Lords Sitting of 9 February 1949

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers
The Viscount Allenby—Took the Oath.

THE STATUS OF NEWFOUNDLAND
2.35 p.m.
LORD SEMPILL LORD SEMPILL rose to ask His Majesty's Government what is their policy with regard to the present constitutional status of the Dominion of Newfoundland; and to move for Papers. The noble Lord said: My Lords, you will all agree that to-day democracy is being attacked violently from without and, by the Trojan horse methods, from within. These attacks become heavier and, since appetite grows with eating, their success spurs the totalitarian aggressors to even greater efforts to destroy democratic institutions. Democracy is on trial to-day as never before. Surely it is the duty of all of us who are privileged to play some part in this the Mother of Parliaments to insist in the strictest manner possible on the carrying out in full degree of established constitutional practice, and to allow no deviation from it. We should not tamper with the art and practice of democracy and then excuse such interference at a later date by saying that the results were, after all, worth while. But, my Lords, are we not doing something of that kind in relation to Newfoundland to-day? Newfoundland—her position to-day and her future to-morrow—is the subject of pronouncement and discussion in the Parliaments of Canada and Great Britain. Were she free, as I hold she should be, her Parliament would be discussing and arranging her future in accordance with normal democratic procedure.
Your Lordships, of course, will all be familiar with the history of Newfoundland's position in the Empire and Commonwealth, but perhaps you will allow me a few minutes to make a short summary as a prelude to my submission. In 1578, Humphrey Gilbert was granted
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Letters Patent by Queen Elizabeth, permitting the planting of an English colony overseas. I read an extract—
"whose settlers and their heirs for ever should enjoy all the privileges of free citizenship of England."
By 1855, Newfoundland had obtained self-government, which she enjoyed till 1876, when she achieved full responsible government, which she enjoyed up till 1934. In January of that year, new Letters Patent were issued to assist her to meet the economic difficulties of those years. They were to:
"provide for the administration of the said Island until such time as it may become self-supporting again."
When this time arrived, as was envisaged by the Royal Commission, responsible government was to be restored. The Commission of Government was appointed, as I see it, to handle the day-to-day affairs of the Island during an extremely difficult period, but not to make away with her Sovereignty, or indeed to dispose of her future at all.
By 1941, as your Lordships are aware, Newfoundland had become self-supporting, and in 1945 a National Convention was set up. I read an extract from the document which set that up:
"To consider and discuss among themselves as elected representatives of the people of Newfoundland the changes that have taken place in the financial and economic situation of the Island since 1934 and … to examine the position of the country and to make recommendation as to the possible forms of future government to put before the people at a national referendum."
As your Lordships may remember, this National Convention decided unanimously that only two issues should be put before the electors—namely, continuation of the present Commission of Government, or the restoration of responsible government. A motion was before the Assembly to put confederation with Canada on the referendum ballot, but this was overwhelmingly defeated, the voting being actually twenty-nine votes to sixteen votes. This decision of the elected representatives of Newfoundland was cast aside by the unilateral action of the Commission of Government, acting, no doubt, on instructions from Whitehall, which decided that the issue of Confederation with Canada should be placed on the ballot paper, despite the fact that the letters patent of 1934 made no reference at all to such a possibility,

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nor, so far as I am aware, did the Parliamentary Delegation, of which my noble friend, Lord Ammon, who is to reply, was Chairman. Indeed, when I was last in Newfoundland, I read an interesting booklet written by my noble friend, Lord Ammon, in which he made clear reference to the fact that the idea of Confederation with Canada was very unpopular with Newfoundlanders.
As your Lordships are aware, the British North America Act expressly states that Confederation can be brought about only by Addresses from the respective Legislatures of Newfoundland and Canada. I submit that no such Address can emanate from Newfoundland until her Government has been re-established. The Statute of Westminster of 1931, which specifically recognises Newfoundland as a Dominion, lays down that:
"No Act of Parliament of the United Kingdom shall extend to a Dominion as part of the law of that Dominion unless the Dominion shall have so requested and consented to the proposed enactment."
It was under such conditions therefore, very broadly outlined to your Lordships, that the referendum of June, 1948, was held, resulting in 22,000 people voting for Commission of Government, 63,000 for Confederation with Canada, and 69,000 for representative government. Then, in July, on an amended basis, a second referendum was held, resulting in 78,000 people voting for Confederation with Canada, and 71,000 for the restoration of responsible government—a majority of about 7,000. Such a figure cannot be construed as an overwhelming expression of opinion by the people of Newfoundland on an issue of such vital importance, and one in regard to which Newfoundlanders, particularly those in the outports—and those of your Lordships who have been there know how difficult it is to get round Newfoundland—had had no adequate opportunity of being fully informed by all the means available to-day for informing the people of a country, before expressing their views. The opinion is widely held in Newfoundland that the authorities did not allow a fair use of the broadcasting facilities.
My Lords, I have visited Newfoundland several times, and have worked there for a good period in years gone by acting as aeronautical adviser unpaid to that very distinguished naval officer, the then Governor, the late Admiral Sir David
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Murray Anderson, occupying myself with the survey of the airports that were then projected. I came in contact with a large number of people all over Newfoundland. The two main airports which were decided upon are now operating and are known to all who travel by air. They are Gander and Goose. I had an opportunity of coming in contact with all sections of a very fine people—descendants from those of old English or Celtic stock. But it is sad to-day to have it borne in on one that there is a feeling widely held there that they are being sold by His Majesty's Government to Canada. Opinion is also widely held by Newfoundlanders that His Excellency the Governor and the Commission of Government have not only done all in their power, but have even exceeded their constitutional powers, in weighting the scales against them and in favour of pushing them into Confederation with Canada. My noble friend, Lord Saltoun, was to have been here to-day to take part in this debate, but he has sent a telegram to say that he is in bed with influenza and apologising for his absence. He also says:
"I heard in Newfoundland local opinion appreciative of the work of the Commission, but very critical of action of Commissioners in taking part in propaganda in favour of union to influence referendum in relation to Canada."
Just what are the advantages that will fall to Newfoundlanders, and how will their country's economic interest be secured under such an arrangement as that discussed with Canada? We hear very bold statements trade, but these, so far as I am aware, are not backed up by reasoned argument. For example, would Newfoundlanders have to shoulder a per capita debt some seven times greater than the debt they shoulder today, and then be handed out that rather hard deal that the maritimes generally receive and know so well? Perhaps the best answer to these economic questions would be that which Mr. Mackenzie King, then Prime Minister of Canada, gave, when he said it was "No better than an informed guess." It is very significant that the experienced business delegate who was sent by the Commission of Government to Ottawa to negotiate the arrangements now under discussion, on seeing the terms that were being worked out, refused to be a party to signing the document and returned to St. John's.
My noble friend, Lord Ammon, who is to reply for His Majesty's Government, was, as I have already said, Chairman of an important Parliamentary Delegation in 1943. Amongst those who went with him was Sir Alan Herbert, who has certainly made himself the champion of Newfoundland in another place, and has done great work for her. But I feel sure that my noble friend and others who have been over there must very frequently receive letters from friends, not only in St. John's but in the outports, expressing their great concern at the present state of affairs. With your Lordships' permission, I will quote from a letter which is but three weeks old from a Newfoundlander who is now at Oxford, and who out of term goes home again. He writes:
"People in England have no inkling of the bitterness that has been generated against England for her handling of the situation in Newfoundland. During a visit home last summer I met people who, for example, were determined never again to stand when 'God Save the King' was being played. This would have been unthinkable a few years ago."
My Lords, I do suggest that if we had followed the regular constitutional practice established through centuries and forged in the democratic tire of experience, and had honoured our obligations, the name of England would stand in Newfoundland to-day as high as it did when Humphrey Gilbert, on August 4, 1583, raised the flag. As we read in The Elizabethan Spirit, written by that constructive Empire-conscious statesman, Leo Amery:
"On the shores of the harbour of St. John's, Newfoundland, in the presence of many English and foreign fishermen, Humphrey Gilbert solemnly hoisted the English flag and, in the Queen's name, took possession of the harbour and all territories for two hundred leagues every way. Thus was laid the foundation stone of the British Commonwealth and Empire."
I thank your Lordships sincerely for bearing with me, and I hope that those who follow will join with me with vigour in pressing His Majesty's Government to think again and to follow the course that both conscience and established democratic practice dictate, by restoring responsible government to the people of Newfoundland. The elected National Convention, to which I have already referred and which was set up in 1945, is surely already a step in the direction
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of establishing, or I should say re-establishing, Parliament in St. John's.
Before giving way to those of your Lordships who will speak, I would like to ask my noble friend who is to reply on behalf of His Majesty's Government four questions, which I feel sure he will be able to answer. First, is it considered that the referenda figures give full expression to the dictum of the late Prime Minister of Canada—that
"The people of Newfoundland indicate clearly and beyond all possibility of misunderstanding their will that Newfoundland should become a part of Canada"?
Secondly, do His Majesty's Government deny that a promise was made to Newfoundland for the restoration of responsible government when she was again self-supporting? Thirdly, do His Majesty's Government agree that Newfoundland has been self-supporting since 1941, and has made a substantial interest-free loan to Great Britain? Fourthly, do His Majesty's Government regard the Commission of Government as a democratic body representative of public opinion, and, if not, under what authority do His Majesty's Government state that the Commission of Government have the right to solicit votes for confederation with Canada at the time of the referendum, and contrary to the majority decision of the democratically elected National Convention set up in 1945? My Lords, I ask leave to move for Papers.
2.53 p.m.
LORD RENNELL: My Lords, this Motion is a difficult one to discuss. That is not to say that it should not be discussed, but it is difficult to discuss it without running the risk of causing a good deal of injury in various quarters. There are three parties to this particular problem: the people of Canada, the people of Newfoundland and the people of this country. There is also a great deal of back history and there are certain elements in that back history, to which I think most of us will prefer not to refer. In fact, it is an extremely delicate subject. The noble Lord who has moved the Motion has approached the subject purely, or almost entirely, on a constitutional issue. He has, in other words, approached it on the way things have been done, rather than on what was intended should happen. I do not think those two aspects can be dissociated one

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from the other. Though I do not intend to refer to the rather delicate subjects I have mentioned. I do not consider, unfortunately, that it is possible, to look at the present situation without having regard to and a very acute memory of the past.
May I take one particular point to which I should like to revert—that of the economic situation of Newfoundland to-day? I believe it to be quite misleading to say that because the revenues of Newfoundland from 1941 to 1947 exceeded expenditure, that necessarily means that the Dominion of Newfoundland is economically a working proposition. There are a number of factors in war which entirely vitiate the economic situation of any country. Without disrespect to any of the parties concerned, may I be allowed to mention the case of one British Crown Colony which has for many years past been, and is again, in deficit and has required grants-in-aid? I refer to British Somaliland. I could show a period when I was associated with the administration of that Colony during the war which was a time of great prosperity, a period in which there was a very large excess of revenues over expenditure. If I took the average of the period from 1940 to 1947, I could show conclusively that British Somaliland was a prosperous country with a working surplus. Everyone knows that that is not the case, and the prospects of that Crown Colony being a solvent economic proposition are to-day. I am afraid, remote.
The economic situation of Newfoundland, during the war, was affected by a number of, shall we say, non-recurring factors. Some of those factors still persist. There are, of course, American bases and American expenditure in Newfoundland, and there is the revenue, direct and indirect, derived by reason of Newfoundland being a refuelling and stopping point for trans-Atlantic aircraft. I should require a great deal more convincing than is to be obtained by reading any of the figures which I have seen that either of those two sources of revenue was likely profoundly to alter the economic situation of Newfoundland in the long run.
Broadly speaking, there are only two main assets on which the Dominion has had to depend in the past and on which
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it would have to depend in the future if it were to remain an independent self-governing Dominion They are timber, with some possible mineral development, and fish. It will be well known to your Lordships that the fisheries have depended largely on the sale of dried cod, which is a diminishing, factor in Newfoundland commerce. In fact, though some people have a taste for dried cod—people in South America and certain Mediterranean countries for instance—I cannot help feeling that there are preferable methods of preserving the fish which would make it more appetising and do a great deal more to popularise it than bacalhao, much as I like it. These are the sort of factors which I do not think justify anyone saying that because Newfoundland revenues exceeded expenditure from 1941 to 1947, Newfoundland has achieved the possibility of economic existence.
I am afraid that I remain of the opinion which I have always held, that Newfoundland as an economic proposition is not viable in the long run as an independent unit any more than any of the maritime provinces of Canada would be had they remained independent. Is it conceivable that even Nova Scotia, let alone Prince Edward Island, might become and remain an independent and self-supporting economic entity? It does not even bear thinking about, and I am afraid that the case for Newfoundland is somewhat similar. To argue from that basis fairly, one must go back not only to 1934 but to the years antecedent to 1934 and one must bear in mind the circumstances which caused the economic situation that led to the Commission of Government. If those factors are taken into account, we are all, in one form or another, faced with trying to find a solution—we in this country, the people of Newfoundland, and the people of their great neighbour, the Dominion of Canada. A solution that has been proposed (I will come in a minute to the method being adopted to achieve it) is for Newfoundland to enter the Dominion as the founders of the Federation had originally conceived. That, I submit to your Lordships, is the right answer and the only answer which is practical from everybody's point of view.
Of the many arguments that have been advanced, and upon which the noble Lord who moved this Motion has touched, a great deal of play—in my view, too much

