Lords Sitting of 4 May 1949

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers
2.36 p.m.
MOUNTBATTEN ESTATE BILL [H.L.]
Read 2a.
PEOPLE'S DISPENSARY FOR SICK ANIMALS BILL
Read 2a, and committed.
UNIVERSITY OF NOTTINGHAM BILL
Read 2a, and committed.
TEIGNMOUTH AND SHALDON BRIDGE BILL
Read 2a, and committed.

SCOTTISH HYDRO-ELECTRIC SCHEMES
2.37 p.m.
LORD CLYDESMUIR: My Lords, in the unavoidable absence of the noble Viscount, Lord Elibank, I beg to ask the Question standing in his name on the Order Paper.
[The Question was as follows:
To ask His Majesty's Government whether the £50,000,000 to which Lord Morrison referred in his speech on the 5th April as the total amount contemplated to be spent for the development of the Scottish hydro-electric schemes will be a capital expenditure of a commercial nature secured by interest-bearing debentures or some similar form of security issued by the Scottish Hydro-Electric Board under the Act and with a view presumably to becoming revenue-earning in the future; or, on the other hand, will it be in the form of a direct grant from the Government as might be inferred from Lord Morrison's remarks.]
THE PARLIAMENTARY SECRETARY, MINISTRY OF WORKS (LORD MORRISON): My Lords, the £50,000,000
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to which I referred in the debate on April 5 is the approximate total estimated cost of the hydro-electric schemes which have up till now been confirmed by the Secretary of State. This expenditure will become revenue-producing as the schemes are completed and come into operation. The schemes are being financed by the issue of stock. No Government grant is payable to the North of Scotland Hydro-Electric Board, who are under statutory obligation to balance their revenue and expenditure over a period, but the stock issued by the board up to the present has been guaranteed by the Treasury.
LORD CLYDESMUIR: My Lords, I thank the noble Lord on behalf of my noble friend for the answer which he has given. The noble Lord will agree, I think, that this transaction is on a purely business basis and will not, of course, interfere with any future grants that may be decided upon for the Highlands.
LORD MORRISON: That is perfectly correct. I am sorry that the noble Viscount who put down this Question has not been able to come here to-day. So far as I can ascertain, he appears to be the only member of your Lordships' House who read into my speech something which I never said, or even suggested.
LORD CLYDESMUIR: My Lords, I think that the noble Lord has now made the matter perfectly clear.

BRITISH REPRESENTATION IN SPAIN
2.40 p.m.
EARL HOWE: My Lords, I beg to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask His Majesty's Government why it is that a British Ambassador is appointed to Lisbon, Moscow and not to Madrid; whether the continuance of such a policy is calculated to strengthen the Atlantic Pact, and if not, whether they intend to take steps to bring such an unrealistic policy to an end.]
THE PARLIAMENTARY UNDERSECRETARY OF STATE FOR FOREIGN AFFAIRS (LORD HENDERSON): My Lords, His Majesty's Government normally accredit a Head of

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Mission to every Government with which they are in diplomatic relations, except where there are special reasons against doing so. In the case of Spain there is such a reason—namely, the Resolution of the United Nations General Assembly on December 12, 1946, part of which recommended that member States should withdraw their Heads of Missions from Madrid. So long as this recommendation remains in force, His Majesty's Government will abide by it. Since Spain is not a signatory to the Atlantic Pact, the absence of a British Ambassador from Madrid can hardly affect the Pact. In answer to the third part of the noble Earl's Question, I must refer him to the answer which I gave on April 6 to the Question put down by the noble Lord, Lord Ailwyn.
EARL HOWE: My Lords, I cannot understand from the noble Lord's answer why it is, apart from the general question of the United Nations, that we are able to have an Ambassador in Moscow and yet not to have one in Madrid. I quite understand the international difficulties, but surely the policy is rather unrealistic. Cannot the noble Lord tell us that His Majesty's Government are, in fact, going to modify their attitude towards Spain, especially in view of the official announcement of the American Government which appears in to-day's Press?
LORD HENDERSON: I am not able to give any such assurance. I have indicated the basis of His Majesty's Government's present policy. That basis still remains.
LORD AILWYN: My Lords, would His Majesty's Government not agree that the inclusion of Spain in the Atlantic Pact would, by reason of her strategic position, enable her to make a very considerable contribution? Would His Majesty's Government not agree further that dislike of a nation's form of government is no valid reason for a diplomatic boycott, the continuation of which, surely, far from weakening the position of that government, must serve to strengthen and consolidate General Franco's régime in the hearts and minds of the proud Spanish people?
LORD HENDERSON: My Lords, as I said to the noble Lord on April 6, there
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are more than strategic considerations to be borne in mind. As regards the second part of his question, there is no diplomatic boycott. Although there is no British Ambassador in Madrid at present there is a British Chargé d'Affaires.

PETROL RATIONING
2.43 p.m.
EARL HOWE: My Lords, I beg to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask His Majesty's Government, whether they can state clearly the reason for the continuance of petrol rationing; whether it is due to shortage of dollars, in view of the huge increase of production within the sterling area; whether it is due to shortage of tankers, in view of the very large amount of tanker tonnage completed or under construction within the sterling area; whether it is due to the Berlin Airlift; whether it is due to shortage of refining facilities within the sterling area; whether it is due to sending the savings of petrol by British motorists to Poland, the Argentine and other countries; whether it is the intention of His Majesty's Government to bring the system of petrol rationing to an end before the next General Election and, if so, when they anticipate being able to carry this out, indicating the governing factor.]
THE LORD PRIVY SEAL (VISCOUNT ADDISON): My Lords, replying to this Question on behalf of my right honourable friend, I have to say that the continuance of petrol rationing in this country is due to the fact that any increase in consumption would involve additional dollar expenditure or a reduction in exports. We can afford neither at the present. Shortage of tankers is not a factor which limits imports of motor spirit into the United Kingdom at the moment. The output of motor spirit and other petroleum products by British companies is limited by the refinery capacity available, which is at present fully absorbed in meeting existing demands. The oil companies have plans for a very large expansion of refinery capacity, but these will not mature fully for some time.
The consumption of aviation spirit on the Berlin Airlift is only about 120,000 tons a year. Less than half of this would

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be saved if the Airlift ceased, and these savings would be required for the expanding needs of civil aviation. Sales of motor spirit are made to many foreign countries, including, the Argentine, but not Poland. I am not in a position to say when it will be possible to bring the system of rationing to an end.
EARL HOWE: My Lords, I thank the noble Viscount the Leader of the House for the answer which he has given. May I ask him whether he will bear in mind that it is due to the suggestions of the motorists' organisations that some 20,000 tons of petrol have been saved every month? It is in the official statements that only 90,000 tons will be used in doubling the ration in June, July, and August May I ask whether he will consider giving British motorists the benefit of the remaining 130,000 tons which have been saved through these suggestions from their own organisations.
VISCOUNT ADDISON: My Lords, we will give the most friendly consideration, as we have already done, to what the noble Earl suggests. As I think he is well aware, the future supplies of non-dollar petrol are mainly dependent on the completion of the increased refining capacity, a matter which is now in hand.
VISCOUNT SWINTON: My Lords, is not the suggestion that what we may save, or a large part of what we may save, on the possible cessation of the Berlin Airlift, will be expended on civil aviation (which I thought was contracting because sonic uneconomic services are to be discontinued) an entirely new suggestion, and one that the Government have never thought of before?
VISCOUNT ADDISON: My Lords, I am not aware of that. I hope the economies which are being now exercised by the air Corporations do not necessarily mean that there will be less flying; there are other methods of economising. I understand that the statement I have made is literally correct. Less than half of the amount would be saved, and it is anticipated that these savings will be required for purposes of civil aviation. That is a true statement.

THE ECONOMIC SITUATION
2.46 p.m.
LORD CHERWELL LORD CHERWELL rose to call attention to the Economic Situation; and to move for Papers. The noble Lord said: My Lords, for some years now, we on these Benches have been calling on the Government to abandon the habit of wishful thinking and face the authentic economic facts. Some eighteen months ago, I ventured to beg them, in the name of equality of sacrifice, to give up their cheerful propaganda and tell the public the truth. The Chancellor of the Exchequer has now done so, to a great extent, and we on this side of the House, at any rate, are grateful to him for exposing the real position, unpalatable us it may be. There is more joy in Heaven over one sinner that repenteth than over ninety and nine just men. But in another place it seems as if the Chancellor of the Exchequer's outspoken frankness has led to wailing and gnashing of teeth—of which, of course, there is no lack since the National Health Service came into effect.
Since the Election, same Ministers seem to have been living in a fool's paradise. If we can scarcely say the same of their supporters, it is only because many of them have been in a fool's purgatory. They have been persuaded to put up with shortages, high prices, queues and the general drab unpleasantness by the assurance that these are merely the temporary aftermath of the war and if only people trusted the Socialist Government they would soon advance to a heaven of abundance, with low prices, shorter hours and, of course, diminished taxation. This myth has been blown sky-high by the Chancellor's Budget speech. He tells us frankly that we are not on probation, or even on remand; we have a life sentence—and, what is more, with hard labour, though there may be a possibility of remission in the end, if people labour hard enough and if their behaviour is good enough for a sufficient number of years. That is not a very cheerful prospect. That we are heading in this direction has long been clear and has been stated frequently from these Benches. If the people insist on spending 40 per cent. of the national income, 40 per cent. will have to be raised by taxation. The richer classes possess only 25 per cent. or so, and if

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they are skinned to the bone, it means that 15 to 20 per cent. will have to be taken from the wage-earners. They, in turn, object and ask for higher wages. If higher wages are granted, inflation is inevitable. The Chancellor's only hope is to try by logic and persuasion to get the unions to agree to freeze wages. The question is: Will he succeed?
Before discussing this main problem, perhaps I should say a few words about the general economic position, and about our balance of trade. We are told many encouraging things about this. Exports, it seems, have risen in one year from 109 to 135 per cent. of pre-war volume. And in the same period our negative balance has shrunk from £630,000,000 to £130,000,000. All this sounds very good, but unfortunately it is not quite so good as it sounds. The facts of the situation can be extracted by studying the Economic Survey. I observe that they have to be "extracted," because a cursory reading leaves an unduly rosy impression; but I suppose rosy is half way between pink and red and, therefore, eminently suitable to a Government document. The couleur de rose is obtained not by any misstatement of fact, or by any faulty logic, but by an undue emphasis on the comparison between 1947 and 1948. This comparison, of course, displays a great improvement, in which we all rejoice; but a great part of the improvement is spurious, for surely, 1947 was an altogether abnormal year. The very foundations of the country's economic life have been ameliorated beyond recognition since that disastrous period. We have a new Chancellor of the Exchequer; we even have a new Minister of Fuel and Power!
We all rejoice that our exports in 1948 reached something like 135 per cent. of pre-war volume. Of course, private industry has contributed the main part of this remarkable achievement, and both the management and men deserve the country's congratulations. Even the nationalised coal mines have played a small but useful part. Although the export of coal is barely one-third of the pre-war figures, it is refreshing to see this source of revenue from overseas once more coming into the picture. Nor do I wish to withhold congratulations from the Government on the part they have
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played in helping the export drive. Within the limits of their obsession that industry must always be suspect if it seems to be making money, and that too many controls are better than too few, they have done their best.
The broad outlook, as I have said, is that in the volume of our exports there has been a definite improvement and they are now 135 per cent. of pre-war. The spurious element in the apparently brilliant result, of course, lies in the fact that the figure of 135 per cent. in 1948 is contrasted in Government statements with the export volume of 109 per cent. in 1947. The 1947 figures were artificially depressed by the fuel fiasco, euphemistically called the "fuel crisis" in Government publications. In 1947, as we all remember, many industries were slowed down, if not brought to a standstill altogether, for weeks on end by shortage of fuel. There is no need to recapitulate the sad story of how the Minister's obstinacy and lack of foresight allowed this disaster to occur. After all, he has been "kicked upstairs," and his successor, I gather, has every intention of keeping out of hot water
How much our exports were reduced as a result of the 1947 fiasco, it is difficult to say exactly. But this much is clear. In the last quarter of 1946 we exported 111 per cent. of the 1938 volume, and it was planned that over the year 1947 as a whole our exports should average 125 per cent.; in fact, in 1947 they averaged 109 per cent., 2 per cent. less than in the last quarter of 1946. From this it seems evident that the coal fiasco cost us about 15 per cent. of our exports, corresponding to about £200,000,000 in value. That in 1948 we reached 135 per cent. is still a considerable improvement on the expected figure of 125 per cent. in 1947. The Government should be content with this. It is misleading to compare it with the 109 per cent. to which we were reduced by the Fuel Minister's ill-founded optimism. It is calculated to give a very exaggerated view of the rate of our recovery, which may lead to undue hopes and even to unfortunate pronouncements by junior Ministers.
Somewhat the same criticism applies to the boasted improvement in our invisible exports. Part of it, such as the increased

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earnings of shipping, which in 1948 were £36,000,000 higher than in 1947 and £40,000,000 higher than pre-war—is genuine. But this is only a minor item. The principal improvement is wrapped in impenetrable mystery under the portmanteau heading "Other." According to last year's Economic Survey, this item dropped from plus £100,000,000 pre-war, and plus £73,000,000 in 1946, to minus £20,000,000 in 1947. But here there is a minor enigma, because, according to the latest Economic Survey, it was plus £20,000,000 and not minus £20,000,000 in 1947—but I suppose a mere difference of £40,000,000 should not be taken too seriously! Whatever it was in 1947, we are now told that it jumped to plus £142,000,000 in 1948. Unexplained changes of this magnitude in an item under such a dubious title as "Other" should not allow us to reckon with any confidence on future developments.
Only second in importance to "Other" in accounting for the so-called rise in our invisible exports is the reduction in the extravagant Government spending abroad. This fell by nearly £100,000,000. We are all delighted that the spending Departments should have shown such signs of grace, but it is no good pretending that that proves the activity and revival of our invisible earnings. When we are told that our negative balance improved from £630,000,000 in 1947 to £130,000,000 in 1948 we welcome that fact as a fact. But some of us, at any rate, cannot help recalling that, owing to some sort of financial ineptitude (which again I need not attempt to examine to-day), so many dollars leaked away that we were compelled in the first eight months of 1947 to draw on the American and Canadian Loans to the extent of £680,000,000, instead of the forecast £240,000,000. That foreign exchange was not drained off in the same way in 1948 is no doubt to be attributed to the new régime at the Treasury. We may give to the Prime Minister credit for having made the change, but we must recognise that the vast improvement is due in large part to the avoidance of blunders which retarded our recovery in 1947, and only in much smaller degree to the genuine betterment of our economic circumstances.
If a company making a new issue boasted of the improvement in its balance
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sheet between one year and the next, and omitted to mention that in the earlier year the factory had been put out of action for three months by fire (perhaps fire is not a happy simile, because it was lack of fire which led to cur predicament: I will say by flood), and also omitted to say that in the earlier year a large part of the earnings had vanished owing to a bad system of accounting and financial mismanagement, rather unpleasant remarks might be made in the City about that company. But we take things more easily in the political world. We do not take it very much amiss if the Government fail in their annual Economic Survey to emphasise the somewhat relevant facts which I have mentioned. We are delighted that there has been a genuine improvement, and congratulate the Chancellor upon it, even though it is not nearly so big as it appears to be.
In this connection I must mention my disappointment at the unenthusiastic expressions which the Chancellor used about the fall in the world prices of goods we import, which seems likely to occur. Surely, the standing excuse for our failure to achieve a balance, upon which the Government have always relied, has been the deterioration in the terms of trade. Whether this is due, as they seem to think, to some malevolent intervention of providence, or to their own inept purchasing, policy, I need not here examine. But it is very disheartening to hear from the Chancellor that if there were a fall in the price of our imports, this would by no means be an unmixed advantage, as it would inevitably be reflected in the prices we receive for our exports. Why was a rise in import prices not equally reflected in a rise of export prices? Surely in the sellers' market just after the war we could have demanded far higher prices, corresponding to those we are asked to pay for our imports of food and raw material. I hope the suspicion is unfounded that the Chancellor's pessimism is clue, in part at any rate, to his fear that we shall not be able to take advantage of a fall in world prices because the Ministries concerned made unwise long-term contracts. Signs and portents to this effect seem to have been observed in various fields.
I will not tax the patience of the House by going through the Economic Survey in

