FINANCE BILL

HL Deb 25 July 1949 vol 164 cc388-480

2.36 p.m.

Order of the Day for the Second Reading read.

THE MINISTER OF CIVIL AVIATION (LORD PAKENHAM)

My Lord, I rise to move the Second Reading of the Finance Bill, and I understand that it is the wish of the House that I should do so in such a way as to initiate a general debate on the economic situation. The House, I think, is ready on occasions of this kind to make allowances for the Government spokesman and, torn as I am between my desire to keep my remarks within reasonable compass, my anxiety to make sure that all vital information is disclosed, and my reluctance to burden the House with facts and figures already available in official publications, and in many cases emphasised and discussed in recent debates in another place, I trust that your Lordships will bear with me.

The story is told of Mr. Churchill—I am not sure whether it is true—that at a critical stage of the war he was congratulated on one of his speeches. It was not quite the same kind of speech which he delivered last Saturday, but it was an important speech. He replied that if it were only a question of making speeches we should have beaten the Nazis long before, No Government, it is safe to say, has ever given the country as much information about economic development as the present one, and if it were only a question of providing information we should have closed the dollar gap a long time ago. Full economic statements have very recently been made in another place and have been elaborately debated there. No facts of prime significance have emerged between that time and this, except the conclusion of the Commonwealth Finance Ministers' talks, about which a communiqué has already been issued, and which the Chancellor described as outstandingly successful. The noble Viscount the Leader of the House will be intervening in the debate to reply to points raised by early speakers and, if the House allows me, I myself will speak again at the end. In these opening observations, therefore, I hope I shall be allowed to refrain from any attempt to introduce factual novelty by bombarding the House with subsidiary material and, before I reach the Finance Bill proper, to confine myself to placing in broad perspective the main issues as they appear to His Majesty's Government.

My Lords, in such a discussion as this, which will no doubt be widely followed outside, it is surely right to avoid like the plague three kinds of mentality. In the first place, there must be no complacency. We all want to face the worst, and face it at once. The cardinal fact is that at the end of June the sterling area was running a deficit with the dollar area at the rate of £50,000,000 a month or £600,000,000 in a year. The total reserves of the sterling area are about £400,000,000 so that, at the rate of deficit mentioned, the reserves of the sterling area would have completely disappeared within about eight months. Even making allowance for Marshall Aid and other forms of special assistance, at the rate mentioned the reserves would have gone in little more than a year. That is the grim stark prospect, and any Government which in face of it showed the slightest vestige of complacency would neither deserve to retain the confidence of the country nor have the slightest chance of doing so.

Secondly, it goes without saying, that we must avoid the slightest suspicion of defeatism. I need only mention that to dismiss it. None of your Lordships is likely to be defeatist for a moment, but we have the task—I refer especially to the Government of course, but in some measure we all share it—of bringing home to the public the gravity of the situation, and at the same time avoiding the creation of any undue despondency, anxiety-state or mental tension, except where by doing so we are enabled to induce people to do more than they are doing, to do things which they ought to be doing, or to refrain from doing things which they are now doing and which are contrary to the national interest.

Thirdly (this is a different though related point), we must at all costs avoid the sin of masochism, of self-depreciation—not, at least, in relation to the record of the Government. We on these Benches must look after that. But we must all surely avoid it in relation to what the noble Lord, Lord Rennell, in our last debate on this subject and in a passage that I would have liked to quote at length, referred to as the prodigious effort made by our people, As Lord Rennell said on that occasion, I would like everyone at home and abroad to go, about with a great deal more pride in achievement. Irrespective of our Party affiliations and responsibilities there is surely a great deal of truth in that.

May I elaborate that point a little, even at the risk of repeating what I and others have said before in this House? After all, it matters tremendously that Idle main facts of our present situation should be burnt in the mind of the public; and that can be done only by endless, tedious—boring if you like—repetition of a few essential things. We may claim to be more successful than any other country in having turned our economic resources to tie best and fullest use since the war, in spite of all our handicaps. National production is running at a high and still increasing level—something like 25 per cent. above the pre-war level, at a conservative estimate, and about 6 per cent. above last year's level. Productivity per man, which I know is a very difficult subject, has recently been placed by the Chancellor of the Exchequer—who, as most critics will agree, is fairly cautious in this sphere—as 10 per cent. above prewar; and the same productivity per man appears to be increasing at the present time at an annual rate of about 4½ per cent. overall—by which I mean 4½ per cent. over the whole employed population.

LORD BARNBY

Would that be allowing for reduction of hours, or is it based on pre-war hours?

LORD PAKENHAM

It has nothing whatever to do with hours. It is what a man does; it is the increase in the annual rate.

LORD BARNBY

Taking into account the shorter hours?

LORD PAKENHAM

It is as in the statement that I have made, without bringing in the question of hours either way. That is the increase overall, and therefore it means that manufacturing industries must be improving their productivity at a very remarkable rate. Capital investment, in manufacturing industry and otherwise, is well above pre-war, and we are beginning to secure the real dividend on some of the resources which have been ploughed back. The volume of exports—not just the money value, but the volume of exports—was just over 50 per cent. higher for the first half of 1949 than for the first half of 1938; that is a wonderful performance, wherever you place the credit, and whatever the future holds. None of that would have been possible unless we had not only proclaimed but actually carried out with maximum success the policy of full employment. Apart from a few doubtful voices, almost everyone agrees to-day in applauding full employment as an ideal, but when we remember that throughout the period between the two wars unemployment averaged 14½ per cent., or one man in seven, I hope that even the "ranks of Tuscany" will raise a cheer for what has been accomplished in this direction at least.

But, my Lords, we on this side are absolutely convinced that we should never have achieved that result if we had not abandoned the basic economic principles which governed our economic life before the war and substituted the principles of a planned economy. I can assure the House and the country that, whatever discussions are embarked upon with our friends overseas and wherever they take place, we shall on no account abandon the fundamental principles which alone make it certain that our national effort will be the greatest of which our people and our resources are capable. The picture is in almost all respects very different and vastly more encouraging than that of 1947. The Daily Telegraph, whose leader writers are always talented even though sometimes they are a little acid in their expressions of view, have recently talked of the last two years as being years of steady progress. And yet the stern paradox confronts us, that while we are producing more, and in many ways are more economically successful than ever before in our history, while, if I may use a metaphor from boxing, we have fought our way back into the middle of the ring and we are winning many of the rounds, yet there is still that gaping wound over one of our eyes.

LORD LLEWELLIN

The left eye!

LORD PAKENHAM

I think I can accept that. It seemed to have stopped bleeding, but now the blood has started to pour again at a rate that causes grave anxiety. The cry goes up from the right honourable gentleman who leads the Liberal Party in another place: The Government have now been in office for four years. They came into office immediately after six years of world war, and credit is due to them for a great number of things which they have done. Surely the point ought to be reached now when we can say that this policy was succeeding, and that we ought not all the time to be faced with some new crisis. That was said by Mr. Clement Davies.

What was Britain before the war? She was many things that were great, and many things that were good; and she was also some things that were not so great and not so good. For our immediate purpose, however, she was something that was very precarious, and in the light of the war, she has left us a legacy of peculiar awkwardness. She was a country that depended upon imports for an exceptionally high proportion of her foodstuffs and raw materials, and she was paying for only about three-fifths of those imports by her exports of goods. It is the two facts taken together which, in the light of our war losses, have left us a unique problem. We had become so dependent upon imports. We had ceased to pay with exports for more than three-fifths of them, and since the war we have had to pay for them all. Moreover, we will have to go on paying for them all.

The first answer, therefore, to the right honourable gentleman, Mr. Clement Davies, is that whatever Government had been in power after the, war we should have been faced, as we are now faced and shall continue to be faced, with a long-term problem and an uphill job. By and large, taking us as a country, have we made more or less progress in balancing the exports and imports and in earning our living internationally than might have been expected? Making all allowances both ways, on the one hand for the so-called sellers' market and for foreign assistance, or assistance from overseas, including Canada, and, on the other side, for the fact that our exports at the end of the war were much less than half the pre-war figure, and also making allowances for the assistance which through O.E.E.C. and otherwise we have rendered to countries in greater distress than ourselves, I submit that we have exceeded the expectations of almost everybody in balancing our global exports and imports by the second half of last year—I am talking now of the country and not of the Government. In spite of new difficulties that have shown themselves, as was expected with the decline of the so-called sellers' market during the present year, there is little reason to think that, taking the first half year of 1949 as a whole, we had parted to any serious extent from this general state of overall balance.

But the House, of course, does not need me to remind them that the real snag has proved to be not the difficulty of balancing our general account but the dollar problem, a problem common to us and to almost all the non-dollar countries, and in our case taking the form of the sterling area's heavy deficit with the dollar area. But even here do not let us overlook, as some are rather inclined to do, the very great progress which has been made in reducing the deficit to more manageable proportions by expedients familiar to, and I think agreed by, the House, and with generous assistance from the United States and Canada. From a figure of £1,024,000,000 in 1947, our deficit fell to £254,000,000 in the first half of 1948, and to £169,000,000 in the second half of that year. In the first quarter of this year the comparable figure was £82,000,000—which is much lower than the second half of last year.

Although when the Economic Survey was published in March we expected some increase in the second quarter's deficit, this anticipated increase was not inconsistent with our general objective of covering the deficit with Marshall Aid and Canadian assistance in such a way that our gold and dollar reserves could be maintained at the level at which they stood when Marshall Aid began in 1948. There was no reason to suppose that that could not be achieved, but that has not happened. Something quite different has happened. On the long journey back to economic independence—and, as I said earlier, we have to achieve a self-supporting kind of independence which we could not claim before the war—from quarter to quarter sometimes things go better than was expected and sometimes they go worse. I will not say that when they go better it gives me in this series of debates a certain advantage over the noble Lord, Lord Cherwell, but when they go worse it gives him the advantage because I know that he is quite depressed when they go less well and, shall I say, rather more depressed when they go well. I leave it there. At any rate, this time they have definitely gone worse than was expected. There is nothing to be ashamed of there, but it is vital to face the fact of the deterioration, without undue self-reproach but with increased understanding and resolve. Above all, we—and I do not mean only this House but I include the whole country—must understand what has happened and what is happening if we are to set it right.

The Chancellor of the Exchequer and the President of the Beard of Trade have already explained in another place, with the help of Tables published for the purpose, the different elements in the deterioration that has come about. The United Kingdom imports from the dollar area have coincided precisely during the first six months of this year with the estimates in the Economic Survey. The outstanding feature of the period, however, has been the sudden reduction in the dollar income of the sterling area—that is, in the total amount received by the sterling area for its exports. The sterling area has sold less than was expected to the dollar area, epecially the United States, and it has sold it at lower prices. The United Kingdom exports for the first six months have been £12,000,000 less than the Survey forecast. That in itself does not account for much more than a quarter of the deficit, of the amount by which expectations were disappointed in the first six months; and among various other factors, including certain movements on invisible account, one cannot pass over the reduction in sales of Colonial products, particularly commodities like rubber, cocoa, tin and sisal.

In short, it is with no such absurd intention as to put the blame for our difficulties upon the United States, who are our very generous friends in a world where of course we have other generous friends as well, that I state one objective fact. The sudden and unexpected difficulties of the sterling area—I am not referring to all the difficulties — have arisen from the sudden and unexpected decline in the United States demand during the same period. They have not arisen—and we can all accept this fact—through any deterioration in our own performance, although I cannot repeat too often that it is a matter of desperate urgency that we should improve our performance in every way.

My Lords, what I have said does not mean that there is what is commonly called a slump in the United States at the present time. Changes in economic activity of the kind that have taken place in the last quarter occurred regularly before the war. Between 1937 and 1938, for instance, there was no major slump in the United States, but imports from the whole of the sterling area dropped by nearly a half. I myself had forgotten that the drop was of that order. Imports from the whole of the sterling area dropped by nearly a half between 1937 and 1938 and from the United Kingdom by over 40 per cent., without any real slump in the United States.

VISCOUNT SAMUEL

Is that in money, or volume?

LORD PAKENHAM

I feel sure it is volume, but I would like to check that up. It is this kind of thing which has taken place during the last few months, but our ability to withstand it during these critical post-war years is much more limited than it was before the war and, as the House is aware, we have been forced to make reductions in some of our most important imports from the dollar area.

Your Lordships will not wish me to describe at length the various steps, short-term and long-term, that have been taken and adumbrated, but I cannot pass them over without a brief allusion. The House is already aware of the stand-still arrangement initiated a little while ago when we saw what was happening, and with what the Chancellor of the Exchequer has called the "medium-term decision" to work on the assumption that we must cut our dollar imports by 25 per cent. below the 1948 level; that is to say, by £100,000,000. So far as I can discover, most responsible people are agreed that the following propositions hold good concerning these cuts, which of course, fall mainly on raw materials. First, we can all agree that they are quite unavoidable; secondly, they are bound to do not insignificant damage, though they have been conceived so as to minimise the harm; thirdly, it is a matter of the utmost satisfaction that at the Conference of the Commonwealth Finance Ministers it was agreed to recommend to all the Commonwealth Governments action comparable in its result (to use the expression which was employed), to that already decided upon by the United Kingdom. Fourthly, I think we can all agree just as strongly that the cuts cannot be a long-term solution of the dollar problem, but can be justified only as an expedient forced upon us by the present emergency.

I am afraid that I do not find myself in a position—and I do not think your Lordships would expect me to be in such a position—to say much that is new about that long-term solution which we are all agreed must be fundamental and not just a mere palliative. We have read the statements, published on July 11 and July 19 respectively, about the British, Canadian and United States talks, and the Commonwealth Finance Ministers' talks, and your Lordships are aware that further ministerial discussions are to take place in September in Washington with reference to the first talks. Your Lordships are also aware, perhaps, that it was stated in the communiqué that the need for close and continuing consultation, if the measures discussed are to be effective, is accepted by the Commonwealth Finance Ministers.

Perhaps I may just refer to one sentence out of each communiqué. The aim, in the British, Canadian and American view, must be the achievement of a pattern of world trade in which the dollar and non-dollar countries can operate together within one single multilateral system. The only other fact that I would bring out at this point is that the Commonwealth Ministers agreed with this declaration in explicit and deliberate terms. In short, therefore, we cannot conceal from ourselves—though it may not always be wise to say it too loudly or too pointedly—that the standard of life in this country, while it must, of course, rest primarily on the quality of our own exertions, is bound always to be influenced by the policies of other countries—wise or foolish as they may seem to us to be—and no Government in this country can promise our people a precise level of reward for their efforts without any reference to the policies which others may or may not pursue. That places on the Government here a heavy responsibility for taking, in conjunction with friendly countries, the kind of initiative that we are now taking, convinced as we are that the fortunes of all the countries concerned are interwoven, and that none can benefit in the long run unless we all benefit together.

Meanwhile, what can we on our own do about it? The first thing is to intensify at every point our existing efforts to bring down our level of costs. I emphasise that, but at the same time I suggest that on this subject it is just as dangerous to exaggerate in one direction as in another. I am sure that there will be no disposition in this House to make any mistake of that sort. As I said earlier the decline in British exports to the United States in the last few months cannot be put down to any increase in our costs, and yet that decline has occurred. Swiss exports to the United States, to give only one example, have fallen in the past few months as steeply as British. I am advised that in 1948 our British exports were considered to be about as competitive in the American market as they were before the war, if we except some of our consumer goods of a luxury character which were cut down for war purposes and had not yet had tine to catch up.

Again, not every noble Lord, perhaps, is aware that last year the total British exports to the world at large increased very rapidly by about 50 per cent., while American exports fell by 30 per cent. It is worth while bearing that in mind.

VISCOUNT SAMUEL

I am sorry to interrupt the noble Lord again, but I am trying to follow these extremely important and interesting figures which he is giving. I would ask him to make it clear beyond doubt whether the figures which he gives refer to volume or value. If there is a decline in value of our exports, that may be to some extent serious, but it may be due to a decline in general world prices. If, on the other hand, the decline is in volume it is much more serious and may well give rise to unemployment in this country.

LORD PAKENHAM

I am grateful to the noble Viscount for his intervention. When I refer to exports and imports, I always intend to refer to volume. If the noble Viscount finds on some occasion that I have used value figures he will be justified in censuring me. My intention is always to refer to volume figures, unless, of course, I specifically say otherwise.

It is true that there has been some special reduction in coils in the United States lately, through concentration on more efficient plant as total production has tended to decline there, but we ourselves, in reply to that, can reasonably count on lower costs as soon as our new plants now under construction have been completed. Nevertheless, that kind of comparison is not good enough. If British costs are looked at against the background of our re-war relation to American costs, we halve not done at all badly. Some would say that we have done well. But the point is that it is not enough to recover the pre-war ratio of costs, since we are not trying merely to regain the market we had in North America. We are already selling there 25 per cent. more in volume than before the war. Now we have to achieve something very much bigger in order to pay our way in dollars. Therefore, on behalf of His Majesty's Government, again and yet again, I emphasise the need for greater productivity, harder work, better management, more initiative and fewer restrictions—especially where all these factors affect the export trade.

And so I reach the Finance Bill. The sequence of argument, I hope, will be clear enough to this House, where the connection between our internal financial policy and our external trading results has been so often stressed. Indeed, we on these Benches have been accused of neglecting this connection. Though we do not accept that criticism as fair or convincing, we fully accept the fact of the connection. The most direct of all the Government's responsibilities in promoting a reduction of costs is their responsibility for defeating inflation, and it is against this background that the disinflationary policy of the Government must be reviewed. This Budget will go down to history, I suppose, as a standstill Budget—not a bad or unworthy name. Sometimes, as we know, we have to run very fast in order to remain in the same economic posture, but this is a case where we have to stand very still and very firm against all sorts of inflationary and other forces if we are to move forward in the future. And with the Budget, of course, goes the other side of the stand-still arrangement, the White Paper on personal incomes. The need for self-restraint is to-day greater than ever. We call more urgently than ever to the whole nation to realise that no section must try to take more out of the kitty at this time; that any section which does so is endangering the vital interests of the country, because the money and, what matters much more, the goods behind the money are just not there, and will not be there until they have been created by additional exertion.

Your Lordships may recall that when the Budget first appeared it was described by The Times as a stern Budget. Everywhere, except by those who thought that he was making out things to be worse than they were, my right honourable friend the Chancellor of the Exchequer was rightly praised for his courage and realism in introducing it. I think we all now agree that it is a good thing that he took what was then considered a somewhat gloomy view. At any rate, I can recall no Finance Bill in peace time—perhaps noble Lords whose memories go back further than mine will put me right if I am mistaken—whose main principles were accepted with so little controversy. The Budget surplus is £470,000,000 on the conventional basis, £492,000,000 on what is now called the true revenue basis, £14,000,000 over all—that is the contribution which the Exchequer, after meeting all its liabilities, can make towards the further easing of inflationary pressure on the economy as a whole. I am not aware that, either at the time or subsequently, any important body of opinion has challenged the wisdom of these surpluses. I hope, therefore, that the House will approve them.

