Lords Sitting of 24 July 1946

Preamble
The House met at two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers.
The Lord Ponsonby of Shulbrede—Sat first in Parliament after the death of his father.
Prayers.
  VISCOUNT MONTGOMERY OF ALAMEIN.
  Field-Marshal Sir Bernard Law Montgomery, G.C.B., D.S.O., having been created Viscount Montgomery of Alamein, of Hindhead in the County of Surrey—Was (in the usual manner) introduced.
LORD UVEDALE OF NORTH END.
Sir Ambrose Edgar Woodall, Knight, having been created Baron Uvedale of North End, of North End in the County of Middlesex—Was (in the usual manner) introduced.
LORD NEWALL.
Marshal of the Royal Air Force Sir Cyril Louis Norton Newall, G.C.B., O.M., G.C.M.G., C.B.E., having been created Baron Newall, of Clifton-upon-Dunsmoor in the County of Warwick—Was (in the usual manner) introduced.
HIGH WYCOMBE CORPORATION BILL.
Read 3ª, with the Amendments, and passed, and returned to the Commons.

CARDIFF CORPORATION BILL.
Read 3ª, with the Amendments, and passed, and returned to the Commons.
DERBY CORPORATION (TROLLEY VEHICLES) PROVISIONAL ORDER BILL.
IPSWICH CORPORATION (TROLLEY VEHICLES) PROVISIONAL ORDER BILL.
MAIDSTONE CORPORATION (TROLLEY VEHICLES) PROVISIONAL ORDER BILL.
READING CORPORATION (TROLLEY VEHICLES) PROVISIONAL ORDER BILL.
Order of the Day for the House to be put into Committee on re-commitment of the Bills read.
Moved, That the House do now resolve itself into Committee.—(Lord Walkden.)
On Question, Motion agreed to.
House in Committee accordingly:
[The EARL OF DROGHEDA in the Chair.]
LORD WALKDEN: In regard to the Provisional Order Bills on the Paper, your Lordships will see that four of these Bills have been amended by the Select Committee. The Amendments in these four Bills are of a purely formal nature, and in order to save the time of the House I propose, with, your Lordships' permission, to take these Bills through Committee without putting your Lordships to the trouble of the House being resumed after the Committee stage on each Bill. I may say that the Amendments to each of these Bills are the same, and I shall be happy to give your Lordships any information you may require. If your Lordships consent to this procedure, I propose to take the Bills in the way suggested.
Amendments proposed by the Committee to each Bill made.

SKEGNESS PIER PROVISIONAL ORDER BILL.
House in Committee (according to Order) on re-commitment of the Bill: Bill reported without amendment.
GOVERNMENT OF BURMA (HOUSE OF REPRESENTATIVES) (AMENDMENT) ORDER, 1946.
GOVERNMENT OF BURMA (GOVERNOR'S LEAVE AND TRAVELLING ALLOWANCES) ORDER, 1946.
INDIA AND BURMA (BURMA MONETARY ARRANGEMENTS) (SECOND AMENDMENT) ORDER, 1946.
THE SECRETARY OF STATE FOR INDIA AND BURMA (LORD PETHICKLAWRENCE): My Lords, I beg to move the Motion standing in my name.
Moved, That the Draft Orders, as presented to Parliament and reported from the India and Burma Committee On Thursday last, be approved.—(Lord Pethick-Lawrence.)
On Question, Motion agreed to.

NATIONAL INSURANCE BILL.
2.36 p.m.
Order of the Day for the Third Reading read.
THE LORD CHANCELLOR (LORD JOWITT): My Lords, I beg to move that this Bill he now read a third time. May I take this opportunity of explaining that there are a few merely formal Amendments which I shall move in due course if the House agrees to the Motion. May I also take the opportunity of explaining that I do not intend to propose an Amendment to Clause 42. Your Lordships will remember that the noble Lord, Lord Llewellin, moved an Amendment to provide that persons selected as members of the local advisory committees might include persons put forward by organizations concerned with certain interests. The noble Lord, Lord Strabolgi, said "You do not put forward persons, you put forward names," and I expressed provisional agreement with the noble Lord. I thought that he had a good point there. He said that he wanted the wording to be in good English. I am glad to think that he and I thought alike on that occasion, but further reflection has made me think that perhaps there is a greater authority than either of us. I refer to the Revised Version of the Bible in Chapter I of the Acts of the Apostles, when the remaining Apostles had to fill the vacancy after the death of Judas Iscariot. Acts I, verse 23, says:
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"and they put forward tea, Joseph called Barsabas, who was surnamed Justus, and Matthias."
Your Lordships will observe that they put forward two persons, not names, Joseph and Matthias. On the strength of that authority, I feel certain the noble Lord will be convinced that he and I were both wrong. That is why I do not propose to move an Amendment. I beg to move that the Bill be now read a third time.
Moved, That the Bill be now read 3ª.—(The Lord Chancellor.)
On Question, Bill read 3ª.
Clause 43:
Determination of claims and questions.
(3) Regulations under subsection (1) of this section shall not provide for the determination by the Minister of questions as to the right to benefit, but shall provide—
(c) for enabling appeals to be brought from such a tribunal to a Commissioner (to be called "the National insurance Commissioner") or deputy Commissioner appointed by His Majesty for the purposes of this Act or to a tribunal presided over by the National Insurance Commissioner or a deputy Commissioner:
(4) Regulations under subsection (1) of this section may provide for the reference to the High Court for decision of any question of law arising in connection with the determination of a question by the Minister, and for appeals to the High Court from the decision of the Minister on any such question of law; and—
(c) notwithstanding anything in any Act, the decision of the High Court on a reference or appeal under this subsection shall be final.
(5) Subject to the provisions of this section, regulations made thereunder may, in relation to the determination of questions in accordance with the regulations, include provision—

(a)as to the procedure which is to be followed, the form which is to be used for any document, the evidence which is to be required and the circumstances in which any official record or certificate is to be sufficient or conclusive evidence;

(b)as to the time to be allowed for making any claim or appeal, for raising any question with a view to the review of any decision or for producing any evidence;

(c)for summoning persons to attend and give evidence or produce documents and for authorising the administration of oaths to witnesses;

and except so far as they may be applied by regulations under this subsection the Arbitration Acts, 1889 to 1934, shall not apply to any proceedings under this section.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in subsection (3) (c) after "Act," to insert "being in either case a barrister or advocate of not less than ten years standing." The noble and learned Lord said: My Lords, this Amendment is intended to carry out the promise I gave on the National Insurance (Industrial Injuries) Bill. It will put the two Bills into line with each other. I beg to move.
Amendment moved—
Page 37, line 27, after ("Act") insert ("(being in either case a barrister or advocate of not less than ten years standing)").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, at the end of subsection (4) (c), to insert
"and on any such reference or appeal the court may order the Minister to pay the costs of any other person, whether or not the decision is in his favour and whether or not the Minister appears on the reference or appeal."
The noble and learned Lord said: My Lords, this Amendment also is intended to make this Bill comparable with the National Insurance (Industrial Injuries) Bill, and to carry out the undertaking I gave. I beg to move.
Page 38, line 15, at end insert the said words—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved at the end of subsection (5) to insert:
"It is hereby declared that the power to prescribe procedure includes power to make provision as to the representation of one person, at any hearing of a case, by another person whether having professional qualifications or not."
The noble and learned Lord said: My Lords, this Amendment is proposed for the same reason. I beg to move.
Amendment moved—
Page 38, line 34, at end insert the said words—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 49:
Inspectors.
(4) If any person—

(a) Wilfully delays or obstructs an inspector in the exercise of any power under this section; or

(b) fails to answer any question or to furnish any information or to produce any document when required so to do under this section;

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he shall be liable on summary conviction to a fine not exceeding ten pounds in the case of a first offence under this subsection and not exceeding fifty pounds in the case of a second or subsequent such offence:
THE LORD CHANCELLOR: My Lords, the Amendment to this clause is intended to carry out an undertaking I gave to the noble Marquess, Lord Reading, on the National Insurance (Industrial Injuries) Bill. I beg to move.
Amendment moved—
Page 44, line 14, leave out ("fails") and insert ("refuses or neglects")—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: My Lords, I beg to move that this Bill do now pass.
Moved, That this Bill do now pass.—(The Lord Chancellor.)
2.40 p.m.
VISCOUNT CRANBORNE: My Lords, I should like if I may to say a few words on this Bill before it actually passes into law or, to be more accurate, before it actually leaves your Lordships' House. This is, of course, not a Bill on which a great deal needs to be said; it is not a controversial Bill; it is not one of those measures which could conceivably lead to that clash between Lords and Commons to which I understand the Minister of Fuel and Power is looking forward with such hopeful anticipation. All Parties in this House support the principle of national insurance; there is no difference between us on that. This Bill is largely the work of a Coalition Government, representative of all Parties, during the days of the war. I remember sitting myself on some of the committees which considered it in its early stages and I well remember the general harmony which prevailed. It is, I think, because of the labours of successive Governments of all political colours that we in this country already have, as I think the noble Lord, Lord Beveridge, indicated in his famous Report, the finest system of social services in the world. That is a matter on which we can all congratulate ourselves without, I hope, being at too great pains to apportion the credit for so happy a situation.
But however good are the social services of a country they can always be improved, and that, as I understand, is the object of this Bill. It seeks to codify

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the existing law and to make such improvements in it as past experience and our financial situation render possible. I am very glad that in their proposals the Government have retained the principle of contributory insurance, because that is, I think, the essence of all true insurance. A man or a woman who wishes to protect himself or herself from the major catastrophies of life must allocate money from his own income for that purpose, if the other sections of the community are really to co-operate to ensure that the benefit he receives is worth having, that is, of course, all to the good, but some contribution by the beneficiary himself is surely essential. In the present scheme, as we all know, the employer, the employee and the community all play their part, and that is, I think, a very true reflection of our joint responsibility.
There are, however, certain sections of the community to-day (I hope not very large ones) which apparently hold the view that the whole cost of this and similar schemes should fall upon what is known as the "State." I remember a speech by a former Minister of Education, Mr. Butler, in which he told how he had received a letter with regard to his Education Bill from a very angry lady, who wrote, "Why should this Education Act be paid for out of rates and taxes? Why is it not paid for by the State?" That is an example of very muddled thinking, but although it is one which it is extremely easy to laugh at, it does reflect a common and a very dangerous illusion. I am extremely glad that in this great measure the Government have not lent themselves to that illusion, for if they had the country would very soon have been bankrupt. I believe that the basis of this scheme is sound and one which we all, on whatever side of the House we sit, can support.
Only one matter of substance, I believe, has been the subject of controversy. It is a matter of common knowledge to your Lordships that we on this side of the House (and here I believe I speak not only for the Conservatives but also for the Liberals) would have liked to have seen the friendly societies given a rather larger part in the administration of this scheme. This question was very fully debated in the earlier stages of the Bill. I do not wish to reopen it now, but I would like to say that I listened during the Committee stage, like many others of your Lordships, to an extremely
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powerful and persuasive speech by the noble and learned Lord on the Woolsack in which he marshalled all the arguments against including the friendly societies. That speech, if I may say so with all deference, was a very remarkable Parliamentary effort—one of the most remarkable we have heard in this House for many a long day—but to me at any rate it would have been more completely convincing if the friendly societies had not for over thirty years been playing an efficient and valuable part in the structure of our national insurance, although it is perfectly true that they became originally connected with it by what was little more than chance.
When, in the years before the last war, Mr. Lloyd George brought in his insurance schemes, there was no State machinery in existence for the purpose and therefore, as we all know, he used the friendly societies, which were already available to his hand. They came forward patriotically in the national interest and did the work required of them, as I am sun we should all agree, both sympathetically and efficiently. It was one of those ad hoc arrangements so common in this country which have proved satisfactory and which have become assimilated into our social system. Personally I wish very much that that connexion could have continued and I could not help having a faint suspicion (I hope it was not an unworthy one) as I listened to the noble and learned Lord that, although he very studiously avoided saying so, there was a certain ideological element in the Government's decision. As good Socialists they prefer State servants to representatives of private institutions, but the result to many of us is that they have eliminated what we should have regarded as a valuable element and a means of providing very good healthy competition which would have helped to keep the Government officials up to the mark. However, I recognize that this is a point on which two views can be held.
It is no doubt arguable that it would not have been justifiable for this House, on this one point, however strongly we felt about it, to postpone the bringing into operation of the rest of the Bill, with ninety-nine per cent. of which we are in the very fullest agreement. Nevertheless, I would not like this occasion to pass without taking the opportunity, on behalf of the noble Lords who sit behind me,

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to pay tribute to the magnificent work which has been done by the friendly societies in the past. They were called in to meet a national need and they have earned the gratitude of all of us by their untiring and efficient work. I am glad their name has not been entirely excluded from this Bill and that their experience and their counsel will still be made use of on the local committees.
I would conclude by saying that I believe the purposes of this Bill are essentially good. It is a Bill which I hope and believe will be of benefit to the less fortunate sections of the community of this country. We all know that there are certain people who, through no fault of their own, are unable entirely to protect themselves against the major catastrophies of life—old age, sickness, unemployment and so on. It is in these cases that we, the people of Britain, feel a moral obligation to step in and help those fellow citizens of ours who need our assistance. That is the aim and object of this Bill and I am sure that all of us, to whatever party we may belong, are glad to give it our blessing.
On Question, Bill passed, with the Amendments, and returned to the Commons.