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detail. As I have said, the picture presented on a cursory reading is quite a cheerful one; it is when one compares it with last year's Survey that doubts begin to appear. Frequently the figures are wildly different from the forecast. In many cases the data given for 1947 in this year's Survey are totally different from those given for the same year in the 1948 Survey. This sort of thing is very disquieting. We can rely, I trust, upon the figures given for the balance of trade, for these should be readily ascertainable. As I have said, I am delighted that the total balance seems to be returning to equilibrium. Whether we shall be able to maintain and expand the volume of our exports, with the possibilities of a recession abroad looming ahead, is not so certain. Price and quality will no doubt be the determining factor. The difficulty of restoring our balance with the Western Hemisphere, which is so strongly emphasised, is, of course, a very real one.
To shift the production of exports to goods saleable in the dollar market will, of course, be our next task. But, in the main, the production problem, if we believe the figures, seems to have been solved. If so, surely the Government's attitude on controls ought to be reexamined. There seems little doubt, according to the figures in the Survey, that the Chancellor's Budget surplus has done its work, and that the inflationary pressure has practically vanished. If this is so, it is not easy to see why the Government insist on maintaining so many controls. We have always been told that they were necessary because prices would rush up if we had too much money chasing too few goods. But now the consumer certainly has not too much money, so this argument has gone by the board. Surely all these controls cannot be needed merely to shift the emphasis of our production effort to goods suitable to the dollar market.
The distribution of man-power seems to show some improvement, though not anything like so much as is needed. In this connection, there is a matter to which I think strong exception should be taken—namely, the institution of a totally new tabulation of the distribution of manpower in this country. Many of the categories have changed, and almost all the figures. If we are to be confined to these new tables, it will be utterly impossible to
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follow the course of events and to see how the redistribution of man-power is proceeding. One remarkable fact stands out. In every category except the Services, the figures in the new table are greater than in the old—with one exception. In the old table we find for the end of 1948, under the heading "Public Service"—which includes civil servants, national government and local government service—a total of 2,230,000. In the new table the only comparable heading—namely, "Public Administration"—totals only 1,147,000. Not only are the totals different, but the figures for the sub-headings are unrecognizable; 760,000 people seem to have vanished from the public service into thin air, although the total man-power listed in the new series is 3,000,000 greater than in the old. Nobody, of course, believes that 750,000 Government employees have lost their jobs. What has happened, clearly, is that they have been hidden away in other categories, where the fact that they are paid by the public is less easily recognised. It is unfortunate that the most striking change in the new series should concern the figures in the category which has been most criticised—namely, the number of Government employees.
I will mention just one other feature which I hope will interest the noble Lord who is to reply. The House may remember that the Government spokesman found some difficulty in explaining in a recent debate how it was that our total exports had only gone up by a half, while the man-power engaged on orders for exports had more than doubled. If we are restricted to the new table, this particular problem will not vex Government speakers in future. For in this table the man-power engaged on orders for export is omitted altogether. Of course that is one way of escaping from a dilemma. It is rather an ignoble way out, and I am sure the noble Lord who is to reply will not approve of it. To change all the categories is a well-known statistical device for concealing the facts from those anxious to measure the progress of events. The Government can relieve themselves of the imputation that that is their intention if, and only if, they continue to publish, along with their new series, tables showing the distribution of man-power in the old categories, as they have done up to date. I trust that this is their intention. If

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not, I think we should register a strong protest, not only because Parliament will be deprived of any possibility of discovering what is happening in this field but also because we should all deplore any action by the Government which would be bound to expose them to imputations of such an unhappy character.
I will not weary the House with examining some of the other dubious points in the Survey. There is the usual statement that we are getting practically as much food as ever we did pre-war. But the Government admit that on rations and points we got only half the calories that they claim we get in total, and as they have utterly failed to give one simple menu showing how we can get the other half, I think that claim has been laughed out of court.
THE MINISTER OF CIVIL AVIATION (LORD PAKENHAM): Before the noble Lord goes on, will he forgive me for asking him from which table he claims that the orders for export have been omitted?
LORD CHERWELL: I think it is from the new man-power table in the Economic Survey.
LORD PAKENHAM: The noble Lord was not referring to the Digest, which contains the figures?
LORD CHERWELL: I do not think they are in the Digest either—at least, not in the new table.
LORD PAKENHAM: Do not let me interrupt the noble Lord. I felt it right to make the point, as he was making so much of it.
LORD CHERWELL: I am glad to hear that the figure is in the new series in the Digest, but I am still rather doubtful. The figure is given in the old series in the Digest, but not in the new, so far as I recollect.
I do not think I need say much about the Budget changes. As last year, of course, the Chancellor found himself obliged to throw a sop to the Left Wing. I refer, of course, to changes in the duties on property passing at death. As has been pointed out in letters to the Press and elsewhere, the immediate effect is to penalise near relations who inherit property as against strangers and more dis-
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tant relatives. It is, I think, a new point in the Labour programme that the ideal of the family should be discouraged. I do not think it would commend itself to the electors as a general proposition. But perhaps they have been conditioned by years of propaganda to approve any infliction on people owning more than £30,000, which is the sum at which the Chancellor's penalties become serious. I will revert later to the more general economic implications of this problem.
The only other change that deserves comment is the increase in the charge for telephone calls. This seems a very retrograde step. It has always been held that taxation tending to impede or impair the ease of communications was bad for trade and ought to be avoided. It has another most ominous aspect: although the Post Office has had a favourable balance for a long time, it has never before been frankly stated that that balance should be used as a means of collecting revenue. That is an entirely new departure, which lends itself to almost unlimited extension. Are all other Government monopolies and nationalised industries to be used in this way? Is the price of coal or gas or electricity to be raised whenever the Government need extra revenue? I do not believe anybody had such possibilities in mind when the Government nationalisation plans were discussed, and I think Parliament should be told just where the Government stand in this matter.
On the whole, the Budget is more remarkable for what it does not do than for what it does. All hopes of any reduction in purchase tax or income tax have been brushed aside. The penny off beer seems to have been conceded rather in the hopes of increasing total consumption, and therewith the revenue, than as an alleviation. Indeed, in place of any relief the Chancellor has set a limit to the food subsidies, even though this entails a rise in the price of certain commodities. All this shows great courage and betokens a realism which is quite unusual in Socialist circles but it is inevitable unless the Government spending is reduced. And far from holding out hopes of a reduction, the Chancellor himself anticipates increases. These immense charges are an inescapable consequence of the modern view that it is the duty of the Government to nurse us from the

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cradle to the grave. The sturdy self-reliant Englishman, proud of his ability to look after himself and his family, seems to have gone out of fashion. Pre-natal care, maternity benefits, welfare officers with the right to intrude into your house and make sure you are running it properly, children's allowances, education, school meals, subsidised food, subsidised houses, medical attention, accident and unemployment benefits, old age pensions and funerals—all these are provided by the State. "All this and Bevan too," as the Chancellor must have said, remembering that all this would have to be paid for. It is his underlining of this brute fact that seems to have caused alarm and despondency amongst members of the Party opposite. Both Parties agree about the desirability of these services. The main difference is that the Conservative Party have always said frankly that if the country wants the services it would have to pay for them, whereas the Socialists have preached that the poor could enjoy these benefits without losing their other amenities. Always they have inculcated the view that the manual workers could get these services without cost to themselves, by soaking the rich.
That this is impossible is quite clear if we compare the national revenue with national expenditure. Roughly half the total annual revenue, or something like £2,000,000,000, is spent on defence, normal administration, debt service and so on. The rest—something like £1,800,000,000—is to be spent on the social services. There is not much saving to be made on the first half. Something like £500,000,000 or 5 per cent. of the national income, is required for the service of the Debt; to cut that would be dishonourable and unjust to the patriotic people who have subscribed to it and who have already had about half their savings taken from them by the fall in the value of money. About 7½ per cent., or £750,000,000, is needed for defence, and no one can contemplate cutting that. The ordinary business of public administration swallows another 6 or 7 per cent. and no one would propose to do without such necessities of civilised life. These items may be regarded as the fixed charges of government. Certain savings might be made by economical administration and good
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housekeeping; almost certainly we might get better value for our money if we adopted a rather more cheeseparing line. But there is no likelihood of saving more than £1,000,000 or £2,000,000 in this sphere of expenditure.
Roughly speaking, the middle classes and the rich contribute in taxes enough to pay for these minimum fixed charges. But they can do no more; if more is needed it must and does come out of the pockets of the poor classes. That this is inevitable emerges clearly if we consider how the national income is distributed amongst the various groups of the population. The so-called rich—that is, the surtax payers with over £2,000 a year gross—number 175,000, about three-quarters of 1 per cent. of the people gainfully employed in the United Kingdom. Their average income is £2,150, making altogether less than 4 per cent. of the total of personal incomes, and barely 2½ per cent. if death duties are taken into account. This year a further 1 per cent., euphemistically called a "Special Contribution." has been taken from them. Clearly, if they were all reduced to beggary this would contribute very little to the 18 per cent. (£1,800,000,000) of the national income required for the social services. What of the middle classes—the 9 per cent. of the people whose breadwinners earn something between £500 and £2,000 a year?. They have been hard hit enough already, in all conscience. I know, of course, that leading members of the Labour Party do not care "two hoots" for them, and think them worth only "a tinker's cuss." But even if one took away everything from them over and above £500 a year, only about 2 per cent. of the national income would become available. Not much contribution to the 18 per cent. required for the social services!
Is there any other source than the 20,000,000 breadwinners with less than £500 a year from which sums of the order of £1,800,000,000 a year could be drawn without alienating Socialist votes? Some short-sighted people point to the large figure under the heading "Profits" in the statistical tables, and clamour for an increased profits tax. Nothing could be more silly. The only thing that counts, or ought to count, is not what profits are made but how much is paid out to the owners. In fact, only a minor part of

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the total profits of companies is distributed; and this, as we know, is heavily taxed when received unless the recipient's total income is below the exemption limit. The major part, in so far as it is not reserved for tax liabilities and so on, is ploughed back into the business.
If the profits tax were to be increased it could have only two possibilities. The first is that the tax would be added to the price and passed on to the consumer. That would be disastrous in the export market and in the long run would hit the poorer classes in the home markets. The second is that the amount ploughed back into the business would be reduced. Such a policy would be fatal. The cost of replacement to-day may often be two or three times as high as the price at which plant and machinery were bought. Already many firms face ruin because of the Treasury ruling that depreciation may be reckoned for income tax purposes only on the cost of acquisition, and not on the cost of replacement. The sop thrown to them in the Budget, which is not even retrospective, does not go nearly far enough. To raid the reserves set aside for re-equipment, development and expansion would wreck our hopes of maintaining industrial output, let alone of increasing it.
Is there any other form of taxation which would bring in something like one-sixth of the national income, required for the social services without, of course, hitting Socialist electors? Your Lordships will no doubt have observed that some thoughtless individuals, anxiously seeking some sand in which to bury their heads—perhaps I might call them "economic jay-walkers"—have tried to revive the old nostrum of the capital levy. Envious people, who cannot bear to see anybody rewarded for postponing the enjoyment of his earnings or risking his savings, of course love to gloat over the prospect of robbing people, who have been more thrifty than they themselves, of their property. I do not deny that these embittered persons might derive a certain amount of sadistic satisfaction in watching such a process, but no one capable of logical thought can possibly pretend that it would help in any way to find the annual revenues needed to finance the social services.
After all, what is capital? In the main it consists of real assets, such as factories,
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houses and so on. How can you make a levy on these? You could confiscate them, of course. If they were producing revenue, you could take the revenue and use that, but you could achieve the same result by taxation of income and, as we have seen, there is not nearly enough to do any good in this direction. But that does not seem to be the idea. The people who propose a capital levy seem to hope to use the confiscated capital to finance the social services. Is the plan that the Government should offer a dentist a millionth share in Blenheim Palace, or a certificate in Harrods Stores, as payment for making a set of false teeth? It would be about as much use to him as his share in British railways or, for that matter, in the Palace of Westminster. The dentist has to pay his grocer's bill. If he offered to transfer to his grocer his share of Blenheim Palace in settlement of his monthly account, he would get a very "dusty" answer. Neither the dentist nor the grocer can afford to lock up his working capital in share certificates.
Unless you imagine that these weird certificates might become some sort of subsidiary currency—in which case you might as well print a lot of £1 notes and have done with it—a capital levy can be used to pay running expenses only if somebody can be found with liquid money ready to buy the assets and pay cash for them. But, quite apart from this, where are the hordes of rich "mugs" to come from, with money in the bank waiting to buy capital assets which have just been confiscated from their predecessors? No rich man can save money at the present rates of taxation; nor can anyone be expected even to try to do so with the threat of a capital levy hanging over his head. Only if the amount raised is small, compared with savings seeking investment, can a levy on capital make any contribution to annual expenditure. The same is true of death duties. And, far from there being savings seeking investment, the danger seems to be that, in the future, savings will be far below the level of what ought to be invested if industry and trade are to flourish and expand. The sur-tax payers, as we have seen, are in no position to accumulate anything appreciable, nor are the middle classes, whose real income has been practically halved.

