Lords Sitting of 5 June 1946

Preamble
The House met at half past two of the clock, The EARL OF DROGHEDA on the Woolsack.
Prayers.

MINISTERIAL SALARIES BILL.
The LORD CHANCELLOR acquainted the House that the Bill was endorsed with a Certificate from the Speaker that it is a Money Bill within the meaning of the Parliament Act, 1911.
Order of the Day for the Second Reading read.
THE SECRETARY OF STATE FOR DOMINION AFFAIRS (VISCOUNT ADDISON): My Lords, this Bill, as your Lordships are aware, arose out of the Report of a Select Committee of the House of Commons, which dealt with salaries of Members and many other matters. The proposals ultimately adopted by that House were somewhat different in some respects from the recommendations of the Select Committee, in that it was recommended there should be a certain sum of money, £500 a year, which was to be accounted for as free of Income Tax. We felt that that would create invidious distinctions, and it was decided that that suggestion should not be adopted and that the Members in that respect will be just like other taxpayers so far as the Income Tax is concerned—which I am sure is perfectly right.
It is proposed in this Bill that certain Ministers should have augmentations of their salaries. The Postmaster-General, notwithstanding the scope and size of the great organization which we shall be discussing later on to-day, is in charge of perhaps the biggest business in this country, and is to have his salary raised to £5,000 a year like other senior Ministers. The salary of the Minister of Pensions will be raised from £2,000 to £3,000. Then the Assistant Postmaster-General and the Parliamentary Secretary to the Minister of Pensions for various reasons, mostly rather out of date, were receiving a salary of £1,200 a year as against that of other Parliamentary Secretaries of £1,500. This Bill proposes
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to bring their salaries up to the same level as that of other Parliamentary Secretaries.
Another proposal in the Bill, which I hope will meet with your Lordships' approval, is that the salaries of certain junior Ministers in this House who perform very important duties, as Whips, or representatives of Departments—who in my view, and I think in the view of everybody, have hitherto been quite inadequately paid, three with salaries of £500, and two others at £700 per annum—should receive the same increment of salary as is paid to Members of Parliament generally. This will bring the salary of the Captain of the Gentlemen at Arms and the Captain of the Yeomen of the Guard to £1,200, and of the three Lords in Waiting up to £1,000 a year, bringing these last to the same level as Members of Parliament in the House of Commons.
With regard to Members of the House of Commons, there is an additional payment which brings their salary up to £1,000 a year, and, as I have explained already, they are subject to the same pains and penalties as the rest of us so far as the Income Tax authorities are concerned. There are besides minor provisions in the Bill which adjust these payments, such as that of the Chancellor of the Duchy of Lancaster, and others, to make them accord with existing Statutes. I think I have given your Lordships a bird's-eye view, shall I say, of the proposals which were adopted practically unanimously by the House of Commons and approved by all Parties. I sincerely hope your Lordships will be willing to give your approval to it, and if you do, perhaps I might say that it would be very convenient if the Bill could be passed through its remaining stages to-day, so that it may become law and effective as soon as possible.
Moved, That the Bill be now read 2a.—(Viscount Addison.)
2.35 p.m.
VISCOUNT SWINTON: My Lords, I would like to offer an observation or two on Clause 2 of this Bill, which deals particularly with the junior Ministers in this House. I was going to say that this remedies a very long-standing grievance, but I do not think we can call it a grievance, because the persons who have suffered under it have been too public-spirited ever to go on strike. But it certainly does remedy an injustice which I believe the whole House will want to see

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remedied. There are a number of Departments of State which cannot be directly represented in this House. They are represented by noble Lords who occupy honourable positions at Court, such as the Captain of the Yeomen of the Guard and the Lords in Waiting. Though they are not Ministers they are virtually additional Under-Secretaries in a number of different Departments, each of them having to undertake the functions of several Departments. In this House, where criticism is extremely well-informed, where there are many experts on every subject, they are constantly and quite rightly submitted to both intelligent interrogation and informed criticism. The only way in which they can deal effectively with questions not only on matters arising on Bills but on points of administration in the Department is to make themselves completely familiar whit the work of the Department just as if they were Under-Secretaries and come here ready to present their case.
While I cannot pretend that I and others have been completely satisfied with the answers which we have got from noble Lords in that position, there is not a member of your Lordships' House who will not agree that they have been most assiduous in the discharge of their functions and have given an enormous amount of time and trouble to the work inside the Departments. I am all in favour of paying the trade union rate where there is a proper responsibility for which to pay it, and I think this Bill is long overdue. I am extremely glad that it has been introduced, and I feel sure that your Lordships will wish to expedite it in any way you can, so that when they go away for a happy Whitsuntide holiday—at Blackpool, is it?
NOBLE LORDS: Bournemouth.
VISCOUNT SWINTON: That is more expensive still, so it is even more important that they should have a slightly higher emolument.
2.38 p.m.
THE MARQUESS OF READING: My Lords, I should just like to say one word in support of this measure which we are very glad to approve. The increases of salaries, of course, attach to these offices whoever may be the actual holder of them at the moment. As far as we personally are concerned, I think: it is a matter
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of satisfaction to all of us that some of them anyhow are held by members of this House with whom we are familiar, and we desire to congratulate those noble and extremely versatile Lords who are likely to benefit by the provisions of this Bill, and to hope that as they continue to discharge some of the functions of members of a repertory company, as they do in this House, they will be at least solaced in learning their parts the knowledge that their services have been more adequately remunerated.
2.40 p.m.
VISCOUNT ADDISON: My Lords, I am extremely grateful to noble Lords for what they have said. Particularly am I grateful to the noble Viscount opposite for his expression of appreciation concerning my colleagues.
On Question, Bill read 2a; Committee negatived.
Then, Standing Order No. XXXIX having been suspended, Bill read 3a, and passed.
2.42 p.m.

AURAL AIDS INQUIRY.
THE DUKE OF MONTROSE THE DUKE OF MONTROSE had given Notice that he would ask whether His Majesty's Government can now give any information regarding the Medical Research Council's inquiry for the production of an improved and standardized aural aid; and what arrangements, if any, are visualized for its manufacture and distribution; and move for Papers.
The noble Duke said: My Lords, you might think that, in rising to move the Motion which stands in my name, I ought perhaps to apologize for bringing this same subject to your Lordships' attention so often. But if your Lordships could realize what an amount of correspondence I receive from poor people asking for advice about aural aids—where they can be got, what they cost, which is the best and so on—asking for help, in other words, to enable them to keep their employment, to enable them to keep their salaries, and by retaining their employment and their salaries to maintain their homes, I feel that your Lordships would recognize the urgency of this matter. Therefore you will net mind if I do not so much as apologize for troubling you so often on this matter. I think you may applaud my humble effort.
This is what has happened. Early in 1944, the Government, through the Royal Medical Council, appointed a committee to make research into the provision of a really good aural aid which could be manufactured and sold at a reasonable price. Towards the autumn of 1944 I broached the matter for the first time in your Lordships' House, and asked what progress this committee had made in carrying out the work for which it was appointed. The Government spokesman of that day stated that it was then too early to give any definite information. So I waited until March, 1945, one year after the appointment of the committee—and then I again troubled your Lordships by asking what progress the committee had made. The Government spokesman again informed me that it was too early to give me any definite information, but that it was expected that in the autumn of 1945 the Government might be in a position to say something. So in December, 1945, I troubled your Lordships once more, and again asked for information as to the progress which the scientific committee were making. I was informed by the speaker for the Government, on that occasion, that they were again hoping to find perfection round the corner, but that I was still too soon with my inquiry. I am afraid I got rather angry, and I said I would come down here again in three months' time and demand a definite statement.
Well, I have been very patient. I have waited six months—that is until June—and now I come here and ask for the fourth time whether I can have some definite statement as to what this committee have done in carrying out their researches. Has it discovered a perfect aural aid? If so, is it really preparing and planning to manufacture and distribute it in the country? This is Derby Day, and I am really getting very tired of leading my old horse out on the course again. I am beginning to have doubts about my trainer. I would like to see the horse win, and then I would relegate it to the stud, hoping that it would produce some hopeful aural aids. But, seriously, I really would like to have some information, assuming that the committee have reached the stage when they have got a really good aural aid. There is a rumour to the effect that the Post Office are going to produce an aid.
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I wonder if that is correct. If it is, I do not understand why the Post Office should have anything to do with the production of such an apparatus. But if there is to be a standard national aural aid, can I be told if it is going to be manufactured by the Government? Is this going to be an industry which the Government are going into, or will the Government put out the manufacture and production of the aids by contract to existing aural aid makers?
If the aid is to be made under contract by manufacturers of aural aids, I would ask and advise that there should be a test imposed. No aid, I suggest, should be sold unless it has passed a test and has been given a certificate from the Government that it is a good and efficient aid. There will be a new light industry if the manufacture of aural aids is taken up by the Government. And it is going to be a big thing. I wonder if the Government have considered the possibility of going into the export trade with aural aids as well. There is not merely a necessity for aural aids in this country, but a great need for them exists also in the self-governing parts of the British Commonwealth—Australia, Canada and Africa. I do not think aids are made in any of those countries. In Germany and France, I understand, there are not the means for making aids either, but there is a great demand for them. Therefore, when they are considering this question, the Government have the opportunity of encouraging and developing a great new light industry.
When the aids are manufactured, either by mass production or in any other way, the distribution of them will be a very important matter. The Minister of Health speaking in another place the other day said something which I would like to trouble your Lordships by quoting. He said:
"It is an awful business that poor people afflicted by any degree of deafness should be the subject of exploitation. Some appalling prices are being demanded for these hearing aids, and, when our apparatus has been perfected, I propose to take steps to see that it is made available without any exploitation by private people in its sale."
Now that is very good as far as it goes. But when the Minister refers to "our apparatus," that leads me to assume that the Government have an aid. But how is it to be distributed? A source of trouble to-day is that we have in this country so many different kinds of aids each of which

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has its own selling agency. The maintenance of these selling agencies, with their nice and beautifully-clothed young gentlemen behind the counters, costs money, and that helps to put up the prices of the aids to unreasonable limits. Therefore I suggest that concentration in the matter of distribution would be a very good thing. If distribution is to be a part of the new national Government service, I hope that it will be arranged for the distribution to be carried out through clinics established in all the large infirmaries or hospitals in the country. At these clinics there should be facilities for the examination of people with regard to their hearing. They would then be able to say that this or that aural aid would suit a certain person best, and that person would be able to get it from them at a reasonable figure. That is the best way to concentrate the distribution, through Government hospitals or clinics.
I would like to ask also at what price the aural aid will be sold. I said last time that aural aids were extremely highly priced, and the Minister of Health confirmed my statement when he said that they are exploited at £30 or £35. Since I raised the question in your Lordships' House two firms in this country have already reduced the price of their aids to £12; but the price might come down further. This ought to be part of the national medical service. The Government are going to supply in that Service, I understand, artificial teeth, free of cost. They are going to supply spectacles, I believe, free. If the Government are going to supply artificial teeth free and spectacles free, why should they not supply artificial ears free? If a man cannot bite, he is given free teeth. If he cannot see, he is given free spectacles. If he cannot hear, why not give him free ears? Why give free teeth and free spectacles to people, yet not free aural aids?
The other point to which I would draw your Lordships' attention is that aural aids must have electric batteries. Without them the aural aids are no use. It is estimated that the cost to a deaf man in maintaining electric batteries to keep his hearing aid in operation comes to about £6 a year. That is a big charge. Why should it be so high? The Government, in their national medical service, will give people suffering from diabetes continuous free treatment. Why, then, should a deaf man not be given free batteries to keep his aural aids in operation? I must congratulate the Government on the fact that
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since our last debate on batteries the purchase tax has been removed. That was a great triumph, but the gilt must come off the gingerbread because I have already received notice from one firm of battery makers that die price of their batteries has been increased. In some cases the increase is as much as 50 per cent., so that the people who really benefit by the Government's consideration in taking off purchase tax are the manufacturers, and net the deaf people.
It might be a good thing if the Government consider the manufacture of batteries on a mass system. Batteries made in this country are very poor, compared with those made in America. Even the best British battery is very poor. I have some American batteries of pre-war manufacture which are still operating satisfactorily. One would be very lucky indeed to get a British battery to last one month, and that is why it costs an average of £6 or £7 a year for a person to maintain his aural aid. I would also ask, on that subject, why the Government cannot in the meantime facilitate the importation of American aural aids, or Darts of aural aids. If we could import freely some of the small valves and batteries used in America we could make up the machines in this country. It is very difficult now to get permission to import, and I suggest that the Government should allow, and should facilitate, the importation of American aids and parts of aids. I must say that I have a personal grumble there. I was given an aid as a present from the American Red Cross, as a mark of appreciation of the efforts we are making in this House. I accepted the present with thanks, but by the next post came a form from the Customs authorities demanding £6 IOS. revenue tax from me—on a present! If I had been a wounded soldier and had lost my arm, and some friend had given me the latest American artificial limb, I should have to pay £27 tax on it. Does it not seem ridiculous that we are charging tax when American dollar values come into this country free? It seems an extraordinary proceeding. Surely we should be grateful for such gifts and accept them without taxing them? Therefore I ask the Government to consider, also, the freer and facilitated importation of American aids and parts of aids.
Before the new aid on which the Government are working can become a national standard aid a period of time is bound to elapse. I think I am right in saying that the national medical service will not operate before 1948. It will be 1950 before the full organization is in operation and it will be 1950 before these Government aids are available on a large scale. Are deaf people really expected to remain unable to get on with their work until 1950? That is a long time. Between now and then there is a vacuum to be filled, a gap to be bridged. Why should the Government not approve two or three of the best aids in this country—call them Mark I aids—and make them pass a Government test of efficiency? These aids might be distributed to the people at once, at a minimum cost. Later, when the Government have perfected their own aid and have their plans all ready, let us have the Mark II aid, the Government national standard aid. Let us do something now with Mark I, and go on to Mark II.
That is the main point. I can quite imagine that the noble Lord who replies will tell me that this will all cost money. I know it will. But doing something for the deaf is not merely a sort of charity; it is a very good investment. If we do nothing whatever for the deaf in this country, leaving them to struggle with their difficulties, they will be incapable of doing anything. They will have to be housed in institutions all over the country. That would cost a big sum. It has been estimated that it would cost this nation £7,000,000 to maintain in idleness all the deaf people in the country. If something is done for them, if they are put in institutes where they can learn lip-reading and finger-language, and given aural aids where possible, then these same people will be able to take up industries of all kinds. I have seen them engaged in book-binding, I have seen them in printing works, I have seen them engaged in carpentry, I have seen them in engineering, and I have seen them in horticulture. If they are working they will be earning good wages, and they will not merely be wage earners, but will maintain good homes. They will become good subjects, and instead of the whole burden of £7,000,000 a year being placed on the public Exchequer, there will be a lot of self-respecting men who can maintain
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themselves and their homes. Therefore, this is not charity. It is a sound investment for the Government to undertake. I do hope that they will be able to report good progress. I beg to move for Papers.
3.5 p.m.
VISCOUNT CECIL OF CHELWOOD: My Lords, I really have very little to add to what has been so very admirably said, if I am not impertinent in saying so, by the noble Duke. I entirely agree with everything he has suggested, and I rise mainly to make one observation. The noble Duke spoke about import difficulties. There is no doubt that there are at present import difficulties. I have had experience of those difficulties myself. I went to view and try an American machine at the London office of the company. I tried it. It was not very cheap, but otherwise it seemed to be a very interesting machine. I arranged with the gentleman who showed it to me that he should send somebody down to my little house in the country where it could be fully tried. That was months ago. I have called at the office once or twice since. There is always the same reply. He is quite ready to do it, but he cannot get the thing over from America. It may not be the fault of the Government or the Treasury or the Customs administration, but it is the fact that this very valuable instrument, which, in some respects, is quite different from, and superior to, anything I have seen in this country, has not arrived here.
In the same way, I went to another place in order to get a new part for this very machine which I hold in my hand at this moment. I was told that they were bringing over a particular part, which was made in America, better than it could be made here, but it had not arrived. I said "Where is it?" They said: "It has really started." This was weeks ago. "It is on the seas and it will be here directly." I have seen and heard nothing of it. I cannot help thinking that there must be some great hedge erected somewhere which prevents the full and free importation of these things from the country where they can be made best. I hope that the Government will look into this question very carefully, because it is really a great scandal if there is some red-tape rule which prevents the full freedom of importation of these things which are really deeply necessary for a very deserving section of the population of this

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country. Probably the noble Lord cannot give me an answer immediately, but I hope that he will see that his colleague who is responsible does not put the report of this debate into the waste-paper basket, but makes some investigation with regard to the matter.
With reference to other matters that have been raised, I am a little nervous about the question of distribution. I shall be very interested to hear what my noble friend has to say. I agree to a very large extent with what the noble Duke has said, but I do not feel that clinics established in various towns in this country would be a very effective method of distributing those instruments to the poorer classes. Obviously, if those people lived in the country, as many of them do, they would not be able to get to such places without great difficulty. I hope that something better than that will be achieved in the way of distribution, but I wait to hear.
There is one other matter which I will mention. The Minister of Health—I am sorry I have not got his actual words here—said something to the effect that they hoped in the future that there will be the same care taken with regard to the hearing of the population as is now being taken with regard to their eyesight. I hope that meant—I am not sure that the words quite cover it—that there would be the same kind of inspections in the schools of the country in respect of defects of hearing as are now made in respect of defects eyesight. In quite a number of cases there is no doubt that if you can deal with a defect in hearing at the very outset, and apply proper remedies, you can at any rate check it, and make hearing much more effective. I hope that it will be made quite clear that it is part of the policy of the Government to see that everything that can be done for the children in the schools will be done.
I am told that a new machine—the outcome of the work of this Committee—has already been made. I do not know whether that is so. Probably if it is so, it has been made only in such small numbers that it is not possible to put it on the market for general sale. If that is so, I hope that everything that can be done will be done. I should like to ask some questions about the new machine, but I am not sure that my noble friend, for all his attainments, would feel that he is
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sufficiently expert to deal with those matters. I do, however, want to say one thing about it. I speak in the presence of the noble Duke, who knows far more about this matter than I do. I do not think any very great advance has been made essentially in these hearing aids for some time.
Since the original device of having an electrical magnification of sound which is practically the central part of all these machines, there has been no great advance. The best machines I have been able to try are still very defective, and they are defective for the reason that while they convey the vowel sounds they do not convey the consonant sounds. The consonant sounds, of course, are much more delicate and much less robust than the vowel sounds. They have first to go through the diaphragm of the receiver and then the diaphragm of the loudspeaker, and they get lost altogether. They are not conveyed at all. I hope that a very complete study of that particular difficulty has been made. I do not know whether my noble friend is able to say anything about it, but to my mind it is by far the most important of the difficulties in the way.
There is also one other difficulty which seems to me not to be overcome at all, and that is to find a machine which will do whit a normal ear can do, but which no machine can do, namely, make a distinction between the sounds to which you want to listen and the sounds to which you do not want to listen That is a very delicate matter. Of coarse, when sitting at the dinner table, with an ordinary good healthy ear, it is possible to listen to the person at the other end of the table, and ignore all the intervening speakers. Very often that is a good plan. But no machine can do that unless there is some special device for it. I do not know whether anything has been done to meet that difficulty. But, unless something is done, you cannot hear the speech to which you wish to listen.
These are just casual observations which I hope my noble friend will consider. I particularly with to endorse with all my strength the plea of the noble Duke, that this is really a very urgent matter which is affecting the livelihood and happiness of a great number of people, and that, even if we cannot immediately get a perfect machine, as I do not suppose we shall, nevertheless some

