 per cent. minority, and thereby breaking up the scheme and destroying that benefit which had been brought about.

That really is where the whole crux of the matter comes—that sooner or later the Government have got to give power to industry to compel a small recalcitrant minority to come into a scheme which has been considered to be for the general benefit of an industry as a whole. It is absolutely essential that those powers should be given. No one appreciates the difficulties more than I do, but that is really the question which industry is asking the Government this afternoon: What are the intentions of the Government in this matter? What are their plans? Have they got any? Have they any views? Can they give us any encouragement? Surely it has been as open to them as it has been open to the rest of us, to see what has been done in almost every other industrial country on the face of the earth.

I have spoken at some length this afternoon because I have felt it necessary to draw attention to these points. It will be essential, and it is vital, that such powers should be given to us in one form or another. I do not believe that it is a practical notion that each industry can come separately to Parliament and ask Parliament to give it a separate Bill for its own particular scheme. I do not know how many groups you can make of British industries; certainly you cannot make less than twenty-five or thirty. These Bills will be controversial and lengthy documents, and with the Parliamentary time available it is quite inconceivable that we should wade through the reorganisation of British industry in this form, with a series of measures of this kind. I am quite convinced that what will be essential is a general Enabling Act to permit an industry to make application to the proper Minister for a scheme and for an Order giving it compulsory powers to compel any minority, which wishes to stand out, to come into its scheme. I think that the best machinery which can be set up in this case will be something on the lines of the Tariff Advisory Committee, which has worked so very well in this country, and which is a model I think we might well follow—a committee which could thoroughly investigate any scheme brought before it, make recommendations to the Minister, and enable an individual industry to set up a trade association governing the industry itself, and, by means of a committee at the head of that association, to grant a measure of self-government to the industry which I believe is vital, and the alternatives to which I believe to be extremely harmful.

I have no intention this afternoon of going into the details of such a scheme. It is my intention at the very beginning of next Session to bring a Bill before your Lordships dealing with the details, in order to enable our discussions to be more precise and in order to enable us to go into all the many aspects of the practice of this question, quite apart from the theory which I am discussing this afternoon. I am acutely conscious of the difficulties. I have been at great pains to draft this Bill, and I can very easily see the difficulties—the questions of the definition of an industry or an ancillary industry; the protection of minority interests; the protection of the consumer, both the industrial consumer and the trade consumer; adequate protection to labour, a very vital point in any of these schemes; the whole question of new entrants and new processes, perhaps the most difficult point of all. All those questions have to be dealt with. It is not my intention to take up time this afternoon by going into them. They present grave and real difficulties, but to my mind there is not one of them which is insuperable. I think that the alternative is very grave. If one takes into account a point which I was discussing earlier in my remarks this afternoon, the question of what has been done in Germany in regard to the compulsory formation of a completely new industry, I think one can say without exaggeration that industry finds itself between the Scylla and Charybdis of Hitler and Stalin.

What I am asking the Government to do is to give us self-government, to allow us to set up our own associations and to manage them ourselves with such authority of law as is necessary to make the view of the majority compulsory upon the small minorities which otherwise can wreck our schemes, and to produce the minimum of Government interference. I am not one of those who advocate a great deal of Government interference in industry—it is not likely to work very well—but there are certain powers which we are bound to have unless we are to remain in the same unorganised and unco-ordinated condition as that in which industry finds itself to-day. It is not as though this was altogether a novel point. It is not as though leaders of industry, perhaps speaking with far greater authority than I can, have not stressed this over and over again. One could produce hundreds of quotations in support of this view. This afternoon I will produce only one. Sir William Firth, the Chairman of Richard Thomas and Co., Ltd., speaking in the early part of this year on the question of the reorganisation of the iron and steel industry, said: Private and individual interests block all possibility of progress being made on a basis of national efficiency. Statutory power is essential. That is really the truth of the matter.

Of course, it is very frequently not in the interests of certain individuals to come into a scheme which is very much in the interests of the industry as a whole and very much in the interests of the nation. Quite small personal interests continually prevent people from joining in a scheme of that kind. The fact that they will lose their personal pre-eminence, or that some friends or protégés of theirs will not achieve quite such good situations as they otherwise hoped to place them in, is a very common cause preventing people doing things, which they otherwise would do for the health and benefit of their industry. Everybody who has any experience in this matter knows that very well. There are small companies who feel that they will have the opportunity of doing better under the shelter of a large association. They remind me of the situation of ten men whose business it may be to dig a trench to prevent themselves being shot by the bullets of the enemy; nine of them work hard and dig the trench, and the tenth man joins them inside. He of course is in a stronger and better position to do either any fighting or any running which may be necessary thereafter; and he has done none of the essential work which has given him this protection. It is that situation which has to be remedied, and it can be remedied only by statutory power.