FINANCE (No. 2) BILL.
2.50 p.m.
Order of the Day for the Second Reading read.
LORD PAKENHAM: My Lords, I beg to move the Second Reading of this Bill. I hope that I shall not be falling below the level of the occasion if I speak rather briefly this afternoon. We have had in recent months more than one very full discussion about the economic position of the country. I recall one in particular in which the noble Lord, Lord Cherwell, played a prominent part, and in which I inflicted myself on the House at some length. On the other hand, those of you who are thoroughly expert in these matters have already studied the Finance Bill with great care and will not expect me to go through it clause by clause. Therefore, I think that I can best meet the feeling of the House by setting out broadly what has confronted the Chancellor of the Exchequer in particular and the Government generally, and by trying
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to show how he has set about solving that problem. Your Lordships will realize of course that the Finance Bill covers a rather narrower sphere than the Budget, but in what I say this afternoon I am bound to touch upon questions of expenditure as well as those of revenue, because the problem that has confronted the Chancellor of the Exchequer inevitably covers both.
The essential components of any Budget consist of three types of figure. First of all we have an estimate of expenditure, then we have to meet that by borrowing—which is the second type of figure—and finally we have taxation and the rest of the revenue. This year the estimate of expenditure is £3,887,000,000. Last year it was £5,565,000,000. The difference is £1,678,000,000 or a reduction of expenditure of thirty-one per cent. The decrease is naturally in Defence expenditure. It would be very strange, when the war is over, if there were not a very large decrease there. The Civil Departments' estimated expenditure is £145,000,000 up, due to various items of social improvement all of which I think your Lordships approve. I refer particularly to education, housing, family allowances, increases in old age pensions, and the provision of milk in schools.
There has, of course, at different stages of the debates elsewhere, been criticism of this figure of expenditure as being too high, but I would respectfully submit that no one in another place—nor I think here since I have become a member of your Lordships' House—has come forward to question any important decision of policy by His Majesty's Government on the ground that it is too expensive. Indeed, we were severely taken to task the other day by the noble Viscount, the Leader of the Opposition, because it was argued that some proposition which had a certain appeal in justice was possibly too expensive. I do not feel that anybody in a responsible position in any quarter of this House can seriously argue that it would have been easy to make any larger reduction in this figure of expenditure.
At the same time the fact that it is not easy imposes, as I am sure your Lordships will all agree, all the greater duty of vigilance, and it becomes all the more important, as has been recognized by the Chancellor of the Exchequer, to scrutinize every item to see if by any administrative

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economy we can bring the figure lower. Last night I happened to be reading Mr. Winston Churchill's biography of his father, who it will be remembered was Chancellor of the Exchequer in 1886. Mr. Churchill recalls that in the 80's it cost the Liberal Government of the day, in the period just before Mr. Randolph Churchill took office, something between £80,000,000 and £90,000,000 a year to govern the country and defend the Empire. This year we are faced with an expenditure of £3,887,000,000. Mr. Churchill recalls that in those days these figures of Liberal expenditure were greeted by what he calls "genial malice by the Tories." I am sure the spokesman of the Tories this afternoon, the noble Viscount, Lord Simon, will give evidence of geniality but not of malice. In view of the size of the figure I am sure that sympathy will be the emotion to which he will be most likely to give expression.
Be that as it may, we have a very heavy bill to meet and the Government proposes to meet £725,000,000 of it by borrowing. That is what appears at first sight but these things can be calculated in various ways. If non-recurrent items in this year's expenditure and revenue are excluded the deficit goes down to £268,000,000. The right honourable gentleman, the Chancellor of the Exchequer, has estimated that in the current year we are going to pay 18s. 4d. out of every £1 spent out of revenue compared with 12s. in the last war year. So much for the relation between the total borrowed and the total to be raised in taxation. I will only mention further, while on the subject, that the cheap money policy of the Chancellor of the Exchequer does seem to have been a great success. Even that very austere critic, the Financial Times, has admitted that we have brought off a big thing in that direction. I will not go into details but I think your Lordships will agree that the Chancellor of the Exchequer has deserved very well of the country by the ingenuity and persistence with which he has pursued the cheap money policy in recent months.
Now we come to revenue. This deficit estimate of £725,000,000 is a compromise. On the one hand, while expenditure has gone down by 31 per cent. the estimated revenue is only £123,000,000 below last year's receipts—a reduction of less than 4 per cent. The level of taxation has been kept, therefore, pretty stiff.
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We have had in that policy two objects in mind. On the one hand we are determined to get back as soon as possible to a balanced Budget, and on the other hand we are under no delusions about the necessity of counteracting the danger of inflation. The Chancellor of the Exchequer has not shown himself a rigid doctrinaire. He has provided in the last two Budgets for which he has been responsible certain important reliefs which I will touch on in a moment. The cost of these reliefs means in a full year—they do not all come into effect at once—£500,000,000. Perhaps what is more significant and interesting is that out of that £500,000,000 of tax relief only £30,000,000 comes through Customs and Excise relief and the rest, some £470,000,000, comes under the Inland Revenue. That is to say the £470,000,000 relief is in the field of direct taxation and only £30,000,000 in the field of indirect taxation.
I will not weary you by running through the details of these reliefs which are of course available in the Bill. I will just mention one or two of the reliefs from Purchase Tax and instances of reduction of tax. Among the goods which, under the present Bill, are freed from tax altogether I may mention domestic pots and pans, dressers, and other kitchen equipment. I do not know whether that vitally concerns your Lordships at first hand, though very often we notice a psychological impact in the home from the absence of these articles at cheap prices. Others of your Lordships will be pleased, as I am myself pleased although I do not suffer from this infirmity, that the electric batteries for hearing aids are being freed from the Purchase Tax. I think that this House has played an important part, unless I am much mistaken, in securing that relief.
Those of your Lordships who are blessed with thick and beautiful crops of hair will be pleased that the tax on hair-waving machinery has been much reduced. It has not been altogether abolished. I, personally, am not so sorry as I would have been some years ago that hair-waving machinery is still subject to a certain level of tax. I confess that, looking ahead a year or two, I take more interest in the fact that, in another place, the tax on wigs was removed completely. In saying that I am, as I say, looking ahead at any rate in my own case, with

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great forethought. My feeling may be shared by other noble Lords whose brows expand as their hair evaporates.
I will not say more about reductions of indirect taxation except to call the attention of the noble Viscount, Lord Simon, who, I understand, is going to speak after me, and who, like myself, finds it a great pleasure to visit Lords cricket ground when he can steal a few minutes from our deliberations here, to the fact—which, I dare say he has not failed already to observe—that sports other than certain kinds of racing will be subject to a reduced rate of duty. I look forward to receiving some congratulations from so keen a cricketer as the noble Viscount, when he speaks.
In the Inland Revenue field, your Lordships will remember that the autumn Finance Act made provision for a reduction in the standard rate of Income Tax from ten shillings to nine shillings, and for increased personal allowances. The present Bill gives other relief: it increases earned income allowance to one-eighth, subject to a maximum allowance of tax on £150. It also makes provision for first instalments of the repayment of the postwar credits to women over 60 and men over 65. The Excess Profits Tax, as I expect everyone knows, which was reduced under the last Bill, will come to an end altogether under the provisions of the present Bill on December 31. The Bill also provides for a new scale of Estate Duty. Under this scale estates up to £2,000 will be exempted from Estate Duty. Estates of between £2,000 and £7,500 will pay less than at present. Estates of between £7,500 and £12,500 will pay the same. Estates above £12,500 will pay more. I should just point out the effect statistically of these changes. In an ordinary year, 150,000 estates will be relieved entirely, 30,000 will have duty reduced, 7,000 will be unaffected, and 10,000 will be subject to a measure of increase.
I am not going to speak very much longer, but perhaps, at this point, I might call attention to the implications of these proposals. They make clear, I think, that His Majesty's Government are very far from taking the view that private property is wrong, that savings are wrong, that inheritance is wrong. What we do say is that these are good things of life
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and they should be distributed as equitably as possible, always bearing in mind that ultimately they spring from someone's exertions and sacrifices, and that in any steps we may take in re-distributing the burden we must be at pains to ensure that exertions and sacrifices are made more and not less attractive. If I may venture just one ideological reflection of my own, it will be this. The greatest sociological problem with which we in this country, or those in any country at all similar, are faced is to reconcile two great social principles which at first sight might seem to conflict.
On the one hand is the principle of equality, the principle that each one of us when he comes into the world should be given an equal chance to lead a good and happy life; and on the other hand is the principle of what you might call family continuity, that is, that a man who has made sacrifices, and saved, should be allowed to hand on some of the fruits of his exertions and his sacrifices to his children. It may be that noble Lords on this side lay more stress on the first principle, and it may be that noble Lords sitting opposite will lay more stress on the second. But it seems to me that all of us, if we reflect on these things, will agree that somehow or other we have to strike a balance between those two principles, and I will submit very respectfully to your Lordships that a balance is struck in the Bill which is now before the House, and that it should be broadly acceptable to all of us and to the nation as a whole.
I will add a word regarding future taxation arrangements. I have already touched upon that subject. I think that what strikes one most of all, if one studies this carefully, is the consistency with which the Chancellor of the Exchequer has sought to apply the test of incentive at every point. He has asked himself: "Will this change increase incentive, will it lead people to produce more, to put forth greater exertions and to make greater sacrifices?" It will be observed from what I have said, that a far greater proportion of reliefs come under the heading of direct taxation: Income Tax, Surtax, and so on—a comparatively small amount comes under the "indirect" heading. In the old days, orthodox economists used to argue that indirect taxation was regressive, that it fell too heavily on the poor man, or at any rate, fell more heavily upon him than direct

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taxation. I am inclined to say that, in the circumstances of the day, that view must be reversed, or at any rate reconsidered.
Without wishing to attempt to say anything final, or very authoritative, I would suggest that in the first place the taxpayer, while, of course, he would rather not be taxed at all, prefers to be taxed by indirect taxation rather than direct taxation. That, I suggest, is a matter of common observation as one moves about the country and meets one's fellow-countrymen. Secondly, it seems clear, I submit, that indirect taxation, taxation on commodities and so on, is seldom if ever a deterrent to production. Direct taxation very often deters people from producing as much as they might. As was cogently said the other day, you can give up smoking, you can give up drinking, and you can give up working, and the easiest of the three is to give up working. We have sought to avoid rendering that last option overwhelmingly attractive. This Bill, and the Budget from which it springs, has a simple theme, though it contains two notes. On the one hand there is the note of controlling inflation, and on the other the note of stimulating production. I would suggest that this Bill gives effect to those two ideas in a manner that we can approve of in this House, and it is my pleasant duty now to move that this Bill be read a second time.
Moved, That the Bill be now read 2ª.—(Lord Pakenham.)
3.10 p.m.
VISCOUNT SIMON: My Lords, we shall all agree that the noble Lord, Lord Pakenham, who is now the maid-of-all work among His Majesty's servants who sit on the Front Bench, has discharged his task in the very happiest manner. Of necessity, discussion of finance proposals in this House is an academic exercise. We can neither frame finance proposals, nor can we alter them. I remember that the late Lord Darling, when he was trying a case and was told that it was governed by a previous decision which he did not like, said that no doubt he was compelled to follow the precedent, but he was not compelled on that account to admire it. Perhaps your Lordships, in a similar vein, may say that we are called upon to swallow this Bill, but we are not required to say that we like the dose. I had not intended, in the short time that I shall detain the
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House, to make detailed reference to these proposals, because I think more general reflections are suitable in your Lordships' House, but in view of one observation of the noble Lord opposite I must depart from my intention.
I had observed the provisions in this latest Finance Bill on the subject of the reduction of Entertainments Duty, and I had observed them with pleasure. They come under Clause 7. Of course Entertainments Duty goes back a long way. I think it was in 1935 that the duty was reduced in the case of stage plays—what was called the living drama, when actual people presented themselves on the boards. Now, Clause 7 (1), which deals with that matter says:
"… for the words 'a circus or a travelling show' there shall be substituted the words 'circus, a travelling show, a menagerie or any game or sport'"—
such as cricket, I suppose—
"' other than the racing or trial of speed of animals, vehicles, motor vessels or aircraft'."
No doubt that is very gratifying to many of us, although I think the language is curious. It becomes even more curious when I read the next provision, which says:
"… the reference to the racing or trial of speed of vehicles does not include a reference to cycle races where the cycles are propelled by the riders themselves."
Apparently that is not regarded as a trial of the speed of animals. If it were monkeys who rode de bicycles, no doubt the sport would be subject to the higher tax. As it is, reduction of the tax is provided. I think many of us are very glad that it has been found possible for the Chancellor of the Exchequer to reduce the rate of Entertainments Tax on the great sports of the country like cricket and football. For a long time, as I have reminded your Lordships, there has been a similar reduction in the case of an actor on the stage. Under the present Entertainments Tax the noble game of cricket is dealt with in exactly the same way as a strip-tease turn. That is the position which we have now reached. Of course it does not apply to racing, because apparently the racing or trial of speed of thoroughbred racehorses is regarded as being a test of the animals themselves, rather than of the jockeys mounted upon their backs. Such is the present state—and it is an improved state—of the law of Entertainments Tax.

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It was my purpose to devote myself not to any particular clause but rather to calling attention to one or two financial principles and prospects which suggest themselves when one considers the finance provision for this year. There is no sacrosanct character attached to that particular period of time called a fiscal year. There is nothing in the nature of things which equates the time it takes the earth to go round the sun with a new finance statement and provisions. But it is very convenient that we should have annual Budgets, especially when it becomes a question of whether the Budget is balanced. I propose to refer to the proposals for this particular year and to ask the House to consider for a few minutes a certain tendency which it may be important for us to watch—and possibly to criticize. What I ask your Lordships is this: what is the future of Income Tax, its amount and its productivity, in the hands of a Socialist and nationalizing Government? I think that is a perfectly apposite question, and it is one which I would like to develop for a short time.
I am not quite sure that my noble friend Lord Pakenham mentioned the figure, but it is as well to have it in mind that out of a total revenue of something like £2,900,000,000 Income Tax—in which I include Sur-tax—produces about £200,000,000. That is an enormous sum. For at least a generation past it has in fact been the principal single source of the revenue of the country. Sur-tax is comparatively unimportant. There may be occasions when the question of Sur-tax appeals to a certain kind of audience, when a certain kind of speaker assures the audience that only if a particular Government are returned will the rich man be properly taxed. Nobody can say that the present Chancellor of the Exchequer has not done his best in that way. When he was reducing Income Tax he made up for that reduction by taking particular pleasure in squeezing a little more out of Sur-tax. In spite of that—and it is almost incredible that it should be so—out of the £1,200,000,000 which the Income Tax and the immense Sur-tax provide, only £80,000,000 will come out of Sur-tax. The reason for this is that there are so few people in this country who have these very large incomes, and such people who have them, I think, do not find that the incomes do them much
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good. I believe it is correct that the income of those who have more than £2,000 a year in this country amounts to only 2 per cent. of the national income as a whole. What is going to happen to Income Tax, if we continue under this dispensation, or one like it, in the future?
In origin, of course, Income Tax was a war tax. It was imposed by Pitt in 1799. The moment the peace of Amiens was signed, Income Tax was taken off. It was put on again in 1803, when the war was resumed, and it was taken off the moment Waterloo was won and the Napoleonic Wars were over. One might have thought that was the end of it. But in 1842, I think, Sir Robert Peel re-introduced it in connexion with a great many very valuable reforms, and even then, or soon afterwards, there was a prospect of it disappearing, because, if I remember rightly, Mr. Gladstone, in the first (and some people think the greatest) of his Budgets, provided that in the course of the next three years Income Tax, which was then sixpence in the pound, should go down by twopence a year until it disappeared in the third year. There is not the slightest reason to doubt the genuineness of that calculation. What happened in the interval which prevented it was the Crimean War, and, the Crimean War interposing, again Income Tax was continued. It has since risen to the figure we know.
No doubt, as a matter of interest, your Lordships may have considered what it was when you were young. When I was born Income Tax was twopence in the pound. I agreed in the year before the last war, as Chancellor of the Exchequer, to make it 5s. 6d. but in the emergency war Budget I raised it to 7s. 6d., not without some prominent politicians and economists expressing doubt whether this was not too big a jump. I always shared the intention and held the view that it ought to be raised to 10s., as it was; but that it should continue at figures anything approaching that seems to me to be one of the most formidable facts connected with our financial future. Let us see what Income Tax at 9s. in the pound is likely to mean under a Socialist and nationalizing Government. It is an appropriate moment to consider it, because, up to the present, no actual case of nationalization, such as this Government has planned, has come into force