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decent machine would be of enormous value to the poorer classes of the people of this country.
3.9 p.m.
LORD WALKDEN: My Lords, I feel grateful to the noble Duke and his colleague for raising this matter here to-day. I esteem it a great privilege to have been deputed to reply. The noble Duke has certainly chosen a fortunate day, one on which I can make some positive statements in reply to his numerous questions. I am afraid, however, that I cannot do that with regard to all his questions, because some of them went beyond the Motion on the Order Paper. Neither, I am afraid, can I enter into the inner technicalities of hearing aids, old and new. I am not a technician, and one must leave that to those who are acquainted with all the details. But I can, I hope, make a statement that will be deemed satisfactory, at any rate to be going on with, from now onwards, and which will be welcomed by all who are suffering from deafness.
The Medical Research Council, who were entrusted with the inquiry, and their three sub-committees, have completed their researches and have submitted the results to my right honourable friend the Minister of Health. All that work is therefore finished. The Minister has given a great deal of personal attention to the whole matter, even in the midst of all his other vast responsibilities, which are, as your Lordships know, very heavy, and he has authorized me to say that, with the approval of the Government, complete and generous lines of policy have been decided upon, quite definitely.
Firstly, the Electric Acoustics Sub-Committee evolved a hearing aid which has been tested and found to be as efficient as any now available, either British or American. We cannot find anything better, and we think ours is an improvement on anything that has existed before. This new aid will be supplied free of charge (there is no question of paying £8, £10 £12 £25, or the £62 which was mentioned on a previous occasion, for one of these aids) to all who need it, when the National Health Service comes into operation. The Bill for that service was introduced last March—I do not think the present Government lost much time over it—and it is now winning its way
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through Committee in another place. It will appear in your Lordships' House before very long, I hope, and then we shall see from what date it is likely to come into operation. I cannot speak firmly at this moment as to the date when it will be an Act, but I am informed that it is expected to come into full operation in 1948. That may appear to be at a somewhat distant date.
There may be eighteen months or perhaps a little more as an interim period, and during that time the Government will do their best to make interim arrangements for the supply of the new aids, but of course they will have no authority to provide them free of charge until the Act is passed. They will have to do the best they can to supply it at cost price to patients through the hospital services. Of course, they have not control of the hospitals at present, but I am perfectly sure that all the hospitals will be only too glad to co-operate in making this aid available for those who need it. That is quite possible. There will also be provided facilities for servicing the maintenance of the aid (this is very important) with new batteries or other requirements or repairs, free of any charge except where the machine has been damaged by carelessness on the patient's own part. If he lets the machine get smashed or spoilt, he will have to pay for its repair or renewal.
Clinical arrangements will also be established, chiefly in the hospitals, though there will probably be others, by which any person may consult a fully-qualified specialist and have his hearing tested. In any case where deafness is likely to prove amenable to treatment, it will be accorded free of charge. If an aid is needed, it will be provided free of charge. One of the principal aims of the service will be the prevention of permanent deafness. The most careful diagnosis of its causes will be pursued and appropriate treatment given wherever it appears that hearing can be improved by medicine or by surgery. The Electric Acoustics Committee have also made recommendations for the provision of improved equipment for testing the degree of deafness from which any patient may be suffering. This equipment will also be supplied to clinics without charge.
The Ministry of Health is now very actively engaged on the immediate

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problem of getting supplies of the testing apparatus, and the new aural aid produced. It is just a problem of production. They must be available in adequate quantities by the time the new National Health Service Act can be brought into force. If we can get them before, we will, and I am informed that the charge is not likely to be more than £10 for a very good aid. The help of the Ministry of Supply is being obtained, and we have every confidence in its ability to meet all our requirements. It did some wonderful work throughout the war in producing very fine and delicate instruments for the Forces and for other requirements, and it has assembled a splendid team of people with whom this work will be placed, and we are quite confident that the instruments will be made available at the earliest possible date.
Certainly we are not going to hand the fruits of these researches over to a market where anyone can produce them and do what he likes by way of exploitation. The noble Duke on the last occasion—and I have read his speech once more this morning—made a very drastic remark on that point. He said:
"Surely the Government are not going to leave it to an unholy scramble to take what results from the work of the Committee and ensure its supply."
We are not. We are not going to throw this invention over for exploitation by any people. It will be a State production, a State monopoly. The maximum benefit will thereby accrue to anyone who needs it and the State will only have to pay the cost price of production. These arrangements will bring to an end all the fraud and the profiteering of the past which have been so eloquently condemned in previous debates both by the noble Duke and the noble Viscount, Lord Cecil. They will inaugurate a new and brighter period for the deaf. The sufferings they have endured will be modified immeasurably. All the contumely, the cold-shouldering and the ignoring which they have suffered will be brought to an end. They will be able to obtain an aid that will help them to take their proper place in social and industrial life.
The young people will also be dealt with most carefully from their youth up. They will be tested in the schools for every possible ailment—in their eyes, ears, nose or throat—and they will have free treatment. It seems strange that deafness was
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not mentioned in either of the two White Papers, the great Beveridge Report or the Health Report issued by Mr. Willink for the Coalition Government, or even in the new White Paper issued by the present Government. It seems to have been overlooked, possibly because many people did not know what we could do for deaf persons. The researches have been made by very fine people, and now we do know what we can do, and every arrangement will be made to carry their recommendations into effect.
3.19 p.m.
LORD SALTOUN: My Lords, it is with singular pleasure that I have heard this afternoon the noble Duke trying to induce a Socialist Government to undertake a new national industry. As an old. Tory I have not any special predilection on forms of trade so long as they are efficient, and if the Government system is proved superior to the "unholy scramble," nobody will welcome it more than I. But there is one thing every member of this House would wish to do, and that is to congratulate the noble Duke on the result of his persistent efforts, for I am sure that His Majesty's Government, although in charge of this matter, will be perfectly ready to acknowledge that it is his persistence and steadfastness that has brought this into being. I am sure we would all wish to congratulate him on the results obtained, and to wish the Government good luck in what they are going to do for the deaf, one of whom I may be soon myself.
3.21 p.m.
LORD WOOLTON: My Lords, I should like to intervene for one moment, firstly, to say how glad I am to hear from the noble Lord that steps are going to be taken in the schools to look after the school children. If by that means we can prevent people from becoming deaf, it will be of even greater benefit than providing instruments for them when they are deaf. I hope that that work will be pursued. I know that medical officers of schools have a great deal do, but I am sure it will have very valuable results. There was one point in the noble Lord's reply on which I was not quite clear. He said the Government was going to have a monopoly of the production of these instruments. I take it that he meant precisely what he said, namely, that the. Government was going to have a monopoly

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of the production only of these particular instruments they are now adopting, and that it did not mean that nobody else would be able to produce instruments, because there may in course of time be new instruments invented which will be even better than those produced by His Majesty's Government. I should like to be assured that the monopoly is not going to prevent new development.
LORD WALKDEN: My Lords, I can assure the noble Lord at once that there is no intention to seek to monopolize the production of all these instruments. We shall, however, have a monopoly in respect of the production and distribution of our own creation, and I think everyone will agree that that is quite proper.
3.22 p.m.
THE DUKE OF MONTROSE: My Lords, speaking with a knowledge of people afflicted by deafness, I am sure I can say they will be extremely grateful to the noble Lord for his very informative reply. There is no doubt that my old horse is not only on the course but can now see the winning post. It is very good to know that research has finished and that work will begin on making these aids. In connexion with schools, I hope the noble Lord will keep in mind the question of the supply of cinemas. We have developed in the past two great teaching agencies—finger-language and lip-reading. Those are the only ways in which you can make a deaf person understand language. With language comes intelligence, and that is the only way of lifting the deaf people from the state of the animal. If you bring in cinemas, you will have a wonderful means of educating the school-children, at a most impressionable age, with finger-language and lip-language, assisting the teaching with words, and the words with stories. I hope that in dealing with the education of the deaf in schools the Government will bear in mind the supply of cinemas and possibly the provision of a cinema theatre in each large school for the deaf. In view of the satisfactory answer, I ask permission to withdraw my Motion.
Motion for Papers, by leave, withdrawn.

IRON AND STEEL INDUSTRY.
Debate resumed (according to Order) on the Motion of the Earl of Dudley, That there be laid before the House Papers relating to the recently announced Government policy in regard to the iron and steel industry.
VISCOUNT GREENWOOD: My Lords, I rise to support the Motion so ably moved by my noble friend, the Earl of Dudley, yesterday. His family is the oldest steel-making family in the world. He has a patent signed by James I giving his ancestors a monopoly—I hope nobody objects to that monopoly—to smelt iron ore with coal. Thereupon there was established the famous Round Oak Iron Works, which became the Round Oak Iron and Steel Works, and which still exists. My connexion with the iron and steel industry commenced twelve years ago when I was made chairman of Dorman Long and their subsidiary companies and a director of their companies in South Africa and in the Argentine. I want to say at once that when I refer to Dorman Long—which naturally I think is the greatest steel company in the world—what applies to that company applies to most of the steel companies in the realm. I hope your Lordships will give me the opportunity for a few minutes to give my idea of the set-up of the steel industry, which I do not think has been made as clear as it might have been. First of all, there are 300,000 shareholders in that industry, for whom we directors are trustees, feeling very keenly our responsibilities. I want to read a short description of the shareholders in the steel industry:
"Shareholders in this industry, in other words, the owners, are not a few individuals holding large blocks of shares. Dorman Long have over 28,000 shareholders. Out of 26,583 holdings of preferred ordinary and ordinary shares, 15,366 are of less than fifty shares of each class, 3,578 are of less than one hundred shares and 6,339 of less than 500 shares. I have no doubt an analysis of the shareholdings of other large steel companies will also show that those undertakings are largely owned by holders of small numbers of shares."
That is a very important point, because much abuse is heaped upon the capitalistic owner, so-called, by people who must be quite ignorant of the ownership of these steel companies. Investment by thousands of our own workpeople in the companies in which they and their forbears have worked is very natural on their part.
As to the workers themselves, in Dorman Long, including our collieries—

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or rather your collieries!—they amount to nearly 40,000 people. Relations in the steel industry between management and workpeople have always been of the closest and most amicable nature. Altogether there are about 300,000 work-people in this great national industry, and we have not had any trouble in that industry for over forty years. I think that is an unrivalled record and I think it is complimentary to all sides. I know all the leaders of the trade unions in the steel industry. During the war we had frequent conferences with them, and we are continuing those conferences, in which we show to them everything the industry is doing and its ramifications throughout the world. I cannot speak for them, but, as far as I know, in my part of the world, the north-east coast, there is no demand whatever for interference by the Government with the present system of carrying on the industry. Great towns have been built up by this industry. One of them with which I am intimately connected, Middles-brough, depends on this great firm of Dorman Long largely for its existence, its expansion and the employment of its men and women. We keep the closest contact with technical schools, from which we recruit the capable boys and, in these days, the capable girls for the successful carrying on of our industry.
One criticism which I have to make against the Government is this. They have intervened in this happy family industry. They have brought anxiety—and I think cruel anxiety—into the homes of thousands of people who for long years have been employed in the steel industry, whose sons look forward to continuous employment in this industry, but who to-day are uncertain of their future. This is particularly true of those who represent abroad various firms of worldwide reputation, who came back in large numbers from all over the world, joined up, fought through the war, and whose survivors are coming back to the headquarters of their various firms and are going again to the farthest ends of the world. I meet as many of these men as I can, and for the first time in my connexion with the steel industry there is a hesitancy and an uncertainty about their future. They are salesmen, and they are the people who get the orders. Without the orders, without the demand, the mills cease.
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It is easy now to sell steel, because there is such a demand, but the time will come very much sooner than we like when it will be difficult to sell steel. Now British steel, with the great names behind it, has a goodwill in this world which I think is unrivalled. But what will be the position having regard to the prejudices as well as the competition in certain countries of the world against the British Government? What will be the chance of a salesman to sell British Government steel? How could he sell British Government steel to-day in places like India and Egypt where, unfairly I think, unreasonable prejudice is running so strongly against us?
That is one of the criticisms I make on the Government's suggestion of public ownership in any shape or form. They apply to the commercial product, steel, a political construction. My noble friend, Lord Perry, who speaks with unusual experience and authority in this matter, pointed out yesterday in the debate that he was horrified at the idea of Ford cars in the future being possibly called British Government Ford cars. I cannot but feel that Henry Ford I—because although Americans are never too kind towards monarchy, they love to have their name carried on by their sons—the greatest individualist in the world, must be perturbed that the Ford car might be sold as the British Government Ford car. The point is a serious one. I want to maintain the goodwill of British steel with the names of famous British firms stamped on it. I believe that the Government's policy will militate against this goodwill, against the sales of steel and ultimately against employment in this country.
One other feature of the steel industry which has not been mentioned in this debate is our close link with science. For over seventy years there has existed in this country the most famous of all scientific steel institutions, namely, the Iron and Steel Institute. It has over 3,700 members, most of them distinguished scientists who are employed in the various steel industries. They are reinforced by professors and teachers in scientific schools and colleges all over the world and it is the very Mecca of every visiting scientific steel man when he comes to England. Continuous connexion is kept with every country, with every firm of note in that country, by this scientific branch of the steel industry. There is nothing I resent more, now that I am

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immersed in this great industry, than the glib criticism that the industry is behind the times. It never has been behind the times from a scientific point of view, and many of the great processes and inventions of steel, and in reference to steel, have come from this Institute in London.
I hope it will be remembered to the credit of the steel industry that the number of scientific men now training for the steel industry is ever increasing. The head of it at the present moment is a distinguished Canadian with a wide experience in the New World, who brings to bear in this scientific institution, so closely allied to the commercial side of the industry, all the latest knowledge on that side. Science in steel, like art, has no frontiers. These scientific men pool their knowledge, communicate with each other, and in that way we get the advantage of their scientific knowledge in addition to the advantage we receive from our own people, who are constantly travelling round the world looking for new equipment and new processes.
May I just say a word or two on common ground in this matter, which I always think is a good thing in a debate. The Minister of Supply, in his speech in another place, referred to the steel industry as a basic industry, the life-blood of the nation. I think there is no dispute as to that. It is more than that now. It is not only the life-blood of the nation, but since coal exports have practically ceased—there were 40,000,000 tons a year exported prior to the war—since that irreparable loss in export, steel is our best hope, and our best hope depends in the future on the salesmanship of our representatives abroad and, of course, on the cost of the product we produce. Another common ground is that we all want increased production. We want increased efficiency by the installation of new plant, which would mean, in another phase of it, new processes.
That brings me to the plan the industry itself has submitted to the Government. This was wholly explained by my right honourable friend Sir Andrew Duncan, whose contribution to the steel industry, and to other great national productions in this country is, of course, of the very highest character. The Report was not a matter of hasty preparation at the request of the Ministry of Supply. A great many items in the Report were in preparation
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before the war. The war really commenced for the steel industry in 1937–1938. I speak with knowledge here, because I had the honour to be President of the British Iron and Steel Federation in 1937, and Sir Andrew Duncan was then, as he is now, the independent chairman. We believed war was inevitable and we took every preparation we could to prepare the steel industry for that eventuality. In those days the various Service Departments submitted their requirements as they did during the war. We never failed a Service Department or the Government during the war. That was due to the preparation made before it. But, during the war, every mill, every furnace, every item of every plant was worked to the maximum and many have deteriorated in the process.
It is pretty hard to blame the steel trade of this country for not being equal to the American steel production plants. They had two years clear run, while we were fighting alone, and they took the chance to re-equip. That was largely owing to our orders in this vast enterprise in the world of steel. But, let us face it, we no longer keep the predominant position which we enjoyed at the beginning of the century. Our maximum production for years to come will be 15,000,000 tons of steel ingots or at most 16,000,000 tons. America is doing over 90,000,000 tons to-day, and will shortly do 100,000,000 tons. That is competition, I am bound to say, that makes one realize how hard is the fight which we have to recover our position for the sale of all our products in steel throughout the world.
The Report goes back to pre-war days in some elements. The second element was brought in by Sir Andrew Duncan when, during the war, he sent the then Steel Controller, Sir John Duncanson, to America and around the Empire, to visit all the big plants, to make personal contact with all the big makers and bring back, as the result of his personal contacts, the latest information with regard to such matters as production and equipment in the industry. My own firm, two years ago, sent three of our head technical men to America to examine all the big plants so that we might re-equip our works on the Tees-side, and be ready for the fierce competition which has not yet come, but which is inevitable. Now the scheme set out in the Federation's