The type of financial organisation of which I have had some experience and of which I have seen a good deal is no answer to this. It is extremely unusual to get large companies to agree among themselves to combine their financial identity, to sink their personalities and to come together, unless there are very powerful inducements. Nor is it necessarily an ideal thing that this country should have nothing except a few very large industrial companies. The trade association is an ideal middle course for the reorganisation of British industry. It cannot be effectively undertaken without the legal power of the majority to bring in small recalcitrant minorities, and it is, I believe, absolutely essential for the Government eventually to give us some powers in this respect. I sincerely hope that we shall hear something this afternoon from the Leader of the House which will give us some encouragement in this matter.


My Lords, as I gather that there is no one else who desires to address your Lordships on this very interesting topic, it falls to me on behalf of the Government to make some reply to the very interesting speech to which we have just had the privilege of listening. I should like to preface what I have to say by thanking the noble Lord who has just spoken, not so much for the introduction of this topic, because unfortunately it does not seem to have provoked that discussion which he and certainly I had hoped to listen to, but because it has given him an opportunity of elaborating his views on a subject to which I know he has given a great deal of attention, and on which he can certainly claim to speak with much more authority than I can claim to possess. In fact, the only reason that I take it upon myself to address your Lordships this afternoon, is that I feel that a subject of such a character requires careful reply on behalf of the Government, and since, unfortunately, the Board of Trade is not directly represented in your Lordships' House, I have thought that it will be more courteous to my noble friend, and perhaps more satisfactory to your Lordships, if I state the view which, as I understand it, my right honourable friend the President of the Board of Trade holds on some of these topics.

Without prejudging the form of the Bill which my noble friend has promised us next Session, and without in any way forecasting what the attitude of the Government may be towards that Bill—because, as he will readily understand, and indeed as he himself pointed out, the subjects with which the Bill proposes to deal are very intricate, very complicated, and such regulations by governmental action as he proposes to sanction are matters which would have to be very carefully considered, in order to see that no injustice is done to any section of the community—at the same time I am very glad indeed to know that he is proposing to bring forward such a Bill, because I am quite sure that the contributions which he makes will be worth very careful consideration, and because also I hope it will elicit views from all sides of the House which may assist the Government in considering what is undoubtedly a very necessary matter for consideration.

There are certain propositions which I think present themselves in considering this subject of Government interference in the rationalisation of industry in this country. First of all, I think it will be generally agreed that since the conditions must differ in vital respects in various branches of industry, it is plain that there is no one method which can be selected as suitable for the development and organisation of all industries, and which can apply equally and indifferently to every one. Secondly, I think from that proposition it follows that since those engaged in an industry presumably know best what are the special needs and difficulties of that industry, proposals for its development and organisation should normally come from the industry itself; in other words, that we should proceed rather by evolution from within an industry than by revolutionary alterations imposed by Government from above. Then I think also that we have to remember that whereas, as my noble friend has pointed out, there are some industries and some conditions in which the co-operation, or indeed the initiation by the Government of proposals, may be necessary, we must not assume that Government co-operation or statutory authority is necessary in every case. I think that if an industry evolves a system of development, and finds that it is necessary for Government assistance to be invoked, it must make out a case for establishing that necessity, and I think even more strongly that where outsiders demand that rules and regulations shall be imposed upon an industry by the Government, against the will of that industry, they must make out a very strong and exceptional case in order to justify that demand. One has to remember that the mere fact that there is a probability of Government intervention, and uncertainty as to whether the Government are likely to interfere or not, is hanging over the head of any industry, is in itself calculated to check its development and discourage those engaged in any enterprise.

Apart from that, one has to be very careful before we sanction compulsory and statutory authority to deal with some of the matters to which my noble friend suggests that a plan of rationalisation ought necessarily to apply. Let me mention only two of those to which he referred. Statutory authority is sought to fix prices and to fix wages. As my noble friend has reminded us, it has not been many years since anything in the nature of a trust or ring was regarded as inherently undesirable, and there is antitrust legislation within the United States, to which he referred, as evidence of that fact. To-day we recognise that under certain conditions requirements for fixing prices and regulating and partitioning trade between firms engaged in the same business may be necessary and desirable, but so long as they remain voluntary there is this check imposed upon them, that if they impose prices which are unreasonably high they run the risk of other persons coming into the trade and underselling them, and breaking the ring. If, however, you have a statutory authority behind your fixation of prices the consumer is completely deprived of that protection, and that is a matter which has to be very carefully borne in mind before we agree to that proposal.