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except the Bank of England Act, which is not, for this purpose, important. But we are on the way to the nationalization of the coal industry, to the nationalization of air transport and to the nationalization of iron and steel.
What I ask your Lordships for a moment to do is to consider the effect these changes are likely to have on the productivity of Income Tax. I assume that the boards, which are to take over the administration of these great branches of industry, will pay Income Tax. We have been told in terms, I think, that the National Coal Board will be subject to Income Tax. The Post Office is not. But I presume it is intended that each of these great organizations will pay Income Tax if they make profits. What is the prospect of their making any such contribution to the national revenue as is made now in those departments of commerce? Let us take the case of coal. As long as there are different colliery companies, those which make profits pay a tax on those profits. It is not true to say that Income Tax is a tax on income in the sense of the gross amount you receive; it is a tax only on what is left to you after you have made the necessary expenditure to earn your income. The prosperous separate colliery undertakings—A, B and C—each now pay Income Tax. There are no doubt others—D, E and F—which do not make profits, but losses. They, of course, do not pay any Income Tax if they have not made any profits. But under the existing system those people have to look after themselves.
Under the nationalization plan for the coal industry the Government take over and put into a single holding all these colliery companies, whether previously profitable or not. Is it not very probable that the losses which are made by some of them will be met by the profits made by others? And the Income Tax which has to be paid by the National Coal Board will be based on its profits as a whole. It will be entitled to set off the cases in which there has been a loss against the particular colliery undertakings where there has been a profit. But I must say I am much concerned that you should consider whether these nationalization schemes applied to many industries, such as iron and steel and others—taking a great group of enterprises of the same
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sort, and treating them all as one under a particular board—will not, as a consequence, cause losses of some enterprises to be met by the profits made by others. If so, the result will be a very great reduction in the amount of Income Tax which the State will receive.
Let me take it a step further. When the Coal Industry Nationalisation Bill was discussed in this House we secured that adequate accounts should be kept. Let us suppose that the National Coal Board starts publishing intelligible accounts, and that those accounts do show profits on the Whole—which is much to be desired—will not there be a demand to increase wages until the profits disappear? Will not the miners say: "Look at your own accounts; you are making a profit; you have no business to make a profit; we have always heard from you that service is the thing that counts, not profit"? Of course, that does not apply to an application for a rise in wages! It seems to me extremely probable that that will be a further reason why some great nationalized industry of this sort will not in fact provide revenue in the form of Income Tax. Increased coal prices may well result, and if that occurs there will be injury to everybody. My noble friend opposite is a very clear-headed and ingenious man, and he may be prompted to say, "After all, the present owners are going to be paid compensation. That compensation they can invest. The profits on those investments will be taxed, and they will take the place of the profits which are lost by nationalization." I think this is one of the matters where we might wait and see. I do not know how much the compensation is going to be. I do not know whether it is really going to operate as an effective substitute or not.
Lastly there is this consideration under this head. All this matter is based on the assumption that you are going to maintain and, I hope, increase output. But are you? That is the source from which increased profit would come, no doubt, but there is certainly no sign since the passing of the Act that increased output is being achieved. So we are now in the position that the miners are face to face with the State. Incidentally, we have repealed the Trades Disputes Act. Speaking not at all as a partisan but as one trying to analyse the future financial situation of Income Tax, I wonder, in the case of the nationalized industries, whether

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you are not more likely to find that the Chancellor of the Exchequer has to provide a subsidy instead of deriving great amounts of Income Tax from the nationalized industries. That is the first point I wish to put before your Lordships for consideration.
Now for a few moments let us consider the demands of the social services to which the noble Lord quite properly referred. I am glad that before I spoke the noble Viscount the Leader of the Opposition said what he did about social services. I certainly am the last to be counted among their critics or their opponents. If the noble Lord, Lord Beveridge, were here, he would confirm my claim to be one of the first who took a ministerial part in these matters, and that at a time when social services were not so universally approved as they are to-day. None the less, there is a tremendous bill being piled up for those excellent services, and so long as you supplement revenue you are meeting it out of borrowings; therefore, you are really not trying to make both ends meet. You are going to have a very anxious situation, and still more anxious if that revenue itself, which has hitherto depended almost entirely on private enterprise, is going, in the matter of profits and Income Tax, to subsidize nationalization.
Look how the Government themselves are at this moment relying upon private enterprise. Their supporters from every platform are told to believe—and many of them do believe—that there is something wicked in private profit. Yet how does the matter stand? The Lord President of the Council, in one of his many manifestations, feels that there should be great production to help the export trade. Who is going to do that? Why, the people who are engaged in private enterprise. Nobody suggests that the nationalization schemes are going to get back for this country its export trade. The Chancellor of the Exchequer the other day pointed out that he was getting rid of the Excess Profits Tax. He said that it was an excellent war-time tax. Excess Profits Tax is a duty on excess private profits. Its whole productivity is due to the fact that you are relying upon the productive effects of private enterprise. If we have a Budget—as we shall have in the future—which more and more will be endeavouring to substitute nationalization
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(I am sure with the best intentions) for private enterprise, I confess myself to an anxiety as to whether or not the revenue we get by these means will be anything like so productive and abundant as it has been under the system the Government are seeking to displace. Whether or not with an annual expenditure of more than £3,000,000,000 you will get an annual revenue to meet the high increase in expenditure, remains to be seen. There has been an improvement this year, I admit, but you are faced with the fact that the country is undertaking an immense number of new enterprises under an entirely novel system of management. The Government have to find the revenue year by year sufficient to meet current demands—each of them justified in itself—for social services, for policing our part of Europe, and all sorts of things. I ask myself, is it wise in that situation to go on substituting this new method for the method which has produced so much revenue?
Lastly, I put this question—and I put it again without any desire to crab anyone. I quite understand the good purpose in what is being done, but I would earnestly ask those who are principally concerned whether so high a figure of Income Tax—I am including Sur-tax—can be maintained without injuring the community. There was a remarkable passage in Mr. Dalton's speech early this month. I have copied it out. I think perhaps the noble Lord opposite had this in mind when making some very interesting observations at the end of his speech—rather surprising, from his point of view—to the general effect that indirect taxation was to be preferred to direct taxation. When I think of all the speeches I have heard made in another place from the Labour benches denouncing indirect taxation and insisting that the whole revenue be got by direct taxation, that is an astounding thing to hear from the Benches opposite. Let me read what the Chancellor of the Exchequer said in another place on July 19:
"I am quite sure that what most people need, and what gives the greatest stimulus to incentive, so far as incentive is dulled and blunted and repressed by taxation, is to pay less Income Tax."
I call attention to those most remarkable words of the Chancellor of the Exchequer. He is saying in terms that the greatest stimulus to incentive would be reduced Income Tax. As we know from

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another passage, he favours indirect taxation. It is true that indirect taxation is borne by people with less appreciation of what they are bearing. A man smokes his pipe of tobacco, having paid so much for it, and he believes he has paid all of that for the tobacco. He has done nothing of the kind; he has paid only a small fraction for tobacco, and most of the money is taken by the State through indirect taxation. We are all being indirectly taxed all the time, and large numbers of us do not know it. It is an entirely novel doctrine to me to be told that the most important thing from the Socialist point of view is to keep on indirect taxation, as opposed to maintaining high Income Tax. I think the Chancellor of the Exchequer may well be right; but after inveighing, as he and others have, against the profit motive, after vowing that he was going to see to it that the people who had got a considerable income should be taxed to blazes, it is to me very remarkable to hear him say that from his point of view indirect taxes are much more to be preferred to Income Tax, because people do not really feel them so much. They do not indeed.
That brings me to the conclusion I wish to reach. Is so high a figure of Income Tax and Sur-tax really consistent with maintaining the health of and the best services for the community? I have come very strongly to the view that it is not worth while for the best brains in business to accept a highly paid job. I think there are, a good many members of this House who will confirm me in that view. I do not say a man will not take a directorship if he has not got one, but I do say that to offer a large additional salary to a man who is already in a substantial position, if only he will undertake the management of some great concern, is really to invite him to do a very public-spirited and generous thing, for the amount he will get out of it will not be worth talking about. We are all of us, I am sure, entirely in favour of equality of opportunity, equality of treatment and every other sort of equality. Nobody desires that more than I; I want to see it with all my heart. But when you have it, you are not going to get a whole race of people who are equal in capacity. How many people are there in this country to-day who really have those exceptional qualities of judgment, organization, business drive and knowledge as to how best to manage some enormous enterprise?
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There are Very few. There are not thousands; there may be hundreds.
If you say to those people (who already have, I am assuming, an income which counts as adequate), "I appeal to you to take charge of this national affair and to manage it for me, and if you do I will give you an income of five figures" (which I gather, according to the true doctrine, nobody ought to have), why should he do so? I am convinced that at the Bar at the present moment quite a new situation is arising, although I speak now as an old fogey who is not in the least interested in wigs becoming untaxed. I am convinced that at the Bar you would find that the small numbers of people who are really making considerable incomes and who have a great business are, far more than they ever did before, refusing business, although it might seem valuable to them (and certainly their clerks would think that way). They say to themselves, "Why should I sit up half the night with a wet towel round my head and work away at these extra, briefs when, after I have done it all, the only result is that the Chancellor of the Exchequer, who is determined to swat the Sur-tax payer, takes the whole of it back again?" That is certainly happening all through the higher grades of occupation and I feel sure it is happening in that select group of people with great commercial qualities.
I put it on record that I fear (I do not say more than this because I am only engaged in pointing out what is, I think, a tendency) that what we are doing in this series of Budgets is depriving industry of the brains which are more needed now than they ever were. For a man to get up and to say that the keynote of the Government's financial policy is to encourage incentive is to me a little surprising. There it is. I appreciate the difficulties. I am perfectly willing to loin with anybody in taking as cheerful a view as is reasonable in the circumstances, but those difficulties are formidable, and I do not find that the Chancellor of the Exchequer says things which are in all cases greatly encouraging. It is all very well for the noble Lord opposite to say that one of the keynotes (there are only two, so it is a simple chord and not, I hope, a discord) of the Government's policy was that it was determined to resist inflation; but is it not on record that when Mr. Dalton went to Bournemouth—no

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doubt a most bracing place—he told the people there that the fear of inflation is passing? Is it? I hope devoutly that it is. But it is far more easy to talk about the fear having passed than it is to get rid of the thing itself. What I do know is that wholesale prices are rising and that wage levels are going up. It is obviously much more difficult to restrain spending now in peace-time than it was in war-time. While we owe an absolutely inexpressible measure of gratitude to the National Savings Movement which was started at the beginning of the war, none the less they are going to have a very hard task. I do not see myself that there is such a great sign of the Government appreciating the possible imminence of this danger.
In his speech the other day the Chancellor of the Exchequer said that he was looking forward to a continuous process of tax reduction. So are we all, but when the Chancellor of the Exchequer says that, I suppose it means he is going to make the tax smaller if he can. I therefore repeat the question I put before: how on earth are you going to finance this immense programme of public expenditure if at the same time you are going substantially to reduce taxes? There is only one possible answer, and that is that your new method is somehow or other going to result in greater production than the method which you denounce and which you are supplanting. The Chancellor of the Exchequer rather shocked me when last week he seemed to speak as though he thought the Purchase Tax might be permanent. The Purchase Tax was a very good tax in war-time (and I say so because I first devised it and imposed it) because it made things indiscriminately more expensive. The result was that people were not able to buy so much and thereby the call upon supplies was reduced and the inflation which occurs when Governments compete with private people for the things which are to be bought was prevented. But although it was a very good tax in war-time, it is, I venture to say, one of the worst of taxes in peacetime, because it is completely indiscriminate in its operations, so far as the figure is not modified, on poor and rich people alike. The poor woman who wants to buy an article on which Purchase Tax is imposed has to pay exactly the same addition as a rich person, and that is the fundamental objection to indirect taxation
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which is, I gather, now rather favoured by the noble Lord and not looked at at all askance by the Chancellor of the Exchequer.
That is the situation in which I think we find ourselves. Therefore, while I wish to be as cheerful as is right in the circumstances and to place all the confidence I can in those who now control our financial affairs, I venture to think that the whole matter depends upon increased production. If we cannot get increased production, and thereby increased profits and increased taxes, then indeed we shall run the danger of being in a most anxious and difficult situation in a few years' time. I hope the House has not thought that I have travelled too far from the subject of debate by making these observations, which frankly are not connected particularly with the present Budget, many of the features of which seem to me to be admirable; but I think we ought to look ahead, and if we do look ahead I am myself greatly disturbed by some of the considerations which I have ventured to put forward. Not now, but at some suitable date, I shall be very glad, either in public or private, to receive from the noble Lord opposite suitable correction.
3.49 p.m.
LORD BARNBY: My Lords, I have enjoyed the analysis to which we have just listened, and I suspect that feeling is shared by all on this side of the House. The noble Viscount, Lord Simon, as an ex-Chancellor of the Exchequer, is well qualified to speak on this subject, and he has covered the ground, wide as it is, with great effect. He has done a great service in bringing up at this stage many of the points on which he laid emphasis. It has been the experience in recent years that on more than one occasion the Second Reading of the Budget in this House has gone by without the intervention of any speaker. I intended to intervene to-day, not knowing who else was to speak, because it seemed that that was a precedent which should not be followed. I would remind you, as you know well, even although, as the noble Viscount, Lord Simon, said, our functions are largely perfunctory, that the preamble of this Bill, as is customary in asking for further provision in connexion with finance, requires that it be by and with the advice and consent of the House of Lords. That means that custom has decreed that advice should be

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received from this House. Personally, I think that as our lives are so largely dependent upon the character of the Finance Bill, it would be right that that custom should be revived and it be assumed on the Order Paper that this opportunity to give advice, provided in the Constitution, be taken advantage of more regularly on the occasion which is offered by the introduction of the Finance Bill. This House has such a wealth of authorities on agricultural and industrial matters that it would be of benefit to the nation that convention should allow time for more wide expression than has been customary in the past.
I do not approach this Bill with any theme of criticism, but rather, in the main, of commendation. That feeling was certainly reinforced by the considerate, appealing and persuasive manner in which this Bill was presented by the noble Lord, Lord Pakenham. Indeed, had we not had rooted in our minds some of the convictions of which the caveat of the noble Viscount, Lord Simon, has reminded us, we might almost have left the Chamber convinced that none of the anxieties which we really feel were justified after that persuasive presentation. I am particularly thankful that the Budget has as its underlying principle a final purge of the school of contractionist or deflationist policy which brought such misery in the past. There was lingering around in Government circles, in the Bank of England (although certainly not now existing under nationalization) and in the big banks, an archaic out-dated theme that contractionist policy was right. I have no doubt in my mind that the cause of the result at the last Election—I am only speaking from this side of the House—was the aftermath of the recollection of all the misery which was brought about by that deflationist and contractionist policy, the reduction of spending, dismissals and the repayments of borrowings, which brought about the disastrous position which then existed. In addition, there was a cessation of encouragement to overseas enterprise. I repeat the commendation that the Chancellor of the Exchequer—I speak as an industrialist—went a long way to meet the requests of industry in the matters on which they had made fundamental representations.
There are, however, three short points I would like to draw to the attention of my noble friends. The rehabilitation time-
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limit, which is due to finish at the end of 1949, seems short. It may well be that under the difficulties existing today it will not be possible to expend the moneys which industry is entitled to do under the Bill. Again, there is the uncertainty which comes not only from the policy of nationalization but from the fact that the Excess Profits Tax will be withdrawn. Again, the Purchase Tax is a disadvantageous tax. It misleads the buying public and encourages extravagance. I realize that all this is tied to the food subsidy programme which the Chancellor of the Exchequer said is going to cost £340,000,000. It may well be a lesser evil than the spiral rising of wages, but still those are the anxieties. Those anxieties have increased, as the noble Viscount, Lord Simon, has said, and in disregard of the reassurances of the noble Lord, Lord Pakenham, that incentive is the aim of the Chancellor and that the planners should be encouraged in some way beyond what they are now if risks are to be taken. I am not suggesting that more should be available for spending, but that companies should be allowed to build up their reserves.
I urge further a relaxation of the foreign exchange restrictions in order to attempt to build up business overseas on which we must in future rely for our increase in income, and in the exchange which we shall need to supplement the exports upon which we are dependent. The whole Budget was based on an export programme, and it is in that direction that I want to reinforce the words of the noble Viscount, Lord Simon. I do not think he touched on this particular angle. We have large commitments for social services and for shorter hours, and other advantages of easier living encouraging an inclination to less effort. We have also the heavy burden of agricultural prices, but that price policy I am sure commends itself to this House. The present easy attainments of markets may well turn out to be illusory, and it will be proved that far from achieving the goal which has been imposed by this seventy-five per cent. increase in volume above our pre-war exports, we shall find that the recapture of production by competing overseas countries will result in their sending goods to neutral markets at a price below that which we, with these high burdens, are able to make available to our buyers.

