§ Order of the Day for the Second Reading read.
§ 6.8 p.m.
§ THE MINISTER FOR THE COORDINATION OF DEFENCE (LORD CHATFIELD)
My Lords, in moving the Second Reading of this Bill perhaps it would not be inopportune for me to point out that I am undergoing a somewhat new experience. No doubt my feelings are somewhat like those which your Lordships might have if you were suddenly placed on the bridge of a battleship and told to take her smoothly and safely to port. I hope I shall have the indulgence of your Lordships in my novel experience this evening. This Bill follows on a statement made by the Prime Minister in another place on April 20 last, when he said that it was the intention of His Majesty's Government to introduce a Ministry of Supply Bill, and to institute a Ministry of Supply which would have over it a Minister of Cabinet rank, and that the Bill would be so 876 framed as to enable it to be developed in the fullest way as a Supply Ministry, although for the time being, at any rate, the intention was that it should be administratively circumscribed within certain limits.
It was said that it would deal with three things initially, and, firstly, with the problems of Army supply, considerably expanded as they have been by the recent decisions to increase the strength of the Army and the Territorial Force. Secondly, it would deal with the responsibility for certain general stores—what is called common user stores—which the War Office already supplies to various Departments, including the Civil Defence Department, and that this particular function would be progressively extended as was found desirable. Thirdly, it would take over responsibility for the acquisition and maintenance of the reserves of certain materials, including raw materials—that is to say, those materials required for the defence programme. He also said the branches which would be transferred from the War Office to the new Ministry would include those dealing with research, with experiment, with production, design and inspection. In addition, the ordnance factories would be taken over, and the Bill would include powers to take priority over industry for Government orders for defence. He said also that a Ministerial Priority Committee would be set up. This Bill which is before your Lordships follows precisely the lines indicated in that statement by the Prime Minister.
In moving the Second Reading of this Bill I think I ought to make a few remarks to your Lordships, first, as to why it is being introduced at this particular moment, and not at any other moment, and secondly, as to why the action of the new Ministry is to be limited beyond what some would consider necessary—that is to say, that it will not cover at first the whole field of supply. The reason why the Bill is being introduced at the present time is that it is in the proper sequitur to a number of other measures that have been recently introduced by His Majesty's Government. I refer to the Military Training Act and to the large increase in the Territorial Army. These measures, which were necessitated in themselves by the international situation, have completely 877 changed the hypothesis on which Army supply has up to the present been based, but they have not necessitated any change in the hypothesis for the Navy or the Royal Air Force. That is an important factor to be borne in mind. So we have been Faced with a sudden problem of great emergency and magnitude which requires exceptional and rapid action. On the principle of putting first things first, it has been necessary to put aside lesser considerations and principles which have guided us in the past. But if you are going to judge the wisdom of the Government's action, I think it is necessary that all of you should be perfectly clear as to what are the conditions under which we have been working in the last ten or twelve years.
I should like to remind your Lordships that after the War, when the Ministry of Munitions was abolished and the vast accumulation of stores that it made was scattered to the winds, it was thought necessary to consider once again in 1923 whether it was right to go on working in watertight compartments, the Army and the Navy Supplies and Contracts Departments being completely shut off from each other, with a new service introduced which equally was not in touch with the others, or whether it would not be wise to set up a Ministry of Supply in peace for all time. A Committee was set up to go exhaustively into that question. I was on that Committee. We sat for three and a half years and we heard witnesses of every type on the matter. We definitely came to the conclusion that it would not be a wise step to set up a Ministry of Supply in peace. We considered that, better than that, the proper step was to make the Service Supply Departments co-operate and that each Department should create its own connection with industry and work out its own requirement; of industry in war. The three Supply Departments, we thought, should be completely coordinated and made to work together harmoniously.
The Government in 1927 accepted that Report and it had the most beneficial effect on the relationship between the three Service Departments. I refer to the Principal Supply Officers' Committee and the Supply Board. The great effect that was made by that decision, and the effect it had on the Services themselves, I do not believe is fully realised by those 878 who are not in those Services. Anyhow, during the last two or three years, without any special powers to our Defence Ministers, without any undue disturbance of industry—and what disturbance there was having been voluntarily accepted—it has enabled the Navy to start its vast rebuilding programme; it has enabled the Royal Air Force to set up a vast new organisation in industry on a scale never before envisaged; and it has enabled the Army, with its limited hypothesis up to this year, to provide the necessary weapons until this new problem arose—and that without any friction or serious clash between the Departments of State. Any difficulties that there have been have been readily resolved either by the Principal Supply Officers' Committee, now under the Chancellor of the Duchy, or by the Supply Board, under Sir Arthur Robinson. I think myself—and I have had very considerable experience on both sides of this problem in the last fifteen years—that the success that has been achieved is not so much a matter for acrid criticism as a great tribute to the decision made in 1927. It is always easy to find faults in people or in organisations, but the good points are sometimes apt to be swept away by a stroke of the pen.
Now, however great may be the advantages of setting up a Ministry of Supply in certain circumstances, we must not forget that there are also disadvantages. There must be disadvantages if you tear away from the Services their supply sides and thereby compulsorily separate the fighting men who have to use the weapons produced from those who design and produce them. That is an undoubted fact which is fully recognised by those who deal with these matters. But, at the same time, it has always been recognised that the time might well come, when some new and special problem was before the country, when it would be wise to set up a Minister of Supply and to give him special powers at a time when you would have to raid industry much further than you have ever contemplated doing in the past, to disturb and to take so much of the country's industrial resources into the defence programme that it could only be accomplished by some very special and arbitrary measure. But that does not to my mind make it wise to disturb those parts of the supply machine which 879 are working efficiently and harmoniously, so long as they continue to do so. I believe that the new Ministry will have a vast and difficult enough task in what has been allotted to it.
Now, if I may come to the Bill itself, of which I believe it is proper for me to make some small explanation of the principles, your Lordships know that the Bill is divided into three Parts. The first Part provides for the powers which are to be permanently entrusted to the Minister. It also provides him with a Parliamentary Secretary. Part II provides special powers to be given temporarily for the purpose of securing the supply required during the continuation of our expanded defence programme. Part III of the Bill contains the more or less formal provisions which are needed. As regards Part I, Clause 1 merely enables a Minister of Supply to be appointed. Clause 2, which is one of the major clauses, and Clause 3 give general powers for the supply of any article required for the public service, but the Minister is only to exercise those powers in regard to supply to any other Government Department if that Department's supply powers in regard to the articles required have been transferred to the Minister. The transfer is effected, as stated, under the authority of Clause 3 by Orders in Council. It is provided in Clause 6 that these Orders in Council shall be submitted for the prior approval of both Houses.
The scope of the powers to be transferred to the Ministry are shown in a White Paper, Command 6034, laid before Parliament on May 31. In that statement the phrase "articles required for the public service" should be carefully noted, because it occurs frequently in the Bill, and a very wide range is given to it by Clause i8 of the Bill, which provides that articles required for the public service cover, not only the normal supplies for the public service, but also the materials needed for the maintenance of essential civil industries in the event of war, reserve stocks and materials, as well as plant and machine tools needed for the production of any supplies that are required. Clause 4 gives power to the Minister to finance an accumulation of reserves if that is considered to be the most effective way to secure the carrying out of the defence programme, or, in 880 emergency, stocks of materials for the maintenance of essential civil industries. Clause 5 gives power to the Minister to call for a return of stocks of articles which might be required for the public service.