Then again, proposals for fixing wages. Under certain conditions it may be necessary to take such a power and to exercise such a power, but to allow the State universally to fix wages in all industries would seem to me to be a very dangerous power to give, and one which would be very likely to lead to very serious situations if the organised labour in that industry, for example, regarded the wages as inadequate and was desirous of establishing its case in the last resort by attempting a strike. A strike against wages imposed by a combination of employers is always an unfortunate necessity. I think strikes and lock-outs are relics of barbarism, and I am sorry whenever they become necessary, but the possession of that power is very often the one protection which the workmen may have; and if you are going to have wages fixed by the State, then apparently a strike against such a wage would be a strike, not against the employers at all, but against the State itself. That is a matter which I am not suggesting is an insuperable or an invariable objection to any form of the regulation of wages by Statute, but that sort of consideration makes it necessary in my view to proceed with very great caution before we can accept as a principle that the State is always to give statutory authority to agreements to fix wages.

Moreover, I am not at all sure that industrialists themselves would welcome too much interference by the State in such matters as the regulation of production and the decision as to how much plant shall be used, as to whether any fresh plant should be installed, as to whether any new-comer shall be admitted into the industry, and matters of that kind. Excessive organisation may, in some cases, lead to red-tape and to weakness rather than to efficiency and to cheapness. All these matters have to be very carefully borne in mind before we can accept any general rule that the State is in all cases to be invoked to assist in the matters which my noble friend defined as being the immediate subjects of rationalisation. My noble friend quoted one very striking instance of how far they have gone in foreign countries. He told us that in Germany an Act has been promulgated—because I think the preliminary of introducing a Bill does not exist in that country—under which there is to be, as I understood him, a corporation formed to which everybody is compulsorily to belong, that a Commissioner is to be appointed by the State who will regulate the affairs of the corporation, and the risk of any loss will be thrown upon the involuntary shareholders.

It so happens that the development of oil from coal is a matter which we also in this country have considered, and with regard to which the Government have formed their own plan to encourage production in this country. It happens to be a plan which my noble friend knows very well, because it is one under which one of the great industrial organisations with which he is connected is at present actively engaged in operating. I wonder which he would have preferred—that the production of oil from coal should be encouraged, as it is in Britain, by providing a measure of protection for a defined period of years against foreign importation, so as to encourage the voluntary effort of the great industries in this country in finding the most effective means of producing the oil from the coal; or the method adopted in Germany of compelling them all to come in by appointing a Trade Commissioner to manage it, and of making them bear any loss which may ultimately result. I am not sure that that comparison gives us any reason to be ashamed of the method which he have chosen to adopt.

That leads me to this observation, that when we compare how we have fared under the system under which we are at present working, and under which we have been working since the National Government came into power, with the results achieved by foreign nations, I am not sure that the comparison tends to support the view that foreign nations do these things so much better than we do, as we are sometimes apt foolishly to suppose. I have had taken out some figures which I think may interest some of your Lordships with regard, first of all, to the volume of exports in four or five of the leading countries in 1929, 1931 and 1933, and a comparison between the results which this country has achieved and the results which have been published in these other countries. Taking the volume of exports of 1929 as the basis of comparison, treating that therefore as equivalent to 100, in the year 1931 the volume of exports in this country had fallen off as compared with 1929 by 37 per cent. In 1933, two years later, the volume of exports had fallen off, as compared with 1929, by only 36 per cent. So that, in fact, there was an improvement, although only a small improvement, in the volume in 1933, as compared with the volume in 1931—an improvement of 1 per cent.

Now let us look at the United States. The volume of exports in 1931 compared with 1929 showed a falling off of 33 per cent.; in 1933 it showed a falling off of 48 per cent.; so that, instead of an improvement of 1 per cent., we find a deterioration of no less than 15 per cent. Well then, there is Italy, another country which is cited in the terms of the Notice on the Paper. In Italy in 1931 there had been a very slight reduction in the volume of exports—a falling off of only 1 per cent. as compared with 1929. In 1933 the falling off had risen to 21 per cent.; in other words, the position of Italy had deteriorated by no less than 20 per cent. Germany is another case cited by my noble friend. Germany in 1931 showed a reduction in volume, as compared with 1929, of 14 per cent.; in 1933 the reduction was 44 per cent.—a deterioration of no less than 30 per cent. in the comparison of the two years.