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The trade position seems easy to-day, but those of us who remember the acid times of the 30's will realize that the moment is not one on which to base the expectations of long continuance. Full employment is expected to be the back on which these heavy burdens of expenditure will be carried, but full employment here must depend on full employment in the United States. If that begins to relax we are in a world of wide competition and we are in a hazardous position. Therefore it may well be that the belief existing to-day that we can pile burdens on to industry and yet produce goods at a price that will bring us the big volume of trade that we must have is an illusion. Yet that is the belief on which this Finance Bill and the Budget are based.
I would not like to conclude without a reference to the national land fund. Surely the Chancellor is entitled to commendation for having the vision and enterprise to take advantage of an opportunity which lay open to but was neglected by several of his predecessors. I feel that in this case he has grounds for wide commendation. It is on that note that I will end, while supporting and endorsing the caveats which were entered by my noble friend Viscount Simon, and his expression of anxiety concerning the matter of the encouragement given to enterprise. I sincerely hope that the spokesman for the Government will bear in mind the considerations which my noble friend has urged.
4.1 p.m.
LORD RENNELL: My Lords, I very willingly follow my noble friend, Viscount Simon, if only to add something to the remarks which he made on the subject of Income Tax, and the burden of taxation generally. A point which, I think, was rather skated over in his remarks was that the right comparison of expenditure this year is not with expenditure last year, but expenditure in 1939. The subject of the burden of taxation as a whole raises so many questions going beyond the scope of this Bill that it will be neither appropriate to touch upon them now, nor germane to a discussion which, as the noble and learned Viscount, Lord Simon, has already said, is largely of academic interest to your Lordships. But it is only fair to say—speaking for myself, and I
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think for other noble Lords who sit on these Benches—that the provisions of the present Finance Bill, broadly speaking, commend themselves, and should commend themselves, to anyone who has examined the situation in detail. The noble Lord, Lord Pakenham, has referred to a few of the problems that have had to be faced, and I think we must all agree that what it has been possible to do in this Finance Bill has very largely been done by the Chancellor of the Exchequer. It is, therefore, perhaps, rather more pertinent for me to address my remarks to one or two individual points than to the Bill as a whole.
If I select one or two points of a slightly academic nature, it is with the object of calling attention to certain matters and certain changes which might be made and which might be brought to the attention of the Chancellor of the Exchequer. First, I would say that one thing which would ease the task of those trying to deal with national finance very considerably would be to ensure that the fiscal year of a number of Government and quasi-Government enterprises should coincide with the fiscal year of the Budget. It is not for me to point out that the statement of national accounts, which is supposed to reflect the activities of the Chancellor of the Exchequer as a whole, cannot, in fact, reflect those activities accurately when some of the funds with which the Chancellor of the Exchequer is concerned close their fiscal year on a different date. That may seem a small matter, but I submit that the suggestion, if adopted, would certainly enable the position to be clarified.
My second point is that there is an omission on a matter of some importance. It is one which obviously cannot be rectified at this moment, but I hope that it will be borne in mind by the present Chancellor of the Exchequer and by any Chancellor of the Exchequer who may succeed him. This point deals with the application of Income Tax to the profits of companies in respect of allowances and charges for depreciation and obsolescence. In my humble view, if there is one factor more than any other which has brought so many industrial enterprises to the state of, I will not say inefficiency, but lack of modernity in which they are to be found to-day, it has been the inadequate allowances made by the authorities for depreciation

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and obsolescence. This applies especially to modern industries where changes are rapid, where processes in use have constantly to give way to more modern discoveries. There is no doubt that in the matter of the allowances that are made in this respect, we fall very considerably behind what is done in America. It is on that more than, perhaps, any other single factor that the continuous modernization of American industry depends.
That modernization of American industry has formed the subject of quite odious comparisons with British industry. Those comparisons have been made very freely, and I think it is not unfair to say that they have been made more freely, perhaps, from the Benches occupied by the noble Lords opposite than from any other quarter. That some recognition of the need which I have touched upon has been granted is a very welcome fact. That recognition is certainly to be found in this Finance Bill and in the last one, for there are certain increased scales of allowances in respect of new plant installed, allowances to agriculture, and for depreciation. That recognition has been given to this problem is a matter for satisfaction, and we are all grateful for it. But the mere fact that the problem has been recognized by these concessions leads me to express the hope that greater concessions of the same sort, once the principle has been recognized, will find their place in future Finance Acts, whether introduced by the Government to which noble Lords opposite belong, or by other Governments hereafter.
The recognition of the due which must be given to modern industries is also to be found in the concessions made by the Chancellor of the Exchequer, for instance, in the remission of Excise Duty on certain products of the artificial silk and similar industries, in the matter of fibre and yarn. I think I am right in quoting him as saying in another place that he hoped to remit these Excise Duties in full when it was possible to afford it. It is the recognition of certain realities of that sort which, I think, makes this Finance Bill particularly commendable to most of my noble friends on these Benches, and I have no doubt to others also in your Lordships' House.
There is also the recognition which has been accorded in so great a measure in this Finance Bill (in a greater measure
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perhaps in this Finance Bill, introduced as it has been by the Government now in power) to the family incentive, to which reference has already been made. There is certainly recognition now of what might be called the sanctity of private property. In spite of many statements which have been made to the contrary by friends or colleagues of those associated with the noble Lords opposite, the sanctity of private property is recognized in the remission of the Estate Duties on estates of £2,000 and under, and the remission of certain duties on estates over that amount. That concession, in my view, is one which has been all too little remarked in the Press and in public conversation in this country and in other countries. The social consequences of that—if I may say so, the political consequences—are as far reaching as those of any piece of legislation which this Government have introduced in the course of the present Parliamentary Session. Does not that concession not only create and sanctify but indeed stimulate among the whole of the public of this country the idea of the acquisition of private property which shah not go out of the hands of their successors when they die? Does not that concession, in fact, create that very class which at any rate the more theoretical Communists have described as the Kulak class—the very body of people who have been regarded by the Communists as the greatest obstacle to the realization of the Communist State? If, as I believe, that is the case, all of us on this side side of this House have to express our thanks to the present Chancellor of the Exchequer for having introduced that concession into the Finance Bill.
There are one or two smaller points of which much the same could be said. The noble Lord, Lord Barnby, has referred to the concessions made and to the views expressed by the Chancellor of the Exchequer on the subject of land, and the preservation of that land and of its amenities for the sake of the country as a whole. They are sentiments with which no one in your Lordships' House could disagree. There again, in fairness, we must recognize that the Chancellor has done what many of us could have wished his predecessors had done before him. I have only one other point, and that is, again, the question of the burden of taxation as a whole. It is difficult not to

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regard the future as black so long as expenditure continues on this level. It is also difficult not to share some of the doubts, perhaps all the doubts, of the noble and learned Viscount, Lord Simon, about the sources from which the revenue is to come to meet that expenditure so long as it lasts. But—and this is perhaps the only really important point at this moment, because the noble and learned Viscount, Lord Simon, has spoken on the long-term view—at this late stage and in these (for this purpose) somewhat academic surroundings, I wish to refer only to the immediate future; to the next year or so.
The sources of revenue are still there, if only because the measures of nationalization to which the noble Lord referred have not yet been placed upon the Statute Book. Is it not equally important to ensure, by whatever means are open to the Chancellor, that every step is taken to combat the inflation which we fear and which some of us, perhaps more than others, think is very real? I am not sure on that point myself yet. I expressed those views in the course of a Motion tabled in your Lordships' House by the noble Lord, Lord Cherwell. It is early yet, within a year of the determination of hostilities, to say how far that inevitable measure of inflation consequent upon a war has gone. I would prefer to reserve judgment for another year, but I must recognize, as we must all recognize, that those measures which can be taken to ward off dangers of this kind must be taken. If such measures involve high taxation, high indirect taxation, and the continuance of Purchase Tax for some time to come, that is better than to risk the consequences of a movement getting, if not out of hand, at least partly out of hand. It would mean we should have the task of stopping the horse from running away at a time when, if it has not actually got the bit between its teeth it has, at any rate, shied at an obstacle, and looks a little mischievous. I do not think, therefore, that the dangers of the burden of taxation for, say, this year are quite so great as the noble and learned Viscount suggested, although I am not sure that the noble Viscount intended to refer to the dangers of the next twelve months in particular.
VISCOUNT SIMON: No, I did not.
LORD RENNELL: My feeling is rather that the policy of this Finance Bill has been right, and that we must reserve judgment and see how the situation develops in twelve months' time. Your Lordships may share with me one other regret. Under Clause 7 the Government have provided this country with more and better circuses, but they have not been so successful or so generous in providing bread. Even if this is an academic discussion, it may have the effect of drawing attention to points such as those mentioned in the course of this afternoon's debate, and in that way it will serve a good purpose. It is a fitting, if slightly ironical, thought to close what I have to say, that your Lordships may take only an academic interest in that which affects us all, being powerless to change it as a part of the Legislature, and equally powerless to change it, in that your Lordships are for these purposes disfranchised; we cannot even express by our votes a choice in those on whom depend our financial and economic well being.
4.20 p.m.
LORD MORRISON: My Lords, in the brief contribution which I venture to make to this interesting discussion I shall endeavour to emulate noble Lords who have taken part in the debate, and who in a very interesting way have dealt with specific points of the Finance Bill in the present situation, rather than attempt to range over the whole field. I make one qualification; I propose to confine my remarks to one specific point. Reading through the debates in another place on the Finance Bill, my interest was most aroused by a brilliant speech delivered by the senior Burgess for Oxford University, Sir Alan Herbert. He apparently impressed the House so much with the contribution that he made upon the subject of betting that in closing the debate the Chancellor of the Exchequer promised that what Sir Alan had said would be considered immediately. I want to put before your Lordships some views on a particular phase of this subject which seem to me to indicate that unless the Chancellor of the Exchequer, or the Government, take almost immediate steps in one department of this evil there will be a worse financial ramp than there has been for a very long time indeed.
Many of your Lordships are sportsmen, although, like myself, you have

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reached a stage at which perhaps you spend more time watching sport than participating in it. This particularly applies to the sport about which I am going to make reference in the remarks that I have to make, namely, the sport of Association football. There are 40,000 football clubs in this country, all of them, with the exception of perhaps two hundred, amateur clubs playing purely for the love of the game. In some quarters of the community to-day it is popular to gibe at people who only watch games and do not play them. But I give you these figures. If you take a basis of twenty-five participants per match—that is eleven players on each side, two linesmen and the referee—and multiply that by 40,000, you will find that a million players are, every week, playing in organized football during the football season. Let us now look at the number of spectators. If we have two hundred professional football clubs in this country, with an average attendance of 20,000 (some of them have a great many more, and some a great many less) we get, roughly, two million people who are watching Association football matches weekly in England and Wales. My figures do not include Scotland and Northern Ireland. If you add Scotland you greatly increase those figures.
Based upon these football matches, an enormous betting business has been built up within recent years, known as football pools. For payment by postal order of a small sum of money—usually from one shilling to five shillings per week—anyone can send in a coupon attempting to forecast what will be the results of football matches. The prizes are dependent upon the amounts paid into the pools, and they range sometimes from a few shillings to very vast sums. It may surprise your Lordships, but one firm alone, in the year before the war broke out, on six different occasions paid out £30,000 to the prize-winner of what was called a "penny pool"—the people investing a penny and trying to forecast results. On six separate occasions a person won £30,000. Before I proceed further, may I tell your Lordships that I am not asking for legislation to stop this, and for two very definite reasons. The first reason is that I know of no legislation that could possibly stop it. It would be quite impossible for all the Acts of Parliament that were ever passed to stop millions and
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millions of people from indulging in this pastime or hobby. Therefore, I am not in favour of attempting to stop it, because you cannot do it. The second reason is because all over this land, in thousands if not millions of homes, the father, mother and family gather round the family table and endeavour to fill up one of these football coupons, investing perhaps half-a-crown a week. For the life of me, I cannot see that they are doing any harm or committing any crime. Therefore, I am not in favour of interfering with them.
My object in raising this subject is to draw the attention of the Chancellor of the Exchequer to certain matters which are arising and which urgently require his attention. In the first place, pool betting is increasing with tremendous rapidity. Secondly, enormous profits are being made out of pool betting—and not by those who send in half-a-crown or five shilling postal orders. It may be within the recollection of those of your Lordships who follow this form of sport or betting that only last year one firm alone made an offer to the Football Association of £100,000 per year, as a free gift, in return for their co-operation in helping to run these pools. The Football Association, to their credit, refused that offer. The third point I want to make is that not one penny of the profits made in this business goes back into sport. There is nothing to prevent any person or group of persons from forming a football pool. There would be nothing to prevent any of your Lordships from putting your names to an organization and starting a football pool, and appealing to the public in every way possible to send in coupons and postal orders. No one takes any trouble to find out whether the amount paid out in prizes bears any relation to the amount that is sent in. The whole matter is left entirely free.
There is tremendous activity going on in this business at the present moment. That is the reason why I have taken this unusual course of bringing these facts before your Lordships, in the hope that this matter may receive the urgent attention of the Chancellor of the Exchequer. Although we are told that there is a tremendous scarcity of paper, millions of letters are being sent out by these people. In the district where I live, within the last lay or two every person has received a letter. I myself have received three, probably owing to