Once we accept them, however, it is not surprising that, with one notable exception, the Budget allows few reductions in taxation. The simplification of the stamp duties and the death duties was a reform long overdue, and this clearing up of obsolete duties, and the subsequent simplification of the tax structure, should be of great advantage, both to those who administer and to those who pay these taxes. But financially it has no marked effect on the Exchequer balance sheet. The remission of a penny a pint on beer is estimated to cost the Exchequer £20,000,000 in a full year. The increase in the initial allowance for wear-and-tear purposes involves the Exchequer in a loss which, by 1951–52, will amount to £75,000,000. This concession is perhaps the most outstanding feature of the Budget, apart from its general anti-inflationary character, and the Finance Bill as it now stands is evidence of the Government's desire to add to it any further improvements which could reasonably be made. The original provisions of the Bill, which in themselves represented a substantial relief to industry and a considerable additional inducement to re-equipment and modernisation in the interests of higher production, particularly for the export drive, have been expanded during the discussions of the Bill in another place.

In the first place, an Amendment has been accepted which will extend to buildings the improved allowance for research expenditure on plant or machinery. Another Amendment will ensure that the increased initial allowance of 40 per cent. will apply to the whole purchase price of a ship delivered on or after April 6, 1949, even though part of the price may have been paid before that date. The clauses of the Bill as they now stand represent, therefore, a substantial indication of the Government's desire to relieve industry of a handicap which, it has often been alleged, has been one of the main stumbling blocks in the way of a further expansion of output. These two concessions alone—on beer, and the initial allowance—will cost the Exchequer about £96,000,000 in a full year. This is a figure which is not sufficiently appreciated, and we ought to remind ourselves of it when we criticise, if we feel bound to criticise, the Budget.

It is not surprising that these remissions had to he counterbalanced by increases in certain of the other duties. In selecting the places where those increases should fall, the Government have tried so far as possible to follow the same general principles as those employed in previous Budgets. The increase in the duty on football pools is one to which no reasonable person can take exception. I feel certain that in this House there will be no one to rise and say that the Government have been too harsh on the football pools, though perhaps there are some noble Lords who are addicts of the pools; but I feel in this Chamber they will keep that to themselves as a guilty secret which will not enhance their reputation! There has been a sustained campaign against the tax upon the pools, but the figures certainly do not support the arguments that have been used. Indeed, the receipts from the duty up to the end of June have amounted to £3,250,000, compared with £2,000,000 for the same period last year—a comparison which hardly supports the fear that the increase in duty will mean a catastrophic fall in turnover.

The increase in the death duties, as distinct from their simplification—and I do not want to link the two—is a further step towards removing that inequality in the ownership of property which we on these Benches have always sought to diminish—especially when one bears in mind that on estates up to £17,500 there is no increase in the rate of duty—in fact, such estates benefit by no longer being subject to legacy and succession duties. I hope that the noble Viscount, the eminent and distinguished ex-Chancellor of the Exchequer, who is to follow me will be tempted to recall his own superb radical past and claim that this is in the tradition he sustained with so much vigour and eloquence in the early years of the century.

It is sometimes said that even these relatively small increases in taxation could have been avoided and that further substantial remissions could have been granted if only the Budget had not to be framed on so large a total sum of Government expenditure. That is the kind of facile criticism that really does not get us very far. Of course, the Government agree that the total of national expenditure is very high. Of course, we agree that every penny must be scrutinised with even greater care than would be necessary if the figures were lower. Of course, we are maintaining a close watch on the growth of total expenditure. We are making special, and I should think unprecedented, efforts to eliminate from the public administration all waste and extravagance. But we become a trifle impatient, to put it mildly—and perhaps that impatience is not confined to members of the Government—with a document such as that which the Conservative Party issued on Saturday.

That document has been received, I am sorry to say, with rather disrespectful levity by noble Lords on these Benches, but let us turn to more impartial judges. Let us turn to The Times, which no one has ever called an organ of the Left. The Times, in its leading article, quotes the sentence, Conservatives will curb expenditure by cutting out waste, and points out that if the promises in the statement are fulfilled, Conservatives will actually increase expenditure in at least five different ways. The Times, with its penchant for meiosis, if I may put the two foreign words together, continues: Since income tax and purchase tax are also to be reduced it is difficult to see how this can be done."— Some would have said it was impossible. Prices must come down, says the document, and yet, as The Times points out, the statement promises measures which must surely lead to a rise in prices. The paper adds that if the Conservatives intend to cut food subsidies, or reduce housing subsidies, they have not said so. Such a document must send a cold shudder down the spines of the real Conservative economists, the only people with a real alternative policy, although in our view it is a lamentable one—I refer to people like the noble Lord, Lord Brand, whom I think I should be right in placing in the same category as Lord Balfour of Burleigh, and, outside this House, the editor of the Economist, The News Chronicle, which may perhaps be taken as a paper of middle station sums up the document in this way —I venture to ask the attention of your Lordships, because these words are not mine, they are much better than mine, and no doubt express, aptly and tersely, the thoughts of the noble Lord, Lord Rennell, the noble Viscount, Lord Samuel, and the noble Marquess, Lord Reading: The British people are not complete morons, there is a limit to what they will swallow. They— that is, the Conservatives— are making promises which cannot possibly be kept in the lifetime of a single Parliament—least of all in the difficult times we are now experiencing. I cannot compete with that plainness of expression. I will only say briefly, from our point of view, that never was so much expenditure promised with the raising of so few taxes. We regard it as a staggering attempt to "eat your cake and keep it," to have everything both ways; and we cannot believe that it will be taken very seriously by thinking people in this country.

Let me return, as I approach conclusion, to the Finance Bill and the national expenditure provided for. Of course, this national expenditure is very heavy. Is there anyone, however, who would say, for example, that the provision in this year's Budget of £760,000,000 for defence is excessive—surely, none of your Lordships—in view of 'the perilous era in which we live, and the Communist threat that looks likely to be with us for quite a while yet? Is there anyone who will say the same of the many millions allowed for the Health Service, the National Insurance scheme, family allowances and war pensions? Surely, my Lords, all these services represent a general policy on which there is a wide measure of national agreement; and certainly if we have ever accused noble Lords opposite of desiring to cut down the social services they have lacerated us in the most fierce and brutal way. No, my Lords. The Government were pledged to enact them and were elected with a mandate to put them into effect.

But quite apart from any pledge or mandate, we on these Benches—here I think I can speak for all, or nearly all, members of the House—are proud that we as a country have put on the Statute Book and brought into operation these tremendous measures of social amelioration. Their full benefit will not appear immediately, but it should eventually make all the difference not only to the material security but to the human dignity of the ordinary men and women of this country. However, there is no escape from the commitments. The Budget speech made it plain that services of this kind must be paid for, and must be paid for by taxation, direct or indirect; though the Chancellor of the Exchequer emphasised at the time that—to use his own words— …we must moderate the speed of our advance in the extended application of the existing social services to our progressive ability to pay for them by an increase in our national income. While no doubt many of your Lordships will wish to discuss and criticise some of the details, I am hopeful that you will regard this, in its main outlines, as the only Finance Bill for which a Chancellor of the Exchequer who was at once honest, realistic and courageous (as is the present Chancellor of the Exchequer) could have made himself responsible at the present time.

I am hopeful that the noble Viscount who is to follow me, who speaks on these matters with so much more authority than someone like myself, will agree that it is a good, wise and patriotic Budget. But we all know that the Budget alone cannot save the country, however much it puts obstacles in the way of our doing things which are anti-social and makes it more attractive and easier to do what is of national value. Many other factors besides the Budget must play their part in our eventual national success. Above all—here I think we all agree—our national mood as a people will be decisive, and that mood, in its turn, will depend on a widespread comprehension of our present situation, a comprehension more widespread than at present. To that, I know, we are all equally anxious to contribute, in whatever quarter of the House we sit. I beg to move that the Bill be now read a second time.

Moved, That the Bill be now read 2^a. —(Lord Pakenham.)

3.24 p.m.

VISCOUNT SIMON

My Lords, the noble Lord opposite—not for the first time—has greatly charmed the House with a most able exposition, in which one finds a judicious mixture of acute observations and information on the overhanging economic problem which faces us all, with references to some of the detailed provisions of the Finance Bill. I am sure we are all delighted to have heard his speech. If I may be allowed to say so, there was really only one yawning gap in it which I thought I detected. So far as I remember, the noble Lord said nothing whatever to connect the economic situation with Socialist policy and the extensive nationalisation in which he and his friends believe. He began by inviting us to be neither complacent nor despondent and so far, I am sure, we all sincerely agree with him. He then invited us to celebrate our pride in the achievement of the increase of national production, in the increase of production per man and in the steady progress that has been made in the last couple of years. I am sure we shall all be willing to join the noble Lord in that. But does he invite us to take pride in the achievement of the nationalised industries? Is he telling us that the national production has improved in those industries which this Government have thought fit to nationalise?

It would have been interesting if he could have given us a figure (perhaps it is at his hand, and we may hear it later) on this subject of additional production per man in the nationalised industries. May not the whole of this pride in achievement, which we all ought to share, whatever our politics, be due to the enterprise and energy of the industries that have not been nationalised which have produced this remarkable result? We heard nothing at all from the noble Lord on that subject. While I am quite willing to join him in being tremendously proud —that was his phrase—in some of the things that have been done, I waited with great anxiety to know what it was of which he was tremendously proud. I notice that the noble Lord did not say he was tremendously proud of the success of nationalisation.

When we have the annual occasion to consider the Finance Bill, your Lordships approach the subject without any idea that we should seek to alter its terms. Your Lordships share the privilege of paying taxes, but you have no part or lot either in framing them or in electing the people who do frame them. No doubt that is as it should be. But on this occasion, even in this House, when we submit to the Finance Bill, we claim to exercise what I think Francis Bacon once described as that ancient and patient request, 'Strike, but hear me'. I wish to say a few words about the contents of the Finance Bill, leaving other noble Lords who are so well qualified to deal with the wider subject of our grave' economic situation—the need to regain our economic independence, the need to pay our way, the need to close the dollar gap and the need to restore our external trade balance. I may say, incidentally, that I do not understand why the noble Lord should have said that in times past we 'were not self-sufficing in that matter. The fact that there were invisible exports in the form of the earnings of our foreign investments, our shipping or our banking, is just as much to the credit of this country as the exporting of material things. There was a balance. But it is perfectly true, and is known to everybody who has considered the subject for years, that the balance was secured by including these invisible exports.

In latter years, under necessity, we have sold every foreign interest we had, and yet there are some people who think we can go on just the same as before. Therefore, the only thing I would say on the general situation is this. While in my humble opinion we have to face it with fortitude and resolve, and certainly we must never for a moment give way to depression, yet our external problem is so grave that it will be of no avail to use comfortable words. And unless it is handled with wisdom and courage, the crisis in which we are now will worsen and might end in disaster. The Finance Bill which we are now debating is the Chancellor of the Exchequer's contribution towards the restoration of our economic health. Nobody disputes that our economic health is a matter for grave concern and calls for close attention. I entirely agree with the noble Lord opposite that this is not a Party matter. We are all in this; we shall all gain if it is done well, and we shall all lose if it is done badly. It is not a matter for ordinary Party controversy. For my part, if I venture to refer to what I think are some mistakes in the recent past, it is in order that they may be avoided and, so far as may be, corrected in the future.

I think the Finance Bill must be judged by asking how far it provides a remedy, or at any rate an amelioration, and how far the policy which inspires it deserves to he regarded as a policy that will promote national recovery. Obviously, there is no time to lose. I quite agree with the noble Lord when he said that we ought to take a broad perspective. Take the broad perspective, and what do you find? You find that four years after the Armistice, the Socialist Government are exacting higher taxation than was required at the height of the war. You find that 40 per cent. of this year's national income is taken away compulsorily for public purposes and public spending. To my mind, the really serious question, upon which it is perfectly possible to have a difference of opinion, but which it is important to keep in the front of our minds, is this: Is that the better course to take? Is it justified, in the present circumstances, to take for State purposes an average of 8s. out of every £1 of this year's income of the people of this country? Of course, as the Chancellor of the Exchequer pointed out, 8s. is an average. We should all agree that in distributing the total burden we should endeavour to adjust it so that the biggest load falls on the broadest back.

The noble Lord was pleased, in a very kind phrase, to refer to my past interest in this subject. There, at any rate, he can never reproach me for having altered my point of view. The only question is whether present arrangements really secure that result in a fair way. Therefore, I think the first question which an honest and an unprejudiced mind should be prepared to face is this. Here is an immense toll laid on the national income year after year. Does it, or does it not, promote the national recovery which all so ardently desire to see? I can quite understand the Socialist theory on the subject. It is quite a simple theory. It was believed that a Socialist Government, sustained by a Socialist majority in the House of Commons, could spend practically unlimited sums of money gathered by taxes to the greater advantage of the community as a whole. There is nothing unfair or distorted in that statement. We were invited to believe that the Socialist planners were so gifted that they would manage all sorts of things at the public expense much to the public advantage. Whether the recent history in the London docks confirms that or not I will not stop to ask.

The theory was that if only we put this power in their hands prosperity would be promoted; the hated profit motive would be exorcised, and the country would be satisfied for "Socialism believes in Britain." The time is coming, however, when the question will be whether Britain believes in Socialism. Of course, these theorists were high-minded and sincere—I have never doubted that for a moment—but what I venture to think they failed to appreciate was that if they carried their theory too far, consequences would follow which would be deeply injurious to our economic recovery. It never seems to have occurred to some of these gentlemen that national recovery may be hindered by a Socialist policy and by continuing rates of taxation so heavy as to reduce incentive and to tend to crush enterprise. That is the root issue which serious citizens have to consider and decide. In so posing it, I am not seeking, of course, to levy any reproach against the sincerity and devotion of other people, any more than I hope they will doubt my own sincerity in putting my argument forward.

It is quite true that there was another argument which appealed to a great many people who were perhaps more credulous. Many of us have heard it within recent years. It was said, "If the nation can raise and spend all this money in the years of war, why not maintain the rate of taxation after the war is over and so finance, not the hateful business of war, but every sort of scheme which seems good—nationalising one industry after another for the beneficent purposes of peace?" Noble Lords opposite who have been in touch with some of their followers know perfectly well that in recent years that has been an argument of considerable appeal to people less instructed than themselves, who did not appreciate that the expenditure we had to face in those years of war was a terrible overspending, made possible only by selling all the possessions we could lay hold of and gaining assistance of every kind.

The man who goes on doing that when the period of terrible necessity is over is like the man who has been overspending his income and overdrawing at the bank because he is faced with some terrible crisis in his home. He is not a wise man if lie thinks he can go on spending at that rate because he did it, and did it to good purpose, in the years when it was absolutely necessary to do it. It is no good going to your bank manager, when he tells you that you are overspending your income, and saying, "My dear sir, how do you suggest that I can possibly cut down my expenditure?" The bank manager would say, "That is your business, and if you do not attend to it you will end in the bankruptcy court." The bankruptcy court will tell you what your actual situation is; but it will not necessarily tell you by what policy you might have avoided arriving in the bankruptcy court.

Combined with this rosy vision was the agreeable prospect of "soaking the rich." I have had one or two figures taken out to see how matters stand in at least one direction. Let us take all the people in this country who have a gross income of £2,000 a year—that is to say, all the people who are liable to surtax. Let us suppose that we take away all the income that is left to them after they have paid tax, so that they will not have a single penny left. Even so, the amount that will thus be reaped will barely be sufficient to finance one month's expenditure of the Government, at the present time. It is to his credit that the present Chancellor of the Exchequer has stopped this nonsense about "soaking the rich," and has done his best to teach people who were deluded about it that in the end the benefits we receive have to be paid for by ourselves. In that respect we recognise a great change in tone and in leadership. We had for a time the regrettable Mr. Dalton, who went on his way cheerfully imposing taxes, squandering the American Loan and informing us that he had a "song in his heart." I wonder whether it is not appropriate to apply to him two lines from Hamlet: Himself the primrose path of dalliance treads, And reeks not his own rede. However, the present Chancellor of the Exchequer has made a valiant attempt to curb these delusions, and has administered a much-needed shock. He has insisted that benefits must be paid for by those who enjoy them; he has put a limit to the food subsidy, and he has emphasised the elementary importance of our overseas trade: and for all this we owe him our sincere thanks.

But there is another feature in the situation which makes a continued high rate of income tax more serious than ever. I wish to call the attention of your Lordships to this fact. Before a great industry is nationalised, the successful enterprises in that industry have been making profits and paying income tax, while unsuccessful enterprises put up with their losses. When you nationalise an industry you take all those enterprises and put them under one ownership—that of the State. What happens? Any profits in one area are set off against losses in another, and the nationalised industry at best makes a smaller profit—if, indeed, it. makes any profit at all—and it pays less tax. Of course, experience has now shown that nationalised industries in practice make a loss, in spite of increasing the prices of the commodities they sell. Yet the Socialists tell us that if they have another chance they mean to extend nationalisation to other industries—sugar, insurance, cement, et cetera. Many people have sought to find the real explanation of why the Government want to nationalise steel. I offer your Lordships the most plausible explanation that occurs to me. The iron and steel trade under private conduct is so prosperous that if the Government do nationalise it they might at last get hold of a nationalised industry which did not make a loss.

The Chancellor of the Exchequer explained, I think in his Second Reading speech on the Finance Bill, that it is quite a false conception to suppose that a nationalised industry ought to make a profit. He called attention to the circumstance for example, that in old days people put up barriers on the roads and levied toll but that nowadays the roads are provided without any direct payment. What he said was: It is only in capitalist industry that profit must continue to be earned in order to support the private capitalists. That is a very poor outlook for income tax. If that is so, and if there is to be a great increase in nationalising, the situation will get worse and worse, because more and more losses will be made in an increasing number of nationalised industries, and the diminishing proportion of private industry will not go far enough to fill the gap. I cannot think that that is one of the hopes behind the Chancellor of the Exchequer's explanation. I am reminded of the remark, witty, penetrating, good-humoured (as Mr. Churchill's remarks usually are) when he said that he thought Sir Stafford Cripps was a very virtuous man who every now and then suffered from a blackout.