In Part II of the Bill, which deals with the temporary powers of the Minister, there is a very important clause—Clause 7. The first subsection of Clause 7 is to secure priority for Government orders over anything else. The second and third subsections are to requisition output if the exercise of the power under subsection (1) does not achieve the desired result. Subsection (5) enables a controller to be appointed to carry on the whole or part of any business in which the person fails to comply with the Minister's direction. Subsection (6) fixes the price in the case of difficulty occurring between the producers and the traders on the one hand and Government Departments on the other. Clause 9, which is also part of the same group of powers, enables business records to be examined relating to articles required for the public service. Clause 8 gives power to require available storage accommodation to be placed at the disposal of the Minister, and Clause 12 gives power to require the protection of essential plant required for defence manufacture.
Although all these powers are expressed to be exercised by the Minister, it is of course intended that they shall be exercised in consultation with other Departments, in so far as the supply functions of these Departments are not transferred to the Minister of Supply. Further, the exercise of powers as to priority would be subject to the general control of the Ministerial Priority Committee which has been set up. As I have already stated, there has not been up to the present any substantial need to use priority powers, but with the extending programmes for the Army it has seemed desirable that they should at any rate be available. I should like to say one word about the appointment of controllers. That is a very drastic sanction which we hope will never have to be put into force. Similar powers were in the possession of the Minister of Munitions in the last War, but they were only used on two or three occasions during the whole period of the War.
In addition to providing the Minister with great powers over industry, Clause 7 gives a measure of protection as regards private contracts which may be set aside 881 by reason of Government priority, and also provides in subsection (6) a resort to arbitration in the event of it being impossible to settle the price by negotiation between the Minister and the contractor. I shall propose at a later stage a change in the method of selection of arbitrators as shown in the Bill, by reason of the discussion which took place at the Report stage in another place. The Amendment which I shall propose will provide that the panel of arbitrators shall be appointed by the Minister, and it is the intention that he shall appoint these from as wide a field of selection as possible, and that he shall appoint a Chairman and Deputy Chairman, who shall be persons with wide legal experience and capable of bringing an unbiased judgment to the task which will fall on them, of selecting from the panel the arbitrator or arbitrators to be appointed to deal with specific cases.
Clause 10 prescribes the powers of persons appointed as controllers. Clause 11 provides protection for directors of businesses who, in producing articles required for the public services, contravene the memorandum and articles of association, or, in case of statutory companies, the governing statutes. Clause 12 provides power to the Minister to require any contractor or sub-contractor to carry out whatever protective measures may be considered necessary to protect essential plant in his works from air-raid damage. Clause 13 is for the authorisation of the temporary powers in Part II, which has been proposed as being for three years, that being the same period as that during which the Military Service Act will run. If this part of the Act is still needed at the end of the three years, then it may be extended from year to year on an Address to His Majesty by both Houses of Parliament. Part III of the Bill contains general provisions regarding the administration of the Ministry, and as regards expenditure, which I need not refer to any more at this stage.
This Bill asks, as your Lordships will see, for new and extensive powers, to be energetically but reasonably applied. It adds a new powerful driving cog to the general supply machine, that can be clutched into those wheels where it can be best applied, but will not throw out of gear the delicate parts of machinery that are already working smoothly and effi- 882 ciently. At the same time the Government can at any moment, by Order in Council, extend or re-direct the new power to be created into other unlimited Government spheres as and when they think it wise so to recommend. May I assure you, my Lords, that this question of a Ministry of Supply Bill has been considered in the past, as now, not from a narrow Service outlook, nor as a political issue, but rather in the very spirit that I know animates everybody in this House, of doing what is wisest and best in a difficult emergency and acting on the best balance of advice at the disposal of His Majesty's Government. I beg to move that the Bill be read a second time.
§ Moved, That the Bill be now read 2a.—(Lord Chatfield.)
§ 6.33 p.m.
§ LORD ADDISON
My Lords, I must apologise for having to address your Lordships for a second time on the same day on the Second Reading of a Bill. It so happens that by the accident of Parliamentary business, it relates to two measures which concern Departments to which I have been attached. Thus I am fortunate enough to be able to say with what pleasure we have all listened to the noble and gallant Lord who has just spoken. I did not know whether to admire more his charm and lucidity or his brevity as compared with the Minister of Supply in another place. I have here before me a copy of the speech of the Minister of Supply on the same topic in another place, and I see that after he had occupied no fewer than nine and a half columns of the OFFICIAL REPORT, he craved permission to pass to the actual Bill itself. How long those nine and a half columns occupied I do not know. I confess I find them somewhat boresome reading because I think that any competent foreman of the works department would have been familiar with all his arguments and would have regarded them as commonplaces.
Another thing which I admired about the noble and gallant Lord was the agility with which he skated over the Government's change of view. We have discussed this matter I think three times in this house, and twice on formal Motions. One was by Lord Mottistone. I am not sure that Viscount Swinton did not also take a hand on one occasion and I had a hand at another time. We received most 883 convincing arguments from the Government why it was undesirable, in these critical times, to set up a Ministry of Supply. So satisfied were the Government supporters that when we had the temerity to carry the matter to a Division, only seventeen of your Lordships voted for the Motion. I remember that the Lord Chancellor had been most unfortunately coached because he relied upon the Report to which the noble Lord has referred, and whoever had coached him had unfortunately omitted to point out that the governing consideration before the Committee was an instruction that the Report was to be drawn up on the supposition that there would not be a major European war for, I think, ten years. Of course, that was a very important governing consideration which made all the difference.
§ LORD ADDISON
I drew the attention of the Lord Chancellor to it. He had prepared an argument with great care and lucidity to convince us that a Ministry of Supply was not necessary, but he had overlooked that instruction.
§ LORD ADDISON
I am coming to the Bill, but I think I am entitled to make these observations and I must say I am doing so because I admire the way in which the noble and gallant Lord passed over what had taken place on previous occasions.
§ LORD CHATFIELD
I think, perhaps, I might justify what I said rather more than Lord Addison accepts. What I said was that it was quite true that at the time when we were considering this question we were not considering a vast programme of armaments, but rather a period of disarmament, and the situation was not the same as now. But, nevertheless, we studied the problem not from the point of view of the situation at the time, but as a matter of principle, and our decision and recommendations were given not on a matter of expediency at the moment, but on a matter of principle.
§ LORD ADDISON
Yes, that is true, but I am drawing attention to the fact that the critical situation of the last few months, in which these Motions were discussed in your Lordships' House, is quite different from the circumstances which accompanied the setting up and the deliberations of that Committee. It reminds me of a man who, when confronted with a difficult situation, said: "What is the use of having a mind, if you cannot change it?" That is the attitude of the Government on this important matter.