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—has been made of the financial issue, so far as Newfoundland is concerned. We have been told that entry into the Dominion will involve Newfoundland in a higher rate of income tax and also, possibly, in disadvantages in import restrictions. The bulk of people in Newfoundland for whom we should have most thought and care are the vast majority who pay no income tax; they are the people who suffered most during the miserable years that preceded 1934, for which I am afraid we in this country must take a great responsibility. Let us face the fact that in a large part it was the trading methods of those who traded with Newfoundland which reduced a large part of her population to the state of poverty and abjectness described in the First Commission's Report, when the Commission of Government was appointed. And since we in this country were mainly responsible for that, we are now responsible for finding a solution to this problem, which has not yet been solved.
We have had, and to some extent still have, in Newfoundland, if I am rightly informed, a situation resembling the worst usages which led to the Truck Acts in this country, though the situation is better than it was fourteen years ago. Would it not be to condemn those people to an infinite period of that sort of life to suggest that they should go back to a precarious economic existence as an independent and self-governing Dominion? I hope your Lordships will agree with me that that short summary is not an unfair statement of the position. I think many of your Lordships will believe that the present solution will be the happiest one for the largest number of people in Newfoundland to-day.
There was one term used by the noble Lord, Lord Sempill, which I am sure he did not mean quite as it was used, and which I would like to take up, lest there should be any misunderstanding in Canada about words used in your Lordships' House. The noble Lord spoke of our being held responsible for having "sold" Newfoundland to Canada. I am sure the noble Lord did not mean that in so many words. I would not like anybody either in Newfoundland or Canada to feel that that was ever our intention or that there is any justification for using these words—if for no other reason than
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that a sale involves a consideration. Of course no one in this country could have contemplated such a transaction; nor could anybody in Canada be accused of having bought anything or wishing to buy anything. Let us consider for a moment what this proposed entry of Newfoundland into the Dominion of Canada means to the people of Canada. There is no advantage to them, so far as I can see from the figures which I was privileged to see in Canada last autumn. Indeed, it involves a burden of considerable magnitude on the remainder of Canada for many years to come.
The figures of what are called the transitional grants are quoted in Command Paper 7605, on page 11. They amount to tens of millions of dollars at a time when, as we all know, Canada is suffering economically from very considerable stringencies. I cannot believe, I will not believe, the suggestion that the Canadians are doing this in order to get something out of Newfoundland. The figures themselves give the lie to any such accusation. The figures show that Canada will be contributing something to Newfoundland for a very long period. If the Canadians contribute some 50,000,000 dollars to Newfoundland, it seems to me that the people of Newfoundland must have the advantage. It is they who have the advantage, and not our very good friends in Canada, who have made a settlement which I am satisfied in my own mind is a very generous one, and which can only benefit the people of Newfoundland. Nor could it be said that in doing this, the Canadians have relieved this country, because for the last few years, as the noble Lord said, Newfoundland has had a surplus of revenue and we have not had to contribute. In other words, the sole benefit of this very munificent settlement (as I regard it) is to the advantage of Newfoundland and to no one else.
Let me deal with another point of which a great deal of play has been made. It has been suggested, as I believe, most improperly and somewhat offensively, that the people of Canada have sought this amalgamation, this entry into the Confederation, in order to secure the iron ore deposits in Labrador. In the first place, that it not true, for the very simple reason that a large part, though not the whole, of the so-called Labrador iron ore deposits are in the Province of Quebec and not in Labrador at all. Actually, the

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geological formation runs over the whole of that area of ground through which the boundary between Quebec and Labrador runs as it was delimited under the decision of the Privy Council. I happen to have seen a number of people associated with the development of that Province, and I have heard the opinions of Canadians from the Province of Quebec and elsewhere. I believe there is no quarrel on that issue, and indeed there could not be a quarrel when the major part of that which is to be worked in the immediate future lies, as is admitted on both sides, in the Province of Quebec. There cannot be a question of Canada getting something she has not had before: she has it already.
The last point in that order with which I want to deal—and this I am afraid is a matter of opinion; many of your Lordships will not agree with me, though others perhaps will—is about the referenda. I am not talking about whether a referendum was constitutionally right or wrong, but about the results. One can always argue, as we know only too well in this country, upon what votes really mean. There is no doubt that if a poll had been taken of the population of the United Kingdom, not divided into constituencies, the supporters of His Majesty's present Government would not be in office, as they are a minority—I think about 47 per cent. of the electorate voted for, and 53 per cent. against them. They happen, however, to have a very large majority in another place.
Anybody could argue that the figures of the second Newfoundland referendum, which showed a majority in favour of entry into the Dominion might, if that poll had been taken by constituencies, have shown a vastly bigger majority in favour of entry into Canada. I do not know whether it would; but the noble Lord opposite says it would. It may be that it would, and it may be that it would not; one cannot argue on hypothetical calculations, but it is a possibility. It is not legitimate, therefore, to say that because the majority was not so large as some people thought it ought to be it did not express the views of the people as a whole, or that those views, had they been expressed in another way, might have been different—or, indeed, that they might have reinforced the particular result. So much for some of the argu-
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ments against the citify of Newfoundland into Canada, and for the re-making of the Newfoundland Government and Newfoundland's maintenance as a self-governing Dominion.
I now come to the most important part of what the noble Lord who opened the debate has said—namely, the method. With the very small knowledge I have of constitutional matters and procedure I would not dream of going into the reasons for the adoption of the particular methods which were adopted. But I must admit—and I know I share this view with a great many people, including many of your Lordships—that I have an uncomfortable feeling that the way it has been done has not been happy. I think we are all a little uncomfortable. One might have hoped that greater thought would be given to the way in which such a big change in people's lives and their government was effected, and that a different conclusion might have been reached. I can see that it would have been perfectly fair to restore an Independent Government, and proceed by way of an Election or a referendum after that. As it is, however, I am unhappy about the way it has been done. In a book called Murder in the Cathedral, which many of your Lordships have no doubt read, the Bishop Thomas is tempted by the classical tempters, and finally by the fourth tempter who holds before him the possibility of the Crown of Martyrdom. The Bishop is for a time tempted, and then in his prayer he prays:
"Save me from the greatest treason
Of doing the right thing for the wrong reason."
3.16 p.m.
LORD AMMON: My Lords, the noble Lord who has just sat down has adequately answered the case that has been put by the noble Lord who opened this debate, and I might well have left the matter there. However, Ism hoping that in a few words I may be able to show your Lordships that, far from any injustice being done to Newfoundland, she has been treated with the utmost generosity; and, further, that all the fundamental laws of democracy have been observed. I think I may remove even the little unhappiness felt by the noble Lord, Lord Rennell. I suppose there is not one of us but who feels a sentimental twinge at the parting, shall I say, of this our oldest Dominion. New-

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foundland represented practically the first stone of the Empire. Ever since then her people have had a troubled and chequered career. They have never been able to develop their resources, not even from the time when John Cabot first landed there in 1497, which was some eighty-six years before Sir Humphrey Gilbert went in and took possession in the name of Queen Elizabeth. Then they had trouble with the Star Chamber, who wanted to make Newfoundland solely a fishing station and to prevent every means of developing which they could. Out of that, it is just as well to remember, flowed the present spread of population and conditions as we have them now—a small community scattered round 6,000 miles of coast, which has made it impossible to develop social services, or local government, or by any means to achieve national progress or a national programme. That point must be remembered when we are considering the problems put before us.
The noble Lord, Lord Sempill, asked me a question (I will try to deal with the other questions, but I particularly want to deal with this one) whether it is not a fact that since 1941 Newfoundland has been more or less on a sound economic footing. That is very much on the lines of the question, "Have you stopped beating your wife?" because since 1941 Newfoundland has taken advantage of the conditions that flowed naturally out of a state of war. Until 1933, when the Commission under the noble Lord, Lord Amulree, went out there, they were in debt to no less an extent than 101,000,000 dollars—and that on a population of 280,000 (one need not dwell very much on that point)—and they had little or no trade outside. It is as well to remember that the Commission of Government went out there, not as a Commission imposed upon the Dominion from this side but at the request of Newfoundland. The then Government of Newfoundland asked that we should step in and take control of affairs. It was only then, when Newfound-was put into the hands of the Commission of Government, and something like order and proper conditions of administration came into effect, that some degree of stability was obtained.
From that point perhaps it would be just as well if I endeavoured to show your Lordships' House exactly how the present condition from a constitutional
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point of view arose. I do not stray further than the constitutional position, because in accordance with the gracious Speech from the Throne there will come up in another place, and subsequently here, a Bill dealing with the British North America position in which the wider question will be debated. For the moment, I am concerned with trying to demonstrate that everything has been done to follow along constitutional lines in order that justice might be done to Newfoundland. This question was raised by myself, if my memory serves me rightly, on May 3, 1944. in this House—in fact, it was my maiden speech. In the course of that debate the noble Marquess who leads the Opposition, Lord Salisbury, who was then the Secretary of State for Dominion Affairs, made an authoritative statement of the policy which was being pursued by His Majesty's Government then and which has been continued since.
Perhaps your Lordships will bear with me if I quote the germane extracts from that speech. The noble Marquess said:
"As soon as practicable after the end of the war, that is, the war in Europe, machinery must be provided for enabling the Newfoundland people to examine the future of the island and to express their considered views as to the form of government they desire, having regard to the financial and economic conditions prevailing at the time. In the meantime the Secretary of State will take soundings in order to ascertain what kind of machinery would be acceptable to the Newfoundland people. If the general wish of the people should be for a return to full responsible government, we for our part shall he very ready, if the island is then self-supporting, to facilitate such a change. If, however, the general wish should be either for the continuance of the present form of government or for some change of system which would fall short of full responsible government, we shall be prepared to examine such proposals sympathetically and consider within what limits the continued acceptance of responsibility by the United Kingdom could be recommended to Parliament."
Subsequently, my noble friend who now leads the House, and who was then Secretary of State for Dominion Affairs, announced to your Lordships on December 11, 1945, that, in pursuance of the statement of policy to which I have referred, His Majesty's Government had decided to set up in Newfoundland an elected National Convention of Newfoundlanders, whose terms of reference would be as follows:
"To consider and discuss among themselves, as elected representatives of the Newfoundland