A challenge has been made once again across the Table to this effect: "Well, how would you reduce expenditure?" I am willing to admit it is a very difficult thing; but, all the same, I believe there are many ways in which you can reduce expenditure without prejudicing the social services or the standard of living. That observation does not in the least meet the point that the gravest consequences will follow if that is not done. Consider, for example, this proposition. A very high rate of taxation and adequate saving cannot go on side by side. No less a person than Lord Catto, I believe, insisted on that proposition in a speech the other day. The Government exhort people to save. Some of us have interested ourselves actively all over the country in trying to do what we could to help this invaluable National Savings Movement. The Chancellor of the Exchequer has openly put on record that he is very much disappointed with recent results—and well he may be; for figures which are given on the wireless every week make it clear that the withdrawals are larger than new money. It is certain that the National Savings Movement has not yielded all we had hoped.

But there is still a real form of saving which industrial companies can make, and which indeed they must exert themselves to make. It consists in refraining from distributing their, profits in dividends and putting a substantial part of those profits to reserve. Not only do such reserves strengthen the ability of the company to produce in the future and so promote the country's trade, but they are essential as the source from which worn-out plant can be renewed and the efficiency of production further raised. I must say that I thought it was a commonplace among people who understood this subject to rejoice that such reserves should be created by the industrial enterprises of the nation. I could wish that this Finance Bill did more than it does to assist that process; but at least it does something. The noble Lord referred to it just now.

Now let us look at the other side of the picture. Before any portion of the profits can be put to reserve, tax has to be paid on them. Income tax is paid alike on the profits that are distributed and on the profits that are not distributed. Not only are the profits of the company taxed, even though what is left is put to reserve, but if they are carried to reserve, they also bear a further profits tax of 10 per cent. It is right to say, too, that in the case of profits which are distributed the profits tax is 25 per cent. Are the efforts which these industrial companies are making efforts which deserve to be adversely criticised? Nothing surprised me so much, when I studied the discussions in another place on the Budget, as to find that it was actually made a matter of reproach that industrial companies placed such profits to reserve.

I have here a passage from the OFFICIAL REPORT of another place of May 18, when the present Chancellor of the Exchequer dealt with the matter. It may be that, speaking without sufficient check, the words which he used were not intended to convey the meaning which they seemed to contain. But when I read his words I certainly understood him to say that these industrial companies were putting £1,215,000,000 to reserve for last year. He cannot have meant that because, though that may be the proportion of the profits which they made which went to reserve, before they went to reserve they suffered heavy income tax and they suffered profits tax; and in point of fact the amount which was carried to reserve was something under £600,000,000. Was that a reasonable thing to do? Was it a selfish thing to do? Was it contrary to the interests of the country that it should be done? On the contrary, it was the very thing essential to help to bring about a recovery in those industries.

We are always being adjured that we must bring our plant and machinery up to date. Surely everybody knows that to replace plant and machinery at present prices, or at prices which may be expected in the near future, requires a much larger sum of money than the worn-out plant cost years ago. I should have thought that nobody with the Treasury's opportunity of knowing the truth could suggest that that saving was excessive. What is the meaning of suggesting that it is this saving which is the cause of high prices? That was the Chancellor of the Exchequer's proposition. I should have thought that the rise in prices of the products of industry to-day was mainly clue to increased costs in the wages bill, to increased costs in the price of material; and in case of nationalised industries I should think the increased cost is largely due to the loss of efficiency. It would be interesting to know from the noble Lord, Lord Pakenham, or from the noble Viscount, Lord Addison, what in their understanding was the meaning of the suggestion offered as a comforting solace to the Government's supporters in another place that the explanation of the rise in prices is the grasping cupidity of manufacturers.

LORD PAKENHAM

The noble Viscount will forgive my interrupting, but was that expression, or anything approaching it, used?

VISCOUNT SIMON

No, that expression was not used. I hope I have not misled anybody. What I refer to is just this. It is quite simple, if I may be allowed to quote the Chancellor of the Exchequer's own words: …one of the reasons prices are so high is because profits have been so frightfully high over the last few years. Then the Chancellor of the Exchequer goes on to say: "If the honourable Member … will look at the figures for last year, he will see that over and above the figure for all dividends, deben- tures, interest and so on, of £730,000,000, £1,215,000,000 were put to extra reserve by companies. I recognise that there may have been a misunderstanding about the figure put before him, but the statement is not accurate. So far as I can see, the conclusion is not well warranted.

I will leave the noble Lord, Lord Cherwell, and others to deal with the wider economic issues which we have to face at this difficult time, but I offer this general reflection—it seems to me that it is fundamental to the Budget, to the Finance Bill and to Socialist policy—on the results of maintaining this enormous burden of taxation four years after the war. Four years ago a great many people in this country were disposed to believe that very high rates of taxation, directed especially against the supposed rich, would put in the hands of the State immense funds which would be better used under Government direction and which would give an endless series of benefits to poorer people, without the poorer people having to pay substantially for them. Nobody who recalls the situation as it was four years ago can deny that statement, but that belief is now shown to have been a delusion: it was honestly entertained, but it was a delusion. A high rate of expenditure, even on the best causes and for the most worthy motives, is possible in a country like ours only if the great bulk of the money is produced by taxes, direct or indirect, which fall upon humble homes.

The noble Lord, Lord Pakenham, has pleasantly referred to my historical opinions, so perhaps I may be allowed to say that have not, to my knowledge, varied in my view. In my view, it is absolutely right to maintain and apply these two principles: first, not only is it the duty of the State to provide for defence and for the running of essential civil services, but the State should, so far as it is possible, come to the help of those who most need help. That was the proposition which I used modestly to urge in the days when I was associated with the authors of social reform in the Government of Mr. Asquith. Secondly, I should certainly maintain this proposition; that in raising public money by taxation the contribution should be so adjusted that those who can spare most should pay most. Those were the two fundamental principles of Liberal finance. They were principles upon which I was brought up, and I stand by them.

But see what has happened. In the course of my political lifetime I have seen the annual revenue exacted by taxation rise from little over £100,000,000 to nearly £1,000,000,000 before the last war; and I have seen social services developed, With the good will and help of, all political Parties, until, even at this difficult time, this country stands first in the world in that form of communal help. But it is a false and foolish philosophy which leads one to suppose that no taxes can be too high and that social services can be provided to any extent at the cost of other people. As I have ventured respectfully to say, the Chancellor of the Exchequer deserves our admiration for having endeavoured, though at a very late date, to teach these elementary truths to people who had been suckled in the foolish creed which he was exposing. The truth is that taxation in this country must be reduced somehow or other, because so high a rate of taxation as now exists, however useful the purposes to which the money is put, is crippling the industrial recovery without which the life of the country would be imperilled. As compared with that, of course, the ingenious details of a complicated Finance Bill do not matter at all. We are, in fact, spending more than we are earning. Whatever be the cause, sterling is not regarded in all quarters with the full confidence that we would wish. It is no good just blaming that fact on foreign countries. The only remedy is to examine our own housekeeping, and to realise that it is only by painful, detailed and resolute reductions and economies that we can deliver ourselves from grave impending peril.

My Lords, what I have endeavoured to say shows that I recognise that the instrument of taxation may be used for social ends. But when it is so used, it is an operation of surgery. It is a surgery practised on the body politic, and if this instrument is used clumsily, excessively or vindictively, then it can destroy the body politic instead of making it more healthy and the person upon whom the operation is performed more satisfied. Socialist speakers have denounced the profit motive, though this proposition does not apply to demands for increased wages. But, after all, what is the profit motive? It is the desire, natural in civilised man, to apply the work of his hand or his brain to provision for the benefit of himself and his family. That is the profit motive. The greater part of mankind works for the sake of gain; and nobody does so more obviously than the wage-earner.

There is a line of Tennyson which says: We needs must love the highest when we see it. That is a proposition of very doubtful validity when it comes to taxes. Too high a rate of income tax saps energy. People will not work so hard if the Chancellor of the Exchequer takes away so much of the reward. Therefore, while I thoroughly appreciate the honourable motives which have led to this form of Socialist policy—and I do not claim in this matter any special attribute of wisdom—I do most respectfully submit to your Lordships, and if I may to my friends on the opposite Benches, that everything depends on realising that there is a measure up to which you can do this but beyond which the most grievous disservice may be done to the community. I have not delayed the House by referring to two or three of these taxes in detail; I give way because I know that others wish to speak. But I hope that what I have said may be borne in mind in the spirit in which it is offered—in no superior spirit, not in an endeavour to teach anybody his business, but merely because throughout my life I have thought very sincerely on these things and have been and remain the most ardent of social reformers. I should hate to think that before my time comes to an end I might see these fine and wise ideals sullied and degraded by what I regard as a foolish form of fiscal excess.

4.5 p.m.

LORD RENNELL

My Lords, there is one point in this Bill that I would like to pick out, a point to which the noble Viscount referred—namely, taxes based on undistributed profits. I also wish to express my regret that this Finance Bill does not contain any modification of what I think is an unjust and an unwise piece of taxation, especially at a time when by common consent industrial companies have been asked to limit their distribution by way of dividends, if for no other reason than to build up reserves and plough money back into their businesses. Under a dispensation such as that, which the vast majority of industrial and commercial companies have accepted, it seems to me illogical, to say the least of it, to remove in taxation some of those profits that would otherwise be ploughed back into their businesses. This is a subject which I referred to on the occasion of the last Finance Act, and I will certainly continue to do so as long as this tax, which I think is very unwise, remains on the Statute Book. My second point is akin to that. I wish to make a plea for increased depreciation allowances on machinery and plant. The initial allowance to which the noble Lard, Lord Pakenham, referred, renders at long last a concession but is an anticipation in earlier years of total depreciation allowances. But what I have argued before and I will not detain the House with arguing again in detail, is that the whole scale of depreciation allowances should be raised so as to enable industry in this country to modernise plant gas the Chancellor of the Exchequer and the Government are constantly urging industrialists to do.

As this debate has by common consent been made an occasion to consider certain economic aspects of our situation, in common with other speakers I propose to move straight on to that subject for the occasion is certainly one of very great gravity. I am grateful for what the noble Lord, Lord Pakenham, said in his speech about my remarks on an earlier occasion in regard to the achievements of this country in the course of the last two or three years. I withdraw in no way from what I then said. I think our measure of recovery is a subject about which we can feel justifiably proud, and it is certainly one which should be more emphasised by those of us who have the opportunity of going abroad and talking to people there. That is not to say that our position is good or satisfactory; nor, indeed, is it as satisfactory as I had thought when I spoke on that occasion so much more optimistically than did the noble Lord, Lord Cherwell. I think I said then by way of comment on his speech that I thought he had taken rather too pessi mistic a view. I am sorry, from every point of view, to find that he is right and that I was unduly optimistic, because since then our situation has shown itself to be considerably worse than I had thought.

Some of the main facts of this situation have been disclosed in the course of debates in another place, and some figures which have been provided show why we have landed in our present difficulties. Unfortunately I do not think that quite enough explanation has been given of the magnitude of the drain on our bullion exchange resources in the course of the first six months of this year. There were, possibly, good reasons for that and I am not arguing about it. I do not think that sufficient light has been thrown on the matter for us here, or people abroad, to be in a position to judge exactly how it has arisen. If we can make deductions from what has been said about the course of the last six months, we shall find that the decline is attributable to three main reasons. In the first place it is attributable to the decline or perhaps the postponement of purchases of products from the sterling area. Lord Pakenham has referred to this; he mentioned a figure of £12,000,000 by which, as I understand, purchases had fallen short of anticipations. That, I gather, accounted for about one-quarter of the additional drain on our foreign exchanges which has taken place.

The second source of this drain is probably delay in payment for exports, due to people postponing the date of payment as far as they can. The third source is undoubtedly a very large leakage through the controls which halve been instituted and which are still in force. These three sources really have a common origin and explanation, with the possible exception of a certain part of the first of these factors—that is, the decrease in purchases from the sterling area by the dollar area, which is, in my view, in part attributable to a decline in business activity in America and a consequential tendency to postpone purchases. Apart from that, the rest of that factor and both the other two factors are in the main attributable, I think, to what has been considered abroad to be the over-valuation of sterling.

LORD PAKENHAM

Will the noble Lord excuse me if I intervene for a moment to put right for the purpose of the record a matter to which he has just alluded? The figure of £12,000,000 out of the £44,000,000 was the decline below the anticipated figure of our own exports. I should like to take the earliest opportunity of making that clear.

LORD RENNELL

I beg your Lordships' pardon and I am sorry if I misunderstood that figure. I ask your Lordships to consider it cancelled. But, even so, there is an amount by which exports of sterling area products to the dollar areas did fall short, and that is the first of the three factors which has also increased the dollar deficit. Let us forget the figure of £12,000,000 and assume that some part of this figure is attributable to the desire to postpone purchases at a time when the dollar area is going through a restriction of business activity. The balance of that factor, the whole of the tendency to delay payment and the leakage through controls, is nevertheless attributable to a belief in the world in general that sterling is over-valued and that if these purchases which have been made are paid for later rather than sooner they may be paid for in sterling at a lower exchange rate. Similarly, the leakage through controls, which is a figure of quite substantial magnitude, is a result of people who have become possessed of sterling getting rid of it otherwise than through the controls at lower than the official rate, thereby diminishing the intake of dollars and hard currencies resulting from our trading activities.

I now want to touch on what I realise is a slightly difficult subject. I think it is necessary to do so in order to see how far difficulties in which we now find ourselves can he corrected. There is no doubt that for some months past there has been a growing tendency on the part of people outside this country—and among them some of our best friends—to consider and to state in public places that sterling is over-valued and that the only remedy for this is devaluation or revaluation at a lower level. I, personally, have heard a great deal of this talk, and no doubt most of your Lordships have also. It has been largely propagated in and from the United States. It has had a growing effect in undermining the confidence of the world in general in the ability of His Majesty's Government—whatever the complexion of that Government may be—to maintain sterling at the present level in terms of gold and dollars.

I was in the United States in the Autumn of last year, and I spent many hours listening to, and arguing with, Americans about the level of sterling, and trying within the limits of my capacity to rebut arguments in favour of the devaluation of sterling. I may add that, so far as I could see, I did so without, apparently, the slightest effect at the time. The propagation of these ideas over a period of months culminated in a feeling in the United States and other countries that it was only a question of time before sterling would be devalued. In fact, it had become common form for myself and my friends and colleagues to be asked: "Will devaluation take place in June or in September?" We were not asked whether it would take place, but when it would take place.

More recently however I am glad to say that there has been a considerable change in that attitude of mind. I have recently received from the United States information and memoranda which show that some of the people who in the latter part of last year were advocating this devaluation have changed their attitude of mind about the advisability of the revaluation of sterling, not only so far as the interests of this country are concerned but so far as the interests of the United States also are concerned. The general line of argument now used—and I believe it to be absolutely right—is one which I think ought to be emphasised and publicised as much as possible. There are, it is said, only two great international trading currencies in the world to-day, the dollar and sterling, and if one of these—sterling—begins to display real instability that must inevitably lead to a restriction of world trade, to the disadvantage not only of this country but also to the immediate disadvantage of the United States. It is that consideration which has led these people in America to begin to take up an entirely different attitude of mind. But nevertheless the harm has been done, and I think it is reflected in the extremely serious figures which were published about a month ago and which led to the present discussions about the standing of sterling owing to the unanticipated drain on gold exchange and our very slender reserves.

I cannot pass from that point without saying two things. If I understood him rightly, the noble Lord, Lord Pakenham, spoke about the sudden and unexpected decline of, dollar purchases from the sterling area. I venture to suggest that this decline in purchasing by dollar areas from sterling areas may have been sudden, but it should not have been unexpected— for the simple reason that, not only in the United States but in every other major country in the world which has a financial standing and activity such as ours, where there is a decline in trading activities people tend to buy less abroad. Now we knew that in the United States commercial and industrial activity had been declining since autumn of last year. It should have been fairly obvious that, as that decline continued month after month, until the present time, the United States and dollar areas would generally purchase less abroad. Therefore the decline should not have been unanticipated, and I suggest that the remedy now being taken might have been taken three months earlier.

The second point which I am afraid I cannot allow to pass unnoticed is the campaign, to which I have already referred, which shook confidence in the stability of sterling. I am aware that on more than one occasion, both in another place and in the country, the Chancellor of the Exchequer stated that it was not the intention of the Government to devalue sterling. But I cannot help wishing that the mischief of this campaign in the United States in favour of devaluation could have been more actively combated. And had our good friends over there been enlisted in stopping this talk, we should not have suffered the injury we have to the confidence in our currency and financial stability.

Having said that, it is only right and proper that I should come to where we are and what remedies we can apply. In the first place, let me touch on our internal financial situation.

THE LORD PRIVY SEAL (VISCOUNT ADDISON)

The noble Lord mentioned a third source of our troubles in which he used the word "leakage." I do not understand what that was.

LORD RENNELL

I will elaborate that. I am grateful to the noble Viscount because I had intended to elabo- rate this a little. There is a substantial leakage of sterling dollar exchange, in spite of the exchange controls, in the remittances in hard currency to this country of proceeds of exports. A variety of devices are used; they have been referred to by honourable gentlemen in another place and I will not elaborate them now. But it is known that in certain parts of Europe, and elsewhere in the world, it is possible to deal in sterling at rates of exchange other than the official rate. I did refer to these rates, on the last occasion we debated these matters, as having improved to about 3.20 dollars: these rates are, however, again at something under three dollars to the pound. The volume of these leakages has gone on increasing. Any controls we impose here, if we are to keep sterling on its present level, which is vitally necessary, must be administered as tightly as possible, but it takes two parties to do that.

So long as other parties outside this country, whether in Europe, in the Middle East or in the Western Hemisphere, do not assist us in this matter, those controls are going to become gradually more and more inoperative, But I fear that many of our good friends in many parts of the world, instead of seeking thus to co-operate with us to maintain the stability of sterling, which it is in their own interest to maintain, are seeking devious ways round the controls in order to trade in sterling at lower levels than those specified in the financial agreements which have been come to with so many countries, including their own. I am not going to elaborate the methods, of evading our controls, because it would be beside the point in this debate, but I regard the leakage as much more substantial than is generally realised; and it is increasing. Fundamentally, however, the real reason why trade goes on in the black market and people deal in sterling at open market rates is that they do not want to hold sterling because they fear that it is going to be devalued. So long, therefore, as that fear is there, the tendency to get rid of any sterling at any price is bound to continue, and cannot be counteracted only by tightening up controls, even with the cooperation of our good friends abroad. First of all confidence in our currency and in our internal financial stability has to be restored.

What are the remedies for this problem? There seem to be two alternatives. One alternative is to devalue sterling—that is to say, either to choose a lower level at which the exchange rate can be maintained, or to let it find its own level. I will not go into the consequences of that; they are fairly obvious to most of your Lordships. That certainly is the classical remedy; and classically, perhaps, the right course. But I do not wish to be interpreted as saying that it is the right course for us at this time. I most emphatically do not; but it is a course, and it is the classical course. It would be fraught, however, with the gravest consequences for this country, as well as for all major trading countries in the world who have to trade through sterling, because, in spite of the development of financial centres in many parts of the world, a substantial volume of world trade is still carried on in sterling and cannot be carried on otherwise than in sterling; and since that sterling trade would be affected by devaluation, other countries would equally be affected by a change in value. This alternative of a revaluation of sterling at a lower level is, I believe, in certain circumstances a possible solution, but I most abundantly feel that it is not the right course to try to follow now. The second alternative is to hold sterling at the present level. This, I think, is emphatically the right course. I think six to nine months ago we were very much further on the way towards achieving that than we are now.

