WAGES AND PRICES.

HL Deb 28 February 1940 vol 115 cc621-68

4.3 p.m.

LORD BALFOUR OF BURLEIGH had given Notice that Vie would call attention to the fact that unless the consumption of goods by the civilian public can be drastically curtailed a vicious spiral of alternate rising' of prices and wages is inevitable; ask His Majesty's Government what steps they propose to take in order effectively to limit consumption; and move for Papers.

The noble Lord said: My Lords, on January 10 the Prime Minister made a speech in which he laid down certain items in the policy of the Government on the Home Front. If may respectfully say so, it was a very admirable speech. The Prime Minister explained that war must necessarily involve a diminution in the quantity of goods available for civilian consumption, and that therefore any attempt to maintain the pre-war standard of living would be not only futile but dangerous as well. He also referred to the vicious spiral, and he said that it was the Government's considered policy to avoid inflation. It was on the day following that speech of the Prime Minister that I put down on the Paper of your Lordships' House the Motion which is before your Lordships to-day. I felt that if this great task were to be successfully accomplished it was necessary for the whole population to have a much more detailed guidance as to what is expected of them than had up to that time been given. It so happened that three days after the Prime Minister's speech the Chancellor of the Exchequer also made a speech, and he reinforced and repeated what the Prime Minister had said. He said in effect that it had been his concern and that of the whole Government from the very first day of the war so to shape policy as to avoid the vicious spiral. He also said that, in order that the Government policy might be carried out, it was necessary for the British people to understand what was required of them, and he said that British citizens cannot be governed by edict. With that I entirely agree, and it is for that reason that I hope that, as a result of this Motion in your Lordships' House to-day, we may extract from the Government some important detailed statement of the size of the problem and the colossal nature of the savings which are necessary, and some indication of what the individual citizen is expected to do in order that that policy may be successfully carried out.

Let me say, my Lords, that the decision to avoid inflation is one which has been received with approval by all sections of the community. That being so, I do not propose to labour the point, but I would just remind your Lordships that of all the ways of restricting consumption inflation is the worst. It is the most unfair between one class and another; it bears most hardly on the poorest people and on people of fixed income. By raising costs it creates difficulties for our export trade, difficulties which perhaps would be acutely felt not only during the war but afterwards, and of course our policy must be so established as to lead us into happy times after the war, as well as enabling us to win the war. Lastly, inflation has the effect of progressively increasing the cost of Government borrowing. That was seen in the last war, and if carried to an extreme it might have the effect of completely undermining confidence in the Government's credit. For all those reasons I welcome the decision of the Government to avoid inflation at all costs.

The task which we have to accomplish is a colossal one. We have to increase production to the utmost of our ability, and above all, we have to divert the greatest quantity of our production from civilian consumption to the service of our war aims. Everything that we can possibly spare has to be devoted to the service of our fighting forces and to the reinforcement of our export trade. That means the greatest possible restriction on civilian consumption. Again, the restriction on civilian consumption will enable us to reduce unnecessary imports. By reducing unnecessary imports we not only have available shipping space for things which we need more, but also we conserve our foreign exchange. Bearing in mind that inflation will occur if an increased quantity of spending meets a fixed quantity of goods, we can see at once where the danger of inflation arises. Increased spending meeting a fixed quantity of goods—or, of course, still more a diminished quantity of goods—must give rise to a rise in prices. We have to conceive of our national income as the whole physical output of the whole community in terms of goods and services. Our prewar national income was in round figures £5,000,000,000. In very round figures the Government's share of the loaf may be taken as £1,000,000,000, leaving for the civilian public to spend £4,000,000,000. Those figures are true both in terms of income and in terms of production. On the one side there is spending power, and on the other side there are goods and services produced. Out of the loaf, pre-war, the Government took £1,000,000,000 worth of goods, and the civilian public had the balance.

What happens when we change over to war? The Chancellor of the Exchequer in his emergency Budget told us that at that time Government expenditure was running between £6,000,000 and £7,000,000 a day—that reaches £2,400,000,000 a year—and he said that it was increasing. Consequently, for a figure of the Government's expenditure in a full year of war, I take £2,800,000,000. Pre-war expenditure was £4,000,000,000 for the civilian public. If the Government are going to take out of £5,000,000,000 as much as £2,800,000,000 that leaves £2,200,000,000 to the civilian public. The reduction in expenditure consequently—the reduction in the stock of goods available for the public—is in the order of £1,800,000,000. Some noble Lords will say, "Oh, but national production will increase in war time." So it will, and for the sake of argument I will take the figure which economists give us of an increase of 20 per cent. Let us assume that national income will rise from £5,000,000,000 to £6,000,000,000. The Government share remains at £2,800,000,000. The civilian public's share of the loaf consequently is £3,200,000,000. That means that in what I may call old expenditure, the reduction is a reduction of £800,000,000 only. But in the meantime parallel with the increase in production is an increase in spending power. Consequently, with the additional £1,000,000,000 of spending power we get back to the old figure of a necessary reduction of £1,800,000,000.

Those are the figures which I have been able to glean from a perusal of the Press which deals with these matters. But before I put my first question to the noble Lord who will reply for the Government, I should remind your Lordships that we can also establish a comparison with the Budget. The Budget, as I have already said, is to be £2,800,000,000. Of that the Chancellor has imposed taxes calculated to yield £1,100,000,000. Consequently there is a gap to be filled by borrowing of £1,700,000,000. That need not all be definite saving, because there are some capital resources which can be diverted for that purpose. In the £4,000,000,000 of which I spoke there was a certain sum, not of spending for consumption but of saving, which goes into capital. We may call it £400,000,000. There was also a certain amount spent on renewals and replacements, representing current expenditure on keeping plant up to standard. There was another capital asset on which we can draw, and that is our foreign resources. The less we draw upon them the better, but obviously it may be that as time flows along we shall have to draw upon those resources. We will say, for the sake of argument, that out of those three capital resources we can take, in the first year, £700,000,000. That leaves as a net figure which has got to be saved no less than £1,000,000,000.

As far as I can make out, my Lords, all the economists are agreed that unless we can save £1,000,000,000 a year by genuine savings, that is, reduction of consumption, then inflation is inevitable. The first question, therefore, which I have to put to the noble Lord, is: does he accept those figures? If he does not, I hope he will tell us why; because I do not think I am overstating it when I say that there is a consensus of opinion among economists that that is the order of the problem with which we have to deal. If he accepts these figures, does he think really that that can be done by voluntary saving, or does he think the occasion is one which demands some drastic plan? You have to remember, my Lords, that it is not as though we were working for an examination in which a pass is all that is required. We are working in a competitive examination, and what we have to do is to see to it that our resources exceed those of our opponents. I am informed that if we had adopted in this country all the measures which have been enforced in Germany, our productive capacity would have increased by no less than 50 per cent. If I may say so, it is a great mistake to jeer at the sacrifices which have been forced on the German people. Sacrifice is a measure of efficiency, and without sacrifice efficiency cannot be attained.

In order to form an opinion of whether we are achieving this object, I survey the first six months of the war. I am told that the figure of saving is now £90,000,000—that is the amount of subscriptions to National Defence Bonds and to National Savings Certificates. I should like to ask the noble Lord whether he is satisfied that that corresponds to the need, and whether he is satisfied that a substantial proportion of that is not coming out of normal savings which would have been made in any case. It would be a guide if he could give us the figures of the number of individual applications for £1,000 in National Defence Bonds and £500 in National Savings Certificates. It may be that he will not be able to give us that information. It is not essential. That is on the savings side. On the consumption side, my Lords, I would like to ask the noble Lord if he is satisfied that we have not been consuming unduly during these six months. There is rationing, and that must have involved some reduction of consumption, but have we been living on our stocks, or can we be satisfied that we really are curtailing consumption as much as is really necessary? What I want is an assurance that we are not just drifting. The whole time that we are without some policy of individual sacrifice, if I may call it so, there is a danger that all of us may take up sides. We may say: "Whatever happens I will not agree to that." I think the sooner we get our marching orders, as it were, the more likely it is that we shall effectively carry them out.

My Lords, you cannot see half the national income swallowed up for purposes of war without sacrifice, and I am convinced that far greater sacrifices have to be made by everybody than we yet realise. I am also convinced that every class is prepared to take its share in those sacrifices. I am quite convinced that that applies to the Party represented by noble Lords opposite just as much as to the Parties on this side of the House. I am quite convinced that the noble Lord, Lord Snell, would be the first to give up his beer and his betting if that was required of him by the Chancellor of the Exchequer, and I am sure I can say the same of the noble Lord, Lord Strabolgi——

LORD STRABOLGI

I never drink beer.

LORD BALFOUR OF BURLEIGH

—and all the other noble Lords who sit on that side of the House. I should like to make one suggestion in connection with taxation to the Chancellor of the Exchequer. I think he makes a great mistake in talking about the standard rate of Income Tax. We all, I suppose, enjoy groaning about paying Income Tax at 7s. 6d. in the pound, but it is remarkable how few of us really do pay tax at anything like that rate. I find that a married man with two children and an earned income of £2,000 pays £525: that is 5s. 3d. in the pound. It is perfectly true that he pays tax at the rate of 7s. 6d., but only on a very small bit. The married man with £1,000 a year and two children pays 3s. 7d. It is rather instructive to observe that if the standard rate were put up to 10s., that man's Income Tax would be increased from 3s. 7d. to 4s. 10d. I have no doubt he would still groan about paying Income Tax at 10s. in the pound, but it would not be true. I suppose all of us dislike going to the dentist, and we dislike much more going to the dentist to have two teeth out than one; and I think the Chancellor of the Exchequer would be much wiser to talk about the maximum rate of Income Tax than the standard rate. Another very remarkable point about the national income is that two-thirds of it is in the hands of people with incomes of less than £5 per week. I find that very difficult to believe, but I have the authority of the Chancellor of the Exchequer, and I feel justified in quoting it. But another fact which always has to be mentioned in the same breath as that remark is that a large proportion of our population are living on the subsistence level and their standard of living cannot be reduced. It can be reduced neither from considerations of humanity nor—and this is important in war-time—from considerations of efficiency.