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people, the changes that have taken place in the financial and economic situation of the Island since 1934 and, bearing in mind the extent to which the high revenues of recent years have been due to war-time conditions, to examine the position of the country and to make recommendations to His Majesty's Government as to possible forms of future government to be put before the people at a national referendum."
Elections to the Convention took place in the summer of 1946, and the forty-five members met in St. John's in September of that year. In May of the following year the Convention sent a delegation to the United Kingdom to inquire what relations could be expected between His Majesty's Government and the Newfoundland Government under various forms of Constitution. Your Lordships will recall that the noble Viscount the Leader of the House made a statement on May 13, 1947, as to the outcome of the discussions which he had with this delegation.
The National Convention subsequently elected another delegation to visit Canada and to discuss with Canadian Ministers and officials the questions which would arise in the event of Newfoundland deciding to join the Canadian Confederation. Following these talks, the Canadian Government sent to the Governor of Newfoundland, for communication to the Convention, the terms on which they considered that confederation could be carried through. In due course, the National Convention made recommendations to His Majesty's Government. The Convention proposed two alternatives on which the people might be advised to vote—namely, the restoration of responsible government as it existed prior to 1934 (and it is important to remember that the restoration of the Government prior to 1934 was the Government that had been superseded by the Commission)—or the retention of the Commission form of government. A considerable minority of the Convention voted that the issue of confederation with Canada should be added to the ballot paper. His Majesty's Government, bearing in mind that strong minority view, felt that it was desirable that the people should be given the opportunity of voting on the issue of confederation with Canada. They therefore decided that this third choice should be included on the ballot paper. Arrangements were thereupon made for the hold-
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ing of a referendum, at which the three issues to which I have referred would be put before the people. The first referendum, which took place on June 3, 1948, gave the following result: For Commission of Government 22,311 votes; for confederation with Canada 64,066 votes; and for the restoration of responsible government 69,400 votes.
As no one form of government received an absolute majority over the other two combined, a further referendum was held on July 22. This referendum resulted in 78,323 votes for confederation with Canada, and 71,334 votes for the restoration of responsible government. I might intervene here to say that, after all, the result was actually more decisive than the figures themselves show, because no less than 85 per cent. of the whole electorate voted, and of that 85 per cent., 52 per cent. voted for confederation. Out of the twenty-five electoral districts, eighteen recorded their votes in favour of confederation—I think that might relieve somewhat the feelings of the noble Lord—and seven districts noted for responsible government.
Let me make the position clear with regard to what the male Lord who opened the debate said about the people in the outports not having an opportunity to record their votes. As a matter of fact, it was the outports who decided this vote. It was the towns who largely voted for the restoration of responsible government, but it was the outports, who were, as I found when. I was there, dominated in St. John's and had little or no say in the affairs, who determined the result of that particular election. I think that should be borne in mind, and that one should not dwell too much on the actual figures, because the whole population is Dilly 280,000, and when you add up the numbers who voted and take from the remainder at least 65,000 schoolchildren, you have not a very large number of people who might have recorded their votes.
The Canadian Government at once considered the results of the second referendum. On July 30, 1948, the Prime Minister of Canada announced that as the result of the plebiscite in favour of union between the two countries was—I quote his words—"clear and beyond possibility of misunderstanding," the Canadian Government would be gl id to receive authorised representatives of Newfound-

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land to negotiate the terms of union. Mr. Mackenzie King added an assurance that in those negotiations any special problems which might arise in connection with the entry of Newfoundland into confederation would receive most careful consideration before any final action was taken. His Majesty's Government issued a Statement on the same day saying that they, for their part, as the Government responsible for the administration of Newfoundland, were in agreement with the views expressed by Mr. Mackenzie King.
Representatives of Newfoundland were thereupon appointed to proceed to Ottawa to negotiate the final terms of union. Following full and friendly discussions, the terms were signed by the Canadian and Newfoundland representatives on December 11 last. A White Paper—which is on the Table—has been published and is now before your Lordships, giving the full text of those terms. As the noble Lord, Lord Rennell, has pointed out, those terms are very generous indeed. Let us see what they amount to. For a period of twelve years transitional grants are going to be made to Newfoundland. In the first three years they amount to no less than 6,500,000 dollars per year, gradually scaling down until in the twelfth year the figure will be 350,000 dollars. So, far from having been "sold," it looks as if Newfoundland has made a very good bargain and come out of the business very well indeed.
As your Lordships will remember, it was stated in the gracious Speech from the Throne at the opening of the present Session that legislation would be laid before Parliament to give effect to whatever decisions might result from the negotiations for admitting Newfoundland to the Canadian Confederation. His Majesty's Government in Canada are shortly expected to ask the Canadian Parliament to submit an Address requesting that an Act should be passed by Parliament at Westminster confirming the terms of union of Newfoundland with Canada. These terms and the Bill which will be presented to your Lordships' House are the outcome of the policy to which I have referred and of the decisions freely arrived at by a majority of the people of Newfoundland in the referendum of July, 1948.
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That, my Lords, is the actual statement of policy. It remains for me now only to answer such as I have not already answered of the direct questions that were put to me. The noble Lord asked me about the referendum figures. I have no hesitation in saying that an analysis of the figures shows that they represent the truth as clearly as they possibly could, and that everything was done under proper democratic conditions. The noble Lord also made reference to the matter of responsible Government. What has to be borne in mind is that the question which was put to the Newfoundlanders was whether they wished to go back to responsible government as it was before 1934. Their answer was most emphatic that they do not want to go back. And that was what one felt everywhere one went. The late Viscount Bennett, who knew something about this problem and with whom we discussed the matter when we had the debate of 1944, said, in the course of the debate:
"The fact is the Report of a Commission indicated that all the money that was borrowed did not find its last lodging place in the development of the country!"
That to a great extent led up to the position of affairs which has resulted so disastrously in recent times. The other matter I have already referred to, and that is the possibility since 1941 of a purely artificial prosperity resulting from war conditions. I might mention, in passing, that, since the war, Newfoundland from the strategic point of view has taken a much more prominent and important position than before.
The noble Lord, Lord Rennell, referred to the question of finance. It is just as well to remember that, under the form of government existing hitherto, the mass of the people have lived under conditions of something like poverty, with little or no social services. By reason of the fact that the population is spread out as it is, there is no local government whatsoever. One of the things that one tried to inculcate, when one went there, was a sense of the importance of local government. But matters are made much more difficult because means of communication are so slender. In the winter time there is no road across the Island, and, except for one local railway, there is hardly any means of transport. Moreover, their

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form of taxation bears of necessity very hardly on the poorest members of the community. In the pamphlet to which the noble Lord referred, and for which I was responsible, I said this:
"Under the present system, approximately 75 pet cent. of the revenue is derived from customs duties, 7½ per cent, from income and 2½ per cent. from liquor profits, thus being largely indirect and condemned by all in Newfoundland except a few rich merchants who consider that they are already sufficiently sacrificed to direct taxation. In the words of the Amulree Commission, 'The tariff is not the outcome of a scientifically considered policy.' One obvious and serious result is that the heaviest burden necessarily falls on the poor. Price control is also necessary. At present the merchant not only passes on to the consumer the import tax, but adds about 30 per cent. as his profit on the whole. The Amulree Commission remark that if prices were high, that was attributed to the machinations of the merchant or shopkeeper. The effect of the high tariff was not appreciated. Freedom from any requirement to make a direct contribution to the expenses of administration produce an indifference to waste and extravagance."
Another point to which the noble Lord, Lord Rennell, made reference was that the fishermen are never out of debt. They are supplied by merchants or financiers with their fishing gear and they are never able to pay off the debt. As they bring in the result of their catch, it is taken by the merchant or financier. That is one of the things that led to the decision of the Commission.
Here we have an Island that has been for about five hundred years attached to the British Empire, and somehow it has never been able to get quite free to develop and grow in the manner it ought to do. I suppose a finer body of people cannot be found anywhere than the Newfoundlanders. They are more British than the British, because there is hardly any other mixture of blood in the population; and perhaps one of the reasons for that is that there is no means of making money except by hard work! That may account for it in some degree. I found a feeling that there undoubtedly could be further development, and that the country could carry a larger population. I believe it can be done, with the co-operation and help of our Canadian friends, who are entering into this matter in a true and right spirit, not with any hope that they are going to make anything out of it themselves, but that if there is anything valuable there they may give the country a full oppor-
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tunity to develop it in a way that has never yet been done. By that means, not only will Newfoundland be benefiting herself, so far as most of the people are concerned, but I believe that the Empire as a whole will be strengthened.
3.40 p.m.
VISCOUNT SWINTON: My Lords, this is not an easy debate in which to take part. Deputising as I am for the noble Marquess, I very much wish that he were here to-day. It is right that I should say a word or two however, and I am sure your Lordships will expect me to do so. Of course, in any debate on this subject, we are in fact discussing what is virtually a fat accompli. When the Bill to establish the new Constitution of Newfoundland comes before us, we shall have the opportunity and the duty of considering that in great detail, and I think it right that we should confine ourselves to-day within a narrow compass on what is an important issue.
On reflection, I think that the noble Lord who moved this Motion will feel that he overstated his case, certainly in some particulars. I refer not so much to his legal arguments, with which I do not think I am qualified to deal, but to what I may call his political arguments. He said that in the action which had been taken we were tampering with democracy. Whether or not we have acted wisely in the way in which this has been done, certainly I think the last charge that could be brought against His Majesty's Government, or against either House of Parliament—because we are all involved in this—is that we have been tampering with democracy. After all, what does democracy mean? If it means anything, it means that the freely-expressed will of a people of a country should prevail. Moreover, I am sure that His Majesty's Government in this country, and His Majesty's Government in Canada, had only one intention, one desire—namely, that in the most effective way possible the people of Newfoundland should be consulted as to what they wished their future to be and should express that view.
I feel that that ought to be said, because we all have a responsibility in this matter. I do not think that anything should go out indicating that there was the faintest intention anywhere, in any Government or in any Parliament, other

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than that of giving Newfoundland that democratic chance. I think it is also fair to say that no one in either House challenged the announcement made on March 15, 1948, when the despatch to the Governor was published, of the form that the referendum would take and how it would be conducted, although we did understand that there would be three stages in this course. If the noble Viscount the Leader of the House casts his mind back, he will remember that, after he had made his statement, the Leader of the Opposition said (I paraphrase it): "I take it then that there will be three stages in this matter: A convention will sit. The convention will draw up its conclusions and forward them to His Majesty's Government; and then a plebiscite will be taken." The reference to that is Hansard of December 11, 1945, columns 544 and 545. Lord Cranborne (as he then was) stated:
"… I take it that His Majesty's Government … have no intention of precluding the people of Newfoundland from voting on the alternatives which the Convention may recommend."
The noble Viscount, Lord Addison, then said:
"I welcome the noble Lord's supplementary question. His Majesty's Government have no such intention. They hope that the Convention will be able to frame their recommendations in the form of questions to be submitted to the people of Newfoundland at the referendum."
I am bound to say that we who sit in either House must all agree that not only was a plebiscite foreseen but it was expressly provided for in the action which was taken.
I would go further and say that, assuming constitutional government in the old form had been re-established in Newfoundland, any Government would, I believe, have been morally bound to submit as an issue to the people of Newfoundland what they wished their future to be. Supposing that without any question we had restored constitutional government to Newfoundland, the same issues would have been there. The constitutional process followed would not have altered the economic or the physical facts of the situation, and any Newfoundland Government would have been morally bound to submit to the people of Newfoundland what their future should be. I am not in favour of a referendum is a normal process, for I think it is a
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bad normal process. I believe that to refer every sort and kind of matter on a referendum destroys Government responsibility, in the sense that a Government should take responsibility.
But it is an entirely different question when the whole future of a country has to be decided and when, as in this case, a perfectly simple issue can be put in a way which everybody must understand, in which everybody has an interest and upon which everybody, therefore, can give a direct vote. I do not think you ever get a vote of that kind at an Election. Even where there is the "hottest" issue at an Election, nobody will say that it is entirely decided on that issue. On this referendum, however, though the majority was not a large one, I do not think anybody would suggest other than that every single person who cast his vote in Newfoundland knew what he was voting for. Therefore, I believe the only practical way in which the decision could be taken by the people of Newfoundland was on a plebiscite. In the circumstances of the case, surely, a direct plebiscite was the practical and democratic way of giving the people of Newfoundland their opportunity?
I think that this House really accepted that—indeed, that both Houses did, as far back as December, 1945. But I do not think we anticipated there would be so much hurry; we anticipated rather closer consultation. On this I agree with the noble Lord, Lord Rennell. While, in my opinion, the taking of a plebiscite was undoubtedly necessary, and while I have no doubt that the result would have been the same—though it may be that the voting would have been stronger than it was—a closer consultation and adherence to what the noble Marquess, Lord Salisbury, called "the three stages" would, I feel, have been wise, and would probably have resulted in the people of Newfoundland feeling that they had been more closely consulted in the matter, or at any rate that they had had more time to make their representations.
But, my Lords, that is a criticism of the method it is not a criticism of the result. If I may say so (though it is entirely a matter for the people of Newfoundland to decide) I cannot resist the feeling that they have taken a wise decision. Behind them now, for they will not enter Canada in some inferior