I have touched on some of the reasons why we are in a less favourable position to-day. I do not mean only that we have a smaller reserve available to-day to achieve our object; we have now also to counteract this tendency to depreciate our position, which has been going on in other countries. Before we can even get back to where we were six to nine months ago we have to make every effort to counteract that. We then have to do what is necessary to secure that sterling will hold its own within the rigidity of the régime under which we are at present living, as it is now not doing. Obviously the first thing we can do ourselves is to have a financial régime which will give both the people of this country and people abroad confidence in our ability to pay our own way. There, in passing, like other noble Lords, I should like to pay tribute to the general account of the Budget, and for the surpluses for which the Chancellor of the Exchequer has budgeted. That is certainly one of the most powerful elements in the financial situation that we can ourselves deliberately achieve. So far, I think, we have done this well, though whether the surplus will be as large as is budgeted for is arguable, because we may run into a period of declining activity and tax returns. I nevertheless hope that we shall give the impression that, despite a very heavy expenditure—which we on these Benches deplore just as much as the noble and learned Viscount and noble Lords on the Conservative Benches—we can still just manage to pay our way and achieve a surplus.

The second element in our position which we must deal with ourselves is that of costs. That is obviously a much more difficult problem. I am not going to detain your Lordships by covering all the arguments about how costs might or might not be reduced. In the long run there is only one thing which will reduce our costs, and that is harder work. You can of course achieve an apparent reduction in costs in the export trade by devaluing your currency. That may produce a temporary benefit; it may, indeed, produce a much more lasting benefit. We have seen in the case of certain European countries that their competitive status was entirely restored in the pre-war years by a devaluation of their currencies. But usually these devices are short-lived, and at long last there is only one method of reducing costs—to produce more goods.

I am not going to say that that is not fully realised by the Chancellor of the Exchequer and by other members of the Government. I do, however, wonder whether, with all their exhortations and preachings, they have succeeded in conveying that to the vast majority of people in this country who support them. It seems to me that we have a long way to go before the mass of the people in this country realise that failure to work harder can have only one result, and that is starvation. Less work means a lower standard of life, lower by so much that it is doubtful whether we can on our present output even get enough food to keep our- selves going. It is not a question of whether we would like to do this, or whether we would like to do that. It is at long last a solid fact that if we do not do it there will not be enough to eat. I know the question of wages and costs is a very difficult one to put over, for political and many other reasons, but put in those terms, is it not reasonable to say: "Look, chaps, a forty-four hour week to-day is nonsense; we cannot make our economy pay on a forty-four hour week. It is a question of having to work something like fifty hours and producing much more in the twenty-four hours during which any man is working than to-day. There is no other course, except that which will produce more goods."

I am not one of those people who believe that the working man in this country is producing so much less than he did in 1938. The noble Lord, Lord Pakenham, quoted figures which purported to show that, despite the decreased working week, labour is producing more than in 1938. I accept that, and I believe it to be the case. But the point is not whether he is producing more than in 1938, but whether he is producing enough to pay for our keep. I am afraid the answer is that he is not at the present moment producing enough to pay for our keep. Increased production can be achieved only in part by working harder on to-day's standard working weeks. I believe that in the long run substantially increased production can be achieved only by working longer hours as well as harder. I am not concerned with political programmes, programmes for the next Election, or anything like that, but I am certain that somebody, some day, will have to say to the people of this country that everybody must work considerably longer hours if we are to get out of these difficulties and ensure that even something like the standard of living that we at present enjoy is to continue.

On that point the noble Lord, Lord Pakenham, made two very pertinent remarks. The noble Lord will correct me if I am wrong, but towards the beginning of his speech I understood him to express his belief and confidence that we should pull through. He then said: "But at what standard of life we shall pull through, I cannot say." That is the point. The noble Lord repeated something of the sort later. He said, quite rightly, that no Government could pro- mise any particular standard of reward. He was then talking about what other people did, and whether what they did was wise or foolish. The essence of those two remarks—I will repeat it—is that we cannot tell at what standard of life we shall pull through, and no Government can promise any particular standard of reward. The noble Lord, Lord Pakenham, has rendered a great service in emphasising those two points. He may, however, not agree with me in this: I do not believe we can pull through without a substantial reduction of the standard of living in this country as a whole, if longer hours of work mean a reduction in the standard of life. For I believe that to be an inescapable fact. If the noble Lord will allow me to finish, I will give way in a moment.

LORD PAKENHAM

I only want to say, with a mixture of gratitude and embarrassment, that the last observations of the noble Lord carry him a long way from what was in my mind.

LORD RENNELL

I said I did not think the noble Lord would agree with my conclusion, but that was my conclusion from the remarks he had been making and is my codicil to his—

LORD PAKENHAM

To my will?

LORD RENNELL

Yes, my codicil to his political testament. However, putting those things on one side, we on these Benches (and I believe I speak for other noble Lords on this side of the House) in saying that there are two alternatives—namely, devaluation and the other one to which I have referred, to hold sterling at the present level—wish it to be clearly understood that we stand for the latter, and we do not agree that any attempt should be made to devalue sterling at this time. We believe that in certain respects —here I agree with Lord Pakenham—the situation may not be quite so bad as it appears at present; it is difficult to say. Where you have a decline in business activity and a fall in prices there is always a feeling of difficulty and uncertainty, which may, nevertheless, in the long run produce good results, if it means that we are in a period of falling prices in the world in general. After all, we have been praying for that for the last four years. If it makes individual business activities difficult, if it in makes people restrict their purchases abroad, those difficulties are as nothing compared with the advantages of a fall in prices without which, frankly, I think not only we but practically every other country in the world will be bankrupt.

We are not alone in having a difficult Budget situation, in having had to cater year after year for rising costs and rising prices, and if we can now look forward to a decline, for heaven's sake let us greet it with joy, and not at once start discussing how to stabilise prices on a higher level. If the decline has set in—as I, for one, believe it has—and is going to produce considerable difficulties as it goes on, the difficulties for keeping sterling on the present level will be proportionately less, and the drain which has taken place may tend to flatten out. But it will flatten out only if there is that same determination to stand where we are and to produce more, to which much service has been given by people of all Parties, but to which too much lip-service has been given by many of the people who ought to be working. It is because of those considerations that I personally regret at this moment that more figures were not produced when the debates took place in another place a short time ago. It would have brought home to the public with greater gravity the real difficulties of the present situation and it might have given them a greater lead in how to get out of those difficulties. I fear there has been an attempt rather to skate over the difficulties by not producing enough figures. We have been told that this will be Postponed until the Autumn. I hope and pray that the situation will not get so much worse in the interval as to create a real crisis. I do not believe there will be a crisis, but I do 'believe that if the Government had produced more figures and had taken steps earlier they might have lessened and stopped the whispering campaign which took place in the United States, and have obviated some of the difficulties that have arisen and to which I have referred.

4.42 p.m.

LORD PETHICK-LAWRENCE

My Lords, I shall be excused if I do not follow the two speeches made by the two noble Lords opposite. I cannot deal with the speech of the noble and learned Viscount, because it covered such a wide ground, and when I was looking for some positive proposals he seemed to avoid giving an answer. The most striking illustration was when he told us that our taxes were too high because our expenditure was too high, although he did not suggest a single item of expenditure which he would propose to cut out. I do not emulate the noble Lord who has just sat down because, on the main subject—namely, the question of devaluation—he put a brilliant case with far more knowledge than I possess, and I should not venture to add to anything that he said. I can say only that, so far as I understood his point, I find myself almost entirely in agreement with him. There was one point in the latter part of his speech to which I will refer in its proper place, when I am discussing the general financial and economic situation.

Before I come to the general matter which we are discussing to-day, I would say one or two words with regard to the Finance Bill which, nominally, is the subject of our debate. Both my points relate to death duties. The Budget makes very considerable changes in death duties and, so far as large estates are concerned, makes changes which are almost revolutionary. I am not going to attempt to discuss the merits of those changes, but I would say this. I think that all testators who have large estates to bequeath should be aware that on the day the Finance Bill becomes act these duties will be very largely increased. I should like my noble friend Lord Pakenham to confirm or disagree with the statement which I have made, that these changes come into effect on the day the Bill becomes an Act. Though it is too much to hope that all testators who have large sums at their disposal will be aware of that fact, if the noble Lord makes the position clear the bulk of solicitors throughout the country ought to be aware of it. And where they have been entrusted with the making of a will which will be affected by these changes I think they should call the testator's attention to it; otherwise the distribution between the legatees and the residuary estate may be very different from that which the testator imagined when he made his will.

Secondly, I have a disagreement with the Treasury in regard to estate duties which I do not think has been fully ventilated before. In the matter of surtax, the different rates of taxation are charged on different slices of income. When it conies to estate duty an entirely different method is adopted, and there are certain marginal points at which the whole rate of tax on the estate changes; and curious results arise out of that. Take the considerable marginal value of £100,000. An estate below £100,000 is to pay 45 per cent., and an estate above £100,000 is to pay 50 per cent. If the Treasury made no adjustment there would be the ridiculous position that the man who left £101,000 gross would, after payment of duty, have a very much smaller amount to distribute than the man who left £99,000. The Treasury does not allow that, but it charges no less than 100 per cent. on the whole of the slice from £100,000 to £110,000. I think that is very anti-social, because a man who has £110,000 will find himself perfectly free to spend that odd £10,000, knowing that he will have just as much to leave. I know the Treasury have an argument in favour of the present system, but I do not think it is a complete answer. I would ask the noble Lord, when he replies, to tell me whether he does not think it possible to rectify this anomaly in some future year.

I now pass to the subject in which we are all interested—namely, the larger question of the financial and economic situation of the country. As I said at the beginning of my speech, I do not think the speeches made by the two noble Lords opposite form a peg upon which I should like to hang my remarks. I would prefer, therefore, to relate them to the currently expressed views on this subject which I find put forward, not by uneducated and ill-informed people but by people of considerable knowledge and economic understanding, including no less a person than the editor of that great paper the Economist. It is because I hold a substantially different view from them that I desire to put forward my case. In my opinion they are guilty of a misrepresentation of the main facts, a failure to attribute the present crisis to its main quarters and a lack of psychology in the direction of future policy.

First as to the facts. It is said that we are completely failing lo pay our way in the world; that we are living far beyond our means; that we are progressively falling behind in our task of making ends meet; and that we are heading for bankruptcy and ruin. The noble Lord, Lord Pakenham, in the course of his speech gave certain facts, which I shall repeat very briefly, with one or two others which seem to me to contradict the current view. But before I do so I want to set out what is a frequently expressed though, in try view, an erroneous diagnosis of our present difficulties. It is alleged in many quarters that the morale of the British people is being sapped by the policy of the Labour Government—in particular in the matter of nationalisation, of full employment, of excessive social services and in the continuation of controls. Accordingly, it is suggested that the remedy is, in the words of Mr. Winston Churchill, to "set the people free" by retorting to competitive trade, by a progressive reduction in the food subsidies, by removing all price controls and rationing. And to these is added in some quarters (including the noble Lord opposite), s reduction in the standard of living, and longer hours of work; and, by the editor of the Economist, a dose of mild unemployment —though I know that the Conservative manifesto, in carefully-chosen and rather half-hearted words, declares that it does not favour the deliberate creation of unemployment.

Now for some of the real facts. The first is that in spite of t le crippling losses of the war, in spite of the need to build up again our internal capital, and to make good the terrible housing shortage, in spite of the war-weariness of our people, the overall exports and imports to and from oversea countries (including invisible items, but excluding Marshall Aid and Canadian gifts) were, in the last recorded year, almost n balance. That is a definite fact. The second fact is that our visible exports exceeded in volume pre-war figures by approximately 50 per cent. The third fact is that our total production in the last recorded year was, according to my calculation, some 16 per cent. above that of 1938. The noble Lord, who no doubt has more up-to-date figures than I have, may put it somewhat higher.

LORD PAKENHAM

It is more than that.

LORD PETHICK LAWRENCE

These are indisputable and remarkable facts, on which, in my opinion, our people and our Government should be congratulated. I have often been at a loss to account for the discrepancy between these facts and the views expressed by certain people. I had the good fortune a few nights ago to listen to Mr. Geoffrey Crowther, the editor of the Economist, who was having a debate with another economist. He dismissed all exports from the United Kingdom to oversea countries to which we owe money as "unrequited exports," and he wrote them off altogether. Having done that he produced a theory that we were in serious deficit on our overseas account. Surely, that neglects the main fact, that we emerged from the war a debtor country. It is one of the misfortunes of a debtor that he has to make payment not only of interest but sometimes of capital to reduce the volume and magnitude of his debt. We have been obliged to take that course. To say that that does not count seems to me to neglect one of the main facts of the situation.

Now, my Lords, though I have spoken in praise of what has been done in this country I would not have you imagine that I underestimate the gravity of the crisis confronting us as a nation. I am fully alive to our difficulties and to the urgent, imperative importance of taking steps to put us in a better position. I am aware that they call for the most strenuous and continued exertions if they are to be overcome. At the same time, I disagree fundamentally with the approach which I observe, and the demand based upon it, to return to the old methods of competition which brought about those terrible inter-war years of unemployment and disunity in the nation. Those who favour that course seem to me to be like a passenger who has been brought up a steep hill in a heavily-loaded wagon by gallant horses and the good driving of the driver. They have reached the top of this exceptionally steep hill and they have turned a corner, from which they see a hill, as steep as, and perhaps even longer than, the one which they have just come up. The passenger at once begins to curse the driver and demand that he lays on the steaming steeds with a heavy whip. I think that that is bad psychology; I think it is the wrong approach, and that, instead, we should say words of encouragement to the people of this country for the marvellous way in which they have responded to what was required of them. What is needed is some such words as were used by Mr. Churchill in wartime to tell the people that they had had difficulties which they had surmounted in the past, but that there were difficulties to face in the future which would demand equal and perhaps still greater efforts of sacrifice and exertion.

But, to return from this metaphor to the problem before us, what is the new crisis that confronts us and why has it arisen? Why is it that, in spite of our overseas balance and of our increased production, in spite of all that I have been describing, we are in this plight? Of course, the answer is quite clear: It is because in regard to our trade with a particular country our exports and imports do not balance. What is even more serious, this unbalance with regard to this one particular country appears actually to be deteriorating. I would have your Lordships not to be in too much of a hurry to cast blame. It is human nature and it is easy, when something goes wrong, to try to find a scapegoat, and to say that this situation has come about because someone has blundered. I have lived a fairly long life, and it is my experience that a great deal too much blame is cast when things go wrong. Such troubles often arise, not from individual mistakes but because events were too grave to be met in the way which those who were confronted with them hoped would be adequate. In this matter there are two alternative schools of thought in casting blame. One blames the United States, and the other blames the people of this country. My view is that we should not blame either.

The difficulty arises from the failure of the human mind to adjust itself quickly to new situations. What are the new situations brought about in consequence of the war, and not only of the war but of some of the years that went before? The first new situation is that America which was a debtor country, at one time one of the greatest debtor countries, is now a creditor country, and perhaps the greatest creditor country that the world has ever known. Secondly, the United Kingdom, which before the United States was the greatest creditor nation, has now become a debtor nation. The next great change is that for the first time this country has been governed by a Government who are determined to have full employment. The old ideology which arose from underemployment and unemployment has disc appeared. The final great change is the upset in a large number of other countries with which both the United Kingdom and America have done trade in years gone by.

While it is true that no great creditor nation can take payment of the debts owed to her and the income tax on those debts, unless it is prepared to provide means for the debtor to pay, and while an individual may ultimately take payment in specie, a nation cannot take all its debts owed to it in specie—it must take a large proportion of them in kind. While it is true that America has not wholly awakened to this fact, I think it would be not only unwise but very unjust for us, as Mr. Geoffrey Crowther said the other night—and I fully agree with him in that—to blame the United States for not being alive to the changing situation. I think that the generosity first of Lend-Lease and then of Marshall Aid are historic events which will be remembered for all time. Though we may take the view that there is another lesson which also has to be learnt, I think that for us to cast blame on our great neighbour who has behaved so generously would be wanting in judgment and in truth. What I have said about the United States, I should add at this point, applies also to Canada, whose generosity certainly ought not to be passed over, considering its great scale and the kind way in which they have come to our assistance.

Equally, however, I reject the alternative of casting blame upon our own people, of decrying what is going on in this country. Of course, I do not object to noble Lords opposite—I am talking of their Party and others—objecting to the policy of our Government. It is perfectly right that they should do that, if they want to. I think that the noble and learned Viscount, Lord Simon, said that he was anxious—and that in this he agreed with the noble Lord, Lord Pakenham that we should not decry our own country. But although the noble and learned Viscount, and certainly the noble Lord who spoke from below the gangway, did not think that, there has been a great deal of decrying of our own country in quarters which ought to know better. I think that this extract from the Economist will bring that home. It appeared on July 16, and is a passage taken from the American Survey which, as your Lordships know, is compiled by the American staff. The quotation is from page 135: Many of the most friendly [American observers] are trying to avoid impatience and sometimes annoyance at what seems to be a refusal on the part of the recipients of aid, especially the United Kingdom, to face the most obvious requirement, to get down to work. In my view, taken in general terms, that is a slander, and a grew slander, on the British people. But I do not cast blame on the American editor of the Economist, who is reporting on opinions of which he is aware; nor do I blame the American people who are basing their criticism on information which has been brought to their attention, as supplied from this country. The people I do censure are those of our own people who are constantly crying "stinking fish" and who have represented the people of this country as slackers and shirkers.

It is true of course, that there are some strikes going on in this country, and I am the first to deplore what has taken place. But I would point out to your Lordships —and I think the members of the Government sitting on this Bench will bear me out—that the number of days lost by strikes in the last few years is a tiny fraction of the number of days that were lost by strikes in the intervening years between the wars, when another system of economy was being practised. I imagine also, though T cannot prove this from statistics, that the strikes in this country are very small indeed compared with those that have taken place in the United States during the same period.