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There remain the poorer section of the community with less than £500 a year. Can their savings make good the inability of the richer groups to invest with taxation at its present level? After all, they dispose of practically three-quarters of the personal income left after direct, but not of course, indirect taxation, has been levied. This fact may perhaps surprise some noble Lords, but it emerges quite clearly from Table 9 of Command Paper 7649. All the same, I do not think we can expect these poorer people to do very much in the way of investment. What incentive have they to save when they are insured against all the hazards of life by the various social services? And can you really expect them to, with beer at 1s. 2d. a pint and cigarettes at 2d. each?
Thus, penal taxation conspires with the social services to discourage saving. Far from there being private stores of liquid money waiting to be mopped up directly or indirectly by capital levies and similar expedients, there is a grave risk that there may soon not be enough to keep industry in a healthy condition. This will be a serious menace if the Government's grandiose investment plans are to become an annual feature. As I have said before, they seem to me exaggerated. If production is really as high as the Government claim, we may in the not too distant future find that we have built up manufacturing capacity which cannot be kept fully employed, especially in the basic industries. Consumption has been artificially swollen in many directions by the need to fill up the pipe-line and to replace stocks. Indeed, so far as I can make out, the Survey indicates that something like 7 per cent. of the national effort went into this in 1948. This process will presently be completed. And, when it is, there will be a great fall in demand. This stage, I am told, has now been reached in America. I trust the Government are watching the position carefully. Otherwise, they may be faced with considerable unemployment in the factories they are so hopefully erecting.
If the majority of the electors desire social services costing 18 per cent. of the national income, they are entitled to have them. But it is plain, as we have seen, that they will, and actually do, have to pay for them themselves. The
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money cannot be found by higher profits taxes or a capital levy. And as for raising income and sur-tax, why, if we were all charged at 20s. in the £ for every penny over £10 a week, it would not produce a third of the sum required. It is only fair that wage-earners should know this and realise that it is their money which is at stake. If they did, they would be grateful rather than resentful when the Conservatives try to curb the lush and lavish expenditure by which Ministers seek to commend themselves to the electorate.
The National Health Service is deservedly very popular. If the beneficiaries realised that it costs each wage-earner 5s. out of his pay-packet every week, they might be a little more doubtful as to whether all the claims for wigs and brassieres and the like for foreigners as well as British subjects should be granted without question. The National Insurance and Assistance Boards are admirable institutions. Nobody wishes to reduce their activities. But the worker should understand that he pays about 5s. 8d. a week over and above the cost of his stamps in the form of taxes on beer, tobacco, pools, betting and so on, to maintain them. Food subsidies take another 9s. a week out of the pay packet. It may be right that the wage-earner should pay an extra 9s. a week for his smokes and drink and 9s. a week less for food for the family—his wife, at any rate, might very likely think so. But he ought to know what he is doing. If he did he would be able to say whether he would rather pay an extra twopence or fourpence or whatever it may be for his packet of twenty cigarettes and let the Government use the money to keep down the price of food, or leave the price of cigarettes alone and pay 1s. 2d. a week extra for the family's food.
The Chancellor has tried to bring home these elementary facts to the country. If the manual workers really comprehend that they must regard the social services as part of their consumption and that they form part of their standard of life, if they recognise that to have these amenities they must go without something else which they could otherwise enjoy, and if, with this knowledge and prepared for these sacrifices, they elect to have the benefits of the social services, well and

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good. But part of these sacrifices are indirect taxes and purchase tax, and it is illogical to try to offset them by insisting on higher wages. There is only a finite pool of man-hours of effort to be shared out. Anything extra in building schools or hospitals or the like means so much less for clothing or household ware, or whatever it may be. Higher wages all round will not increase the individual's share one iota.
There are fewer than a million people in these islands with incomes over £500 a year after tax is paid, and under 200,000 with more than £1,000 a year. Rightly or wrongly, these are the people who run the country's business. A few of them no doubt get these higher incomes, two, three or four times the average, and give little service in return. Some may obtain them by methods we all deplore. But we must not let the existence of a few spivs, eels, butterflies or whatever is the zoological term of opprobrium in fashion blind us to the fact that the vast majority of these people are being paid these higher salaries on their merits, because they are able to make a contribution worth far more than their salary to the country's needs or desires and because no one else seems able to do it better or more cheaply. Without men able to organise or administer, to cure the sick or invent new machines or processes or whatever it may be, the country's production would atrophy.
On the whole, the people earning more than the average are the ones whose brains or industry have raised them above the average. They are the managerial class which is always being exhorted to improve methods of production. If they are the highest paid they are also the most valuable members of the community. They should be encouraged in every way to use their talents to the full. Rewards and incentives which induced them to exert themselves would pay a handsome dividend to the nation. But I realise that the Socialist Party, which has risen to power largely by attacking the rich and successful—I really do not know why—might find it a little difficult now to encourage them. After all, most of us are trying to earn a living. Why should we resent the fact that some are better at it than others? Without them our affairs would stagnate. They are the catalysts which determine the rate at
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which the country's business proceeds. In a democracy with universal suffrage they can, of course, always be outvoted. And if the majority have been brought up to envy and hate anyone who is more successful than themselves, they can easily be disheartened, suppressed and ultimately destroyed. This seems to be the road we are travelling. The main part of their earnings is confiscated; they are held up to obloquy and contempt—unless, of course, they are Labour officials or camp followers. They have been described by a leading Minister as "vermin," which implies, if his words mean anything, that they deserve to be exterminated.
Of course, if that is their intention the majority can no doubt achieve it. But if the million people or so who run the country's business are despoiled and liquidated, the short-term gain in cash will be negligible, whilst the long-term loss in efficiency will be utterly disastrous. The wheels of industry will slow up, output will sink and the general standard of life will fall. "Omnipotent Parliament" can no more defy the laws of economics than it can defy the law of gravity. A nation can consume only the equivalent of what it produces, unless it can beg, Morrow or steal part of some other country's output. Since the war, generous capitalist America and our warm-hearted fellow citizens in the Dominions have granted us immense subventions in the most valuable form. To a great extent, this has concealed our parlous economic state. But we cannot count upon this sort of charity for many more years. Whether we like it or not, we shall have to devote in future 6 or 8 per cent. more of the national product than before the war to making exports to pay for our imports.
Rightly or wrongly, the Government are apparently determined to invest a good deal more of the national wealth every year than we did previously. If we are to continue the present shorter hours of work and existing restrictive practices, and yet devote a further 10 per cent. or so of the national effort to these social services, then there is no alternative but considerable austerity in other directions. Until the country manages to produce a great deal more, or agrees to spend a great deal less, Misery Budgets will be the order of the day. It is most unfair of people to grumble at being asked to

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pay for what they have ordered. The grievance, if any, is that they were misled as to the price, or even given to understand that they were "having it on the house." But that grievance lies against Socialist propagandists in general—and the most vociferous of them are often the loudest grumblers now that they find they have to pay the bill.
My Lords, there are many other general economic questions I could have raised. There is the question whether a country can for long avoid inflation and whether industry can flourish if two-fifths of the country's income is taken in the form of tax. There is the efficiency of nationalisation which has recently been brought home to people very vividly by their electricity bills. There is the need to stabilise exchanges so that multilateral trade will help to balance the dollar deficit. There is the remarkable co-operation of the sterling area to save dollars. There is the folly of investing large sums in labour-saving machinery without making sure that the workers would take advantage of the new facilities. There is the delay in introducing the agricultural expansion plan which we have advocated for so long. All these matters I have discussed frequently before, and I will not weary your Lordships by embarking on them to-day. After all, as Anatole France said, "The art of being a bore is to say everything."
The general outlook has improved in some ways but has worsened in others. The foreign situation has been lightened by the Atlantic Pact and darkened by events in China. Our increasing exports bid fair to pay for our imports. But the sellers' market is on the wane. Rising wages are raising costs of production; and the means of paying for imports from the Western Hemisphere are yet to be found. In home affairs the Lord President seems to hope to substitute for the delaying powers of your Lordships' House, the veto of Transport House, and the financial supremacy of the House of Commons seems to be called in question by the claims of outside bodies to a final word about Budget proposals. Failure to understand the rudiments of economics is causing unfounded resentment amongst large numbers of manual workers. Restrictive practices, threats of strikes and go-slow action abound. Perhaps the most hopeful portent is that the
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Chancellor seems clearly to have recognised the fact that the country can consume only what it produces, and that he is trying to convert his colleagues to this somewhat old-fashioned opinion. If he succeeds, and if they, in their turn, can bring it home to their followers, unrest and disturbance in the industrial world may be avoided and the country may be able to struggle through to a brighter future. It is a testing time for Democracy, and the next five years will show whether it can survive in these troubled times. I beg to move for Papers.
3.41 p.m.
LORD RENNELL: My Lords, as usual, we have all learnt a great deal from the noble Lord's exposition of figures, both of some that have appeared and, as he pointed out, of some which have apparently not appeared. Of all the items of recondite information which he has elicited there is one of which I must say I was quite unaware that was that the National Health Service Act would provide brassieres and wigs. That, of course, is a most valuable hint for all of us to follow, although I agree that with regard to wigs, some of us need to follow it more than others! I do not know whether the National Health Service Act specifies the sort of wig which may be obtained free of charge, but it may in certain directions be a valuable professional asset which, presumably, will not be taxed. But it was not on the general line adopted by the noble Lord that I wish to speak, because this occasion seems to me to warrant—certainly in my case—a rather different approach.
SEVERAL NOBLE LORDS: Hear, hear.
LORD RENNELL: The remark which I just made was not expected to call for the noises which I have just heard, nor did I hope that it would. My real reason for a different approach is quite another, and it is not, perhaps, one which will necessarily be appreciated by the noble Lord, Lord Pakenham. It is this. We have formed the habit in your Lordships' House of having annually what might be called an economic stocktaking as the result, in the main, of the publication of the Economic Survey. We have had other economic debates on particular points which have been touched on by the noble Lord, Lord Cherwell, and which will no doubt be touched on hereafter—notably on the Finance Bill and the specifically

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financial aspects of the present situation. But the main economic debate in your Lordships' House has taken place, as I say, about this time of the year, as the result of the publication of an economic White Paper, and in that respect this debate to-day follows the precedent of two or three previous years. Why this date is particularly important to me is that it is probably the last economic debate of this kind that we shall have in your Lordships' House before the General Election. If it is not the last, then the last will take place very near the fateful date.
Moreover, this debate falls at a time when the first year of the operation of the Marshall Plan is coming to an end and when certain debates have taken place in the United States on this year's Marshall Aid programme. I do not see how the economic situation in this country to-day can be discussed, or even thought of, outside the context of the Marshall Aid Plan. After all, it is to that more than to any other single element that we owe the very much better position in which we find ourselves to-day. I say that without wishing in any way to disparage the work that our people, of all sorts and all classes in this country, have done to contribute to this better being. As a matter of fact, the two things are directly connected with one another, because if that improved production to which Sir Stafford Cripps referred—if he is rightly reported in the Press to-day—in a recent speech in Rome, had not taken place in this country in the course of the last twelve months, it appears to me to be at least open to doubt whether our American friends would have been quite so forthcoming in the second year's allocation of Marshall Aid. It is indeed because they have seen—and we in this country must admit to have seen it—the improvement that has taken place as a result of the efforts of our own people.
That is clear from the statistical figures which have been published, not only in the economic White Paper, but in the current monthly abstracts. They are not all satisfactory, or not all so satisfactory as some are. Notably, I think that if we look back over the last two or three years since the nationalisation of the coal industry, it will be idle to pretend that we are not, in all classes and in all political Parties, by and large, disappointed at the results of coal production.
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It has improved, but, nevertheless, we are still disappointed. I think that fact is undeniable as also it is undeniable—and I hope it will not be denied—that Lord Cherwell's contention that to employ the standard of measurement of 1946 or 1947 to measure the improvement today is really entirely misleading. It is misleading to take a crisis year, compare it with a better year, and say, "We have done very much better." But, making due allowance for all that, it is obvious that there has been a very substantial improvement which, I repeat, is due in part to our own efforts and in part to the very great assistance which we have received from the United States. It is because that improvement has taken place partly by reason of our own efforts that our American friends have been willing to contribute on the same generous scale for next year as they have contributed in the past.
But, haying said that, I think it is reasonable for us to look at our own situation in a rather more optimistic frame of mind than was, perhaps, apparent in Lord Cherwell's opening remarks. I agree that there are many black points and many difficulties. To one or two or those difficulties I hope to refer later in my remarks. But when all the criticisms which we can make have been made, let us present ourselves to the world as a country which since 1945 has made substantial progress and substantial recovery. We see evidence of that every day of our lives. I agree, of course, with the noble Lord, Lord Cherwell, that we still have a great many controls—too many indeed. It may well be that many could have been relaxed. Some of these controls have been referred to in your Lordships' House quite recently. The pleasure of making, maintaining and administering controls still appears to delight the hearts of the many unnecessary offices which are engaged in that pursuit. At the same time, a number of controls and restrictions have, in fact, been relaxed. We know that we can now buy a suit of clothes without coupons. That is a matter of fact. We know that for the past few days we have been able to buy chocolates without points. That is a small thing, I dare say, but it is one which happens to give a great deal of pleasure to a large number of people. We know that in a certain number of

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trades—trades connected with building for example—a number of restrictions have been removed in regard to the procurement of raw material. All your Lordships who are interested and concerned in agriculture know that to-day it is easier by far to have farm buildings repaired or new farm buildings constructed than it was three years ago.
These things are true, and it is proper that they should be said because it is not right that the rest of the world should think, in spite of what they are constantly being told by speakers in this country of the prodigious effort made by our people, that that effort has produced no result. It has produced results. That is very apparent from the comments which have been made by a number of eminent American spokesmen in connection with the second year's allocation of Marshall Aid from the United States. I would like everyone at home and abroad to go about with a great deal more pride in achievement and much less complaint about the sordid and drab atmosphere in which we know in certain respects we still live. My reason for wishing that arises, if you like to think so, partly from self-interest. How are we to persuade other people—the United States, European countries and many countries who are not on as favourable and as friendly relations with us as they ought to be—that we are what we are, if we are constantly saying that everything is bad and nothing is getting better? We cannot expect people to pay the attention to our foreign policy and our economic policy abroad which they deserve if we go about talking about the bad mess we are in. In business it is elementary that when one tries to raise money one does not go about saying, "Business is awful." One says one is making a certain amount of money, but it ought to be a great deal more. If it is only in the context of our relations with foreign countries, we shall be wise to present our case in as good an atmosphere as we can.
I do not want to give a large number of statistics to show that an improvement has taken place—because I believe that it has taken place, and many of your Lordships will agree with me. That will be seen from the figures in the statistical abstracts and many other publications. But I want to comment on one or two
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of the difficulties which I think are shown by the figures which have been published. The main difficulty, one to which the noble Lord, Lord Cherwell, referred, seems to be that of Government expenditure in the light of prospective taxation. I hope that other speakers who follow me will take up this point more particularly, and therefore I shall not elaborate it. There are two ways of raising more taxation; one, to increase the rate, and the other, to increase production. If income goes up and the tax remains the same, the Government will presumably get a larger revenue. In commercial terms, we shall get a bigger profit from a larger turnover. What is troubling me is that the turnover—the rate of increase in production—is insufficient to carry the commitments which we have undertaken. This is another way of saying what the noble Lord has said, but without emphasis on the sources from which the taxation is to come, and rather with emphasis on the failure of production to keep up and increase at a rate commensurate with our commitments.
In the hope that others will speak about taxation, I will confine my remarks at this point to one aspect—namely, the creation of capital. In the Economic Survey there are a number of estimates of the creation of capital in this country. They are not in themselves very reassuring, and perhaps the noble Lord, Lord Pakenham, when he replies, will be able to comment on some of my remarks. In Table 25 it is estimated that what is called "gross capital formation at home" will amount to £2,330,000,000 in 1949. In the two previous years the gross capital formation has grown from £2,040,000,000 in 1947 to £2,352,000,000 in 1948. With the estimate of £2,330,000,000 for 1949, there has been a slight reduction and not an increase. The account for 1947 and 1948 was balanced by drawing on our foreign investments, but the estimate for 1949 shows a balance by drawing neither on foreign investments nor on investments abroad. The disquieting fact is that the estimate for 1949 is smaller than the figure for 1948.
These figures are borne out by others in the White Paper, and lead one to arrive at a rather unsatisfactory conclusion. In Table 7 there is an estimate of