Well, having spoken in support of a Ministry of Supply on two or three separate occasions, I certainly shall not oppose it now. We welcome this conversion, and I have only just this to say, that I am doubtful whether the noble and gallant Lord will find that he can continue the limitations upon the functions of the Minister which his present proposals indicate. I think particularly, with regard to the common user of supplies, that the functions of the Minister of Supply should immediately be extended to cover a very large volume of ferrous and non-ferrous metals and other supplies, which are required by all producing Departments and by all the major industries. Otherwise, we shall have a very needless inflation of price and, I am afraid, serious delay. It is true, I think, from what I learn, that the work before the Minister in expediting the supply programme, of the War Office particularly, is exceedingly urgent, but there are one or two quite obvious things, for example scientific instruments, which are required by all the Services. I suggest that the Services' common user should be extended to them, and it is very urgent that it should. However, these are minor matters. I rise on behalf of my noble friends to say that I am glad at last that His Majesty's Government, in this matter as in others, have come to our point of view, and that we live in hope.
§ 6.42 p.m.
§ VISCOUNT SAMUEL
My Lords, I am sure your Lordships appreciated very greatly the manner in which the noble and gallant Lord has presented this Bill. His opening observation reminded me of something that was said about Lord John Russell who, it was alleged, was a man who was quite capable of undertaking any task suggested to him, even that of commanding the Channel Fleet. However 885 incompetent Lord John Russell or any other statesman would have been to discharge that office, certainly the noble and gallant Admiral has shown as great efficiency at the Ministerial box as on the Admiral's bridge. His lucid, comprehensive, and compact exposition shows that he has Parliamentary qualities which will be a strength to the Government, and also a service to the whole House.
My mind necessarily goes back to previous discussions, to which my noble friend Lord Addison has referred. More than a year ago, on May 23, 1938, my noble friend Lord Mottistone moved a Motion for the establishment of a Ministry of Supply. I gave him such support as I could, the noble Lords, Lord Addison, Lord Trenchard and others supported him, but the noble Viscount, Lord Stone-haven, opposed, and on behalf of the Government the noble Marquess, Lord Zetland, who is now on the Government Bench, gave to the Motion an emphatic negative. That was the famous occasion on which he used the phrase that ought to become perhaps classic, that the mind of the Government was to introduce such a measure "sooner or later, perhaps." Then six months later, on November 1, we had a two days' debate on national defence, initiated by the noble Lord, Lord Strabolgi, when again this matter was given prominence and the establishment of a Ministry of Supply was supported once more by the noble Viscount, Lord Trenchard, and also out of the fullness of their experience by the noble Viscount, Lord Swinton, and the noble Lord, Lord Milne. Once more the Government rejected the suggestion, and the Leader of the House, the noble Earl, Lord Stanhope, gave an accumulation of reasons why the establishment of a Ministry of Supply was open to grave and irrefutable objections: it would involve delay rather than accelerating supply, it would introduce confusion rather than greater simplicity, it would be useless unless it included compulsory powers, whereas compulsory powers could only properly be exercised in time of war. However now, under the pressure of public opinion, the Government are taking a different view, and the least convincing part of the noble and gallant Lord's speech was, I think, that in which he gave reasons for this change of attitude.
886 As long ago as the time of the grave crisis last September the noble Earl, Lord Baldwin, speaking in this House said that he would "mobilise our national industry tomorrow." Some of us wondered why our national industry had not been mobilised in the "yesterday," rather than waiting for the "to-morrow." But the task now is one of mobilising our national industry for purposes of defence, and that is far too vast an undertaking to be left to the Supply Departments of the Service Ministries. They cannot cope, and are not designed to cope, with that task. It needs close and constant contact with the industrial leaders throughout the country, with the trade union leaders and the Labour movement in general, and it undoubtedly requires a special Department and a special Minister devoted to the one object. As soon as it became apparent that we had to have an immense programme of national defence it should at the same time have been obvious that the creation of a Ministry such as this was essential. The conditions already, in 1936, were wholly different from what they were in 1923 when the Committee sat to which the noble and gallant Lord referred.
The scope of this Bill is very narrow. It has the title of a Ministry of Supply Bill, and it may be it takes powers to extend the functions of the Minister more widely than at first, but in fact it is at the outset little more than a Ministry of Army Supply Bill. No doubt the Army requirements are the most urgent, on account of the great expansion of those forces during the last few months, but the Air Force also is now on an immense scale, and for my own part I cannot doubt but that great advantage would be gained if some parts, at any rate, of the requirements of that Ministry were to be included within the functions of the Minister, if not immediately, at all events after a not very long interval. The Bill, however, it must be said, does give elasticity. It allows for growth, and no doubt the task devolving upon the Minister is a very delicate one at the outset in order to fit in the new system with that which already prevails. There are competitive claims from the various Departments—and they are necessarily competitive—and a great deal of tact and discretion as well as drive will be required from the head of the Department. The success of the Ministry must necessarily 887 depend very largely indeed upon the personality of the Minister.
This is little more than a legislative framework—and I do not complain of that; it is a mistake for the Legislature to try to deal with these matters in too great detail itself—a framework which will be filled in by administrative action. And for my own part I feel, as I have said, very little doubt but that the powers of transfer should be exercised in the near future, and the functions of the Minister enlarged. One of the reasons why it is desirable to concentrate in a single hand a very great deal of this business is the financial reason. The competition between Departments must have, directly or indirectly, some effect upon the prices that have to be paid. The Departments may not exercise control in an equal degree upon the prices that they are charged, and contractors are naturally tempted to give priority, unless there is some instruction from above as to priority, to Departments where the financial conditions may be easier. This financial aspect has, I venture to say, been too little considered, and the noble Lord who has spoken has said nothing with regard to the control over expenditure that the Minister of Supply ought to exercise. We have never adopted a policy of "Peace at any price," but we have adopted a policy of "Arms at any price." Whenever there is war or danger of war, Treasury control is necessarily relaxed, the tap is turned on, the golden stream pours out, and frequently a great deal of it runs to waste.
In the latter years of the Great War the House of Commons appointed a Select Committee on National Expenditure, of which I had the honour to be Chairman. We sat during two sessions of Parliament. We were a numerous body, and we divided ourselves into a number of sub-committees which examined the expenditure at home, and at the Front to some extent, of all the various Departments concerned in the War. We found that the waste in many directions was immense, and such of our recommendations as were put into immediate operation did, I believe, save the taxpayer many millions of pounds. Nevertheless every member of that Committee was convinced of the fact that there had been, and still was, a vast deal of avoidable waste through lack of 888 financial control. I had to preside not only over the whole Committee but also over the sub-committee dealing with the War Office, which then included the Air Force. The Air Force at that time seemed to have even less adequate control than the other Departments. It was a new organisation with no financial traditions, and the waste there in many directions was undoubtedly colossal. Whether the Air Ministry at the present time is still inclined to extravagance I do not know. I have heard rumours, but have no personal knowledge and so cannot speak. When men's lives and safety are directly concerned, the Department of course must have the best and must not be stinted. Nevertheless there can be adequate regard for life and safety and at the same time a proper control over expenditure.
I would draw attention to the statement that was made when, with the consent of all Parties, the nation embarked on its great new policy of defence. In March, 1936, a Government White Paper was issued in which the following sentence appeared:His Majesty's Government are determined that the needs of the nation shall not serve to pile up extravagant profits for those who are called upon to meet them.Ministerial declarations were made at the same time to a similar effect. That was three years ago. I have been provided with a statement showing some of the dividends which were, in fact, paid last year compared with the dividends paid immediately before that statement was made.