I am sorry that the noble Lord who took up this point from the Liberal Benches is not here now, but no doubt his noble Leader who is sitting there will report to him what I ant going to say. It is true that we now have a shorter working week. But this is true also of many ether countries, and particularly of the United States. There has been a very considerable cutting of hours in the course of the last one or two decades. It is my firm belief that an attempt to impose a much longer week—I think the noble Lord talked of putting it up from fourty-four to over fifty hours a week, a very considerable increase—would not result in increased output. During the war at the time of our greatest crisis, there was an immense demand on labour and, quite rightly I think, people were called upon to work enormously long hours for a short time. I thought that when that short time had elapsed the Government would have the wisdom to cut down the hours again; but as in the previous war, the mistake was made of keeping on those long hours for years, with the result that not only did output fall down and down but the health of the people was undermined.

There is another reason for shorter hours, which I think may perhaps come as a surprise to some noble Lords. We all know that there has been a great call upon women to work, and magnificently have they responded. We shall no doubt have other opportunities of paying tribute to the work that they have done. But I wonder whether your Lordships have ever thought of the effect that the employment of large numbers of women, particularly married women, has on the position of their husbands. I have heard it said in jest that your Lordships go home earlier than would otherwise be the case in order to help your wives with the washing up. An amusing point that I would add to that is that there seems to be a good deal of truth in the fact, not that we are neglecting our duties but that we, in common with a large proportion of men throughout the country, find that the time has come when we cannot expect our womenfolk to cater for all our needs without some help from us. I believe that to be true of all classes at the present time. I believe that one reason why men are not prepared to work the very long hours that they did before, is that they have to make some contribution to the work of the household. It is also true that there is a proportion of constitutionally work-shy manual workers. But my observation among all classes and sections of the community, male and female, is that the proportion is fairly equally dis tributed through all classes. In every section of the community, so far as I know, there are a certain number of constitutionally work-shy people. I believe that is probably true of other races as well, and I do not think that one Government or another, or one system or another, will change that basic fact.

I venture to think that another cause of our present difficulties is not fully recognised. I remember years ago Sir George Paish who was editor of the Stat" He pointed out that in the triangular and multilateral trade that took place we sent machinery or whatever it was to Japan, Japan sent silk to America, and America in those days sent wheat to us. 1ist was asked at a public meeting how we paid for our imports from America. His answer was "By sending machinery to Japan. The fact that over a large part of the world that system has lapsed has prevented us from taking advantage of those ancient methods, and if we want to pay our debts to America we have to pay them direct and not through the medium of a third party.

My Lords, what is the position? I am forced to conclude two things. I think there is a failure in this country to realise the consequences that flow from the two facts that I have mentioned. In the first place, there is a failure to realise the consequences of full employment. There are restrictions and restraint on output which are still practised by both sides of industry. These restrictions arise from the cruel conditions of free cut-throat competition—conditions which induced employers to band themselves together, and to make gentlemen's agreements of all sorts to protect them against falls in price and other industrial events causing them serious losses, and which compelled workmen to stand together shoulder to shoulder to prevent cuts in wages and, on the completion of the job, total loss of work, and probably unemployment. With the welfare State, full employment and the country's grave debt position, these old restrictions have become obsolete and, with proper safeguards, they have to be progressively abandoned.

That is by no means all that is to be said. With our new debtor position and loss of triangular trade it has become essential that we should study the needs, the wishes and, if you like, the whims of the particular customers from the Western Hemisphere which must be foremost in our thoughts. We must use all our activities to satisfy them. This is no easy matter and it is no single question; it is a variety of different questions. If I give but two illustrations I should be very sorry if noble Lords thought that I imagined that by themselves they would be sufficient to end our difficulties. They merely indicate the kind of thing I have in mind. We have a large number of American visitors to our hotels. Those of us who have travelled in America know that the first thing one gets on entering an hotel is a pitcher of iced water. At every meal iced water is served. I have never been into an hotel in this country where as a matter of ordinary practice iced water is served. It is perfectly clear that the Americans feel that they are not having what they want, and if they ask for it they have great difficulty in getting it. Hotel proprietors in this country complain that they cannot provide for American visitors a large number of luxuries, new table linen and all that sort of thing. When I went to Switzerland a couple of years ago I found that the people there were on a very restricted diet, but that as soon as a foreigner came out he was presented with a large packet of food coupons that enabled him to do very well at hotels. I can well understand why the Government do not wish to lift all the restrictions on luxury meals for ordinary people. I think it would produce a bad effect on Americans if when they came to an hotel they found us having everything we wanted, but I do not see why American visitors should not be provided with a book of coupons which would enable them to have something above what is supplied to the ordinary residents of hotels.

I saw in a newspaper on Sunday an article by the former Secretary of State for Scotland, Mr. Toni Johnston, in which he told of the decline of the Harris tweed industry in the Hebrides. He said, in effect, that the American market for Harris tweed had practically disappeared. So far as I know, there is a great demand in America for Harris tweed, and I would like the Minister who is to reply to the debate to tell me whether something could not be done, both to re-establish Harris tweed in the States and to arrange so that Americans visiting this country shall be enabled better to obtain what they ask for. I have spoken longer than I wished to do, but I felt that there was a large amount of ground to be covered. I have endeavoured to put before you what I conceive to be the undoubted facts of the situation, and my interpretation of them, both as to their cause and as to the remedy which we ought to adopt. I contend that the record of our people since the war can well be put alongside their great record during the war, as a matter for pride and congratulation. Those who now attempt to decry the efforts of our people are, I think, doing an ill-service to our country. I believe that our people, approached in the right spirit, will shoulder the burdens that this new crisis imposes upon them, and that by their exertions they will carry their task through to a successful conclusion.

5.22 p.m.

LORD BLACKFORD

My Lords, all those of us who have come up to this place from the House of Commons listen with great affection and respect to anything which falls from the lips of the noble Lord who has just sat down. Particularly we would agree with his charming peroration. But I feel bound 'to recall to the notice of your Lordships the underlying feature of this debate, which is the fact that the last gold reserves of this country are, rapidly running out. I could not detect in the long speech of the noble Lord, Lord Pethick-Lawrence, any sense of urgency regarding that fact, or any suggested remedy for it. I belong to a school of thought which believes that the most drastic remedies will have to be applied in order to right the present position. I believe that, in the end, this nation will have to undertake much more work and probably will have to suffer a lowering of the standard of living. Certainly, in my view, there will have to be a drastic reduction in taxation. If that qualifies me to have my name added by the noble Lord, Lord Pakenham, to the names of the two distinguished gentlemen whom he described in his speech as "Conservative economists," then I shall be happy to qualify for that position.

LORD PAKFNHAM

I am sorry. I did not quite hear that last remark. It was entirely my fault and I apologise to the noble Lord.

LORD BLACKFORD

All I said was that I am of the school of thought which believes that drastic changes of policy will have to take place in order to right the position. If that qualifies me to be classed with those to whom Lord Pakenham has referred as "Conservative economists," I shall be quite happy so to qualify.

LORD PAKENHAM

May I just say that, speaking for myself, that fact alone would not qualify the noble Lord for that description. But he has so many other qualifications that I am very glad to put him in the same category.

LORD BLACKFORD

Let us now concentrate on the question of reduced taxation. Those of us who feel that reduced taxation is essential have had a very poor time of it recently. We know perfectly well that the present Government are not in favour of reduced taxation or of reduced expenditure. They tell us so. Mr. Jay, the Economic Secretary to the Treasury, in the course of his speech on the Budget Resolutions said that we might effect economies of £500,000 here or of, perhaps, even £1,000,000 there, but those who thought economies could be carried out on a scale of tens of millions of pounds simply did not know what they were talking about. That is what he said—or words to that effect. His speech on the Finance Bill was not concerned with economy at all. On the contrary, it was devoted entirely to the question of how to raise additional taxation. The form which he favours is capital levy, and the whole of his speech on that occasion was devoted to considerations in that connection. Mr. Jay is well worth listening to, because, like the noble Lord, Lord Pakenham, he is one of the Labour Party's young intellectuals. Another of the same kidney is Mr. Gaitskell, who goes round the country openly advocating capital levy. So these gentlemen have no idea of reducing taxation. On the contrary, they would add to it. If we read the New Statesman—as I do every week—we find that that is the theme which is constantly to be found in that periodical. The gentlemen to whom I have alluded are very well worth listening to because they are the coming men. The Labour Party are becoming more and more "intellectual" on their Front Bench, and are pushing more and more into the background the old stalwart trade unionists who find all the money but have not so many brains.

LORD PAKENHAM

What about Lord Quibell?

LORD HAWKE

He has the money as well.

LORD BLACKFORD

Of course, there are exceptions. I was saying that the present Government have no intention of reducing taxation or of cutting Government expenditure. Accordingly, we naturally turn with hope to an alternative Government. Here I am bound to say I find myself in a very disappointed state of mind. I spent yesterday reading The Right Road for Britain. This morning I turned to The Times and read the leader upon that publication, and I am bound to say that I find myself in agreement with The Times leader and with Lord Pakenham's comments upon it. There is no sense of urgency, no sense of crisis, about The Right Road for Britain, and no definite proposals for the reduction of taxation whatever. Of course, I agree it is not possible in these Party political propaganda pamphlets to go anywhere near to telling the truth. None of them does. At the same time, it seems to me a pity that the Prime Minister should have so hurriedly rushed on to the platform at Durham and said that The Right Road for Britain was the most dishonest document he had ever read, because The Times leader points out that whole chunks of it might very comfortably have been inserted in Labour Believes in Britain. Upon my soul, I think that is the case!

But let me get back to this question of taxation. What does The Right Road for Britain tell us on the subject? It says that 8s. in every pound is taken by the Government for taxation. It says, in the next sentence: "We Conservatives think that this is far too much." We can all say "Hear, hear" to that. But by how much is it too much? Recently, a question was asked in another place as to how that 8s. in the pound compares with the level of taxation in half a dozen other countries. It was found that the 8s. was about double the figure in some of the other countries. The nearest country to ourselves in this matter was the United States, where the taxation works out at 6s. in the pound. So, if we were to reduce our taxation to the level of taxation in the United States, it would mean reducing our taxation by one-quarter. And in order to reduce our taxation by one-quarter our expenditure would have to be reduced by one-quarter. What does reduction of expenditure by one-quarter involve? Does it not involve economies to the extent of something like £700,000,000 a year? No Party is prepared to advocate that, particularly in any Party political pamphlet or broadcast, because naturally they would lay themselves open to Opposition attack.

Is it possible for us to compete with the rest of the world with taxation at 2s. in the pound higher than that of the United States? I speak as a business man and not as a Conservative politician, and I say what I believe to be the view of other business men, the sort of view that can be found in the speech of any chairman of an industrial company. I consider that in the long run we cannot carry on with taxation at 2s. in the pound higher than that of the United States. I do not believe that in the long run industry can bear taxation of 11s. in the pound on all money put to reserve, with replacement costs at present-day levels. I believe these economies will be forced on us, whether we like it or not, not with any malice aforethought of the Conservative Party, or any other Party, but by the irresistible pressure of economic reality. I believe that in the end economies of that order will be forced on this country whether we like them or not, and that will involve, as the noble Lord, Lord Rennell, said in the course of his valuable speech, a reduction in the standard of living.

I pass to my second and only other point—namely, the question of more work. This is a point on which we all agree, except apparently my noble friend Lord Pethick-Lawrence. Certainly the Chancellor of the Exchequer is fully alive to this. He has been saying "more work," only he puts it as "increased productivity": seven syllables instead of two—but then, he is an intellectual. The Prime Minister called for 10 per cent. more work, and had advertisements posted all over the coun try to that effect. Other Ministers are following these examples; and are calling in all directions for more work. Especially did Sir Stafford Cripps do so three weeks ago in his speech.

What was the response of the London dockers to that cry for more work? Fifteen thousand of them chose to remain idle for thirty-three days, for no reason whatever except that they chose to imagine that they were misled. What action did the Government take to counteract the action of the London dockers? None whatever for a very long time, except, of course, to put in some troops to do the dockers' work for them, while the dockers went off cherry picking in Kent and received 30s. a day for it. The Government passed Emergency Regulations. But did they make any use of the Emergency Regulations? They just went on doing nothing, until finally an independent member of the Labour Party dared lo bob up—the Chairman of the Dock Labour Board actually dared to take action with the full approval of his Board! What did he do? He uttered a mild warning: "If you do not go back, it is possible that the Dock Labour scheme may be endangered." What was the action of the Government about that? Unbounded fury. Repudiate Lord Ammon! At all costs, cast him out! Sack him! What has he dared to do? He has dared to say "Boo" to the goose, and that the London dockers are possibly wrong; while Mr. Isaacs in his broadcast the Saturday before had done nothing but tell them what fine fellows they are. Personally I am sick and tired of flattering the British working men when they take action of this kind. The dockers are sheep. I cannot be abused for saying that, because Labour's most notable and capable cartoonist, Low, drew them as sheep in the Evening Standard only a week ago.

LORD STRABOLGI

But he drew the Dock Board and the Government as dogs!

LORD BLACKFORD

That has nothing to do with it. If we take any hundred men it is true to say that ten of them are good, ten are had and the remaining, eighty are sheep. The efficiency of a unit depends on whether the good or had are in the ascendant, and that depends on the efficiency of the leadership at the top. The fact is that the bad men are in the ascendant in the docks and that is why they behave as they do.

Let me turn to another industry. What is the response of the railway unions to this request for more work? It is a "go slow," in Manchester and the North. Is anything being done about the "go slow"? Nothing whatever. They will "go slow" until they choose, at their pleasure, to "go quick" again, whenever that may be. It is absolutely deceiving ourselves to go on with the sort of stuff which the noble Lord, Lord Pakenham, has been saying, about the working men being the best in the world and they are splendid fellows. So they are, if properly led; but they are not being properly led. The Labour Party have the main responsibility in this matter. It is for them to get hold of the bad elements which are disintegrating the trade unions and get rid of them. If I were asked as an outsider to differentiate between one set of unions and the other, I would say that those trade unions which are engaged in competitive industries are all right, but those unions engaged in key industries are those on which the Communist elements have concentrated. Those are the unions into which they have infiltrated and in which they work, and it is up to the Party of the noble Lords opposite to get hold of them and change that state of affairs. I maintain that it is a waste of time to go into profound questions of devaluation, exchange control, convertibility of sterling, multilateralism, and all kinds of long words which we outsiders must listen to with appropriate respect, unless we get the right spirit in the labour of this country.

5.38 p.m.

LORD STRABOLGI

I congratulate the noble Lord on his speech, which we all enjoyed; I particularly congratulate him on its honesty, It is the sort of speech shot at me, day and night, by business men who are members of the Conservative Party, but which we all too seldom hear from the Benches opposite. The noble Lord is representative of the bulk and flower of the Conservative Party and I heartily congratulate him on telling the truth about their policy. I am only sorry that he apparently did not give notice to my noble friend Lord Ammon that he was going to refer to him; had he done that, I am sure that my noble friend would have been here. He seems to be in a very pugnacious mood just now, and we might have bad a very interesting speech from my noble friend. I think that was rather an oversight on the part of the noble Lord.

I agree with the noble Lord about taxation. We all object to taxation. The Government do not put on taxes for pleasure or to punish people, but because they have got to do it. I object to taxation. I am against all taxation. I am a Gladstonian where taxation and fiscal questions are concerned. I think with Mr. Gladstone that money is best left to fructify in the pockets of the people. I agree also that with one or two exceptions there has not been much sense of urgency in the debates we have had, either in this House or in another place. It is a most serious situation. I think the noble Lord, Lord Rennell, just touched on it. I congratulate my noble friend Lord Pakenham on the courage of his speech, but apart from that, there was far too much soothing syrup.

I believe that the most significant statement we have had yet was that made on the wireless by the Minister of Agriculture last Thursday. This radio speech was remarkable. We have had many well-informed debates on agriculture in your Lordships' House in which the Government's policy was defended.

But the Government's policy was always based on the supposition that we would manage to get on our feet, and that Marshall Aid and the American Loan would see us through our difficulties. I dare say the agricultural policy we have been pursuing was on that supposition o a good one; at any rate it received a good deal of support from the Party opposite, and the farmers seem to like it. Now for the aftermath. This is what my right honourable friend Mr. Williams, the Minister of Agriculture, said (I quote from The Times of last Thursday): I have to tell you now that we are in grave danger of failing in our task. The livestock part of our programme is going ahead pretty well. Where we are falling down is in our plans for a much larger acreage in crops. Read that sentence in conjunction with what we know only too well, and what has been reiterated in the debate in this House—namely, the fact that the drain on our dollar resources a few weeks ago would, if continued at that rate, have bankrupted us in two-thirds of a year. Read in conjunction with that, even the agriculture programme is not succeeding. I support the noble Lord, Lord Blackford, and other noble Lords, in saying that the situation is very ominous and grave.

I have been searching for some light front the various speeches that have been delivered both here and in another place. I have been reading past speeches of even the noble Lord, Lord Cherwell, with great enjoyment and profit, and I am looking forward to what he has to say to us today. But I am very like the young man in Omar Khayyam: Myself when young did eagerly frequent Doctor and Saint and heard great Argument About it and about: but evermore Came out by that same Door wherein I went. Where are the constructive, positive long-range remedies? The noble Lord, Lord Rennell, speaks of two—namely, either the devaluation of sterling (I was very glad he so powerfully opposed what I think would be a ruinous policy), or the alternative of maintaining sterling at the present exchange rate. In the controversy that has raged in another place in the two-day economic debate, and in the columns of the newspapers, I have seen only one workable and constructive long-term suggestion, which I venture with great modesty to support. I would very much like to hear the views of my noble friend Lord Pakenham on this when he comes to wind up the debate; and even more would I like to hear the views of the noble Lord, Lord Cherwell. I refer to the proposal for the revaluation of gold in terms of dollars, as against the Bretton Woods price. Of course this is a matter for others besides ourselves.

This proposal was dealt with in some detail, and I thought with great ability, by my honourable friend the Member for Nottingham, Mr. Norman Smith. It has been developed in a letter to The Times by a friend of mine who is not in active politics, but who is well known to many members of the Conservative Party and k a well-known business man—Major Beddington Behrens. I am sure his letter in The Times did not escape the attention of my noble friend the Leader of the House, or the noble Lord, Lord Cherwell, or other noble Lords who particularly follow the matters. The revaluation of gold in terms of dollars would immensely increase immediately the value of the gold in dollars at Fort Knox, and would provide a vast new reserve of currency based on gold at the new value of the fine ounce in terms of dollars.