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status, but will presumably have the full status of a province of that great Dominion, they will have the whole financial and economic strength of the Dominion of Canada. Having read the terms which were negotiated between the representatives of Newfoundland and the Canadian Government, I consider that the terms are generous and certainly, if I were looking upon it as an economic question, I would have no doubt as to where the balance of interest in this matter lies.
I take it that we shall have in the Bill which will have to be introduced in this country a clause setting out what is to be the future Constitution of Newfoundland as a province, and we shall then see exactly what rights are to be given. When the noble Lord who moved this Motion reflects upon that, and casts his mind on to how wide are the powers in all local government matters in a province of the Dominion of Canada, I think, he will not consider that Newfoundland, by the step which she is taking, is surrendering her freedom; but rather that in the greater entity of the Dominion of Canada she is maintaining her freedom and ensuring her prosperity. My Lords, I thought it right to say as much as I have. I think the only conclusion of this House in the circumstances in which we find ourselves (I hope it will be unanimous) will be that this decision having been taken by the people of Newfoundland, we wish them God-speed.
3.55 p.m.
THE LORD CHANCELLOR (VISCOUNT JOWITT): My Lords, by strange ill-fortune the Leader of the House, who ought to be replying to this discussion because he gave a great deal of time and thought to it as Secretary of State for Commonwealth Relations, is prevented from so doing by reason of the fact that he has a bad throat. I am in the unhappy position, therefore, of having to try to do what he would have done, whilst he listens. But he has always been benign to me, and I have no doubt he will be to-day! Had the noble Viscount been replying, however, I think he would have felt, after the speeches we have heard in this debate, that there is little that need be said. The speech of the noble Lord, Lord Ammon, so well informed as it was, so enriched by his personal knowledge of the subject, has,
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I think, left me little to answer, and I shall therefore occupy only a very short space of your Lordships' time.
So far as the legal issue is concerned, it is, of course, the fact that our Parliament is a sovereign Parliament, and one cannot place any restriction upon what our Parliament may do. It has been said that Parliament may do everything except turn a man into a woman. If Parliament enacted that, the courts would have to proceed on the assumption that the change had been made. Therefore legally there is no doubt that our Parliament is competent to do what it desires. But a difficulty arises. Your Lordships will remember that the Newfoundland Act of 1933 provided for the suspension, for a temporary period, of the existing government and contemplated that on request we should restore that government. There obviously is a lacuna, because it was never provided how the request was to be made. It was laid down that the government should not be restored until a request was made, and there was no provision as to how the request could be made or who could make it. That was the difficulty. As to whether Newfoundland is or is not self-supporting, I will not attempt to add to the observations that have been made, nor to detract from them. But this, at least, is quite plain: that there never has been a request for the restoration of responsible government. Such a request could have been made on two occasions, but it was not made.
That being so, we cannot follow the Act of 1933, which sets out in the Annexe the following extract from the Royal Commission:
"It would be understood that as soon as the Island's difficulties are overcome and the country is again self-supporting, responsible government, on request from the people of Newfoundland, would be restored."
There were two conditions for the restoration of responsible government. One was that the Island's difficulties would be overcome, and the second was that a request had been made, and a request has never been made. There being that lacuna, it is obvious, is it not, if one tries to follow democratic processes, that the best form of request one can get is a request from the people by means of a plebiscite. What better authority for a request can one have? So the matter was

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referred to the people in the plebiscite, and again the people have not by a majority requested the restoration of responsible government. On the contrary, in the second plebiscite which was taken, the people requested by a substantial majority—more substantial still if one considers the electoral district divisions in which the vote was taken—that there should be union with Canada. Consequently, negotiations have take place and provisional terms have been drawn up.
I agree with Lord Rennell that this is rather a delicate subject at the present time, because I believe that at this very moment of time the Canadian Parliament are debating the matter—at any rate, if they are not actually doing so now they will be in a few days' time. But the Agreement has been drawn up and it contains this clause:
"These terms are agreed to subject to their being approved by the Parliament of Canada and the Government of Newfoundland; shall take effect notwithstanding the Newfoundland Act. 1933, or any instrument issued pursuant thereto; and shall come into force immediately before the expiration of the thirty-first day of March. 1949, if His Majesty has theretofore given His Assent to an Act of the Parliament of the United Kingdom of Great Britain and Northern Ireland confirming the same."
Consequently, before March 31 proposals will be made to confirm the terms of this Agreement and, of course it will be open to your Lordships, if you are so minded, to discuss and debate the terms.
The terms provide for the future constitution of Newfoundland as a province of Canada. They set out in full the details of the Constitution. They provide how many members Newfoundland is to return to the Canadian Senate and to the Canadian House of Commons. Indeed, they deal with all aspects of the matter. I must say, though I do not pose as an expert in this matter at all, that it seems to me that the proposals Canada is making are by no means ungenerous. It certainly is a fact that for many years to come this will entail a heavy burden on the people of Canada. Therefore, any suggestion to the effect that we have "sold" Newfoundland, or anything of that sort, is quite beside the point. We, in this country, have not sought to take and have not in fact taken a penny piece out of it, and Canada, for her part, is also paying, a very heavy price for the
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chance of getting Newfoundland going again.
I have never been to Newfoundland, and I have never seen it, but I have read many papers about it. I am not going to impute blame to one Party or to any one group of people, but I do think that we all shamefully neglected our duties there. The fact that there is not a road, or hardly a road, on the Island, the fact that there is practically no education and the fact that such things as a drainage system are really non-existent, seem to indicate that it is a great pity that in the old days, when we had rather more money than we have to-day, we did not spend some of it on the development of that island. But we did not do so, and there were, as we all know, unhappy incidents with regard to the Island, on which none of us need now dwell. What we have to consider is what can best be done in the interests of the people of the Island. In this connection I would like to say that all those people with whom I have discussed the matter believe that this is the best proposal.
The people of Canada, subject to what their Parliament says in the next few days, appear to be willing to take on this onerous responsibility. They will try to give the people of Newfoundland some of the benefits which the various provinces of Canada now enjoy. And to be a province of Canada is to be well within the bounds of democracy and democratic Government. I therefore submit to your Lordships that the course which we are taking is the right one, and I venture to hope that the opportunity which is now given may not be lost. However that may be, obviously in the course of a few days—certainly in a few weeks—your Lordships will have before you a Bill (that is, presuming the proposal goes through the Canadian Parliament) confirming the Agreement which has been come to, on which your Lordships, if so minded, can make what pronouncement you like.
LORD AMMON: My Lords, may I, with your Lordships' permission, correct a slight misstatement which I made during the course of my speech. I said that, speaking from my experience when there, there was no direct taxation on the island. I am informed that now 60 per cent. of the revenue comes from direct taxation. There is also in operation

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some system of local government. I apologise to the House, and, as your Lordships will note, I have taken the first opportunity open to me to correct my mistake.
4.7 p.m.
LORD SEMPILL: My Lords, I would like to thank the noble and learned Viscount who sits on the Woolsack for his intervention in the debate. I have taken careful note of what he said. I thank also my noble friend, Lord Ammon, for his long speech. When my noble friend, Lord Lucas of Chilworth, mentioned that Lord Ammon would like to speak again, I thought that perhaps Lord Ammon was having second thoughts, and I hoped that he was going to give way to my suggestion. I learn now that I was wrong. I thank your Lordships who have spoken in this debate. I cannot say that, personally, I am at all satisfied with the replies—it would not be right if I said I was. I ask your Lordships' leave to withdraw my Motion and, in doing so, I would like to say that I propose at the earliest possible moment to introduce a Bill to be entitled "The Newfoundland Liberation Bill," and I will take the normal steps to that end. I thank your Lordships.
Motion for Papers, by leave, withdrawn.

POSITION OF SMALL TRADERS
4.8 p.m.
LORD LLOYD LORD LLOYD rose to call attention to the position of the small trader in this country; and to move for Papers. The noble Lord said: My Lords, if my Motion refers specifically to the small trader, it is because I feel that in these days of mass organisation the interests of the small man in this country are tending increasingly to be overlooked but in that the majority of small traders are to be found in the field of distribution, and particularly in that of retail distribution, I realise that my Motion does, in fact, cover a very large subject. Indeed, it may be said to cover the sale of practically every article from a Rolls Royce car to a Rolls razor, and to deal with every kind of business, from a department store to a barrow boy.
With so large and complex a subject, I feel that any detailed approach is impossible for me in the time at my disposal
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this afternoon. Nor, in any case, am I qualified to speak on the intricacies of the main industries and businesses involved. My approach is entirely that of the consumer, for I am myself a consumer, and, clearly, my main concern is for the retailer, partly because most of the small men happen to be in the retail side of the business, but also because the retailer is the man with whom I chiefly deal. Upon his courtesy and upon his efficiency depend most of my daisy needs, and a good deal of my comfort and convenience. Therefore, I was rather surprised some months ago to note that the Chancellor of the Exchequer, in reply to a question in another place, said that the independent trader represented no one but himself.
Obviously, the independent trader represents his own interests, but if he gives good service and a variety of choice to the consumer, surely he represents the consumer's interests as well. Indeed, if I may say so this remark of the Chancellor was just another example of the attitude of mind which is unfortunately too common in the ranks of the Party opposite. I refer to that apparent inability to understand that the man who is independent, who is not organised in some union or other, can still be a valuable member of the community. The Chancellor of the Exchequer stated that the independent trader represents no one. It would be more true to say that there is nobody in the Socialist Party who represents the independent trader.
It is this fact and this mental attitude which I believe are responsible for the Government's neglect of the interests of the private trader over the last three and half years. Since 1945, all enterprise in this country has been handicapped by excessive interference on the part of the Government. Nobody, however, has suffered more than the small man, partly because of his more limited capital resources, which make a quick turnover vital to him and the increased costs difficult to absorb; and even more, I think, because he is the ultimate link with the consumer. It is upon him, more than upon others further up the line of distribution, that the burden of Government control has fallen most heavily. He it is upon whom the snoopers snoop, and if they snoop successfully he may be con-

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victed of an offence. If he is convicted, the penalties that face him are serious.
I should like to quote to your Lordships, if I may, the remarks of Mr. Justice Hallett at a recent Assize in Norfolk. He said to the prisoner:
"Parliament has given power to the Minister to put out of business anyone to whom he takes a dislike. Unfortunately, you are one of those people. You have been put in a very difficult position. Because you have got a simile black mark, the Minister has now deprived you of making the livelihood you previously earned. It has nothing to do with me. The Court can exercise no control over the actions of Ministers."
That is the sort of penalties with which the trader is faced. Usually it is he, more than anybody else, who is most completely submerged beneath the sea of forms which nowadays seem to encumber the simplest transaction. The first problem that confronts him is the control of the retail and wholesale prices of nearly every commodity to-day. As the result of this, he is faced with a fixed margin of potential profit, from which his costs have to be found. And these, like everything else, are continually rising.
Wages have more than doubled since before the war. Rates also have gone up, and in this connection it is interesting to note that the 1929 Derating Act, which relieved industry of 75 per cent. of its rates, did not include the shopkeeper. The cost of repairs and maintenance, again, have increased enormously and there is the cost of the controls themselves. A reputable trade paper states that clothes rationing has accounted for 5½ per cent. of the work of the whole of the staff engaged in the retail clothing and textile trades. This represents the work of no fewer than 20,000 people. Again, owing to nationalisation, the small trader has had to pay more for his coal, gas, electricity and his freights, not to mention the heavy loss which these industries have incurred and which are reflected in the crippling and unpleasant tax demands which he, like all of us, from time to time receives, and which make it difficult for him to plough back any profits or build up reserves.
If it were a question merely of running costs rising steadily, as they have risen, I would not say that existing profit margins are necessarily unreasonable. It is true that some of them date back as
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far as 1939, and are obviously outmoded. But even so, there are marry which would not be unreasonable if it were a question of running costs alone. But one of the greatest handicaps which the small man has to face to-day is the greatly increased capital expenditure and risk of capital loss. The cost of replacement of stock has risen at least three times what it was before the war and, of course, requires a great deal more finance. This difficulty is aggravated in its turn by purchase tax, whereby the small man becomes an unpaid tax collector for the Government. He pays tax when he buys goods, and he recovers the tax if and when he sells goods. In the interval he is forced to loan the Government, free of interest, the amount of the tax. It is estimated that at the present time some £60,000,000 is being carried by the retail trade in purchase tax.
What is the result of this? The small trader has two alternatives: either to reduce his stocks, and thus reduce his turnover and profits, or go to a bank and ask them to finance his purchase tax. Whichever he does, he is worse off. And if his goods do not sell quickly, or if in the meantime purchase tax is reduced, he is faced with a capital loss. This is a bad tax. It is had for the trader himself, and bad for the consumer, because it encourages the trader to carry smaller stocks and to concentrate on utility lines which do not carry purchase tax. It is also bad for the export trade because it discourages manufacturers of new types of goods, which by their very novelty are risky and which wholesalers and retailers are not prepared to handle. The effect of high prices, high taxation and purchase tax has enormously increased the capital resources which are necessary for the small trader if he is to carry on. No allowance is made by the Inland Revenue for these greatly increased costs. Where is the small trader to find the additional capital? There are only two ways: either to go once more to the bank and borrow, which is not a healthy state of affairs, or to find it out of his profits margin. If he finds it that way, there is little profit left to the trader.
I turn now from increased costs to increased competition. The small trader to-day has to face greatly increased competition. On these Benches we have no objection to free competition—that