I shall trouble the House with a very few of these figures because they are of very great importance and have a direct bearing upon the Bill now under discusssion. Of steel and general armament makers, Thos. Firth and John Brown earned a dividend in 1935 of no less than 21 per cent. free of tax. In 1938 that was increased to 30 per cent. free of tax. They actually paid in 1935 12½ per cent. free of tax, and in 1938 17½ per cent. Hadfields earned in 1935 a dividend of 14 per cent., and last year 34 per cent. In 1935 they paid a dividend of 7½ per cent., which was increased last year to 22½ per cent. Vickers' dividend was increased from 8 per cent. to 10 per cent. in the same period, and meanwhile the capital had been increased by 50 per cent. Among shipbuilders, Cammell Laird earned a dividend in 1935 889 of 3.2 per cent. and in 1938 of 19.7 per cent. In the one year they paid 3.3 per cent., and in the other 10 per cent., and the capital was also doubled.
§ LORD MANCROFT
Can the noble Viscount say whether these increased profits were made out of armaments or whether a large amount of these increased profits were made out of purely civil work, such as mercantile shipbuilding, as in the case of John Brown's?
§ VISCOUNT SAMUEL
I had not overlooked that point, and was going to state that of course it is impossible to say whether the whole of these profits were made out of armaments; but these are the leading armament makers.
§ LORD MANCROFT
The noble Viscount will mislead the public if these figures go forth without specific explanation that there is no implication that these great profits have been made at the expense of the country's misery.
§ VISCOUNT SAMUEL
I did not say anything about the country's misery, and I was going to say, if my noble friend had not interrupted me—I had it in my notes—that of course one does not know how far these profits were due to armaments and how far to other business; but there is no reason to think other business should have made these immense profits and should have led to the very large increase in the capital of many of these firms. There is also the case of Yarrow's. They show an increase in their dividend from 10 per cent. in 1935 to 20 per cent. last year. No one would doubt that Yarrow's are mainly an armament-making firm. Fairey Aviation earned a dividend in 1935 of 4 per cent., which increased in 1938 to 25.7 per cent. tax free, and the dividend paid increased from 5 per cent. to 15 per cent. tax tree on a capital which had been doubled. I could give other instances if necessary, but I have said enough to show—in fact it is quite notorious—that the armament firms of this country have mace very large profits during the last three years, and their shareholders have benefited accordingly. The fact is admitted. The Government are now introducing a new system of taxation, and my noble friend opposite would not suggest that the Government would go to the trouble of introducing a new Armaments Profit Duty if they did not think there had been excess profits made. 890 Indeed they have frankly stated that the measures they had taken have not proved adequate, and that further measures of a fiscal character have had to be taken. The Armaments Profit Duty, however, leaves a very large part of these profits to the firms concerned, and only applies to contractors who do armament business to the value of £200,000 or more.
I mention these facts in order to urge that this new Ministry should make it one of its chief purposes to ensure an adequate control over the profits made from Government contracts. It is not enough to have an Armaments Profit Duty, for the reason I have stated that it does not apply over the whole field and only deals with a part of the profits. There should be a more adequate control in the terms of the declaration made three years ago that:His Majesty's Government are determined that the needs of the nation shall not serve to pile up extravagant profits for those who are called upon to meet them.I trust, therefore, that this Department will have a strong accounting and control branch, that although of course speed should not be sacrificed to financial considerations, it will recognise that financial waste is always a sign of inefficiency, and that the motto of the new Ministry should be "Speed without wastefulness."
§ 7 p.m.
§ VISCOUNT SWINTON
My Lords, I should like to join with noble Lords who have spoken in congratulating my noble friend on the charm and clarity of his speech, and equally upon the skill with which he piloted this Bill at this stage through the snags and shoals which, to the simple mind, would hardly appear to exist at all, so smooth was its passage. I also want to join, as one who has steadily in this House advocated the creation of a Ministry of Supply, my congratulations to those which have been given to the Government on their conversion, or partial conversion. Perhaps, rather than partial conversion, I should say that part of the Government appear to have been converted but part are still living in sin, because it is only part of the work of supply which is to be transferred to a Ministry of Supply, while a very large part, or, at all events, quite as much, remains outside the net as is to be transferred within it. I should hardly like to think that the "agreement to differ" which brought such comfort to the mind 891 of my noble friend who has just sat down was finding its way back into the Cabinet. I hope and trust that is not so.
I make no apology for speaking now. This is the only opportunity, when this Bill comes up for Second Reading, of asking your Lordships to devote some little further time to the consideration of the principles involved. It is the most important Bill, industrially and strategically, that we have been called upon to consider, and it is important that we should consider it with the thoroughness and the gravity that it deserves. The issues involved are very familiar to your Lordships. We have debated them in this House. We have had the experience of men like Lord Addison, who was himself a Minister of Munitions in the War, and of impartial and very authoritative men like Lord Trenchard and Lord Milne. The argument of all those who, like them and myself, have advocated a Ministry of Supply, is essentially this, that such a Ministry would be absolutely necessary in war and, that being so, the Ministry ought to be created now. It ought to be created now because the Ministry as it should function in war must be ready to function and its very readiness would, I believe, be a very material deterrent to war itself. What should that organisation be? It is, as I see it, essential that it should be that organisation which is required in time of war. You need not exercise all the compulsory powers. All the arguments that the Leader of the House addressed to us on a previous occasion as to the undesirability of setting up complete compulsory control of the whole of industry is utterly irrelevant, if I may say so with respect, to the question of whether or not you should have a complete and effective Ministry of Supply in being. You need exercise none of the compulsory powers unless you find that they are necessary; but the organisation must be there; it must be established and equipped and ready to function as you would require it in war.
What, then, should that organisation be? What should be the responsibility of this Minister of Supply and over what should he operate? I submit that he should be in charge of the full field of supply for the three Services which he will have to cover in time of war, and 892 that he should have that executive responsibility here and now. I do not want to discuss now how far that should go in Admiralty matters. A great deal may be said in support of pure shipbuilding being kept outside. I do not think it would be proper to digress into that at this moment, but I am quite sure of this—and I speak from experience almost as long as my noble friend, with whom I have had many happy years of working—that there is a mass of Admiralty work which calls for the same material, calls for the same labour, often skilled labour, and is placed actually in the very same factories as work for the Army and the Air Force. Over that wide field of what really is common service I have no doubt at all that the Minister of Supply should function.
I dwell on this because my noble friend in his speech spoke of these very questions of principle. What has been the Government's answer when pressed on this, and pressed, believe me, with no feeling of hostility, because there is only one thing we all, I believe, want to do, and that is to get the best organisation for this country in these difficult times? I think it was my noble friend Lord Zetland who rebuked me on a previous occasion, and said how wrong it would be to establish a Ministry of Supply because it would interfere with ordinary business. Well, I never have understood why one single Ministry should interfere with ordinary business more than three separate Ministries or sections of Ministries operating independently. But we all agree to-day that business has got to be interfered with, and that the first call on business is for the munitions required by this country. That argument, I take it, is no longer advanced.