Where I do not detect a positive policy is as to what shall be done with this accretion of monetary wealth. This is where I propose to make a suggestion. In the past, in these economic debates and in the debates on trade and commerce in your Lordships' House, I have for a good many years ventured to stress the importance of restoring the sterling bill on London as an international medium of exchange. None of your Lordships would deny the fact that if we could restore the sterling bill on London, which before the First World War was the international medium of exchange of currency throughout the world, it would be a great advantage to the trade both of the Old and New World; and it would bring about that multilateral trade which the Americans want, and which is so desirable in the long run. How can that be done? It can be done, I suggest, by using the extra monetary value of the gold in the vaults of the United States and in our own vaults to underpin and support the sterling bill on London. By that means we should do away wilt the threatened division of the trading world between the dollar and the sterling bloc, which we all wish to avoid; it would bring them together, and in time we might perhaps get the rouble bloc in as well. I suggest that is something constructive, and it flows from the suggestions made by the two sources to which I have referred. I think the honourable gentleman, Mr. Robert Boothby, in the same debate also touched on this matter of revaluing gold in terms of dollars. We know that it would increase the output of gold in South Africa, West Africa and so on, and, although I a n not a fanatic about gold, it seems to me that this is one of the long-term proposals which is worthy of close attention on both sides of the Atlantic.

I have no doubt whatever about the second proposition that I propose to put before my noble friend Lord Addison, of which I have given him notice—and which, indeed, I have had the great benefit of discussing with him on many occasions in the past. One thing which we cannot neglect at the present time (this follows on the remarkable broadcast of the Minister of Agriculture, and the general deterioration in our economic situation) is our unused acres in this country. It is not to be denied that out of 48,000,00 acres—of cultivable land some 16,000,000 acres—some people put it even higher—exist which are known as marginal land, or rough grazing land, which produce only a few sheep, game, grouse and so on. It is known that that marginal land of 16,000,000 acres, on a conservative estimate, can be cleared, drained, tilled and cropped. My noble friend the Leader of the House knows it; he has seen it done. But it is not commercially profitable under the present system; it does not pay a farmer to do it to-day. But this is not a period when we can consider such matters as what is commercially profitable if we can produce large quantities of extra food, as I am assured we can.

I am assured that our food production could be increased by 30 per cent. if we could bring this marginal land of 16,000,000 acres into proper production. We must not count the cost. We must look upon this as a war operation. The machinery and the men can be made available. When I say that we should look upon it as a war operation, I mean that we should conduct the operation as we would conduct any similar movement or development on a comparable scale in war. In war-time we built vast aerodromes, great camps and vast structures like the Mulberry Harbours, and so on. We devoted the necessary resources to producing them, and they were produced. I say that the emergency now is comparable to the sort of dangers with which we were faced in war; indeed, the danger is perhaps more insidious, because as yet it is not so generally appreciated by the mass of the people. I am not criticising what has been done in the past. I think the agricultural policy was well justified, provided everything had gone well. But every thing has not gone well; the Chancellor of the Exchequer and everybody else in the Government knows very well that things have not turned out as we had hoped. That has been due largely to causes outside our control. I do not believe that noble Lords opposite would put the entire blame on the Government, and I certainly would not.

But things have changed now and the situation is serious. Here is something that is certain, and I do not think we will be forgiven if we neglect it. The argument is sometimes used that it is perhaps better to devote these resources of labour, material, and so on, to develop unused lands in Australia, Africa or elsewhere. Why not do both? Is there any reason why we should not do both? There is this reason against developing only our Colonial or Dominion territories: that if you buy too much from any market, presently its currency becomes hard against you, whereas what you produce in your own country you can rely upon. It is your reserve: it is something to prevent the starvation about which the noble Lord, Lord Rennell, was brave enough to speak to-day in this House. I hope my noble friend will be able to announce that at any rate consideration is being given to a very large reorganisation and re-vamping of our whole agricultural policy to bring into full use the 16,000,000 acres of marginal land.

5.52 p.m.

LORD BRAND

My Lords, this debate has gone on a long time and has covered a good many subjects. I have a certain number of things I wish to say to your Lordships, but I will be as concise as possible. I have not always agreed with my noble friend Lord Pakenham on economic subjects, but nevertheless I differed very little from the analysis of the crisis that he gave to-day. But I did not think he went far enough in his comments about how to deal with it, or with the fundamental causes. He said that the reason why United Kingdom products had not been sold in the same amounts recently in the United States was due entirely to slackening of American demand. My own opinion is that it has something to do with price as well. I think it is a universal view that, whatever the cost of our exports to other countries in the non-dollar area, in the United States and Canada they are high in relation to local products. Therefore, I think it must have something to do with price.

The noble Lord said—and the noble Lord, Lord Pethick-Lawrence also referred to the same subject—that we had a real equilibrium in our balance of payments at the end of 1948. It is perfectly true that we had a deficit of £300,000,000 with the United States, which was covered by Marshall Aid, and a surplus of about £.300,000,000 with the rest of the world. But I agree with what Mr. Geoffrey Crowther was reported to have stated. I do not agree that it was a real surplus. Supposing that Marshall Aid disappeared to-day, the exports that we made to the rest of the world would be quite useless to fill our gap in the United States. The exports that we have made to these other countries, being unrequited exports, must be far easier to sell than they would be if they were exports competing with those of other countries. If we agree with Pakistan and India that they shall use the sterling balances, representing the war debts we owe them, to pay for their imports from us, they are only too willing, I should say, to take our exports more or less at whatever prices are charged for them. These, being unrequited exports, would not enable us to live at all if Marshall Aid ceased to exist and we had to rely on turning the labour and capital from producing those exports to producing something on which we could live. However, all this is a comparatively minor point.

I would like to refer to two other points made by the noble Lord, Lord Pethick-Lawrence. I think he rather threw cold water on the idea that we need to produce a great deal more. I think that is a mistake. We have to produce at least the £300,000,000 of imports which are now covered by Marshall Aid. Moreover, if I am right, we are importing only 85 per cent. of our total 1938 imports. We should like to make that up. We also want to improve our standard of life. Further, in my view, unless we have greater production it is quite likely that we shall not he able to counteract inflationary tendencies in this country. Therefore, for all these reasons I think we certainly require greater production.

The noble Lord, Lord Pethick-Lawrence, also stated that this Government had made a great change from other Governments because they were determined to have full employment. I should have thought that every Government wished to have full employment, though I do not know of a Government which can secure it. They may now be able to do things some of which they could not do before. And if we had a closed economy and need not think at all about our external position, it would be much easier for us to create more purchasing power if we saw unemployment coming, and try to remedy unemployment in that way. But we have only to look at the United States at this moment to see how difficult it is to bring back employment. There is no country in the world which wishes to have full employment more than does the United States. If we produce a state of affairs here in which we cannot sell our exports, we shall certainly have unemployment, and the Government will be able to do little about it. We shall go tack to unsheltered as against sheltered industries. Therefore, what the Government have above all to do is to maintain conditions which enable our exports to compete with those of any country in the world.

One lesson I draw from this crisis is that of the extreme fragility of our position and of the immense pace in which we can use up our reserves—because after all this is only a minor crisis. The slightest adversity endangers us and the sterling area, and one lesson I have drawn from it is that £500,000,000 of reserves are too small for this country and the sterling area. We have to do our utmost—which means additional exports, and a still bigger surplus—not only to re-create the reserves we have lost, but to add to them. The noble Lord, Lord Pakenham, pointed out that £100,000,000 of cuts in our imports is no remedy; and everyone will agree with that view. As to other remedies, the Chancellor was noticeably silent in his speech. He hoped, after his discussions with Mr. Snyder and Mr. Abbott, to first some fundamental solution on the basis of continuing full employment in each country, and on an agreement between all the I.T.O. charter countries upon remedial action to promote stability in world commodity prices when supply and demand get out of balance, also on the basis of full employment. I find these words vague. It looks to me as if the Chancellor were pinning his hopes upon some agreement between Governments resulting in the permanent settlement of our difficulties, without any serious change in policy here or any painful adjustments.

I should perhaps be unfair if I said that it looked to me as if the Government thought that, since they had achieved full employment, it was now the turn of other countries; that if their policy had produced serious difficulties for the United Kingdom, other nations, and particularly the United States, must find a way out for us. That may be a misunderstanding on my part. In any case, I am extremely glad that the noble Lord, Lord Pakenham, made it clear that there was no danger of the Labour Government making the United States the scapegoat. When we look at what the United States have done for us; when we consider that they have had a boom which has been extremely helpful to us in the last two or three years; when we consider that there is quite a slight recession from that boom (which was sure to take place) and when we think of what they are giving us, I am sure we cannot possibly place any blame on that country.

We have first of all to see how we are to manage our own affairs. Above all, we must make as a first charge on our economy the production of exports, being mindful not only of cost and quality but also of deliveries, so that we can compete with others; and the Government should, and no doubt will, facilitate in every way this difficult task. The noble Lord, Lord Pakenham, spoke of the different things we have to do to increase production—such as hard work and so on with which I agree. But it did not seem to me that he provided many additional economic motives for production. However, before coming to what I consider we must do, I should like to detain your Lordships for a few moments on the subject of what we may expect from the United States—and any help from them would, of course, be of the greatest assistance.

I do not know whether your Lordships read in the papers the other day an extremely interesting broadcast by Mr. Clifton Utley which, from my knowledge of the United States, I should say represented well-informed and even expert opinion in that country. If I may summarise what he said, I think it may be useful. His first conclusion was that this country, in order to help American opinion, must take steps to improve its own competitive power. When this was done, other things might follow. Possibly there might be a reduction in the tariffs—and, of course, for a great creditor country to have high tariffs is, so to speak, a contradiction in terms. Possibly, the United States might take over an increased share in Western defence, which would provide some dollars. As part of a general readjustment of the European currencies, it might not be impossible that the United States should provide a large stabilisation loan—not only for us but, of course, for European countries as well.

He also thought that President Truman's Fourth Point—Colonial development—might later be taken more seriously. If all this were done, there might ultimately be general American investment in this country, similar to our own in the world during the nineteenth century. Mr. Utley believed that he was travelling far beyond the present American political horizon in making these points; and from what I know of his country, I should certainly agree with him. I regard that sort of programme as optimistic, but perhaps not impossible. What Mr. Utley was insistent upon was that the first steps had to be taken by us.

We are accustomed to say that the United States must act as a creditor nation and lend freely and invest; but the question is: How? Their private investors have ample opportunities, and very safe ones, at home. Why should they invest in the United Kingdom or other European countries? They are told that devaluation may occur at any moment and that we have the highest taxation in the world; they read of constant threats against capital and of continuous advances of nationalisation. Why should they invest in this country? I consider there is no chance whatever of their doing so, except through the International Bank which, as your Lordships know, issues bonds on the American market. Those bonds are bought by the American investor, and in that way, indirectly, he may invest in Europe. Industrial and commercial investments are different, and under favourable conditions they might be made on a large scale in this country and in South Africa, Australia, Canada, and elsewhere. But several things are essential. These investments must be welcomed; taxation must not be so high as not to make them worth while; and, more important than all, those who contemplate making them must have confidence in sterling and in the Government's policy. If they go to the rest of the sterling area, they are still concerned with sterling; and if sterling is under suspicion, they will then be put off as things are here.

I have stressed this question of investment because I believe it is fundamental. I consider that we are unlikely within any measurable time to close the dollar gap and build up further reserves purely by exports. Capital movements are essential and what is also essential is the willingness of foreigners to have confidence in sterling, and to hold it in the form of temporary balances and otherwise. One of our difficulties now is that whoever holds sterling at this present juncture feels that perhaps he would like to pass it on fairly soon, because he does not know what is going to happen.

In the end, however, the future of this country depends not so much on what others do as on what we do. I should like, therefore, to make a few brief remarks on internal policy. First, I should like to mention two points. We must, of course, attempt to obtain imports elsewhere than from the dollar area to the greatest extent we can. In this sphere, I think we might ask the United States to agree that we should be able to exercise moderate discrimination in making such purchases. As your Lordships know, to Mr. Hull, to Congress and to Americans in general, discrimination has been like a red rag to a hull. While perhaps they sometimes tend to practise a little discrimination themselves, it is apparently wrong for other people to do so. I think it is quite possible that they might now feel that in the circumstances some discrimination should be allowed to us. To take another matter, possibly in the future if exports went very badly we might have to consider exceptional measures like those that the French and Italians have followed—that is, to give a sort of bonus to exporters to the sterling area, to let them either retain a certain proportion of the dollars they make out of their exports or sell them. If they sold them, they would be able to sell them at a profit in the free market. I regard all such arrangements as undesirable, but it may be that, rather than see our reserves fall further, we might have to consider them.

As to internal policy, it is obvious that the all-important objective is, wherever we sell exports, to compete not only with Americans but with Italians, French, Belgians, Japanese, Germans and others, not only in the world at large but in the sterling area as well, while we also pursue, so far as we can, an expansionist and not a restrictionist policy as regards international trade. I do not think we have seen the worst of the competition which we may have to meet. The Germans and the Japanese have only just begun to compete with us, and when I look at the minute share in international trade which they have now, compared with the very large and substantial share which they had before the war, I think we must still have some apprehension of their competition. I myself agree with what I thought was an excellent letter from Mr. David Eccles in The Times the other day, when he said that we must reduce our demands to such a point that labour, material and capital will flow easily where they are most needed in the moving battle for exports. But how can we get to the point where these exports for certain will compete with those of other countries? I agree with the noble Lord, Lord Pakenham, that we must have greater efficiency, no restrictive practices and harder work. I would add that, in some cases at any rate, where it would undoubtedly increase exports, we should work longer hours. I would also return trade as far as possible into private hands, give up Government-buying so far as we can and, for instance, restore the Lancashire Cotton Exchange.

Our trouble at present is that we are over-strained and taut in every direction. Therefore, it is extremely difficult to see that labour and capital do flow towards where they are needed for exports. Personally, being an outsider—I have not the information which the Government have —it seems to me as though there are signs that we are beginning to suffer a little from inflation again. I do not say the Government have deliberately brought this about, because t 1e last thing that the Government would want, I know, is inflation. Unemployment is at its lowest ever. Imports are increasing—this may be due entirely to price. Bank deposits are rising; savings are falling. I notice that Government expenditure for the three months up to July 17 is up by £60,000,000 as compared with last year. There is a very big drop in revenue—£150,000,000. I do not know whether that is due entirely to the Chancellor of the Exchequer's tax reductions or to some other reasons. Moreover prices, while falling in the United States and while, so far as I can judge, remaining steady or falling in European countries, are still rising in the United Kingdom. It is imperative to prevent any further worsening in this respect. So far as I can learn, I believe that our competitive position is still reasonably good in the whole of the non-dollar area, al- though it is difficult to generalise, but I have no conviction that it will remain so if we let prices continue to rise here while they are steady or falling in other countries.

Above all things, I would abandon the very unfortunate policy of nationalisation at this moment. I personally endorse wholeheartedly what the noble Viscount, Lord Bruce of Melbourne, said only two or three days ago. I feel sure that the nationalisation of iron and steel will add to the cost of our exports, just at the moment when that will or may be disastrous. Secondly, and most important of all—and here I agree with the noble Lord, Lord Blackford—I think it is necessary by hook or by crook to reduce Government expenditure so as to be able to reduce taxation. This is necessary, not only in order to restore incentive (though there it is very necessary in the case of both the employer and the wage earner) but for another reason. Here I do not altogether agree with my noble friend Lord Rennell. I consider that one fundamental reason for our difficulties is that the world is again somewhat losing confidence in sterling. I had exactly his experience in the United States, where I spent much time persuading my American friends that depreciation and devaluation were not the way we should go. They became less enamoured of devaluation later, but now I would say that confidence in sterling throughout the world is at a low ebb, certainly a lower ebb than we would wish, not simply because of the fall in our reserves but also because of the inordinately high taxation from which we suffer here.

I estimate—and perhaps the officials of the noble Lord, Lord Pakenham, could say whether this is correct—that taxation now takes 44.8 per cent. of the total personal income of the country, and nearly 41 per cent. of the gross national product of the country. These are staggering figures. I think the world has little confidence in us because clearly we are overstraining ourselves, because of the height of our expenditure and because we are continually adding recklessly to it. The noble Lord, Lord Pakenham, knows my views about the free Health Service. However admirable it is, I believe it is a serious mistake to add so greatly to our taxation at this moment. All this is why many experienced outside observers believe that we may ultimately not be able to escape depreciation of sterling. They do not believe that any nation can continue to stand the taxation we have and flourish.

It is clear to me that the Chancellor in his Budget speech was very concerned about Government expenditure. You will remember he said that expenditure was certain to increase but that, unfortunately, it was not at all clear that the revenues would not fall. I know the reply I shall get is that reduction is quite impossible and that all I am saying is up in the air. I do not consider that an answer. If expenditure is too great, then ultimately there will be a reduction—willy-nilly it will happen, whatever you do—by depreciation, but only after great tribulation. As your Lordships know, the French, if I may say so without insulting that great nation, have preferred depreciation to paying their taxes very regularly. Rather than face what would appear to be a reduction in our standard of life, we perhaps might like it to be brought about in another way; and that is what might result from too high taxation.

Lord Pakenham classes me with Conservative economists. I would say, in defence of Conservative economists, that when things were bad they did have a plan by which matters could be righted. I do not know what is the plan of Labour economists. When things go bad now, there is nothing—no question of putting up the rate of interest, no question of restricting credit. Nothing is done, except to "Keep exchanges level by severe exchange control and watch your reserves fall." But what do you do? What is the new method by which you ensure that you do not remain in a fever? It seems that you put your thermometer in water to keep it at 98.4, and say that that is the temperature of the patient. I would like to ask my noble friend what is his remedy for a state of affairs not exactly like the one we have now, because he may say that it is not due to our price level at all and it is not due to inflation, but to a change that has happened in the rest of the world. But suppose it was quite clear that we were suffering from too high prices? What would he do?

All the matters to which I have referred are matters upon which the Government must make up their minds before the Washington meeting in September. As I have said, all former ideas on how to manage our affairs in a critical situation, like using the rate of interest (which, by the way, I would raise at the moment) or restriction of credit are now in abeyance; the responsibility for planning everything is on the Government's shoulders. It is a heavy task which everyone must hope that they will accomplish successfully.

6.25 p.m.

VISCOUNT ADDISON

My Lords, we have listened to a debate full of questions, to some extent full of misgivings, but not perhaps as wealthy in suggestions as one would wish. I listened with great interest to what the noble Lord, Lord Brand, was saying, and until he came to his last five or ten minutes I found myself in agreement with much that he said. But I think beyond that point his political prejudices overcame his economic judgment. I would like on that point generally, to say a word about the suggestion of the noble Lord, that the world has little confidence in us. That was his expression, and I cannot imagine a less helpful suggestion than that in the present critical times. For my part, I do not think it is correct. The noble Lord, Lord Pethick-Lawrence, spoke of the wonderful record of this country in increasing its exports and its production, and its record in other ways. That is a record of which we are justly proud, and I do not think—

LORD BRAND

May I interrupt? I thought I said "confidence in sterling," not "in us."

VISCOUNT ADDISON

I took down the words of the noble Lord, but I am quite willing to accept his amendment, and I am glad of it, because I think that the record of this country, in contradistinction to that of spate others, in increasing its production in face of immense difficulties and wholesale war damage in the course of the last four years, is something of which we may legitimately be very proud. It is not, I think, an occasion for belittling either ourselves or even less our currency, though I am acutely conscious, as is the noble Lord, of the difficulties of our time.