You are dealing only with the volume of exports?


That is so. I am coming to production, so far as we can get the comparative figures; but for the moment I was dealing with the volume of exports only. I have no figures to give to your Lordships with regard to Russia. Unfortunately there seem to be no figures available, but I do not think that is very material in this discussion, because I cannot suppose that anybody in your Lordships' House would desire that the system of Government control which is enforced in Russia, with the tale of misery and hardship and almost slavery which it involves, should be enforced in any degree in any free country. Japan is the one instance of improvement. Japan in 1931 had a falling off in exports of 16 per cent., and in 1933 had an improvement, so far as the preliminary figures show, of 10 per cent.; so that Japan has improved by 26 per cent. I understand, however, from those who are familiar with the conditions in Japan that it is at least arguable that the fall in the external value of the yen and the very low costs obtainable by Japanese labour through mechanised production account for that much more than any alteration of the system of industrial control or any increase in Government rationalisation. Your Lordships will therefore see that the only country apart from our own that shows an improvement is Japan. All the others show a falling off. It does not look, therefore, as if we had a great deal to learn from other countries in our ability to weather the economic storm which has afflicted the world during the last few years.

My noble friend Lord Reading asked me whether these figures were confined to exports. I have also got some figures with regard to production, and if I am not trespassing too much on the time of your Lordships' House I should like to be allowed to give a few of them. In the case of production the standard taken is the average of the period 1927 to 1929. The average of these three years has been taken as the standard, and the comparison again is made between that standard and the two years 1931 and 1933. In the United Kingdom the percentage of production in 1931 was 86.7 per cent. of the standard year. In 1933 the percentage had improved to 90.9 per cent., an improvement in the case of this country of 4.2 per cent. Japan again shows a greater improvement, from 107.1 per cent. in 1931 to 131 per cent. in 1933, an improvement of 23.9 per cent. But with that solitary exception there is in every other case except our own a falling off in the comparison of 1933 with 1931.

I need not trouble your Lordships with the full figures, but in the case of Italy the falling off is 4.2 per cent. In the case of Italy we had to take the 1928 figures instead of the average of the three years, but I do not suppose that makes very much difference in the calculation. In the case of Germany the falling off is 4.9 per cent.; in the case of the United States it is 4.4 per cent.; and in the case of most other countries it is substantially larger. Czecho-Slovakia, which is one country that is coming forward as an industrial producer, shows a falling off of actually 21.8 per cent., Poland one of 14.5 per cent., and France one of 13.2 per cent. So that once more if we take that test it would seem that the United Kingdom comes out better than almost any other country, and again I say it does not look as if we had much to reproach ourselves with as compared with other nations in the way in which we have handled the situation of the last three years.

I could, if necessary, but I doubt whether it really is necessary, go through a number of the leading industries in this country and show what in fact has been and is being done, because, as I know my noble friend would be the first to admit, it is a complete mistake to suppose that in this country we are not taking very material and very striking steps in the direction of rationalisation of the various great, industries of the country. Reorganisation has, of course, become much more possible, as he was good enough to point out, since the introduction of the tariff system has rendered it possible for us to reorganise behind the protection of that tariff wall. In the case of agriculture, to which he himself referred, under the Agricultural Marketing Act a whole series of schemes has been brought in which I suppose only a very few years ago would have been regarded as impossible by almost any politically-minded body in this country, but which are now accepted and are operating, not always with complete success but at any rate with more or less success, and which are steadily giving us experience and enabling us to improve them as time goes on and are placing agriculture once more in the position which it ought always to occupy, as one of the great industries that vitally affect the well-being of the whole community of this country.

In the case of coal there have been Acts passed which render it possible to reorganise the coal industry of this country, district by district, and your Lordships may have read only the other day—I think on Monday last—in The Times newspaper an account of the advance which has been made towards the amalgamation of collieries under the powers granted to the Coal Mines Reorganisation Commission, showing that sometimes on the basis of amalgamation, sometimes on the basis of federation, sometimes by means of compulsory schemes, sometimes by means of voluntary schemes, real marked progress is being made in reorganising that great industry. Again, I would remind your Lordships, since my noble friend cited the success of the coal industry reorganisation schemes in the United States, that we too have shown a very marked improvement in that industry in this country during the last twelve months.