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Report was prepared by the ablest men in the industry, it was supported by the whole industry with one or two critical exceptions, but with no exception so far as opposition to the Government scheme is concerned. That is our plan, That plan, I am glad to say, has been accepted by the Government, with, naturally, the usual qualifying exceptions as to detail.
The issue comes to this. Who is to implement the agreed plan? There will be no other plan. There is no one else capable—I am not speaking offensively of Ministers—in this severely technical industry, of preparing an alternative plan. By the acceptance of the Federation's Report that is practically accepted by the Government. Now we say the plan should be carried out by those men who drew it up, and who rendered the best possible service during the war, with the workpeople who worked so amicably with them. We do not believe that the Government, with its interim Board of Control and some form, not disclosed, of public ownership, can possibly be effective in carrying out our plan.
The Government suggestions are vague, and they make for delay, and these are two facts which in business are major sins. A delay is inevitable and will continue, unless the Government have some new scheme, not yet disclosed. If I might use a sporting comparison, I would say that our team, in the steel industry, is in the field; the Government team is invisible—I suppose it is still in the dressing room. At any rate, we are ready and willing to start at once. I must say this in fairness to the Government. In the Coalition Government, when Sir Andrew Duncan was Minister of Supply, and since then under the present Minister of Supply, certain large portions of our plan have been agreed, but a still larger portion has not yet been agreed by the Government. I sincerely hope that, whatever happens as to the arrangements in the future, the Government will very quickly decide on this scheme which has been most carefully prepared, and give the industry every encouragement to go ahead with them.
Now I wish to refer to the speech made yesterday by Lord Winster. He made two statements which I must contradict. He rather suggested that the employers in the steel industry were responsible for the slump in the 20's of this century. That
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was a world slump. It began in America—in my opinion it will begin there again—and over night. Mills by the thousand ceased to roll all over the world. Employers in this country had nothing whatever to do with it, It is a reminder that this little country is more dependent on foreign trade and, in commerce, on foreign influences than any other industrial country in the world. We in the steel trade believe that in a very few years there will be another slump, and we have made in our Report every preparation we can—with the good will we hope and believe of the Government—to ensure that the slump proves as harmless as possible.
Then there was another point made by Lord Winster. He rather doubted—and other Ministers have said the same thing—the capability of the steel industry to raise its own finance. Well, the steel industry—and I can speak for the industry here—have no such qualms. They are convinced that their credit is good. All the great firms have been for years paying off debentures and building up great resources in order to re-equip and modernize their industry. I am not a timid man, but I am afraid of a Socialist Chancellor of the Exchequer who wants to play the role of Santa Claus with his three per cent. to help the steel industry. I would rather borrow the money at four per cent. than be in bondage to any Government. Our credit is so good that we can raise the money without difficulty at the lowest possible percentage given on the public market to any industry. I think that would be confirmed by any leader of the industry.
LORD STRABOLBI: Will the noble Lord forgive me for interrupting. Is he now speaking of his own great firm or of the industry as a whole? If he is speaking of the industry as a whole, how does he explain the opposite view apparently taken by the Report?
VISCOUNT GREENWOOD: Certainly I can speak with authority of what the noble Lord calls my own great firm, and I can speak generally for the steel industry. Of course, there may be firms that will not be able to borrow money from the public investor as cheaply as some other firms. But, speaking generally, I am certain that the industry would rather go to the market, which is overt owing with money, than be subsidized by the Chancellor of

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the Exchequer, however benevolent his ultimate object may be. I do not wish to detain your Lordships longer. I appreciate beyond words the courtesy of your attention while I have been speaking. I do not often trouble your Lordships. In conclusion I just want to say that we have all read or heard the grave speech of the Foreign Secretary. I want to draw attention to that iron curtain. It is not only a curtain over the west of Europe, it affects the south of Europe and Asia and the east of Asia. It is a bar to our trade. The Foreign Secretary admits that. The spectre of famine is in Asia and in Europe. Rationing is inevitable, and I deplore that beyond all words, because if food supplies to workers in coal-mines and steel mills are reduced it will almost certainly lead to a decrease in production. They have been underfed to a large extent for years. I hope that the Government will consider the special claims of the heavy industries, these primary, vital industries which exact a lot from the men, grand men though they all are. The point I want to make to the Government is this. With these burdens, with the unsatisfactory nature of the coal industry which, if it proceeds in its present sluggish condition, will mean another cut in supplies to the steel industry, there is bound to be unemployment. With all these problems besetting the Government why bother this industry, which it is admitted, through the words of the Minister of Supply, "has a magnificent war record"? We in the steel industry do not mind inspection. They can co-operate with us. In some respects—in many respects—as they do now, they can control us. But I beg of the Government to give us the opportunity to establish in peace what they admit we did in war, a magnificent record.
3.53 p.m.
LORD STRABOLGI: My Lords, I would like to congratulate the noble Viscount on the excellent form he has shown us to-day. It takes me back many, many years to another place when he and I were old antagonists on a quite different subject. I am glad to see that he seems to have actually grown in mental and physical stature and vigour since those days. Like him and like the noble Earl who introduced this Motion I also am directly interested in this industry. I have a substantial
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interest, although I do not claim anything approaching the great knowledge, indeed the inherited knowledge, of the Earl of Dudley, or the unique knowledge in your Lordships' House of the chairman of the great firm, almost the international firm, of Dorman Long. I have some knowledge, nevertheless, of the facts.
I had not intended to refer at all to the question of finance for this scheme which is under examination and would not have done so if it had not been dealt with so fully by the noble Viscount, Lord Greenwood. I thought I detected some of the Derby Day spirit—I hope he was on "Airborne"—in his robust optimism about the industry being able to raise the necessary money for its full programme. I quite understand that he can go to the City of London to-morrow and get all the money he wants for Dorman Long. But that was not what was set out in the report which your Lordships have all read and which in a way we are discussing to-day. I am well aware of what Sir Andrew Duncan said on this matter, but what this Report said, and after all it was dated December, 1945, was:
"Taken overall, it would appear not improbable that the industry could meet approximately half the cost of the programme out of its own resources."
That is a very different sort of statement.
VISCOUNT GREENWOOD: May I intervene for a moment? That part of the Report which says "out of our own resources" means the resources available here and now, without further borrowing. Further borrowing, which I dealt with, would be possible because our credit is good. We are assured by those who know in the market to-day that there would be no difficulty in raising over a period of years, as the Report says, quite small sums of £11,000,000 or £12,000,000 a year.
LORD STRABOLGI: Yes, I see the point, and I accept it immediately. It was also made by Sir Andrew Duncan. He said that the expenditure would be spread over seven and a half years but he also brought in—and the noble Viscount did not mention this—the proceeds of the compensation of the coalmines scheme. I admit this extra asset for the resources of the industry. But while there may be a good investment market at the present time for the iron and steel industry, we are discussing the

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long-term policy, covering a term of seven or more years. If a slump comes, and if the seller's market deteriorates, and we have not such good business in the export trade, would it be so easy to raise it then?
THE EARL OF DUDLEY: The plan is a five-year plan, I would like to point out.
LORD STRABOLGI: Yes; but it does not begin at once.
THE EARL OF DUDLEY: Yes; this five-year plan starts from now—from last year.
LORD SRABOLGI: I am told that the total amount is £68,000,000 or thereabouts and I hope that the noble Viscount is right in saying that that money can be raised over this term of years in the City of London. But I repeat that the Report itself is not quite so optimistic. I must refer also to another matter in his speech. The noble Viscount fell back on the old familiar argument about the small shareholders in the industry. To quote his own figure, I think he said there were 300,000 shareholders in the iron and steel industry. I have been hearing a similar sort of argument for years and years. We used to hear it particularly with regard to the railways. We used to be told that all railway shareholders were widows and orphans—or so it seemed. Nobody but widows and orphans had snares in the railways. When there was any talk about taking over the railways we were always told that the widows and orphans would have to starve. I was once a shareholder in Dorman Long. I am sorry to say that I sold out at the wrong time, as I always do. If I had known that the noble Viscount was to become Chairman I would have held on.
When the noble Viscount talks about no demand for nationalization from meeting of his workers I daresay, as he is up in the north-east, that there have not been mass meetings demanding nationalization. But there were great mass meetings at the General Election, and they were almost entirely Labour in the north-east. I was there myself and I know hat I am talking about. The men were shouting for Labour and it is perfectly absurd to pretend that they did not know what the Labour programme was. We are only carrying it out. I admit that it is going to be very difficult with this industry.
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It so happens that Dorman Long is a great integrated concern. We have held the lead in iron and steel making, and in the use of its products in the past for several generation, and because of that, and because we were pioneers we did not generally adapt the system of integration, where all processes from smelting to the finished product are carried on under the same roof or series of roofs. Dorman Longs one of our great integrated industries and because it is efficient it presents my right honourable friend the Minister of Supply with a very serious problem.
We are not attempting to take over the whole engineering system of the country but Dorman Long, and other firms like it, represent in miniature the whole of the heavy industry of this country. Because of the vast range of their products it is difficult to draw the demarcation line as to where the making of the raw material for the engineering industry ends and where the working-up and processing begins. Obviously the only thing to do in that case, and I am personally sorry for the noble Viscount, is to take over the whole thing. But when he talks about there being no demand for this policy on the north-east coast, I must say that I think the northeast coast is the last area which I would care to quote in connexion with this, subject from his point of view. That is one of the areas that suffered most severely during this terrible Period of slumps through which we passed between the two wars. I was the Member for Hull when he represented another constituency in the House of Commons. I know how we suffered then. I know what resulted from the policy of the great leaders of the industry, who are now opposing the Government's plan. The result was the closing down of shipyards in Jarrow and in Hull and other ports, a diminished British demand for steel, immense unemployment, and embarrassment to the Admiralty through the loss of shipbuilding capacity when war broke out. If I may respectfully say so, I would not quote the north-east coast in opposition to the Government policy.
Then the noble Viscount mentioned the question of exports. I find an echo there. He asked, "How can you sell Government steel abroad? How can a merchant sell Government

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steel? "I want to tell him, speaking as a merchant, that if we can get Government steel at the right prices, and quickly enough, we can sell it all right, if we are left alone to carry on our present connexions. I want to say this quite frankly, that I hope this matter will receive very careful examination in the future. This is not a scheme to be rushed into. Everyone in the Government realizes that. It has to be approached with great delicacy and care. I hope that the whole question of exports particularly will be examined without any precipitancy, but with the greatest care. Under the cartel arrangements that were growing up in the past—I had not intended to refer to this, but the noble Viscount has drawn me into it—certain foreign markets were closed altogether to any British steel at all. At any rate, that is not a healthy state of affairs. When the noble Viscount talked about who can sell Government steel, in the future I hope that he will not be quite so pessimistic about the qualities of British workmen and British technicians.
I think that Government steel will be as good as the best steel that has ever been made in the past. I see no reason for deterioration. What does matter is that the merchants who understand their customers' needs, and who can deal quickly with their customers' requirements, should be given a free hand to sell Government steel abroad. In other words, what I hope will happen—I am supporting the Government in this policy, and I am making no sort of criticism—is that what the noble Viscount calls Government steel will be cheap, of good quality and readily available in abundance, which at present steel is not. We are terribly hampered in every branch of the engineering industry in the country because of the shortage of steel. I hope that it will be available in abundance to good honest buyers, whether they need it for their home industries inside this country or for sale abroad, and, if that is the case, I can see a return to the predominant position which the British steel industry held until about the end of this last century.
I must just refer—because this has a bearing on the speech to which we have just listened with such enjoyment—to two of the speeches which opened the debate yesterday, the first by the noble
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Earl, Lord Dudley, in which he spoke of the Government's scheme being the death sentence on private enterprise. The noble Lord, Lord Rennell, whom I do not at this moment see in the House, speaking I presume for the Liberal Party, took a different line altogether. He spoke of the continuance of the monopoly, and he said that could be dealt with by public control. I think that the noble Earl, Lord Dudley, would agree that the monopoly which he proposed is not private enterprise, not in the sense in which he used it.
THE EARL OF DUDLEY: Yes.
LORD STRABOLGI: It is not. If you like, it is an organization—I call it a monopoly tending towards cartelization. It is not private enterprise.
THE EARL OF DUDLEY: Yes.
LORD STRABOLGI: The remedy for that according to Lord Rennell is to have a monopoly under Government control. I am sorry that the noble Lord, Lord Rennell, is not here. I think he would appreciate the argument. The difficulty here is that, if you have a great industry which forms itself into a monopoly, and then you have to adopt a Government control policy to look after the consumer interest and the public interest generally, that great industry because of its power, and because of its monopoly of experts if you like, tends to control itself. That has been happening a great deal during the recent war. I am speaking here as one who has to buy steel to make up into all kinds of goods which are sold at home and abroad. Our interest is to buy, as I said just now—the same as the interest of merchants engaged in the export trade—cheap, good steel, which is readily available in sufficient quantities.
May I take a hypothetical or imaginary case which illustrates exactly what I am trying to explain to your Lordships? Suppose the noble Earl, Lord Dudley, and I were manufacturers of cisterns. I choose cisterns because neither of us makes them. The cistern is made from plates. Our success in business (we are rivals) depends on the service we give, and the fittings on the cisterns—the valves, pipes and regulating devices and so on. Suppose, with the war coming, he found that one of my principal people had become Controller of Cisterns, and he found immense difficulty in getting his

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raw material, in this case the plates and copper pipes and so on, he would not be very pleased about it. That is what I mean by the danger of a big and very powerful industry forming itself into a monopoly or semi-monopoly, being put under Government control, and then becoming in effect controller of itself and its own business.
THE EARL OF DUDLEY: May I point cut that the noble Lord has been instancing a war period all the time?
LORD STRABOLGI: Yes.
THE EARL OF DUDLEY: You cannot compare the future. We do not in this Report visualize a war period going on indefinitely. We visualize a return to the same kind of Government control, in a stronger degree, perhaps, to which we were subjected in the years before the war, which is quite different from the sort of control which took place during the war.
LORD STRABOLGI: Of course, in the plan which we are discussing, the plan of the Federation, the same sort of set-up is visualized.
THE EARL OF DUDLEY: No.
LORD STRABOLGI: I think that is their plan. I hope that the noble Earl is right, and that will be very comforting to many people, I can assure him. But the point I am leading up to is this. The ultimate authority has to be, or will be, I presume, a Steel Board. I do not mean for the interim period, when the necessary Bill is being drawn up, the necessary negotiations taking place, and examination going on, but that finally the nationalized industry will be under a Steel Board. I do not naturally expect a reply from my noble friend Lord Pakenham on this point. After all, it is not his Department, but I would be most grateful to him if he would take a note of this point of view, which is held by very many people with a knowledge of the industry. This Steel Board should consist, of course, of experts, though not necessarily entirely of experts. I think that Lord Greenwood would be the last to claim to be an expert in steel, but he is a very expert company chairman. He will not mind my saying that. A man with the right sort of mind can be valuable on such a Steel Board, even although he is not necessarily an expert, even although he has
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not been brought up as an iron puddler. The members of the Board should be for the most part experts. But what is important is that they should be absolutely independent of any other interest. They should be whole-time directors, and they should be paid adequately. This may mean some change in Treasury practice and Treasury ideas, but I think that is very necessary. Such salaries must be paid as would attract the very best men, and enable these men to give the whole of their time without any sort of outside interest. I do hope I carry the noble Earl, Lord Dudley, and the noble Viscount, Lord Greenwood, with me there. I refer particularly to Lord Rennell's contribution yesterday, and I would only say this to the noble Lords on the Liberal benches: that his attitude differed very much from that of the hon. Member, the Leader of the Liberal Party in another place. I hope there is not a division between the Party in the two Houses. The noble Lord has declared himself roundly and squarely against nationalization, but not Mr. Clement Davies. Mr. Clement Davies may be an agnostic, but Lord Rennell an atheist on this matter of nationalization.
I do not want to detain your Lordships because there are others who have much more claim to speak on this matter than I have, but I want in conclusion to refer once again to this question of the export trade. With great respect to the noble Viscount, Lord Greenwood, I would say that it is not only the name on the steel bar, billet, plate or round, or whatever it may be, that sells it; it is sold also by the skill and knowledge of the merchant. For two or three hundred years now our export trade has been built up, not only on the quality of British goods but on the goodwill built up and the confidence established by the British merchant with his customer abroad. That is why I do submit that there is a very strong case for leaving the export trade in its present hands.
Very large transactions are normally concluded nowadays by cable, within twenty-four hours, and it would be asking too much of a Government Department or a semi-Government Department to act in that way. It is too much responsibility. The merchant takes the responsibility because, if there is trouble, he loses, and that is his concern; he makes his peace with his bank manager as best he can.