I welcome one or two things that he said, and particularly certain suggestions that he made. I think much of the thought behind what has been said is governed by a desire to balance the dollar and the sterling worlds, and by the impression that they can be made to balance. Well, that may happen some time. I certainly do not think in face of the facts, that we can expect it in the near future. After all, as some noble Lords have said, we have to face the fact that the United States is a great creditor country, just as we were in the last century, and we ourselves, instead of being a creditor country, are a debtor country, which, of course, enormously increases our burden. When we were a creditor country one of the adjustments which was sought to be made was a great increase in our investments overseas, and I welcome very much what the noble Lord said with regard to than, method of adjusting, at all events, some of the balance from the United States. But he said it needed confidence in sterling. I agree with the noble Lord, Lord Rennell, that the gossip about devaluation and so forth did a lot of harm. I believe that it contributed, as Lord Rennell said, at least to hesitation.

For my part, though I am not an economist. I have never been convinced that devaluation could do us any good; indeed I feel that it might do a lot of harm, because the immediate result must be that whilst our exports could be sold for fewer dollars, so that they would be cheaper to the purchaser, we should have to sell many more exports in order to obtain the same amount of dollars as we obtained before. That would be a rather considerable undertaking. One other immediate result that would follow before we could achieve the increase of exports would be that we should have to pay much more for all that we imported. In view of these considerations, I confess that I am glad that this Government have no intention whatever of entering into this rash experiment. And I am pleased to find that on all sides of this House that policy is supported.

The noble Lord said something about the necessity of enlarging the reserve of £500,000,000, as we would like it to be. I entirely agree with him. I think that a larger proportion than one noble Lord has suggested of the trade of the world is based on sterling, and that a reserve of this magnitude is something which we ought to increase if we possibly can. The noble Lord put forward a number of suggestions, but I will comment upon only one of them, because it happens to relate to a subject about which I myself have often been guilty of intervention. It is clearly desirable and necessary—I do not say as a long-term policy but in the immediate future—that we should, so far as possible, diminish our dollar purchases. That means that when we want commodities we may find ourselves compelled to buy them somewhere else than in dollar areas. The noble Lord entered a mild protest against interpreting Article IX of the Loan Agreement in such a way as to suggest that the allocation of purchases elsewhere might he classed as some measure of discrimination. I myself have never been able to take the view that if you have money to pay for goods in one country and not the money to pay for them in another country, and you buy them where you have to, that is discrimination. It is something which is forced upon you by necessity. I was very glad indeed to hear the noble Lord enter—quite mildly as I say—a protest against that interpretation.

The noble Lord, Lord Rennell and others have had comments to make on the question of prices. Many years ago I held the post of Minister of Munitions, and whilst doing so I learnt a lesson which burnt itself into my mind so that I have never forgotten it. We sought to reduce prices of a good many commodities, and the cost accountants were asked to get out analyses of costs. One of the most surprising features of the results of their examination was the relatively low proportion of total cost for which wages accounted in the cases of a large number of manufactured products. The same thing, I have no doubt, is true to-day. When speaking of reduction of costs Lord Rennell and, to some extent, Lord Brand—who is not now in the House—spoke in terms of wages. I cannot accept all they said in that connection. I should have said that better management was a subject—

LORD RENNELL

I thought I spoke not mainly about wages but about hours of work.

VISCOUNT ADDISON

Assuming that you are paid for doing a certain amount of work, if you do more work for the same wages, that, at all events, is a lowering of your pay. Although the noble Lord did not have the hardihood quite to describe it so brutally as I am doing, that is what it amounts to. What I am stressing at the moment is that other ingredients of prices are deserving of examination just as much as wages. One of the outstanding needs is for better management. We have heard a good many complaints about the dearness of some of our textiles in some markets. I think it is undeniable that the response of some branches of the textile trade to the appeals for improved methods of management has been very disappointing. But where they have made improvements results have been most encouraging, despite the fact that the same rates of wages have continued.

There is another item with regard to the sale of our exports which I suggest urgently requires attention, and that is our sales methods. People from whom we get reports represent to us, particularly as regards the United States and, to some extent, as regards Canada, that our sales methods, especially as applied to some classes of commodities, need improvement. Therefore, when we are talking about prices and the saleability of British goods, it is not simply the labour costs that we have to think about. I came across one apostle of this doctrine some time ago who was very frank. He said: "What the country really wants is a dose of deflation with a million unemployed." I, myself, heard him say that in 1931. I was one of those who rebelled against it, and I went into the wilderness as a result. I hope there is not a single noble Lord in this House who wants the methods that were pursued after 1931 to be pursued to-day. They did bring down wages, it is true.

VISCOUNT MONSELL

Cut Cabinet Ministers' salaries!

VISCOUNT ADDISON

We had deflation with 2,000,000 or 3,000,000 unemployed. That is not an expedient which I believe any Party wish to encourage. I see from their manifesto—though I have not read it in great detail—that the Conservative Party advocate full employment, and do not at all events suggest that there should be any reduction in wages. I am still hoping to have the opportunity of further examining that document to see what remedies are recommended. At present, so far as this particular crisis is concerned, I have not derived any help from it.

There are other things than those which I have mentioned, which, clearly, we have to undertake. I am not in the least minimising the critical nature of the situation. We have, as Lord Strabolgi said, to increase our whole production as much and as quickly as we possibly can. We can also buy from sterling areas goods which we would otherwise wish to buy from dollar areas. There are great opportunities for further co-operation within the Commonwealth. I am glad to say that the recent exchanges between Commonwealth Finance Ministers, so far as they have gone, are very promising indeed. It is the fact, I think, that we have some ground for hoping that one of the contributing causes to the gap will be minimised in the near future. As we know, it has been greatly aggravated by the diminution in purchases, to which Lord Rennell has referred and, I dare say, due to the causes he described—hesitation in existing circumstances, because of certain falls in price, in the hope that prices would fall still further. But this great falling off during the last three months of purchases of commodities which are dollar earners—tin, rubber and wool—has contributed very much to increasing the gap. I sincerely hope that a contribution will be made to diminish ing the gap[...], the restoration of these purchases.

I agree with the noble Lord, Lord 13rand (though I do not recommend some of his methods) that the increase of production is still, and will continue to 'be, a vital necessity, and I cannot stress this too much. Anything he or anybody else can do to promote this increase I am sure we as a Government will recommend. I am sure it will not be brought about by running down sterling, and I am sure it will not be promoted by the threat of the reduction of wages. It will be promoted, I believe, by putting our resources and brains to improving our methods of production, and especially by improving our sales methods in different parts of tie world. I need not go into the large number of expedients which are now being discussed between ourselves and our friends.

I do not think there is any expedient suggested to-day which is not at this time the subject of 'meticulous and anxious examination. I think 1:11at is a fair statement. I think we are entitled on national grounds to expect as many helpful suggestions as can be put forward. I deplore the comment of the noble Lord, Lord Blackford, about the strikes. They are most deplorable, of course, but I have in front of me a list which makes me feel proud when I read the record of this Government over the last few years. We have had strikes—sporadic, annoying, causing loss. BM after the last war, in September, 1919, there was a railway strike which went on for some considerable time; there was a national stoppage in coal in 1920–21 ire May, 1926, the miners' lockout took place there were strikes of moulders and engineers in 1920, a strike in the cotton trade in 1922, and finally there was a policemen's strike. The record for long-continued, deplorable strikes was shocking. If we compare it with the much less time lost through disputes during the last five years, and with the immense increase in productivity which this country has sustained, I think we ire entitled to he proud of our old country. We should not run it down before all the world — though I do not say that in any way whatever to minimise the gravity of the present crisis.

Finally, I take this opportunity, as we have some members of the Conservative Party present—I do not know whether for the moment the noble and learned Viscount, Lord Simon, is one, but he sits on the Opposition Front Bench—of asking what they are going to do about it. This week-end I had a look at their latest prescription. I am sure that the noble Lord, Lord Brand, would be disappointed in it.

LORD BRAND

I have not had an opportunity to read it.

VISCOUNT ADDISON

I recommend it for your perusal. What it comes to is that despite all that has been said, they are not going to denationalise anything we have nationalised except steel and a certain amount of road transport. All the rest of nationalised industry is to be continued, with certain reflections on the words "economy" and "administrative decentralisation" and choice phrases of that kind. They are going to give us better health services, better terms for the doctors, free drugs for private patients, better terms for farmers, more secondary and technical schools, better pay for soldiers and sailors, and full employment —and, at the same time, a reduction in income tax! It would require an economist of greater agility than the noble Lord, Lord Brand, to continue these services on their present scale and at the same time reduce taxation. At all events, I express my disappointment in this important document. We welcome every considered constructive suggestion that can be helpful in the present emergency. I do not minimise it, but I have confidence this country will come through.

6.46 p.m.

LORD CHERWELL

My Lords, I do not wish to follow the noble Viscount the Leader of the House in discussing the document which he has not yet read. I would only point out that his Party's constant reiterations about the impossibility of economies rather reminds me of a forbear of some of the noble Lords in this House—not, of course, of the noble Viscount who has just sat down—who got into financial trouble about 150 years ago. As an economy it was suggested that he might dispense with one of his three pastrycooks. He exclaimed, "Do you grudge me even a biscuit!" That is very much the sort of thing the Labour Part say when Nye suggest that economies might be possible in some of their under- takings. It is less than three months ago now since I invited the House to discuss the economic situation. The debate followed the usual lines. I ventured to point out to your Lordships that the Government had put the position in an unduly rosy light, asked for some information on certain points that seemed to me important, and emphasised that the barometer was by no means "Set fair" and there was danger of serious storms ahead. After some weighty interventions, especially from the noble Lord, Lord Rennell, and the noble Lord, Lord Brand, the noble Lord, Lord Pakenham, made the sort of reply we have come to expect from him on these occasions. He did not waste very much time on my criticisms hut reproached me that every year since 1946 I had taken too gloomy a view of the situation, and he boasted that the optimists on the Front Bench on the Government side had proved more right than the pessimists.

LORD PAKENHAM

The noble Lord will forgive my interrupting him, particularly since there is little time, but he will recall that he described my speech at the end as moderate and reasonable. I hope he still holds that view.

LORD CHERWELL

If the noble Lord has studied the principle of relativity, he will know that the epithets "moderate and reasonable" are relative to the usual tenor of his speeches. I only wish his statement had been true. To-day the noble Lord has taken a rather less optimistic line. He urged us to be careful to avoid a number of dangers. He asked that everyone should avoid self-depreciation. If that was directed to some of his colleagues, I think it was rather otiose.

I do not want at this hour to go through all the details of what happened in 1946; how the situation was saved by the American and Canadian loans; how in the spring of 1947 the Government's optimism was completely set at naught by the crisis of the summer. I can well remember receiving my usual reproof from the noble Lord on that occasion, and accepting it in the usual humble and contrite spirit in which I accept anything that falls from his lips. We were saved from ruin in 1947 by Marshall Aid. Noble Lords opposite cheered up, and it was reported—here I must confess I had it second-hand—that the Chancellor had been seen to smile. This cheerful mood persisted until a few weeks ago. My warnings about the sellers' market vanishing, the rising costs in production, restrictive practices, and threats of strikes and go-slow action were all brushed aside. Any attempt to high-light the deep-seated maladjustment which the Government seem to have discovered in the course of last month was pilloried as "Party politics." We have just been blamed for not having offered a plan for getting over the crisis in the Conservative document that was being drafted about that time. It may be that we ought to have realised that the Government's confident forecast of the future was wrong, and that we ought to have foreseen the crisis and put in some plan. Perhaps the draftsman believed rather too much in the accuracy of the Government's knowledge of what was about to happen.

Once again crisis has overtaken us. Hurried cuts in our imports from the dollar areas are giving another twist to the turn of the austerity screw. Once again we are fighting desperately to save our gold and dollar reserves from dwindling far below the minimum level at which they can be held to be a sufficient backing for sterling. With this history behind them, noble Lords' must not be so touchy if we direct certain criticisms against the Government's handling of our economic affairs. It is really no good saying that everything in the garden is lovely if you have the broker's men in the house. I hope that on this occasion the noble Lord will, therefore, answer the various questions put to him in a serious spirit, much as we enjoy his sallies and quips on all occasions.

LORD PAKENHAM

Since the noble Lord seems to be suggesting that I have not answered the questions put to me on previous occasions, I would say this deliberately. The noble Lord is very apt to put detailed, statistical questions which he knows very well will not be answered and can never be answered on the spur of the moment. If he wants questions of that kind answered by a Government speaker, he knows perfectly well that he ought to give notice.

LORD CHERWELL

I am sorry if I have overrated the profundity of the noble Lord's knowledge of our affairs. Today the noble Lord has attempted to clarify the cause of this deep-seated maladjustment. I am afraid I agree with the noble Lord, Lord Rennell, that the clarification is not quite complete, The noble Lord, Lord Pakenham, told us that the imports into the dollar area from this country had fallen by about £12,000.000. I would be glad to hear how much the imports from the sterling area were reduced. After all, the shortage is something of the order of £65,000,000. That is the difference between the forecast gold reserves and the point to which trey have actually fallen. Unless there were falls in exports from the sterling areas to the dollar areas of the order of another £50,000,000, the visible trade balance alone cannot explain it. Before the war our exports paid for about two-thirds of our imports. If, as we are now told—and f should think it is true—we are now bringing in only four-fifths of the pre-war imports, and exports are one and a half times as much, we should be in balance as regards visible imports and exports, even allowing for a 20 per cent. deterioration in the terms of trade. There is no great maladjustment there.

But we are told to look at the fall in our invisible exports, which have fallen from £232,000,000 to £98,000,000, due to our loss of foreign assets. I am afraid I must differ here from my noble friend Lord Simon; I think -le has also been misled on this point. In fact, our income from abroad in the form of interest, profits and dividends is only £43,000,000 down, and this is offset by a rise of £40,000,000 in our net shipping earnings. The real changes in the rather arbitrary table of invisibles are, first, that the Government last year spent abroad £167,000,000 more than pro-war—offset, it is true, to some extent by sales of surpluses, which, of course, cannot be repeated, amounting; to about £87,000,000. Then there is the mysterious item to which I have referred before, labelled "Other," which fluctuates from year to year by more than £100,000,000 and has sometimes not even remained the same for the same year as we proceed from one Survey to the next. This year, fortunately, it was £70,000,000 up on pre-war. But can we rely on this being so next year?

The third point which has reduced our invisibles is that we are now paying out £82,000,000 more than pre-war under the heading of "Interest, Profits and Dividends." This really does require a great deal of explanation, which I hope we shall receive. It corresponds at 2½ per cent. to a capital investment of £3,200,000,000, That figure, I am afraid, has an ominous resemblance to the so-called sterling balances, to which I shall refer later. The noble Viscount the Leader of the House once said that this was "funded debt." I was afterwards informed that this was an error, and I hope I am right in assuming that it was. There is a much more serious maladjustment in the dollar areas. It is not very easy to see exactly how that comes about. The Chancellor of the Exchequer seemed to suggest that our troubles were largely due to the loss of our income from dollar investments. But our total loss of interest, profits and dividends, as I have already said, is only £43,000,000. So that if the whole of this had been dollar income it would not go far to explaining a deficit of £340,000,000. The loss of dollar investments, therefore, is not the explanation.

What is the explanation? The United Kingdom, so far as I know, has not balanced its dollar accounts for a long time. The noble Lord, Lord Pethick-Lawrence, said that before the war they were rectified mainly by exports of raw materials from the Empire and other parts of the sterling area—I hope I do not shock the noble Lord by the use of the word "Empire"; perhaps I should say "Commonwealth"—and that these exports from the Empire to the United States were compensated by exports from this country of manufactured goods to the Commonwealth or Colonies. What has happened to destroy this comfortable triangular process? In 1948, as in 1938, we procured, so we are told, 32 per cent. of our total imports from the Western Hemisphere. As our imports were only 80 per cent. of pre-war, this corresponds to a drop in our dollar imports by volume of one-fifth. Have our exports of raw materials from the sterling area to the Western Hemisphere dropped in quantity to such a degree that we can no longer balance our trade in this way, for our home exports apparently are up 25 per cent.? Or is it the fact—as I am afraid may be the case—that the prices of our imports from the dollar areas are pegged at high levels by some improvident arrangement, while the prices we get for our exports have followed the market down? Perhaps we shall be given the answer to the conundrum.

Unless the sterling area imports from the dollar area have risen beyond measure, it is difficult to see why, in spite of Marshall Aid, this great depletion of our cold and dollar reserves has occurred. Whatever the cause, the drain is there. The Government reaction so far has been the rather crude expedient of cutting down dollar imports by one-quarter and asking the sterling area to follow suit. It is the sort of reflex action that occurs to make you blink your eyes when someone thrusts his fist in your face.

What are the Government's plans for dealing with the long-term maladjustment? We have heard mention of a trip to Washington. I hope this does not portend what I believe is known in certain circles as "popping round the corner to see uncle." It has been hinted that there is some idea of persuading the Americans to fix prices for the raw materials we export to them from the Empire. Is this the idea? It would not seem to be a very helpful proceeding, unless they also fix quotas; for, clearly, fixed prices without quotas are not of much use. The idea that the Americans will contract over a long period to take large fixed amounts of Empire products at favourable prices to us seems to me to savour of wishful thinking.

VISCOUNT ADDISON

We have done the same with wheat for them.

LORD CHERWELL

Perhaps we are more or perhaps less provident than they are. I think the noble Viscount, Lord Addison, and others have mentioned the possibility of getting the Americans to bridge the dollar gap by large-scale investments in the sterling area. As has been said, this, of course, is what we did throughout the nineteenth century when we had an export surplus. But the world has moved on since then. In Victorian times no country in which we had large investments would have dreamed of nationalising them, with derisory compensation, or blocking their earnings or imposing such hampering restrictions or regulations as would be tantamount to wrecking the enterprise. If they had, Queen Victoria's Ministers would have known what to do about it. But nowadays everybody claims the right to do all these things in the sacred name of national sovereignty or social justice or some similar combination of abstractions.

In those circumstances, as the noble Lord, Lord Brand, said, can we really expect America or, indeed, any other nation to invest abroad on a large scale? The Foreign Secretary gave us some hint—I think it was intended as a hint—as to the Government's plan—namely, to deal with the matter on a higher plane. Is that really all that has been excogitated? Or have the Government any broad coherent plan? They pay lip service, of course, to the ideal of multilateral trade, and this certainly is a most desirable objective, for before the war something like one-third of our trade was triangular—or perhaps I should say polygonal. If we want to expand our exports and our earnings front foreign trade, clearly it would be a great mistake to eliminate this and go in for bilateral arrangements. But whilst paying lip service to multilateral trade on which the Americans, I think rightly, set great store, the Government confront the world with bilateral bargains. I recognise their difficulties. Unless one has a convertible currency, it is difficult to foster multilateral trade, and to make our currency convertible—as we saw in 1947—may lead to a most appalling drain on our gold and dollar reserves unless the world has confidence in sterling.