Then again, in regard to iron and steel your Lordships will remember that not only have numerous reorganisations taken place, but as a condition of the grant of a substantial measure of protection the Import Duties Advisory Board advised that the iron and steel industry should achieve a very large measure of reorganisation, and your Lordships are probably aware that as a result of that encouragement there has been formed in the industry a body called the British Iron and Steel Federation, which is only the first step in reorganisation because it is formed for the purpose of establishing machinery to bring about a scheme of real reorganisation. That first step has been taken and a piece of machinery has been set up which, in the words of the Imports Duties Advisory Committee, presents "great possibilities of usefulness to the industry and to the nation at large," although "its ultimate success will depend upon the vigour and single-mindedness with which that machinery is used." Further, in shipbuilding there has been a voluntary scheme very much on the same lines as the flour millers' scheme to which my noble friend drew attention. I need not remind him of the very complete rationalisation which has taken place in the chemical industry, because he knows very much more about that than any of your Lordships even wish to know.

Similarly, in regard to electricity. Some twenty years ago Great Britain hardly counted in electrical engineering. Practically the whole of the great electrical engineering firms of the world were outside this country, and we drew the bulk of our supplies from abroad. Owing to reorganisation the industry has now brought itself fully up to the level of its foreign competitors and is able to hold its own in competitive enterprise, not only in supplying the home market but also in securing its fair share of foreign orders. As to the supply of electricity, your Lordships are familiar with the Act of 1926 which established what is known as the grid system, under which the whole of the production and generation of electricity has been centralised in the hands of one board.

Again, in the transport industry one need not do more than refer to the Railways Act of 1921 and the great measure of reorganisation and concentration which that involved. Looking down to more recent times, there was the London Passenger Transport Bill which was piloted through this House by my noble friend Lord Londonderry, and which has concentrated and organised and rationalised the whole system of passenger transport in the Metropolis. There is, too, the Road and Rail Traffic Act of last year which gave effect to recommendations of the Commission set up under Sir Arthur Salter and rationalised the competition between the road and the railway. Then, in the shipping industry, there are a number of schemes, which I need not take up time by describing because they are all the subject of discussion even to-day, under which a variety of offers and suggestions have been put forward by His Majesty's Government conditional upon reorganisation of the industry itself. I am given to understand that the industry is at the present moment engaged in working out a plan under which it is hoped to achieve a reasonable scheme of rationalisation.

In all these directions very great advance is being made, advance which has not ceased and shows no signs of ceasing to-day. The process of modernisation, of organisation, and of rearrangement goes on all the time, and the Government have not been found lacking when a case has been made out in rendering assistance to any scheme of the kind. But it is rather a different thing when we are asked to pass a general Act which is going to enable any industry to reorganise itself and to claim statutory powers for the reorganisation scheme which it sets up. My noble friend in his speech recognised the difficulty of doing that effectively. He indicated that there were precautions, which he was going to introduce into his Bill, which he thought would go far to meet the objections that obviously could be raised. With regard to that, I can only assure your Lordships and my noble friend that when that Bill is introduced it shall receive the most careful consideration, not only from my right honourable friend and the Board of Trade of which he is the head, but from the Government at large, in order to see how far he has been successful in overcoming the difficulties of which he is so conscious. Beyond that it would not be wise for me to go, and he would not expect me to go.

For this evening I think it is sufficient for me to say that on the record which we have the industry of this country and the Government of this country have no reason to be ashamed of the progress which has been made during the last three years. We see that in this country almost alone in the world production has increased, exports have revived, and unemployment has decreased. While there is still a long road to go before we reach our old standard of prosperity and well-being, we have no reason to despair that in due course that measure of prosperity will be attained.


My Lords, I intervene only for a moment or two and for a particular purpose. I do so in order that it may not be thought that we on this side of the House and indeed the members of your Lordships' House in general are not interested in the Motion which has been raised. For myself, I find that this debate has been most interesting, and I think your Lordships will be indebted to my noble friend Lord Melchett for introducing the subject and for an opportunity of considering all the matters he has put forward. As a result of what fell from the noble Lord, we now know that a Bill will be introduced upon the subject. That, of course, would afford the proper opportunity for discussing the matter in de- tail; indeed, the Motion as framed is merely for the purpose of asking what the Government's plans are.