My Lords, with your permission, I should now like to turn to Mr. Keynes. Mr. Keynes has put forward a scheme which was mentioned some months ago and of which a revised version has just been published. It is not for me to advocate it. I want to tell your Lordships very briefly what it says, and I want to ask the noble Lord whether it has been considered. The scheme is one of what was called first "compulsory saving"; later it was called "deferred pay." It is neither taxation nor borrowing, but a combination of both. It has the great advantage of insisting that every person in the country down to those with the very lowest income, which is exempt, has in addition to paying his taxes to agree to the deferment of a portion of his income. This will be held in the form of blocked savings. The scheme has this great advantage: that by drawing-off purchasing-power it would go a long way to securing the equilibrium between the spending-power on the one hand and the stocks of goods on the other which is necessary to avoid inflation. I understand that, in terms of families, the family man with children and an income of 75s. a week would have an increased spending power. The family man with an income of £5 a week would have in the aggregate almost the same spending power as he had before, but the increase in his earnings due to harder work would be taken from him and sterilised in the form of deferred pay. In the whole of the classes receiving over £5 a week the aggregate reduction in spending power would be of the order of one-third.

There are two other features in this scheme. One is a scheme of family allowances, which would be 5s. for each child up to a certain number. This is necessary in order to mitigate the hardship to the lowest-paid classes. There is also added to the scheme a capital levy. Well, my Lords, I cannot say that I care about the idea of a capital levy. I suppose it suits me just as well as it suits anybody who owns land and very little else; but, much as I dislike it, I should say that I am not prepared to refuse to take my own medicine, and if from above we were told that this scheme would give us the maximum efficiency and that this is the way to win the war, then of course one would feel bound to accept that sacrifice, as one would expect others to accept the sacrifices which they were called upon to make. I wish, therefore, to ask the noble Lord, have the Government considered this scheme, and have they decided for any reason to reject it?

Then, my Lords, I should like to know how this matter appears to noble Lords opposite. I would say in that connection that it is essential that this scheme should be compared, not with what we should like, but with whatever practical alternative there is. The most likely alternative, if we do not do anything about it, will be inflation, and inflation will not suit the Party represented by noble Lords opposite. Two weeks ago in your Lordships' House we had a debate about exports, in the course of which the noble Viscount, Lord Elibank, who is not here to-day, made a proposal for a control of wages. That provoked the retort from the Benches opposite: "Never control of wages without control of prices." My Lords, I can only say that had I sat over there I should have said the same thing. I have tried to look at this scheme from the point of view of noble Lords opposite, and I think I should say certainly two things. I should say, if we accept this scheme, then these blocked savings must not count for the means test after the war.

NOBLE LORDS

Hear, hear.

LORD BALFOUR OF BURLEIGH

I think I should say that, and I think I should go further and say that there is a thing called Excess Profits Tax, which is 60 per cent. If profits have paid Income Tax as well, they have paid 75 per cent., and I think I should ask whether it would not be fair—I am the workman—that, if my surplus earnings due to harder work are to be blocked till after the war, the remainder of that 25 per cent. should also be blocked. I do not know what the answer would be, but I think that is the sort of line on which I should argue. From the point of view of the Labour Party, this scheme avoids inflation; it provides a reward as an incentive for hard work, in the form of deferred pay. It provides another thing: the maximum freedom of choice to the person who has money to spend, as compared with some elaborate scheme of rationing and price-fixing. It seems to me that that is a great recommendation in a free country. Limit the spending to the lowest amount, but let your spender have the greatest choice of what he is to spend it on. Finally, it does mitigate the burden of sacrifice to those who are least able to bear it.

My Lords, we hear a good deal about equality of sacrifice. How splendid it sounds, and how difficult of attainment! The sacrifices which will be required before the victorious end of this war will be lives and money. The sacrifice of lives, I think we may say, is equal between one class and another, though it is not equal between those of us who are too old and the young and active who are called upon to offer that sacrifice. The sacrifice of money is perhaps even more difficult to make equal; it is very difficult for the sacrifice to be as great for the rich man, or the man in comfortable circumstances, as it is for the poor man who is near to the border of the subsistence level. I believe, however, that the whole country is ready to make whatever sacrifices may be demanded, if only it can be told what they are. Our people are a kindly, easy-going people and they are a forgiving people; but I think, my Lords, that there is one thing that they would never forgive. They would never forgive a Government which, by lack of courage or by lack of leadership, or simply by procrastination, deprived the people of the opportunity by toil and sacrifice to rise to the full height of the effort of which they know them-selves to be capable. I beg to move.

4.32 p.m.

THE EARL OF LISTOWEL

My Lords, I should like to begin by expressing our gratitude to the noble Lord opposite for enabling us to discuss this vital problem of war finance, and also to thank him personally for the very remarkable speech to which we have listened with so much interest. Those of us who sit on this side of the House do not intend to strike a discordant note so far as the main contention of the noble Lord opposite is concerned; indeed, I think it would be surprising if there was one dissentient voice in the whole course of this debate. We agree with him that the war can be financed only by a much larger inroad into civilian consumption than has taken place at present. We also agree that the most disastrous method of effecting this inroad is inflation, and we hope, as he does, that we may receive some assurance from the Government that it is not pursuing a fatal policy of drift which would lead us inevitably to inflation.

I do not intend to go into the figures on the subject of the reduction in civilian consumption which were dealt with in such detail by the noble Lord opposite. All that I should like to say on that point is this. In the last war, the reduction in the civilian share of the national income was estimated at about 40 per cent. This war, as the noble Lord has pointed out, is likely to be considerably more costly; and it is obvious that we have not as yet surrendered anything approaching a half of our pre-war incomes to the State, and I think approximately one half is the estimate that would agree with the figures given by the noble Lord opposite. He quoted £3,800,000,000 as the civilian share of consumption when our national income had increased from £5,000,000,000 to £6,000,000,000. That raises the rough figure to rather over half our pre-war income.

We do entirely agree with the noble Lord—I think he was a little apprehensive lest he should not receive support on this side of the House—that the least desirable method of eliminating civilian demand is by inflation, and that inflation is the terminus to which an uninterrupted race between wages and prices inevitably leads. But, my Lords, there is one aspect of the problem on which he touched, but perhaps touched rather lightly, to which I should like to draw your Lordships' attention. If the retail price of certain necessities is to rise still higher, as most people seem to expect, and wages do not keep pace, the obvious consequence is a further fall in the standard of living of the whole wage-earning class. Now, as the noble Lord pointed out, the wage-earner has no desire to shirk a fair share of the financial burden of the war; this has been shown, for example, by the amount of working-class savings which have gone into War Loan. I do not honestly think, however, that he should be blamed for grumbling a little if his standard of living were to be lowered still further before the Income Tax and Surtax-paying class has made even heavier sacrifices than it is making at the moment. I hope that the Government will bear that in mind when they set about distributing the burden as equally as possible, and I hope that they will forgive me for reminding them that a very small increase in the cost of living means far greater hardship for 90 per cent. of the population than a very large increase in Income Tax means for the remaining 10 per cent.

There is one small section of the community that I do not believe anyone would expect to bear even the smallest part of this increasing burden: I mean the children of the poorly paid wage-earners with large families. It has been estimated by sociologists that 20 to 25 per cent. of our children under fifteen were living well below the poverty line before the war began. They almost all belonged to families of more than three children, representing the 10 to 15 per cent. of our total population that have always lived in dire poverty. Sir John Orr, in his well-known report on nutrition, declared that the diet of these children was insufficient in all the vitamins required for normal good health. Expressed in another way, the risk of acute poverty is greater in childhood than at any other period in life, and one out of every five children born into the working class grows up under conditions of malnutrition which impose a lifelong handicap on efficiency and happiness. I have made rather free with statistics, and I hope that the noble Lord who is going to speak next [Lord Stamp] will pull me up if he thinks I have committed the crime of exaggeration.

In considering the distribution of this burden of war finance, there is a passage in a recent article by Sir William Beveridge in The Times newspaper with which I think we shall all agree. He writes: If we are to restrict consumption, we must not do so at the expense of vital needs. Above all, we must not do so at the cost of children. Indeed, it would be universally agreed that even in war-time, when exceptional sacrifices are demanded of us all, so long as the adult population has sufficient to eat, we cannot allow the children to go short. I should particularly like to ask the Government how they propose, when they apply their axe to civilian consumption, to avoid cutting into the standard of bare existence enjoyed by these impoverished families. There are, of course, various ways in which this might be done, and I should like to recommend, as deserving, perhaps, the consideration of the Government, two well-established devices for providing necessities for those who cannot pay for them at the market price. The first of these is price control. So far as my recollection bears me out, price control is included in Mr. Keynes's amended scheme when he talks of the iron ration. It was not mentioned by the noble Lord opposite, and I was a little surprised that he did not include it in his survey of the scheme. We are already spending £50,000,000 a year in keeping down the price of foodstuffs. How far we can go in this direction must obviously depend on how much money the Government can spare for subsidising civilian consumption. In any event, this is the most expensive way of helping the poorest consumers, and for that reason cannot possibly be expected to stabilise the cost of living.

I therefore suggest that the Government should respond to the suggestion of the noble Lord opposite by making the fullest possible inquiry into the feasibility of a system of family allowances that would directly benefit the children of the largest and poorest working-class households This seems to be the obvious alternative, if an alternative must be provided, to higher wages and the vicious spiral that would follow, if these minimum standards are not to be undermined. I am aware that when this subject was last debated in your Lordships' House, though the principle of family endowment was supported by the noble Viscount, Lord Samuel, by Lord Dawson of Penn, and by the most reverend Prelate the Archbishop of York and many other speakers, the Government replied that public opinion was not, as yet, ready for this experiment or even inquiry, for that was the principal request. But that was before the war, and the changed circumstances which I have alluded to have not been without their effect on the public mind.