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particular phobia is reserved for the Government's nationalised industries. But we have a predilection for fair competition, and I think that is more than can be said for some of the competition which the small man has to face to-day. In the first place, there are the co-operative societies, which have been his competitors for many years and have enjoyed for many years certain advantages in taxation. Some people citicise the tax immunity of the "divi." I do not quarrel so much with this as with the fact that the profit from trading with non-members may be included in the gross profits from which the "divi." is declared. As a result, it is possible to pay a larger "divi.," and some of these profits escape the taxation which they should properly pay.
This is not the only advantage enjoyed by the co-operative societies. In general, of course, they enjoy the benefit of intimate relations with the Socialist Party, both personal and, I believe, financial. In particular, they happen to enjoy the special favour of the Minister of Food, if the Christmas allocation of poultry, rabbits and sugar is any guide. More important still, they appear, if The Times is correct, to enjoy, with the T.U.C., the special confidence of the Government, when it comes to the question of framing the future policy of the Government. I understand, again from The Times, that these discussions have been going on for some time and have not been entirely harmonious. This lack of harmony seems to be most regrettable; but even more regrettable is the fact that discussions of such importance on the future of distribution should have been held without the participation of the private trader.
I turn from the co-operative societies to municipal trading which, as your Lordships know, has been encouraged by the Government in their Local Government Act. Such competition has within it the seeds of injustice, because it can be subsidised out of the rates, not only without the citizens' poll, but also without the production of the balance sheet. As a result, the private trader may well be forced to subsidise his own competitior.
Finally, there is uncertainty about the future. Uncertainty and lack of stability are the greatest enemies of our economic recovery. Heaven knows, enough dislo-
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cation has been caused by past nationalisation schemes of the Government, but if the evil were confined to the follies already committed, I think there would be more hope for the future. However, some of the more exuberant supporters of the Government, having tasted blood, so to speak, clamour for more, and their views may easily be found in any of those very reputable organs which purvey the views of that particular section of the Party, among them, of course, the New Statesman, from which I should like to quote a few words from an article written anonymously by a Labour M.P., in which he discusses the future programme of the Socialist Party. He says:
"The second main theme of the 1950 programme must be the cost of living.… In the first place, the programme must contain proposals for cutting both the profit margins and the waste man-power in the distributive trades with a view to lowering prices."
The other passage I would like to quote, as one would expect, coming from The Tribune, is in a rather more robust tone, and is written by Mr. Nally, M.P. That says:
"The nation to-day carries a massive burden in an inflated, expensive and often grossly inefficient distributive system, most marked in food. It is necessary to provide new and efficient machinery for handling the people's food and eliminating the horde of parasitic profit-makers who dip so deeply into the housewife's purse. The solution lies somewhere in the field of State co-operative partnership. The best argument for nationalisation is the success of industries already nationalised."
As I read that, I wondered how much loss an industry had to make before Mr. Nally would consider it a failure.
The noble Lord who is to reply will probably tell me that statements from such sources are of no importance and do not represent the views of His Majesty's Government, and I dare say he will be quite fair in doing that. But I am not so certain that he would convince the small trader, because the small trader has seen too many examples where the Government, like the Duke of Plaza Toro, have preferred to lead their regiment from behind. We have had too many examples of what is said by the back-bencher to-day being done by the Front Bench to-morrow. What is more, we know that the General Council of the T.U.C. has recommended rationalisation of distribution, and we know from The Times that discussions have been

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going on for a very long time. Therefore, it is not entirely surprising that amongst the small men there should be certain anxiety and apprehension, and that the forthcoming census of distribution is apt to be regarded as little more than a Trojan horse—a gift horse which I believe they will look very firmly in the stomach.
What is the result? The difficulties to which I have referred are only a few of those which confront the small trader. I have deliberately ignored the normal trade risks which every trader has to accept, and have concentrated on what seem to me to be the additional and unnecessary burdens which the Government have inflicted upon them and which make the retail trade an uninviting proposition to those already engaged in it and also to those who might otherwise have set up on their own. Faced with a limited chance of profit, and an unlimited chance of loss, it would be scarcely surprising if the small man decided to get out while the going was good. If the Annual Abstract of Statistics is at all correct, this appears to be what he is doing, certainly in the retail food trade. Between 1944 and 1947 there were 3,000 fewer independent retailers and 1,000 more co-operative stores and multiples. That appears to be the trend.
To anybody who, like myself, believes in the small man and wishes to see him have a fair chance, this picture is a disturbing one. If we were to apply to the Government the legal maxim that a man must be held to intend the logical consequences of his actions, I think it would not be unreasonable to conclude that the Government wish to eliminate the small man and set up some alternative system. I am anxious to be fair. I am not entirely certain that we can apply such a maxim to such a Government of planners. We all know that many of the things which they have planned have not happened, and, conversely, that many things which have happened are precisely what they have not planned. I feel, in the circumstances, that we ought to give them the benefit of the doubt. At the same time, I feel that if we treat them with this generosity, we are entitled to get from them some indication of their attitude to the small
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trader in particular, and to distribution in general.
I hope when the noble Lord comes to reply he will be able to tell me that in future the policy of the Government will be to assist the small man, and to make the existing system work rather than to attempt one more reorganisation of our economic system. I know it is argued that the existing system is wasteful in man-power and extravagant in operation, but I do not find this generalisation any more convincing than a great many other generalisations which I have heard. Of course, no system is perfect, and it may well be that there are individual cases of exploitation which merit investigation and appropriate action. But individual cases do not condemn a system. I suggest to the Government, with great respect, that if they are really anxious to save man-power and reduce prices, there are many more obvious fields in which they might try their hands.
For example, consider the vast bureaucracy which they have set up; consider the waste of industrial and commercial man-power in operating the innumerable controls, and consider the expense to the consumer of bulk purchase and the high losses incurred by, and the high prices demanded by, the nationalised industries. Are these extravagances to be left untouched for problematical economy in distribution? Nor is price the only factor; convenience and consumers' choice are matters of great importance. To achieve such service the wholesaler and retailer have to take risks. Surely they are entitled to some reward. Undoubtedly, if a number of retail shops were amalgamated into large units it might be cheaper; but many consumers would be further away from essential sources of supply. Again, if everybody were compelled to wear the same clothes, eat the same food and use the same utensils and furniture, it would be cheaper. But, in that case, I would suggest that the Government hand over to Mr. Harry Pollitt right away.
I hope that in replying the noble Lord will be able to repudiate the views of the Party extremists and to say that the Government intend to encourage the small man. I hope it will be possible to take immediate steps to remedy some of the evils to which I have drawn attention

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this afternoon, and, in particular, the evil system of purchase tax—which I think should be abolished or, at least, the unjust method of its collection should be. I should like to see the introduction of some system of tax allowances which will take into account the small trader's capital expenses. Finally, I would like to see the abolition of clothes rationing, which, I understand, was recommended to the Minister as long ago as November last.
In conclusion, I wish to say this. If the Government do the things which I have suggested, I feel sure they will strengthen not only the economic but the moral and social structure of our country. There is much talk to-day of democracy and freedom. I believe that in many ways fewer people are really free. There is a tendency for the concentration of industry and commerce into ever larger unions. The Government have done their best to accelerate this tendency by creating new monopolies at the rate of rather more than one a year. It may be that these processes are the inevitable result of the industrial and technical advances of modern times. But, inevitable or not, I cannot believe that the social results are desirable, or that further concentration should be encouraged unless it is absolutely inevitable and necessary. More and more people are becoming dependent upon somebody else, not only for their living but also for their homes, their food, their clothes and their education.
This increasing dependence seems to me to weaken the qualities which spring from freedom alone—the qualities of independence, initiative, thrift, courage and responsibility. As a nation we have owed much to those qualities in the past, and I cannot believe that in the future we can hope to survive without them. These are the qualities which are perhaps particularly those of the small trader. I feel, therefore, that it is a matter of national importance that one field, at any rate, in our economic life should be left where the small trader can operate and where men of initiative and character can start up on their own. Napoleon called us "a nation of shopkeepers." Perhaps we were: but is not that precisely the reason why we eventually defeated Napoleon? Again, let us remember that it was the small
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man who made possible the miracle of Dunkirk. I beg to move for Papers.
4.32 p.m.
THE MARQUESS OF READING: My Lords, there will be general assent to the proposition that this has been a valuable and a timely Motion, and we on these Benches certainly desire to associate ourselves with it. We have always endeavoured to support the cause of the small man, and I hope we shall continue to do so until such time as the Marxian millennium has annihilated him. I hope that in replying to this Motion the Government may see fit to give us some general indication of their policy—if there be one—in regard to this important subject, for not only would your Lordships welcome a clarification of their views, but I am certain that many thousands of small traders would be glad at this stage to have their profound anxieties and apprehensions either relieved or confirmed.
There have in the past been many attempts by psychologists, sociologists, and even by politicians, to classify mankind. Perhaps one division which would receive a fairly general acceptance would be a division into masters and servants. I would not be misunderstood: I do not mean a slave State, in which all the commissars come first and the rest nowhere. But I mean that there are many men who, by temperament, prefer to be servants, often at high altitude—leading servants of the State, of great corporations or of vast institutions, but none the less servants—whereas there are others who constitutionally are prepared to remain in the foothills, providing always that they can be their own masters. It is from that latter class that the great bulk of the small traders of this country are, drawn. It is often said nowadays that they are uneconomic, and the epithet "uneconomic" on this side of the Iron Curtain is regarded as more or less the equivalent of "bourgeois" on the other side. Yet they form a most valuable section of the community, for they are people, who, as regards the great mass of them, possess qualities of enterprise, of tenacity and of independence.
Those may be middle-class virtues, but at the same time we know now, from the recent panegyrics of the Lord President of the Council, that the middle class possess almost as many virtues as they do votes. Yet

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it was just this class of persons, the small shopkeeper, who suffered perhaps more acutely during the years of the war than any other section of the populace. The man was called up into the Forces, possibly, after a period of deferment; the woman, perhaps, making an effort to carry on the business for a time and then finding herself in a factory, and the business perhaps brought to a standstill, if not actually destroyed, by enemy action. When he came out there was no Reinstatement Act to put him back into the position that he had held in employment before the war. He had to start again, with no premises, no stock; and in the interval the value of the kind of site that he wanted for a shop had mounted to a height which made any such sum as he was likely to receive as gratuity totally unable to cope with the problem of establishing himself afresh.
The wonder is that so many of these small men did manage, in spite of all those handicaps, somehow to reassert themselves and to re-establish themselves in business on their return. Surely that is a potent indication that there is for these people, in the life of this country, a sure and definite niche. There are some amongst them, and perhaps more outside their ranks, who lean occasionally towards the perpetuation of the policy whereby methods of restriction shall be applied: that in a particular area there shall be only so many greengrocers, so many chemists, so many butchers or whatever it may be. I cannot but think that those who support that view are mistaken. It may be that shopping is rationed, but that seems to me no reason why shops should be rationed. It may be that you cannot buy what you want, but you might at least buy where you want. The spectacle of Whitehall allocating greengrocers to Blackpool may have merits as a colour scheme, but it seems to me to have little else to recommend it.
It is true, of course, that in the years before the war these small traders were peculiarly vulnerable in times of economic depression; but the small man was not the only person who foundered during those days. Of course, it is easier for the big concern to close down a few of its unprofitable branches, or to draw for a time upon its reserves. The small man
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has no branches, and he is unlikely to have much in the way of reserves; and therefore in a time which it was then the fashion to call an economic blizzard he is prone to perish. The fact remains that people in this country, or many of them, like buying from small shops. Many of your Lordships know small areas, even in the heart of London, where something of the atmosphere of the village is still retained and where there are small, almost "village," general shops to which people go because they enjoy going there—an action which is, of course, very anti-social and unregenerate, but they continue to do so. There is a certain satisfaction in going into a shop where one is known to the shopkeeper and where one's wants are known and catered for. On the other hand, there is very little satisfaction to be obtained from dropping into Selfridge's, or Harrods, for a few minutes' heartening gossip during the morning round. Therefore, there remains constant this desire for the small shop. It may be bad planning, but it is pleasant shopping.
Reference to planning brings my attention to another aspect. I have tried to follow by plans, by maps and by models, many of these designs for the Gardens of Eden (perhaps, in order to avoid political recrimination, I ought to call them "Gardens of Silkin") which are about to spring up over the country. I cannot help wondering whether, in these designs, any real provision is made for the retention of the small shopkeeper as such. When I study these various things, I see that at recurrent—I sometimes think too infrequently recurrent—intervals, there are on these plans the rather intimidating words "Shopping centre." I sometimes wonder whether some of those who are busily designing these new places have in mind a shopping centre consisting only of plate glass and chromium steel, with an ant-heap of flats above. That is not what many people regard as a shopping centre; it is a place where the multiple shops and the general stores may well be able to accommodate themselves, but it is far outside the scope of the small man.
Is it too much to expect that in these new towns there will be areas, separate from the main and more grandiose centre, where people can still perform the operation known as "running round the corner to get something"? Too