Then came the argument, on which my noble friend based himself in large measure to-day, about the danger of dislocation. There may be two opinions about that. Personally I believe that argument to be greatly overrated because what is proposed by all of us who advocate a Ministry of Supply is not the creation of some entirely new Ministry, or rather of new personnel and sections of Departments. We are not advocating the finding of something entirely new, and transferring from one set of men to another set of new men the functions of supply. That is not the proposal at all. 893 It is not the way it is being carried out here. What is happening even in this truncated Bill is that the whole Supply Department of the War Office is transferred to the Minister of Supply, precisely in the same way as part of the Air Ministry or part of the Admiralty would be transferred. It is a merger of the Supply Departments under one executive head. It has been said they are very competent people who are doing this work. No one knows that better than I do. I have had the privilege of working with them and seeing them in all their Services, and I know they are competent. I wish to pay my tribute to them; but they will not be any less competent when working in a merged Department, as they would have to do in war, than they are to-day in their separate spheres. The final argument, and the argument which was used most forcefully before and again was enforced very much by my noble friend the Minister for Defence to-day, was that it is wrong in principle to separate the Supply Departments of a Service Ministry from what he called the user. There is very much to be said in favour of that. I admit that on the Esher Committee, Lord Esher and Lord Haldane, I think, took a different view.
If I may go back for a moment there is a point which I wanted to make before about dislocation. I believe, as I say, that the danger of dislocation is overrated. To-day—certainly I can speak for the Air—you have Vast orders which have been placed, which will occupy firms for a long time, taking the whole output of factories, and behind them further orders which the manufacturers know of, so that they can jig and tool for them. The amount of dislocation is, as I say, greatly overrated. But whatever measure of dislocation there may be, is it not important that it should be faced now in time of peace rather than in time of war? I should have thought that was really unanswerable.
Now I come back, if I may, to the argument so much stressed by the Minister for the Co-ordination of Defence, the importance of not separating the user from the supplier. I always felt that that was an argument that had to be met, and in a recent debate I propounded the solution that the members for supply on the different Councils—the Admiralty, the Air and the Army Councils—who become 894 the principal officers of a Ministry of Supply, should remain members of their respective Service Councils, and the noble Viscount, Lord Trenchard, and the noble Lord, Lord Milne, both said in this House that they thought that was a complete answer to that problem. Incidentally, I would like to ask my noble friend whether the chief officer of the new Ministry of Supply—who I suppose will be the very distinguished sailor and public servant who has been Director General of Munitions Production, I think that is his title, in the War Office—will continue to sit as a member of the Army Council. I most sincerely hope that the answer is in the affirmative. But what I think is in the minds of most of us in regard to that argument about not divorcing the user and the supplier, is that you will have to make this an effective Ministry in war, and, that being so, you should do it now.
Observe, my Lords, that this Bill departs entirely from the principle upon which the noble Lord has laid such stress. The Admiralty and the Air Ministry are still to adhere to the principle that the user and the supplier are to remain one and the same, but in the War Office that principle is no longer to apply. Yet surely to-day in the War Office, under the new expansion scheme, the problems of strategy and the problems of organisation must be—at least so I should have thought—as closely interlinked with the problems of supply as they are in the Admiralty and the Air Ministry, who are in the full vigour of the execution of their great programmes. It is only in the War Office that this principle is transgressed, but most effectively transgressed. What happens? What happens is this, that you transgress this principle of not divorcing the user and the supplier without making a really effective Ministry of Supply. I know that powers are taken under which it can be made a real and effective Ministry, but what I think we want to know is what is the Government's intention. How far do they intend to go, and when do they intend to carry out this extension?
I am bound to say I myself am not at all reassured by the statement made by the Minister-designate of Supply in another place. It really was a most extraordinary speech. He said: "I am taking over the War Office supply because the Secretary of State wishes me to do so. 895 He wishes to use me as an agent, or wishes"—I will not say to pass the buck, that would be improper—"to transfer these responsibilities. But you really would not suggest," he went on, "that I should go and take over from the Air Ministry or the Admiralty, unless the Ministers there want to make me their agent or would like to discard their functions also." With great respect, you cannot approach this great principle as if the Minister was setting himself up as an agent to be employed or not to be employed by commercial firms, if they thought fit, in this market and not in that market. It is a tremendous question of principle. It is a question of what is the right principle, and it ought not to be left to the idiosyncrasy of Ministers to decide. It is a question on which the Government must make a decision on the merits of the case, and it must not depend on the wishes for the time being of this or that Minister. As the noble Lord, Lord Addison, pointed out, this Minister is not going to function as a Minister of Supply at all under the present arrangement. He simply is the Director-General of Army Supplies taken out of the War Office and put apart.
It is said that he is to take over the common services, but on that the noble Lord, Lord Chatfield, was, I think, very frank, and he has given the information that I wanted and that I think we all wanted. The common services which this Minister is to take over under the present plan are merely those services which up to this moment the War Office has been conducting as agent either to the Air Ministry or the Admiralty—nothing else. Compare that with the field which was covered by the Ministry of Munitions in the War. By common services in a Ministry of Supply I understand—and I think all who feel as I do understand—not just those things which the War Office does to-day as an agent, but the provision of articles which draw on a common stock of material, or which require similar industrial facilities. That is really what we mean by common services as they would be conducted by a Ministry of Supply in war.
I do not want to labour this, but it is a vital matter. Let me therefore put certain examples to my noble friend. All of these cases—I could multiply them indefinitely—are cases where the supply of the article draws on the 896 same material, the same labour and often in actually the same factories. Take guns. As I understand it, and I have read the Minister's speech in another place, he will be responsible for guns of a type which the War Office use. If it so happens that the Admiralty or the Air Ministry are using a machine gun or a Bofors gun which is of the kind the War Office also use, then he will place the order for it; but if, as they do in fact to a great extent, they use different machine guns and different other kinds of guns, although it is the same labour, the same material and very often the same factories, he will only place an order, as I understand it, for those guns of the War Office type.
Take shells. He will order shells for the Army, but he will not order shells for the Navy. He will order shell cases, but he will not order bomb cases for the Air Ministry, and he will not order mines or depth charges, because they are not Army requirements. If fuses are to go into a shell used by the War Office, they will be the responsibility of the Minister of Supply; if the fuses are required for a weapon that is not a War Office type, then they will not come within the purview of the Minister of Supply. Take scientific instruments: my noble friend Lord Addison referred to them. It is always very difficult to get the highly-skilled men and also the special material which are necessary, and which can only be found in a few firms, so that the same firm has to take orders from the Admiralty, the War Office and the Air Ministry. If it is a War Office scientific instrument, the Minister is responsible; if it is a scientific instrument for the Admiralty or the Air Ministry—the Minister is not responsible. The same with wireless: if it is a wireless used by the Army, the Minister orders it: if it is a wireless used by the Air Ministry or the Navy, the Minister does not order it, although I suppose the orders in many cases are going into the same shops.
Take explosives: I think there the War Office has been the agent for the Air Ministry and not for the Navy, and therefore the Minister will place orders for explosives for the War Office and the Air Force, but will not place orders or have any responsibility for explosives for the Admiralty. I do not know what the responsibility is for uniforms and clothing. Presumably the Minister orders the Army 897 trousers but does not order the Air Force trousers, and he would certainly not be allowed to order the trousers for the Navy—at least, I presume so, but perhaps I shall be corrected if I am wrong. Take also motor transport, which all the Services require in a greater or lesser degree. It may be that if the Navy and the Air Force bought exactly the same kind of motor car which is bought by the Army, then the Minister would place the order. I am not even sure in that case, but certainly if they required different kinds of transport from that which the Army required, then the Minister would supply the Army but he would not supply the Navy or the Air Force.