I desire to make only very few observations, because with the general character of what has fallen from the noble Leader of the House I myself have no fault to find and no criticism to offer. What I do suggest—and I feel sure the Government must have this in mind, as could to a certain extent be gathered from the observations just made based, as I think they were, partly on the views of the President of the Board of Trade—is that we must be very careful indeed before the Government intervene in industry, especially when the subject matter is not brought before the Government as a result of a very large measure of agreement among those engaged in the particular industry concerned. After all, this. country's industries have been evolved by individuals. I am far from saying that because that has been the case there should be nothing in the nature of legislation or Government support. Above all things I think we must try to struggle against too rigid views—views, it may be, which have been held for many years. We must be elastic because undoubtedly the present time demands it. I think we have to adjust ourselves to circumstances.

As it appears to me, the position that the Government ought to take up—I say it with all respects—is that they should consider the cases as they are brought before them, giving due thought and attention to all that is put forward, but bearing in mind above all things the public interest and the trade of the country. It must be remembered—and it is not always remembered, especially by those who are advocating rationalisation—that there are dangers in rationalisation as well as advantages. Everything is not advantage. One of the benefits of rationalisation is to get rid of redundant plant and obsolete plant. Redundance and obsolescence occur in particular enterprises for various reasons into which I will not enter. One of the difficulties of rationalising an industry is that in the particular district in which an enterprise has become redundant there results a maladjustment of employment; you have a decrease of employment. You run a risk in your reorganisation of creating unemployment in a district. It may be a sacrifice that you must make. But all these matters must be taken into consideration before you come to a conclusion that there should be anything in the nature of compulsion of even an insignificant minority.

I have these matters very much in mind and I have seen the effect of them. It is idle to think that the mere fact of rationalisation of an industry is going to produce immense benefits to the trade of the country immediately. I gather that my noble friend, although he did not deal with this particular part of the subject, would take the view that no such difficulties arise as I have been pointing out. Of course, in an undertaking of which he and I have some knowledge, we are too familiar with these things to think that anything of that character could happen. It is a question of balance and, of course, a question of time. Many considerations and many complications arise in a great undertaking of which I imagine the Government have no knowledge until they are brought to their notice by the particular trade concerned. I did not gather from the noble Lord who opened the debate that he was advocating in any way that we should follow the methods of the countries to which he referred. In fact he expressed himself most definitely and very strongly against; the latest action of the German Government. It is not necessary to make many observations on that, more particularly after what has fallen from my noble friend the Leader of the House.

As I followed what was said by the noble Lord, I gathered that the suggestion made—and I should have thought that it was the only one that could be considered in this country—was that only when there was a large body of opinion in an industry should the power of the Government be used to compel a minority to come in. It is only by general agreement that we can expect to get satisfactory working of any system introduced in an industry. It is unnecessary to refer to the difficulties that can be brought about by a very small minority in the matter of under-selling and various other things. As I understand the proposal, it is that a trade association should take the initiative in the matter and bring it before the Government. Then there should be power under an Act of Parliament to enable the trade by a large majority—ex hypothesi it must be a large majority—to compel a minority to come in, and that should he done not by coming to Parliament but by giving the Minister power to make inquiry and hear objections. If I followed what fell from the noble Viscount who leads the House, what would commend itself to the Government would be that a special industry or a group of industries should come to the conclusion, that it was necessary for the Government to intervene and that it would be very undesirable at present to have any general measure. But, of course, we have not yet seen the Bill, and all these matters will have to be most carefully enquired into in detail.

What I would desire to impress upon the Government is that, notwithstanding all we may read or see or hear about compulsion by the Government, there is still in this country a very strong spirit of individual freedom and liberty which would resent the interference of Government unless it becomes necessary, by reason of the conditions of the day, that they should take some step which otherwise would not be considered desirable. I desire only to make one other observation and that is that we must very carefully consider some of the factors dealt with by the noble Lord, Lord Melchett, such as the fixing of prices and the fixing of minimum wages. We should consider those matters very carefully, I think, before we interfere in that way. We should consider very carefully the condition of the whole country before Government support is given to great industries in taking control into their hands in such a way that they might be able either to fix prices or wages without general assent on the part of those interested.

I make these observations in the hope that they may be considered when the Government's attitude has to be determined on the Bill presented. All I ask is that there should be the most careful examination of any proposals that are put forward. But do not let us rush on impulse to follow what has been done because other countries have done it. I agree with what the noble Viscount the Leader of the House said, that it does not look as if we had anything to learn from them in this respect. We have rather improved on their methods and have succeeded where others—except Japan, for special reasons—have failed. So far as I and those associated with me are concerned we shall give careful consideration to any proposals which may affect industry in these days when it is of such importance that industry should succeed. My last word is that the consideration must not be merely the profits of those engaged in industry. To my mind the determining factor must be whether the proposals made in the Bill will increase employment in the country and make for the general prosperity of the people.