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But I do not think you can expect a semi-Government Department to take the same risks. Furthermore, very important transactions with customers abroad, involving many thousands of pounds, are done on the telephone to-day by men who know each other and trust each other. In that way we very often get trade which would otherwise go to other countries instead of our own. The general service, the quickness of decision and the mutual confidence have grown up in some cases over many generations between the great merchanting houses and their customers abroad. That is what sells British goods as much as, or almost as much as, their quality. With great respect, I think the noble Viscount, Lord Greenwood, would agree with me there.
I hope we will hesitate a long time and examine the matter very carefully—I do not put it higher than that—before there is any interference with the export trade. It so happens that I visited the two countries which have been most referred to recently in connexion with the iron and steel industry and plans of nationalization—South Africa, where I had the privilege of meeting the leaders of the industry out there and seeing the new Government works at Vereeniging and Van der Bijl park, and also Czechoslovakia. Now in South Africa the question of the export trade has not vet arisen, because they are not making nearly enough steel for their own purposes, but I made careful inquiries about this and I understood that when they are in a position to export they will allow merchants to buy from them in the same way as any other customers.
In the case of Czechoslovakia—and this is extremely interesting—the situation is different from that in this country because the Germans had integrated the industry with their own. Many of the employers collaborated with the enemy, and when the Czechs had what they called their revolution and rose and, with the aid of Allied armies, liberated their country, they were faced with a problem which could only be solved by taking over practically all the heavy industry. Seventy-five per cent. of it was taken over, and the great integrated works corresponding to Dorman Long, like Skoda, Mannesman, Witkowitz, were put under one metallurgical board of experts, responsible not to the civil servants but
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to the Cabinet. I had the privilege of meeting some of those responsible people. I inquired what they were doing about exports. One reason I went there was to buy some steel, such is the shortage in this country. I was told that the metallurgical board was responsible for all sales and purchases, but wherever possible were keeping their old agents abroad. Some of the great firms had the same agents—in some cases British agents—in all parts of the world, and wherever possible they were keeping them. Therefore the machinery of international trade was being as little interfered with as possible, and that did not conflict with the general policy of nationalizing the heavy industries of Czechoslovakia. I put that experience and information forward, with great diffidence, to my noble friend Lord Pakenham, and I think it is worthy of consideration.
I repeat that I am sorry for the noble Viscount, Lord Greenwood, and the other directors of integrated works. They suffer in this way for their own efficiency. They have ripened the peach too quickly and made it too luscious. I was always a little tired of waiting until industry was thoroughly in the doldrums before we began to talk of nationalizing it. I hope that he and the noble Earl, Lord Dudley, will regard this great policy with interest and hope, though perhaps with some trepidation.
4.16 p.m.
VISCOUNT BRIDGEMAN: My Lords, I am a newcomer to the steel industry, of little seniority and no rank; therefore I cannot presume to talk with any authority in the way that my noble friends the Earl of Dudley and Viscount Greenwood have done in this debate. Listening to this debate, however, it has struck me that there are two alternative approaches to nationalization: either you nationalize an industry because it is ripe and beautiful, or because it is inefficient and not doing its job; and you choose the argument to suit the case. Another thing that struck me, listening to debates here and reading the debates in another place, was that as they progressed we have heard it repeated, more and more loudly, that the nationalization of the steel industry is in the national interest; but there has not been a corresponding increase in the number of reasons given to justify that decision. It reminds me of the particular

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type of Englishman abroad who, in order to convince the foreigner, shouts what he has to say louder and louder, and oftener and oftener.
One thing did come out fairly clearly to me, and that was that the decision made by the Labour Party that nationalization of the steel industry was a good thing, was made before the General Election. I see that the noble Lord, Lord Winster, said yesterday that the decision was taken after long and intensive research and was fairly and squarely put before the electorate at the General Election. If that means anything at all—and I am sure it means what it says—it means that whatever arguments were put forward subsequent to the General Election really made no difference, because the die was cast before then, and the report of the Iron and Steel Federation could not have made any difference whatsoever to the Government's decision because that decision had already been taken. We ought to realize that quite plainly, if I have thought of that matter aright. That applies, indeed, to the question of capital about which my noble friend Viscount Greenwood spoke.
Before the Iron and Steel Federation had said what they had to say about capital, a decision had been taken that they could not raise it. That strikes me as being a little curious, because, looking at the debate in another place, I see that the Chancellor of the Exchequer said that they were going to give something very close to gilt-edged rate on any scheme he approved in what still remained of the private section. If you give a near gilt-edged rate, it means the people you give it to are worthy of credit; and if they are worthy of credit, why should you then say they are not likely to borrow in the City of London what is required, which is the difference between what can be raised from the internal reserves of the steel industry, as it says in the Iron and Steel Federation Report, and what is required to complete its schemes? It seems to me that there is a little discrepancy in this outlook on the question of capital, but, as I say, the decision appears to have been taken long since. When it came in, the Federation's Report was looked at by the Government who said, "We like it very much. We think a lot of the things you have put in this Report are very good and we should like to adopt them, hot on no account can these schemes be
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carried through by the people who have devised them, who have studied them and who have the experience to work them that must be done by somebody else."
As I have said, it would be wasting your time to put forward any more arguments why the steel industry should not be nationalized, but perhaps it would not be such a waste of time to say a word or two about what I think may possibly happen if it is nationalized. We were told yesterday by the noble Lord, Lord Winster, that one of the reasons for nationalizing the steel industry was to, get that freedom and positive action which will come from public ownership. Exactly. Once the steel industry comes under the control of the Government, there will be a great deal more freedom in the hands of those who work it because they will have a handful of Jokers. I looked up a quotation from Alice it Wonderland about and I looked it up very carefully in case the noble Lord, Lord Lindsay, might be in his place! That quotation says:
"'I will be jury,'
Says cunning old Fury,
'I'll try the whole cause
And condemn you to death'."
It is very easy to get freedom of control, but I am wondering whether this idea of freedom of control does not conflict with certain action which has been taken in connection with the Cohen Report. In the Cohen Report, if I remember rightly, a good deal of stress was laid on the need for proper arrangements for Board of Trade investigation into this industry or that, and quite rightly, if I may say so. In the case of the steel industry, just at a time when it is changing its management and when the efficiency of the new management is on trial, it goes into the blackout. All those provisions recommended by the Cohen Report go by the board as far as the steel industry is concerned, and so also goes by the board the annual tonic which those people have to take who are running a public company—the annual report and accounts, the questions on them and so forth, which make sure that the spotlight of public attention is shed on those big private industries which it is the concern of the public should be efficient and well-managed. It is rather peculiar that when the Government, I imagine, will not tolerate any weakening of the powers of inspection of a public company, at that

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moment, unless I am very much mistaken, the working of the steel industry will recede into the blackout.
This brings me to the point of exactly who is going to manage the steel industry. It cannot, I suppose, be managed—I am talking about the higher management—by the people who are there now. The technicians and so forth will, of course, go on, but the higher management is now being conducted by people who, I suppose, in the opinion of the Government, ought not to go on managing it any longer and must, therefore, be replaced by other people. Otherwise, how is the improvement going to be made in the steel industry? I do not know. We were told on the Coal Bill—I think in another place—that there was going to be no provision for the Comptroller and Auditor General to investigate the accounts of the Coal Board because, apparently, it was rather cramping to the initiative of the civil servants or of whoever was in charge of those accounts to come into the spotlight. That is the exact opposite to what would be the position in a public company under the provisions of the Cohen Report. I do not know whether the Coal Bill is going to be any sort of blueprint for the Steel Bill when it appears, but if it is, I think there is one feature to which I ought to draw attention, and that is the schedule at the end of the Coal Bill. There there is a double option for the owner to relinquish or the Government to take over any industry which does not strictly belong to the coal industry. I do not know whether that is going to apply in the same measure to the Steel Bill, but if it is, we shall have a magnificent opportunity for Empire building within Whitehall.
I have spent ten years in Whitehall in different Government offices without having been a civil servant for one day, so I know how very easy it is to put up a plan to one's boss and make it appear that the only thing to do is to take a little more control and get a little more of industry into the net. It is very easy, it is very amusing, and I am quite sure it would happen. I hope the noble Lord, Lord Strabolgi, will find that his industry is sufficiently far away for it not to happen to him. I feel, too, that one of the things that will happen will be a difficulty in making the Treasury change its skin, its spots or whatever it wears, and
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to adopt a freer attitude towards the control of the money in the steel industry. It is no good thinking that the Treasury is not going to insist on having the last word in financial policy. It will be a nine days 'wonder if there is any change of that sort, and my small experience does not encourage me to think there will be. If that is so, and if the Coal Bill is a blueprint for the Steel Bill, then the Treasury will control the reserves, and once it controls the reserves it is perfectly true to say that the higher management of the steel industry will be in the hands of officials in the Treasury. I want to make that point very strongly because I am quite certain that that is what will happen.
I will now go back to the question of the industry being in the blackout. There again, having had a little experience of Whitehall, I know how tempting it is, when there is an awkward question, to brief one's Minister that it is not in the public interest to give the answer. I would not say I have not done it myself, but I can tell you exactly at what point those briefs will be offered to the Minister, and that is if or when the steel industry under the Government, or some part of it, begins to make a loss. We hear a good deal about the profit motive, but it may be necessary to study the loss motive a bit more carefully before we have finished. If I may refer to that book, The Managerial Revolution, which the noble Lord, Lord Lindsay, mentioned yesterday, I noticed, if I got it right, a rather curious doctrine by which it appeared that a loss was not the same thing if it were made by the Government as if it were made by private people. I hope that these things will not happen, but if they do happen another great industry will pass from the category of the creators of wealth to the category of the consumers of wealth. Those are the things which I fear will happen. I do not know whether I have overdone the Cassandra business; I do not think so.
I would say this in conclusion, that this is a point at which a halt can be called. Once we pass into the nationalization of the steel industry I myself can see no logical place at which nationalization can stop, for the reasons I gave your Lordships just now. At that point the horses of nationalization will have started to bolt, whether the coachman wants to stop them or whether he does not.
4.30 p.m.
LORD PIERCY: My Lords, the noble Earl who proposed this Motion seems to me to be a man of that happy disposition that never has a bad horse in his stable. He looks upon this great industry in which he has spent a great part of his life with affection; but he has passed over the bad times it has been through—I might say the dangerous vicissitudes through which it has passed—its present problems and the difficulty and doubt which hangs over its future, at any rate on the basis of an output of 16,000,000 ingot tons which is a higher figure than the industry has ever before produced or made. I would, therefore, like to get a little bit nearer, if I can, to a neutral view, and try to see the problem as a whole. I would point out, first of all, that there are two points upon which the Government and the managements of the industry are on common ground. In the first place, the industry has assumed, and is bound to retain, a monopolistic form. Secondly, in the industry as it is today very extensive capital investment and replanning is needed.
As to the first of these points, the present-day monopolistic form of the industry, I appreciate that an earlier generation—Sir Hugh Bell, of whom I remember many kindnesses as a young man, or Sir Arthur Dorman—would have recoiled from that thought. But it appears to be true that the future of the industry must lie in a regime of common control of prices within a ring fence of protection, and Government assistance or participation in its international marketing arrangements, and possibly some—I think almost inevitably some—Government control of its investment plan. These conditions date, of course, from the early thirties. They emerged from the bargain which was struck in 1932 between the industry and the Government of that day. At that tirne—a little contrary, I think, to some of the retrospects you have heard to-day—it was commonly admitted that the industry had fallen back a little in technological progress and that, in the words of the Sankey Commission, "regional amalgamation and re-equipment on a very large scale "was needed. Whether the iron and steel masters agreed with that or not, the bargain was this, that they got protection as an opportunity for a thorough reorganization of the methods and the physical structure of the
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industry. Having started like that, the arrangement became permanent. It was not found possible to remove the protection; the Import Duties Advisory Committee were brought in, and they were given control, not only over prices, but some control over new schemes of development.
It was in that setting that the Federation was set up as the central organ of the industry, and it did pull the industry together, into a fairly loose structure, but very like those great cartels of which we know abroad. In 1944, the Federation drew up for itself a new constitution; and printed plain in that new constitution is the fact that the industry envisaged that the control of the Federation over the industry must travel further along the same lines. As regards the reorganization of the material structure of the industry, it is true than £50,000,000 were spent between 1935 and 1939, but I am going to suggest that it is a fair observation that that £,50,000,000 fell short of the extensive reconditioning which was clearly seen to be necessary in 1932. Today the estimate for putting the industry in first-class technical order is £168,000,000. I think it is agreed on all hands that that vast expenditure is absolutely essential for the efficiency of the industry. Of course it is partly due, no doubt, to the fact that America and other countries have come up meantime, but partly, I would suggest, it is an overhang from the conditions which go back to the thirties and long before that. However that may be, we are faced with this situation—and it is a clear-cut situation in spite of all that Lord Rennell said yesterday on costs and prices.
Whereas before the war, compared with America, our prices for common steel were on the whole round about ten shillings a ton cheaper, at this moment they are higher than the American prices. That has got to be rectified. That is the reason for the necessity of this extensive programme. I will not dwell too much upon that except to say that it does suggest that the industry does not deserve quite all the bouquets which the noble Earl, Lord Dudley, was inclined to offer it yesterday. I make those two points as my foundation that there is common ground between the industry and the Government that the monopolistic structure of industry must be continued, and that an enormous programme of reconstruction is vital.

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Now the industry is emerging from the war, and the programme of reconstruction is possible. The industry has been under a special form of complete Government control in war-time, and the question arises as to what is its future to be.
There must be a new deal. The industry itself has proposed the form of a new deal, and it deserves to be noticed and considered. The form of the new deal proposed by the industry was along these lines. The Federation—and I am now talking of these proposals it put forward in 1944—expressed the willingness of the industry for some Government control over prices. It expressed a willingness for Government participation in the making of any future international marketing arrangements. It did stipulate that any control which was exerted under those two heads should be exercised "at the highest possible level." The industry subsequently—I think under a little pressure from the Government—consented to formulate and bring forward a programme of investment for the reorganization of the industry as a whole, based upon a five-years' period. That is the origin of the five years' plan. One must admit that on the face of it, this suggestion from the industry does not appear a very unfair proposition. It is a clear-cut suggestion for a continuance of Government control very much on the lines of before the war, but, no doubt, made a little more precise and comprehensive, just as within the industry the powers of the Federation would be made more comprehensive and precise.
The real question is—and this is the whole point at issue—why should not the Government have accepted these suggestions? Why should the Government have rejected them and gone instead for a plan of nationalization? I think that that is a very fair question, and that we should look round and try to see if we can give reasons for the decision in the sense of nationalization that has been taken. Let us look first at the monopoly point. I think in spite of both the charge, or at least the innuendo, on the part of Lord Rennell, that there was some doctrinaire or dogmatic motive, and the disclaimer from the Government Benches of any doctrinaire motive, we must admit that to leave this great monopoly in a basic industry in private hands would not agree very well with
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the pattern of the Government's policy as it has been laid down, and that the proposal in a sense does flow, whether we like it or not, from the general pattern of the Government's policy. No doubt it would be justified in this particular case by the very basic nature of the industry. After all, the prices of iron and steel do affect the prices of a very large part of the industries of this country, including the great engineering group of industries, which employs a far greater number of men than the steel industry itself, though the steel industry is a very large employer of men.
Parenthetically, I would like to say this. Seeing that coal will be nationalized, and transport is to be nationalized, and seeing that they are elements which go to the very root of steel-making, I am a little surprised that many steelmakers, in the circumstances, do not feel a little easier in their minds that their industry is to be nationalized, and that they have not to make their bargain with a nationalized coal industry for supplies of coal, and with a nationalized transport industry. Now, secondly, we must look at this control proposition in a practical way. If you accept the principle, have you got the means to carry it out, and can you secure your object? One must admit in fairness that there is a great difference between the control envisaged by the Federation and control which might be regarded as efficacious control.
The Federation itself asks that any control shall be exercised "at the highest possible level," and in another passage in the Report, if I recollect rightly, described the system which would be set up as "self-government by the owners within the framework of Government policy." The question is whether, if this problem is looked at in terms of controlling a monopoly, a necessary monopoly, if you like, in a great basic industry, that sort of arm's length control, or a sort of control which merely lays down the framework of public policy, is enough. Would it, for instance, buy off the various industries which, over the last two years, have been complaining of the prices that the steel industry has charged them. I have not overlooked what Lord Perry said yesterday. He made it quite clear that he would rather deal with the "toughs" of the steel industry whom he knew than with the "toughs" of

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Whitehall whom he did not know. I cannot express any opinion on that. It is a point of view.
Taking this matter a little further I am clear in my own mind that if the Government wish to exert anything that really amounts to control over the price policies of this industry, they cannot do it at arm's length. And with regard to arm's length control, I am doubtful, in spite of the competent civil servants whom the Government have at command, whether they could really set up a department or instrument to do it. I am inclined to think that anything in the nature of a genuine control of this intricate monopoly, with its relations with a multitude of other industries, set up by the Government would have to get inside the existing control exercised by the Federation. If you have to sit in the Federation not merely as a participating member, but, in the last resort, as a controlling member, is that really a thing that the steel industry would like? It seems to me that Government control inside an organization like the Federation might take decisions which ignored the fact that, in this industry as a whole, private entities, the shareholders, are taking the risk and have funds at stake. So I suggest that, following from the Government's objects, the decision to reject this suggestion for control from the Federation and go in for nationalization is a sensible decision, because the only degree of control that would do for them, would be something that would not really be compatible with the preservation of the private interests which are at present the base of the industry.
Now let us look at the question of carrying out the investment plan. To me it does seem that probably it is better that this should be carried out by the Government rather than the industry. The setting up now, at this time, of an economic and thoroughly efficient investment plan in the physical sense is of absolutely vital importance. It is of more importance even that we should rearrange the industry now, on the right lines, than that we should make the decisions about future Control of prices or other things. The industry has put out a plan. I am certain that it represents a very real effort in the common interest of the Economic Efficiency Committee and all other parts of the Federation to produce something which will be a good, first-rate,
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long-term plan of investment for the industry, which will see it through for a long time to come. I must say—and I think this is a fair observation—that the industry has not produced that plan without a certain amount of difficulty, and that the plan as it stands is inevitably bound in with the private structure of the industry.
In any industry like the steel industry, you are bound to take into account in your plan all the important interests. You have got to bring everybody in some degree into the tea party, whether it is Round Oak which has existed for 150 or 200 years and has now lost its local significance or whatever it may be. Subject to that, I have no hesitation in saying that from all the information I can collect it is a most impressive effort. Having said that, I would like to say that I think we should beware of the assumption running through so many speeches which have been made on both sides of this House—it has had some countenance by Government speakers—that the Government are satisfied with the plan as it sands and, taking it by and large, no very important beneficial alterations can be suggested to this plan. I think that is putting the thing, to use a sporting phrase, "a little over the odds." There are experts who can apply yardsticks to this plan and can, I think, light up very illuminating phases. I am not pretending that I in5 self am in any way expert, but I will substantiate that point by indicating the sort of places in this plan where its proposals do not seem quite perfect.
First of all, on the matter of location, we heard a great deal yesterday from the noble Lord, Lord Rennell—very justly—on the great achievement made in the production of steel, through the whole series of processes, from British iron ores, in Lincolnshire and Northamptonshire. Undoubtedly the plan provides for an increase of that sort of production in those regions. But experts differ and the plan is not regarded by everybody as perfect. There are some experts who regret that a larger increase of production from British iron ores has not been established. They think that the reason more has not been done in that section comes from the necessity of preserving some sort of balance between the interests concerned in the industry. Secondly, some people think that not enough has been done in