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many of these big shopping centres would appear from the evidence of the maps of these towns to be at an unreasonable distance from the homes of the smaller people who will have to live there. Moreover, one wonders whether it is the intention to confine shopping centres and other arrangements for shopkeeping to the lock-up shop, or whether there is to be provision for the man who wants to live over his shop, and who does not want to incur the transport costs of going to and from his business, perhaps once or twice a day. I think it is true to say that there is something very attractive about the atmosphere of a shop which, when you go into it, discloses a parlour beyond and the life of a family going on. It is preferable to merely going into a lock-up shop which has nothing behind it but a store, which may or may not contain anything, according to whether or not the ration supplies have arrived.
These points need looking at with care when new towns are being developed. The small man has much to contend with in these days. He has the present rating system, which may later require overhaul; he has difficulties in regard to arrangements in restraint of trade; he has the competition of the co-operative societies, and the competition of municipal trading. Let those in whose eyes size is the only merit reflect sometimes that the majority of these great stores that have come into being, here and elsewhere in the world, have in many, if not in most, cases sprung from one humble shop, started years ago by a man of vision and energy. And let them not be in too great a hurry to eliminate the small trader from the society of the future. If he is suffered to survive, the country as a whole, in ways not only tangible but intangible, will be the richer for his survival.
4.47 p.m.
LORD WILLIAMS: My Lords, I welcome the opportunity of taking part in this debate, and I should like to make early reference, if I may, to the Annual Abstract of Statistics, which was quoted by the noble Lord, Lord Lloyd. Unfortunately, in the Abstract of Statistics they have departed from the classification which they laid down in 1940, inasmuch as they have excluded all retail shops that are not dealing in sugar; all shops with no sugar registrations are, so far as
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the grocery and provision sides are concerned, excluded from the figures. In the year 1947 those shops numbered no less than 19,000. Tea shops were also excluded; by that I mean shops dealing by way of speciality in the sale of tea and coffee. Nearly 24,000 of these did not appear in the figures of the year 1947. Had the noble Lord quoted a figure for 1940 the comparison would have been much worse than it was, because in 1940 there were 166,900 independent retailers—that is, on the grocery and provision side—whereas in 1947 the figure had dropped to 120,400. The difference, in my opinion, is due to the fact that all those shops that had less than twenty-five sugar registrations ceased to be able to supply sugar, and they have been excluded from this particular figure.
In order to confirm my impression I should like to give your Lordships percentages of sugar registrations of the multiples, the co-operatives and the independent retailers. Taking the year 1940 as the basis, the multiples had 24 per cent. of the sugar registrations, the co-operatives 28 per cent. and the independent retailers 48 per cent. In 1947, out of sugar registrations totalling 46,891,000 the multiples held 21.4 per cent., the co-operatives 26.5 per cent. and the independent retailers 52.1 per cent. As compared with the year 1940, therefore, the independent retailers had improved their position to the extent of 4.1 per cent.
I am not going to enter into the general argument regarding the merits or demerits of the small trader. Suffice it to say that the small trader for the last hundred years has occupied an important position in the distributive economy of the country. My own opinion is that he will continue to play an important part in the distributive economy of the country, but I think it is essential, in his own interests, that the small trader should try to rationalise himself; because, unless we are to get efficiency from the small trader, he will cease to exist. We hear from time to time that, so far as nationalised industries are concerned, one of the essentials is that of efficiency. I do not quarrel with that. I think it is essential that there should be efficiency. But we cannot restrict efficiency merely to one form of industry. It has to apply to every branch of industry, whether it is nationalised, and whether it is distributive.

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In that connection, I would like to draw the attention of your Lordships' House to an extract from the Grocer dated April 18, 1942. It deals with a speech that was given by Mr. C. P. Houghton, who at that time was the head of the Wholesale and Retail Section of the Ministry of Food. He was dealing with the question of sector distribution. This is what it said:
"Mr. Houghton said one of the most uneconomic forms of trading was the supply of small parcels of goods transported long distances from different sources. Out of a random sample of fifty-seven retail shops, they found that the average number of wholesalers per shop was 6.9 and the number of manufacturers supplying the average shop"—
that is, of the 57 samples—
"was 33.6. Of a larger retail shop with 1,480 registrations the retailer had twenty-four wholesalers and ninety-nine manufacturers. Another retailer with 600 registrations had ten wholesalers and sixty manufacturers supplying him."
Whether we like it or not, one has to accept the position that there is need for some form of rationalisation so far as those particular distributors are concerned.
One would have imagined from the speech of the noble Lord that nearly all the small traders were going out of existence because of the competition of the co-operatives and the multiples. In the case of grocery, provisions and general, the multiples in 1940 had 15,000 shops; in 1947 they had grown to 15,300 shops. In 1940, the co-operatives had 9,500 shops, and that number had grown by 1947 to 10,300. When we come to butchery establishments—again, small traders operate in that particular branch of foodstuffs—we find that the multiples had 10,448 shops and the co-operatives 5,420, while the independent retailers had 29,317. The trade of the multiples per shop was £95 per week, and of the co-operatives £85 per week, while the independent retailers, who are the small people, were able to do a trade of £64 per week.
When we turn to another branch of the trade into which small people enter more frequently than into any other branch—that is, the sale of sugar confectionery and chocolate—there is really an interesting story to tell. On the grocery side, where they sell sugar confectionery and chocolate, the multiples had 7,760
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outlets, and the co-operatives 8,193, while the independent grocers had outlets numbering 108,981. In the case of sugar confectionery shops proper, including tobacconists and newsagents—and anybody who has a little capital and does not know very much about business generally wants to buy that particular type of business because he thinks it is easy to run—the multiples had 3,111 outlets, the co-operatives none, and the independents 91,406. If you take a combination of those selling points of confectionery and chocolate, you find that the multiples had 4.8 per cent. and the co-operatives 3.62 per cent., while the independents had 90.69 per cent. My noble friend will agree that, on that account at any rate, there is not very much competition with the co-operatives.
I was glad to hear the noble Lord say that he was not interested in the question of taxing the dividends of the co-operative societies, but there are some people who are very anxious to do that. I should like to present to your Lordships' House a point of view which is often ignored in a consideration of this subject. It is that, if there were taxation of the co-operative dividend, the co-operatives could avoid payment of that tax by reducing their prices after allowing for costs of distribution. In the year 1947, the co-operatives distributed £39,500,000 by way of dividend on purchases. That represented roughly 8.92 per cent. of turnover. The national retail trade (excluding alcoholic beverages) was £3,743,000,000, and if all the shops had a return on their trade similar to that of the co-operatives, there would have been a surplus of £294,000,000. It is a very simple question to ask, What would have been the effect on the small trader if co-operatives had cut their prices by 8.93 per cent.? If the small traders had had to follow, there would have been no surplus available for them to carry on their businesses, and therefore no return upon them.
May I, for a moment, deal with one other point raised by the noble Lord—the question of the allocation of poultry, rabbits and sugar over Christmas. Incidentally, the Minister of Food, in deciding upon a new allocation, did a vast amount of good, so far as some of the small traders were concerned. He did it for this reason: that poultry and rabbits had been allocated on the basis

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of a datum performance. That datum performance related to supplies taken in 1939. The same thing had applied to points goods, such as canned fruits, canned salmon and canned meats. Any small trader who was operating in 1939 and had a small performance in the purchase of those commodities was not able to get any increased allocation, irrespective of the additional registrations which he might have. It is true to say that, as the sugar registrations of the independent retailer increased by 4.1 per cent. in 1947, we secured his additional supplies. When the Minister made the departure from datum he benefited to the same extent as the co-operatives. The only people who suffered were those independents or multiples who had lost sugar registrations.
In the case of rabbits, in spite of the fact that the co-operative movement has about 16 per cent. of the meat registrations of the country, it was allowed only 1½ per cent. of the supplies that came in. The departure made by the Minister gave to the co-operative movement roughly 11½ per cent. against the 1½ per cent., but still left them 4½ per cent. short, based on meat registrations. But that departure of the Minister had this very important effect. Those who were merchants and wholesalers were holding stocks in the hope that when it came to Christmas they would be able to dispose of them on the black market, but once supplies reached co-operative shops they had to give supplies to their own people at prices which were rather less than they had anticipated getting.
In conclusion, may I say that when you talk of small people and the desires of small traders you must not ignore the fact that the co-operatives represent roughly 10,000,000 small people who have subscribed a small amount of capital to enter into business on their own account, and that out of their mutual trade they return to themselves the difference between the costs of distribution and the selling values. Last year there was a distribution of roughly £40,000,000 which represented no less than £4 per membership of the co-operative movement, and that £4 added materially to the value of real wages. I have every sympathy with the small trader, but in putting forward his claims do not let us forget that justice should be meted out to those 10,000,000 people who trade for their mutual benefit.
5.3 p.m.
LORD BALFOUR OF INCHRYE: My Lords, I am sure that every member of your Lordships House is grateful to my noble friend Lord Lloyd for having raised this vital subject. I believe I am correct in saying that this is the first occasion either in this House or in another place since the end of the war where the focus of Parliamentary searchlight has been put upon the small trader. It seems to me that we should fairly and reasonably ask ourselves certain questions as regards the small trader. The first is: Is he necessary? The second is: If he is necessary, can he survive? Thirdly, if he is to survive, are there steps which should be taken now in order to help him so to do? I propose, with your Lordships' permission, briefly to examine those three questions.
I submit that his value is very great, and in assessing his value it is worth remembering the pre-war trading figures. We have had many figures this afternoon dealing with the periods before, during and after the war, but the first set I would like to give you are those given for the division of total retail sales in 1939. For my information, always wishing to convince noble Lords opposite that the source of information is good in their eyes, I went to an authority on this subject—a Mr. Hoffmann of the Union of Shop, Distributive and Allied Workers. In 1939, approximately 9 per cent, of the retail trade was done by co-operative stores, 26 per cent, by multiple stores, while independent shops of various kinds, including street traders, did the remaining 65 per cent. With those figures I think we establish at any rate that before the war the small trader played a very large and important part in community life.
As regards his actual service to the community, my noble friend Lord Reading made a moving appeal for recognition of that service. I think it is widely recognised, and it has been well put by the noble Lord, Lord Strabolgi, who unfortunately is not in the House. From the Benches opposite he put the matter clearly during a debate on a Bill dealing with the reinstatement of retail shop premises when he said this:
"In theory, the big unit, the big chain store, should give better service, but in practice that is not the case. The decent little shopkeeper is usually the man who gives you by far the