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the gross fixed investment in the United Kingdom, which shows, as one would expect, a steady increase over 1947, 1948 and 1949 from £1,465,000,000 to £1,635,000,000 and then to £1,755,000,000. In other words, the directing element of the Government hope and expect to be able to increase the amount invested in fixed investments in the United Kingdom next year by £120,000,000. If my conclusion is right, it is expected that there will be an increase in fixed investments in the United Kingdom of £120,000,000, this year out of a figure of gross capital formation which is lower by £20,000,000.
I am afraid that is not the end of the story. In the White Paper we are given a number of figures of the allocation of capital investment in the United Kingdom, but nowhere can I see how much newly-created capital is expected to be invested overseas. It is a matter of common knowledge that many parts of the world still depend for their capital investment on capital which is created in this country. That applies not only to Colonial territories but also to a number of Dominions. If inter-British territory trade is to go on developing, the capital equipment required for those territories has, in the main, to be found here. Under President Truman's Fourth Point, it may one day he found from the United States, but the machinery for doing that is not there yet. The capital still has to be found here. We know that and have made provision for it. Under the Colonial Welfare and Development Act provision is made for ten-year plans of development in most of the territories, and it is shown that the money required will be derived from certain sources—local surpluses, local savings, some reserve funds and the balance by capital investment from here. Those plans have, I believe, in the main been agreed by His Majesty's Government. In other words, we are committed to find those capital sums from here to implement and carry into effect those Colonial development schemes. I would like to know what is the aggregate of our commitments year by year in respect of those schemes, assuming that the individual territories can find the shares which are attributed to them in the plans.
That, however, is not the end of the story. Your Lordships know perfectly well that there are great development schemes in progress in South Africa.
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Your Lordships know that the great new gold-bearing area in South Africa is still in process of being proved. It is also in process of being developed, and large sums of money will be required for that development. Those sums of money are required not only for sinking mine shafts and putting in mining machinery, but for building roads, houses and railways, and installing water supplies and all the accessories for a big industrial development in a remote and arid part. Those sums total to a very large figure. One of the reasons for the difficulties which have already arisen in South Africa has been the drying up of the influx of new capital into that country, and mainly from this country, for various reasons into which I need not go. A country in the stage of development of South Africa, with immense future possibilities, must require year by year a substantial contribution of new capital from outside. That has always come from here, and if the development is to continue in the next few years that capital must come from here and cannot come from anywhere else. There are great development schemes in Australia—with regard to meat, to quote only one. If we are to get meat from Australia, capital must be invested there, and that capital can come only from here. I do not want to weary your Lordships with numbers of examples of that sort.
All capital invested abroad from here must be created here in the first instance, and it can be created only by work and by production. The estimates in the Economic Survey show a small decrease in capital formation here, instead of an increase—a very disquieting feature. Have His Majesty's Government in their Survey, and in the allocations of the estimated amount of pew capital which is to be created, made proper provision for overseas investment in British territories and possibly in other countries—although I am talking especially about British territories? If they have not, either one of two things will happen: either those territories will not be developed on the lines which, in approving these development schemes, we have undertaken they shall be developed, or the amount available by investment in this country under the various categories referred to in the Appendix will have to be cut down. The only other possibility is that the creation of capital will increase Very quickly and

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to much more than the figure forecast for 1949. That is one of the more particular aspects of this problem of high rates of taxation on a given income to which the noble Lord, Lord Cherwell, referred, and with which I hope the noble Lord, Lord Brand, will deal when he comes to speak hereafter in this debate.
The principal source of anxiety in my mind at present in regard to our economic situation arises from the doubt whether capital is being created quickly enough here to provide for the development to which we are committed, which the Government themselves wish to undertake and about which they express themselves so clearly when they write, on page 14:
"It is the Government's intention to maintain a large investment programme."
One can have all the intentions one likes, but one has to have the resources before those intentions can be carried into effect. That there is some doubt on this point even in official circles is, perhaps, borne out by a statement on page 15, where it says:
"The total stock of fixed capital, whether in the form of buildings or plant, is so large in any highly developed community like ours that total expenditure on maintenance is inevitably very great."
I will come back to that point in a moment.
"Consequently, the resources which can be devoted to new investment are strictly limited."
They certainly are limited, even on the estimates which the Government have made. I wonder whether the programme is not too optimistic, and whether the amount on the plate is not a little in excess of the powers of digestion of the community.
A second matter, which is closely connected with it and which I find disturbing, is the amount required for renewals and depreciation. When we come to discuss the Finance Bill I shall have something to say on the particular aspects of the depreciation allowances in the Budget. I think it is only fair to say to those who may not realise it, that on to-day's costs there is probably not a single industrial company in England that has the resources to carry out replacements, however conservative may have been their distributions in past years. That goes for the most prosperous and certainly, to my
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personal knowledge, one of the greatest of all industrial companies, not only in this country but in the world. Obviously, that is because costs have risen. But depreciation allowances for years past have been wholly insufficient, and they still are. In other words, the Treasury have tried to take more out of the pot than there was in it, if a sound and proper financial policy was to be pursued. My metaphor is slightly mixed, but I think your Lordships know what I mean. The proposal to increase initial depreciation to 40 per cent. is no remedy whatsoever. It applies to current expenditure, and makes no provision whatever for the factory which was built three or four years ago. That is the problem to-day.
Those signs I do not find reassuring in the Economic Survey. What I find pleasanter reading is the balance of payments with foreign countries. There, frankly, I think a great deal has been achieved. We can see that from the figures published in the table; and those of us who are fortunate enough to have contact with foreign countries and other people can see it in the impression and the situation created abroad. We have for twelve months past been witnessing a slow but steady improvement in the value of sterling in open markets—which are sometimes called black markets but which, nevertheless, do reflect other people's ideas of the value of our currency. There has been a steady improvement from what may be called the low point, where sterling in the United States—admittedly not in large quantities—wasworth about 1.65 dollars to the £, to the point where it is now probably worth about 3.20 to 3.30 dollars, and is, in fact, beginning to look the official rate in the face.
We know, as has been said in technical and financial papers, that sterling has become a scarce currency in many countries. It is as scarce in certain countries as dollars. We know that that is appreciated in America. As your Lordships will have seen recently from the papers, a very influential body of people who take the view (which is largely held in this country) that sterling should not be devalued but should be maintained at this rate, have gone so far as to say that international and world trade cannot recover and cannot be conducted on an increasing basis without the restoration

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of sterling at these levels to a world international and strong currency. We may have known that, but it is refreshing to know that our friends in America also realize—or this body of them do—that strong sterling is as necessary to them as it is to the rest of the world. They realise that the dream of some woolly-minded or narrow-minded people, that the dollar would replace sterling in all the markets of the world, is not shared by everybody and is an unrealisable ideal—if it be an ideal—and is one which would not be in the best interests of the United States themselves. That realisation can only have come from an appreciation of the improvement in our position.
I close the remarks I have to make with this. We are on the road to improvement. Many of us feel that that improvement could have been more rapid if a number of very serious mistakes had not been made, I firmly believe that the fuel crisis was perfectly avoidable, that it ought never to have happened in a properly conducted administration and that it cost us twelve months' setback. But, with all that, I still believe that we are very much on the upward grade and, as the noble Lord, Lord Cherwell, said, all those who have contributed to it—management, labour and, equally, the Civil Service in their able administration of these tiresome problems—have real reason to congratulate themselves and, in fact, to take a pride in what has been done.
4.13 p.m.
LORD BRAND: My Lords, your Lordships have listened to two very interesting speeches. I shall hope to give your Lordships some remarks of a general character, taking perhaps rather a different line from that of both the speakers who have preceded me. Perhaps I shall be not quite so critical as the noble Lord, Lord Cherwell, and I am not sure that I shall be quite so optimistic as my noble friend Lord Rennell. I agree with him in his remarks about taxation. I am not sure that I am so optimistic as he is on the question of our balance of payments.
I want to stress certain points which have not been dealt with very fully, either in the White Papers which we have had before us or in the Chancellor's Budget speech. The Chancellor is, I am sure, fully aware of all the problems that I am going to mention, but I do not think
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he wished to say too much in his Budget speech. It struck me (perhaps I am not quite fair) as somewhat like the advice of a psycho-analyst given to an audience, some of whom he thought were still suffering from certain illusions, and therefore he did not want to say too much at the outset. But I think the Chancellor showed great courage in his Budget—and, indeed, courage was essential. I agree that the country has done a great deal under his guidance. Production is very considerably up, and what is the most striking achievement, as Lord Rennell said, is that we haw for the time being achieved an overall equilibrium on our balance of payments. That is certainly something we could not have expected to achieve whet we looked at our position two years ago, or even one year ago. But, as other speakers have said, we have always to bear in mind that this achievement is based entirely on Marshall Aid, and that Marshall Aid goes on only until 1952. It is also, to my mind, to a great extent the result of a unique sellers' market, which we shall not have with us so very long. The real test, in my opinion, will come during the next two or three years.
Our most formidable problem, of course, is the dollar gap, and that may be becoming rather more than less formidable at the moment. It is true that we have increased our exports to the United States, and we have still more largely increased our exports to Canada. I think our exports to Canada last year were 300,000,000 dollars, which is certainly a great achievement. But prices in the United States are falling, and although those falls, particularly in raw materials and food, may be transferred to this country after a period of time, it is not the case at present that our prices are falling and, of course, the fact that the United States prices are falling and ours are not presents an added difficulty to our exports. Furthermore, the dollar scarcity itself, in a curious way, creates a strong protective element in favour of our exports to the rest of the world. Our exchange control, and the fact that we are able to afford only a few dollars to the rest of the sterling area, means that they have to buy from us and cannot buy from the United States. In consequence, it is easier and more profitable for our exporters to sell outside the dollar area

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and inside the sterling area and other non-dollar parts of the world.
I would like to ask the noble Lord who is to reply whether some part of the exports included in our total sum are unrequited exports. I think they must be. I mean such exports as those to which the noble Lord, Lord Rennell, referred—for instance, machinery for the ground-nuts scheme in Africa. If so, this appears in our export figures as going towards paying for our imports. But in so far as unrequited exports are included, while it may obviously be very beneficial to export this capital, the figures become to some extent misleading, so far as our actual capacity to pay for our imports is concerned. We also allow countries with sterling balances in this country—built up either during or after the war—to use some amounts of them to buy exports. To that extent also, I suppose, our exports are unrequited and we do not get payment for them. These two influences, the dollar scarcity, together with this use of unrequited exports, tend to cause us to build up a rather high-cost protected area in the rest of the world to which our exporters are naturally encouraged to export rather than to the United States. This is a danger to a wider multilateral trade—and it is only on the development of multilateral trade that we can ultimately survive. These are tendencies against our dollar exports; and we cannot live without our dollar exports, because we cannot live without our Western Hemisphere imports. And while there are other difficulties—and this is the point I wish to stress—in the way of selling great amounts of imports in the United States and Canada, one of the most important influences is the question of cost. It is vital, therefore, that we should do everything we can to keep the cost of our exports to the United States and Canada down to the lowest possible level.
The dollar problem, therefore, is not to my mind at all solved, and I do not think it is soluble by direct trade. We can solve it only by finding other countries whose exports the United States will buy, and then by trading ourselves with those other countries and getting the dollars that they have earned to pay for our imports from the United States. It may be that certain invisible exports will help us very much in
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the future. We have heard to-day a good deal about oil refining, and it may be that in the next few years the oil that we can sell for dollars will do a great deal to help towards balancing our position with the United States, though I do not know to what extent.
If we look at the conditions in the rest of the world, the bear points, if I may put it like that, in our future trade with them are that we have to recognise that there will be a diminution in the sellers' market, and also that we shall certainly have to face competition from quarters from which we do not have to face it at present; and particularly from Germany. Again, therefore, the question of comparative costs is all-important. These are the external problems that are vital to us. I should like to summarise them. The question is, how we can keep our costs competitive, both with the rest of the world and with the sterling area; how thus we can maintain our reserves; how we can deal with unemployment, if our exports do fall; and how, in worse times, when we must expect a fall in revenue, we can keep our financial equilibrium when the last straw of taxation (which is what in my opinion it is) has already been placed on the camel's back.
This is where I come to the point that the noble Lord, Lord Rennell, stressed—namely, the question of high taxation. I have stressed these problems because they are, in my opinion, the real problems of a welfare State. I do not think that welfare depends upon nationalisation; nor do I think it depends on welfare schemes, when they have reached the point of involving taxation so high as to be damaging, to our whole economy. It is here that the question of costs of our exports reacts on our external policy—in fact, in determining our internal policy we in this island have to have constant regard to its effect on the external. To ignore this is still, I think, the weakness of some Socialists, as it was in 1931. In fact, one can almost say that until the present Chancellor of the Exchequer came into office, the Government did not have any regard to this problem. It is impossible to say that the present Chancellor of the Exchequer has not had the greatest regard to it. But even he has concurred until now in a great increase of expenditure, leading to increased permanent taxation—although

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now, when (as I think) it is late, he has said there must be no more expenditure and no more Supplementary Estimates. We have, in fact, reached the time when we must come to a halt.
I do not mind so much the temporary taxation, aimed at providing us with an anti-inflation surplus. Such taxation is necessary; but it is temporary, and it is reversible. Permanent taxation is quite a different matter. The need for permanent taxation, if I am right, has increased since the Estimates of 1948–49 by £332,000,000; that, I think, is the increase in the 1949–50 Estimates. Of course, that figure includes Supplementary Estimates for 1948–49. That huge additional expenditure is due to defence, in a minor degree, but must largely be due to the free health services, which the Chancellor of the Exchequer estimated at £260,000,000. The seriousness of this great increase is enhanced by the comments of the Chancellor of the Exchequer, which are undoubtedly true, to the effect that we must expect a further considerable increase in social welfare expenditure in the course of the next five or ten years.
The Chancellor went on to say that what was distressing to him was that one could not say the same about the revenues, which, of course remained uncertain. The outlook, therefore, so far as our Budget is concerned, is particularly serious. I regard taxation as rather like some medicines—necessary, perhaps salutary up to a point, but beyond a certain point becoming definitely poisonous. It is for this reason that I regard the free health scheme, however admirable anyone may think it, as against the interests of the community at this particular moment. I think it should at least have been delayed until our total production was higher, and we saw our way more clearly.
Our permanent irreducible taxation is too high for our present production. Moreover, it is imperative, with times as they are, that we should have some reserves of taxable capacity. We do not know what is going to happen with regard to Marshall Aid; we do not know what we may have to provide for defence; we do not know what losses of revenue we shall suffer if the world becomes somewhat more deflationary instead of, as it has been in the last few
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years, inflationary. Here, I am saying only what, in my opinion, both the Chancellor of the Exchequer and the Lord President of the Council have said. The Chancellor of the Exchequer made it clear to all his hearers that, if we had these social services, we should have to pay for them, and that they had reached the limit. The Lord President the other day went further on the B.B.C. and said (I am not quoting his exact words but they were to this effect) that in fact we could not maintain existing social services without greater production. In fact, as the Americans say, we had "beaten the gun" so far as the social services were concerned. We have behaved rather like a banker who makes advances hoping that the funds with which to make them may come into his possession later.
I regard taxation at this present height as definitely inflationary. The reasons are obvious. It is, I think, the universal view in industry that taxation as it now is saps the desire for maximum effort in the case of the wage-earner, and that it reduces incentive in the case of all others engaged in production. For instance, risk-bearing enterprise—that is, the taking of risk of profit or loss—is hardly worth while at this moment. It is directly inflationary if it tends, as it appears likely to do, to bring pressure for higher incomes all round. It is inflationary because it influences the ordinary man to spend on consumption what he otherwise might have saved. It is inflationary because it forces those with capital to live on capital. This tendency is now extremely widespread, and it will be increased again by the increase in death duties. Ultimately—and this is the point made by the noble Lord, Lord Rennell—excessive taxation unduly depletes industrial capital, and this again lessens production. If I am right in these arguments, it is at this point of taxation particularly that internal policy affects external. It adds to costs and militates against exports when it is vital that we should have a large increase in them.
There may be a danger that we may price ourselves out of the market. Hitherto, exports have shown great strength, but with the lessening of the sellers' market we cannot be sure whether we shall have so easy a time in future. If conditions change adversely in the outside world, can we adjust ourselves? We

