HL Deb 23 January 1940 vol 115 cc393-404

3.36 p.m.

VISCOUNT ELIBANK had given Notice that he would draw attention to the rise in the cost of raw materials and commodities and in wages which has taken place since the beginning of the war and ask His Majesty's Government whether they have any steps in contemplation for dealing with a situation which may seriously affect our export trade; and move for Papers.

The noble Viscount: My Lords, it is a little over two months since I raised in your Lordships' House the question of the vital importance of the export trade to this country, and since that time the Government, strongly supported by the Press and by public opinion, have taken steps to make things easier and to promote that trade. But there are still certain matters dealt with through the Departments in regard to which red tape and bureaucracy still exist. I am glad to say, however, that there is an amelioration in the conditions over which the Government have direct control. When I say "direct control" I exclude from that to some extent such control, for instance, as that of the Wool Control Board.

Since November another factor has arisen which was not so evident at that time, but which bids fair to play havoc with our export trade and also, one might say, with our whole economic existence. I refer especially in this respect, as I do in my Motion, to the rise in the cost of materials, the rise in the cost of commodities, and in the level of wages since the war began. What happened in this respect during and after the last war is within the knowledge of practically all members of your Lordships' House. The cost of all the three items which I have mentioned—materials, commodities and wages—rose out of all bounds until, owing to the resulting excessive cost of production and sale, owing also to the sudden deflationary reversal of the gold standard, our exports dwindled so dangerously that great unemployment arose, and when attempts were made to bring wages back to an economic level there was a grave national crisis which led ultimately to the so-called General Strike of 1926. That was a state of things which we do not wish to see repeated, and which we can far less afford to see repeated in these days, when even more terrible burdens of debt, expenditure and taxation are daily being piled up against the community, as they are in this present war, whilst at the same time we still have the large debts of the last war hardly liquidated.

The fact is that to-day everyone, whether reputedly rich or reputedly poor, is gradually being levelled up or levelled down to everyone else's conditions to such an extent that even the most ardent Socialist will very soon be able to claim that a genuine state of Socialism has arisen in his lifetime. But it is not my intention to-day to enter into a dissertation on Socialism or even to criticise the rise in the cost of materials, commodities and wages which, after all, are the obvious outcome of any state of war such as has arisen. My object, on the other hand, is to draw attention to the situation as it exists and to ask His Majesty's Government whether anything can be done to prevent the continuation of the vicious circle—or the vicious spiral, as some people prefer to call it—which has started and can only end in disaster unless it is curtailed, controlled and directed. To understand what has actually been happening, I have obtained certain statistics from the Board of Trade, and I wish here to acknowledge the promptness and courtesy with which the Department supplied those statistics. I have obtained those statistics in order to illustrate how, early in the war, this particular thing developed. For instance, between August and November cereals of all kinds had already risen by 47 per cent., meat, fish and eggs by 19 per cent. and other foodstuffs by 21 per cent.


Would the noble Viscount allow me to ask whether those are wholesale or retail prices?


Those are the prices given to me by the Board of Trade as the general rise and I cannot say whether they are wholesale or retail. As to raw materials, cotton and wool had increased by November by as much as 31 per cent. and 24 per cent. respectively. Take wool which, as I have just stated, had risen by November by 24 per cent. I am credibly informed that by March 1 wool with be 70 per cent. dearer than it was before the war. The effect of this on the textile manufacturing trade will be practically to kill it as there will be very little market for woollen cloths or clothing at the higher prices resulting from the higher cost of the raw material. The South Scotland textile manufacturing trade, which is a high-class trade and has always been largely an export trade, will be very nearly put out of action altogether by these very high prices. I hope the Government will seriously reconsider the wool prices now fixed for March I and that it will be possible to lower them and make them more economic.

There are certain other points connected with the Wool Control which I should have liked to bring in detail to the attention of your Lordships, but they are not cognate to the general issues of my Motion. Therefore I will merely content myself by making a strong appeal to the Government that early and special investigation be made into the personnel of the Wool Control and into the number of the staff employed, which has been officially declared, in reply to a question by one of your Lordships published in the OFFICIAL REPORT, to be 909—not the mystical number 999 which the Ministry of Information possessed, but 909, which is at any rate, apart from the 583 of the Timber Control, some twelve to fifteen times larger than any other Control in the country. I suggest that there is reason for investigation into that. I suggest also that there is reason for investigation into the operation of this Wool Control. It is being freely and openly alleged in Scotland and in parts of England—I believe even in Yorkshire—that this Control is very much in the interest of Bradford where it has its headquarters, and that Scotland and other interests in England are getting what is called in colloquial parlance a raw deal.