I have been expressing in the last few sentences my personal point of view, but it is clearly of much more interest to your Lordships to hear the point of view of the Party and the trade unions which my friends and I endeavour to represent. It is true that there is some hesitation and apprehensiveness in the minds of many trade unionists about family allowances. What they mainly fear, I believe, is that the value of such allowances will be deducted by employers from their wages, thus lowering the general wage level in bad times and preventing it from rising, as it should do, in good times. If that were to happen it would, of course, defeat the whole object of the scheme, which is to prevent the standard of living of the poorest section of the wage-earning class from being further depressed. The Government, if they were to consider operating such a scheme, should certainly inform employers that these payments are no more a subsidy to their wages fund than the cost of housing, education, health insurance, or any other social service, and they should be prepared to penalise any employer who took unfair advantage of the higher family income of a certain number of their employees. I am convinced that this is the main reason, although there are others, for the doubts of a large section of the trade union movement, and that if it could be reassured on this point it would then view the proposition as a whole in a very different light.

There are certain other advantages in family allowances in war-time which are worth pondering. It has been calculated that during the last war at least half a million fewer babies were born than might have been expected in normal times. Many parents must obviously have been afraid to bring children into a world in which they might be exposed to misery and want. Family allowances would obviously do something to prevent a repetition of this disastrous acceleration of an already steadily falling birth-rate. Another, and admittedly less important, gain from such a scheme is that it would be the most effective antidote to the latest development in German propaganda. German broadcasts are constantly trying to stir up discontent by denouncing the "plutocratic, imperialistic democracies," because they allow the toiling masses, black and white, to be "cruelly exploited" by a mere handful of capitalists. Surely the most effective retort to this sort of propaganda is that which the Secretary of State for the Colonies made last week in an epoch[...] making statement in another place so far as the inhabitants of the Colonial Empire are concerned. By showing what I may call the same prudent generosity nearer home, we could claim that even in war-time we are steadily diminishing the worst poverty both at the centre and round the periphery of the Empire. I should therefore like to supplement the very vital and important question addressed by the noble Lord to the Government by asking for some assurance that the Government plans for reducing civilian consumption will not hit the poorer wage-earners with large families, and if they can give this assurance I should like to know what steps they propose to take to achieve this object. My endeavour has been to draw attention to one aspect of the problem of war finance which might otherwise not have been properly explored—namely, the effect of reduced consumption on the poorest section of the wage-earning class. I hope your Lordships will excuse me—because it is a matter of very great importance to all of us—for having dilated at some considerable length on this one small but, I think, exceedingly vital aspect of the problem.

4.49 p.m.

LORD STAMP

My Lords, it is very unlikely that there will be much division of opinion in your Lordships' House upon aims and directions, though there may be, of course, considerable differences of opinion as to methods and degrees by which we should reach them. When I last spoke to your Lordships I had occasion to refer to the fact that the problem is fundamentally one of the total amount of consumable current commodities and transferable services. Since that time there has been increasing public recognition that no amount of juggling with money and prices can actually increase the quantity of goods that our ships can bring to these shores or that we, fully extended, can manufacture. But we must not suppose from that, although the misconception is current, that financial methods do not matter, because, apart altogether from the fundamental fact of the total amount of commodities in the country, there is the competition between the Services' demand and the civilian demand for them, which is conditioned almost entirely by financial methods—by taxation, loans, and all other financial relations with prices which make tremendous difference to the way in which this total amount of commodities is divided and whether there is unhealthy competition between them. The moment there is real competition between them, the inflation—the "vicious spiral" to which the noble Lord who introduced this debate has referred—begins.

I said that the problem is one fundamentally of total current commodities, distinguishing that from the use of all our present old non-renewable assets. It may be necessary for a man to give up a larger house and go into a smaller one for reasons of his private income, but it does not do much to contribute towards the cost of the war merely to change one asset from one ownership to another ownership, or even to leave a house vacant. Those manipulations of the old assets have very little effect upon the fortunes of the finance of the war. And in the same way—I spoke of transferable services—it is quite obvious that to dismiss an old retainer who is not capable of taking up any other class of work does not really make much difference to the total war effort, inasmuch as if you have to pay more taxes to keep him by public assistance, you might just as well have paid him his wages and kept him in the service to which he was used. I do not say that there are not exceptions to these things, but in general the problem is one of current consumable commodities and transferable services. The consumption of commodities per head is substantially greater than it was in the last war, and that is a fundamental fact which we must keep before us when we are considering what degree of sacrifice people are being asked to make and what it is possible for them to make without making them either discontented, unhappy or inefficient.

We have seen from the argument which has been put forward by the noble Lord who introduced this debate that if we can induce those who have increased earnings to put them on one side and not to spend them in competition for consumable commodities, that will go a very great distance towards "paying for the war" to use a popular phrase; but he has shown to us that it does not go far enough and that some retrenchment on pre-war consumption is essential. Now a great deal of retrenchment is possible before we shall, as a nation, be living worse off than we did in 1914 to 1918. We shall expect, naturally, that the higher wages which are being earned in many parts of the country by overtime and the like will be spent in commodities unless by some special measures they are stopped. The question that the House is really considering is whether those special measures should take the form of moral suasion, of intellectual conviction, of statutory compulsion, or of some automatic method such as inflation. We can therefore afford to deduct a considerable amount from the pre-war standard of life throughout the country without destroying the probity of the economic machine. If we can get this intellectual conviction home—and I believe that it is fast getting home, apart from any class rivalry or feeling—if there is conviction throughout the population that these sacrifices are necessary, they can be made without loss of efficiency.

I do not wish to give your Lordships too many figures, but I am sure that you all watch, as a key to this situation, the retail indices published by the Bank of England. Before you draw lessons from those, I want just to give one warning. Your Lordships will have observed that before the war—in August—compared with the previous year, the retail sales were up by 4.2 in value and 6.4 in volume, so that when you are looking at the later figures and you see the amounts of increase in value or volume that you can derive from them, you must remember that the kind of national income figures which have been put before you to-day are not those of August but are much earlier, and therefore you cannot take credit, as it were, for the 6.4 in the month of August as a plus and take the minuses from that: you should take your minuses from the earlier period—from a year before. The retail index only gives you the volume of the retail sales by the process of dividing by the retail price index. But you can get a rough indication of volume; and whereas it looks to be, and indeed it is, a fact that far greater monetary expenditure is going on throughout the country outside London than before the war, the actual volume of things bought, owing to the change of prices, is not so great; and corrected for price, the diminution in total volume of things bought is an encouraging figure—for food somewhere in the neighbourhood of 9 per cent. in volume and for things other than food somewhere in the neighbourhood of 15 per cent., in December.

As I say, those corrections of price are very rough, but it is a fairly good indication that some retrenchment is already taking place. In considering these figures, however, you must remember that we are continually draining away from the ordinary retail purchasing clientèle a considerable number of adult purchasers who are going into the Army and other Services and are being fed, as it were, not out of the shops, but from the public larder. The figures are therefore not precise guides to the trend of events, but they are the best that we have, and it is very important that we should watch them very closely. It is important that we should watch the total pay-roll, as our American friends call it, and the way in which it is being dispensed, because it is at that point that we reach the vital situation referred to by the noble Lord who initiated this discussion—the vital point as to whether we are taking enough from current consumption to get rid of the competition between the two great consuming sides, the Services and the civilian side, in which lies the germ of inflation. As I said before, and I think I can repeat it now, there are no very clear signs of inflation at the present time, but I think we may say that possibly some of the seeds of inflation have been sown, and that if the temperature is too high they will very easily spring into full flower; but at the moment we are not suffering from inflation. Before I leave those retail figures, which I hope your Lordships will follow very closely from month to month as this problem develops, I should like to remind the House that, of course, for reasons well known to us all, Central London was down by about 30 per cent. and Suburban London by about 5 per cent. In order, therefore, to get the values up, as they are, you may be sure that in the great spending districts, the manufacturing districts, the increase in volume has been very considerable. It is, however, at the moment diminishing; it is not as great as it was two or three months ago.

There is one great peril that we are facing to-day. We are all very proud of the prowess of the Navy in keeping the seas free and enabling vast quantities of commodities to come to this country. It adds to our prestige; it influences the world, and it is a kind of psychological asset that we are loath to give up; and every sign that a ration can be increased looks like being a national asset of a psychological kind; but I am afraid that there is a peril lest this very freedom of the seas and the good use of our shipping may tempt us to buy and consume more than we can afford. It would be a sad thing if prestige itself were to lead to inflation. The word inflation, of course, usually has the definition applied to it by the speaker. We think of it as a fixed quantity of goods with an increased amount of purchasing power applied to them, but the problem we have to face is a diminished quantity of goods against an un-diminished quantity of money. Now whether that is inflation or not is largely a matter of definition, but that is the situation that we are likely to be faced with, and that, together with the competition between the two purchasing sides, is the situation to which we wish to apply our correctives, and those correctives, as has been said in this House, are scarcity, and, because of it and rightly, the system of rationing. But to apply these correctives to pretty well every class of merchandise is almost an impossible administrative task. We may have a scarcity and, outside the particular cost of living items, allow prices to rise. You only have to realise all that to see that that is not a solution of the problem of paying for the war. What we want to do is to apply to scarcity automatically reduced spending power in order that there should be no price rise benefiting people abroad, but that the transfer of spending power to the Government shall be complete. When I refer to no price rise, I would remind your Lordships that we must have price rises which correspond to really increased costs, otherwise the whole economic machine jams. It is the price rise beyond that figure which we have to fear.