My Lords, we had not intended to intervene in this debate from these Benches because we did not want to bring up at this moment the issue of Socialism versus Capitalism. We are always interested onlookers at the attempts of those responsible for manipulating the capitalist system to get it to work. The noble Lord, Lord Melchett, always has interesting, and in some ways almost socialistic, suggestions to make to which we are very glad to listen, but of course he is attempting a hopeless task, only less hopeless than the laissez faire policy advocated from the Liberal Benches. I intervene, then, not to bring forward the Socialist solution as the only means of dealing with these problems, but to draw attention to the complacency of the reply of the noble Viscount who leads the House, a reply ignoring completely the fact that the position of this country, with which he is apparently so intensely and deeply pleased, still leaves us with something like two millions or more of unemployed persons and, including their families, with something like six million persons existing at a standard of life which is hopelessly and utterly inadequate in a modern civilised country, and with a general standard of life of the workers of this country as regards food, clothing and housing which it is a disgrace in a wealthy country of this type that the capitalist system has been utterly unable to raise. The noble Viscount appeared to be completely satisfied with the position in this country as compared with other countries, and we take strong exception to that point of view. We believe that there is no excuse for not raising the standard of living of our people. We believe—and we agree with the evidence given before the Macmillan Committee on this point—that there is no limit to the extent to which the standard of life of our people can in fact be raised.

The other point to which I wanted to draw the attention of your Lordships is something that the noble Viscount said when he was comparing the position of this country and the position in other countries. He first of all referred with some sympathy to the experiments being carried out in Germany and Italy, though he of course pointed out that the effect of those experiments had been enormously to lower the general prosperity of both Germany and Italy. But then he turned to another country with whom we are in friendly relation, Russia, and his insulting references to a friendly country—I say deliberately "insulting references"—based apparently on a complete misunderstanding or on gross ignorance, and entirely unjustified ignorance because the figures of trade of that country are fully available for anybody who takes the trouble to examine them—the inaccuracy and the misleading nature of his remarks to your Lordships' House I feel cannot be allowed to pass without a protest from these Benches. After all, it is not our task always to trail the coat before conditions in other nations—


Is the noble Lord satisfied with the standard of wages paid in Russia?


Of course not, but I would remind your Lordships that the standard of life of the people is rising year by year, having started from a level so low as to have been described almost as famine conditions seventeen years ago, and due, as the noble Earl will remember, partly at least to the intervention by armed forces of this country in an attempt to impose a régime in another country which was not our concern. But I do not want to be drawn away upon that. I only want to point out that that is a country in which there is a rising standard of life, almost alone in the world, and that the remarks of the noble Viscount were entirely unjustified, grossly inaccurate and utterly misleading.


My Lords, with regard to the remarks which have fallen from the noble Lord, Lord Marley, I may say that my information regarding conditions in Russia utterly disagrees with his suggestion that the standard of life of the people of Russia has improved recently. The standard of life of Russia was, I believe, never so low as it is to-day. The people are starving in hundreds of thousands, many of them are so ill-clad that any nation should be ashamed of their condition, the people in Russia are destitute to-day, and the plans which Russia has put forward for the amelioration of the condition of the people have succeeded in hardly any degree whatsoever is any direction. The accidents to railway trains are at the present time enormous—


There are no accidents in this country, are there?


Nothing compared with those in Russia.


What about Gresford Colliery?


I am not going to be led into a digression. All I want to say is that my information is totally at variance with that which Lord Marley has just presented to your Lordships' House with regard to conditions in Russia. With regard to the complacency of which the noble Lord spoke, I am satisfied with the progress which the Government have made in the matter of unemployment as compared with the progress which the Labour Party made when they were in office. When they left power there were 3,500,000 unemployed against the 2,000,000 to-day, and I am glad to say that the number of unemployed is still going down. For the noble Lord to taunt the Government of the day with not dealing with unemployment satisfactorily is absurd having regard to his own past record.