Now I return to the main theme of my Motion. I have already referred to the increase in the prices of foodstuffs, of cotton and of wool, but in order to present a full picture of the export trade I shall have to add iron, steel, chemicals, oils and coal, all of which had risen by November by over 9 per cent. Nonferrous metals like copper, zinc, tin and lead had also risen, not quite so much, but by over 5 per cent. Jute had risen by something like 200 to 300 per cent. Then we come to wages. This is a most important item, as your Lordships will no doubt agree, because wages form about 60 to 80 per cent. usually of the value of any manufactured article. Wages I find have risen on an average by 12½ per cent. and are still rising, like the prices of some of the raw materials and commodities. Two countries, Japan and Italy, are our principal competitors in the export trade to-day. Those two countries have three distinct advantages over us. First of all, they have the advantage of lower currencies; secondly, they have the advantage of lower wages; thirdly, they have the advantage of a lower standard of living. In fact it might be said that, except for the United States of America and the Scandinavian countries, those three advantages are possessed by practically all our competitors in the export trade. Those advantages are advantages with which it is very difficult to compete if our prices are rising out of proportion to economic considerations.

This shows how important it is to maintain in this country, in war time at any rate, as rigorous a control as possible over prices and wages. Unless we do that the vicious circle will go on turning. Higher wages will succeed higher prices, and these will be followed by lower exports, until at last, as in 1914ߝ19 and thereafter, we reach that national crisis which led to a national disaster at that time. The nation as a whole must take its share in the solution of this problem. As the Prime Minister said in his admirable speech recently at the Mansion House: All must take their share in the sacrifices ahead of us if we are to achieve the victory which is essential to our lives and liberties. I venture to-day to make certain suggestions. I think it was the noble Viscount, Lord Swinton, who in his most lucid and admirable speech in your Lordships' House last week, said that he never made a speech in wartime unless he had some constructive suggestion to make. To-day I desire to make some suggestions. It will be for your Lordships or the Government to consider whether they are constructive or not. In any case I agree with the noble Viscount, Lord Swinton, that in these days speeches ought not to be made with the mere object of criticism, but should have something constructive about them.

My belief is that the last war proved that it is not satisfactory to control most of the elements of our economic structure and leave others, equally important, uncontrolled. You must control all of them if you are to obtain the best results. For instance, there is a direct control in this country over the income of the individual through graduated Income Tax and Super-tax; there is a direct control over the profits of undertakings through the Excess Profits Tax; there is a direct control over the prices of raw materials and commodities through the Control Boards; there is a direct control over manufactured articles through the Price Regulation Boards; there is a direct control over food prices through the Ministry of Food; and there is a direct control over agricultural prices through the Ministry of Agriculture. Yet wages, the most important element in output, are not controlled, except here and there in an indirect way. I venture to suggest that if we are to have satisfactory results, wages must be controlled as well as all these other matters I have mentioned, and all these, including wages, should be treated in due relation to the part they play in the whole economic structure. Unfortunately, at present the Trade Union Council do not seem to realise the immense importance of the thesis which I have attempted to outline here this afternoon. In a recent report the General Council have insisted that wage negotiations are and must remain the function of the individual trade unions. I have just had a note put into my hand in reply to the noble Lord, Lord Strabolgi, saying that the prices sent to me by the Board of Trade were wholesale.


Thank you very much.


The Trade Union Council advocate, as a remedy against the vicious spiral, a stricter control of prices and profits. I do not take exception to that suggestion, but I do consider that the Trade Union Council have not yet realised or appreciated the true inwardness of their own position in the whole scheme of production as applied to war conditions and to war measures, and that a stricter control of prices and profits by itself, without a strict control of wages, will not effect what is wanted. In this country very few people are against the war that we are waging, and the Trade Union Council and its members have been and are amongst the most earnest and patriotic supporters of it. Therefore it does not seem much to ask them to bear their fair share of economic sacrifice, of the common burden of the war, even though it be by way of control of wages with the accompanying lowering of wage-scale in relation to the cost of living.

I have asked myself how this wage control could best and most fairly be effected. I venture to suggest that a reasonable way would be to set up district wages regulation boards on the same principle as the district prices regulation boards. These hoards should, of course, be established in consultation with the Trade Union Council and the principal employers and federations, and they should have control over all wages except certain wages of the heavy basic trades to which I will refer directly. Over these district wages regulation boards, with which for the purposes of this argument I should couple the district prices regulation boards, I should superimpose a central prices and wages regulation board whose special function would be to review and correlate prices and wages in special relationship to our export trade and to our economic existence as a whole. This central control board should have upon it outstanding members of Government, business, labour and economic circles. I admit that some of the basic heavy trades of the country which already have, national negotiating machinery on wages would have to deal direct with the central board, but in the last resort I think it is inevitable that those wages, like the others, should be subject to the final control of the central board and should be correlated in their turn with the whole economic structure. It is true that there are certain trade boards which have been in active operation in this country for a good many years and have done very excellent work. Those trade boards are more like negotiating boards, and I see no reason why they should not be incorporated into the machinery which I have outlined here this afternoon and be very useful adjuncts to it.