Reference has been made by some of your Lordships to the subject of taxation. Now, nothing that I say from the outset on that subject will I hope be taken to refer to questions of equity. However virtuous what we are doing may be from the point of view of sacrifice, that is not the point I am on. I am going to take the differential types of taxation that we have over different groups of income and wealth, and I am not dealing with whether they are fair—that is not my point at all—but with whether in themselves they can be relied upon to pay for the war. Now it is rapidly getting home, thanks to the speeches of His Majesty's Ministers and others, that if you take a very much larger sum from the wealthy that would only be a drop in the bucket, and leaves another problem we have to consider. However necessary it might be to tax the rich, from the point of view of social justice, it does not solve the problem, because it does not very much relieve the commodity situation, as probably two-thirds of the commodities of the country are currently consumed by people with incomes of under £5 a week, while the actual consumption of commodities—those commodities which are involved in this problem—by the wealthy is relatively small, and much smaller than the amount of their residual wealth. From this point of view it is interesting to look at the immediate pre-war percentages of incomes taken as taxation and what is left as spendable income, and to make a comparison with the year 1940–1941 under the existing taxes. This is a result that we get, taking three levels—£250 a year, £2,500 a year and £25,000 a year (all multiples of ten). At the £250 level the total taxation was 8.8 per cent. It left for spending 91.2 per cent. That 8.8 per cent. has now risen to 12.

LORD STRABOLGI

That is direct taxation.

LORD STAMP

No, all classes of taxation put together. I am following the model of the statement of taxation drawn up in the Colwyn Committee Report, which is based strictly on those lines. On the £2,500 level the tax was 22.5 per cent. and has now risen to 31.6 per cent. The spendable income, therefore, was 77.5 per cent. and has fallen to 68.4 per cent. On the £25,000 level the tax was 55.3 per cent. This is not on investment income, but on earned income, and it has risen to 69 per cent. The amount that was left for spending was therefore 44.7 per cent., and it has now fallen to 31 per cent. No local rates, of course, are included in this, or any Excess Profits Tax or Death Duties. Taking investment income, including provision for Death Duties, on £250 a year the tax was 11.2 per cent. and has become 14.4 per cent. It left formerly 88.8 per cent. for spending and now leaves 85.6 per cent. On £2,500 the tax was 35½ per cent. and it becomes 46.8 per cent. It left 64.5 per cent. for spending formerly, and now 53.2 per cent. On the £25,000 income—your Lordships will have seen the table in the OFFICIAL REPORT last week—the tax of 86.7 per cent. has become 115.9 per cent. That is to say, what was left was 13.3 per cent., and that has now become minus 15.9 per cent. I am not complaining in any way that this is wrong; I am just asking your Lordships to look at the scope of this matter.

It is true that in regard to the small incomes in the first group that I have been speaking of you must multiply them by a very large figure. It is true the income of the rich is large, but you can only multiply it by a very limited number. I know it is rather confusing to give figures in this way, and it is much easier to make them plain by using a diagrammatic form. I would, therefore, with your Lordships' permission pin these figures up in the Library with some graphic illustrations of them. That will enable your Lordships to discover the scope of the taxable resources of the country. Whatever may be done in the future in regard to those incomes from the point of view of equality of sacrifice, we want to keep emphasizing the fact that we are dealing with quantities, with commodities, and spending power on goods. You can never by financial juggling with prices, or by the most ferocious taxation of high incomes redistribute those commodities in the way you want to do in order to avoid inflation.

My final point is to revert to what I have already said in the middle of my remarks, namely, that this is a problem which should be studied by itself before the question of shipping resources and before the maximum we can buy are brought into the picture. If we start with the maximum that we can possibly get from abroad, and then leave it to find its level afterwards, we may find ourselves impelled to inflation by means which we cannot avoid. But if we budget ourselves upon a clear idea of the total that we ought to spend as civilians—and that, I take it, is the real purpose of this debate—then I think that the shipping problem and the exchange problem can be dealt with more rationally. But the foremost problem is competition between the purchasing Services and civilians for a limited amount of commodities, compelling an unhealthy dislocation of our price system and ultimately the vicious spiral.

5.9 p.m.

VISCOUNT SWINTON

My Lords, one of the additional advantages of having my noble friend who has just sat down in this House is that we not only receive from the speeches which he gives us economic facts and considerations that we can hardly get from anyone else, but we have the advantage as it were of getting two Government replies in an important debate at this time. I shall only intervene for a very few moments in order to direct attention to a particular aspect of this problem in connection with export trade, but before I do that I should like to make one comment on the very interesting speech of the noble Lord who has just sat down. He adumbrated, as indeed did the noble Lord who initiated this debate in one of the best speeches I have heard in this House for a very long time, various ways in which the problem could be dealt with.

The problem is obvious to all of us. The noble Lord, Lord Stamp, said you might possibly deal with it by a very elaborate system of rationing covering almost everything we buy and use. He discarded that—and I think that except in the last resort I should agree with him—as being so cumbrous a method and so complicated a method that it would be almost intolerable to those who have to suffer under it, and almost impossible for those who have to work it. If there is any other way of doing it, I think rationing had better be confined to principal articles, with which it is easy to deal. He at once discarded, as we all do, inflation, and I gather that on the whole, as at present advised, he comes out on the side of a voluntary appeal to everybody to budget not according to his own needs, but in accordance with the national need. That may be the right way, but I am perfectly certain that if that is the way which the Government intend to follow then it cannot be followed by ordinary citizens simply after listening to speeches, even speeches as excellent as the one delivered by my noble friend who has just sat down. There must be precise and definite directions given. It really is no good saying to the workman who takes home £9 or £10 earned by piecework that he must so budget that he does not spend unnecessarily. We want precise directions as to the way in which we should limit our expenditure. If we are told that we must limit it in such a way as not to involve dollar exchange, how is the unfortunate individual to know whether his purchase does, or does not, involve an inroad on the dollar exchange? People must receive most specific advice and direction.

But I am bound to say that even after that direction has been given, I believe that something more will be required. I do not believe that you can stop short of some compulsory method of restricting purchase of what is not necessary. I speak, as anyone of us must, with great diffidence on this matter, because only the Government can have full knowledge, and with that full knowledge the Government mast give a lead, and a definite lead, on whatever line is to be followed. The Chancellor of the Exchequer has told us that certain kinds of food are being subsidised, and therefore that an iron ration of food was being kept at a more or less stabilised price. But that is only one side of the picture. It really means that a man does not have to spend so much upon these kinds of food and therefore can buy more of other commodities which are not subsidised. That gave Mr. Keynes an easy one in The Times next morning, and he asked when the second chapter was to be published and whether it was "to be continued in our next." As the noble Lord, Lord Stamp, did not say anything about it, I hope that my noble friend Lord Hankey is going to deal with the other side of the picture.

Subsidising certain articles of food, if it stood alone, might be not only expensive and inadequate, but even actually harmful to the particular purpose in view. The specific point to which I want to direct your Lordships' attention is this. Most of what has been written and said on this subject has been directed to the question of the "spiral," to inflation, leading to an increase of the total war bill, and consequently to an increase in the amount of money which has to be raised for Government expenditure. That of course is a very important side, and perhaps the most important side, of the subject, but it is not the only one. It is now axiomatic—though I am not sure it was to everybody, even to members of the Government at the beginning of the war—that export trade is perhaps the most vital of all munitions because by that export trade you supply the sinews of war. My right honourable friend the President of the Board of Trade is now giving admirable support to what is known as the drive for export trade, but export trade is not quite so simple a thing as some people think. It has been said, but said I think with only partial truth, that it is very easy to get export trade to-day—that it is a seller's market, and that all people have to do is to go out and sell, provided they can get material to manufacture into the goods they are going to sell. There are a good many risks which have to be taken. There are political risks, exchange risks and many others.

It is true that elimination of subsidised German competition has eased exporters of some difficulties, and that is an important advantage. It is true also that in some markets and in some commodities where there is a shortage it may be easy to get a remunerative, and perhaps a highly remunerative, price. It is of vital importance that manufacturers should not sell at a lower price than they can reasonably obtain. I say that advisedly, because I know of certain cases where a lack of combination has reduced assets which we might have secured. Export trade of that kind, however, is relatively small in amount. But while I am sure that there may be some commodities and some markets in which it is easy to get export trade at a considerable profit, there are other trades and other markets where export must be done, but where it must still be done at fairly cut prices. The competition from the United States of America in South America, for instance, is certainly not going to diminish in spite of all the great orders that are placed from here. Indeed, on the contrary, that competition is probably going to be more intensive, because—this is so obvious and axiomatic—if a factory has been working at 50 or 60 per cent. of capacity, and then an influx of orders from some belligerent country comes to fill the factory rather fuller and at the same time export business becomes available as well, obviously that factory, enabled to work up to 80 or 90 per cent. of capacity, is going to produce at a cheap and efficient rate. Moreover, shipping through seas where ships are not subject to the risk of enemy attack may make freight rates far less onerous than those which have to be paid on export from this country. At any rate I have said enough—and I am sure everybody engaged in industry today will agree with me in this—to show that there is a wide range where, if the necessary amount of export is to be done, cost price will still remain the most important factor.

That brings me to this: that therefore any rise in costs here is not only going to affect the bill which we shall all have to pay for winning this war—as we are going to win it—but also makes it more difficult to export and to get the sinews of war which we need. There are two ways of meeting that possibility. One, the wise way, is to do everything we can to stabilise costs, to keep them down as far as we can, so that business may be done on a natural and economic basis. The alternative—and it is a terribly slippery slope and nearly as dangerous as inflation—is to begin a process of subsidising export. It may be necessary to do it in some cases, but I am sure my noble friend will agree with me that it is a thing to be done only in the very last resort, if you can possibly avoid it. But of this I am quite sure: that unless we can avoid inflation and stabilise costs a great deal more than I see any prospect of at the present time, then we shall either suffer in our export trade or be driven into subsidising it as the only way of getting it. Not only will that be a most unhappy thing for us to have to do in the war, but we must look beyond. In all these war measures we have to be thinking of the trade which is going to come after the war, when a great deal will have to be done by us in trade organisation. I should feel most unhappy if I thought that we were going into that post-war trade having built up our export trade on an entirely uneconomic basis of subsidies. I am perfectly certain that everybody in industry to-day is only too anxious to be organised, to take any wisely-planned direction, to combine in any way to make what is most needed and to sell it wherever it is most needed. Trade, industry, employers, workmen will respond most readily to that appeal, but they must have a policy to follow.