I could go on indefinitely with a list like this, but is it not only common sense that when vast demands are made on industry already, and demands far greater even than this will be made if we come into war, it will be absolutely necessary to vest in one purchasing authority all these common purchases? I would beg of the Government to consider whether it is not wise to vest that purchasing authority in the new Minister to-day.
Take research, to which my noble friend referred. The research for pure Army purposes will vest in this Ministry; but how closely interlocked all that research is to-day ! Those of us who have been concerned with these things know that so well. I agree with my noble friend that we do work closely, we have worked closely together, but I am sure it would be much better if, where so much of this is in common, the responsibility of supply and the responsibility of research were in this Minister.
Then I come to the question of priorities, and I really must deal with that. One of the great advantages of a Ministry of Supply is that the Minister of Supply is the authority—subject to the final Cabinet authority in case of dispute—who has the responsibility to determine priorities. He has no such power at all under this Bill. He has not. I will show your Lordships that he has not any real power to determine priorities. He cannot have. He has a power to say that a particular factory shall deliver a Government order before it delivers a private order, but that is not what I mean by priority. He has not the power under this Bill to say: "You shall deliver that order for the War 898 Office in priority to the Air Ministry order or the Admiralty order." That is all going to be dealt with through a system of priority committees. I do not believe in committees for getting executive action. The Minister cannot have that power to-day, because he is merely a War Office agent, and of course you cannot give a mere War Office agent, sitting in a separate building, power to decide on priorities between the War Office and the Air Ministry, or between the War Office and the Admiralty. But if the Minister, as he would have in a Ministry of Supply, has the executive responsibility for delivering the goods, the common goods, to each of the three Services, then of course, because it is his executive responsibility, because he is the man you shoot at if there are not guns for the Navy or guns for the Air Force as well as guns for the Army, there devolves upon him the duty of assigning the priorities—subject always, of course, to the supreme authority of the Cabinet.
This Bill does not set up a war organisation; it is not pretended that it does. I would beg my noble friend to tell us what is the organisation which the Government believe will be necessary in time of war and which they intend to use in time of war, if war should come. They must have taken their decision on that; they must know how much in their opinion ought to be vested in this Minister in time of war. I cannot believe that it is only these functions which are assigned to the Minister under the White Paper, which has been quoted—of course it is not. If these were all the functions which the war Minister of Supply is to exercise, the whole of the rest of the powers in the Bill to extend would be meaningless. I would beg the Government to use those powers in the Bill, when they get it, now, to create and operate a Ministry of Supply covering the full field which they mean that Ministry to cover in war. I believe that is a necessary preparation for war, and I believe that in creating that effective Ministry of Supply with, the full powers and the full field it would have to exercise in war, we are not only making our preparations complete but we are perhaps establishing a very effective deterrent to war and an insurance of peace.
§ 7.29 p.m.
§ LORD GAINFORD
My Lords, I rise only for one moment to deal with a point on behalf of industry. Industry is very 899 much perturbed at certain permanent powers which are included in this Bill. In Clause 2 powers are given to the Minister to buy, manufacture or otherwise produce any articles required for the public service. When we turn to Clause 18 we find that the expression "articles required for the public service" means:(b) articles which, in the opinion of the Minister, would be essential for the needs of the community in the event of war; and(c) anything which in the opinion of the Minister is or is likely to be necessary for or in connection with the production of any such article as aforesaid.What industry is apprehensive about is not that the powers proposed to be given in this Bill shall operate for a limited period, but that those powers should be in the permanent part of the Bill.
I would point out that just as in Egyptian history there rose up a new King over Egypt, who knew not Joseph, so in the event of a permanent provision of this kind being placed on the Statute Book, it would be possible for a Socialist Government to nationalise nearly every industry in this country, and it would have unlimited powers if it were deemed advisable to exercise those powers. Industry is quite prepared to do its utmost for the Government in the present emergency; it is willing to help in every possible direction; but it does ask that the Government should put some limitation upon the power of manufacturing and production given to the Minister in perpetuity. While I am putting down an Amendment to deal with the subject, I do feel that it is a matter of sufficient importance for the Government themselves to put down an Amendment, which would at any rate limit that power of manufacturing and producing against private enterprise, and not support what might eventually become a Socialist policy.
I recognise to the full that the Minister and present Government, as the Minister of Supply said in another place, have no intention whatever of superseding the normal processes of trade. He said he was not going to start enormous State manufactories. And again to-day the noble and gallant Lord stated clearly that it was not the intention of the Government to put industry out of gear. While the White Paper shows that it is their intention to be quite reasonable in regard to industry, industry is apprehensive upon 900 this particular point, and I press the noble and gallant Lord to introduce some Amendment on behalf of the. Government which will meet that apprehension, which in my opinion is a reasonable one, on the part of industry.
§ 7.33 p.m.
§ LORD BARNBY
My Lords, my first need is to draw your attention to the clock, and ask you to bear in mind not what it says at this moment, but what it said at the hour at which consideration of this Bill was begun. I think you will understand then the difficulty in which I find myself in addressing the House at this moment. It seems to me regrettable that with full knowledge of the pressure of Parliamentary business, it should not have been possible to arrange the order of business somewhat differently. Surely the hour at which consideration of this important Bill was begun suggests that there might well have been some revision of the Order Paper. I know it is presumptuous for a Back Bencher to suggest such a thing, but in the interest of those who have to speak one must express regret that some such rearrangement was not made.
I cannot help reminding your Lordships of the vast importance of this measure. It is a Bill which proposes revolutionary changes in the practice of this country, perhaps not unnecessarily, and that the discussion of it should be limited, under the constitutional arrangements that we have in this country, to such a parsimonious and meagre amount of time as has been allotted to it by those in control of the House, is much to be regretted. Further, I would remind your Lordships of the wealth of talent and experience possessed by members of this House, and that they should be condemned to discuss a matter of this character in such a limited space of time will, I am sure, be a matter of surprise to the country. I feel sympathy with the noble and gallant Lord in charge of the Bill in the desire that he should not lose his dinner, but we have heard Lord Swinton, speaking from his great experience, and we have also heard a distinguished past President of the Board of Trade, and the noble and gallant Lord is going to be denied, except at the expense of his dinner, the opportunity of dealing with the most momentous arguments which have been put forward.
901 Naturally I want to associate myself strongly with a great deal of what Lord Swinton said. As to general agreement with the Bill there can be little doubt. The fact that it should have been introduced by the noble and gallant Lord, coupled with the conviction of his vast experience from a technical as well as administrative point of view, gives encouragement to anyone that the manner in which it has been presented and prepared is necessary. I listened with attention to the three debates which took place in this House in the early part of this year, to which reference has already been made, and while refraining from speaking myself, I listened with surprise because in those three debates a great part of the attention was given to the question whether or not there should be a Ministry of Supply, and little time was given to the powers to be conferred. As Lord Swinton has said, the essential part is the priorities, not only the priorities of production, but the priorities of the different Services concerned.