These are my proposals, and I submit that they are worthy of very serious consideration by the Government. They add force, moreover, to the suggestion which was made last week in your Lordships' House and which was very fully debated and supported by a number of members of your Lordships' House: that there should be added to the War Cabinet a Minister for Economic Co-ordination and that this central board and these matters to which I have referred should come to that Minister to be dealt with in the final resort. After all, these questions are of very great importance, and it really requires someone with super-authority, who is also concerned with the other measures connected with our trade, to deal with them and supervise them. The measures I propose are admittedly drastic, but only by drastic measures can we put forth our greatest effort and hope to secure victory. If by those measures we lay the basis not only for winning the war but for winning the peace, then indeed we can claim that any sacrifices we may make will be doubly blessed and rewarded. I beg to move.

4.1 p.m.


My Lords, I am speaking on behalf of the Opposition on the very important Motion put forward by the noble Viscount. Before I came to your Lordships' House I fortified myself by consulting my noble friend behind me (Lord Snell), as I always do, and also by consulting some of the leading trade union representatives in another place, because obviously this Motion does affect the trade unions and the Trades Union Congress.

I should like to say at once that I think that your Lordships are indebted to the noble Viscount for ventilating this vitally important question. With much of his speech we of course agree, and especially with the last part, where he advocated the presence of a Minister for Economics in the War Cabinet. I have been saying this now for some months and my noble friends and my friends in another place have been echoing it also. We are very glad to count the noble Viscount as a recruit to that idea. I understand that the noble Lord, Lord Stamp, is also going to intervene in the debate. We are very privileged to hear him. I hope he will realise that what I have just said is no kind of personal reflection on his important post in the Government or on the advice which he gives. We think there should be a Minister for Economics in the War Cabinet with full powers. I am sorry to keep on saying this, but we intend to hammer at it until the Government either resign on the subject or give way to us.

I should like further to inform the noble Viscount that his proposal for a district wages board to prevent wages rising would never be accepted by the Trade Union Congress or by the individual trade unions. If you really want trouble with labour, go forward with that proposal! I propose in a very few words to give the Labour attitude, and I do not think that the noble Viscount will really complain about it. We have trade boards already, but they, of course, prevent wages dropping below a certain amount. Until the Government can control prices and ensure that there shall be no great increase in the cost of living, however, the trade unions must, in the interests of the lower-paid workers, insist on wages rising also. I am afraid that that is axiomatic and cannot be departed from. The Labour Party and the trade unions also agree entirely that we do not wish to see this so-called vicious spiral, with prices being chased by wages and with the unorganised workers, pensioners, and others living on fixed incomes, suffering. We do not want that at all, and we will do anything reasonable to avoid that catastrophic occurrence. As my noble friend Lord Snell points out, however, we do not find much anxiety on the other side of the House to prevent the vicious spiral going downwards and to prevent a drop in wages in bad times.

What we do advocate is a much more stringent control of the prices of goods. The noble Viscount gave us some figures from the Board of Trade with regard to the rise in wholesale prices. My information with regard to the rise in the cost of living—and Lord Stamp or Lord Templemore will correct this, if necessary—is that it has gone up by about 18 per cent.


My figures are up to November.


I am speaking of the cost of living as a whole, including the cost of rent, travel and everything else.




Yes. The noble Viscount says that wages on the average have increased only 12 per cent., so that so far wages lag behind the increase in prices. If prices are not controlled the lower-paid workers, the unorganised workers, are bound to suffer. The more powerfully organised trade unions are fully aware of this. The miners, for example, who are always in a very powerful bargaining position, are to-day saying that if the Government cannot prevent the rise in the cost of living there should be a sliding scale for all wages. I do not think that it is possible to get away from that. They are thinking in this matter not only of the colliers but of the un-organised wage earners, the old age pensioners, disabled ex-Service men and others; and I am sure that the noble Viscount would be the last to desire to see those people suffer by a rise in the cost of living.

When we speak of sacrifices, I hope that we are all prepared to make sacrifices in this great struggle in which we are engaged, but there are certain people who really cannot make sacrifices; their standard of living is so low, they are so close to the poverty line, or even below it, that they have no margin to sacrifice. On the other hand, there are workers who in wartime, because there is a scarcity of their particular type of labour—skilled workers and so on—can no doubt command a higher wage. The Labour Party support the Government's invitation to those people to invest in voluntary loans to the Government for the conduct of the war, but we would ask for this further safeguard. If workers who, not always through bargaining but often simply through the scarcity of their labour, find that their economic position has improved during the war, subscribe to the Government loans, then they say: "Do not let the fact that we own these Government Bonds and so on be used as a lever after the war to depress our wages; and if we fall out of employment"—this is very important—"do not let the means test or public assistance officials penalise us because we have been patriotic in the war and done our best to invest anything that we could save from our increased wages in Government scrip." I think that that is reasonable, and that is the demand of the Labour Party.