But, my Lords, whilst I was very much interested in Lord Melchett's speech, I felt that there were certain caveats which ought to be entered. I am very glad that the noble Viscount the Leader of the House has put forward in general terms the principles which ought to actuate the Government in regard to interference with trade. Personally I believe that there has been in many directions rather too much interference with trade. I believe that the voluntary effort of our own people, owners and workmen, in trying to co-operate one with another and not to get into conflict, has effected one of the greatest improvements which have taken place in recent years. There is no desire on the part of the workman to strike if he can possibly avoid it; there is no desire on the part of the owner to stop men working and carrying on their industry. There is an increase in the spirit of goodwill and co-operation, and that is what we want to have continued. But I believe that the people of this country love liberty and freedom. They do not want to be dragooned under a dictatorship such as those to which the noble Lord, Lord Melchett, alluded in connection with Italy, Germany and other countries. We want to do our things gradually and by our own voluntary effort.

The noble Viscount who leads the House is, I think, open to correction on one point. He referred to an article in The Times a few days ago on the subject of the Coal Mines Reorganisation Commission. That Commission was established four years ago, and to my mind it has not only not assisted amalgamations and progressive work, but it has interfered with them, and it had better never have been appointed. So far as I know that Commission has done no good work, and after four years it has really nothing to show as the result of its existence. It has cost over £50,000 a year. At the present time it is still in touch with a large number of collieries, but it has really not effected anything. All that has been done in connection with amalgamation, as the noble Viscount will see if he will read that article again carefully, has been the result of voluntary efforts, and those voluntary efforts have been made chiefly in the direction of trying to improve the selling arrangements. The coal trade as a whole is entirely opposed to forcibly fusing the financial interests of different enterprises and firms. The Mines Act passed by the Labour Party does enable various districts to deal with coal, not only by controlling prices but by creating standard tonnages for each firm. That is the way in which industry ought to be protected, and the public also can be protected under the terms of that Act. I agree that improvements which take place under that Act may well be for the advantage of the coal trade, and I think it is by co-operation and voluntary effort, rather than by compulsory action, that we shall succeed in helping industry in this country.


My Lords, I cannot help feeling pleased at the result of this afternoon's debate. My words seem to have provoked a mild storm in one corner of the House, and a lullaby in another quarter of the House, and I feel very largely in agreement with the sentiments expressed by noble Lords on all sides. I want, however, to make one or two things quite clear. I never advocated that we should adopt any of the foreign systems to which I drew attention. On the contrary, I think they are all bad, one way or another. I merely drew attention to them as indicating the general trend—and it is a very important world trend, which we cannot ignore—of the great industrial nations of the world. I do not think any of them have done the job properly, and I hope that we shall succeed in quite a different way in making a success of reorganisation. It is, however, very important to recognise the general industrial trend of the age in which we live.

Nor did I advocate Government interference in industry. That was not at all what I wished to see. I think I tended to make myself plain when I referred to the Scylla and Charybdis of Hitler and Stalin, and asked for a measure which I believe will give us a great deal of self-government in industry. I agree with the noble Viscount the Leader of the House, that we want these things to be evolved from industry itself, and not imposed from above. All these points and difficulties can better be discussed on the Bill itself, and I have no intention of delaying the House by going into them this evening. So far as the Leader of the Opposition is concerned, he twitted me with trying to make some sort of arrangement which would make the poor old capitalist system totter along. I differ from him. He is one of those who are far behind the times, and still living in ancient realms of thought, from which I departed long ago, and who believes that two systems exist, Capitalism and Socialism. There has never been a Capitalist system, and that is why I am proposing my Bill, in order to have a system. All that has existed so far is a lack of system. A Socialist system does not exist either. It has never been brought into existence, and has never been defined.

We are all anxious to see proper co-operation of industry and its true development, and what is the right way will be found out by experience. As to the remarks which fell from the Liberal Benches, of course I entirely agree that the individual effort of the industrialist is an indispensable part of real progress, and in whatever proposals I bring before the House I shall do everything I can to give him the fullest possible play, without giving him so much freedom that he is able to injure himself or his neighbour. It is the old struggle between the State and the individual which Spencer and many other people have defined and when we come to another stage it has got to be defined, and defined in the largest measure of liberty which the State can afford to give. I am very glad indeed to feel that we have embarked upon consideration of this topic this afternoon, and very pleased that the noble Viscount the Leader of the House has given an assurance that the Bill, when it comes forward, will be considered and will be, in the ordinary phrase, "cut about from every possible angle," so that we may get further ventilation of views on this very important topic. I beg to withdraw my Motion.

Motion for Papers, by leave, withdrawn.

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