803
pursuing this theme of integration, that a little too much consideration has been given in retaining plant and setting up new plant for the cold-rolling and re-rolling sections of the industry. Thirdly, looking at the matter within the framework of the controversy between home ores and imported ores, there are critics who suggest that the maximum economies in transport, which might have been gained from a rearrangement of the siting of the industry, have not been fully achieved. I will not pursue this, but I would like to make the point, that the plan, although very good and possibly the best in the circumstances is not perfect and it is not absolutely certain that the Government will be so dazzled by its merits as to accept it as it stands.
The reasons why I suggest that the reconstruction of the industry is best in Government hands are these. I believe that some rearrangement of private—that is company—interests is inevitable, quite apart from the severance of advanced stages of fabrication from earlier stages. Is it not likely that some amount of regional grouping and amalgamation may be necessary? A good deal was said about that in the Sankey report. That is a long time ago; but the question still applies. If there are to be amalgamations or grouping in our industry is it not a sensible suggestion that any commercial risks arising from such rearrangement should fall to the Government? It was the apprehension of these risks which led coal-owners in the past to defer amalgamation.
Secondly, it was pointed out several times that this really quite large rearrangement of the physical pattern of the industry will have repercussions on employment, and so on. To put it another way, it is difficult to disentangle the commercial aspects from Government policy. I will illustrate my point briefly. A good many years ago I was invited to luncheon to meet Sir William Firth and his son, who was then at Cambridge. The young man was rather attracted by the Douglas Credit theories, and the idea was that I should give him a little sound monetary doctrine. There was Sir William Firth and there were two directors, including his works director. But did we get to the Douglas Credit theory? Not for fully fifty minutes! Firth was telling the works director, and the works director was telling Sir William, that their new strip mill
804
would be at Scunthorpe and not Ebbw Vale. Not over their dead bodies (one gathered) would it be at Ebbw Vale. I make no comment on the issue as between Ebbw Vale or Scunthorpe, but I quote the instance as showing that there may be considerable divergence, even on problems of siting, between private owners and the Government. Where such divergence arises, I suggest that it might be rather a good thing that the whole of the responsibility, both for disturbance and for commercial aspects, should rest with the Government.
And now a word on finance. I would agree very cheerfully that the question of whether the industry can raise the whole funds required is a matter of opinion. If anyone were to put it higher than a matter of opinion I should have to disagree with him. When the figure was £125,000,000 and not £168,000,000 I was temerarious enough to suggest that it might be difficult; but I might have been wrong. And although the figure is now £168,000,000 it may be that stock markets are more favourable. I think it is true, however, that if you have £168,000,000 to find, it is better, working it out under any reasonable system of accounting, as an overhead that it should be capital at 2½ per cent. rather than capital at 4½ per cent. I am inclined to argue, then, that possibly taking it all round, and weighing up the pros and cons—some of which may appear evident to noble members opposite, as well as to noble members on this side of the House—the Government decision, although it may be incorrect, is at any rate not unreasonable.
If we can assume that for the sake of argument, let us consider the objections to the decision—or rather to the situation which has been created by it. There are two objections. The first is the objection on the score of the partition of the industry, the severance of its parts, and secondly there is the objection that it creates a great deal of uncertainty, perhaps for a considerable time. The question of partition, of course, raises a difficult problem. I remember one of the Ministers talking about nationalization problems, and he said "Electricity—I can see it on the back of my hand." But he could not see quite how the iron and steel industry was to be dealt with. The plan which the Government have adopted is to take over certain of the processes and on the whole to leave fabrication free. It

805
may very well be that as a long run scheme this division between the earlier and the later processes—with certain marginal cases to be decided ambulando—may be the best scheme.
There are one or two points of method which might be taken into consideration. In the first place, it seems to me extremely important, in this initial stage, that the Government should take over concerns as units. The Government should begin by taking over the whole of a company organization, rather than aim at separating some of the assets and taking them over at valuation. I do not think there is any fundamental difficulty about that. They take over the going concern and they take over the existing management. There is no disturbance of the production or with trade relations. The goodwill goes with the name, and so on. That gives the Government time to decide what advantageous groupings may be necessary, what properties can be sold off. On such a plan, again, the compensation problem is simplified.
It may well be—I think the Government should take this into consideration—that the iron and Keel industry, in so far as it is to be taken over, is one that could be taken over on the basis of compensating shareholders on the value of their shares. It does not seem to me that the valuation which has been put on iron and steel shares in recent years represents arm extravagant price for the undertakings. On the other hand, compensation on that basis would represent a fair deal for the shareholders. So much for partition. If it were handled on those lines, I cannot believe these problems of severance would cause extreme difficulty or great disturbance while they were being decided.
With regard to uncertainty, the noble Viscount, Lord Greenwood, did suggest that there was a good deal of anxiety on the part of the people in the industry, but it seemed to be the persons engaged on the export selling side of the industry who felt that anxiety. This is one of the more indefinite parts of the Government plan. One might however say that at the moment, with regard to production and sale, there cannot be much uncertainty or much of a problem, because it is a sellers' market. For some time to come everything that can be made will be capable of being sold. There will not be much difficulty with regard to where to
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place it; so that the problem of the precise method of handling the export trade, which is vital, does not arise in the absolutely immediate future. I do not think that shareholders, judging by Stock Exchange movements, are much disturbed.
I myself think that there are two things really which are important. In this time of uncertainty, in this interim period, it is essential that the Government should proceed as rapidly as possible to settle the large details of the investment plan, to sanction them and to get them set on foot, and in that connexion no doubt it will be appropriate that the Government should—as the Chancellor promised—provide funds. In ha: connexion there is the point made by Lord Rennell with regard to the scrapping of plants. Concerns will be unwilling to scrap existing plant which has a value when they do not know what is going to happen financially to the company. That problem, I suggest, would be settled easily if the Government were to make some announcement on the basis of compensation, because if a concern were going to be taken over on the basis of compensating its shareholders, all the assets would go with that purchase, and there could then be no impediment to the scrapping of assets if that were necessary for pursuing a development scheme, the special finances of which the Government would then provide.
If there is uncertainty, I think on the whole it is an uncertainty that lies, and one can easily understand it, very much in the minds of the management of the industry. They wonder what is going to happen to the precise pattern of these great undertakings which they have been managing, and with that one can feel very great sympathy indeed. In the last year or two, I have been privileged to see a little of the steel industry, and it is certainly true that then is great vigour and enthusiasm on the part of the management in some of our iron and steel concerns They have got a number of very notable young men. But it is not only the young men. Many of the old men, the leaders of the industry, are very notable figures. It is very right that any anxiety they may feel about their future should be set at rest as soon as possible. I think there is one general proposition which must appeal to them, and that is

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this, that they are the people upon whom the Government must rely for the future conduct of this great industry.
Nothing but the greatest efficiency in management, backed by large and well-directed expenditure on research, will in the new age keep the steel industry efficient and enable it to produce at a desirable economic cost. The steel industry must produce at a low cost, not only to keep its export market and sell competitively 16,000,000 tons for export, but also to supply material at low prices for our fabricating industries to enable them in their turn to export goods which will keep our balance of payments where it should be, and buy us the imports which we must have. I do not myself believe that the management of the industry have anything to fear with regard to the future. I do not see why they should not have a career as full of interest and as full of hope and encouragement in working for the Government as for a large body of shareholders. There is nothing particularly inspiring about a shareholder, even when you see him, which is rather infrequently, at an annual general meeting. What I am trying to do is to look at this matter, as far as I can, from a detached view. Of course, your Lordships will see my particular trend and bias. It is impossible to cast that out. Nevertheless, I have tried to set out the considerations as fairly as I can.
I conclude with this thought, that whether we like it or not, the general pattern and structure of industry is changing under our noses. By the time the coal industry, the power industries, transport and one or two other things are nationalized, you will have in effect a new total set-up, because of the reaction of those things on other industries. The steel industry was an extraordinarily successful industry up to about 1890 or the end of the century. It was one of the wonders of the world, in past days, in the 70's or 80's, when Lady Bell described part of its setting in her book At the Works. In those days, to provide for increasing population and expanding prosperity, one could rely safely on the iron and steel industry and the textile industries of this country. Unfortunately, there have since been different times, when these great industries over long periods were the centres of unemployment. We can rearrange all that with
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new methods; and it may be that the great iron masters of the past will be succeeded by a generation of great managers acting in the public interest. Where large changes are necessary, a clean sweep of much that is familiar in the old pattern of things may be the best guarantee of the future. It is in that spirit that we should look at this issue.
4.59 p.m.
VISCOUNT RIDLEY: My Lords, I would say that I have some personal connexion with the steel industry, perhaps not so much as some of the others who have spoken, but which gives me some knowledge as to how it is conducted. During the war I have been a civil servant, and in that connexion have also, in a subordinate position, learned something of the working of the machine. I do not think the steel industry can be treated as a separate entity when considering the method in which the whole of the industry of this country is growing, not perhaps back into its pre-war shape, but out of its war-time shape, into the form in which it is rearranging itself for the future. I think that one has to think very carefully as to what is the real implication of the changing structure of the industry. Up to now, and indeed at the present time, the general control of the main industries, coal, steel, shipping, ship-building, engineering, transport and so on, has not in fact existed. There have been a series of groups, larger or smaller, in different trades. There have been a series of trade associations. There have been arrangements between one industry and another, but there has not been any centralized controlling body which has had decisive influence over the trend of the economy of the country as a whole.
It seems now that we are tending towards some such centralization under the nationalization proposals of one sort and another which are in the mind of the Government, and I think it is as part of that pattern that we should consider the present proposals of the steel trade itself. We have always had in this country a continual change in our customs, our methods of running industry, our methods of looking after our local affairs; and it has been, I think, rather a characteristic of ours that these institutions have grown and developed, changed and adapted themselves to whatever were the circumstances of the time. So has the make-up

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of the firms within industry, these firms historically having grown from small beginnings, through large extensions, amalgamations and so on. I believe it is very important to preserve, so far as possible, that type of life and flexibility and adaptability within industry as a whole, and I consider that a concentration of power and influence over our economic life in any one centre is detrimental to such freedom of growth and freedom of life within the economy of the country.
Now I am not saying that for political reasons. I would say that any form of a corporate State would be equally dangerous and equally bad. I am not now saying that there is any suggestion in the minds of the Government, when making these proposals, which leads them to wish to implement such a centralized control for doctrinaire reasons. I cannot say whether it is so or not. But whether or not that is the reason, it is quite clear that the policy of the present Government in general in these directions is towards that form of over-all direction and centralization of control and responsibility. I believe that to be a dangerous thing and I consider it is more dangerous than the Government may now think.
I find it difficult to understand the reasons which impel people of responsibility to take that view, unless those reasons lie in what was said yesterday by the noble Lord, Lord Lindsay, who I thought was extremely helpful, when he referred to the importance of an investment policy for the purpose of avoiding slumps and for preventing unemployment whenever possible. There I go a long way with him in seeing the necessity for a capital investment policy in order to help in levelling out the slumps. But I would not go as far as to assume that in order to do that it is necessary for the Government either to own, in a strict sense, or to control, in a narrow sense, any of the industries on whose activities recovery in difficult times might depend.
I remember very well the discussions which mere held under the auspices of Nuffield College and which were referred to by the noble Lord, Lord Lindsay, and I thought that running through that series of papers was the too quick assumption of that fact which seems to me to be more than doubtful. Granted that it is necessary and, indeed, I think we should all say, inevitable and, even more than that, desirable, that the country as a
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whole should have a general direction and guidance over the more important aspects of industry, an over-all control can be worked out on a variety of different lines. I would give you one example. Not so long before the war, I think it was in 1935 when there was a great deal of concern about unemployment and what were then known as the Special Areas, a special loan was arranged for financing railway equipment, maintenance and modernization works. This loan was made at a special rate, and one condition was that as much as possible of it was to be spent in the Special Areas. That was to a certain extent successful, until the war came and interfered with it. I am not saying that that is the ideal or the only pattern on which such an operation could be conducted, but it does at least show that there are opportunities of all kinds where Government influence can be exercised very considerably on the general rate of expenditure and investment in capital goods. That I take to be the main object of what is behind this general drift in policy. I think that careful study would show that there is an alternative solution along those lines.
As to whether there was a mandate at the last Election for this particular piece of Government policy, I would not say. The last General Election showed a general desire among the people of this country for a much greater general control by the Government over industry, but I should hardly think the time during which the Election campaign was conducted was sufficient to explain in very great detail the implications of it to any particular industry. Taking the steel industry as one of a whole range of industries which is important as affecting and controlling our national life, one has to consider it not only as a matter of general policy but also in relation to the industry itself. There are the very great difficulties of the separation of the units into component parts; there is the very great difficulty of delay in carrying out the reconstruction plans, which are clearly of very great importance that, I think, is undeniable. As to the monopoly nature of steel production in this country, one has to be careful in stating the reasons for objecting to a monopoly. I suppose the main reason would be that there is a danger that supplies would be refused to any customer, or that the price would be raised unduly or unfairly, or that there

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is no competition of any kind in order to keep up the quality or the performance of the industry.
There is in the steel industry, of course, a definite system for fixing prices. There was, up to the war, an equally definite arrangement, through the Import Duties Advisory Committee, for certifying whether those prices were right or not, which removes the first part, at least, of the danger. One could hardly say that there is no competition at all in the industry. There is the competition of quality. There is the competition of one firm being proud of its achievements, proud of its name. I hardly dare to say so, but I thought when the noble Viscount, Lord Greenwood, was speaking, with all due respect to him, that there were more firms on the north-east coast than Dorman Long. There is the competition which consists of the management of the firm feeling that they have done their job adequately, that they have run the works efficiently and been able to show a balance sheet without any serious defects.
So it is not quite such a monopoly as one might think. One of the difficulties from which the industry sometimes suffers is comparison with the steel industries of other countries. It is quite impossible to compare it with the industry in many parts of the Continent before the war, where the wages paid and the costs of coal were far lower than in this country. It is quite impossible to compare it with the steel industry in America, where the units are of immeasurably larger size and where distances are by no means comparable with those here. Indeed, if you analysed the production of heavy steel products in America, you will find that in three large works they produced the whole amount we produced here. In view of the history and the background of the necessary location of works in this country, I think it is impossible for us to think of going so far as that. That means that the structure of the industry in the two countries cannot actually be compared.
As to exports, I think we shall very soon reach the time when the cost of the product will enter into the question. I would not say that a Government-owned concern could not make and sell steel, or indeed any other product, efficiently and at a competitive rate, but I fear very
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much that it would never be able to achieve the degree of centralization necessary to allow freedom to managers of plants to conduct their businesses in the most economical way. That is not a criticism of the principle of ownership by the nation of steel-making companies; it is a criticism of the method which, one may fear, may be applied to the management once the industry is under public ownership. The control exercised during the war by the Government department was very complete, very thorough and very rigid, but it was not always so efficient as one hoped it would be. I could quote many examples, greater or less. I know of a modern up-to-date re-rolling plant which was not able to keep going on two shifts for more than a comparatively few months. That was the Government's plan at that time. That, however, is only one example.
More important still, I think, is the very great difficulty which derives from the fact that iron and steel production has to be situated at a certain point. The important factors in deciding such a question are, as is well known, costs of transportation of ore and coal. That results in the necessity for works producing pig-iron or steel, or integrated works producing whole ranges of products, to be located at those places at which it is economical that they should be located. However, prices may, for extraneous reasons, change from time to time, and conditions may be such that a plant in a certain area can no longer hold its own. That has resulted in the deplorable condition in which certain areas have been left due to the movement of heavy industries. In the past there was no solution to the problem of what should happen to the people who were left behind like that, and that has led, as has been said often enough—and quite rightly—to the great fear of unemployment, which, as one noble Lord mentioned yesterday, was one of the reasons why many people supported this Government and voted them into power. That is a very natural fear, and it is most important that people should not suffer from it.
There may be occasions, when, in the interests of the proper functioning of the industry, it may be necessary to abandon the site of one plant, to build another plant somewhere else and to take all the necessary consequential steps. Who is to

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take the responsibility for such a decision? I have heard it said that one of the arguments for the national ownership of the industry is that the nation alone can do that. There are also arguments against it. I would be the last to say that the industry should abandon a site and leave to their fate the people who had worked in it, but I do say that it is going to be very difficult for any Government authority to take the whole responsibility for such a movement. I can imagine very well that in some circumstances works could be kept going which are no longer economical, in order not to run the risk of having to move people. That would result in the cost of steel for all home industries and for export being raised. In such a case one would like to see the decision taken that it was better to keep the works running where they were and not to debit the whole of the cost to steel-making but to debit it to social services of one sort or another. I do not see that that can be possible with one employing authority. On the other hand, it might well be that in some particular case it would be better to move the works and take the steps necessary to give alternative employment, or to move people and to make whatever other adjustments seemed to be necessary.
We are now reaching the stage where the Government, through the Distribution of Industries Act, are taking steps—and quite rightly I think—in respect to movements of industry and population. I believe myself it will be far easier for the Government to be able to deal with such a situation in partnership with industry rather than in isolation. In such a case, if it were to happen, I would prefer to see an agreement between the Government and the firm or plant concerned that the plant should either be moved or not moved and consequential adjustments made on another account. I think that is of the greatest importance because it underlies a great deal of the criticism which has been made of some of the steel works of the past and which has been used as one of the main reasons for the objection by the Government to the proposal that the Federation should implement their plan under a modified system of control. I feel it will be one of the great dangers of the future that unified Government responsibility for that side of it may be more of a disadvantage than an advantage.
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That brings me to the objections which have been made to toe Federation plan. The last point which I mentioned is, I think, one of the most important. Then there is the question of finance, which has been discussed by more than one speaker in your Lordships' House. I do not think there is any reason to suspect that the industry as a whole cannot obtain the finance it requires. I would remind your Lordships of the existence of the Finance of Industry Corporation, which was founded for the very purpose of financing the larger undertakings such as these.
I think that the proposals for the nationalization of this large part of the steel industry are clearly related to a plan for the economic life of the country. I fear that it is being over-planned. We have often been told, and I think it is a fair criticism, that in the past capitalists and industry were too free to do as they wished, and were inclined to run after the short-term advantage of profits. That may be so. I think possibly it is a criticism which in some cases could in the past be accepted. I believe that there is quite a new spirit amongst the employers and the management of industry. They are, since the war, much more receptive to the idea of the industry being merged in general with the Government machinery, and I think there is the opportunity now to take advantage of that better spirit and to try and work industry on a better cooperative basis.
Speaking not only for the steel industry but for all the important undertakings of the country, I feel that disruption will result inevitably from nationalization, and it should not be tried at a moment when we are so vitally concerned with reconstructing ourselves after the war. It is too important to make any mistake about it. It is not as if the whole country is in a desperate state of disorganization, inefficiency and the fear of unemployment. It is, I think at the moment, an unwarranted risk to take. I think also that the steel industry is not, by its nature and by its obligation, suited to be treated in this way. I do not make that as an argument against the planning of the economy of the country, but I would submit that the present proposal is planning from the wrong end, and planning in too great detail, planning in which there is a danger of tying everything into