With regard to the wider question of the rise in prices and the effect on the export trade, we think that the Government are very much to be criticised for not pegging sterling higher. We think that the drop in the dollar value of the pound from 4.68 to 4.03 was too sharp, and that by an earlier introduction of exchange restrictions this could have been avoided. We might have had to subsidise exports if we pegged the pound at a higher level; on the other hand we are having to pay more for our imports as things are, and that accounts for some of the rises in wholesale prices cited by the noble Viscount. We also say that the Government are not doing nearly enough to control this rise in prices. The increase in jute prices quoted by the noble Viscount is really indefensible. Furthermore, with regard to another element in the rise in prices—namely, shipping freights—we consider that all merchant shipping should have been requisitioned much earlier than it was actually requisitioned, so as to control freights. With regard to internal prices, we think that a great deal more could be done—it is being done to-day in France by our French Allies—to peg prices and to prevent an undoubted and too rapid a rise in the cost of living. If the French can do it, I do not see why we should not. If you do these things I do not think you will find organised labour unreasonable in the matter of asking for increased wages.

There are two other comments that I would venture to make. The first is this: with the increase of retail and wholesale prices profits do not always decrease. In fact, well organised monopoly industries are able to increase, and do increase, their prices in such a way that their profits are maintained. That being the case, it is not easy for the noble Viscount to go to organised labour and ask them to make sacrifices, when their own employers manage to keep their profits at a high level. As the noble Lord, Lord Stamp, is to speak, and as he is a very eminent banker, and I see other eminent bankers present in this House this afternoon, I should like to say that I notice that the banks are keeping up their profits in spite of the country's difficulties. That being the case, you really cannot go to the lower-paid wage-earners—agricultural labourers, for example—and ask them to make sacrifices.


May I interrupt to say one word? If they keep up their profits they are controlled and have to pay Excess Profits Tax, and they also pay Income Tax, which is graduated; so that if their profits are the same they are in fact less, if I may put it in that way.


I am not a banker, but why does the noble Lord, Lord Strabolgi, say that the profits of the banks have gone up or kept up?


I did not say they had gone up; I said they had been maintained.


They are not being maintained; they have gone down. What is more, bank dividends have not been appreciably increased for the last fifteen or twenty years. If any increased profits have been made they have been used for covering the losses which banks have made in trying to provide credit to help industry in the post-war difficult times. But it is not correct to imply that the banks, for the bank shareholders, have made money out of the country's difficulties.


I notice that their shares always stand at a very high level, and they all seem very prosperous.


That does not justify the noble Lord in implying that the banks have made increased divisible profits.


I said they were maintained. At any rate, the banks are asking for a higher Treasury bill rate today in order to maintain their profits. However, what the noble Viscount opposite said is perfectly true—there is the graduated Income-tax and so on; but the working man has to pay higher taxes in the same way. He is very heavily taxed on his little luxuries such as beer, tobacco and entertainments and on his tea and sugar. And, after all, there is always this argument, that a working man with a family of young children has a very hard time in making ends meet, and he has not a big margin for sacrifices and savings. When you talk of equality of sacrifice, do remember the lot of the lower-paid wage earners.

The other comment I venture to make is this. I entirely endorse, as all your Lordships will, what the noble Viscount said about the necessity of helping export trade in every way we can. I also endorse his remark that we should try to make constructive suggestions. I am going to throw out a suggestion that I know is very controversial indeed, but I think it is worth while examining. As we must help the export trade, would it be altogether impracticable to give some exemption in taxation to the profits made from what I may call abnormal exports? If you do that you will get the most energetic section of the entrepreneurs seeking round for a market for exports. They will know that their profits will be taxed at a lower rate and they will then seek to export to foreign markets, instead of contenting themselves, as most of them do to-day, with perfectly safe Government contracts on war work and so on. That is the suggestion I throw out. I do not know whether it will appeal to the noble Lord opposite, Lord Mancroft, and other orthodox economists, but it is a form of subsidy for export and I think it is worth examining. We shall await the Government's reply on the very important matters raised by the noble Viscount with great interest.

4.15 p.m.


My Lords, it might be convenient if the debate were adjourned at this point in order to take the Royal Commission. I understand it will be a suitable moment for another place.

House adjourned during pleasure.

House resumed.