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best, for the simple reason that he depends on good will for his livelihood."
My Lords, as my noble friend said, housewives are extremely anti-social as regards the theoretically planned State, where they have to do as they are told, because they insist on continuing with their preference for the "little man round the corner."
The noble Lord, Lord Williams, said that efficient economy of distribution was really, as it were, the test as to whether a system of small traders should or should not be encouraged to survive. He said, "If you on those Benches insist on efficiency and economy in nationalised industries, you must also insist upon it when you put forward your point of view for the survival of the small trader "I think that puts his observation fairly. I have heard so often from those Benches, in regard to losses in nationalised industries, and particularly aviation, the defence that they have such great social importance, and therefore we must not be so small-minded as to look at the pounds, shillings and pence, but must accept the grander conception of value in regard to those industries. I would only say that if the noble Lord, Lord Williams, advances that point of view from that side of the House, we also are entitled to advance it; and I submit that the cost of distribution is not the final and complete test of the value of the small trader. The independent trader preserves competition, because if he "goes to the wall" the retail trade remains to be divided up and fought for between the co-operative stores, the municipal enterprises and the multiple combines.
I believe also that it is good for the commercial vitality of the nation that there should be channels or an opportunity for small men who refuse to become planned cogs, following that perfect blue print of the totally planned England which allows no place for the small trader. One has but to read the literature of the theoretical planners to come to that conclusion. But the individualist insists on opening shops where he thinks there is a need, even though the planned blue print may say it is not necessary. We on this side of the House reject absolutely the point of view which has been put forward by Sir Joseph
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Hallsworth at the Blackpool Conference of the Union of Shop, Distributive and Allied Workers. He said there:
"Anyone with sufficient money and impudence can 'crash into' the distributive trades."
That seems to me a most reprehensible sentiment to put forward. Since when has a Britisher who is willing to risk his skill and his resources in pioneering his own way of commerce deserved the label "impudent"?
My Lords, I think there is a moral value of the small trader, because he forms a close social contact between the supplier and the consumer. The small trader is a member of his community; he spends his takings in the community. Often he is engaged in local government, and almost certainly he is engaged in the work of the local chamber of trade. He serves his community and he spends his profit locally, whereas the hard-working members of the staffs of multiple shops and co-operative stores are always answerable for policy and profits to some great organisation at the centre. There is a great danger that we may not pay sufficient attention to the question which we have to answer now: Can the small trader survive?
That survival must depend on the Government's attitude and intentions. We have had a reassuring speech from the noble Lord, Lord Williams, who has played such a distinguished part in the Co-operative Movement. He has said, in effect, "Good luck to the small trader if he can survive against the competition which I represent!" But not all speakers in the noble Lord's hierarchy speak with that kind voice. Take the words of Mr. Neil Beaton, who was at the time a leader of the Co-operative Movement, at a Scottish conference during the war. He seemed to me to express what is felt today by many who think the small trader is in danger. After referring to the fact that the co-operative societies hoped to open a shop in every town and village in the Highlands, he said:
"There is a fight. The small shopkeeper will have to go, whether he likes it or not."
Now let us take Mr. Peddy, director of the Hull Co-operative Society. This is what he said:
"Large-scale monopolies are meaning to get the trade of the small shopkeepers as we are. There are thousands of shops more than are necesary."
Next, I invite your Lordships to refer

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to the most modern document, Problems of Distribution, which has been issued within the last few days by the Co-operative Society. Let us look at paragraphs 20 and 21, on page 23, where the real aim of the Co-operative Society is stated, for all who care to read, as follows:
"The Co-operative Movement as an organ of voluntary democracy expects that its rôle in a Socialist Britain will be more important than it has been in a capitalist Britain. It should be regarded as a desirable alternative to the rigidity of pattern which is so often a feature of state organisation."
That does not look so good, perhaps, from the point of view of anyone interested in municipal trading. The next paragraph says:
"What the Co-operative Movement has already achieved indicates the use to which it might be put if it were more whole-heartedly supported by other wings of the democratic movement."
Small traders can hardly feel reassured, therefore, by the pleasant words of encouragement and toleration spoken to-day by the noble Lord who represents the Co-operative Movement. It seems to be so clearly their wish to put small traders out of business in order to obtain a larger share of the distributive business of this country.
The present position is as the noble Marquess, Lord Reading, has described it. The war and the call-up have closed down thousands of businesses run by independent men, who now have to try to re-start their businesses on far smaller resources than are possessed by the great stores and the co-operatives. The co-operatives and the multiple stores can go to a town, and can afford to buy the best sites. They can afford to establish branches which can trade at a loss, if necessary for several years, in order to get the custom which small shops have enjoyed. In these great organisations the losses of one small local branch are offset by the profits made by many other established branches in other parts of the country. The "big boys"—the co-operatives and the multiple shops—can advertise centrally, and they can give credit facilities which the small man cannot give. Lip service has been paid to the small trader by various Ministers of the present Government—is the noble Lord, Lord Lucas, amused at lip service?
LORD LUCAS OF CHILWORTH: I am just wondering how much is being paid at the present time.
LORD BALFOUR OF INCHRYE: I will tell the noble Lord. Mr. Herbert Morrison has spoken of "the rights and freedoms of the lesser firms." Mr. Herbert Morrison is the noble Lord's own "boss," to whom he will have to report if he says anything wrong to-day. This is what Mr. Herbert Morrison has said.
"There is a great deal to be said for survival of the small firms, of the family undertaking."
Mr. Morrison also said that he did not wish to see the individual crushed out. The noble Lord asked me what lip service is being paid. I have just told him. Now that is all to the good. But I ask: Does that view—the view expressed by Mr. Herbert Morrison—really hold sway in his Party generally, or do the Socialist "back-room boys," some of whose statements I have just quoted, really hold power and rule? Do these views on the desirability of individuality surviving in our commerce hold sway, or must traders qualify to some theoretical standard of size and turnover before being allowed to exist?
The political views expressed by Mr. Herbert Morrison sturdily defend individualism, but it is not always so. I look at the words of some others who have taken part in these controversies. In the Sunday Times during the war there was a forum—co-operative societies against the small trader. One who took part in that forum wrote this—I quote his words:
"There is no reason why a single branch concern with adequate turnover should not be as efficient as individual branches of multiples. Of an estimated total of 750,000 pre-war shops, 90 per cent. independent traders had an average turnover of just over £2,000 per annum. Is that considered a turnover adequate to efficiency?"
I think it will be agreed on all sides of the House that the writer of that was inferring that anyone who had not a turnover of £2,000 per year could not be efficient, and therefore could not comply with his standard of definition as to what should be allowed to exist. That was written by a gentleman named Mr. George W. Lucas, President of the Motor Agents' Association. It was a contribution to that interesting discussion in the Sunday Times. Mr. George Lucas was putting forward a sort of means test. If you had got £2,000 turnover a year, Mr. Lucas would allow you to continue in business. If you could not accomplish

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a turnover of £2,000 a year, you could not be efficient, according to Mr. Lucas's standard.
I have quoted what he wrote. To-day, we are to have the privilege of hearing Lord Lucas of Chilworth speak on behalf of the Government. I shall be interested to hear whether Lord Lucas speaks with the voice of Mr. Herbert Morrison, and will express the sentiments of Mr. Herbert Morrison, or whether he will speak with the voice of Mr. George Lucas, President of the Motor Agents' Association. We shall await with great interest what the noble Lord is to say. There are black clouds gathering at the present time over the head of the small man.
The noble Lord, Lord Williams, spoke on the taxation of co-operative societies. I do not want to go into that matter to-day. I would dearly like to have the time and opportunity to debate that subject with him, because in my view and in the view of many others the co-operative societies to-day enjoy advantages of taxation which was never the intention of those who passed the Finance Act which laid down their present taxation position. In those days it was never contemplated that such a large amount of trading would be done at co-operative shops by those who were not members of a society—trading which nevertheless gives a benefit to those who are members when they receive their dividend. A further important concession was made to the co-operative societies in the Finance Act of 1947, which gave them a preferential rate of profit tax—5 per cent. instead of 12½ per cent. And I quote Mr. Glenvil Hall, Financial Secretary to the Treasury in the present Government, when he said that although this applied to all industrial and provident societies, it was the co-operative societies who would be the chief organisations to benefit. All along the line the co-operative societies have an advantage in their taxable position as compared with the private trader.
Now I understand that the T.U.C. at Margate called upon the Government to make an investigation into the distributive trade. My noble friend, Lord Lloyd, dealt with the straws in the wind, and the noble Lord, Lord Williams, tried to blow them away—the straws about Mr. Strachey's allocation of sugar and his allocation of Christmas turkeys. The
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whole tendency in legislation is to go against the private trader and help the co-operative society. The private trader is penalised under the Town and Country Planning Act. The widow cannot turn her front parlour into a shop without incurring the risk of a development charge. The shopkeeper is in doubt whether he can legally advertise his wares on his own plot of land, because he becomes liable to development charge. Now the nationalised corporations are threatening to go into the retail trade. When the Electricity Act was passing through this House, we protested about certain powers for trading being given to the corporations. To-day the Electricity Area Boards in certain areas are circularising electrical consumers offering to sell lamps on credit, delivered to their doors, although I grant that they are selling them at the retail price. I consider that unfair trading. When it was done by a private electricity company, it was done at risk to the shareholders' money, and the directors were accountable to the shareholders for the result if they lost money. But to-day it is done virtually with public money. Provided the accounts are made to balance over a period of years, the Treasury is perfectly happy—and if the accounts do not balance, the losses have to be made up by the taxpayer.
There is a growth of municipal trading which is a menace to the small shopkeeper. I will cite only one instance, in West London, where a municipality is going into the retail wireless trade and is offering to deliver wireless sets on credit terms. I will give one more instance of this weight against the small trader. The noble Marquess, Lord Reading, talked about the need for preserving sites in new towns where small traders could have shops. There is a tendency for certain Socialist councils to give a preference to co-operative societies over private traders. I would instance Wolverhampton, where the Socialist council allotted the first six sites for shops on a new housing scheme to a co-operative society, and ex-Service men and other traders were informed that applications for the remaining sites would be considered at a later date.
I will conclude by saying that private traders ask for no special advantages; they ask only for a fair opportunity. If

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the Government declarations, such as that made by Mr. Herbert Morrison, are not just so much "eye-wash" about a year before the election to reassure a section that refuses to be planned, the Government should now declare their recognition of the value to the community of the independent small trader, even the small trader with a turnover of up to £2,000 a year.
I would like to make some suggestions. First, I suggest that there should be short loans on easy terms for re-starting small businesses, with a preference given to ex-Service men; secondly, that new towns should include provision and plans for small shops on the lines pointed out by the noble Marquess, Lord Reading. Thirdly, I suggest that the Government should see that what I might call Left Wing local authorities do not squeeze out independent men in an unfair way, as I have just instanced. Fourthly, I suggest that the present system of rating, whereby a bank in a prominent position in a town may pay less rates on a lower assessment than a small shop, should be reformed, so as to help small businesses. Fifthly, there should be protection for small traders in any projected reductions of purchase tax in forthcoming Budgets. Sixthly, I suggest some reform of taxation. I do not want to go into the controversy about co-operative taxation, but there is a genuine feeling that at the present time the co-operative societies are enjoying an advantage which was never intended, If the Government are really in favour of the small trader, a long-term charter on the lines I have indicated, ensuring his preservation, should be granted. If, on the other hand, the Government do not believe in small traders as an essential and vital part of our community, let them say so, and the small trader will know where he stands.
5.28 p.m.
LORD LUCAS OF CHILWORTH: My Lords, although the noble Lord, Lord Lloyd, couched his Motion in terms specific to the small trader, he has widened the discussion until it has covered the whole distributive chain and the space it occupies in the economic life of this country. I gather, in spite of the banter of the noble Lord, that that was his intention. I also gather that beneath that banter there was serious concern on his part, and that he expected from me a serious reply.
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The noble Lord started by expressing regret that the Socialist Party did not represent the independent trader, and that there was an entire absence of representatives of the co-operative societies on his side of the House. How fortunate the noble Lord is that my noble friend Lord Williams is a director of the Co-operative Wholesale Society, and that I stand at this despatch box as one who before taking upon himself the respectable trade of politics served for years in industrial life as an independent trader—and one, I may tell the noble Lord, who does not take his instructions from some of the gentlemen he has mentioned who sit on the back benches in another place. I was rather taken aback that in his criticism of the large scale trading of co-operative societies, municipalities, and other forms of trading, he made only a fleeting reference to multiple concerns. I wonder whether that was out of consideration for his "lord and master" from whom he takes cinders, the Chairman of the Party of which the noble Lord is such an adornment. I hope the noble Lord will take that shaft from me in the same good humour in which I have taken those directed at myself.
Perhaps it would be as well if I attempted to give a serious reply to this debate—a debate which has contained more irrelevances than I have heard in your Lordships' House for a long time. I will try to place before your Lordships some of the considerations which I think have to form the background in any consideration of the future, and to bring into this peculiar set-up of producer and distributor the one factor which is usually left out of consideration—namely, the consumer. Although the data which has been available for a serious study of this matter is all too scarce, there have been many organisations of repute which have given some thought and consideration to the factors. In this country we have never had a census of distribution. Everyone deplores the fact that the proposed census has had to be postponed. When it is held, it will fill large gaps in our knowledge. However, there have been many surveys and, whatever they have brought forward, they have proved one thing—namely, that the cost of bringing the buyer and seller together is too high, and that the spread between the cost to the producer and the price to the consumer