As the noble Lord, Lord Rennell, said, when people have no confidence every trick of the trade and every "wangle" is exploited to get rid of pounds and obtain dollars, kronen, Swiss francs, or whatever it may be in their stead. No system of restrictions and penalties will be able to stop up all the leaks and loopholes. Again, as the noble Lord, Lord Rennell, said, if people think that the pound is going to be devalued they will call in every penny they can, whilst holding up as long as they possibly can payments of anything they owe. I am personally of opinion—and I think the noble Lord, Lord Rennell, agrees—that to a great extent the crisis which has grown up is largely one of confidence, and not merely one of balance of trade. I entirely agree with the arguments of the noble Viscount, Lord Addison, about the damage that would be done by devaluing the pound, and I am glad that he made the perfectly plain unambiguous statement that the Government have no intention of doing this. I trust that the world will take note of it and that confidence in sterling may return.

I was very pleased to hear the noble Lord, Lord Rennell, say that the whispering campaign which Las done so much harm is dying down, and I trust that in due course this source of harm will be eliminated. But, as several noble Lords have said, the trouble is that foreigners who see us collecting 40 per cent. of the national income in taxes naturally ask themselves whether we can avoid inflation, and how long sterling can maintain its value. We all know that the Government are doing their best to avoid inflation, and I was sorry to hear the noble Lord, Lord Brand, say that he thought he saw signs of its returning. But I think it will be agreed that we are balancing on a knife-edge. Quite apart from these matters, of course, the Government's other proceedings since they came into office are not entirely calculated to inspire trust abroad in their economic wisdom—the bloated capital programme; the failure to man many vital industries, such as the textile industries; the fuel fiasco in 1947, which cost £200,000,000 of exports, or the convertibility muddle in that year which swallowed one-third of the American Loan. Although foreigners may applaud our open-handed generosity, which has provided some £840,000,000 out of British resources since the war to stimulate world trade and help forward world recovery, I doubt whether such behaviour conduces to a belief in our business capacity. I must confess that it shakes my faith.

However good the objective, could we really afford to be so generous? Nobody could be more fond of France than I am, but was this the time that we could afford to lend her £115,000,000? The Netherlands are doing well, and certainly deserve the reward they have reaped for their hard work. But should we, who are in effect getting Marshall Aid from Belgium, really have given them £41,000,000 of surpluses free of charge? It cost us a lot of money to defeat Italy. Was it really right to give her £55,000,000 worth of stores for nothing? I do not feel under any special obligation to the Burmese, who were almost the first to walk out of the Empire, and I find it hard to understand why we should have given them £38,000,000 and loaned them £36,000,000 more. No doubt it is very pleasant to play the Lady Bountiful and hand out largesse all round, but is it really fair for the Government to do this at the expense of the British people? Together with the drawing rights on the sterling balances, all these gifts and loans amount to more than we received from America and Canada under the Loan Agreement. We seem to have handed out something between £1,200,000,000 and £1,500,000,000 since the war. And now we are in trouble because we have lost a mere £100,000,000 or so from our gold and dollar reserves.

That brings me to another feature which is bound to cause even more anxiety abroad about the future of the pound; and that is the huge burden of the so-called sterling balances which overhang the nation's life. Here we have this vast mass of thousands of millions of pounds of artificial debts created during the war, which the Socialist Government seem to have accepted and treated as ordinary commercial debts. As the House may remember, I have always pressed the Government to block these sterling balances pending an examination of their validity. A part of them, of course, are perfectly proper, honest balances, for which full value has been received. But a large part—indeed I believe the greater part—cannot be justified on grounds of equity. If the United Kingdom, in defence of some country against the Italians, the Germans or the Japanese, needed military works, for instance airfields, why should we be charged for their construction? If our troops, in protecting certain territories from enemy devastation, caused damage, why should the United Kingdom taxpayer have to make this good? If you go on to a neighbour's land to prevent a disastrous flood from spreading, and ask him to help to prepare or build a dyke, you do not expect him to charge you for his efforts at so much an hour. But even if you do admit his right to charge you for anything he may have done to help, you do not expect to be charged exorbitant rates. This, in fact, is what happened in many cases in the East. Always we were told that these matters would be cleared up after the war. Never could we obtain a proper itemised account.

I may perhaps mention one instance which, I feel sure, was typical of the way these balances were built up. One item obtained—after a great deal of struggle—was some tens of millions of pounds' worth of petrol bought for the use of the Army in India. Petrol at that time could be landed at Bombay from Abadan for something like 6d. per gallon. We were charged some 2s. or 3s. a gallon—the difference being apparently simply the tax levied in India on petrol. This shows the sort of rough and ready way in which hills were made out, bills which the British taxpayer is expected to foot. Then again, there was the rate of exchange. As a result of all the money spent in these countries there was, of course, serious inflation; and in India the purchasing power of the rupee dropped to something like 8d. or 9d.; yet the rupees charged against this country in these weird and wonderful accounts were converted into pounds at the pre-war rate—equal, I believe, to about 1s. 4d. No wonder vast sterling balances accrued to countries whose frontiers we were protecting from the enemy!

This sort of thing was not, of course, universal. In many countries we had normal commercial dealing, and fair and proper accounts were made out. Whether, in addition to all our efforts, we should be called upon to pay our smaller Allies for the help they gave in the war may well be argued. But certainly nothing can justify the British taxpayer being called upon to find swollen sums grossly in excess of the efforts made by countries which we helped to defend. Instead of paying tribute, this country should have presented a counter-claim for the vast expense to which it was put in protecting its alleged creditors from being pillaged by the Nazis, Fascists and Japanese.

I asked last week how great the sterling balances were, and what arrangements had been made about their liquidation. The House may remember that the noble Lord said that the Government would not disclose anything about them. I hold this to be a blunder of the first magnitude. In the first place it reveals a contempt for Parliament and the electorate which I thought prevailed only in totalitarian States. After all, it is not the Government or members of the Cabinet who are having these millstones fastened round their necks; it is the unhappy British people. Something like £300 of foreign debt is being clamped on to every household in the land. The taxpayers are to be made responsible for paying these sums. The Government will not condescend to tell us what debts they have recognised in our name, or what arrangements they have made about paying them. If the directors of a company refused to tell their shareholders what liabilities they had contracted in their name they would very soon find themselves in Queer Street.

LORD PETHICK-LAWRENCE

May I ask the noble Lord whether he was not in the Government at the time when these debts were incurred?

LORD CHERWELL

Certainly; and we made it plain that we were going to have an accounting about the whole thing at the end of the war. That accounting appears not to have taken place.

In these matters the Government evidently considered themselves above the law. There was another and even weightier reason why the Government's secretive attitude is most unwise. As in the ease of gifts or loans, concessions about drawing down sterling balances imply equivalent, unrequited effort by our people for the advantage of others. At the best such payments represent goods, the results of sweat and toil in our factories and workshops, shipped abroad without our receiving anything in return. At the worst, I understand, some of these creditors have insisted on being given hard-won dollars, the fruits of our exports to the Western Hemisphere, in order to use them for their own purposes. I hope I am wrong about this. If so, no doubt the noble Lord will enlighten me.

Can your Lordships imagine anything more calculated to shake confidence in the future of the pound than this state of affairs? No one can tell, when the country seems to be getting into equilibrium, whether we may not be put "into the red" by the Government releasing £100,000,000 or £200,000,000 or £300,000,000 to one or other of these claimants. Foreigners would have to he very confiding if they felt confident in holding sterling with these vast undefined, unknown liabilities in the national balance sheet. If only the Government had curbed their exuberant generosity and blocked these "phony" war debts it is possible that, with the help of the American and Canadian Loans and Marshall Aid, we should have recovered our equilibrium by now, that confidence in the pound would have been complete, and that convertibility, with all its advantages, would have been feasible. Even now it may not be too late. I beg the Government not to close their minds to these considerations. Convertibility, with the fillip this would give to multilateral trade, would be a great step on the road to recovery. Once this had been achieved issue would lie fairly and squarely on our own shoulders. A rise in productivity would be matched by a rise in the standard of life.

After all, the world does not owe us a living. Some generous nations like the United States and the Dominions may be prepared—and indeed have been prepared—to contribute some of the fruits of their toil to help us "round the corner." But in the long run we can consume only the equivalent of what we produce. As the noble Lord, Lord, Rennell, said, we must either produce more or eat less. If we could sell our goods for convertible currency, if they could move freely about the world as they used to do, efficiency and hard work would reap their full reward. The struggle to match our goods against the foreigner's would of course remain, but if we failed we should know it was our own fault, and the crude expedient of blaming our troubles on the foreigner, whose prices some people seem to think ought to be adjusted to suit our convenience, would lose what little logic it has. Two years ago, I wound up my speech with an appeal to the Government, in the name of equality of sacrifice, to face realities and to broadcast the truth, even if it meant eating some of their words. Sometimes a shaft of light strikes where it is least expected. I was agreeably surprised to notice the other day that even the Minister of Health had had a glimpse of the obvious. He said: The only people who can put you on your feet Are yourselves; and for 1949 I give you: Work first, Independence second and Socialism third. It is a far cry, this, from some former pronouncements. I will not be so unkind as to resurrect them. For there is more joy in Heaven "over one sinner that repenteth than over ninety and nine just persons." If only the Socialists had preached this doctrine for the last thirty years, we should be in a happier state to-day.

We must all hope that this change of heart will spread, for it is the only thing that will save the country; that the manual workers will see the folly of strikes and go-slow actions and restrictive practices of every sort, and that all classes of the community will join in a great drive to save the situation. It is true that we had more strikes after the 1914–18 war than this time, but there was a great difference to which I do not think enough attention has been paid. In those days His Majesty's Opposition were sitting on the side-lines cheering on the strikers. That is not happening this time. Nor will it happen so long as the Conservatives remain in Opposition. The position is bad, but I do not believe it is irretrievable. However, it will require a united national effort such as saved us nine years ago. Party shibboleths which divide the country must be sacrificed in the cause of unity. Class hatred must be damped down, and if possible eliminated. If all the members of the Government direct their energies to this aim, instead of antagonising half the electorate with measures and phrases which have no conceivable relevance to the sombre issues which confront the country, and if they can make the electors realise how serious the crisis is, I believe we may yet win through to a happy and prosperous future.

7.24 p.m.

LORD PAKENHAM

My Lords, I am in something of a difficulty because, when the noble Lord, Lord Cherwell, demands a series of careful answers to a number of points that he has put, my natural inclination is to attempt to provide them, even though I must remonstrate with him for using some of these statistical points without notice. Normally, he would be entitled to a full reply. I understand, however, that perhaps he and other noble Lords do not wish a reply of that character to-night. I am a little diffident upon this point, because I was in trouble before at almost this hour upon a measure of this sort, and I do not want to repeat my mistake.

LORD CHERWELL

I did not expect an answer. I only hoped for it.

LORD PAKENHAM

That still leaves me in something of a difficulty. I cannot allow the noble Lord to go away and say that the Government would not help him. But I will try to compress my remarks into a very brief compass indeed.

First, I should like to reply to a point raised by the noble Lord, Lord Pethick-Lawrence, in a speech which interested me at any rate, and probably other noble Lords also, very much. He asked, first of all, when the changes in the estate and legacy duties would take place. The answer is: from the date of the passing of the Act. I now come to a slightly more complicated point. I apologise to the House at this late hour, but I think the answer may be widely studied—at any rate, the noble Lord, Lord Pethick-Lawrence, attaches importance to it. I refer to his suggestion that the present method of charging estate duty should be changed to the surtax principle of taxing successive slices of estates at different rates.

The Chancellor of the Exchequer agrees that there is much to be said in favour of such a change, but on the other hand there would also be considerable difficulties. With surtax we are dealing with the income of an individual, and he is accountable for the whole of the tax on that income. But with estate duty we may have many different items of property passing on one death, with different beneficiaries and different persons accountable for the tax on each property. The noble Lord will remember that so well. In fact, except with the very small estates, it is usual to find that there is property passing under more than one title on a death. Each time fresh assets or liabilities were discovered in connection with one of the properties, or any revision of the estimated values took place, a fresh computation of the tax payable on each set of properties would be necessary. This would mean additional work to the accountable parties and their professional advisers and to the Estate Duty Office. Moreover, whenever properties pass on death under more than one title, their administration would be held up so long as any questions were outstanding on any one of them. It is true that these problems already arise when the value of an estate is within one of the margins, but this occurs only in a small minority of cases My right honourable friend appreciates the point made by the noble Lord. He appreciates the force of the noble Lord's case looked at from one aspect, but for reasons which I have outlined I do not think that we should be justified in changing over to the surtax principle. I thought it right that the noble Lord should have that answer.

I will reply now to the noble Viscount, Lord Samuel, in relation to the question he put to me when he asked me whether at a certain point I was talking of value figures or volume figures. I was referring to the decline in American purchases between 1937 and 1938. The comparison, in fact, was by value, hut the argument still holds good. There was a greater decline in that period than has occurred since. When I was illustrating the fact that we improved our position in 1948 relative to the Americans, in the sense that our exports increased and theirs declined, there again I was using value figures for the comparison. I am in the hands of the House, but I must speak briefly. I do not think that any of us misunderstood or indeed grudged the noble Lord his ability to say: "I told you so" on this occasion. I think that when the professional "gloomster" of the House (if I may use that expression) anticipates a period of gloom, and gloom arrives, he is entitled to say that he was right and others were not so right. I think we certainly cannot object to that. But I cannot accept the view that, during the last three years, the noble Lord has been right. I should say that he has been fantastically and extravagantly wrong, but that occasionally the game has run his way. The score has mounted up against him, but he has scored his goals in prophecy, and we must not grudge him his moment of relative satisfaction, to use his own form of words.

LORD CHERWELL

I have no satisfaction in being right. But I must recall that on the other two occasions, when the Government rounded the corner, it was clue to the American Loan and to Marshall Aid.

LORD PAKENHAM

My Lords, the noble Lord can go on arguing about his own past, to the point where he would hold my interest but where other noble Lords at this late hour would become restive. I do not share his view that the pessimists since the war have been right. I say they have been badly wrong, but during the last three months things have gone worse than we had expected. We all agree that we must set to work to put them right. The noble Lord let slip one astonishing observation. He approached, though not very closely, this new Conservative statement of policy. He did not, so far as I can gather, express any great admiration for it. It seemed to me that he felt it could have been very much better drawn up. There seems to be lesser discipline on his side of the House. I am not quarrelling with that, but I gathered he thought it was a thoroughly bad document.

LORD CHERWELL

I do not know what gave the noble Lord that impression. I was complaining that we were being blamed for not having offered a plan. As the document was drafted long before the crisis emerged and while the Government were full of confidence and hope about how wonderful the future was to be, naturally we did not produce a plan for surmounting a crisis which we were assured was not going to occur.

LORD PAKENHAM

The noble Lord has foreseen the crisis approaching for three years, and as he is something of a confidant of the Conservative Party I am surprised that no plan was drawn up. The noble Lord actually said that it may be we ought lo have foreseen the crisis. The noble Lord claimed that he did. I can only assume that his opinion was overlooked. But be that as it may, what we are complaining of at the moment is not that there was not a plan, but that this document suggests an increase of expenditure and a diminution of taxation and shows no possible way in which that could be done. The noble Lord said that this document was drawn up a long time ago. Mr. Churchill could not have prepared his speech of Saturday last a long time ago, and that told exactly the same story.

If the noble Lord wishes, I will return to the question of the grants and loans to foreign countries. I cannot go into them in detail. I know the noble Lord has thought a great deal about this matter and I do not say that he may not have constructive points to raise. But, speaking broadly, our problem, as the noble Lord is well aware, is that of shortage of dollars. Therefore, it has been possible for us under the Marshall Aid scheme to receive dollars from America and then give part of the assistance to European countries. That has been perfectly possible, and I should think it was one reason why we have obtained so much in the way of assistance. I can only speculate whether we should have received as much assistance had we shown ourselves completely blind and deaf to the claims of those it was within our power to help.

LORD CHERWELL

The amount to which the noble Lord refers, which was the conditional aid, was only £60,000,000. I left that out because that is a perfectly good and valid export. For if the Americans will give you dollars in return for your handing machinery to France or whoever it may be, that is just as good as exporting goods into a dollar area. The other £840,000,000 was not given under the terms of conditional aid; it was given without any recompense to this country at all, so far as I can make out.

LORD PAKENHAM

Without going into all the details upon which it was granted, I still say that our problem in the world has been to pay for dollar goods, but it has been within our power, and I think we can take pride in the fact, to help others on a considerable scale in a way which has not cost us dollars.

The noble Lord dealt with the question of our sterling balances, and I would gladly explain more clearly than I can from this place why it is so difficult to give an explanation. The Bank of England entirely agree with us that to provide this information would be to disclose what is confidential between the banks holding these balances and their clients. So the noble Lord really should not draw some kind of business analogy, or argue from commercial practice. It would be contrary to all commercial practice to publish the figures in question. Further than that I would only say, as my noble friend said, that the noble Lord was a member of the Government—and I am not quarrelling with the decisions of the Government in this matter—when these liabilities were incurred, and, therefore, as between the noble Lord and myself at any rate, if there is a discussion as to whether the liabilities were incurred too easily, I feel relatively immune in comparison. I am sorry to end so acrimoniously. I have the deepest regard for the noble Lord and I hope one day he may have for me. But be that as it may—

LORD CHERWELL

I have never lost it.

LORD PAKENHAM

I am sorry to have hurried my reply to the noble Lord, to have not replied to the measured and very thoughtful speech of the noble Viscount, and of course to say so little about the other speakers. But my noble friend the Leader of the House has replied to the earlier contributions, all of which I thought were extremely interesting. Therefore I hope that we can now move forward from this point, whether or not we disagree about the past and the details.

On Question, Bill read 2^a; Committee negatived.

Then, Standing Order No. XXXIX having been suspended (pursuant to the Resolution of July 13):

LORD PAKENHAM

My Lords, I have it in command from His Majesty to acquaint the House that His Majesty, having been informed of the contents of the Bill, is pleased to give his consent so far as His Majesty's interest is concerned on behalf of the Crown, the Duchy of Lancaster and the Duchy of Cornwall that the House may proceed therein as they shall think fit. I beg to move that this Bill be now read a third time.

Moved, That the Bill be now read 3^a.—(Lord Pakenham.)

On Question, Bill read 3^a, and passed.