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the fact that on past occasions I have taken part in filling up a football coupon, and I shall probably do so again. As I said a moment ago, I see no harm in it. But, in addition to the letters that are being sent out, newsagents and small shopkeepers throughout the country are being appointed as agents of the football pools for the coming football season. Some of your Lordships, when entering your newsagent's shop, will probably see a card in the window announcing that the shopkeeper has had the great honour of being appointed an agent of one of the football pools. When the football season starts at the end of August, I venture to say that there will not be a single factory or workshop in this country which has not an agent working inside the factory, who will be collecting money from the workmen and sending it to the pools.
Although we are always being told that it is impossible to get on with certain work because of the scarcity of labour (and urgent vital work should be proceeded with) two weeks ago a small army of people were engaged by the leading football pools in door-to-door canvassing for members. That army is now operating in some of the industrial centres, going from door to door and enrolling customers for one particular firm. When scores of industrialists are clamouring for factories in which to carry on their business, one of these firms has succeeded in getting an enormous factory in North London, and within the last fortnight has sent out a circular letter to every person resident in that Parliamentary area, offering employment. To girls leaving school at the age of fourteen they have offered thirty-five shillings a week for a five-day working week, working from half past nine till five o'clock. The result is that many of the businesses in that area are complaining bitterly that their staffs are leaving them and going to work in this football pool business.
Just before I left to come to your Lordships' House this afternoon I had yet another letter handed to me which was received from a firm which describes itself as the only pool to guarantee to their clients a return in dividends of between 80 and 90 per cent. of the money received. They add that in 1939 the staff employed by them totalled 15,000. That is one firm alone. A group of the larger of these
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firms have announced that their aim is to try and get a turnover of £100,000,000 by the end of the season after next. Before the war, in so far as it is possible to ascertain figures, the amount they took was something like £3,500,000. They are now agreed that by an all-out and vigorous campaign they will try and get, by the end of the season after next, a £100,000,000 turnover. I suggest to the Chancellor of the Exchequer that a very simple method is at hand to deal with this problem. Already the Government recognizes betting through the Racecourse Betting Control Board which controls totalisators and horse-racing. It seems to me that it would be a simple thing to apply this control to the football pools. In 1939 the total invested on the totalisator in horse-racing was £7,000,000. Football pools this year will probably get seven times that amount. The Betting Control Board, set up by the Government in 1928, makes considerable profits, and some of these profits are devoted to improving bloodstock and the sport of racing. I suggest that a Football Pool Board should be set up on similar lines to license those who carry on football pools, the licence to be based on a percentage of the pools.
Your Lordships may be interested in what Sweden did in this connexion. Apparently Sweden, with a population not so big as that of Greater London, took an interest in British football matches to such an extent that the Government found it necessary to take control of football pools in Sweden. In three years before the war, in Sweden, from football pools carried out on the results of British football matches, the Government collected £8,000,000, which was used for creating playing fields and recreation grounds for children and for generally promoting sport in the commonest sense of the word. If Sweden can do that, surely we are not going to lag behind them. The suggestion I make, if carried out, would bring in revenue to the Chancellor of the Exchequer of £1,000,000 a year to begin with. There would be no serious objection from the public, who would be guaranteed an honest deal, which they are not getting at the present time, or from the genuine football pools, who would be protected from unfair competition; and that revenue could be used in the interests of sport, for the provision of playing fields and to aid struggling clubs.

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I apologize to your Lordships for having introduced this speech into the debate on the Finance Bill, but Sir Alan Herbert raised it in another place in another connexion. I have pointed out the evil which I think is going to be unmanageable unless somebody does something about it quickly, and the Chancellor of the Exchequer is the only person who can take rapid action. I have ventured to suggest how he could obtain control of this business before it gets out of hand. I hope to receive some assurance from the noble Lord who is going to reply.
LORD PAKENHAM: My Lords, I do not think that it would be the desire of the House that I should deal extensively with the questions which have arisen during the debate. The best service I can render to the various speakers is to assure them that everything they have said will be faithfully laid before the Chancellor of the Exchequer. Some of the points that have been made will no doubt improve his digestion, and others will no doubt retard it. I am sure he will be as interested to read what has been said as I have been to listen to it this afternoon. I would just like to thank all those noble Lords who have been kind enough to say some pleasant and agreeable things about me, and those who did not but who no doubt intended to do so.
On Question, Bill read 2ª;Committee negatived.

FUTURE STRENGTH OF THE SERVICES.
4.33 p.m.
LORD CROFT LORD CROFT rose to call attention to the strategic commitments of His Majesty's Government at home and overseas and the Forces necessary to fulfil those commitments; and to move for Papers. The noble Lord said: My Lords, I make no apology for raising the subject contained in the terms of my Motion at what we sometimes used to describe as "this late hour," because although we have been debating vital matters with such skill and interest in this House for the last three months, I feel sure your Lordships will all agree that there is no question which we can debate which is of such supreme importance to the future of this country as that of defence. My principal object in tabling my Motion is to ask his Majesty's Government to inform the public what is to be the shape of our national defences, in view of our
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strategic commitments, the foreign policy which we are pursuing and the necessities of Imperial defence. What is the Government, in fact, asking of the Royal Navy, what of the Army and what of the Royal Air Force? The uncertain picture at the present time is having a disturbing effect, for it is difficult for the officers, and men in the various services to know exactly what prospects are held out to them; whether Forces will expand, or whether the axe may fall. Other Powers do not hesitate to tell the world where they stand and what their intentions are. I suggest that it is time that we in this country had a plan. I would like to ask the noble Lord who is going to reply for the Government how voluntary recruiting is going, and whether it is satisfactory in all three Services. That is something which I am sure your Lordships are anxious to know.
I would also like to ask, if it is not satisfactory, whether the noble Lord can give us the reason. Is it perhaps because the Government have given no guidance to the country as to the future, or is it perhaps that the conditions of service, improved as they undoubtedly are, are still not such as will attract the best recruits? I do not ask for specific details of actual distribution of the Forces, but I think that this House and the country are entitled to know what Forces and what formations we have to dispose next year, when the war-time Forces which have been built up over the recent years will have been dispersed. I want further to ask the noble Lord what are the strategic commitments for which those Forces are built up, in so far as the national interests permit him to disclose the facts. The Government would receive the confidence of the people, I am sure, if they would give us the facts. I think the country deserves to be told all that must now be known by His Majesty's Government. I submit that you cannot continue to ride off without a policy, as was done in another place. One was inclined to sum up the remarks of the Secretary of State as meaning that, on the matter of the Services, all he would say was: "Tar-baby, he say nuffink." I hope that the noble Lord when he replies will not assume the attitude of Brer Fox and say that he, too, is going to lie low. There is no doubt whatever that the hounds will soon know where he and his colleagues are, because there is a general insistence

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by the nation to know what is the real position.
The Government cannot get away any longer with evasion and silence on this question. The great struggle for our existence must surely have convinced our countrymen, if it was necessary to do so, that we cannot any longer build up in a few weeks or months Forces to meet a world conflict. From the nature of the scientific advance which has taken place in the last few years in military affairs, it is clear that if war does come it will come upon us no longer with notice but as a bolt from the blue. I recall the constant votes against Service estimates between the wars and the strident calls for disarmament, irrespective of the armaments of other Powers, on the part of the then Opposition, and, although I hate to recall it, the failure of my own Party to stand up adequately to the storm of pacifism which they met in Parliament, in the pulpit, on the platform and in bye-elections from all those who believed that collective security was an alternative to armaments and who put their faith in international forces which did not exist at that time, instead of recognizing that adequate armaments are an essential pre-requisite to collective security.
I have not the smallest doubt that the motives of those who gambled with our fate were in many cases sincere, but in the light of events and having regard to the hairbreadth escape we had from utter disaster and servitude, from which we were only saved by brilliant leadership—and here perhaps I may be permitted to say how we rejoice at seeing the noble Viscount, Lord Montgomery, here this afternoon as one of the members of this House—by the valour of our fighting men, the staying power and determination of our people and the amazing contribution of the whole Commonwealth and Empire, we cannot again gamble with our fate. Memories in this country are proverbially short, but I cannot believe they are short enough to allow the continuance of drift in this world so full of inflammable material, and where, alas, co-operation and friendship are still so lacking in many quarters.
Let me run through one or two of the main anxieties which demand not only the strength and determination of our country, but, much more, preparedness and
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a policy. Let me take first the outer defences of the Empire. As far afield as Malaya and Burma there is the rustling of unsettlement due to the chaotic results of the invasions of those great countries, and undoubtedly we shall require police forces in all those areas until this transitory stage has passed. Then there is the immense problem of Palestine which, so long as it remains the scene of enmity between two great conflicting interests, must require something much more than mere policing. In Palestine gratitude seems to be eliminated on both sides, yet the whole of the inhabitants of that country owe all they have to British strategic policy in the past. One might imagine that the armed might of Great Britain had never rescued that country from the Turkish yoke and that our fighting men had never really entered into the great conflict in Europe and liberated so many people. Surely we must realize that but for that fact the unhappy lot of the Jews now on the Continent of Europe would have been far worse and that they would have been confronted with perhaps complete and final extinction. That is what the armed forces of Great Britain and of the Commonwealth Empire did above everything else. In their wonderful victory they undoubtedly saved great masses of people from complete starvation and from death.
Again the liberation and new life of the Arab and Moslem world in the whole of the Middle East were due to British victories in two great wars. Arab unity was only possible under the shelter of British arms. The Arabs of North and East Africa were only recently lifted out of bondage, and but for British arms the Egyptians, as I think every student will agree, would to-day be the slaves of Mussolini and Hitler. These great services to Jew and Arab and to the Middle East in general are, I think your Lordships will agree, a glorious page in our military strategic history, and might, one would have hoped, have earned the undying gratitude of all the inhabitants of that great area. Instead, by our effort to be fair and impartial, we are the butt of extremists on both sides, and British soldiers and airmen, the shield of peace, to whom so much is owed, are assassinated, insulted and kidnapped. These events have culminated in the last few days in what has been described as "foul murder" even by their own compatriots, and this awful tragedy, involving the loss

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of so many innocent lives of great public servants, has horrified not only this country but the whole world. It is a painful picture, but with such inflammable material it is not to be denied that there is the possibility of a new war in that area, and the power of British arms alone can stay great bloodshed, misery and disaster. If that is so, then I ask the Government whether we are adequately prepared and armed to preserve peace in Palestine and in the Middle East and for the defence of Egypt.
Then we have the problem of India. With the rights or wrongs of the policy upon which the Government has embarked I do not intend to deal this afternoon, because it would be quite inappropriate to do so. For what they were worth, my warnings were uttered ten years ago in another place. We must face up to the fact that it is possible, and indeed probable, that the great Indian Army, built up over such long years of endeavour and sacrifice, may no longer be at our disposal for the preservation of world peace and that our whole strategic balance may consequently be upset. I hope my fears in that respect may prove to be groundless and that the wonderful military partnership of Britain and the fighting men of India may be preserved to write yet further glorious pages in their common history. Meanwhile the cleavage between Moslem and Hindu in India is so volcanic in character that you cannot be absolutely certain that Hindu and Moslem soldiers, who have learned the science of war, will in all events remain at peace with each other. It was, as your Lordships so well know, the military genius of this country which blended the many races of India into a great and efficient army, an army which threw the Japanese back from the Indian frontier, destroyed that Japanese army in Burma and thus saved India for freedom. Whilst this great experiment of self-government is proceeding the peace of that great subcontinent must still, it seems to me, depend on the Pax Britannica and that is the protection provided by His Majesty's Government. I would ask whether the Government are satisfied that our scattered and small British forces in India are adequate to protect life in the transition stage.
Then we come to Europe and the occupation of the British zone in Germany. Can the Government tell us how many
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troops we have available there, and can they give us an indication into what formations they are organized and how they are equipped for emergencies? Can they also tell us what is the strength of the forces of our Allies in the American and Russian zones and what forces of occupation there are in Austria, Hungary, Roumania and the Baltic States? If these vast forces, especially those of Russia, are necessary to keep the peace in Central Europe, are the Government quite certain that our forces are adequate in Western Germany? If, as we all pray, U.N.O. is going to be a great and enduring instrument for peace, it is now admitted I think on all sides that there must be a large international force behind it, and I ask His Majesty's Government what is to be our contribution. To wait on foreign countries before we do anything is surely dangerous. It is for the British Government to decide what is to be the maximum contribution we can make to the common defence of the world.
Clearly, if we are to count as a great power in U.N.O. and to have any influence, we must hare far larger forces than we can secure under any voluntary system. If, on the other hand, which God forbid, any one Power or group of Powers break up U.N.O., then the menace to world peace will be so dangerous and immediate that we must have even larger forces than would otherwise be necessary. I should like to congratulate His Majesty's Government in that they are sufficiently realists to have decided to continue, at any rate for the present, the system of universal service, for without it in this menacing situation which we see in so many parts of the world we should be simply courting disaster. We are a small people in these days of immense populations—population sometimes armed and organized for war. I was distressed to read in the reports of the Dominion consultations how little was achieved in promoting a real Commonwealth and Empire Defence, for unless the Commonwealth is prepared to pool its resources for the defence of peace I see no guarantee of safety for this country or for any other country within the Commonwealth system. Indeed, I see no hope for the world unless the Commonwealth is united and strong, and we can have lasting understanding with like-minded free nations. It seems to me that the Government have failed woefully in grasping the nettle, and we