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are now economically the most rigid community in the world, and we find the greatest difficulty in making changes or in adjusting ourselves to new situations. There are also considerable influences, apart from taxation, which are leading towards higher prices. For instance, we have seen ominous rises in the case of both coal and steel. The ultimate danger to a community like ours, if we are or become a too high-cost economy, is that our reserves will diminish and, as the Chancellor of the Exchequer has rightly said, the diminution of our reserves cannot be permitted. We must always remember that our reserves are not simply our own possession. They are the reserves also of the whole sterling area. Our existing reserves of gold and dollars are, in fact, the nerve centre of our whole economy. Any diminution of the reserves would be a sort of ultimate red light saying "Stop."
Notwithstanding what the noble Lord, Lord Rennell said, a good many people in high places in the United States, I think, believe that if our exports are over-costly that might easily be cured by devaluing sterling. I believe such people to be quite wrong. Of course, if prices were to fall heavily in the United States and do not or cannot be made to fall enough, or quickly enough, in this country, or elsewhere in Europe or in the non-dollar world, then the dollar would become definitely undervalued as against all other currencies, and some adjustment might be required. But even that would not help any country, in so far as it allowed its wages and salaries to rise proportionately to any rise in prices. Moreover, if we leave aside the dollar area, it is certain in my view that devaluation of sterling would not help us against the non-dollar countries. I cannot conceive that, if we devalued, other countries would not devalue also within a few hours. If that were so, we should be exactly as we were. If our costs here were already on a proper level in relation to the other countries, they would remain so. If they were too high, they would still be too high.
I do not think that any political Party or the world of economists have any clear ideas as to what we should do if we ever had to take steps to protect our reserves. I have read the recent Labour programme, Labour believes in Britain,
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to find out what the Labour Party think on this particular point. What the pamphlet has to say is this:
"Constant adaptability will be necessary to cope with changes in world economic conditions. The Government must be constantly ready to deal with any emergency."
Their remedies are as follows:
"(1) Purchasing power and production must march together."
That is not much good in these difficult times, because what is needed is not purchasing power in this country but purchasing power abroad. If purchasing power in this country were increased too far, it would put up prices and make it more not less difficult to sell exports. Then, the publication says:
"Women must get equal pay."—
I do not think that that has a great bearing on our gold and dollar reserves. The third remedy offered is this:
"Finance must continue to be the servant and not the master of employment policy. Control of investment and public ownership of the Bank of England safeguard the industry of the nation against the whims of financiers who brought misery to millions in pre-war days."
I do not think that is exceedingly helpful, and I must say that it sounds to me as if Dr. Dalton were the author. In former days in case of crisis, what the author calls "the whims of financiers" took the form of an increase of bank rate and a restriction of credit to restore our reserves.
So far as I know, the country now has no plan. I do not impute great blame to anybody in particular, but I think the country ought to have a plan. If you have no idea what you are going to do in these new-managed currency days, when the bad time comes it is rather like contemplating that you may have to fight a war sometime but without having the slightest idea how you will fight it. I do not ask the noble Lord who is going to reply to give me his plan. I have some ideas as to what the plan ought to be, but those ideas might be unwelcome to him, and I agree the subject is immensely difficult.
Your Lordships may say that in complaining of the effects of taxation I am crying over split milk. That, I fear, is largely true. All Parties have, I think, in the main, accepted the policies which have involved the very high taxation. It

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is now becoming recognised that the maintenance of the benefits provided, as well as our external stability, depends—as the noble Lord, Lord Rennell, and I think Lord Cherwell., said—on a greater, perhaps much greater, production. But greater production also depends more than anything else on what I might call "the geese who lay the golden eggs." In using that phrase I am not referring to Ministers; I mean all the creative, organising, risk-taking enterprising influences in the nation. Nor would I like to label them "the managerial class." I think the managerial class is a highly valuable class, but it is not the risk-taking class. That class is something quite different. It is risk-taking that is required. But in order to take risks, one must have something to take them with—one must have some risk-taking capital.
From this point of view it is worth while asking what sort of a world we have produced with taxation permanently at its present height. I feel it is a world where it would be almost absurd for anyone who reflects to take financial risks—that is, to take the risk of loss as well as profit, considering what is left of the profit, if he makes it, and what he bears of the loss if he incurs it. It is a world, therefore, where enterprise must be at a very heavy discount; where no young man can build up capital; where "risk-savings"—and this is a very important point—look like becoming almost nonexistent, because the saving classes, the capitalist class (let me call them "the rich"), are almost taxed out of existence. They are also now blamed, because they do not save, and because they live on capital. But the poor things cannot do anything else, unless they change their whole mode of life and, for instance, dismiss everybody they have had in their service for years, and so on. Therefore there are no savings in that class, and I do not think there will be. I think it is a world, too, as Lord Rennell said, where, however high may be the profits which industry is making, with taxes and depreciation allowances as they are at present, industry's resources will prove insufficient for its needs.
I was very much struck the other day by the speech of the Chairman of the Cunard Company. As your Lordships will have seen, he pointed out that to build either the "Queen Mary" or the
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"Queen Elizabeth" would now cost at least £15l,000,000, whereas each cost £5,000,000 before the war. The Company's depreciation allowances, however, are based on a cost of £5,000,000, and not upon £15,000,000. One can understand what is the effect on all industries of a situation like that. I suggest, therefore, that it is more useful to consider how the geese can be induced to lay more eggs than to pursue nationalisation plans or other hinderances to enterprise.
High taxation, I admit, presents difficulty in finding immediate remedies. That is just why the problem is so serious. But at least I think it is unnecessary to do as the Economic Secretary to the Treasury did in the Budget debate—roughly, to tell the geese that they might consider themselves lucky to be alive at all, and that anyhow many more eggs were likely to be taken from them. Geese governed entirely by instinct would, I believe, after a time stop laying altogether. But the geese I am talking of, while they have instincts, also have patriotism, and I am sure that all patriotic citizens, whatever their opinions, should and will support the Chancellor in his effort, which must be made successful, to hold back increased costs. The future—and it is happenings in other countries that will largely determine our future—will indicate how far the anxieties that I have expressed have substance.
4.47 p.m.
LORD CROOK: My Lords, in the observations which I venture to offer to your Lordships, I do not propose to follow—indeed, I could not—the line of the noble Lord, Lord Brand. My determination to intervene for the first time in a debate on the subject of economics was dictated rather by the thoughts which always come to my mind when I see the name of the noble Lord, Lord Cherwell, associated with a debate on the economic situation in this House. If I may say so, with every respect to his great knowledge and ability, whenever I see the two things, economics and Lord Cherwell, associated on the Papers of this House, I have the picture of a grave prophet standing on the banks of the river crying "Woe, woe; we are all undone." Because of the supreme pessimism which the noble Lord always seems to offer us, associated at

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times with what I may perhaps be permitted to call nineteenth century doctrines, I think some of us ought to try and offer a little twentieth century optimism this afternoon.
I do not want to be so foolish as to suggest to your Lordships that everything in this country of ours is now easy. I know that in the next two or three years a difficult situation may well become more difficult, as markets harden and as we run into difficulties all over the world. But whatever difficulties the Ministers may have to solve in the years ahead, I think we may be doing a disservice if all the time we take a gloomy outlook and spread that feeling of depression amongst the working people of the country; and after all, they are the people who have got to earn the money that we so readily talk about. I would rather take a leaf out of the book of the right honourable gentleman who leads the Opposition in another place, for whom, like so many others, I have the most profound respect as a great war leader, however much I may disagree with many of the views he expresses. He did not go round the country during the war depressing the workers who had a job to do. Whatever private doubts he had in his mind, he stuck out his chin, and he spoke of the ability of Great Britain to see the war through.
What those doubts were we know now, as history comes to be written. Some of your Lordships will no doubt have read what Mr. Morgenthau has recorded, but I would like to remind you of it. He stated:
"While I was in London in August, 1944, Winston Churchill talked to me about Britain's future. He was exceedingly pessimistic. The day the war ended the country would be bankrupt. When Churchill went to Quebec a month later … he pointed out that Britain had expended its economic reserves, its very lifeblood, in the war versus the common enemy, and the abrupt termination of American aid would leave Britain without the resources to reprieve its economy."
While the right honourable gentleman, Mr. Churchill, encouraged the workers to go on working to produce for victory, he realised the difficulties which had to be faced. And the noble Lord, Lord Woolton, whose great abilities, as displayed on the Front Bench opposite, we all appreciated, was also in no two minds at that time. He was rendering signal
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service to the country as a member of the Government and he reminded us in 1945 (to use his own words) that
"Before the war Britain was a wealthy nation with vast overseas possessions. We have sold or pawned all of it and become the greatest debtor nation in the world."
He went on to warn us of the difficulties ahead, and urged that there should be a combined operation by the Government, the employers and the employees to win through to the transition stage. But he added that it would take time, and he pointed out that we did not reach full war production until the end of 1942. The task of retracing our steps, he said, would in some ways be even harder.
I make no apologies for reading quotations from the speeches of the noble Lord, because I think we need to have such matters in our minds to give us a general background, so that we can appreciate what sort of a job the present Government had to face when they took office in the difficult year 1945. They had to rely on the workers, and the workers were undeterred by the knowledge of the vast problems which had been posed to them. They were undeterred, notwithstanding that they were tired after the magnificent effort which they had made during the war, and notwithstanding that millions of them had again to be re-deployed in industry. They were encouraged, of course, by the election in 1945 of a People's Government to face up to a programme which entailed cutting out all imports which were not absolutely essential, aiming at the maintenance of a stable value for sterling and attempting what no other European nation has attempted—to invade the American market successfully. In order to achieve those objectives, and despite all that they had suffered during the war, the people of this country were prepared once more to restrict their personal consumption of goods in order that they could build up exports. They were prepared to take every possible step to stop inflation affecting the cost of goods. They were prepared to do all this because they wanted to win through to a position from which they could look the whole world in the face and say: "We have paid."
The workpeople who were producing were helped by the trade unions of the country and, what is more, by the

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majority of the great employers. The three Parties referred to in the statement of Lord Woolton did come together to do their best in the interests of the country. Noble Lords opposite have their own different views about the right things to be done for this country. So have the trade unions; so have the employers, and so have the workers. But they managed, as we can all manage here, to get together in order to try to secure the balance of payments. I believe that we have a great national ability in this country to get through our difficulties, and whatever may be the difficulties which now face us we are going to get through them. I believe that we may take comfort from the figures of exports which are being announced month by month. I feel that we are entitled to be proud that early in 1949 we can see our exports at 162 per cent. above 1938, higher than the target we set for the end of the year. Both as a result of private talks with members of your Lordships' House, and from hearing what has been said by noble Lords this afternoon, I know that there is great satisfaction at the way in which the invasion of the American and Canadian markets has gone: exports to Canada and the United States over the past twelve months have shown a 50 per cent. increase.
I do not disguise from myself that we have a long way to go to reach that target of £180,000,000 worth of exports which has been set for those markets, but I feel that what we have already done should give us some cause for encouragement. I know that at the moment we sell our goods in Canada at the rate of about £1 per head of the population, while our exports to our friends in Australia are approximately £19 per head. That is some measure of the problem which confronts us. It is at the same time a measure of the huge market which awaits us if only we can capture it. It is also a measure of the great amount of opposition which we may expect in those markets. I think that those who produce here have shown what this country can do. Let me take only one example, which has already been referred to—that of tractors. If we look at the figures we see that whereas we produced no more than 10,000 in a year before the war, in one quarter of last year we exported no fewer than 25,000—a total of £5,500,000 worth of tractors
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and other heavy agricultural machinery in a year.
I do not wonder that when he went back to America Mr. Hoffman, the E.R.P. Administrator, could make a statement which I think we can all regard as most encouraging. He said:
"I am going back to America with a clear impression that the United Kingdom has made remarkable progress in making good on its pledge of self-help. When I took this job in April it seemed to me that the goals which Britain had set in the first year were quite unattainable. The very gallant and successful fight which Great Britain has put up to build up her exports and hold down imports, and thus achieve financial stability, is one which commands the admiration of the world."
I think we may be proud that we have earned from our American friends, who have given us, and are giving us, all the help they can, the right to tributes of that kind.
I would like to remind the House of one or two of the production efforts which Mr. Hoffman saw when he was here. He was able to see our grain production at 70 per cent. above the prewar figure. He was able to see our milk production reach an all-time record in this country. He was able to see a country which had previously imported combine harvesters not only having learned to produce them but producing them at the rate of a thousand a year. He was able to see a new industry in the production of clocks, an industry created in areas which were once depressed. He was able to see that we now not only make enough for our own needs but instead of importing £1,500,000 worth of clocks into the country each year we now, as the result of the policy of His Majesty's Government, export £8,000,000 worth a year. Every day, in the last twelve months, 1,240 cars, trucks and buses have gone abroad to bring in money that we so badly need. In footwear, cycles, motorcycles and dozens of other products the workers' records of production have gone up, so that it is now running at 25 to 30 per cent.—perhaps 35 per cent.—above the pre-war figure.
One of the reasons why I feel so encouraged and capable of some optimism is the contrast between what I saw after the Great War of 1914–18, when I started my trade union experience, and what 3 see to-day. Then production was less than half the pre-war level, and