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a rigid knot of control which may land us in incalculable difficulties in the future.
5.33 p.m.
LORD CHERWELL: My Lords, though the iron and steel industry does not form a very great part of our industrial efforts, it provides the raw material for so many trades that anything that happens to it is of overwhelming importance to the country. For this reason, if for no other, I think the House will agree with the timeliness of the debate initiated by the noble Earl, Lord Dudley. We have heard a number of most interesting and able speeches. I was naturally particularly interested in the speech of the noble Lord, Lord Winster, on behalf of the Government. I cannot, of course, match him in rhetoric, and I will not endeavour to enter into the subject of war-drums or aboriginals to which he referred. I had hoped to say something about an interesting statement about dinosaurs which he made yesterday. But I will refrain since it seems unfortunately to have escaped the attention of the official reporter.
I was not entirely satisfied by the noble Lord's reason for refusing to publish the report on the steel industry. Of course I know it is always said by the Government spokesmen that it is not the practice to publish these reports. After all the Government were ready enough in the case of the evacuation of Egypt to take credit for the support of the Chiefs of Staff. Here, having set aside the recommendation of the Expert Committee it would have been, I think, of interest to the public to know why, and on what grounds, and to know exactly what the Expert Committee had recommended. I do not think it is necessary on this occasion for me to enter into a question of whether the Government have a mandate for the nationalization of iron and steel or whether even the electors if they had a chance to express their views would support them. Nations, like individuals, must of course do what they like. If a man prefers an osteopath or a faith healer, or even a witch-doctor to a regular medical man, then he must be allowed to submit himself to the ministrations of his chosen healer, even though the result may be the familiar "the operation was successful but the patient died." It is our duty to point out the risk he runs
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and that is all. It is his business then to take those risks. It is exactly the same with nations.
The British people have chosen a certain group of well-meaning gentlemen to conduct their affairs. In what terms one chooses to describe their choice, of course, is a matter of taste. I myself think that faith-healer would be the most apt description, but I imagine others might take a somewhat harsher view. Be that as it may we can only leave the country to try the experiments which they presumably expected this group to try. They may be, and I think are very dangerous, and it is our duty to make this clear. I have little hope that the Government will be deterred, but we must trust that the country will survive this sort of "monkey gland" treatment and not be so completely emasculated that it cannot be restored to full health if and when it sees the error of its ways and decides to revert to the more orthodox practitioner.
I therefore propose to examine the Government's iron and steel proposals purely as a business proposition. The Lord President has repeatedly stated that the question of whether or not various industries were to be nationalized must be considered on its merits in each case, and he has agreed that it is the duty of those in favour of nationalization to make out their case.
LORD PAKENHAM: And those against.
LORD CHERWELL: And those against. But when it is a matter of taking definite steps the onus is on the side which wishes to make the change. As far as I can see from this discussion and yesterday's discussion, and reading the debates which have enlivened another place, the Government case may be divided into four main parts. I trust the House will bear with me if I consider these one by one. In the first place noble Lords opposite seem to start from the assumption that the steel industry in this country is old-fashioned and out-moded compared, say, with America, and that private enterprise has failed to set its house in order. Now is this true? The noble Lord opposite said that the industry was in a parlous state. Well I do not quite know why he said that unless it be that he thinks that being in the hands of the Minister for Power and Fuel—
A NOBLE LORD: Minister of Fuel and Power.
LORD CHERWELL: I prefer to call it Power and Fuel, because it seems to me to have plenty of power and precious little fuel. Whether that is the reason he says the steel industry is in a parlous state I do not know.
THE MINISTER OF CIVIL AVIATION (LORD WINSTER): I said it bad a parlous future to face.
LORD CHERWELL: Well, he knows what to expect from his colleague. But when he went on to say that facts and figures incontestably assert a pre-war decline of efficiency, then I was really somewhat surprised. Some Ministers, I know, are not trusted with figures by their officials. I believe it was said of one: "He uses figures as a drunkard uses lampposts, not to light him the way but to conceal his own instability." I am quite sure the noble Lord is not in that class. I was therefore somewhat surprised that he did not produce the figures. Surely they should be produced early in the argument so that they can be tested in debate. When the noble and gallant Lord went on to say that only State control succeeded in converting industry into a war-winning factor, really I began to wonder whether I could not discern some trace of a noble and gallant tongue in a noble and gallant cheek.
Let us examine the facts. How modern ought the machinery in a properly-run industry to be? Foolish people might think the answer obvious. "Of course" they might say, "it ought to be entirely up to date." This is a fallacy and it seems to be somewhat ill-understood outside this House. I know that it is understood here but perhaps I may put it on record why it is a fallacy. To build a steel plant costs about £30 per ton of annual output capacity. If the plant were to be renewed every sixty years this would add about 10s per ton to the price of steel. If on the other hand the plant were to be renewed every six years, this would add £5 per ton to the price of steel. Obviously, sixty years would be far too long to wait before modernizing. Improve-merits in the efficiency of production even in thirty years would clearly almost outweigh the 10s. a ton saved by making do with the old plant. But, conversely, six years would almost always be too soon
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to scrap expensive machinery. For invention is most unlikely in six years to revolutionize production to the extent of saving £5 per ton of steel turned out.
Clearly there is an optimum period over which the plant should run, and it is one of the most difficult and, important functions of a board of directors to determine in each case what it is. Probably in steel works it may on the average be in the neighbourhood of twenty years. Hence in a well-regulated industry we should expect to find a whole series of steel plants, and machinery in those plants, ranging from the very old to the very young, just as we do in living populations. And just as in an expanding population the average age tends to be younger than in a stationary population, so in a rapidly expanding industry the plant will inevitably be more modern and up to date than in a stationary industry. It is for this reason that the steel industry in America may well appear to be more up-to-date. That is not to say that the steel industry in America is better regulated than ours. Reasonable phasing in renewal of plant and so on in this country has, of course, been rendered particularly difficult by the fact that twice within the last thirty years the steel industry has been required to go all out for periods of five years at a time in order to make munitions, with no possibility of properly-planned renovation for peace-time purposes or new construction, and that half-way between the two wars British industry, in common with the rest of the world, was faced with the greatest international slump in history.
Before passing on I would like to sound a note of warning against the error which seemed to creep into many arguments in another place that the measure of efficiency is the output per man employed in the industry. That not the true test. What really counts, far as the nation is concerned, is the total effort required per unit of output. Obviously, this includes the effort required to build the machines which are used in manufacture, spread over their useful lives, as well as the effort of the people working them. I submit that there is considerable danger of a set of Government servants, unhampered by any economic restrictions, overdoing mechanization of an industry entrusted to them. They might be able to boast that they were turning out more of the final product per man than was possible under private enterprise. But

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they would only be doing this by digging into the taxpayers' pockets and employing a lot of men not shown on their own lists to produce the machinery which had enabled this apparent improvement to be made.
So much for the reasons why the steel industry might well, to the ignorant eye, have appeared old-fashioned and inefficient. Now what is the evidence that it actually was inefficient? I have seen all sorts of weird figures quoted which on examination proved to be entirely inaccurate. One such figure which was quoted in another place was that the output per head in America was four times as great as here. I believe it is commonly attributed to the Economic Journal of April, 1943. If anyone cares to look at the original paper he will see that this applied only to a small collection of finished articles, such as cutlery and iron stoves and so on, and not to the steel industry at all. For smelting and rolling of iron and steel, the main activity of the steel industry, the ratio given is only 1.0 to 1.68. And even this is exaggerated, since it compares output in the year 1935 in England with the year 1937 in America. If allowance is made for this, the ratio is something nearer 1.0 to 1.3 or 1.4.
Now it may be said that even this ratio shows that the American steel makers are one third more efficient than we are. But anybody anxious to discover the facts, and not merely to make a case, will find that this difference is very much diminished if we take into account the fact that American ore is very nearly twice as rich in iron as British ore, and that they have more concentrated production even at the expense of greater transport costs. I am not claiming that our steel works were, or are, exactly as efficient as the American works, which have not been upset to anything like the same extent by two wars, and which owing to the rapid expansion of the American population and output are no doubt, on the average, newer in design than the British plants. But to make out that our men are one quarter as efficient is a simple untruth and a slanderous untruth at that. Much the same applies to the other argument that despite the higher wages paid in America, prices in England before the war exceeded the American prices. This is simply not so. I do not blame the ordinary man for an error in this matter,
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since the price lists admittedly are complicated and quite apt to mislead. For one thing, the American price lists quote for delivery at the works, whereas ours quote for delivery to the consumer. This makes a difference of something like £1 a ton.
On top of this there is a convention, the historical origin of which I need not examine to-day, by which all consumers in Britain have a rebate of 15s. a ton, which does not apply in America. Making due allowance for these differences, it can be shown that the British prices for ordinary heavy steel products were for the main items at least 10s. a ton cheaper than American prices. As wages account for something like 20 per cent. of the cost of finished steel, say £2 a ton, the Americans, even if their prime costs were exactly equal to ours, could pay appreciably higher wages than in Britain and yet deliver at the prices mentioned in their catalogues. And all this, of course, takes no account of the very relevant fact that their ore is richer, their coke consumption, costing about 25 per cent. of the finished steel, therefore less, quite apart from its lower price, and their handling and ancillary charges correspondingly reduced. I hope that this disposes of the charge that our steel industry before the war was notably less efficient than the American.
The second argument for nationalization, which is to some extent already weakened by what I have said, is that the industry is incapable by itself of renovating and modernizing its steel plants. Admittedly, and naturally, after six years of war there is a considerable back-lag of renovation to be done. But what evidence is there that the industry is incapable of doing it? On the Government's own admission the comprehensive plan produced by the industry is acceptable. Why should the industry not be allowed to carry the plan out? I have heard only two reasons put forward. The first is that the Government will have to find the money, and must therefore take control. I think everybody to-day admits that that is completely false. The industry is prepared to find the money itself, if it is not inhibited by the Government and if it is given reasonable security of tenure.
It is argued in the second place that the Government could borrow the money more cheaply than the industry. That is true. But why is it true? Simply because any loss that may arise will be

821
borne by the Treasury. Left to himself the private investor would demand one per cent. extra for taking the risk. The Government simply shift the onus of risk on to the taxpayer's shoulder whether he likes it or not. And in any case how trivial is the effect of cheaper borrowing on the price of a ton of steel. One per cent. on the price of borrowing €168,000,000 would make less than one per cent. difference in the cost of the steel. Is it really worth while disturbing the whole of our economy for this? The pound sterling depreciates more than that every couple of months under the present régime.
I think that is enough of history. If I may use a cliché which will appeal to noble Lords: "Let us face the future." If our steel works are reasonably efficient—and I maintain that they are in all the circumstances—and if they have produced a suitable plan for bringing themselves up to date and can find the money for this purpose, are there any other arguments for nationalizing the whole industry? The only sensible one I have heard is that on the one hand it is a monopoly for making vast profits, for overcharging the consumer, and on the other that it is improper to leave to men actuated by the desire merely for economic efficiency the livelihood of great numbers of workers who may be left stranded in derelict villages when industry is transferred to other parts of the country. These arguments are broader than the others, but even if the premises were accurate the conclusions are not logical. They are an argument for Government control but not for Government ownership. Now so far as this question of monopoly is concerned: If firms in an industry all act individually it is said that the industry is inefficient and untidy and it is pressed to rationalize itself. The moment that is done then the industry is accused of being a monopoly. We are told that there is no longer competition, that private enterprise has failed, that the public are being exploited, that enormous profits are being made by enforcing abnormal prices. That is all very well on a soap-box, but I hope it will not go down in this House.
The essence of private enterprise is that the motive of self-interest, if no other, should be harnessed to the cause of cheap, abundant, and efficient production. In a rationalized industry like the steel industry this happens to a pre-eminent degree.
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Prices it is true are uniform; they are fixed by Government agency. But that does not detract from the impulse towards efficiency. On the contrary the more efficient a firm is the lower the cost at which it can produce its goods, and the higher its profit. Therefore every firm strives after maximum efficiency and sets a standard which enables the Control to ensure that inefficient firms are not dragging the whole price structure upwards. Then again, there is the question of quality. A firm noted for the high quality of its wares is more likely to secure contracts than a bad firm. The motive of enlightened self-interest could not be better directed towards securing cheap, high-grade output.
That the steel industry is charging undue prices is equally disproved by the facts. Prices of manufactured articles, averaged over our whole industry, have increased between 1938 and to-day by about 70 per cent. Coal has practically doubled. The price of iron and steel has gone up by less than 50 per cent. What nonsense to say that the industry has been overcharging the consumer. As to vast profits, I think that that was adequately dealt with by the Lord President in his speech in another place. He rattled out many figures showing the enormous fluctuations in the profits of the industry between 1914 and the present day. The figures were quite correct. But they do not prove what he meant them to prove. They prove that the steel industry, dependent as it very largely is upon exports, had suffered from enormous fluctuations in demand. Nobody can say that this is the fault of the industry. They do not let their furnaces and rolling mills lie idle out of sloth or spite. They would be only too pleased to sell. If demand falls off it would be foolish, although perhaps on the face of it not altogether illogical, to say that it is the fault of the user of steel. After all he states his requirements. But it is absolutely absurd to say that it is the fault of the producer.
The Lord President says that the question is, are we to have an iron and steel industry which will go up and down in this manner? It cannot be clone. It must not be done. It reminds me of a chauffeur I had once, who said, when a rock fell from a cliff on to the road in Italy, "That sort of thing didn't ought to be allowed." Of course we all want to even out, and if

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possible, abolish trade slumps and booms. That is a vastly greater question, probably needing international action. It has nothing to do with the steel industry and its nationalization. What about the pretended huge dividends. In the ten years between 1925 and 1935 they averaged 2·1 per cent. Between 1935 and 1945 they averaged 7·7 per cent, or an average over 20 years of 4·9 per cent. Surely nobody would claim that this is excessive. Indeed it is remarkable that for years people were content to develop the vast steel industry which we admire for such a small return. Thus the whole argument that the Iron and Steel Federation is a great lazy octopus, sucking the life-blood of the consumer, goes by the board. It consists of a number of firms, the price of whose products is fixed by Government agency, yielding on the whole fairly small dividends on the actual value of the plants which have been created. And since its profits depend upon the difference between the cost of production and the price fixed by the Government and its prospects of a sale on the quality of its wares, each firm has every incentive to efficient production.
Let us turn to the argument that we cannot leave a body of commercial men to settle the future of thousands of employees on the grounds of efficiency and economic production alone. That is a much more reasonable and much more respectable argument, although it conflicts somewhat with the other argument based on the view that the Federation is not sufficiently concerned about efficiency. It is a very real and sensible point—as a point. As a fact it is, in my view, entirely unreal. We were told, I believe, that from 30 per cent. to 40 per cent. of our plants were to be scrapped under the plan and threatened with social upheavals. But it ought to have been pointed out that less than one-third of these scrappings meant a transfer of workers. If the word "renewals" had been used it would have been much less misleading. So far as I can make out no case has occurred, or at any rate very few in recent times, where the Federation has shut down a plant or transferred it, or built a new plant, otherwise than with the goodwill of the Government. On more than one occasion it appears that plants have been erected or maintained in uneconomic areas simply in order to prevent the ruin and misery which we all deplore
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when a large area is stricken with unemployment.
If it is held that the power of giving priorities and allocating raw material, not to speak of moral suasion, is insufficient, no doubt ways and means could be devised by which the influence of the Government in these matters could be made paramount. It is merely a matter of strengthening Government control. There is no need to nationalize the industry. Much play has been made of the slogan that you cannot divorce control from public ownership. Why not? The headmaster controls the school, but does not own it. Mr. Speaker in another place controls the assembly without owning it. The Government controls my petrol without owning it. You cannot divorce people who are not married. The Federation and control never have been married, although they are getting on very well, and have been for years.
A NOBLE LORD: Living in sin.
LORD CHERWELL: Exactly. Is it because noble Lords opposite feel a moral affront that these two are living in sin that they want to force them to marry? I really think that they might get over that natural inhibition, which is quite proper in individual cases, but which does not really apply to the great industries. The noble Lord, the Master of Balliol said that this was the only cure for unemployment. Well, admittedly, timing of investment is very important. Surely that is what the Control of Investment Bill was meant to regulate? If it is not enough, make it more stringent. It really is totally unconnected with whether you nationalize the steel industry. Anyway, the whole of the steel investment may be £30,000,000 a year. What does it amount to? The equivalent of 3d. on the Income Tax. Alter your Income Tax to 6d. and you do twice as much as by controlling the steel investments.
Are there any other reasons in favour of nationalization? I cannot discover any in the debates in another place which ought to be taken seriously. There were certain rather woolly objections raised because it was claimed that the Iron and Steel Federation had entered into cartel arrangements with certain foreign countries. I know, of course, that the word "cartel" is a red rag to some people who do not quite know what it