5.25 p.m.

LORD MILFORD

My Lords, I am very pleased to have the opportunity of saying a few words on this very important subject, but I feel that most of the things I meant to say have been so much more ably expressed already by noble Lords who have spoken that I shall be very brief. Of course, I feel that there are really two distinct problems here. One is the rise in wages, which seems to be going on all over the country the whole time; that must be taking more commodities and putting up prices. The other thing is that the Government's policy of keeping down prices must lead to still more consumption and in the end, I am afraid, to rising prices and inevitable inflation. Mr. Keynes, whose scheme we are, I suppose, for the most part discussing to-day, has always attracted me as an economist, because he is prepared to scrap all old opinions and start from the very beginning again. His powers of argument and deduction are extraordinary. Nevertheless, I find that I disagree with nearly all his ideas. On most occasions he has a scheme to solve the problems with which we are faced at the moment. He had a scheme for solving unemployment I read it at the time, and there were several statements in it at which I simply squirmed. One, which I read again the other day in his "Theory of Unemployment," was that all the Government had to do was to borrow money and put another hundred thousand men at work and the effect would be that 1,200,000 people would be put at work. It made me gasp, and I did not believe him. Since that day President Roosevelt has spent something between £4,000,000,000 and £6,000,000,000—I do not know the exact figure—and has added £4,000,000,000 to the debt of the United States. I listened to a conversation which came from America by wireless the other night, and we were told that there were still 10,000,000 people unemployed in that country. I do not know how much we have paid people to work on Government account in rearmament, but we still have a lot of unemployment. I feel that that scheme is discredited.

One of the main things that was missed out of the argument for that scheme, and a thing on which I think many noble Lords will agree with me from their personal experience, is this. When I find that Sir John Simon takes another £150 a year away from me, I cannot pay wages. Whether the Government borrow money or take it in taxes, they take real wealth away from one person and use that real wealth to employ another person. It takes real wealth to employ a person: he must have food, clothes and so on. One gain cancels out the other. I think that is one of the reasons why the scheme is discredited. I only say that by the way. On this occasion I read Mr. Keynes's scheme originally—I am afraid I have failed to get a copy of the amended scheme—and I agree with nearly every word of it.

The other point on which I am very keen is a statement which he made very plainly, and I think it is time that everybody grasped it. In waging this war we can only spend current savings. In the last war we had the power of borrowing from the United States. That is lost to us. So we are up against the fact that, if we are going to spend £3,000,000,000, or something of that sort, on this war every year, the money must be obtained out of the current savings of the people. The only other source we have is the gold savings that we can sell in the United States of America. Saving is therefore absolutely necessary, and, if we are going to allow increases of wages, increases of income in every way, those increases must not be spent; they must in some way be treated as deferred income. I do not see that, if this were enforced on the working classes, there would be any real hardship, because, after all, wealth is only deferred income. If a man cannot consume the whole of his income he either lends it to a company and receives a piece of paper promising him a share in the future profits of that company, or he lends it to the Government and receives the promise of a share in the future taxes that will be collected by that Government. All that we are asking is that the working man should be on the same basis. It is in fact what I have always wanted; I want to make the working man a capitalist. The Labour Party always seem to have been shy of that, but I think that it would be an ideal world if everybody was a capitalist. If we are to have this saving, I am really in favour of it being done voluntarily if it can be done in that way. I think that Sir Robert Kindersley and the National Savings Movement have done an immense work, but of course the figures are nothing like big enough.

I do not know how that process is going to be stimulated, but I think that the Labour Party must come in and push it for all they are worth. I should like to refer to a speech which the noble Lord, Lord Snell, made the other day. I hope that the Leader of the Opposition in this House will not think me patronising or presumptuous, but I should like to say that since I have had the honour to be a member of this House and to listen to the debates here, the one tiling which has struck me most is the capacity with which and the whole way in which the business of His Majesty's Opposition is carried on in this House. It must be a very difficult position, I feel, with such a large number always of the opposite opinion, but I want to say that I have never seen any sign of an inferiority complex on the other side of the House. The noble Lord, Lord Snell, made a speech the other day which got me on the raw, because it touched on two of my pet sins. The noble Lord spoke about butter and petrol and—I quote from memory—said that if anyone managed to "wangle" an extra ration of butter or an extra gallon of petrol he deserved to be whipped through the streets at the tail of a cart. One of my vices is that I like butter, and as far as petrol is concerned I happen to live in the country, where an extra gallon is an enormous advantage. If you live in London there is no petrol ration, for you can burn as much petrol as you like by getting on a 'bus or taking a taxi. I recalled, however, the old saying about those who Compound for sins they are inclined to, By damning those they have no mind to. And I looked round to see whether I could find a sin of the noble Lord.

Now there are sins of omission, and what I want to draw attention to is that wages have been rising all over the country. In the month of January—the figures were given the other day—there was an increase of £280,000 in weekly wages among two million men. I cannot see that the leaders of the Labour Party have ever made any protest against that; but, if we are going to allow these increases of wages, in the end it will not benefit the working men, because prices must go up. It seems to me that it is the duty of the Labour Party to help in this matter. It is quite hopeless for a Conservative to suggest that wages must not be put up, but I do appeal to the Labour Party to do all that they possibly can to teach their own people the true facts of the situation.

LORD SNELL

We are always doing that.

5.37 p.m.

THE LORD BISHOP OF WINCHESTER

My Lords, I am sure that I am expressing the opinion of the House when I congratulate the noble Lord on his maiden speech. I should like to say that I hope we may often hear him again. I am intervening only for a very few minutes, and I propose to deal only with one matter. I find myself in full agreement with the noble Lord, Lord Balfour of Burleigh, in his most admirable speech in introducing this subject. I am clear, and I think that we are all quite clear, that if inflation is to be avoided something must be done to cut down the consumption of the civil population. But to every rule there is an exception, and I believe that we shall not succeed in stopping the rise in wages or in cutting down consumption unless we recognise that at the present time there is a considerable section of the community which is suffering from under-consumption. Until in some way that problem is dealt with, you will be faced with it every time you endeavour to call some halt to the rise in consumption. Investigators have told us that something like 10 per cent. of the total population have insufficient consumption, and, if you turn to the child population, according to Mr. Seebohm Rowntree one third of the children of the country have insufficient nourishment during the first five years of their lives. Surveys undertaken in districts such as Merseyside, Bristol and Plymouth all point to the same conclusion, that in families of three children and upwards there is a very large amount of undernourishment, in some cases up to 50 per cent. As long as this continues, whenever you talk about the reduction in consumption generally it will be pointed out that there are these hard cases. Whenever you appeal to noble Lords opposite to do their utmost to point out the dangers of the spiral and of the rise in wages, they will quite naturally point to this considerable section of the community who must have their consumption increased for the sake of their health and their happiness.

This under-consumption, of course, is due to the fact that, roughly speaking, wages are fixed with no kind of reference to the number of children in the family. A wage which is quite sufficient for a man with, say, two children may be hopelessly inadequate for a man with five children. Unless something is done to meet this deficiency, we shall undoubtedly have this vicious spiral. There are, of course, two methods. There is first the method we want to avoid—a general rise in wages all round. If we have a general rise in wages all round, it will not help in the least the poorer members of the community, for prices will inevitably go up and they will be in as bad a position as they were before. I believe the other remedy which has been already touched on by the noble Earl opposite is the right remedy—namely, some policy of family allowances by which a subsidy is given in respect of every additional child in every family where the number of children exceeds two.

I brought this matter before the House some eighteen months ago, and the noble Lord who replied for the Government, very sympathetically, when I asked for a Committee to inquire into the subject of family allowances, told us it was premature at that time. He may have been right, but I wish we had had that Committee. If we had had that Committee, we should have been in a much better position to deal with this matter. I am not now asking for a Committee, because the subject is much too urgent; but I cannot see how you are going to deal with these large numbers of poorer paid heads of large families unless you have some system of family allowances. There is nothing new about it. It is a policy which has been worked with success in Belgium, France, and some other countries. It is a policy which is advocated to-day by men of very different Parties, and I do hope that the Government, in dealing with this most difficult problem which we are now discussing, will see if something cannot be done in the way of giving these allowances to those families where they are most of all needed.

5.44 p.m.

LORD BARNBY

My Lords, the reply we are shortly to hear from the noble Lord, speaking for the Government, is going to be an important one because notice of this debate has been given for five weeks. It was a deliberate and careful consideration on the part of my noble friend who initiated the debate that he would give the Government ample time to reflect on how the amount of instruction which each successive speaker has urged is needed by the country as a whole. I cannot refrain, in passing, from saying, what will be the thought of all your Lordships, that the charm with which Lord Balfour of Burleigh addressed the House was accompanied by a lucidity which merits that the speech in which he raised this difficult subject should enjoy very wide publicity. The answer shortly to be made will doubtless form the grounds for much writing in the Press, which gives guidance to the country as a whole as to how a problem of this character can best be dealt with, and it will require great skill in presentation. The ground has been prepared by the speeches which we have heard recently by different members of the Cabinet, who have urged the need for sacrifice. There should be no doubt about the seriousness of the desire for this instruction. The problem, however, which in the main is one of conservation of our present consumption, resolves itself into one of substitution, and the export trade springs prominently into mind. That is why, when dealing with it, I should like to associate myself with the remarks made by the noble Viscount, Lord Swinton, speaking with all the authority of a former President of the Board of Trade. He very properly reminded the House that when talking about exports he did not mean that exports were necessarily easy to achieve, and it is to that particular aspect I wish to address myself.