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it took nineteen years, and a rearmament programme, to put it back to the place which it occupied in 1913. I think we are entitled to be proud when the United Nations Survey can point out that the national production effort we have made is unequalled in our history. I welcome the further steps which are being taken by the President of the Board of Trade at the moment to capture the American market. Since your Lordships are debating the economic situation, I do not think it would come amiss if I congratulated all concerned with the organisation of the magnificent British Industries Fair which has opened this week, and also those responsible for deliberately and particularly giving the publicity material the slant for the North American market.
All these attempts are made possible because we have workers who are doing their best all the time. I want to take the opportunity of this debate to say how harmful I think it is, and I know many others share my view, for people to talk as if there were grave slacking among the workers in this country, and as if hours were short. Decrying the efforts of our own people will not help us at all. I welcome the cold douche of realism which came from an American trade union representative on the Anglo-American Productivity Council, when he made a statement to The Times last November. Mr. Walter Reuther said:
"I shared the illusion, which seems quite common in this country as well as in the United States, that the difference in productivity arises from the fact that labour here is not working hard and fast. I believe that if it had the same equipment, tools, plant facilities and raw materials it would match the productivity of American labour. I found that the tempo in the plants I visited was certainly as fast as anything that is customary in the United States."
Of course the tempo is as fast; of course the hours are as long. Indeed, it is true to say that when we survey the hours worked in this country and in America last year, we find, from the most reliable returns, that while the average number of hours worked weekly by workpeople in America was only forty, the average in this country was forty-four; and many worked much more. I need hardly remind those of your Lordships who know something of the steel industry of the magnificent response which that industry has given in working
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eight-hour shifts right round the clock, month after month.
The same kind of loose talk goes on far too often about the miners, their work and their hours. That is no way to encourage them either. Some of those who are so ready to criticise the miners ought to try their lot for a little while. Let them try living in the miserable houses erected by the pit owners in years gone by, of which they should be ashamed. Let them try going down the pits and working in the narrow seams, in the heat and in the wet. When I drive through mining villages and look at the men squatting outside their houses—squatting because that is the only way to be comfortable after the positions they have had to work in for so many years—I thank God that I have been so fortunate as not to have to work in the pits. And I invite those who criticise the miners to reflect that, unless they are prepared to go down the pits themselves, they are not in a position to tell the miners that they should do more physical labour or work longer hours.
I am glad that the men who work in the pits now have better hours and conditions. It is not their fault that the coal-mining industry has been in a state of crisis over the last thirty years. That has been due to bad organisation, and to the inability of the people to nationalise. I do not pretend that everything in the mines to-day is right, but the trend of production has gone upwards ever since 1945, and it shows every sign of going up further. With the fresh schemes and new shafts, we can look to production giving that extra amount for export which the noble Lord who moved this Motion is so anxious to see—as, of course, we all are. The reasons for the upward trend of production are many, but it is largely due to the fact that the workers are conscious that they are living and working under conditions better than they were twenty, or even ten, years ago.
If we go into the industrial areas and talk to the people, we can obtain their reaction to the lives they lead to-day and those which they led before. Most of us can gain that only from reading the daily Press. From the Daily Sketch of January 26, 1938, I give your Lordships this description of the conditions which the workers could expect as part of their lives just before the war:
"New milk is rarely to be seen on the poor man's table. Babies by the hundred are

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weaned on condensed milk diluted with water, or crusts are dipped into it for the little ones to suck. … A daily supply of fresh milk does much to build up the bodies and health of children. Social workers agree that in many cases milk is even more important than ordinary food. … Free milk is now being distributed at many Daily Sketch Winter Relief Fund centres in London. Hundreds of gallons are given every week. … The recipients include women recovering from childbirth, convalescents, nursing mothers, consumptives, acute cases of illness being nursed at home, and elderly people who cannot afford the luxury of fresh milk."
People contrast that with the improvements they see coming to them to-day, and many of them will read with astonishment that the noble Lord, Lord Cherwell, seems to think that we can do away with many of the social services and still expect to have the same kind of reaction from the workers. I believe that these improvements are one of the reasons why the history of industrial disputes has been so good since 1945. May I say, as an aside, that I regret that every time there is some little strike there is magnified publicity to make it look as if the workers of the country are striking all the time? In the three years from 1945 to 1948 8,000,000 days were lost; in the three years following the previous war 150,000,000 days were lost, and 100,000,000 of those were in the coal mining industry, to which I have just referred.
I should not like to go on record in this debate as saying that only the workers have benefited from what this Government have done. Private enterprise, which noble Lords on the Benches opposite say they desire to encourage and safeguard, has also had its benefits from the Government's policy. In 1947 22,000 new companies were registered, half as many again as in any pre-war year. That is not a bad indication of the industrial state of this country. Private enterprise is benefiting from the flourishing capital investment programme which the Government and private enterprise together have fostered. May I remind your Lordships that that has amounted to £3,500,000,000, with plans for £2,330,000,000 more in hand—new shafts for mining, electric generators, hydro-electric schemes, extensions of refineries for oil—to which the noble Lord, Lord Brand, referred a few minutes ago—increased building of all types of transport vehicles, and the reorganisation of the iron and steel industry?
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I fear to worry the noble Lord much more, but dare I say this? Four hundred and thirty-three factories were built from 1945 to 1948; 530 more are being built, and 210 more are being planned. From what the noble Lord said, the Government would have been wrong, whether they had built them or not. If they had not built them, they would doubtless have been charged with failing to do their job in planning for the increase of the export industry. But because they did build them, we are warned that they may be overdoing it, and will run into trouble before long.
I think we are entitled to be proud about these factories, and about all our industries. Those of us who have memories of Jarrow, and the Jarrow campaign of years ago, can be thankful in thinking of what has happened in the field of shipbuilding. To-day, 18,000,000 tons of shipping are owned by Great Britain—nearly one-quarter of the world's tonnage. That is an actual increase over 1939, which shows that we have made good our war losses; indeed, the truth is that we have added 5,000,000 tons since 1945—nor are our shipyards half empty to-day. While in 1938 there were only 750,000 tons under construction in the yards, to-day, with our export orders and our own construction programme, 2,000,000 tons are always in the yards. That is a fairly satisfactory picture. Most of us desire to see yet further improvement; we are anxious to see that nothing is done to disturb this equilibrium. Most of us are satisfied with the wisdom that the Chancellor of the Exchequer has shown, and with the great wisdom he showed yet once again in the speech which he made in Rome yesterday.
I have said most of the things I felt I had to say, but I would like to deal with one other point from the speech of the noble Lord, Lord Cherwell. So often in this House, when I listen to matters affecting Civil Service administration, of which I have had some experience for the last twenty-five years, I find that no matter what the Civil Service did, or what the Government did, it would be wrong. That is certainly true of what the noble Lord had to say about the Government's man-power budget. As General Secretary of the Ministry of Labour Staff Association, I had to deal fairly closely with this particular subject. The first thing I would like to do is to invite Lord Cherwell,

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to read a little more closely the figures of estimates under the new scheme, especially the footnote; and, secondly, I would ask him to read the paragraph two pages earlier, which explains the new system. The footnote points out that the Post Office staffs are now shown under the word "Communications" in the re-grouping. That will account for 250,000, at least, of the missing bodies which worried the noble Lord.
I would like to explain the reason for the change, to show that whatever had happened the Government would have been wrong. The figures given to Parliament in the past have related to the insured population of the country. Had they been any other figures they would have had to be specially compiled, and that would have meant great difficulty. Parliament has now changed the system of insurance and brought more people in, and the figures have been brought into line with the higher figure of 3,000,000 insured to-day. Had the figures been kept on the old lines, the Government would have been told that they now had new and up-to-date figures which they were wilfully keeping from the country. Indeed, in order to get those other figures they would have had to send out another form, and noble Lords on the opposite side of the House would have complained about the extra form the Civil Service sent out, and about the extra staff in the Civil Service needed to summarise the form when it came back. What has happened is that the commonsense method of giving to Parliament figures on the new basis of insurance has been adopted. The Government have not gone in for some chicanery and jiggery-pokery with the figures, as one would have thought from listening to the speech of the noble Lord.
I am sorry that I have kept your Lordships so long. I had some things I wanted to get off my chest. They were not essentially economic doctrine, but they mean something to the workpeople in whom so often in my ordinary daily life I find such refreshing twentieth century optimism. I wanted to say what a great improvement I think there has been in this country, and how much those workers have done; I wanted to say how much I believe in the workers of this country. Indeed, perhaps I may put it
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even more widely and say that I believe in Britain.
5.18 p.m.
LORD BLACKFORD: My Lords, we have listened to four very well-informed and interesting speeches, and there would be no excuse for us if we were not fully seized of the opinion of the speakers on this complex subject, seeing that the average length of the speeches has been forty-two minutes. I shall not detain noble Lords for anything approaching that length of time, but I would like to ask of the noble Lord who is to wind up the debate one or two questions on matters which rather confuse me. I fully sympathise with the optimism of the noble Lord, Lord Rennell, and agree with him that we must not cry "stinking fish" about the considerable achievements which the nation has accomplished. The optimist is always welcome:
"Laugh and the world laughs with you, Weep and you weep alone,"
is a very true saying. Sometimes I think that in the speeches of politicians of all Parties there is a certain absence of realism. For instance, I did not notice that Lord Rennell made any reference to the fact that we are annually in receipt of a huge sum of foreign charity.
LORD RENNELL: I specifically referred to the Marshall Plan as being one of two important elements for our recovery.
LORD BLACKFORD: Well, I apologise if I missed out that fact, but the noble Lord did not explain how we should stand without the Marshall Plan, and that is the point I was trying to make. Nor did he make any reference to the fact that certain classes in this country are being so over-taxed that a false economic wage basis is enjoyed by the workers. Thirdly, he spoke as if the conditions of exceptional industrial boom which have been prevalent in the last three years were likely to continue indefinitely. One of the questions I should like to ask the noble Lord who is to reply is what conception he would take of the outlook in the event of industrial slump.
The noble Lord, Lord Brand, laid great emphasis on the necessity for export and, of course, everybody is in agreement with that. But many countries have set a ban upon their imports. We ourselves

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set a ban upon our imports from dollar countries. We say that we must sell much more to Canada, but that we must import less from her. The condition of restricting imports, whereas every nation wishes to boost its exports, is prevalent throughout the world, and I should like the noble Lord, Lord Pakenham, if he would be good enough, to devote a few sentences to explaining how world economy is to be conducted on that basis. My belief is that, however ingenious and learned we may he, these questions will eventually he settled for us by a series of strikes. They will be strikes by strikers to whom surrender is inevitable—I refer to strikes of the consumers. When the consumer says: "Your goods are far too dear they are not of sufficient quality and. I will not buy them," then surely you have no recourse but to reduce the price of your goods and improve their quality until the striking consumer will buy them. Reducing that necessity to four words, it means "More work, less pay." That is in direct opposition to the policy upon which the Socialist Party have built up their power and prestige over the last fifty years. It may be taken as axiomatic, therefore, that they certainly will not accept the policy of "More work and less pay" until they have squeezed every alternative orange absolutely dry.
In view of the considerable recovery which was achieved in 1948, and of the fact that companies' reports still coming in based on the year 1948 show very satisfactory and, in some cases, highly increased profits, I should not like to make that gloomy prophecy did I not believe, from a pretty wide acquaintance with industry, that the sellers' market has definitely passed its peak and is at an end except for heavy capital goods. I believe—and I think anybody acquainted with industry through banking and so on will agree—that the sellers' market for consumer goods has definitely passed, and that we must look forward to a period of slump to which we shall have to adjust ourselves. I think there is no question but that the Chancellor of the Exchequer agrees with me. He says, as near as any Party politician dare—and he has been saying it for a long time—"More work and probably less pay." In the very opening sentence of his Budget speech he said: "If we are to maintain our social services there must be much more productivity." What does
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that mean except more work? Although he has never uttered those four disagreeable words as I have, yet I submit to noble Lords that that has been the burden of his cry for the past two years.
Now it stands to reason, as I said before, that nobody on the Socialist Benches is likely to accept that until every alternative has been tried, and therefore some of their brightest minds are looking about for alternatives. Their brightest rising star, Mr. Harold Wilson, has been pleased to give us the benefit of his alternative. He says, "Recapture the spirit of the merchant adventurers." Now what was the spirit of the merchant adventurers? It was the profit motive, unadulterated and unashamed though not always undefiled. It is odd to find a Socialist Cabinet Minister coming forward and extolling the profit motive as a virtue to be recommended, whereas so many of his other colleagues—more vociferous and raucous than he—denounce the profit motive as being a vice attributed to capitalist exploiters and, therefore, to be destroyed and condemned. The last time I was at the Marble Arch, some three or four Sunday afternoons ago, I stopped on the edge of a crowd who were listening, to a gentleman whom I have seen and heard speaking on occasions during the last twenty years. As I paused, he delivered himself of this remark: "There is no word I hate so much as 'Efficiency.' It is the duty of every worker to do as little work as possible and to get as much money as possible for doing it." In front of him on We little platform was a painted placard marked, "The Socialist Party of Great Britain." I assume, therefore, that funds which noble Lords opposite are so fortunate in drawing from the T.U.C.—
LORD PAKENHAM: If the noble Lord has been listening to this gentleman for twenty years, he must, be well aware that his doctrines are not those of the Labour Party. He belongs to the Trotskyite Party, and really there must be no confusion between the Trotskyite Party and the Party of His Majesty's Government. I should have thought the noble Lord would have known better.
LORD HAWKE: Would the noble Lord confute him next Sunday?
LORD BLACKFORD: There may be some truth—
LORD PAKENHAM: I hope the noble Lord will accept that what I have said is true. There is not some truth in it, but 100 per cent. truth.
LORD BLACKFORD: Of course, what the noble Lord says is true—that goes without saying. But he will admit that it is exceedingly confusing for the ordinary passer-by in Hyde Park to hear such doctrines enunciated, and to find written on the placard, "The Socialist Party of Great Britain," because a layman would be apt to think that such a person as Lord Pakenham belonged to it.
LORD PAKENHAM: I do not want to interrupt unnecessarily, but it is very confusing for members of the Labour Party to find a very reputable gentleman named Sir Waldron Smithers sitting in another place as an official member of the Conservative Party, because we are told that we must not use Sir Waldron Smither's opinions as examples of the kind of doctrines to which the noble Lord and his Party are committed.
LORD BLACKFORD: I am afraid I cannot enter into further argument about what happens in another place in regard to one of the members of the Conservative Party. What I wanted the noble Lord to do in his reply, if he will be so kind, is to produce some coherence out of these conflicting statements. His colleague, Mr. Harold Wilson, on the one hand, says, "Recapture the profit motive," and his colleague, Mr. Aneurin Bevan, on the other hand, says, "Destroy the profit motive." I should be obliged if the noble Lord could tell us where he stands between those two comrades of his on that matter.
But there is another aspect. It must be admitted, of course, that merchant adventurers have had their ups and downs. The successful Sir Francis Drake was knighted on his own quarter deck by Queen Elizabeth—who did not forget to take a considerable rake-off from his prize money, no doubt at the suggestion of her Chancellor, a distinguished forbear of the noble Marquess the Leader of the Opposition in your Lordships' House. The unsuccessful Sir Walter Raleigh had his head cut off by James I, no doubt at the instigation of his Chancellor—another distinguished forbear of the same distinguished Marquess. But throughout the centuries merchant adventurers have had
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a pretty good wicket, until the arrival of Mr. Harold Wilson and his colleagues. Mr. Wilson says, "By all means go into merchant adventuring. If you lose you go bankrupt and that would be too bad; but if you succeed we take nine shillings of every pound you make, and the more successful you are in making the money, the more we shall take. And if you are very successful indeed we shall take nineteen shillings and sixpence of every pound; and every few years we shall come along and take a 'once for all' levy, so that we shall take more than nineteen shillings and sixpence in that particular year. And if you manage to save any money—which seems extremely unlikely—we shall take a large proportion of it when you die, so that you will not be able to hand anything much on to your family."
And we have not yet arrived at the limit, because some of the young and competitive "bright particular stars" of the Socialist Party have been telling us quite plainly that their idea is that whereas the limits of taxation may have been reached, the limits of dividing capital have by no means been reached. Both Mr. Gaitskell and Mr. Jay, who is also a competitor for political advancement, have plainly said that if they are returned to power next year, their idea is to have a capital levy. So it must be admitted that the outlook for merchant adventurers is decidly bleak, and it is not surprising that young merchant adventurers tend to look to other countries, where they are regarded with a more smiling eye. They leave other young men in this country to occupy velvet seats in security; they doubt whether, if the present tendencies continue, there will be any money to pay the pensions to the occupants of those velvet seats.
Is there no way in which the Government can reduce this discouragement to merchant adventurers? There are several ways, with mention of which I need not detain your Lordships, but there is one essential way and that is by the alleviation of taxation. Now, when anyone mentions that, the first thing that his listener, if he be a Socialist, usually says, is, "What economies would you make? I suppose you would cut down the social services." One can well understand a responsible Minister in another place having to be careful what he says;