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appear to be sliding away from that remarkable Imperial comradeship which existed in all the theatres of war to a laissez-faire defence, which might lead ultimately to obliteration in detail.
No conceivable Regular Army can insure us against a major peril of the kind that we have twice been through in the last twenty-five years. It is obvious that we must have the machinery for immediate expansion. Surely the Government have by now made up their mind on the subject of a Territorial Army. I know they have said there will be a Territorial Army, and I am not going to suggest they should actually start training to-day, or to-morrow or this year, because warriors, however keen and patriotic, are bound to be stale after seven years of war, and they need a respite. But to list officers and to select the commanding officers of the various units which, are contemplated, to set up the skeleton framework on which can be built the main structure and to allocate districts and counties to definite formations is essential if we are not to see the best material dispersed perhaps never to be regarnered into the military effort.
Beyond all this I cannot help wondering whether we are completely up to date in the latest use of Army air co-operation in the strategical and tactical use of military power. I have always had this subject very near to my heart. I remember in the winter of 1916, or in the spring of 1917, when I had the honour to serve in His Majesty's Army in France, I had the presumption to send a memorandum to the Chief of the Imperial General Staff at that time, Field-Marshal Sir William Robertson. I urged him then that it was worth while immediately considering building 1,000 transport aeroplanes in order to land troops behind the enemy line in those bloody battles of fixed positions, and attack the enemy artillery from the rear in synchronization with the main frontal attack. That could not be done because we were busy building bombers. I remember a few years after I had a letter from the C.I.G.S. in which he pointed out to me that two Companies had that day been flown from Cairo to suppress riots in Palestine. He said that my dream had at least come true to a small degree.
The remarkable feats of our airborne infantry in Burma, and later the immortal
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story of Arnhem have demonstrated for all time that this form of operation of Army air co-operation so brilliantly executed by the British Army has come to stay. To-day, more than ever, we must look to the airborne punch as the solution of our scattered world-wide problems. Only by such means, in my belief, can we concentrate the essential forces at vital points with the greatest economy of time. Have the Government provided the Army now with the means of thus using our slender military power? Have they the plans? If so, may we be informed of the state of their preparations in this vital matter as well as with regard to armaments? The time has gone by, I think, when we can go on reiterating, as was done by one of His Majesty's Ministers in another place, that these matters are still under consideration. Defence, after all, is more vital than ease or affluence, and I humbly submit far more important than experimenting with the economic, industrial and financial life of this nation. It is on defence that all our minds should be concentrated, and unless we learn that the plans are complete and satisfactory I go so far as to say that we really ought not to adjourn until we have an assurance that the plan is complete; otherwise, our foreign policy, as sometimes in the past, must fail to achieve its fruitful results.
I would urge your Lordships not to allow any consideration of the atom bomb or any new devilish products of science to deflect Parliament from the minimum of proved safety in defence. Remember that new weapons frequently lead their champions to imagine vain things. I always remember after the South African war that most knowledgeable people used to tell me that in all future wars mounted infantry would be the one thing that counted, and they would dominate all future wars. In 1914 I think it will be recalled mounted infantry were useless, and were certainly never employed. After the last war, we were told by some that infantry had been put completely out of date by the advent of that wonderful British invention, the tank. Armour, of course, in the recent war proved vital. But without infantry to fill the gaps and to consolidate the ground gained by armour we certainly could not have exploited the use of our armour, and again and again the shortage of infantry nearly led to disaster, especially at Caen, where

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we saw the greatest assembly of German armour ever used anywhere. It was an assembly against the British Expeditionary Force on a small front, but it was broken and defeated by the British armies.
With the arrival of V1, many shook their heads and told us that nothing could meet this weapon. Its effect was almost miraculously countered by our Ack-Ack artillery and fighter co-operation, but it was British infantry and armour which finally destroyed the launching sites in the Pas des Calais and in Holland. Science found it impossible to counter V2, and it was only when the Expeditionary Force landed and captured the sites from which the rockets were fired that we could breathe again, although in both cases our bombers did great work in breaking up the rhythm of attack. Again, a large number of people told us that with the advent of airpower the day of the battleship was over. I am not going to enter into that controversy, but I think that no one who has studied the strategy of the 1939–1945 war can deny that the presence of a single battleship frequently dominated naval operations over vast expanses of the ocean.
While we pray that the atom bomb may be effectively eliminated from war by the united wisdom of the nations, so long as it is a menace unsolved no Power can sit down to be destroyed by this new force. Just as with V2, the only complete solution as yet may be to attack and defeat the Power using it on its own soil, in its own harbours and in its own skies. To counter any weapon, new or old, this ocean-linked Empire cannot rely on security without the most modern equipment and highly trained Forces on sea, on land and in the air. Therefore, I say that the country must be told where we stand. Foreign Powers, if they have the usual intelligence services such as we knew them to have in the past, must know all about what forces we have, and probably the precise formations which we have in being. Why should we deny that information to our own country? The country should know what we are aiming at, and what is the shape of the forces and the broad principles of policy upon which we are working. Twice in twenty-five years, as your Lordships are poignantly aware, we saw the absolute flower of our people wiped out and the most brilliant of our sons taken from us. We owe it to their treasured
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memories to see that never again shall we fight the trained hordes of tyrants unprepared and ill-equipped. I beg to move for Papers.
5.6 p.m.
LORD TEYNHAM: My Lords, in supporting this Motion I should like to direct your Lordships' attention to the strategic commitments which will fall particularly on His Majesty's Navy. It is with some diffidence that I raise this matter because I am aware of the number of distinguished Admirals who are members of your Lordships' House. The eclipse of Japan has produced a profound change in the balance of power in a very large area of the Pacific, and I think there is little doubt that we are faced with entirely new strategic commitments which must be largely bound up with a combination of naval and air power, and, of course, military power as well, but on a limited scale. The Western Powers have great responsibilities in the Pacific, and we must not fall behind in taking care of our obligations. American foreign policy, like that of Russia, has entered upon an entirely new and vital phase. The Naval Affairs Committee of the United States House of Representatives have recently made it quite clear that they are in favour of complete strategic domination of the Pacific by America, and they have suggested that America should have control over the former Japanese mandated islands—the Marshalls, the Carolinas and the Marianas—and have also asked for specific and substantial rights to sites where they have set up bases during the late war.
In January, 1944, as, no doubt, many of your Lordships will remember, an agreement, which is still in force, was signed between Australia and New Zealand with a view to co-ordination of foreign policy with special reference to the Pacific, and there is little doubt that those two countries are fully alive to the focus of world power which is now centred in this area, and which is daily becoming more and more complex. I am sure that many of us who sit on this side of the House are anxious to know from His Majesty's Government what forces are to be made available, and how they are to be disposed in order to maintain our influence in the Pacific, and to fulfil our obligations. It might be said that the setting down of this Motion is a little premature, on the grounds that the

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atomic bomb tests are incomplete, and that the forces necessary to fulfil our obligations may have to undergo a profound change when the full results become known. But what is happening to the Navy before these results have become apparent and have been analyzed? The fact is that we are again exhibiting all the signs of precipitate naval disarmament which occurred after the first world war, and we are doing this before the atomic bombs tests have become fully known and analyzed. The results of these tests may well show that fleets are by no means obsolete.
What is happening to our fleet? The proposed battleships "Lion," "Thunderer," "Conqueror" and "Temeraire" have been cancelled. The "War-spite" is to be scrapped, while the "Malaya," "Ramillies," "Resolution" and "Revenge" are to be turned into floating barracks. "The Royal Sovereign" has been transferred to Russia, and I understand that the "Queen Elizabeth," "Valiant," "Nelson," "Rodney" and "Renown" are to be reduced to training ships. Our battleship fleet will then consist of only five battleships in active service, which will include the "Vanguard," "King George V," "Duke of York," "Anson" and "Howe." How do we fare in cruisers? Before the war we had sixty-four cruisers, and the United States had thirty-five. Now this position is reversed; while we have thirty-eight underage cruisers, the Americans have seventy-four. Numbers of proposed new destroyers have been cancelled, and of the forty "battle class" laid down, I believe only half are to be completed, and only four of the new "weapon class" of destroyers will go into service.
Most of the capital ships are old and worn out, but what has happened to our replacement policy? It may be wise to hold our hand a little longer with regard to the replacement of battleships, but a replacement policy for aircraft carriers, cruisers and destroyers is still vitally necessary. At the present rate of naval disarmament, the fleet will very shortly be in the same state that it was at the time of the Munich crisis. I hope that His Majesty's Government will be able to assure your Lordships that a replacement policy is not to be neglected, and certainly not because of the possible implications of atomic warfare. And now let us see
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what Russia is doing. Some of your Lordships may have read in the Press that a recent report in the Journal of the Central Committee of the Soviet Communist Party stated that:
"Our shipbuilding yards are turning out more and more naval vessels, and our naval schools are training men for a mighty navy."
It does not appear from that that Russia proposes to rely only on atomic weapons. She is not going to neglect her other weapons.
When the war ended aeroplanes without pilots had been used to carry explosives. Bombs had been dispatched by rocket at the touch of a button. It may well be that atomic bombs may never be dispatched at all in another war unless the members of the human race want complete extinction. During the last war the world was worried about the possibility of gas warfare, but it was never used. The same thing might happen with atomic weapons in a new war; but that does not mean that we should neglect our Navy because of this atomic weapon. I propose to make one comparison between our fleet in the Pacific and that of America. The American fleet consists of five battleships, eleven fleet aircraft carriers, twenty-eight cruisers and some ninety-eight destroyers. Our Pacific fleet, I believe, consists of two light aircraft carriers, four cruisers, and eight destroyers. I hope this force is to be increased in the near future. I am not in any way suggesting that we should be in competition with America, but I feel strongly that it is essential for us to have a strong fleet, not only to show the flag in the Pacific but to fulfil our great obligations and to keep faith with those free nations of the Commonwealth who look to us for guidance and support in naval policy.
5.12 p.m.
VISCOUNT BRIDGEMAN: My Lords, I do not intend to follow my noble friend Lord Croft in the survey of the strategic requirements of the present time. It is quite plain that they are very considerable, and that they are likely to remain considerable. In fact, I do not think that for a long time we shall reach that static period of peace which is referred to at intervals in various official statements. It is also plain that there never was a time when our foreign policy more required the backing of our Armed Forces to enable us to meet our commitments.

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It is no doubt true to say that although we can see heavy and serious commitments over a short-term period we are unable to look far into the future, and it might be argued that therefore it is not reasonable for us to expect His Majesty's Government to draw up a long-term plan for the Armed Forces of the Crown. I can imagine that the Treasury would lend a certain amount of support to that view. They would be pleased if other Departments took the view that they could not plan, so that the Treasury would not be asked for any money.
But the moment we allow such a view as that to be adopted we find ourselves in a vicious circle. The Army needs planning for a much longer term than some people suppose. It needs a much longer view than that shown in the White Paper recently published on the call-up for the next two years. There are two factors which I want to stress rather particularly. They are both new since the time of Cardwell and Haldane. The first is that the Army, and particularly its leaders, technicians and specialists, requires very much more training than did the volunteer Army before 1914. The second is that in these days no second line forces are of the slightest use unless they are all set in practically instant readiness for war. In the time of the Cardwell scheme and of the Haldane scheme the General Staff could assume that there was a period of six months during which this island would be defended by the British Navy, while our second-line Forces had time to train. There were then no aeroplanes. Those two things of course are obvious, and I apologize for mentioning them, but I think they cannot be said too often, because they do involve us in making preparations which are much more firm and definite, much more serious, than those needed before 1914.
What steps appear to have been taken so far? I say "appear to have been taken," because I am only quoting from what has been published. In these days, when the Opposition Parties are not represented on the Committee of Imperial Defence, no one on these Benches has any access to confidential information which might reassure us—or alarm us. The published statements are two. The first is the White Paper on the Call-Up to the Forces in 1947 and 1948. That deals with the
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immediate strategic commitments, and it deals with them very fairly. There is very little in that White Paper which I can criticize. In fact, there are several things which I welcome, particularly the announcement that the Auxiliary Territorial Service is to be continued. So far, so good. That White Paper takes us to the middle of 1950, provided it is not altered, because those people who are called up at the end of 1948 will be in the Forces up the summer of 1950.
The other pronouncement is contained in a speech by the Secretary of State for War in another place on June 27 last. I do not wish to quote that speech in detail. I am not sure that I should be in order if I did. There seemed to me to be three points which emerged from that speech. The first is that the Army has not returned its its peace-time status; the second is that the professional Army can in no sense meet our requirements if a war should come; and the third, that the Territorial Army is to be reconstructed from among those people who offer themselves. I make a point of those words "who offer themselves." I do not want to go into the details of that speech, but I would like to mention two points. First, I should be lacking in gratitude if I did not express my appreciation of what was said about the Army Cadet Force, and secondly, I notice with interest what I may call the rosy sunset of Army welfare and Army education with which that speech closed.
But I was quite unable to discover in that speech, even by reading between the lines, any words which led me to think that any of the proposals outlined have received Treasury sanction or Cabinet approval. I hope very much that those excellent sentiments and those excellent plans for Army welfare and Army education may soon be brought to fruition, and that the noble Lords opposite will not be content with "No" for an answer, whether it comes from the Ministry of Works, the Treasury, or anybody else, but will see that the barrack building programme, and all that goes with it, is properly implemented and that financial provisions are properly made.
I apologize for that excursion and I come back to the three main points of the debate on June 27. As I said, the White Paper deals with the immediate situation. It does not deal with enlistment in the Regular Forces nor does it deal fully with the Auxiliary Forces.

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This question of enlistment in the Regular Forces and the taking of Commissions by young officers is an absolutely vital matter for the Forces. If we go wrong with our young officers we shall have no commanding officers of the right type in twenty-five years' time. In thirty-five or forty years' time we shall have no Generals. If we go wrong with the men in the ranks, in fifteen years' time we shall have no decent warrant officers and sergeants. I am not at all sure that this Regular recruiting is going right. We have a Motion on the Order Paper which may come up after the Recess and we shall come back to that question of recruitment to the Forces.
Let us look at the auxiliary Forces. An announcement has been made that the Territorial Army is to be restricted to those people who offer themselves, which I take to mean to some extent is a return to the volunteer system. I wonder how that is going to meet the requirement which I mentioned just now, of adequate training and readiness for war. I want to be quite fair. I admit that people who are enlisted now, and who have done the proper primary and corps training during the war, will be fully trained. But I want to think a year or two ahead, and of what we are going to do when we have to ask people to join the Territorial Army Who have not had the advantage of proper training under one of these compulsory schemes.
Fortunately this matter is not a question of politics or opinion; it is very largely a question of fact. We can see quite plainly what happened before the last war under a scheme of voluntary enlistment. I take the figures from the Army Estimates of, I think, 1938–39, which tell me that the peace establishment for 1939 was 246,379 all ranks, excluding permanent staff. The strength on January 1, 1939, was 204,009. So you see, without taking account of the increase from peace establishment to war establishment, without any reserve for wastage at the outbreak of war, we were still 45,000 down out of less than 250,000.
That is the actual strength compared to the peace establishment. I want to make that point very plainly, because it quite clearly indicates to me, and perhaps to your Lordships, that we are not likely to do very much better than we did before
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the last war, because these figures are taken at a time after Munich. I want to ask His Majesty's Government as straightly as I can, on what calculations have they based the idea that a Territorial Army in the old shape is going to meet the conditions of the present time? May I put it in another way? This announcement in another place has brought the story of the British Army to a parting of the ways. The announcement might well—I hope it will—turn out to be a foundation for something which is realistic—really adapted to the needs of training for battle, and really adapted to the requirement of readiness for war. Or it may turn out to be a reversion to the bad old ways, in which case, as I say, the facts are before us for all to see.
My noble friend in front of me said just now that it is not a question of Party. There is no point to be gained in deciding who was the more to blame, the people who made proposals which were not big enough, or the people who voted against the proposals, small though they were. To my mind, that is not interesting at the present time. What is interesting is the opportunity which lies before His Majesty's Government and before the War Office to build an Army which is technically and morally capable and properly equipped, both in its Regular and its Auxiliary Forces, for instant readiness for war, and which therefore affords a proper backing to the efforts of our Foreign Secretary, which we so much admire at the present time. May I conclude by saying that His Majesty's Government and the Secretary of State for War are very fortunate in that the noble Viscount who was introduced to your Lordships' House this afternoon has succeeded the noble Viscount, Lord Alanbrooke, because they can be assured of continuity of the soundest possible General Staff advice.
Nineteen years ago I had the privilege of sitting under Lord Montgomery as an instructor at the Staff College, and there he taught that attack was a methodical progression from objective to objective. It is common knowledge that he has never wavered from that conception of battle, and it has been given to few to put his teaching into practice in so brilliant a manner as he has. I would only ask that His Majesty's Government should proceed methodically in the building up of the post-war Army from objective to objective,