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means. The arrangements in question were made with full Government knowledge and approval.
LORD STRABOLGI: Which Government?
LORD CHERWELL: The Government of the day.
VISCOUNT ELIBANK: Any sensible Government would approve them.
LORD CHERWELL: The reason they were made is that they gave this country a fair share in the world's markets at economic prices. Surely it is better that the steel-producing countries should agree to a fair distribution of markets rather than cut one another's throats for the benefit of the agricultural countries? In any event, it should be noted that the Lord President refused to say, even under pressure, whether he intended to enter into similar arrangements when the Government took over. The Chancellor made a certain amount of play with the success of the so-called nationalized South African steel industry. Protected by the huge freight charges between the ports and the Transvaal, this success is scarcely surprising. But in any event it is irrelevant. The South African steel industry is not nationalized in the Socialist sense at all. It is run just like any private company. All that has happened is that the Government subscribed for a majority of the shares.
LORD STRABOLGI: Ninety per cent.
LORD CHERWELL: If that were all the Government in this country proposed—though of course I sneak only for myself—my fears would be somewhat relieved. Then there was vague talk of social justice. I always suspect arguments which depend upon qualifying an abstract noun by an abstract adjective. Christian Science is very remote from science pure and simple. I suspect social justice may be equally remote from plain justice. Why not stick to the simple noun? Or might that perhaps be held to confer some rights upon the creator of a great concern who is to be ousted under the new dispensation? The Lord President used an even vaguer phrase. He said it would make a cleaner, sweeter job. A sweet job! Well, really it shows either an engaging innocence or a degree of cynical irony that I should never have
826
attributed to the Lord President to use an ambiguous phrase of that nature.
There has never been any considerable industrial trouble in the industry that I know of. There has not been any great demand for nationalization amongst the men. I have not heard that steel consumers want it. Indeed, the motor industry views it with horror. In spite of what has been said, it is very difficult for roe to resist the impression that this decision has been engineered—I hope that is the right word—in haste for some political reason. I have given as fair a resume as I could of the arguments which appear to have been used in favour of nationalizing the iron and steel industry. They seem to be founded either upon faulty premises or upon a faulty process of logic. I will recapitulate some of the disadvantages. The main disadvantages, of course, is that whatever might be tip long-term benefits, about which opinions may and do differ, it is perfectly obvious that the whole industry will be thrown into confusion in the transitional period, and production is bound to suffer for several years to come. Everybody agrees, from the Prime Minister down—perhaps I should say up—to the Lord-in-Waiting, who is going to do us the honour of replying and who will, I am sure, do it with his usual frankness and charm—for the Government this evening—
LORD PAKENHAM: Thank you.
LORD CHERWELL: —that far and away the most important thing in our economic affairs to-day is to increase output, whether for home consumption or for export. We all know how many industries depend upon steel in various forms for their raw materials. How can anybody choose this moment to throw the whole vast, complicated machinery of production out of gear merely for the sake of changing over from private ownership to nationalization? It is difficult really to find a word for such action for which no countervailing advantage has been proved.
The second grave disadvantage is the impossibility of drawing a reasonable line at which nationalization is to begin or end. The tendency, as we all know, for a generation or mere, has been towards integrated plans starting with the ore and ending with the finished product. But some plants start with pig-iron, others

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with billets, others with rolled steel or wire. If the integrated plants starting with ore or perhaps with pig-iron are to be taken over and the others left, we shall have nationalized plants next door to private concerns turning out exactly the same finished products. It is not difficult to see what friction and trouble this is likely to lead to. If energetic, active people should be in charge of the nationalized plant they will make sure that they get prompt delivery of the best raw material and the latest most efficient machinery and tools for working it up, paid for out of the taxpayers' money, so as to defeat the private concern which will be subjected to every form of administrative discrimination in order to prevent it from competing with the Government-owned factory.
If, on the other hand, the management of the Government factory is slack and inefficient, great efforts will be made, no doubt, in all sorts of ways, to prevent it being undercut by the private concern next door. An intolerable situation will arise in which the taxpayers' money, the Government's control of allocation and priority for materials, or even labour, will be thrown into the scale against the skill, drive and initiative of the private manufacturer. It may be that this is what some people want and that they hope to drive the private manufacturer out of business in this way and force him to accept nationalization. If so, it is not a very pretty way of setting about it.
The third disadvantage is the complete shipwreck of any hope of long-term planning. After six years of war many steel works are in need of reconstruction and re-equipment. The industry has put forward a comprehensive plan for doing this which the Government tacitly admit they cannot better. But how can any managing director know whether to go ahead or not with such plans? He cannot tell whether the machinery to be renewed will be taken over or not. The directors' duty to their shareholders is to get them the best terms of compensation they can. Will it be better to renew a rolling mill, or press, or whatever it may be, at great expense, and hope for increased compensation, or to leave it running and make hay while the sun shines? A host of such problems are bound to arise, very difficult for any
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conscientious director to solve. Instead of being guided by the comparatively simple, straightforward, long-term plans for efficient and abundant production, he will have to spend all his time pondering over insoluble short-term questions, semi-technical and semi-political. How can anyone hope to build up a healthy industry or bountiful production on these lines?
The last and most serious long-term objection to nationalization is, of course, the stifling effect which it is bound to have upon enterprise and initiative. All the great steel concerns, whose reputation has been an asset to this country throughout the world, have been built up from small beginnings, by men or small groups of men making quick decisions, taking risks, driving ahead, ploughing back a large proportion of their earnings into their factories, seeking to improve their products in every way possible and to expand their sales in every quarter of the globe. It may well be they were lured on by the hope of making a great fortune to hand on to their children. I do not accept the view that it is wicked or criminal to expect a material reward for skill and initiative, for postponing the enjoyment of one's earnings and for risking what one has saved. But whether it be wicked or not, there is no question that most great enterprises in the world have been built up in this way and for this reason. How can we expect people working on a fixed salary to emulate these men? Either they play for safety and take no risks, for what will they gain by it?
LORD CHORLEY: Have you never heard of the Dnieper Dam?
LORD CHERWELL: Certainly I have, but I do not see what it has to do with this. It was a Communist project in a Communist State. I understood that Communists were not to be affiliated to the Labour Party. If they change their minds at Bournemouth, we shall have to reconsider the matter.
Alternatively, people gamble wildly, knowing that if anything goes wrong the taxpayer will foot the bill. There is no self-regulating governor, as there is in private enterprise, to weed out the gamblers or select the men of judgment who know just what risks to take. Nor is there any incentive to special effort or enterprise. Lamentable though it may

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be in nine people out of ten the hope of reward is much more apt to stimulate to effort than a sense of duty. Despite the noble Lord, Lord Lindsay, I fear that the dull, gloomy, bearded Victorian ghost of Karl Marx seems not to have been laid. Indeed it seems to have transferred its activities from the Reading Room of the British Museum to the corridors of Whitehall. All Marx's outworn doctrines still seem to haunt the minds of the Government. Almost every forecast he made proved wrong. Yet his crude, naïve remedy is taken for gospel. The noble Lord who is to reply, recently, when comparing various economic theories, very wittily said that Marx's view was that God and the Devil took it in turns but that the Devil was top at the moment. The Government's proposals in the economic sphere seem directed to prove that this is true. I can only hope that balmy Bournemouth, to which I believe Ministers are about to repair, may witness not only the triumph for which they have worked so hard and sacrificed so much, but also some Pentecostal revelation which will convince them of the error of their ways.
6.15 p.m.
LORD PAKENHAM: My Lords, we have certainly had a memorable debate. I am tempted to describe it as a very influential debate because the speakers were men of such great influence and their arguments were evidently intended to influence their hearers, but I cannot conclude that up to the moment any member of your Lordships' House has yet shown any signs of being influenced by any proposition that has been submitted to the House, either yesterday or to-day. May that be changed when I have finished replying and when the noble Earl himself says a few words at the end. The case for the Government has been so clearly and so firmly put by my noble friend Lord Winster that it is unnecessary for me to say a great many things that otherwise I might have felt it right to say, but I shall attempt in these concluding remarks, besides picking up one or two individual points that seem to require special reply, to try and bring our minds closer together, to see how far we can agree and where our real differences lie. That is a worth-while attempt.
I would just say, before coming to that, how heartily we congratulate the Opposition on selecting the noble Lord, Lord
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Cherwell, to wind up the debate for the Opposition, for the first time since I have been a member of your Lordships' House, and I dare say for the first time in his experience. I know that no one will take offence if I say it is rather a desperate remedy. I cannot help recalling a story on which generations of Oxford undergraduates were nurtured, of the very gallant feat performed by the noble Lord, Lord Cherwell, in the last war. I understand that at that time it was difficult to know how to get out of a spinning nose dive. The noble Lord came along with his mathematical genius and told them that he could do it quite easily; that he could work it out by mathematics. "Have you ever flown?" they asked him. "No, I have never flown an aeroplane myself," he replied, "but if you just give me a lesson for a few minutes and let me go up in a plane, I will put it in a spinning nose dive and extract it in due course, by mathematics." He went up, in his inimitable manner, and he extracted the plane from a spinning nose dive. To him, all honour. He has saved the lives of many men since. To-night I feel he has been called upon in rather the same way to save his side out of a spinning nose dive, and while I see no reason to suppose that his aeroplane will avoid the inevitable crash, I earnestly hope, in view of my old friendship with him, which has never been broken and which. I hope will not be broken to-night, that he will manage to escape by parachute before the end comes. There will always be a warm welcome on these Benches for his outstanding talents.
There is just one point in his remarks where I must enter a protest. My noble friend did not say that the Government had set aside the findings of an expert committee. A good deal of mystery seems to have arisen around this expert committee.
LORD CHERWELL: Read the sentence I have underlined in column 727 of the Official Report.
LORD PAKENHAM: It says:
"It has been suggested that the Report ought to be published in order that Parliament can judge why the recommendations of the expert committee have been set aside."
There is no statement there, and none to follow, as the noble Lord will see, if he will continue reading, that the Report was

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set aside. The noble Lord has the Official Report in his hand, and I have not, and he can correct me if I am wrong, but if noble Lords will study it carefully they will find no statement by my noble friend that the Report was set aside. They will find a reference to an allegation that it has been set aside. That is a very different matter. I am sure that the noble Lord, Lord Cherwell, will accept the correction with the plain evidence in print in front of him.
LORD CHERWELL: If the noble Lord assures me himself that there was no report recommending something other than what is being done, I will, of course, accept it, but I think the printed word is open to a different interpretation.
LORD PAKENHAM: The Press of the world are no doubt reporting our words, and they may be studied in great detail in many other places. I am perhaps not in order in offering a wager to the noble Lord across the table, but if I were permitted to do so I would certainly wager a very large sum that the facts are as I have stated them. There is no great secret about this Report. It was a Report by experts but—and this is the point—the committee were never asked to pronounce on the question of nationalization or no nationalization and there was no question of their reporting to that effect.
VISCOUNT CRANBORNE: I should be glad to know what the committee were asked to report on.
LORD PAKENHAM: They were asked to offer their comments on the scheme submitted by the Federation. They were asked to offer expert comments on that scheme, which they duly offered, but they were not asked to say whether they thought nationalization was a good plan or a bad plan, and therefore they made no suggestion of that kind. That is the simple fact.
LORD CHERWELL: Although they were not asked, did they in fact make any comment of that sort?
LORD PAKENHAM: None whatever.
THE EARL OF DUDLEY: Were the trade union leaders consulted?
LORD PAKENHAM: I am not quite sure what the noble Lord means by "the trade union leaders."
THE EARL OF DUDLEY: The leaders of the trade unions concerned with the iron and steel industry. There are several of them.
LORD PAKENHAM: I am not going to make a specific statement on that point but I can certainly say (and I think the noble Lord, with his experience, will recognise it as bearing the semblance of truth) that the Government have been in the closest touch with the leaders of all the relevant unions.
VISCOUNT SWINTON: Will the noble Lord explain, if the expert committee had nothing whatever to do with the question of nationalization, why the Lord President of the Council told us that the Government could not make up their mind on nationalization until they had the report of the expert committee on the industry's plans?
LORD PAKENHAM: The Government wanted the whole facts. While we are on this point, may I say that I am a little surprised at the difficulty that noble Lords opposite have found in understanding the procedure adopted by the Government during the last few months? While we perhaps differ on the issue of nationalization I honestly should not have thought there was really anything with which a reasonable man could have found fault in the way the Government have acted during the last few months in their handling of the industry. I should have thought that if noble Lords opposite had been in our position they would have acted precisely in the same way. The only complaint that might have been brought against us was that, since we were committed to nationalization at the Election, we ought to have proceeded faster, without waiting for a report from the industry. But does any noble Lord suggest that? I do not think that noble Lords opposite will tell us that the Government have been too reluctant to introduce nationalization. I could conceive an objection on that ground but certainly I could not conceive any reasonable complaint about the procedure adopted by the Government in seeking fuller information concerning the industry before finally making up their minds that it is one which should be nationalized.
VISCOUNT CRANBORNE: We were told yesterday that it was being nationalized entirely from motives of efficiency.

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The noble Lord, Lord Winster, said "There has not been any serious criticism upon the broad aspects of the Federation's proposals from a technical angle." From the angle of efficiency there was no criticism. That was a scheme which did not allow for nationalization. On what ground, other than political grounds, has the Government, therefore, decided to nationalize?
LORD PAKENHAM: The noble Viscount will perhaps allow me to answer that in greater detail later. The short answer is that this was a technical plan—one might say a physical plan—for reconstruction which, in our view at any rate, could perfectly well be operated either under nationalization or under private enterprise—simply from a physical point of view. When we looked into the economic aspect of it we were quite clear in our minds that it could be operated far better under nationalization. I think that makes it as plain as I can make it at this stage, but I am perfectly ready to continue the argument.
Although the noble Lord, Lord Perry, is not with us this evening—no doubt he did not anticipate that the debate would continue to-day—he made a contribution last night which aroused the interest of the House so greatly that I must ask leave even at this late hour, to reply rather fully to a particular point which was raised by the noble Lord and, in a slightly different form, by the noble Lord, Lord Teviot. In conjunction with my noble friend who is in charge of the debate on the Government side, I have been at some gains to try and prepare for your Lordships an authoritative reply to the point raised by the noble Lord, Lord Perry, and, with your permission, I will stick closely to that. The noble Lord asked what nationalization meant with particular reference to the activities of the firm with which he is associated, which extend from smelting iron ore in a blast furnace to the production of finished motor-cars. His mind can immediately be set at rest on one point. It is not the intention of the Government that public ownership of the iron and steel industry should involve the taking over of the motor-car industry or any part of it. I feel sure it is well worth stating, if only because of the publicity which the noble Lord, Lord Perry's, remarks received in the Press this morning, that, in the Government's view, the motor
834
car industry forms part of the engineering industry which they have already stated they do not intend to nationalize.
THE EARL OF DUDLEY: That is because it is not ripe enough yet.
LORD PAKENHAM: You may set whatever gloss you wish on the words. As regards those activities of the noble Lord's company which are the same as those undertaken in certain sections of the iron and steel industry, for example, the operation of a blast furnace and the rolling and fabrication of steel, his attention should be invited to the qualifying words in the speech of the Minister of Supply (Official Report, May 27, 1946, Col. 853). These were the words of the right honourable gentleman, Mr. Wilmot, in another place:
"I propose to tell the House which sections it is proposed should be brought into public ownership, subject, of course, to the possibility of excluding some special individual plants where conditions are exceptional."
The noble Lords' particular case (and there are of course others) was not unknown to the Government, and it was because of the knowledge that such cases existed that such care was taken by the Minister of Supply in his statement. If the Government had produced a more precise definition they would undoubtedly have been critizised for not having provided for consultation with the interests affected. The Government clearly cannot give a decision on any individual case at this stage, least of all, of course, on the floor of the House. Such a decision must wait until the details of the scheme of public ownership are worked out and the necessary consultations with firms have taken place. The noble Lord may say that to sever his blast furnace and his steel-fabricating plant from the rest of the operations of his company may reduce the efficiency with which he can produce motor cars. That can, and will, be considered at the right stage and the noble Lord can be assured that his firm will be consulted.
I felt it right to let your Lordships have an authoritative reply to the particular point that was raised. It covers, I hope, one of the three main questions addressed to me by the noble Lord, Lord Teviot. The largest question that the noble Lord, Lord Teviot, addressed to me was a demand for some "really sound and cogent reasons why the Government considered

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that this alteration from private enterprise to national ownership was going to result in a great success." I am coming to that in a moment or two. The noble Lord put to me a third question. He asked "suppose that a firm which is not nationalized finds some particular way of producing at a cheaper cost and of a better quality articles which the nationalized industry is producing, is that firm going to be allowed to do it?" The reply is that while we do not consider the eventuality described as at all likely, if it arose we should certainly not interfere with a firm conducting its lawful business. That is an answer which I hope will satisfy the noble Lord, Lord Teviot.
I pass over, with the permission of the House, one or two interesting speeches made by noble Lords who are not with us this evening. The noble Lord, Lord Strabolgi, made suggestions which will be considered with special care. To the noble Viscount, Lord Greenwood, I can only say that I myself learned a great deal from listening to his speech this afternoon, as I think did noble Lords of the whole House. I will attempt to reply to his general argument in a moment or two because, as so many others, he raised the broad issue: Are we or are we not to pass the iron and steel industry into public ownership? There are two preliminary points where I would indicate a difference of view. He painted rather a sad picture of our breaking up a happy family. He suggested that the employers and the employed were both in agreement, both sides of the industry. I think that was the implication (if he did not use those words)—that both sides of the industry were opposed to nationalization. I am sure the noble Viscount will forgive my reminding him that the main trade unions concerned in the industry have been in favour of nationalization for some years, and there is no reason whatever to suppose that they are going back on their acceptance of the principle of nationalization to-day. When we are talking of the iron and steel industry and when in this House we have leaders of the industry speaking in the name of the industry, it is worth recalling that the vast majority of the 300,000 men, or approximately that number, who draw their living from the industry, take our side and take the opposite side to the noble Viscount, Lord
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Greenwood, and the noble Earl, Lord Dudley.
There was another point upon which the noble Viscount, Lord Greenwood touched, and which was also touched upon by various speakers. I separate it from the main case because it is concerned with what you might call the transitional period. I say that we in the Government have a shrewd appreciation of what the noble Viscount, Lord Greenwood's firm have attempted to do in the way of providing careers for those who enter the iron and steel industry. I know that is a point very dear to the heart of the noble Viscount, and when he talks about nervousness he is not merely talking about the nervousness of the industrial chiefs, but of the young men who are going in the industry. We recognise what his firm have done in that respect, and in the final settlement reached the noble Viscount can be sure that the opportunities provided for young men who desire to enter this industry will be as great as lies within our power. The Government are devoting a great deal of attention to that point.
The noble Viscount seemed to entertain the idea that the industry is suffering from the purgatory of suspense referred to by Mr. Churchill. I would remind students of Dante that Purgatory is the stepladder from the Inferno to Paradise; it is the passage from hell—perhaps I should not say from the hell of private enterprise—but at any rate it carries us toward the Heaven of State ownership.
LORD CHERWELL: It usually takes hundreds of thousands of years.
LORD PAKENHAM: Well, it is a great thing to be moving in the right direction. I should call your Lordships' attention to the very specific speeches regarding compensation for any developments and improvements made in the transitional period which were made by the right honourable gentlemen, the Minister of Supply and the Chancellor of the Exchequer in another place. That should be sufficient to assure industrialists who may be nervous of launching out, though I may say that there are no signs that the noble Viscount, Lord Ridley, is right when he says that anyone is in fact hanging hack. The statements mentioned should be sufficient to reassure industrialists and guarantee them that if they do make these great improvements,