The thought comes to one that if economy is to be achieved in the consumption of manufactured goods, it must involve export. Doubtless the noble Lord, in reply, will elaborate a little the point which Lord Stamp, with his usual clarity and brilliance, dealt with—the proportion of economy contemplated in what may be called raw material consumption as against the consumption of manufactured goods. Is the sacrifice to be on consumption of, say, sugar of which we take something like 2,000,000 tons a year and produce only 600,000 tons? It would look as if a considerable economy of shipping could be achieved. On the other hand if the economy is to be, in the main, in manufactured goods, which involve bringing into this country raw materials, there must be a distinction between consumer goods and capital goods. I make that point because from the most recent speeches of the Prime Minister and the Secretary for the Department of Overseas Trade the deduction clearly to be made was that the main achievement envisaged in the expansion of exports is an increase in consumer goods as against durable goods. If in consumer goods, then the price at which we can sell them is an essential consideration to ensure worldwide distribution. We have before us the speeches of the Secretary of the Department of Overseas Trade who has so strongly emphasized the Government's determination to achieve this distribution. I should like, in passing, as an industrialist, to say how glad I am to see the decision taken by the new President of the Board of Trade to establish this Export Council, composed of men who can be counted to achieve, if it can be achieved, what is aimed at, and at the same time I would felicitate them on the enegy with which they have already approached the job. But, as Lord Swinton warned us, at the level of prices, can the distribution be achieved in sufficient volume? The alternative naturally remains that if it is not to be domestic consumption, and export cannot be achieved, there must result unemployment. Already there are signs of under-employment in many plants, and that will only be increased.

An additional point upon which I hope the noble Lord will be able, perhaps, to give us some guidance in dealing with export in substitution for domestic consumption is this: Is the manufacturer, faced with a requirement to find a market overseas for his production, going to be prepared to sell in many markets where the war hazard is so great? Obviously some indication of Government policy is required, as to whether they will assume the credit hazard which must come into the considerations of the manufacturer who seeks to find markets overseas for his exports. Along the same lines of assisting export, I hope the noble Lord will remember that communications are of vital importance in assisting the export trade; and I hope he may give thought to, and find justification for, urging in the correct quarters that something be done to speed up the communications with the United States and Canada—indeed with the whole of the American continent. The delay which exists, with the tying up of the American Clipper from Lisbon to this country, is a serious inconvenience to traders as a whole, and a severe handicap to the export trade. It is within your Lordships' knowledge that a plane leaves daily from Lisbon for Berlin, and Berlin is in infinitely closer contact with the United States than we are.

A further point is this. If economy in domestic consumption is to take place I hope the noble Lord will give us some indication of what sort of instruction he has been given by the Cabinet to achieve some review of the scale of indent or provision by the Service Departments on the class of commodities which fall within the head of consumer goods, and how authority can be imposed to modify the very proper and natural caution on their part to avoid any risk of under-budgeting. A Cabinet instruction alone can do that. I will give one simple illustration. Take cotton webbing, which involves the importation of cotton yarn to manufacture it here. It is known that the strength of that webbing is sufficient to carry the loom that weaves it, and not only the water bottles that it is designed to carry. The economy of cotton yarn, the economy of shipping and the economy of exchange on that one simple problem would be appreciable on the scale on which cotton webbing is being used. In conclusion, I would thank the noble Lord, Lord Stamp, for the graphic way in which he illustrated the problem; and as he has come down to the House armed with charts I hope we may find a means of easily understanding the difficult problems he deals with.

5.55 p.m.

LORD GLENTANAR

My Lords, there is little I can add to the succession of very able speeches that we have listened to this evening, but I should like to support the noble Lord who initiated this debate. Many of your Lordships are aware that leading industrialists in this country have been consulting on these vital matters, for some time, and I think it is not going too far to say that they feel that the time is ripe for the Government to put a comprehensive scheme into action. The question as to how much should be left to what I think the noble Lord, Lord Stamp, called intellectual conviction or to statutory compulsion is a very difficult matter, but I should like to support the view expressed by the noble Lord, Lord Swinton, when he said that statutory compulsion in some measure was necessary. I would not suggest that the greatest measure of intellectual conviction should not be brought about both in the minds of the general public and of the leaders of industry, who perhaps will have in a great measure to carry out part of the scheme. Two different kinds of education or instruction, will be necessary, and I hope that the noble Lord who will be replying for the Government will be able to assure us that the Government are considering—I do not like to use the word "propaganda," because it has been so much misused—but the education of all sections of the public in the vital importance of these matters. It is not only a question of compulsion, but of keeping a level between those who may have more intellectual conviction than others. It is not fair to ask any one body or any one individual to give a lead as to the amount or as to the way in which the Government's wish is to be interpreted. I suggest that the first thing is to produce the willing co-operator and then, by means of compulsion in one way or another, to tell him exactly how far he is expected to go. The time is come, my Lords.

I feel there is only one further thing I should like to say, and that is to associate myself with those noble Lords who have stressed the vital need that in any measures that are taken the poorest sections of the community should not have any hardship inflicted upon them. The under-feeding of the youth of this country is a shame, and it has lasted too long. We should have put this right long ago, but now is the time, and I hope it will not be overlooked. I hope we are going to get from the noble Lord on behalf of the Government an assurance that this matter is well under way, as I am sure it is, and that we shall very shortly see the scheme in operation.

5.59 p.m.

LORD SNELL

My Lords, I will delay your Lordships for only two minutes, merely to re-emphasize what was said in the quite excellent speech of the noble Lord who sits behind me. I feel that this argument has not been met or fully considered in this debate. It is that the poor cannot afford to make any reductions in their consumption, and when 25 per cent. of the children in the poorest families are ill-nourished it is quite impossible for us to command any reduction of their consumption. We remember that if they did make such a reduction it would have certain definite results. First of all, it would be taken out of what remains of the vitality of their children. Secondly, it would in consequence reduce the nation's strength in its reserve of man-power. Thirdly, it would do the traders themselves no good. If one hundred people did without one hundred suits in a year or one hundred pairs of boots, so many tailors and so many bootmakers would suffer to some extent in that way.

Nevertheless we agree that at all costs inflation must be avoided. We think too that the situation might be faced in other ways. We might arrange to produce more goods than we are producing. We might set about very earnestly growing far more food on available lands, and we might try to export more and more goods. The argument this afternoon has taken no account at all of the fact that there is a great reserve of wealth-producing power that is not at present being used, that there are nearly a million and a half of unemployed men, and it really does not impress us to ask us to support any restriction of consumption for the poorer parts of the nation whilst the things that I have mentioned are permitted to go on. Of course, we must all do what we can to support the national defences at this time, and I personally feel that I am at a great disadvantage. The worst of living a very simple life and avoiding all kinds of luxuries is that when an emergency of this kind comes along one has nothing to do. One cannot enjoy the thrill and consolation of patriotic self-denial. Therefore I am not quite sure that my life has been run on proper lines. But I would like to say just this word in conclusion, that unless some provision is made whereby the poorer classes are not compelled to share in this self-denial then you will have a lowering of the standard of life. Now, we stand unalterably for an increase in the standard of life of the poorer section of the nation, and if it came to that, we would mobilise the whole strength of the working classes in support of that view. I hope the Government will not be tempted too readily to fall into any trap by asking the most poorly paid in the community to make any contribution by a reduction in the standard of living.

6.3 p.m.

THE MINISTER WITHOUT PORTFOLIO (LORD HANKEY)

My Lords, the motion which the noble Lord has introduced raises a very large and profoundly important issue. It opens up what is really one of the central problems of our economic policy. It has produced, I think your Lordships will agree, a most interesting debate. I think it may be useful to lead up to my reply to the argument he has developed by recalling the recent history of this question, and, more particularly, the precautionary measures which were prepared beforehand bearing on the difficulties which were liable to arise in the early stages of a major war in this connection. The "vicious spiral" mentioned in the Motion is no new issue. We were painfully familiar with it in the last war; when the problem was frequently investigated but never completely solved. By September, 1918, the situation as described in the "Official History" was as follows: Prices, in spite of the controls, and the subsidy which kept down artificially the cost of the loaf, were still rising. The Economist and Statist Index Numbers stood in September, 1918, about 140 per cent. higher than at the outbreak of war; the Labour Gazette Index of retail prices showed an advance of 110 per cent., and the rise had been rather sharply graded during the summer months. The Board of Trade 'Cost of Living' Index Number (which included rent) was just double that for July, 1914, and had risen about twenty-five points since January, 1918, mainly as the result of a sharp advance in the cost of fuel and light, and a still greater advance in the price of clothing. Owing to the decrease in cotton imports, and the large proportion of the woollen output devoted to military or export purposes, the cost of clothing was now nearly half as great again as at the beginning of the year, and nearly three times as great as before the war. The effect of high prices, however, though they gave rise to much discontent, was mitigated by the advance in wages, and fell mainly on the professional class and people with small fixed incomes. There you see the vicious spiral mentioned in the Motion. The Government is sometimes reproached on the ground that before the present war it had not thought out these problems of price and income levels, profits and wages, purchasing power abroad, exports and so forth, and that at the outset of the war it did not announce a comprehensive economic policy. As a matter of fact, as my noble friend Viscount Swinton would remember, the Committee of Imperial Defence opened up these questions as long ago as 1929, in the course of inquiries into the connected questions of man-power and supply. As a result the subject was examined by the Treasury in the light of experience of the last war. Their investigations led to a number of fresh inquiries on different aspects of the question, with the result that a series of precautionary measures was drawn up which could be put in operation either before a war, or at its outbreak, or subsequently. Why then, it may be asked, was a comprehensive scheme of economic policy not announced on the first day of the war? I submit to your Lordships that this was impossible in the circumstances in which this war began. There were too many uncertain factors in the problem.

We are a peace loving nation. We hoped to avoid war altogether. So the date of war was uncertain. We were almost equally uncertain as to who would be our friends or our foes; with whom we should be able to trade and with whom we should not. There was uncertainty as to the effect on our economic position of I such factors as the possible closing of the Mediterranean for a time, or unrestricted submarine warfare, and other unscrupulous and inhuman breaches of International Law, to which from previous experience we were bound to expect that Germany, if she became our enemy, would resort. There was the same uncertainty as to the effects of unrestricted air warfare which, for similar reasons, we had to expect, to say nothing of the blackout, the evacuation policy and other war conditions.