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and perhaps I might say that if they do so they will find my noble friends on these Benches even more helpful than they usually are.
5.25 p.m.
LORD DE L'ISLE AND DUDLEY: My Lords, any member of your Lordships' House who intervenes on the subject of defence in a debate in this House does so with a certain temerity, because he rises with the awareness that there are present many noble Lords who have an immense weight of experience, and what he utters has to be weighed against that experience. Therefore, I should be presumptions if I detained your Lordships for more than a minute or two in this debate. But I intervene because of my conviction that the subject under discussion is one of prime importance, and when I say "prime" I mean it in the literal sense of the word, because I am sure that it is the first task of any Government, whatever its complexion, to be certain that its defence policy is sound. When I read the report of a debate in another place, I saw that a Member of that House said it was useless for a community to debate the method of cultivation of its fields unless it was certain that the sea-wall was sound and could not be breached. I think that is an excellent simile. It is useless for us to dispute and argue—as we sometimes do—about the various methods of cultivation unless we are certain we can cultivate our fields in peace.
There are two points about the British Commonwealth and Empire which I believe are worthy of note. The first is that in two great world-wide wars it has emerged victorious; and the second is that it has failed to prevent those wars. It is the function of His Majesty's Government to do their utmost to prevent another war. They must do so, in my humble opinion, by seeing that the organization of our defences is adequate and that we cannot be surprised. The noble Viscount, Lord Bridgeman, who spoke just before me, referred to the state of readiness of our Forces, and that seems to me to be a matter of particular importance in the present circumstances.
"Blitzkrieg" is a word of German origin, but it has caught on because of its topicality. We realize now that the time for preparation is very short, and it follows, therefore, that if we wish to prevent a potential aggressor from yielding
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to the temptation of attacking, our preparations must be in a very forward state. The longer it takes us to prepare after war has started, the greater the potential dividend to an aggressor. The responsibility which rests upon His Majesty's Government now is therefore a very heavy one. I am disturbed because from the published statements so far I am unable to detect that the Government very fully realize that, in order to conduct a foreign policy which is adequate for the situation, you must have a force in being—as well as a potential force—which is capable of supporting that foreign policy. We must see that in the most economical method possible we organize our war potential now.
The British Commonwealth and Empire I conceive can be in a peculiarly strong position in the circumstances of modern war. Any major war in which this country has been engaged has become a global war. That is a truism which is not sufficiently often realized. If we become engaged in a great war, by reason of our resources and our sea-borne communications it necessarily becomes a global war, because this country can stick it out until (and the day has never come) our communications are cut. But under modern conditions this country must, in any European war, be in the front line. We must therefore see to it that there is a dispersal not only of our military forces but of our productive capacity. If we ensure now, in peace-time, that the dividend to accrue from attacking this country is not immediate victory but must involve a long and arduous war, then we shall have done much to prevent the aggressor from ever embarking upon his aggression. Our defence is not an insular matter; it is an Imperial matter, and I realize that in touching upon this subject I am treading on delicate ground. The British Commonwealth is an organization of sovereign nations, and sovereign nations naturally do not wish to prejudice the conduct of their foreign policy by giving pledges in defence beforehand. I am equally certain, however, that that is not a reason for doing nothing. There are many directions in which we can consult the Dominions, in collaboration, in our production, in exchanging information, and in being certain that if the British Commonwealth of Nations is involved in war we can use the utmost economy of effort, and will not have to do, as, for example,

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we had to do in the last war—take rifles over to the Canadian Forces in order that they can bring them back again to fight in Europe.
What disturbs me about the only pronouncement on defence policy which we have had, apart from the debate in another place—I refer to the White Paper issued in February—is what I might call the procrastinating attitude which it displays. It says:
"This is not the time to come to decisions about the eventual shape of our post-war Forces. The great strides made in the realm of science and technology, including the production of atomic bombs, cannot fail to affect the make-up of our Forces. Time is wanted for the full effects of these startling developments to be assessed."
In the meantime we have to conduct a foreign policy, as one of the noble Lords has pointed out, so it is never possible to make final decisions in defence policy; all these decisions are interim and subject to revision, and the more closely they are examined and the more often revised, the better the organization. I do implore His Majesty's Government—and I say this not in any Party spirit—not to delay their decision, but to come to some decision now about the organization of our postwar Forces.
In coming to that decision they must analyze our commitments, and when they have analyzed our commitments they must, without fear or favour, without paying attention to any pre-conceived notions or Party theories or pledges, see that those Forces are adequate to fulfil those commitments. I would particularly draw your Lordships' attention to the last paragraph of that White Paper. It says:
"Collaboration with the Dominions in defence.
"During the war, collaboration with the Dominions and India has been comprehensive, continuous, and effective. The long accepted principle whereby His Majesty's Forces throughout the Empire have been trained, organized, and equipped on the same basis, proved its value in the easy and whole-hearted co-operation which took place by sea, land, and air, in all theatres of war, between men and women of many races. Behind the Forces, collaboration in the field of scientific and technical development, and in the production of munitions and supplies of all kinds, was equally close and thorough."
If we are to prevent another war, we must not wait for the development of that collaboration until the first shot is fired. I believe a unique responsibility rests upon
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the Government of this country, because although the Dominions and ourselves rank equally in our Commonwealth, nevertheless the Dominions still look to us for a lead and initiative. I do implore His Majesty's Government to inform the people of this country of what they think needful, and I have no doubt that, whatever conclusions they come to, provided the nation is given the facts, every man and woman in this country will loyally provide what is required.
5.36 p.m.
LORD MORRIS: My Lords, I cannot help deploring the fact that the noble and gallant Viscount who joined us this afternoon for the first time has not been able to remain in the House and make what undoubtedly would have been a vastly important and extremely interesting contribution to the debate. I have no doubt that he is barred from doing so by one of those ridiculous traditions to which we are slaves, which says that the C.I.G.S. when in office may not speak in either House of Parliament. It would have been very interesting and very illuminating to have heard what he had to say on this subject. I would like to ask the Government one or two questions. One I would like to ask in particular is whether they have yet made up their minds that they are going to get out of the Middle East, including Palestine, as they intimated some time ago was their intention, or whether they intend to remain.
The importance of that question is this. Your Lordships will remember that we had a debate on Middle East affairs in this House at the end of May, and in that debate, though only fools prophesy, I was rash enough to predict that immediately following upon this announcement of our proposed total evacuation of our troops from Egypt there would be an outburst of insolence and rioting from the Egyptians and their neighbours. The words were hardly out of my mouth when there was an outrage in Alexandria, and now we have this more serious affair in Palestine. I find it difficult to speak with any moderation at all about that, because I know the King David Hotel, having lived and worked there for many months, far better than I know this Chamber. The full casualty list has not yet been published, but I knew a number of those men; I know the great work they have done and the immense debt that we, the

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Jews and, for that matter, the Arabs owe to them. Many of them are Englishmen and a large proportion of them, I am proud to say, are Irishmen. Now it appears that a great many of them, including the Deputy Chief Secretary and Mr. Wash, the economic adviser, are dead. It is indeed a poor return for the asylum which we in this country have been proud to offer to Jews from Europe through the centuryés, that they should murder not only entirely innocent men and women but people who have built up their country during the last twenty-five years.
We have had a most interesting debate this afternoon on financial matters, with a speech from the noble Viscount, Lord Simon. It may interest some of your Lordships to know that one of the very few countries in the world which has succeeded in balancing its Budget, and not merely in balancing its Budget but in having a revenue considerably in excess of its expenditure, is Palestine. That fact, of course, is due, and due solely, to the admirable administration of Palestinian affairs by the British Government—or rather by the Palestinian Government, but through our people—over the last quarter of a century. It is all very well for American Congressmen to sneer at us and to pretend that they could govern India with one hand and Palestine with the other, but from some personal knowledge of that country I may tell your Lordships that it is an extremely difficult place with which to deal. The complexities of the problem are immense.
I want to ask the Government this afternoon whether they are really going to continue this insane policy of trying to administer this Mandate with no more force at their command than a handful of policemen, armed with truncheons and paid £20 a month with all found. It cannot be done. In another place last night Mr. Attlee gave voice to sentiments (with which every one of your Lordships would wish to be associated) of horror, grief and consternation at this dastardly outrage; but why was something not done to avert it? Can the Government, can Mr. Attlee, can the British military authorities, really divest themselves of responsibility for it? I say categorically that they cannot. They had ample warning; they saw what has happened in Egypt and they knew of the murderous attacks on policemen and other authorities
934
during the last few months. It must have been perfectly obvious to them that the time would come when pot-shots at policemen would be followed by a major outrage such as we have now had. Was anything done to prevent it, to anticipate it, or to deal with it? Not a thing.
It appears to me that the time has arrived when the British Government really must make up their minds and formulate some definite policy on this question. They must put enough armoured divisions into Palestine to take care of the place. After all, it is a very small country. There may be 100,000 Jews in Tel-Aviv but the country can be controlled if you have enough armed force. In fairness to our compatriots out there, many of whom have not been home for years and who have slaved there all through the war, you must either get out or give them protection. Soft words are all very well, but soft words here and curfews in Palestine are not enough; something else must be done. We are under a very serious obligation to protect our compatriots in the Middle East from this sort of thing.
When I was in the Middle East in 1942 there was very little of this. We then had the Axis at our doors, and the Jews and the Arabs—I draw no distinction between them as regards trouble making; I am not an anti-Semite at all—were comparatively quiet. They behaved themselves because they knew that in British arms lay their only hope of being saved from the Germans. Therefore they behaved themselves; but now, having saved both Egypt and Palestine from being overrun by the Axis, what is our reward? The King David Hotel. That hotel is both a military headquarters and an hotel. That in itself is a piece of unutterable folly which ought to be remedied immediately, because at present any Tom, Dick or Harry, Jew or Arab, the man carrying the laundry or anyone you like, can and does walk into that hotel without let or hindrance. It is scarcely surprising that, these men having got into the building, these things occur. It is just as though you could go freely into the Palace of Westminster and find this particular Chamber heavily guarded. The futility of that is obvious to anybody who thinks about it at all. General Barker, the local officer commanding, is reported to have said that he had long wished to have this aspect of the matter put right but could

935
get no help or support in his desire to do so That may or may not be accurate.
But think about it as you must and feel about it as you will, it appears to be perfectly clear that unless some action, and some quick action, is taken, and unless we stop merely talking and praying and saying how sorry we are, there are going to be further outbursts of a far graver nature, both in Egypt and Palestine, and the whole place will go up like a volcano. The Government have been warned about this not once but half a dozen times, and I suggest to them that unless they pay some attention to those warnings and send out sufficient troops and air squadrons—and if necessary the Navy—to take care of the situation, they will be taking upon their shoulders a responsibility which I personally would not care to take upon mine. Either they must do that or they must get out. I do not mean by that that the Government must get out, but that they must evacuate the Middle East, as they have said they are going to do. They must do one thing or the other; they must stand and fight, do the job properly and suppress, once and for all, this terrorism which is making us the laughing stock of the world, or give the whole thing up.
5.46 p.m.
VISCOUNT TRENCHARD: My Lords, I do not intend to follow the noble Lord who has just spoken except to say that Palestine is, of course, a very serious commitment. This Motion standing in the name of my noble friend Lord Croft is, I think, of vital importance. I am sorry that the House is empty; I am sorry that important people are prevented from coining and taking part; I am sorry that those who have had great experience in this war and who are now members of your Lordships' House are precluded from coming here to speak on a Motion such as this, on which they could give of their great experience. I am of the 1914–18 war and not of the last war, but I was more than pleased to hear the speech of the noble Lord, Lord De L'Isle and Dudley who was one of your Lordships who fought in the front line in this war, and also the speeches of the two other noble Lords who spoke. I feel that you could extend this subject to an unlimited extent and would get nowhere. Therefore I am not going to follow any of the lines that have been followed.
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The first part of the Motion calls attention to the strategic commitments of His Majesty's Government at home and overseas. I have not heard many of them mentioned yet. Although we do not know the full commitments, we know some, and I hope the noble Lord is going to tell us what those commitments are which are certain. Palestine is one which will go on for some considerable time. The second part of the Motion calls attention to the Forces necessary to fulfil those commitments. One noble Lord spoke of the question of administration, how to get officers trained and how to do the training, but that is, to my mind, outside the terms of this Motion. The Forces necessary to meet those commitments are vital. Surely the first thing we have to consider is what are our resources and what are the overriding points about those resources. Surely we are short of man-power, of raw materials and of time. All the rest is only addition, but those are the three things the British Empire will be short of in another twenty years and is short of to-day. I will repeat them: man-power, raw materials, and time. What is the most efficient and economical way to meet the deficiency both in man-power and raw materials, and what is quickest in time? The White Paper, which was quoted by the noble Lord, Lord De L'Isle and Dudley, says:
"This is not the time to come to decisions about the eventual shape of our post-war forces. The production of atomic bombs cannot fail to affect the make up of our Forces."
Whatever you may say about that, it is the future and not the present we must consider. I will take a period of fifteen to twenty years, and I make bold to say in the hearing of such a great scientist as the noble Lord who sits here that there is not the slightest doubt that the atom bomb has done one thing only at present, and will have done only one thing in fifteen years—that is, to make the air more important than it has ever been before. In twenty years the V2 rocket will not be any more efficient or any more accurate than it is to-day, and no scientist will tell you that it will be made quite efficient in that time. When it is, the Air Force may be as out of date as many other things are to-day and were at the beginning of this war. I will not name them.
Now I come to two remarks made this afternoon by the noble Lord, Lord Croft.