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but in this House one has the great advantage that one can say exactly what one thinks, and therefore I say that if I were in charge of affairs I would keep the food subsidies at £370,000,000—a reduction of just about £100,000,000 on the figure of £465,000,000. It is said that the pegging by Sir Stafford Cripps of the food subsidies has cost the individual household 4½d. per head more per week. Mrs. Mann, the Socialist Member for Coatbridge, appeared to me to squash a good deal of silly chatter by pointing out in another place that, as a matter of fact, the cost of living this year is decidedly lower than it was last year: she mentioned particularly onions, which now cost 4d. per lb. as against 9d. per lb.; and potatoes, as we all know, were considerably cheaper this winter than they were last winter. I should be strengthened in my decision to reduce the food subsidies to £370,000,000 and I should perhaps be protected against adverse propaganda by recollection of the fact that Sir Stafford Cripps, in the Budget debate a year ago when subsidies were £370,000,000, said that they ought not to be allowed to rise any higher. He ought not, therefore, to complain if a Conservative Government were to reduce them to that figure.
LORD PAKENHAM: May I ask whether the noble Lord is speaking with the authority of his Party and representing the view of his Party? Because it is rather confusing otherwise to try to distinguish between the individual and the Party.
LORD BLACKFORD: I thought I made it clear that I spoke for nobody but myself. I am quite open to be repudiated.
LORD PAKENHAM: Would it be correct to say that the noble Lord is flying a kite?
LORD BLACKFORD: No, I am not flying a kite at all. The noble Lord must not put me off. I was going to refer to the Armed Forces. We all know it is essential that the Armed Forces shall, in these dangerous times, be kept right up to date. But I must say I feel we cannot afford to go on spending £760,000,000 a year on the Armed Forces. I am sure there will be an insistent demand from all quarters of opinion for a reduction of
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that expenditure at the first feasible moment. And I do not mind venturing the opinion that there is now a considerable waste in all the Services—but Heaven forbid that I should enter into any controversy on that subject! The fact remains that there are a great many Service prejudices which will have to be sunk and there is much planning which will have to be co-ordinated, because I do not believe that in three years' time the nation will allow an expenditure of £760,000,000 on its Armed Services.
But, apart from that, my complaint is of the tendency of the Socialist Party to refuse to consider any idea of economy. The principle upon which they seem to go is, "We want a thing; therefore we must have it." It seams not to matter whether it is necessary or not. Those of us who express these views do not add to our popularity, and we are looked upon as cranks. For instance, I protested recently against the proposed expenditure on the Exhibition which is going to be held in 1951. The noble Lord, Lord Ammon, asked for £1,000,000 to spend on roads to get people to the Exhibition. A day or two afterwards I met someone who was going to spend £500,000 on improving the escalator at Waterloo Tube Station for the same purpose. A friend of mine is spending £500,000 on improving the Embankment, also for the same purpose. Since making that little speech, I have made further inquiries about this Exhibition. My contractor friend tells me that a contract has been let for £2,000,000 to build a concert hall, which is nothing to do with the Exhibition to sell British goods for export; the concert hall is purely to amuse music-loving people. That is most desirable in itself—I am all for it—but can we now afford to spend £2,000,000 on building a concert hall?
Moreover, it is going to take 10,000 tons of steel to build that concert hall. What is the allocation of steel this year for the City of Plymouth? In proportion to its size, it is the most blitzed city in the whole of England. The allocation is 750 tons. What is the allocation of steel this year for the City of Portsmouth, another great and much blitzed city? It is 750 tons. I was staying in the same hotel as the Lord Mayor of Portsmouth the other day and he told me that. Yet 10,000 tons of steel are to go on a concert hall. That does not seem to me to

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be right. It appears to me to be a financial attitude which is really not to be supported at all. Although it is a small matter in comparison with the huge sums with which we are dealing nationally, it is indicative of the mind which moves the Labour Party.
Recently, when I made a little speech, the noble Lord, Lord Ammon, dealt with me very gently; he smiled at me and said, "The noble Lord has got it off his chest now and will feel much better." But when I protested against the Lord Chancellor's desire to spend £1,000,000 or so and use several thousand more tons of steel on building an unnecessary theatre he said that that was an attitude of mind which created slums. I was surprised to hear him say that, because my own attitude of mind is strongly in favour of industry and thrift. That is because I remember two coloured prints which in the days of my youth hung on either side of the mantelpiece of a bedroom at home. The one on the left showed a prosperous, happy man with his well-fed and well-clothed domestic wife and two charming, happy children. Underneath was written, "The reward of thrift and industry." The housing conditions in which that happy family were living were most desirable. On the other side of the mantelpiece was a picture of a starving, miserable man with a tattered, hungry and dirty wife and two wretched quarrelling children. Underneath was written, "The result of sloth and extravagance." Those people were undoubtedly domiciled in a slum.
The noble and learned Viscount on the Woolsack was even more severe with me when I went so far as to suggest that instead of following the well-known practice of fools, building for wise men to buy at a bargain, we should improvise and use the Gaiety Theatre until such time as the nation could afford to build a theatre on the lines desired. He characterised that suggestion as downright foolish. I must say that I was surprised to hear him say that, because I had recently been behind the scenes at the New Theatre, where a repertory on a large scale has been carried on for the last four years most successfully. I thought the conditions backstage of the New Theatre were most inconvenient and bad, and they could hardly be worse. Therefore I felt rather disposed to protest
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respectfully against the use of such a severe adjective as "foolish" at my suggestion. Then, on reflection, I remembered that in the days of our youth, when the noble and learned Viscount was a handsome and rising barrister and I was but a simple soldier exiled in India, he had much more opportunity to gain intimate acquaintance with the backstage of the Gaiety and acquire a special knowledge of the building.
I do not expect the Government will economise, because it is a well-known fact about a democracy that they will never take notice until they are frightened. We all remember a statesman who stood up in May, 1940, and said "My policy is blood and tears, toil and sweat"; and the nation fell at his feet and said, "Lead us to it." But that same statesman had been saying for the preceding six years, "Unless you take certain precautions, the result will be blood and tears, toil and sweat." Nobody took any notice of him at all; he was ignored. I was one of the fools who ignored him, a fact which I have never ceased to regret; but it taught me a lesson which I shall also never forget. So when I entered your Lordships' House on the death of my father, after an absence of seven years from politics, I made up my mind that if ever I ventured to address your Lordships, I would always say what I believed to be true. I am convinced that we shall not recover and keep our prosperity without additional toil and sweat. That is what the Chancellor of the Exchequer keeps on saying, and if we refuse to listen to him now about the toil and sweat which we must inevitably undergo, we shall have to suffer in due course the tears of mass unemployment and the possible blood of Communist revolt.
5.47 p.m.
LORD STRABOLGI: My Lords, speaking from these Benches I cannot help feeling sympathy for what has fallen from the noble Lord who has just addressed the House. But, if I may give him a friendly warning, I would beg of him to avoid any reminiscences of theatrical adventures. It is always dangerous to indulge in them, for the worst construction is always put upon it. I had a great deal of sympathy with him in his commiserations with the hard lot of the merchant adventurers, the men of enterprise

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who to-day have a hard time in this country. When I was in the United States of America, I heard much the same sort of complaints there by men who, by reason of State, Federal and County taxes, were paying more than ten cents in the dollar of their income. I found that it was not a case of young men making a fortune in the United States. It is a hard, sad world, and we must all do the best we can to look on the brighter side.
If I might venture on the herculean task of trying to cheer up the noble Lord, Lord Cherwell, may I remind him of the brighter side of the situation, which has apparently escaped him?—and this affects what the noble Lord, Lord Blackford, has referred to as the heavy cost of armaments. It has not been mentioned in the debate so far, even by the noble Lord, Lord Crook, who I thought restored a great deal of balance to the argument. The international situation is showing signs of great improvement. There is no doubt about that; and it is especially true of Europe. Whereas a year ago serious people were regarding a Third World War, with all its horrors and disasters, as inevitable, only a small minority now think that war will occur; and amongst those are people who desire it. That improved outlook may mean a tremendous difference to the whole business community, including the merchant adventurers, who have still 80 per cent. of the industry of this country to work upon, even after we have completed the iron and steel nationalisation projects.
The noble Lord, Lord Cherwell, regarded the China situation with some misgivings. After all, I know China, and he knows China. Revolutions are not new there, especially in the course of the last decade or two; and the situation may not be so bad there as it appears. Certainly, events cannot be worse in China, in the light of recent happenings there. If that is the case, then apart from China the whole international situation shows an improvement that is bound to have a good effect upon the general trade of the world. It will restore confidence and will allow people to plan ahead with more certainly than hitherto.
The noble Lord, Lord Brand, shed bitter tears (figuratively speaking, of course) about our expensive National Health service. The one thing that is
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interesting the Americans at the present time is our National Health Service. The doctors view it with apprehension; the public with hope. There is a great demand in the United States for the Government there to emulate our own National Health Service, and President Truman, great politician that he is, has already made proposals to Congress to that end. So if any of your Lordships is thinking of escaping to America to get away from the horrors of high taxation, of National Health and all the other things that Socialism is supposed have brought about here, you will find not much improvement in the United States.
I would also say this: that though I do not myself agree, except in regard to certain commodities, that there is yet an end to the sellers' market, because it is still a good market for many of our specialities, I am a little apprehensive of cut-throat competition between certain Western European nations, including Germany. I hope that my noble friend, Lord Pakenham, and others of His Majesty's advisers, are very much alive to this danger. I do not mean fair competition, but real cut-throat competition. I would like to see rather more vigour—and risk if you like—in the development of the economic United States of Europe, as represented in one of its aspects by the Organisation for European Economic Co-operation. I am glad that in his speech in Rome yesterday Sir Stafford Cripps laid stress upon that. I am also apprehensive about what our American friends are thinking with retard to the revival of Japanese industry. I believe that those apprehensions are shared in Lancashire, and in textile-producing countries generally in Europe, and I hope this matter is being regarded with the seriousness that I suggest it deserves. I can see only one way in the long run to get over this trouble; that is to push on with this economic union of Europe. It is one of those obvious steps that everyone agrees upon but which nobody quite sees how to bring about.
Having listened to the speech by the noble Lord, Lord Cherwell, I reached the conclusion, without any doubt, that he was against Socialism. But I think it must be remembered that what we mean by Socialism is only planning—and economic planning at that. There is a great deal to be said, to begin with, for a Union of Socialist States of Europe, and

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those are the States who are prepared to carry out planning. In this connection, too, reference was made by Lord Rennell to development in Africa: he spoke of investments in Africa. I hope that the development of cotton in Africa is being studied. I think it is necessary for the other Colonial Powers to come in, and we have to bring in the Portuguese and also the French and the Belgians. Here is another example of Western European planned economy, co-ordinated in a longterm policy.
I entirely agree with what Lord Rennell has said about the need for the highest possible investment programme; indeed, I think we must all agree with that. In that connection, I would make a suggestion to my noble friend, and through him to the Government, as I have done privately, that every effort should be made to encourage and make it easy for American enterprises to invest in this country if they so desire. Capital investment which comes from a dollar area, is new, and the more of that kind of investment we have, by desirable enterprises, the better. Already there are concessions in the way of convertibility of profits and dividends, and so on, and I hope that everything will be done to encourage this sort of investment in this country. Mention was made by my noble friend Lord Crook of the export of agricultural machinery, such as combine harvesters. That was only made possible because one of the great Canadian manufacturing firms of combine harvesters, Massey Harris, set up an immense factory near Trafford Park at Manchester. That is why we export them from this country, and that is an example of the sort of thing that I hope will increase; and I am sure the Government will encourage it in that way.
My Lords, if I may, I wish to make what I hope is one other useful suggestion. It will be the last, and I will be as brief as possible, as others of your Lordships wish to speak and have more important things to say than I have. In his interesting speech, a good deal of play was made by Lord Brand about the need for reducing the price of our goods in the export markets. My Lords, I believe that it is necessary to put far greater emphasis on maintaining and increasing quality. We shall sell our goods in the hard currency markets, and particularly
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in North America, primarily on quality. We shall not be able to compete with the Americans in cheap mass-produced goods. We cannot, with their immense domestic markets and with their tradition of mass-production behind them; but in quality we can compete successfully. I cannot find words strong enough to impress the immense importance of this on our people.
I found that view everywhere I went in North America; men in the most responsible positions all stressed that point to me, and begged me to put it before your Lordships at the first opportunity. If we maintain and improve the quality of British goods, we can hold our own in these hard currency markets. Privately, I ventured to make this point as strongly as I could to His Majesty's Ministers, and I make it now as publicly as I can to my noble friend. I earnestly hope that that point will be stressed in all conferences in connection with the export trade, and I have every confidence that the new advisers who have just been appointed are seized of the point. It has a bare mention in the Economic Survey, and I think it could be more stressed. In the quality of our work we in this country are still supreme, and it is this kind of merchant adventuring that will bring us great success and add to our prestige, and that will help us to get over our present difficulties, which I believe we can do.
5.58 p.m.
LORD ROCKLEY: My Lords, I do not wish to detain you many minutes as a good many of the points which I had thought of making have been much more ably made by previous speakers. I should, however, like to associate myself with the remarks of those noble Lords who have urged that the Government should reduce their spending. I feel that the most important thing to regain in our economy to-day is confidence—confidence in its widest sense. It seems to me that possibly the Government underrate the necessity or the delicacy of confidence. It is of little use the Government telling people to increase their savings and at the same time be wildly spending themselves, and meeting that expenditure by increasing taxes. To follow a policy of what is called "cat and mouse" is damaging and unsettling. Cryptic remarks by responsible people, that they might tax this or they might nationalise that, create uncertainty.