My ground for asking your indulgence at this hour is that having been in charge of one of the major controls in the last War, and having preceded that by being loaned to the Army Contracts Department, and subsequently being transferred to the Ministry of Munitions, I have had considerable opportunity of observing the workings of a Ministry of Supply. At this hour, one would need courage to deal with points in detail, but this is the only occasion one has for expressing one's views and attempting to be helpful. I venture to think, too, that the noble Lord in charge of the Bill is being robbed of an advantage which he himself would have welcomed, of hearing more than twenty minutes of constructive criticism from Lord Swinton, with his great experience, to which contribution might also equally have been made by other members of the House.
The point really with regard to the Bill is, as has been expressed by Lord Gain-ford: Shall the powers be permanent or temporary? Shall those great powers that have been offered to the Ministry be included in Part I or in Part II? I wish to associate myself emphatically with the suggestion of the noble Lord, Lord Gain-ford. He, like myself, is able to be in close contact with what we recognise in this country as the mouthpiece of organised industry, the Federation of British 902 Industries, and the need for having industry effectively organised is daily becoming clearer. The existence of the Federation of British Industries is of great assistance to all the Government Departments, and particularly in a case like this, in which I am sure that the noble and gallant Lord in charge of the Bill requires the fullest collaboration of industry.
He was good enough in the course of his remarks to reassure the House on the question of the panel of arbitrators and the manner in which equity and justice for industrialists is going to be assured, and we welcome that statement. On Clause 12 there is the question of the compensation which is to be allowed to industrialists for the expenditure which they are likely to be called upon to make, and while it is provided that 27½ per cent. may be recovered in the taxable year there is some doubt as to the manner in which the remaining 72½ per cent. is to be dealt with. It is suggested that a proportionate amount shall be regarded as permissible to be added to the price of the contracts. But there appears to have been in another place no assurance that the amount to be received under this head would actually escape taxation under the new Armaments Profits Duty. That is a very important matter for industry as a whole, and I hope it will be possible to clarify that point.
The question of priorities, to which the noble Viscount, Lord Swinton, referred, has another angle to which I have given more particular thought, and that is the priority in production of any industrial machinery. With orthodoxy disproved in so many matters, I feel that it may well be that these powers must be co-ordinated very closely with the question of priority for export. I raise this point because in these days it is becoming daily more clear that a "white war" or the economic argument—whichever term you like to employ—is an integral factor of the situation and, as the noble Viscount, Lord Samuel, explained, in these days the tap is turned on and the golden stream flows out. That is what we are proposing to do to-day, and it is inescapable; but if we are going to go on spending on this vast scale it is equally necessary that we should provide the means with which to pay, and that must be by means of our export trade. We are not going to live on merely making armaments, and the provision of ex- 903 change change and the protection of sterling are matters essential to the welfare of the country. No reference has been made to them at all in the introduction of this Bill.
I know that it is heresy to suggest such a linking of powers. One shrinks from the idea that these great powers could be permanent, but if after all the Government have decided, and continue in their determination, that they shall be permanent, then I urge that the question of the priorities of the export trade be dealt with and given the proper consideration. It may well be that in order to protect sterling we must give some stimulus to export trade by some rebate on taxation. It may come from the control of imports and under those conditions one immediately thinks of things like legislation insisting on a larger amount of offal in wheat, machinery for insisting on the larger use of tobacco from South-Eastern Europe, and the conservation of oil for internal road transportation. All of these would involve the control of imports, which again must not be in conflict with the Ottawa Agreements. But under Clause 12 there is a call for the due functioning of industry, and that involves efficiency for domestic production and for export.
That brings us to the desirable action which has been urged by the President of the Board of Trade, and persistently and energetically by the Minister for Overseas Trade—namely, the assistance that is necessary to the countries in Europe which we have guaranteed. The first thing is to strengthen their economic life, so that they may help themselves. That involves priorities for the export of whatever may be necessary for that purpose, including not only armaments but matters for civilian development, so that they may help themselves in every way possible. Then we see that British productive capacity is limited without control, and that brings up the necessity, which is well urged, for the powers which are being provided by the Bill. In referring to the guaranteed countries and the powers which can be given under the Bill, and the relationship of civilian necessity and military necessity in production, I urge again that this should be outside the provisions of the Export Guarantees Act. It may well be said that there is no connection between the two, but I 904 urge that there is, because it is clear that this economic armament is just as important as military armament.
At this late hour I shall, like other speakers, be denied the opportunity of saying much that I would have liked to say, but one assumes that if the intentions of the Government are as rigorously applied in the passage of this Bill through this House as they were yesterday in regard to the Civil Defence Bill, there is little likelihood of large concessions being obtained. All the same, I conclude by urging that the noble and gallant Lord in charge of the Bill may give consideration to the points which have been made.
§ 7.49 p.m.
§ LORD CHATFIELD
My Lords, we have had a most interesting, but all too short, discussion, and I should like, in the first place, to express my thanks to many noble Lords for the very kind remarks they have made about the manner in which I introduced the Bill, which I appreciate very much. I also wish to thank your Lordships for the reception you have given in general to the Bill, and for the spirit of constructive criticism which has been so evident in all the speeches made this afternoon. I certainly sympathise with the noble Lord who has just sat down on account of the late hour at which we had to take this Bill. Unfortunately, the debate on the very popular—or was it unpopular?—measure that was being debated before was unduly prolonged. I had been waiting for some hours to come to this Box, but was not able to do so, but I am sure we shall be able on the other stages of the Bill to discuss a lot of the matters for which there has not been time to-night.
The criticisms which have been made of the Government's proposals have taken a course which probably is a natural one, because it is evident that this question of setting up a Ministry of Supply and of what powers should be given to it is a very controversial one. It is one on which we all may have different views and hold them perfectly honestly, and each of us with considerable common sense. There are undoubtedly, as I have explained, both advantages and disadvantages in the whole plan. There are pros and cons, and what His Majesty's Government had to do was to weigh up these pros and cons 905 and make a decision. The noble Viscount, Lord Swinton, who so kindly mentioned me in his speech, was a member of His Majesty's Government not so very long ago, and I have no doubt, though I do not remember, that he then pressed the views he has so eloquently addressed to the House this afternoon to the effect that the Government were wrong in those days in not setting up this Ministry. I know there is a great deal in every argument he has used. I know them so well. You can say "Yes" almost to all his questions, and yet you can also say "No." That is the difficulty of the problem.
The noble Viscount, Lord Samuel, raised the question of finance and expressed the anxiety he felt at there being no co-ordination of financial control, regretting also that we were going to have only what he regarded as a half-hearted measure dealing with excess profits and so on. Whether his figures with regard to the dividends of the companies he quoted are really substantiated I am not able to say, but we all know, as my noble friend Lord Mancroft pointed out, that these armament firms are also very great industrial manufacturers. The greater part of some of these businesses is not armament work at all, and for many years they have had to live, not on armament work, but on their wits in private trade. For instance, John Brown's, we remember, built a big ship called the "Queen Mary." I dare say that helped to swell dividends though I do not think we can call the "Queen Mary" munitions. Nevertheless, it is impossible to say that the noble Viscount's feelings about these matters are entirely unfounded.