Again we knew that our defensive preparations, though progressing rapidly, would take some time to complete. It would have been easy to produce a beautiful scheme allowing from the first day adequate labour and raw materials for exports and civilian needs if we could assume that our armaments would be complete, with huge stocks of munitions and reserves. As things were, we had to assume that we should have to give first priority to armaments, both in labour and material. The pre-war investigations showed quite definitely that no precise rule could be laid down in peace as to the moment when each particular step should be taken, whether at the outbreak of war or subsequently. The only thing to be done was to have all these defensive precautions as ready as possible.

The result was that by the time war broke out a number of defensive measures bearing on this problem which we are discussing to-night had been carefully thought out. Some were put in operation before the war, others on the outbreak, others during the early months. I might mention the following: exchange control; control of imports and exports, in particular the curtailment of luxury imports; bulk purchase of certain foodstuffs and other commodities; the establishment of the Ministry of Food, together with preparations for the control of food prices and for rationing; measures for increasing agricultural production; rent control; the control of materials likely to be scarce and the fixing of maximum prices; petrol rationing; the control of shipping and the control of the railways. These were all measures which were the subject of much preparation before the war; not all of them, of course, have worked out absolutely smoothly, and in several cases it has been necessary to modify the plans originally contemplated. But it is not too much to say that the preparatory work which was undertaken before the war has put us in a stronger position than that in which we should have been otherwise for dealing with the many economic problems that war conditions entail, including among them the vicious spiral that we are discussing to-night.

Then there were further measures which, while not prepared for in the same detail, were so to speak in the programme, and which have an important bearing on the problems before us. There was the supplementary War Budget which its author described accurately as a "swingeing Budget"; there was a great intensification of the voluntary savings campaign; a Prices of Goods Act designed to prevent profiteering in articles of general consumption; and there is the policy recently announced by the Chancellor of the Exchequer in another place for checking the rise of food prices by what are in effect Exchequer subsidies on certain important articles of food, costing about £1,000,000 per week, or (say) £50,000,000 a year. There has been a series of measures designed to promote exports, including the schemes which are now in operation in the cotton and woollen trades for inducing producers in these industries to give preference to export and Government orders as compared with home civilian orders, including also the recent establishment of an Export Council by the President of the Board of Trade, the task of which is the organisation in detail of the export drive. I dare say your Lordships will have noticed that the President of the Board of Trade has now suggested in another place that a White Paper would be issued shortly on the plans of the Export Council. The question raised by the noble Lord, Lord Barnby, in regard to the Export Council will I am quite sure receive consideration by that body in the course of its work.

All the measures already taken and still in progress provide, I think, sufficient proof that the Government are not drifting, as I think the noble Earl, Lord Listowel, fears. It is one of the main objects of several of the measures I have mentioned to help to avert the development of a "vicious spiral" by checking the rise of prices, particularly of commodities like essential foodstuffs which play a major part in the cost of living. I am quite aware that it can be argued that measures of this type, while invaluable for the purpose of delaying the approach of inflation, are not enough; that, indeed, some of them may even aggravate the problem unless they are accompanied by other measures designed to restrict civilian consumption.

That brings me to the argument that has been developed by the noble Lord, Lord Balfour of Burleigh, with which I will now attempt to deal. The gravamen of the noble Lord's argument is that our consumption is probably proceeding at a rate which is in excess of our production, and that we are eating into our stocks in consequence. He calls accordingly, in the terms of his Motion, for a drastic curtailment of the consumption of goods by the civilian public, and he argues that for this purpose some drastic financial scheme is necessary, such as the ingenious plan for compulsory saving or deferred pay put forward by Mr. Keynes. Of Mr. Keynes's scheme, of which the noble Lord gave a summary and which I have myself read in its latest form from cover to cover, I will only say in reply to the specific question put by the noble Lord that it is being carefully studied and that it has not been rejected. Schemes of that character, however, take one into the region of financial policy. They are obviously very closely connected with the Budget, even though they do not actually encroach upon that ground. The noble Lord will appreciate, therefore, that it is impossible for me to enter into a discussion of the merits of general financial projects such as he has referred to, or to offer any opinion upon them. I would, however, like to make one or two general propositions.

LORD STRABOLGI

Do I understand the noble Lord to say that he is precluded from discussing financial questions in your Lordships' House?

LORD HANKEY

The Budget.

LORD STRABOLGI

We always discuss the Budget.

LORD HANKEY

Well, I am not prepared to discuss the Budget at the present time.

LORD STRABOLGI

I gather that the noble Lord does not mean to argue that it would be out of order to discuss financial questions. If he does that I must on behalf of my noble friend enter a caveat.

LORD HANKEY

I am going shortly to mention some financial aspects of the question. First I will make some general observations, and I should like to mention one typical characteristic of the British Government which has served us well throughout our history; that is, an unwillingness to enact legislation unless we are satisfied that the administrative problems involved can be successfully met. The machinery is of great importance when increasing taxation, and there is a risk of a fiasco if the burden placed on the people who will have to administer the scheme is more than they can successfully carry. The scheme must be examined from that point of view. Next I would observe that in examining any scheme for preventing inflation—the evils of which are fully recognized by the Government—the Government have to assure themselves not only as to its mechanical and practical efficiency but also as to whether it can be fitted into our democratic system of government. A plan that may be admirably adapted to a totalitarian country, where the people have no voice in the Government and have to put up with what their rulers decree, may be wholly inapplicable to a country governed like our own by a Parliament free to express its views without restriction. My point is that a totalitarian Government turns instinctively to compulsion, whereas a free Government, before adopting measures of compulsory saving and so forth, will always need to be fully assured that voluntary effort cannot produce the same result. Of course, we all desire the best scheme that can be evolved, and we have shown again and again in our history what we will submit to in times of war, but our people have, rightly, a very sharp eye for the preservation of those liberties which are the basis of our war aims, and the fact that such schemes must be submitted to the test of a discriminating criticism by both Houses of Parliament compels the Government to exercise the utmost vigilance with regard to them.

Next, I agree with the noble Lord that the question has a very important financial aspect. It is true, of course, that the war expenditure of the Government is only partly defrayed by taxation, and that it serves accordingly to increase the total amount of purchasing power at the public disposal. That, of course, results from the huge orders placed by the Government for the purposes of the war, which put a great deal of money into the pockets of the wage-earners and others. As, obviously, this money cannot all be taken away from them by taxation, they have more money to spend. It is further true that, if the public were to attempt to employ the whole of that increased purchasing power in ordinary expenditure, inasmuch as our war production encroaches on and diminishes the quantity of goods available for consumption, the result would be a general excess of demand over supply, which would act as a powerful force tending to create shortages and to raise prices With all that I agree, and the general financial aspect of the question is therefore, as I have said, important.

But my second proposition is that, important as this aspect is, it is by no means the only one, and I am not sure that a false perspective of the problem that actually confronts us may not be conveyed by a purely financial approach, which deals in what I may call "global" figures, or estimates of Government expenditure and revenue, savings, production and the like. Certainly what most forces itself on the attention of the Government, as we deal with the economic problems that arise from day to day, is the great diversity of conditions in different sections of the economic field. The Government's war demands are concentrated in a high degree on certain branches of industry, such as engineering, shipbuilding and the woollen industry; they fall comparatively lightly upon others. That necessarily means that the supplies of some materials that remain available for civilian consumption after the Government's war demands have been met represent a far smaller proportion of the normal civilian demand than do the supplies of other materials. Again, it is far more difficult to maintain the supplies of some materials which are imported from sources where shipping presents especial difficulties than it is to maintain supplies of other materials. For that reason also the proportion which the supplies available for civilian consumption under war conditions bears to our normal peace-time consumption varies greatly from one commodity to another.

This bears on some of the specific questions which have been asked by the noble Lord. Take the question of how far our consumption is outrunning our production, and how far we are eating into stocks. That is a most vital question. In the case of some important commodities it is a serious practical question with which we are constantly preoccupied; but I find it very difficult to answer the question when formulated in general global terms. Such general data as are available, though far from conclusive, are more reassuring than might be supposed. Lord Stamp has already touched on this subject. The indices of the volume of retail sales published by the Bank of England suggest that a considerable measure of economy has been exercised by the civilian public in their personal expenditure in recent months. In the early weeks of the war there does appear to have been an increase in the amount of buying from shops; but since then there has been a marked reduction. Taking articles other than food, the Bank of England indices show a reduction of 4 per cent. in the value of the goods purchased in November last as compared with November of the preceding year, and a reduction of over 5 per cent. for December as compared with the preceding December. That, I would emphasize, is in terms of money values. When allowance is made for the rise of prices, the effective reduction in the volume of sales of non-food articles was not 4 per cent., but nearly 14 per cent. for November, and not 5 per cent., but nearly 15 per cent. for December. The volume of food purchases also seems to have declined slightly by comparison with the preceding year.

I do not want to base too much on these figures. The Bank of England indices are based on returns from certain shops only, which include principally department stores, co-operative societies and multiple organisations, and they are not necessarily representative of retail trade as a whole. Moreover, we must remember that the wants of large numbers of men who are now serving with the armed forces are no longer supplied through shops. But when due allowance has been made for these considerations, it remains probable that there has been an appreciable reduction in the general volume of purchases made by the civilian public. The Bank of England retail figures also cover the stocks held by the retailers who make returns, and these figures, so far as they go, are encouraging. According to them the stocks held by shops in December were somewhat higher in volume—that is, after allowance has been made for the rise in prices—than they were in December of the previous year.