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If he had not made them I should not be speaking at this moment. There were also some remarks made by the noble Lord, Lord Teynham to which I would refer. They talked about battleships and aircraft-carriers. I think the noble Lord, Lord Teynham, even went so far as to say that the Navy and the Air Force were more important than ever and the Army only important to a limited extent. There is not the slightest doubt that with air power the Army is more important than it has ever been before with its airborne forces. The Navy, I fear, has come to the point of being mere sea transportation. In transportation the air every day is going further and further. It has greater range, greater power and greater economy in man-power and raw materials. When I hear it said that aircraft carriers are necessary, I think there are no airmen, and, indeed, very few other people, who do not consider that they are a passing phase. With the range of aircraft increasing it is of more convenience to operate from the shore.
I warned this House, if I may say so, before this war, of what was happening, and If say now that the war was unnecessarily prolonged. I say to-day that you do not realize what is the most efficient weapon. You have to realize what is the weapon which will be the most economical in man-power, in raw material and in time. If we could provide everything by all means let us provide everything, but we cannot do so. I did not come here armed with any notes, but when I heard some of the remarks which were made to-day I thought that I would try to put my views to the Government. The noble Viscount, the Leader of the House, has said that this subject is very important. I would say to the Government: "All your new political ideas will be of no value whatever if you do not look after this Empire in the most economical and efficient way during the next ten to twenty years. You have got it in your power to-day to do so. The whole country would welcome a decision."
Then we have to consider why men do not wish to join the Services. I still meet a large number of officers in all Services. They ask me, "Will the Government tell us what is going to be the form of service?" A lot of them who intended to take permanent Commissions do not do so because they ask, "Are we going back
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into the old ways of the battleship and all the rest of the paraphernalia?" The Army is more important and vital to-day than it has ever been, because it will always be needed to go and "dig them out" even when there are all these scientific weapons. I beg the noble Lord to convey what I have, said to the Leader of the House. I hope we shall have a big debate on this question in the autumn.
5.57 p.m.
THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR WAR (LORD NATHAN): My Lords, I do not need to have impressed upon me, speaking for the Government, the importance and the magnitude of the problem with which we are confronted in this debate which opened with a speech of so much earnestness by the noble Lord, Lord Croft. It is a debate in which a part has been taken by members of your Lordships' House each of whom has had some experience, if not in this war, then in an earlier war, and a debate to which distinction has been added, by the contribution of the noble and gallant Viscount who has just spoken and who brings to matters of this kind so deep an experience and knowledge. The questions raised by this debate are of far-reaching importance in the whole field of national defence. The noble Lord, Lord Croft, invited me to expound Government policy on the military commitments with which we are faced, to state our ability to meet them, and also to give information about the size and nature of our post-war armed forces.
As far as our military commitments are concerned, I would refer the noble Lord to the Government statement relating to Defence issued as a White Paper, to which reference has already been made in particular by the noble Lord, Lord De L'Isle and Dudley. Your Lordships will recall that that White Paper gave an outline of the main military asks with which we were faced at the close of hostilities. We are still faced with responsibilities in ex-enemy territory and in most of the countries which were formerly under enemy occupation. It is clear that these are commitments which will continue until the Peace Treaties have been signed. In addition, we still have responsibilities in India, in the East and over the length and breadth of world-wide communications.

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Your Lordships will understand that it would not be in the public interest for me to give figures describing our detailed strengths and dispositions in this transition period, and I have, therefore, nothing to add to the information which has already been published. In the same way, it would clearly be quite impossible for me to give figures of the strategic dispositions of our Allies. Government decisions on a matter of such grave importance as the size and nature of our post-war Armed Forces, can be reached only after most careful study has been given to the lessons of the recent war, and after extensive and scientific research into the nature of future weapons. The same joint staff machinery which was charged—not unsuccessfully, I think your Lordship will agree—with the study of the problems of our war-time strategy is now fully engaged in the study of the new and varied problems of our future security. Furthermore, I can certainly assure your Lordships that the Government are fully alive to the necessity of applying the advances of modern science to the design of the future Fighting Services. With this in view, the Government have already strengthened this machinery to take every advantage of the latest technical and scientific developments. Your Lordships need have no fear, for example, that in our future Army we shall fail to make use of the air-borne and armoured elements, which played such notable parts in the recent war. The need for auxiliary forces to provide the necessary backing for the Regular Forces, is also fully realized, and plans to reconstitute the Territorial Army are well advanced. Details will be announced when the structure and terms of service have been finally approved, which I hope will be after not too long a delay.
It has been suggested that uncertainty in these matters makes it difficult for officers and men in the three Services to know how they stand, and to plan their careers accordingly. Certainly, we should all like to be able to look into the future, and to see more clearly the shape of things to come. But I am sure that your Lordships will agree that the Government must not allow themselves to be rushed into deciding the shape of the Fighting Services without proper consideration of all the various factors. They are many, and they are important. Nevertheless, I can, for the Government, confidently assure
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volunteers that the Services will provide good prospects as a career, and that, so far as humanly can be foreseen, no "axe" is likely to fall.
It is too early yet for the Government to say what will be the results of the current voluntary recruiting campaign, about which something has been said in the debate. I am bound, in frankness, to tell your Lordships that up to date they are a little disappointing, but one must take account of the psychological reactions at the end of six years of war, and of the fact that the majority of men who have been in the Forces during the war naturally wish to return to civil life—at all events for a period. I am glad to say, however, that there are now preliminary indications that the rate of voluntary recruiting is improving, and I am hopeful that this will continue. At this stage, I must emphasize the importance which the Government attach to the satisfactory completion and the fulfilment of the programme of voluntary recruiting.
LORD DE L'ISLE AND DUDLEY: Will the noble Lord forgive me for interrupting? It would be a great reassurance, I think, if the noble Lord could give us some figures. After all, the matter cannot be one of very great secrecy, because we now have a system of estimates. We should be very happy to know what are the reassuring elements to which the noble Lord refers.
LORD NATHAN: I must tell the noble Lord opposite, quite frankly, that it would not be in the public interest to give figures at this stage, and I am unable to do so. I come now to a further question which was asked in the debate: what is to be our contribution to the Forces which will be placed at the disposal of the United Nations? This is a matter which is now being studied by the Military Staff Committee of the United Nations Organization, and it is impossible for me to say what our contributions will be until that body has reached agreement on the size and nature of the Forces required. But your Lordships can rest assured that we shall be ready and willing to play our part as soon as we know what is wanted of us. I next come to the question of Commonwealth collaboration, upon which the noble Lord, Lord Croft, touched.
VISCOUNT TRENCHARD: Will the noble Lord forgive my interrupting him?

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I should like to know whether what he has just said about our contribution to the Forces to be placed at the disposal of the United Nations means that the Government will have to wait until they know the size of the Forces for which the United Nations Organization will ask before they take any steps themselves to protect the interests of the British Empire. I should like to suggest that when we have made whatever dispositions are required to protect the Empire, the Forces thus disposed will then automatically go towards making up the Force required by U.N.O. Surely if we get ready at the present time to protect the Empire and do not wait, that would be a quicker way of accomplishing what we have in view.
LORD NATHAN: I was answering a specific question as to the United Nations Organization. I think the noble Viscount must have misunderstood me. Until we know the results of the studies which are now being conducted I cannot say what our commitments to the United Nations Organization will be. We do know that we shall be prepared to meet those commitments. What I have just said does not mean that, in the meanwhile, His Majesty's Government are supine as regards the re-organization of the Forces of the Crown. The contrary is the case. I was coming to the question of Commonwealth collaboration which was raised by Lord Croft, and referred to by other noble Lords. The noble Lord, Lord Croft, seemed, if I judged what he said aright, to be disappointed with the results of the recent meeting of Dominion Prime Ministers. Let me tell him at once that the Government were not disappointed. The Government feel that they have no grounds at all to be disappointed.
There was, in fact, a very full and free exchange of information and views on the question of defence, and I think that all the Dominion Prime Ministers, without exception, went away recognizing to the full how heavy is the share borne by the United Kingdom in defence, and determined to consider, in the light of this, what their own preparations for defence should be. There was a very useful exchange of views, too, on the question of the machinery through which matters of defence should be discussed, and the Government very much hope that this will lead to satisfactory arrangements for mutual co-operation.
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Your Lordships will appreciate that at a time when the Dominion Governments concerned are considering these matters, it is impossible for me to give details.
VISCOUNT BRIDGEMAN: Might I interrupt the noble Lord to say how glad we are to hear that His Majesty's Government are reassured as to the conclusions of the Dominion Prime Ministers? But could not wider publicity be given to that feeling of reassurance, and also to what was actually achieved?
LORD NATHAN: A communiqué was issued at the conclusion of the proceedings, which perhaps has not come to the notice of the noble Viscount. The assurance of satisfaction for which the noble Viscount asks publicity, I give now. I think I have dealt with the various questions which have been put to me specifically. Let me say, in general, that the Government will certainly take into consideration the matters which have been raised in this debate to-day. We are grateful to the noble Lord opposite for having introduced this debate. I will take note of what the noble Viscount has said about a full-dress debate on this subject at a later stage when the moment may be opportune. In the meantime, I can say that the Government are working hard upon these questions and are taking as their motto, not merely "Preparation," but "Preparedness."
LORD CROFT: My Lords, I think your Lordships must have felt gloom and despair in listening to the speech of the noble Lord, Lord Nathan. It is quite clear that he was able to tell us absolutely nothing. I am not attacking him personally, because I am aware that he has to speak very largely from a brief; he cannot himself lay down a policy.
LORD NATHAN: I cannot allow that to pass, because, as no one knows better than the noble Lord opposite, whether a Minister is provided with a brief or not, the matter is his responsibility. I accept complete responsibility for what I have said, and if I have said no more than has been attributed to me by the noble Lord it is because I have a sense of responsibility.
LORD CROFT: I would not for one moment wish to suggest that the noble Lord was not giving us his own considered opinion, but obviously he can give, in this

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House, only the views of the Government as a whole. That was what I intended to suggest when I said "from a brief," because obviously a Minister in any defence Department cannot speak for himself alone.
LORD NATHAN: I entirely accept that.
LORD CROFT: We have heard an extraordinary succession of phrases. We were told that the Government must wait until science had produced further evidence; that they must not allow them-selves to be rushed. Various other phrases were also used, such as: "Until we know the results of the studies which are taking place." Making such a complete evasion is not treating your Lordships' House correctly. It is no longer true that we cannot tell the world broadly what our policy is. There is no strategic reason, no reason of public interest or danger, to prevent the Government showing what foreign countries must know—how many armed divisions we have and are aiming at, and how many airborne divisions we have. These facts are known. When the noble Lord says that he cannot give us the exact figure I must tell him that we will pursue this matter. The last thing we want is to divide tonight on a question of defence, but if we have a reply of that character to future inquiries it may be necessary. Democracy demands to be told the truth about the defence of this country. I hope that the noble Lord will convey to those responsible for the major policy of the Government the fact that we are not satisfied that His Majesty's Government are taking the question of defence seriously. I will not pursue the matter. I think everybody who listened must have been disheartened.
The noble Lord told us that the Dominions Conference was satisfactory, and that a statement was issued to say how pleased everybody was. If that is so, I think he might have given us some indication that they had agreed on anything of major importance. We should have been told. Perhaps it is a further continuation of the policy of secrecy. We want to know, because we believe that the Dominions and this country together are a mighty and wonderful military force. Are we pooling the whole of our military efforts, or are the Government allowing this wonderful opportunity to go by and
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taking no steps to see that we get together in such things as the Canadian Air Training plan? I do not wish to pursue the matter now, but in any event we must raise this question again soon after the Recess, and we hope that the noble Lord will convey the feeling of alarm and despondency which I think men of all Services feel at the position. I beg leave to withdraw my Motion.
Motion for Papers, by leave, withdrawn.

FOREIGN PATENT RIGHTS.
6.17 p.m.
EARL FORTESCUE: I beg to ask the question standing in the name of my noble friend Lord Barnby.
[The question was as follows:
To ask His Majesty's Government if, in view of the delays on the part of the Capital Issues Committee, which often imperil the negotiation of foreign patent rights valuable to this country, they will consider the instituting of an immediate enquiry into procedure which is causing such widespread complaint and uncertainty, and if they will provide more expeditious machinery pending the setting up of the foreshadowed Capital Investment Council.]
LORD PAKENHAM: My Lords, I must make it clear that the Government do not accept the implication that the procedure of the Capital Issues Committee is causing widespread uncertainty and unreasonable or harmful delay. The Committee have a difficult and complex task to perform, and if they are to continue to carry out their duties in any responsible manner they must be allowed time for proper consideration of the merits of an application in consultation with the appropriate Government Departments. Every effort is made to eliminate unnecessary delays. The Chancellor of the Exchequer, with the help of the Committee, has been studying methods whereby the work can be further speeded up, and certain suggestions which have been made are being put into effect. The delays at present involved have been much exaggerated in the Press and elsewhere, but the noble Lord can rest assured that the matter is engaging the Chancellor's attention, and improvements will continue to be made wherever it is found practicable. The National Investment Council, which met for the first time yesterday, is an advisory body

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set up to advise the Government on questions of policy in relation to investment. The Council will not, as suggested in the question, in any way supersede the Capital Issues Committee.

DE-REQUISITIONING OF WORKSHOPS.
LORD GRENFELL: I beg to ask the question standing in the name of the noble Viscount, Lord Long, who apologizes for being absent.
[The question was as follows:
To ask His Majesty's Government, in view of the lengthy negotiations which have taken place in regard to the de-requisitioning of the privately-owned Stone Pier Workshops at Warsash, whether this property can now be returned to its owner, and further, whether His Majesty's Government are aware of the fact that continued delay is preventing ex-service personnel from earning their living.]
LORD WESTWOOD: My Lords, it is hoped that a final decision on the disposal of the properties which are held by the Admiralty on requisition at Warsash, and on which considerable public money has been spent, will be possible at a very early date. In the meantime, ad hoc arrangements have been made to enable the lessee of the Stone Pier and Workshops to take possession, and I understand that he has already started yacht repair activities and is employing a certain amount of labour thereon.

CENTRAL ELECTRICITY BOARD (INCREASE OF BORROWING POWERS) SPECIAL ORDER, 1946.
Report from the Special Orders Committee, That no Petition has been presented praying to be heard against the Special Order, and that there is nothing in this Order to which they think it necessary to call the attention of the House.
Read, and ordered to lie on the Table.

HIGHWAY CODE, 1946.
Report from the Special Orders Committee, That they have examined the Code
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as required by the Standing Orders of the House; that in their opinion the Code raises questions of policy and principle similar to those agreed to by the House when passing the Road Traffic Act, 1930, under which the Code is submitted for approval; that the Code is founded on precedent; that in the opinion of the Committee the Code cannot be passed by the House without special attention, but that no further inquiry is necessary before the House proceeds to a decision on the Resolution to approve the said Code.
Read, and ordered to lie on the Table.
ACQUISITION OF LAND (INCREASE OF SUPPLEMENT) ORDER, 1946.
ACQUISITION OF LAND (INCREASE OF SUPPLEMENT) (SCOTLAND) ORDER, 1946.
Report from the Special Orders Committee that they have examined the Special Orders as required by the Standing Orders of the House; that in their opinion the Orders raise important questions of policy and principle; that the Orders are not founded on precedent; that in the opinion of the Committee the Orders cannot be passed by the House without special attention; but that no further inquiry is necessary before the House proceeds to a decision on the Resolution to approve the said Orders.
Read and ordered to lie on the Table.

BIRMINGHAM CORPORATION BILL.
Reported specially from the Select Committee, with Amendments.
TEES CONSERVANCY BILL.
The King's Consent signified, and Bill reported from the Select Committee with Amendments.

PORTSMOUTH CORPORATION BILL.
Returned from the Commons with the Amendments agreed to.
House adjourned at twenty minutes past six o'clock.