They may be, but the point is that whether we look back on the past with regret or happiness, it is a fact that in this Bill the Government are taking powers which are very important and in my opinion they really should be sufficient. They are taking very great powers in Clause 7 to enable the Minister to examine thoroughly the records and the books, or cause them to be conducted in the way which is necessary in order that the Ministry may satisfy itself, first of all, before the contract is made, or in other cases during the process of the contract being carried out, that the prices which have been agreed are right and not unduly beneficial to the contractor. In addi- 906 tion, as your Lordships know, there has been recently introduced in another place the Armaments Profit Duty which will, as the Chancellor of the Exchequer remarked, catch the balls which the wicketkeeper has been unable to stop. I do not think I can say more than that on the financial question except that I believe it will be less unsatisfactory than the noble Viscount, Lord Samuel, feared.
The noble Viscount also referred to the difficulty of Ministers coping with industry. He said: "How can a Minister cope with industry when Ministers have so many other things to do?" It will be remembered that when the Ministry for the Co-ordination of Defence was set up three years ago, my predecessor was given the task of helping Ministers to deal with that very problem. When I took his place four or five months ago the Chancellor of the Duchy of Lancaster had this duty specially devolved on him of dealing with supply questions and helping the supply authorities in all three Services, as well as the Ministers, in dealing with industry, with labour questions, and with problems affecting the production of munitions.
My noble friend Lord Swinton also made a very eloquent plea for the setting up now of the organisation we must have in war. He said: "If you are going to have, as you must have, a Ministry of Supply in war—presumably going to the utmost limits to which that term can be applied"—I do not know whether he would include the construction of battleships and so on—"but to whatever extent you are to have such a Ministry in war time, it should be set up now." You certainly can use arguments to that effect, but the Government, having considered the matter, have for the reasons I urged in my opening remarks come to the conclusion that to set up a full Ministry of Supply now would be a disadvantageous act. The fact that the Government have come to that conclusion will probably not satisfy the noble Viscount, but I can only say that while one views with sympathy his conviction that that would be the best thing to do, I do not think, personally, that I agree it would be the right step to take.
Is it to be taken as an absolute fact that when war starts a Ministry of Supply must immediately be set up with full powers? I do not think that follows at all. It may or may not be necessary. I 907 spoke on this matter before in your Lordships' House, and pointed out that when a war starts no one can say what is going to happen. The Departments may be functioning satisfactorily, and the hypotheses on which they may expect the war to continue may be all right. The supply organisation may be going on normally. On the contrary, in the first week of the war, you may have a change of circumstances which might necessitate the whole naval programme giving way to the air programme, or the whole of the air programme giving way to the military programme—nobody can be sure. To say before a war starts that you are to set up a full Ministry of Supply, taking away from the Services a well-functioning Supply machine—I do not believe that would be a wise step at this moment when, so to speak, we are almost verging on lining up in the trenches. I think it would be too big a thing to do. It might have the most catastrophic results in delays.
I think that the step we have taken to deal with the problem is the best one that could be taken. As it happens, it is the problem of suddenly increasing the Army in a pre-war period, instead of having to do it possibly, as it was previously envisaged that it might have to be done, at a time when war was already taking place. I think it was really the safest and best step to take. The noble Viscount, Lord Swinton, also asked me whether the Director-General of Munitions Production, Vice-Admiral Sir Harold Brown, would remain a member of the Army Council. I think the answer to that is that he will not, but as a matter of fact the precise form of liaison between the Service Departments and the new Ministry are still being worked out. The Bill has not yet passed through your Lordships' House, but there is a great deal of work going on to decide exactly how these transfers are to be made. They are very complicated and difficult matters, but I do not think the Director-General will be a member of the Army Council. There will, however, be a very carefully arranged form of liaison between the Departments.
§ VISCOUNT SWINTON
I am sorry to intervene; I do not want to press the noble Lord to answer if he cannot do so: but, assuming that the Director-General 908 will not be a member of the Army Council, will the officer who is the chief responsible officer for Supply in the Supply Ministry be a member of the Army Council, or will it merely be a paper liaison between the Department and the Army Council?
§ LORD CHATFIELD
No, he will not be, so far as I am aware, a member of the Army Council. If I am wrong I will inform the noble Viscount at a later stage. *But there will be an arrangement made to ensure that the object which the noble Viscount has in mind is achieved. The noble Viscount hoped that the question as to whether more powers were to be taken over by the Minister himself would not be left to the Minister's own idiosyncrasies or feelings at any one moment, and he suggested that it should be done upon a much bigger scale. I can assure the noble Viscount that is what is fully intended. Of course the decisions that will necessitate Orders in Council being brought to your Lordships' House will be decisions which are made by the Cabinet; they will be Government decisions. It will be the duty of special members of the Cabinet to watch over the progress that is being made, and to see that the great machine which is being created by this Bill is worked with full efficiency and with full effect, and is extended when that should be necessary, subject to the approval of the two Houses of Parliament.
As regards articles of common user, I think probably it is not realised that these articles will be far more extensively adopted by the Minister of Supply than is anticipated. The White Paper may perhaps give a rather misleading impression that there are going to be very few things, only such things as already exist, that the Army work for the other Services will be taken over and that then there will be a full stop and nothing more will be done. That is not at all the intention. The intention is, having set up this Ministry of Supply, to make the utmost use of it that we can, and to take every advantage that can be obtained by means of common purchases and common contracts.
I would like for a moment to refer to the question of priority which was raised
§ *The words "the Minister of Supply will be a member of the Army Council" have been deleted from the original report of this sentence. See Cols. 976 and 977 for Lord Chatfield's correction.909
§ by the noble Viscount, Lord Swinton. He asked how priority was going to be settled by the Minister. He must understand that these questions of priority are not going to arise suddenly now any more than they have existed for the last three or four years. We have always had questions of priority, and one of the results of the organisation that was set up in 1927 was to create what was called a Supply Board, and that Supply Board consists of a large number of Supply Committees. I think there are about ten of them, and each of the Supply Committees consists of a number of representatives of each Service, and whenever any question of priority arises it is those Supply Committees who first recommend how the priority shall be judged and to whom the priority shall be given. Then their report goes to the Supply Board, and the Supply Board, under Sir Arthur Robinson, gives a decision. If he is unable to get agreement, it goes to the Principal Supply Officers' Committee under the Chancellor of the Duchy; so that there is already in existence a priority organisation which has been wholly effective in the past, and there is no reason that I can see why it should not be wholly effective in the future. I do not believe there will be any great difficulty between the Services when the Minister of Supply is dealing with Army supply as well as with his other duties. In the past I think the priority organisation has worked quite satisfactorily.
§ Then the noble Lord, Lord Gainford, was apprehensive about the fact that in the permanent part of the Bill, Part I, powers are given to interfere, as he feels, 910 with industry. As he is going to move an Amendment on the matter, I do not think I need deal with it extensively at the moment. However, I think I may say that we felt it was imperative that the permanent part of a Minister's work—after all, the temporary powers may be suspended at any time, if necessary—must be such that he must have wide powers of supply; and the real safeguard is the fact that the operations of the Minister will come under review by Parliament regularly. That, I think, is the real safeguard, and a very necessary safeguard, which the noble Lord requires. As it is so late, and as I have dealt, I hope, with most of the questions that have been raised, perhaps it would be sufficient now if I left the remainder of our discussion till a later stage.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.