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is unjustifiably wide. If no other has emerged, that fact has, and it has been contained in every Report of any Committee or Commission that has studied this problem.
I would remind your Lordships of words contained in the Linlithgow Report, published in 1922. It there says:
"Distribution costs are a far heavier burden than society will permanently consent to bear,"
and also that it should
"be possible to concentrate in the hands of one intermediary the successive functions now performed by several."
Even the noble Lord, Lord Woolton, when he occupied the responsible position of Minister of Food, said that the distributive trades were one of the most extravagant and luxurious factors in our national life. And there is no denying this. Before the war, the gentleman referred to by the noble Lord, Lord Balfour of Inchrye, made a study of this question, and I had intended to quote some figures that emerged from that study, of which the noble Lord mentioned one in his speech.
One of the most authoritative investigations and surveys made of this problem before the war was by the National Institute of Economic and Social Research. What did that reveal? It revealed that there were 750,000 retail shops in this country serving goods over a counter—that is, 750,000 retail shops supplying something under 12,000,000 families. The turnover over those counters amounted to approximately £2,600,000,000 per annum. Ten per cent. of the 750,000 shops did 45 per cent. of the turnover, and a simple division sum will show that the total turnover per annum of all those shops was approximately £3,000. If you take the 45 per cent. which the 10 per cent. of the shops did, the average turnover of the remainder was £2,000 per annum. Those are figures which were produced by the National Institute of Economic and Social Research.
The statement to which the noble Lord, Lord Balfour of Inchrye, referred, said that those most competent to judge have stated that the lowest turnover per annum that a food shop could have to maintain a reasonable amount of stock turnover was £4,000 per annum. Those are the figures I quoted in 1944 or 1945, and I
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quote them again. Your Lordships may draw from them what deductions you like, but there is one deduction which you must draw from them—namely, that one of the troubles of the small retail trader before the war was that he could not get a sufficient turnover to cover adequately the cost of his operations. It is not the Marxian millennium to which the noble Marquess, Lord Reading, referred, of which the small trader has to be afraid; he has to be afraid, if I may use the expression, of the multiplicity of his own kind.
What are the reasons for that growth? The old Adam Smith theory, which the noble Lord and I learned years ago—he more recently than I—was that if you put two grocers into one street where only one had existed before, the competition between those two would give lower prices to the consumer. That was true the day that Adam Smith uttered it, but completely untrue the day that the branded article arrived. The price fixing and price maintenance that has been built up in the retail trade as a consequence of the advent of the branded article has been one of the primary causes for its inefficiency. What happened to my two mythical grocers? They divided the turnover, and then had to have their margins increased. I was surprised that the noble Marquess, Lord Reading, in a contribution to this debate—as usual with the noble Marquess, of a very high standard—did not attack one of the biggest enemies—namely, restrictive practices, which were built up after the arrival of the branded article.
THE MARQUESS OF READING: The noble Lord will forgive me for interrupting. I did not go into it in detail, but I think when he looks back he will realise that I said one of the things the small man had to contend with was the state of law in regard to the restraint of trade.
LORD LUCAS OF CHILWORTH: I know that the noble Marquess has on many occasions referred to it. Those are some of the factors. There is another factor to which my noble friend, Lord Williams, referred—namely, the intermediaries who insert themselves between the small trader and the producer, intermediaries who erect their "toll gates" upon the path from producer to retailer serving in many cases little or no economic purpose whatsoever. Those are some

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of the problems which are militating against the economic existence of the small retailer. I will return to the position of the small retailer later on.
May I now come to some of the specific points raised by the noble Lord? As to the position of the small trader under control, the Location of Retail Businesses Order was revoked in 1946, since when no licence has been required to open a nonfood retail establishment. In businesses of this class no licence for trade is required, except for milk retailers, butchers, and confectioners. I could argue to my own satisfaction, as well as the noble Lord argued the opposite to his, that the lot of the small retailer and shopkeeper is better under controls and rationing than it was before. He has enjoyed what the noble Lord will understand—the "closed shop." He has had his customers tied to him; he has not had to go out and find them, and only at periodical intervals has he had to stand competition in the flow and ebb of retail customers. The noble Lord mentioned retail margins, and said that they were too high in some cases and too low in others.
LORD LLOYD: I do not think I ever said that. What I did say was that some of the retail margins were fixed as far back as 1939, and certainly needed to be examined. What I said further was that retail margins might be perfectly satisfactory if it were merely a question of running costs, but that another factor was the question of capital costs, and that was what made them inadequate.
LORD LUCAS OF CHILWORTH: I understood the noble Lord's point precisely, but margins are fixed over the whole range of goods as a percentage of the selling price. As the price rises, the profit rises.
LORD LLOYD: The profit rises, but equally so does the cost of replacing the trader's stock. That is the whole point of my argument.
LORD LUCAS OF CHILWORTH: If the noble Lord will bear with me I will deal with all his points—not one will escape. Would the noble Lord tell me how he would like margins fixed? If he fixes a margin at what will remunerate the least efficient unit—and that is how margins are usually fixed—what about the efficient unit? If you fix it at the level which will give adequate coverage
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to the efficient unit, then the small trader or the inefficient member of the distributing community will go out of business. That is one of the problems of fixing margins. The noble Lord is surely not going to argue that if a margin is fixed which will give a trader with a low turnover a reasonable profit, and he doubles that turnover and therefore doubles his gross profit, his overheads double at the same time?
When the noble Lord comes to the question of purchase tax he has my entire sympathy. That tax is something which bears heavily upon the retailer, and I will not deny it. But a solution to the difficulty has baffled the best brains of the Customs and Excise, the best brains of His Majesty's Treasury and, incidentally, the best brains of the retail associations. It is very easy to talk about rebating purchase tax. All noble Lords are cognisant with the mechanics of this taxation. It is easy to rebate on an easily identifiable article, bat unfortunately the easily identifiable articles are all high priced articles and are usually luxury goods. On the small article, which is lost without trace in the maze of distribution, it is an impossibility. If the noble Lord can succeed in evolving a scheme where all others have failed, I can assure him that it will receive very sympathetic consideration, because we are fully alive to every one of the points he has raised. These matters are easy of arrangement to the satisfaction of the retailer on a seller's market, when prices are rising; but on a buyer's market, when prices are falling, it is a different story entirely. I think my noble friend Lord Williams has adequately answered the noble Lord's points with regard to co-operative society economics. I do not suppose I could ever convince the noble Lord—although I hope to do so before I sit down—but I was not surprised that he did not make much of the hoary old story of the dividend of the co-operative societies being a trading profit and being deduct-able for taxation purposes. The co-operative societies are in no different position from that of the noble Lord. If at the end of the year the noble Lord likes to give all his customers a rebate on their purchases as an inducement to them to buy from him, for taxation purposes he is allowed to charge that against his profit and loss account in exactly the same way as the co-operative societies do.

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They are in no different position from that of the ordinary trader. The purchase dividend which the member gets is not in effect a dividend; it is a reduction in the price of the goods he has purchased. The dividends on the shares of the co-operative societies are taxed in exactly the same way as all other dividends. The only difference is that they are not taxed at source, but they are returnable for taxation.
The only point that I think worthwhile discussing upon this matter is one which has not been discussed—I was almost going to say for years and years and years. It is the point of recent introduction which was raised by the noble Lord, Lord Balfour of Inchrye, about a co-operative society being taxed at only 10 per cent. to-day on distributed as well as undistributed profits. The reason is that the distributed profits of the co-operative societies are really looked upon as thrift investments. I need not go into the whole question, because the noble Lord knows the story as well as I do. If there is a difference of opinion as to whether it is right or not, I am afraid it will have to remain a difference of opinion. I do not think there is any quarrel between us as to what are the facts. Nor need I go into the other points which the noble Lord raised; I think I have covered the majority of the details.
I would now like to return to an aspect of the problem upon which I think I can make some useful comment, and that is what noble Lords have popularly called the battle between the large and the small trader. I deplore it very much, and I rather thought that the noble Lord only just steered clear of making it a political issue. It is not a political issue, however much noble Lords on the other side may endeavour to make it so because next year happens to be 1950. In any future rationalisation of distribution an effort must be made—and this is where I find myself 100 per cent. in agreement with both noble Lords who have spoken from the other side, and with the noble Marquess, Lord Reading—to create and maintain trading conditions which will give the enterprise and the initiative of the small trader a fair chance of a fair reward. Those conditions have never existed in the past. It is no good noble Lords trying to argue that this is a struggle between the multiple store and
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the independent trader, or between the large and the small man. The public interest demands that the struggle should be between the efficient and the inefficient unit. There must always be a wide network of distribution if the policy of the dispersal of the population of this country is to be a success. In the last analysis it must be efficiency which wins survival—not whether the trader is a large or a small one. That is in the public interest, and in the consumer's interest; and in the world of the future there will be room for all in their proper sphere. It is efficient service to the consumer which will eventually determine whether or not one succeeds or another fails.
The noble Lord asked me what is the Government's policy? I do not know whether noble Lords expect to get some profound statement from me. The statement I shall make may not be profound but it is, I hope, eminently sensible. The Government's policy is not to return to the economics of laissez faire. On the other hand this Government have no plans for nationalizing the retail trades. They certainly have no intention of driving the small shopkeeper out of business. The aim of this Government is to loosen the grip of those restrictive practices which have gained such a firm hold on the distributive trades, and to maintain conditions in the future in which the more efficient units of distribution, whoever they may be, whether they be large or small, have the opportunity to increase their trade—and, what is even more important, are allowed to pass on to the public the benefits of their efficiency. The national interest demands this. That is the aim and object of His Majesty's Government.
Much has been said about Government controls. But noble Lords have never said what control they would take off. I know that this is a very popular subject; but noble Lords will realise that the overriding responsibility of the Government is the safeguarding of the position of the ordinary man.
LORD BALFOUR OF INCHRYE: The noble Lord said we had never made clear what controls we would take off. I should like to make this point, because it is important. We have always said that we would retain controls which ensure fair distribution where shortages exist, but that we would not continue

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vexatious controls or controls for political purposes. We would take off the control which forbids anyone to have a powder puff made of a piece of material more than four inches square; and the one which forbids anyone to buy a skipping rope longer than 9 ft. 6 in. Those are examples of the stupid controls which, amongst others, we would remove.
LORD LUCAS OF CHILWORTH: The first part of the noble Lord's interjection describes exactly His Majesty's Government's policy.
LORD BALFOUR OF INCHRYE: What about the second part?
LORD LUCAS OF CHILWORTH: The days when I knew anything about skipping ropes are long past; and I have never had any intimate knowledge of the construction of a powder puff.
LORD BALFOUR OF INCHRYE: But that is one of the controls now.
LORD LUCAS OF CHILWORTH: I am not hopeful that the answer which I have given to the noble Lord who raised this matter will satisfy him; but I have tried to be objective and reasonable, and to treat the matter with the seriousness which it deserves.
5.58 p.m.
LORD LLOYD: My Lords, at this late hour it would not be either right or appropriate that I should enter into further argument with the noble Lord who has just sat down, on a subject on which we could probably argue until late in the night. I would like, however, to say how grateful I am to him for the speech he has made and for the way in which he has tried to meet my points. I am sorry to say that I do not think he has met many of them, and I do not feel that when, in a discussion about purchase tax, he asks me to provide a solution, we are getting much further. After all, that is the purpose for which he is on that Bench. However, let that pass. Nor do I feel that he has given me any very clear policy as to what His Majesty's Government intend to do in the future. However, he has given one assurance, which is that the Government do not intend to drive out the small trader, and with that assurance I feel that I must be content. I beg leave to withdraw my Motion.
Motion for Papers, by leave, withdrawn.

AMERICAN AID AND EUROPEAN PAYMENTS (FINANCIAL PROVISIONS) BILL
Brought from the Commons; read 1a; and to be printed.
EXPORT GUARANTEES BILL
Brought from the Commons; read 1a; and to be printed.
BUSINESS OF THE HOUSE
LORD WALKDEN: My Lords, before the House adjourns, I have been asked to make an announcement with regard to to-morrow's business. In order to meet the general convenience, the Scottish Criminal Justice Bill will be taken as the last business to-morrow, Thursday, when the House is meeting at 2.30, instead of at four o'clock as is usual on Thursday. The effect will be that proceedings on the Criminal Justice Bill will begin at about four o'clock.
PUBLIC WORKS (FESTIVAL OF BRITAIN) BILL
Report from the Standing Orders Committee, That the Standing Orders not complied with in respect of the Bill ought to be dispensed with: Read, and agreed to.
WARWICKSHIRE AREA (CONSERVATION OF WATER) ORDER, 1949 SOUTH-EAST YORKSHIRE AREA (CONSERVATION OF WATER) ORDER, 1949
Special Procedure Orders (together with certificates from the Minister of Health): Laid before the House, pursuant to the Statutory Orders (Special Procedure) Act, 1945, and ordered to lie on the Table.

REPRESENTATION OF THE PEOPLE REGULATIONS, 1949
Draft Order made by the Secretary of State for the Home Department, under the Representation of the People Act, 1948: Laid before the House (pursuant to Act) for affirmative Resolution and referred to the Special Orders Committee.
House adjourned at six o'clock.