Turning now to another side of the picture—namely, the saving—we have the encouraging fact, announced by the Prime Minister last Saturday, that the sums lent to the Government in the forms of National Defence Bonds and National Saving Certificates have amounted to over £90,000,000 in the first thirteen weeks of the National Savings Campaign. It is possible, of course, as the noble Lord, Lord Balfour, suggests, that some part of these sums might represent a diversion of savings from other channels. But the rapid growth in the number of savings groups throughout the country suggests that the scale on which new savings are being made is very considerable. I was very glad to hear the tributes paid to the great work of Sir Robert Kindersley in the National Savings Campaign by the noble Lord, Lord Milford, and I wish to take the opportunity of congratulating the noble Lord—I am not quite sure whether he is in the House—on the very interesting contribution, his first contribution to our debates, which he made to-day.

Now, the facts to which I have just referred are not mentioned by me in order to encourage a spirit of complacency; far from it. Rather do I suggest that the problem that confronts us is not to be regarded simply as one of securing a sufficient reduction of purchasing power by taxation or saving or—what is the same thing from another angle—of securing a sufficient reduction of civilian consumption, regardless of the forms which that reduction takes. There are some important commodities in regard to which the maintenance of adequate stocks and the securing of a proper balance between consumption and the flow of supplies represent problems of very great difficulty and of great urgency. Such problems, however, cannot be solved by a general financial panacea. When you have the great differences to which I have already referred between one commodity and another in the proportion of the normal supplies which can be made available under war conditions for civilian consumption, prescriptions for preventing an excess of purchasing power will not really take you very far. If you were to confine yourselves to measures of that type, the most that you could hope to do would be to balance shortages for some commodities by corresponding surpluses in the supply of others, but you would still have shortages of some important commodities. That is why I deprecated a purely financial approach to the question.

The noble Lord Lord Balfour of Burleigh gave your Lordships a calculation of Government expenditure, estimated yield of taxes, available assets in the form of capital resources and so forth, from which he calculated that there remained in round figures about £1,000,000,000 to be found by genuine savings; that is to say, by an actual curtailment of consumption. He asked whether it was enough to rely on voluntary savings to achieve the necessary contraction in civilian consumption. I am not in a position here and now to confirm or to reject the figure of £1,000,000,000; it might be more or it might be less, I do not know; but, as to the answer, I have already pointed out that savings are only one of the several planks in the Government's programme, of which I gave a list in the early part of my remarks. There are in addition rationing, taxation, export and import licences and Prices of Goods Acts. As regards the most important of these, taxation, it is of course not possible to anticipate the Chancellor of the Exchequer's next Budget.

I hope that nothing that I have said will lead anyone to suppose that I wish to minimise the extent of the sacrifices which will have to be borne by the whole of the civilian population if we are to make an adequate effort in this war. The development of our war effort is moving forward steadily, and, as it gathers momentum, the greater must be the extent to which civilian consumption in different directions must be curtailed. This curtailment is important, as the noble Lord, Lord Balfour of Burleigh, suggested, in order to keep in check the vicious spiral. It is also important for other reasons, and notably in order to permit the maintenance of a large export trade, to provide the means of purchasing necessary war materials from abroad. In order to prevent the pressure of the home market from encroaching on our capacity to export, steps have been taken, as I mentioned earlier, in the cotton and woollen industries to require manufacturers to give preference to production for export over production for the home market. More generally, in the allocation of scarce materials which are subject to control, we are endeavouring to secure that adequate provision is made for export purposes. These steps will, of course, serve to reduce the supplies available for the public at home; and a readiness on the part of the public to cut down their expenditure on articles of clothing and on other things will be of great assistance in helping to avoid a condition of real scarcity.

That brings me to the very difficult question which was asked by my noble friend Lord Swinton and other speakers, as to what articles we should buy and what we should not buy. I have been asked whether the Government can give a clear lead as to the particular articles which the public should refrain from buying—whether, for instance, a man should postpone his next purchase of boots or of a new overcoat. It is very difficult to draw up a definite list in a situation which is in a state of constant and rapid flux. I can only suggest one rule which seems to be perfectly safe, and that is that for reasons of shipping and foreign exchange it is obviously upon commodities that are imported from abroad or that are made from imported material that economy is particularly important. I should very much like to be able to say something more definite, but I am afraid that it is really not possible at the present time. I would remark, however, that expenditure on personal services which make no call on imports is in a different category altogether. The noble Earl, Lord Listowel, asked me for an assurance that the Government plans for reducing consumption will not hit the poorest section of the wage-earning class. It is because of the Government's realisation of this potential hardship that the Chancellor of the Exchequer has brought into being the scheme to check a rise in food prices by way of Government subsidy to which I have already alluded; and I might call your Lordships' attention to the fact that about 60 to 70 per cent. of the cost-of-living index figure is made up of the element of food, of which the price is largely controlled by this and other means. The next largest element in the cost-of-living index is rent, and that, of course, is already stabilised under the Rent Restriction Acts.

I am afraid that at this late hour I cannot undertake to deal at any length with the question of family allowances raised by the right reverend Prelate the Bishop of Winchester. All I can say is that a careful note will be taken of the suggestion by the Government. It will be appreciated, however, that the introduction of such a scheme would be something of a social revolution; it would therefore require thoughtful consideration, and not least, I think, from the trade union point of view. The principle of individual cooperation and sacrifice is so important that I only wish that I could find some new and striking way of driving it home. I think, however, that it may be useful to quote an extract from a personal letter which I received a few days ago from a member of this House whom I am glad to see present to-day, my noble and gallant friend Field-Marshal the Earl of Cavan, which he has given me permission to use: You know how much the public like to be 'taken into the confidence of the Government.' May I very shortly suggest a simple method? Get a Government representative to broadcast say once a month on the following lines— 'Yesterday, as you saw in the newspapers, we lost a ship carrying (say) 6,000 tons of meat—this means a week's ration for x people. Will you help to make up for this loss by not ordering any meat for one day? Say next Tuesday. This is not an order, it is in response to your keen desire to help.' "I am certain," Lord Cavan continues, "the response would be astounding, and it could be made quite clear by the speaker that these losses meant no real shortage, but that the public could almost transform them into a net gain by willing response." I am not committing myself to the details of that suggestion, but I do submit to your Lordships that it is a fine illustration of the spirit of individual co-operation and sacrifice at which we should aim.

6.40 p.m.

LORD BALFOUR OF BURLEIGH

My Lords, even at this late hour I ask the indulgence of your Lordships' House to make one or two observations on the reply which we have had from the noble Lord. I should like to begin by referring to the matter he last mentioned—namely, the very admirable suggestion made by the noble and gallant Field-Marshal, because that, as much as anything that has been said this afternoon, reinforces the point I wanted to make as to the need for precise guidance. That is the whole point of what I am trying to say. That is a very good illustration—give precise guidance of that kind and the response will be forthcoming. I think I can say, without contradiction, that every speaker has supported the demand which I make for a comprehensive scheme to be set out and laid down by the Government, which we have not yet had. I was also interested to note that no speaker came out in violent opposition to the scheme which has been put forward by Mr. Keynes. The noble Lord, at the beginning of his reply, gave us a long catalogue of the measures which the Government have introduced. He referred to such things as exchange control, control of luxury imports, rent control, maximum prices, control of shipping, control of railways, and a host of other things. I hope I shall not be considered disrespectful to the noble Lord, but I was irresistibly reminded of the examinee who said, when he was faced with a difficult question, "At this point it may not be amiss to give a list of the Kings of Israel and Judæa." It seemed to me that that part of the noble Lord's answer had as much to do with the Motion on the Paper as that.

The noble Lord, if I may say so, did just a little—quite unintentionally, I am sure—misrepresent my argument. He said my argument was that we are eating into our stocks, and that therefore I called for a drastic scheme of economy. That was not the point. I tried to explain, by figures, that what we needed was £1,000,000,000 of savings. That was why I wanted a drastic scheme. The question whether we are eating into our stocks was quite incidental. The noble Lord did not give a very definite reply as to whether or not he agreed with my argument as to £1,000,000,000, but at any rate he did not very confidently deny it, and if he does not agree with it he did not give us any reasons to support that view. One question which I asked was, have the Government considered Mr. Keynes's proposal, and I was very glad to get the answer that, at all events, they have not yet rejected it. I am bound to say I do feel slightly disturbed at what I regard—again without disrespect—as the rather complacent attitude of the noble Lord on such questions as the diminution of retail sales. He gave us figures taken from the Bank of England index which were satisfactory as far as they go, but, if I am correctly informed, the Bank of England index of retail sales is based on quite a small sample, and I do not think it is convincing proof that retail sales all over the country correspond to that diminution.

LORD HANKEY

I did point that out, of course. I said you must not build too much on it.

LORD BALFOUR OF BURLEIGH

Therefore it is no real ground for any complacency. I accept that, and apologise to the noble Lord if I misrepresented him. Finally, the noble Lord said that a free Government, before adopting compulsion, must be sure that voluntary effort could not produce the same result. We have not acted on that principle. We did bring in conscription before the war. We did not wait to see whether voluntary enlistment would bring the armies we wanted.

LORD HANKEY

We brought in conscription because voluntary effort had not produced the men.

LORD BALFOUR OF BURLEIGH

I do not think it can be said voluntary effort had failed. Does the Government say voluntary effort definitely had failed?

LORD HANKEY

It failed to produce the sort of Army we required, yes.

LORD BALFOUR OF BURLEIGH

I should not have thought voluntary effort had been given much of a trial. I am very glad it was not. I am very glad we did introduce conscription. I think it shows that if the Government see the need, they need not be afraid of introducing compulsion. At this late hour I do not propose to pursue the matter. I thank the noble Lord for the courtesy of his reply. I express myself as completely unsatisfied that the Government have, as yet, found the means of conveying to the country sufficiently precisely the sacrifices which are necessary. I only hope that the report of this debate will help to bring home to the country the fact that we have all of us got to be much poorer as a result of this war, and also that it will do something towards inducing the Government to make up their minds about informing the country, and imposing upon us from above the sacrifices which everybody knows to be necessary. I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.