837
and are eventually taken over, they will in all cases get full and adequate compensation.
I now come to the main issue before us. It is a simple issue, although the subject matter is immensely complex, and indeed is one to which certain noble Lords present have devoted a great part of their working lives. I will not say more about what is called the political point, the question of whether or not this is a political decision. Noble Lords opposite have rather sought to impale us, not unnaturally, on the horns of a dilemma, and to make us say either that it was a technical decision or a political decision. I am not anxious to split hairs with anyone. It is simply a decision which the Government have reached because in their view it is a decision required if this great industry is to reach its maximum efficiency in the years ahead. It is a decision of principle based on elaborate study of facts, and although none of us can claim that we come to a problem of this kind in adult life without any kind of predisposition in favour of one solution or another, I will say quite definitely that in this particular case the study of the industry has been conducted not in blind obedience to general principles of doctrine, but with specific reference to the particular industry concerned. At any rate, we are prepared to stand or fall on the application of nationalization to the industry, and, if I may say so with all respect and in goodwill, a number of the speakers opposite, or at any rate large sections of the speeches opposite, seek to prove from our point of view at any rate, too much. They really prove, if they prove anything, that no nationalization could ever be a good thing. The issue has been mercifully narrowed down from the one that originally might have confronted us of private enterprise versus State enterprise. It is not a question of unregulated, freely competitive private enterprise as one solution, and on the other hand a solution such as would be represented by running the industry on the lines of the Post Office. The gulf between us is clearly very touch narrower than that, and very much narrower than I imagine it would have been if we had been conducting this discussion ten or fifteen years ago. Let us at any rate be thankful for the fact that the gap between us is comparatively small,
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although I quite agree it does remain an issue of principle between us. We all agree that this monopolistic industry requires a considerable measure of supervision permanently, and not only in the transitional period. The choice boils down to this—and I am sure noble Lords will not dissent from this way of stating the case—are we to have a State-supervised privately-owned monopoly, or are we to have a State-owned monopoly?
In either case we are going to have a monopoly, but in one case, that is, in the view of noble Lords opposite, it should be State-supervised and privately-owned, while in our view it should be State-owned. In either case, the industry would be subject to a wide measure of negative control. In either case I hope those who actually run the industry, whether on the highest level or on the lower level, would exercise a wide freedom to take positive, creative and strategic decisions. According to the ideas of the Iron and Steel Federation, which find favour with many noble Lords opposite, the leaders of the industry, the people to take the big decisions, would be ultimately responsible to a small section of the public, namely their shareholders, while under our solution they would be ultimately responsible to the public as a whole. That is the actual issue between us.
In trying to make up our minds which solution to favour, I doubt if many of us (certainly there have not been any signs of this in the debate) are very much concerned with the old argument about the profit motive. I do not think any of the noble Lords opposite argued that unless the industry is left in private hands not enough profit will be earned to animate, inspire, and activize those running the show. I do not think that that has been brought forward as an argument. Nor do I Think that most noble Lords who criticize us—though would not be true of all—are under the impression that in our solution the industry would be run by a group of bureaucrats and politicians. For the most part, the people who took decisions on the top level would be very much the same kind of men as take them to-day. If there were any illusions on that point I should hope that they would be dispelled by the composition of the Coal Board. Without committing us to a board or boards of precisely that character, I would make it plain, on behalf

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of the Government, that the fullest use will certainly be made, on all levels, of the best knowledge in every branch of the iron and steel industry. I would suggest to the House that what is really influencing our minds in deciding whether to favour one solution or the other is a question which can be put in this way: Which solution will provide the greatest scope and opportunity to those who are to take the crucial strategic decisions, will really encourage them to show the most initiative in planning the industry as a whole in the national interest, and will equip them with the greatest resources to enable them to do so? That, I feel, is the shortest way of summing up any difference that exists between us.
Now we come to the special characteristics of the iron and steel industry. I would suggest that there are two characteristics of the iron and steel industry which are of paramount importance in making up our minds on this great question. I say, at any rate for myself, and I hope that I shall not get into trouble for saying it, that those two considerations do not seem to me to point in the same direction. I should say that there is one characteristic of the industry which tells against us and there is one which tells still more strongly, and in my view overwhelmingly, in our favour. I should say that the complexity of the industry—it has been properly stressed by speakers on the other side of the House—is the characteristic which, if taken by itself, would tend to influence us in such a way as to incline our minds against nationalization. Undoubtedly it does create difficulties, but they are not insuperable difficulties; they are difficulties which can be and will be overcome, more rapidly and easily than noble Lords opposite believe. Still this complexity of the industry is a characteristic which does tell in favour of noble Lords opposite. On the other hand—I intend to put this as clearly and definitely as possible in order to see how much agreement we can secure—I would submit that the very important factor which tells on our side is the technical necessity for unified ownership of the whole industry. I hope that the noble Earl who initiated this debate will make sure to tell us whether or not he agrees that simply from a technical point of view ownership of the whole industry should be single, indivisible, unified.
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There is one proposition which does not go quite as far as that, which cannot surely be questioned. I mean the proposition that we certainly need a single planning body to take major decisions for the industry as a whole. Judging from the speeches made to-day, and from the solid and weighty speech made by Sir Andrew Duncan in another place, I should imagine that that proposition is accepted. But I do submit that you are castrating such a body unless you equip it with compulsory powers. In other words, if the solution of noble Lords opposite is to be persisted in, it would mean endowing the Federation with compulsory powers such as never have been conferred on any such body in this country or in any democratic country. And moreover, once you reach the point where you endow a single body, a single executive body of the whole industry, with compulsory powers of that character you find yourselves irreparably committed to the acceptance of a single agency owning the whole industry. I am not trying to lead your Lordships too rapidly along a garden path or to lay down a proposition which, before you know where you are, you will find applied all over the whole of industry. I am trying to stick simply to this one industry. Here we have a vital commodity produced and sold, as we all agree, under monopolistic conditions, moreover one with regard to which efficiency demands production in immensely large units; we have an industry where geographical specialization may well result, in the interests of efficiency, in large and drastic social changes, involving perhaps uprooting the lives of many thousands of people. Alternatively we may find ourselves faced with the decision to refuse to uproot them if we put social above purely economic considerations. These are paramount factors, I suggest. In addition, at this moment the industry shows the need for reconstruction on a colossal scale. Huge capital sums are required; various kinds of State assistance, which have hardly been mentioned in the debate, will certainly be necessary. Above all, concentration on the more efficient or more suitable plants calls for every kind of readjustment between particular interests, and it is the essence of our case that such adjustments can be made much more rapidly, much more effectively and much more cheaply if you unify the ownership of the whole industry. But, if once you

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accept unified ownership of the entire industry—and I am surprised that my noble friend Lord Cherwell in his brilliantly analytical speech overlooked the core of our case, because he never dealt with this point at all—once you accept the case for unified ownership of the entire industry, you cannot, I submit, stop there. The Federation argue, and I can sympathize with them, that they have produced a first-rate plan which we have accepted. They tell us, as we have been told by more than one eminent speaker in the last two days, that we ought to leave the people who drew up the plan to carry it out. But I say without any reflection on, or disrespect to, the gentlemen who drew up that most reputable plan, if they were to own the entire industry private citizens would be placed in a position in which it would be against every canon of political wisdom to place them. It would be quite impossible, I submit, to allow a single group in the community to possess those huge powers of life and death over hundreds of thousands of their fellow citizens and over a commodity so vital to the life of the community.
And so, my Lords, I would simply base the case for our side on two simple propositions and I defy and challenge noble Lords opposite to refute them. I do not wish to end on a provocative note, so may I add that I see no need whatever to be defiant. I hope that the noble Earl will say in a moment or two that he accepts one of the two propositions today, and that he will give the other very careful consideration, to use a formula which we use so often on this Bench. On the one hand, the technical necessities point clearly and definitely to the unified ownership of the entire industry. On the other, if the industry is to be owned by a single body then that single body must not be any sectional group of citizens; it must be the people of our country as a whole. On behalf of the Government I would like to express our gratitude to the noble Earl who has given us a chance of discussing, in what I repeat has been to me a very memorable fashion, this subject which is so vital to all our people.
6.53 p.m.
THE EARL OF DUDLEY: My Lords, judging by this empty House, noble Lords opposite must have realized, perhaps with some relief, that I do not propose to press this Motion to a Division.
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I do not know how the noble Lord, Lord Ammon, has been cracking his whip but if I have kept any noble Lords away from alternative entertainment to-day I am very sorry. I rather wish in some ways that I had whipped noble Lords on this side of the House, if only for the reason that, as an old Christchurch man, I feel that the two first-class speeches which we have just heard from the two Christchurch professors were worthy of a better audience. Those two speeches were in the highest tradition of the Front Benches of your Lordships' House and they were, incidentally, a very fine advertisement for Oxford—and particularly for Christchurch education. I will not say which of the noble Lords, if I had my undergraduate gown on my back, I would choose for my weekly tutorial on economics.
I am not going to detain your Lordships, because the hour is late and we have had a very long debate. I do not propose to follow the noble Lord, Lord Pakenham, into his long and very good argument. But he did ask me one particular point to which I must refer. He asked me whether I would accept the technical principle of a unified industry, that is, working the British iron and steel industry as one concern. I say, definitely, no. It would be far too big, and far too unwieldy. Take the example of the American iron and steel industry. I am firmly of the opinion that the two great firms in America, the United States Steel Corporation and the Bethlehem Steel Corporation, are too large, and that they would function better if they were smaller. I have seen for myself, and in my view the smaller units in America work better than the large units. I hope that answers, to some extent, the question of the noble Lord, Lord Pakenham. The noble Lord then said that if the industry were to proceed under its own steam compulsory powers would have to be conferred upon the Federation. I cannot accept that at all. It would be quite unnecessary, and indeed the Federation would function perfectly well, perfectly cooperatively and perfectly smoothly, with quite sufficient power, with the type of Government control that we had before the war, or even a stronger type.
We have had a very interesting two-day debate. I will not say where I think the preponderance of argument lies—but I do feel quite honestly that nothing further has

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emerged from the Government spokesmen in this debate than emerged in another place last week to persuade us that this is not a political move. I cannot see any technical reason for it whatsoever, in spite of what the noble Lord has just said. We are bound to assume that the step is proposed for political motives and, indeed, on account of greed for further industrial power. And after all when the Government owns these basic industries they will have very great, and in my view highly dangerous, industrial powers—far too dangerous for any Government to own, however good that Government may be.
The noble Lord, Lord Winster, told us yesterday—and I am entitled I think to conclude this—that the Government made up their minds to go ahead with the nationalization of this industry before the Election. The noble Lord emphasized the extent to which this particular policy was put before the electorate at the Election. Therefore the intention to nationalize was definite in their minds before the Election and during the Election. But if the minds of the Government were made up why were they discourteous enough to ask the Federation to produce a Report which was put forward with an open mind, and without any knowledge that the Government had already made up their minds to bring in this piece of policy? Therefore I must refute the idea which came from the noble Lord, Lord Pakenham, that their procedure has been perfectly open. I will not labour that point however.
The noble Lord, Lord Winster, paid a very fulsome compliment about the industry's war record, but spoiled it all by saying, as was said in another place, that it was due to Government control which was in operation during the war. We cannot take that as a compliment. It is rather like telling a woman she is very pretty but that her beauty is clue entirely to her make-up. She does not like it. She takes it as an insult. And so do we. In the case of the pretty woman it may very often be true, but in our case it certainly is not true.
LORD WINSTER: You do not mind the risk of leaving off the make-up though.
THE EARL OF DUDLEY: I just make this point. We had very good control during the war. It was first-class. It
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worked extremely well. As an industry we worked very smoothly with it. Why was that? It was because they were all our own men. They were men who were appointed at the request of the Government, because they could not find anybody else, and in the majority of cases they continued to be paid by the industry. You may say that is a bit of a farce. The reason was that the Government were not able to find anyone else with the necessary experience and expert knowledge to take over that particular job. It will be the same thing when this industry is nationalized. It will be in exactly the same difficulty.
I must make one more point. The noble Lord, Lord Winster, alleged that the reason for the original Government control in 1934 was on account of the inefficiency of the industry at that time. That again is entirely untrue. I happened to be the President of the Iron and Steel Federation in that year, when Government control was first proposed, and I led all the deputations from the industry that saw the then Prime Minister, Mr. Ramsay Macdonald, and Mr. Neville Chamberlain, who was the President of the Board of Trade. Government control was imposed upon us not for any inefficiency but because for so many years we had been subjected to, and brought so low by, the amount of dumping of foreign material all over the world, and particularly in our market. Foreign steel was brought in and sold both here and abroad at a price which did not even cover our labour costs. The Government realized at long last that that could only be stopped by a measure of protection, and they gave that measure of protection conditional upon Government control. That is the true story. The noble Lord, Lord Piercy, said I had not referred to those bad times. I do not want to hark back to those old days. I remember them very well indeed. They were dreadful times. I shall never forget them. How any of us kept our heads above water I do not know. It was only by the good grace of my bank manager and frequent visits to him that I was able to keep my company afloat. I remember the dreadful day when I was offered a Virginia cigarette instead of the customary cigar, and I thought the bottom had dropped out of the world.
It really also is quite ridiculous to say that the industry cannot be left to itself.

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Of course it can be left to itself. We are quite willing to work under Government control, as we have done for many years, smoothly and efficiently. We were also accused of being a monopoly, and it was asserted that there was no competition at home or abroad. As the noble Lord, Lord Cherwell, explained so well, the control that was imposed in 1934 enabled us to stabilize prices and arrange orderly marketing. That is essential, and, of course, the Government are not going to sweep that away. When they take over the iron and steel industry there will be an even tighter monopoly; but I hope that orderly marketing and stable prices will always go on, because Heaven help the steel industry if they go back to those dark days of the twenties and the early thirties. Of course, the Government will never allow them to do that. The point about stable prices and orderly marketing is that it prevents the industry being exploited in times of depression, and it also prevents exploiting the consumer in times of shortage, such as are occurring at present. There is still competition, and very considerable competition, in costs, service and quality. To say that the industry cannot compete abroad is also quite untrue. The industry can and does compete abroad. Before the war twenty per cent. of the products of this industry were exported, compared with only five per cent. from the entire industry of America, and, indeed, those figures recently, in the last few months, have been improving. I noticed—and this is my last word—a hint in the speech of the noble Lord, Lord Winster yesterday that I was not speaking for the Federation.
LORD WINSTER: No.
THE EARL OF DUDLEY: He made a certain reference.
LORD WINSTER: I can assure the noble Lord that I intended nothing of the sort.
THE EARL OF DUDLEY: He said that there were certain people who claimed to speak for certain people and did not do so. I can assure him that I speak fully for the Federation and the industry. I speak for the managers, for the executive, and I claim to speak for a very large number of the workers. The industry is definitely opposed to this plan. Noble
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Lords opposite really must get that into their heads. We shall approach this problem not in any sulky spirit, not in any selfish spirit, not in any "dog-in-the-manger" spirit, not in any unpatriotic spirit. But I must remind the noble Lord of the old saw about leading a horse to the water. We fundamentally disbelieve in this policy. We believe that it is bad for the country. We believe that it is bad for the consumer, and we believe that it is bad for the industry as a whole. When people feel that way you cannot alter their view. The noble Lord quoted a sentence—one sentence—from the statement of the President of the Federation as rather implying that he was in favour of the scheme. But I must quote also other sentences from the President's statement, approved unanimously by the industry as a whole:
"We are opposed to the nationalization of any section of the group of industries commonly known as the iron and steel industry, because we believe it would be injurious to the efficiency of the industry itself, to developments in a wide range of allied industry and to national recovery …
Nationalization of sections of the industry would tear the heart out of the most efficient organizations and destroy the best hope of raising the general standard of efficiency in the industry.
The shadow of nationalization is already frustrating the industry's major schemes for reconstruction and imperilling the realization of the plan of which they are a vital part."
Noble Lords must really not indulge in wishful thinking that they are going to persuade any of us that this is a good plan. I hope that this debate has shown the Government that there is danger ahead, and I hope that they push this scheme into the middle distance. I beg to ask leave of the House to withdraw my Motion for Papers.
Motion for Papers, by leave, withdrawn.

BIRMINGHAM CORPORATION BILL.
Brought from the Commons, read 1a and referred to the Examiners.
GAS LIGHT AND COKE COMPANY BILL. [H.L.]
Reported from the Select Committee with Amendments.

UNION OF SHERIFFDOMS ORDER, 1946.
Report from the Special Orders Committee that they have examined the Special Order as required by the Standing Orders of the House; that in their opinion the provisions of the Order raise no important questions of policy or principle other than those which have been accepted already by the House when passing the Administration of Justice (Scotland) Act, 1933,
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under which the Order is submitted for approval; that the Order is founded on precedent; that in the opinion of the Committee the Order can be passed by the House without special attention; and that no further inquiry is necessary before the House proceeds to a decision on the Resolution to approve the said Order.
Read, and ordered to lie on the Table.
House adjourned at eight minutes past seven o'clock.