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Even the position of savers seems to me a little obscure. When does one pass from being a desirable saver to being an undesirable capitalist? Is it when you have saved £100 or £1,000, or what? Perhaps one might be given a target, which I believe is the fashionable thing to-day! Indeed, there is very little to encourage a man to save. We all know the difficulties in the way of saving to-day, because of crushing taxation. This matter has already been referred to in the debate, but I think the evils are far more damaging than is commonly realised. We must also face the fact that there has been such a levelling down that in many cases unskilled labour is being paid nearly as much as skilled labour. A tool-maker, for instance, or a skilled man operating a machine, receives very little more than the man who sweeps up the turnings. The cloak-room attendant who collects sixpences free of tax probably makes a gross income far exceeding that of many hard-working professional men. The whole position seems to me to be out of balance there is very little inducement for anyone to be skilled in these days.
The noble Lord, Lord Strabolgi, has referred to the necessity for maintaining quality, and I entirely agree with him in that. But I think there is so little inducement now for people to serve apprenticeships to enable them to become really skilled craftsmen that there is a genuine danger of our skilled workers becoming less able than they were in the past; we are relying largely on the knowledge of a previous generation. The angle of taxation is of paramount importance now in any business transaction. I think most directors or managers to-day find, in considering any proposition, that this angle overshadows almost everything else. They have to ask: "Will this attract additional tax?" or, "What is the rate of purchase tax?" or again, "What is the development charge?", and so on. This often means that a very desirable proposition is completely put out of court on account of the taxation.
There seems to me to be a sort of widespread, old-fashioned witch hunt to seek out anyone who is operating at a profit. I feel that if a man by his inventive genius devises a better way of doing a job, he is entitled to a reasonable part of the profits that result; he should not be penalised by taxation and, pos-
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sibly, publicly abused. It gives me the same sort of feeling of discouragement as that which I once had some thirty years ago, when the rate setter came along to my lathe and said he thought of cutting the rate because I was doing the job too well. That was a thoroughly bad practice which the trade unions were quite right to fight, and it has long stopped. But why should that principle be resurrected again to-day in a broader form? I believe that any form of discriminating taxation eventually brings into operation the law of diminishing returns, and to discriminate against the investor is to discriminate against national development.
I do not wish to be controversial, as I am not a violent Party man, but I feel that it is a pity that the basis of compensation in some nationalisation schemes has been considered unfair by many people. I think it is unfortunate that there should be any suggestion that the Government have been clever and have done a smart deal by taking over assets below their obvious value. Of course, the Government are the trustees of the public purse, but I feel that they are also the trustees of the public honour and credit. It is a dangerous precedent, I should have thought, for a Government to issue heir own bolds to take over an undertaking which is valued only at the current Stock Exchange price or the equivalent. One can think of instances where prices may vary enormously in the course of a month or two. Some people point to figures relating to profits of companies; they draw attention to the fact that in some cases these have increased and they say: "Then is nothing to worry about." But I feel that a lot of these profits are not real. As Lord Rennell and other noble Lords have said very strongly—and it is a fact which cannot be over-stated—the way in which depreciation has operated in recent years is altogether wrong. I think industry is grateful for the concessions proposed in the Budget which will assist the provision of new plant, but no provision is made for replacing plant which is going to cost say three times as much as it did originally and which should be amortised from the existing profits.
We hear a good deal about controls and about increasing production, but controls add to overheads and costs of distribution. It must be admitted, also, that

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the armies of Civil Servants arranging distribution have to be carried by the producers. Some people dismiss this as planning, as if planning had never taken place before, which I always feel is rather an exaggeration. We have advanced in planning, as in a good many other things, but it is wrong to suppose that there was no planning in the last century. I often wonder how the question of efficiency can be rightly assessed in these days. If only accountants and others concerned in such matters could devise some means of computing waste due to time and energy lost in queuing, I believe that it would help greatly and would be indicative, in an important respect, as to whether or not business really was being more efficiently run.
It is always possible to play about with figures, but I feel that many of the present controls are unnecessary, and that a far more vigorous effort could be made to remove them. But the Government always seem to me to be working on out-of-date figures which, by the time they are collated, are more of academic interest than of practical value. I do not feel sure that the Government are watching with a broad view the margin of available supplies. There are several signs—as has been stated by previous speakers—of the sellers' market reaching its end, and I believe it is true to say that a 10 per cent. shortage of supply will create a great scarcity, whereas a 2 per cent. surplus may make a glut. I urge strongly that the present situation is far too serious—though one does not want to be over-gloomy about it, for of course there are things on the credit side—to be allowed to be influenced by Party politics. I do urge the Government to make every effort to remove bitterness and to increase good will between all sections of the community, and so allow a return of that confidence which is essential for the maintenance of our standards of living and to make the pound sterling a currency that is wanted by all.
6.10 p.m.
LORD KERSHAW: My Lords, I am sure that I shall have the sympathy of the noble Lord, Lord Hawke, in having to address your Lordships' House at this time. But while it may possibly be thought that everything has been said which can be said on this very important
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subject, there are one or two points that I think still remain to be dealt with. In the first place, I may say that I received the impression that the noble Lord, Lord Cherwell—I am sorry that he is not here at the moment—is not very kindly disposed towards the Government. I think that if he were more kindly disposed towards them, he would probably have thought fit to make some graceful acknowledgment of the Government's goodness towards him in producing the Economic Survey upon which he annually bases his remarks in these debates. This production in a convenient form of facts and figures, of hopes and plans and estimates for the future welfare of the nation, this annual stocktaking, this Survey, makes it easier for the critics of the Government to shoot: the ammunition is provided for them.
In my judgment, the Economic Survey for 1947, the first production of this nature, was a broad and statesmanlike innovation in the science of government and world politics. It was designed to present to the nation a dispassionate, factual and objective review of our condition as a family. It indicated the desperate position in which we found ourselves as a nation, and the organised long-term and short-term plans for our recovery. It offered no Party advantage to the Government, nor was any advantage sought. Having regard to the very serious economic position of the country in 1947 and 1948, it was easy for the Opposition to criticise and ascribe all those conditions to the wickedness or ineptitude, or both, of a Socialist Government. I wonder whether the noble Lord has read his speeches of last year and the year before on this subject, and whether he would be generous enough to acknowledge that not all his deductions at that time were accurate and not all his gloomy prophecies have been fulfilled.
I thought that in the course of his speech he sounded quite disappointed that there had been such progress during last year. It would have been so much easier for him if things had remained as bad as they were. With an obvious desire and a determination not to give away too many Party points, he reluctantly paid a compliment to British industry, to the management and workers alike who, under the overall plan of a

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benevolent Government (that would not be the noble Lord's adjective), in the fourth quarter of 1948 increased the volume of exports, excluding coal and textiles, by some one-third in the case of iron and steel to nearly three times in the case of vehicles, over the volume of 1938. I cannot claim, as the noble Lord can claim, to be an economist. I am just one of the ordinary citizens for whom this Survey was primarily intended, and it gives me, as it must give all those who care to study it, a tolerably good idea of the affairs of the nation and the difficulties which confront us. Unlike the noble Lord, I received a good deal of encouragement front it. It is my view that there is little purpose in a debate of this kind in quoting a mass of figures—the pounds million, the megawatts of electricity, the calories or grammes of protein, vegetable and animal, which we consume every day. These figures we can consider carefully in the privacy of our studies and laboratories. As I see it, the value of the Survey is that it has been made at all and, having been made, that from first to last it bears the impress of truth, of profound thought, of initiative, and of foresight and leadership. There is no attempt to gloss over difficulties. It is not a vote catching device, any more than, contrary to the expectations of some of our opponents, the Budget was. In my judgment it stands out as an example to the whole world of the purity and probity of British politics.
In this connection the final paragraph of the Survey is worth noting. It says:
"This Survey has sought to set out plainly the prospects, good and bad, and the tasks, difficult as they are, which face the British people and their Government in 1949."
I do not apologise for calling attention in this special way to the intrinsic quality of the Survey, because of the efforts of the noble Lord to cast suspicion on it. Phrases have been used suggesting that there are some devious and nefarious reasons for changing the form of the presentation of some of the statistics. In my judgment, a necessary preliminary to any review of this Survey is that it should be accepted as an honest and truthful document designed to place before the nation in a straightforward way an account of the nation's business.
There is little doubt in the mind of anyone that the two most important
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factors governing our economic position and our future are the generous help of the United States and our foreign relations. These two factors, I think, will govern the whole position in the next few years. The European Recovery Programme is to some extent beyond our control, unless our inordinate expenditure on drink and tobacco, not to mention betting and football pools, is increasingly regarded across the Atlantic as an indication of improvident expenditure. The spending of £1,500,000,001) a year on drink and tobacco is no evidence of poverty. Two-thirds of our expenditure on food is spent on drink and tobacco, nearly twice as much as we spend on clothes, and two-and-a-half times as much as we spend on rent, rates and water. I know that this has little effect on the main problems with which the Survey deals—the balance of trade and so forth—except perhaps to a small extent with regard to tobacco and the fact that it may be that in the manufacture of alcoholic beverages some good foodstuffs are destroyed which could be turned to better use, either as food for livestock or for human beings.
In regard to the expenditure on the Armed Forces, I think one of the greatest disappointments I have had is the lack of understanding between ourselves and the Soviet Republic—I know there are many people who think like me on this subject. I always had the greatest sympathy with that country and her endeavours. Like many others, I thought that the advent of a Socialist Government here would ensure amicable relations and co-operative effort between the two countries. I pay tribute to our Foreign Secretary for the patience and tolerance he has shown in regard to that country, in the face of disappointment which to him must have been extremely keen, and in the face of downright rudeness. I hope, however, that the Kremlin will realise that they have only themselves to blame for the present situation. I hope they will realise that this country has no aggressive policy against Russia. I hope they will realise that no cordon sanitaire is needed; that they need not extend their sphere of influence in Europe for that purpose. Above all I hope they will not regard some of the exuberant speeches of the noble Lord, Lord Vansittart, as representing the senti-

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ment of this country in regard to them. That leads me to say that I hope before the year is out there may be some relaxation of expenditure on the Armed Forces.
The two principal factors within our control are coal and textiles, each of which, as has been said I think by the noble Lord, Lord Rennell, are disappointing. The need for a further increase in coal output, says the Survey, and the keys to success, are more regular attendance, greater output per man-shift and an increase in the number of face workers. Let us recognise at once that the output per man-shift is steadily rising; the output for March of this year is higher than in 1938, or in any year since. Extended working, on the one hand, and the introduction of mechanisation, on the other, make it impossible to compare accurately one period with another. None the less, the upward trend is gratifying. Absenteeism baffles the management and the trade union leaders. It is disturbing to find that in each of the last four or five months absenteeism has risen. But who am I, and who are your Lordships, to urge the miner to work longer hours in the pits? I do not know how true it is, but I am told that a good deal of absenteeism may be due to the higher average age of miners. There may be something in that. Miners as a class are no lazier than any other class. I went down a mine not long ago, and the memory I shall always carry of that visit is not the awkward progress along the shaft but the dust, the smell of hot human flesh and the obvious physical strain that was put on the men who were working on the coal face.
It may be—I think the noble Lord who preceded me touched on this point—that we shall have to alter our ideas of the value of human labour. We may be driven to accept the principle that a human being who spends so much of his life in the bowels of the earth, taxing his physical strength in conditions which at the best are difficult and at the worst intolerable, will not work longer hours than a clerk in a healthy, clean office. I for one would not blame them for taking that view. We may even (this may sound revolutionary) have to pay a miner as much as a dentist. I suggest that in many of these things our standards are fundamentally wrong, and
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the sooner we realise that, the more likelihood there will be of increasing the man-power in the mines. The other day I overheard, quite by chance, the efforts of a man—I think he was a Welshman—trying to persuade four coloured men to go into the mines. What success he had I do not know, but it occurred to me, and has probably occurred to the Coal Board, that this problem of over-population in the West Indies might be worth considering in regard to the question of increasing the number of men in the mines.
I had intended to call attention to the great shortage of labour in the textile industry. We are told in the Survey that in the dollar area there is an unsatisfied demand for worsteds. Because of the shortage of labour in that industry, I just want to say, by way of mild criticism of the Government, that I take no satisfaction in the statement that only 300 persons have been directed to industry during the last twelve months. If for any reason there is a setback in our balance of trade—several noble Lords have indicated directions in which there may be a setback; for example, if E.R.P. were interrupted—it may be that we shall not only have to direct labour into textiles and the mines but generally restrict unproductive labour, which we know is being wasted so much in this country at the present time. I feel sure that the Government will not wait until 1952 to take the necessary steps to secure the labour that is needed in these essential industries.
I felt that the noble Lord, Lord Cherwell, seemed to indicate that if he had his way there would be a curtailment of our social services. I hope I do not do the noble Lord an injustice in coming to that conclusion.
LORD CHERWELL: I did not say anything of the sort.
LORD KERSHAW: I know the noble Lord did not say it in so many words, but the impression I had was that that was one way in which an economy could be effected. I merely want to call attention to the fact that there can be an economic profit, so to speak, from the increased health services that have now been established. I believe the noble Lord even went so far as to mention maternity and child welfare. Are we to scrap the services which have reduced our infant mortality from 140-odd per 1,000 to 40 per 1,000?
LORD CHERWELL: The noble Lord must have misunderstood me entirely. What I said was that if we want the social services we must pay for them. That is the only point I made. What I object to is that the people who asked for the social services now complain because they have to pay for them.
LORD KERSHAW: I can quite understand that the noble Lord dare not say that he would scrap those services. But let me tell the noble Lord that twenyfive years ago I interested myself in the subject of maternal mortality, which, as your Lordships know, has now been brought down to two per 1,000 births. For generations that problem defeated solution in this country, and thousands of worsen died of childbirth who need not have died. There is no question about that. Does the noble Lord know that in 1924 a Royal Commission recommended an extension of our maternity services and provided the money for it, that the present Leader of the Tory Party (who was the Chancellor of the Exchequer in those days) took that money for the relief of the Exchequer, and that we had to wait fully ten years before we achieved any progress in dealing with that particular problem? With that experience behind me, I am not at all convinced that the noble Lord, and those who see as he does, would not interfere with those services if he had the opportunity.
LORD CHERWELL: I do not think the noble Lord has the right to impute to us statements that we never made. It is all very well to quote what somebody said in 1924. I do not quote what Mr. Gladstone said in 1887. It has absolutely nothing to do with the facts. I have said specifically—and if the noble Lord reads Hansard he will find it—that both Parties agree about the desirability of the social services. The only difference is that his Party pretend they can be had for nothing, whereas our Party say that they have to be paid for.
LORD KERSHAW: If I remember aright, in the course of his speech the noble Lord used language designed to impute to the Government some unscrupulous and dubious reason for altering the form of the statistics shown in the Survey. If the noble Lord is entitled to impute unworthy motives to the Government in the production of the Survey,
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I think he must not be too thin-skinned about what we say from this side. What I am saying about maternal mortality—and it does not matter whether it was twenty-five years ago or to-day; the spots on the leopard do not change in this respect—is that there are thousands of women in their graves to-day who need not have been, had there been a Labour Government instead of a Tory Government in 1924 or 1925. That is the fact which is outstanding.
LORD CHERWELL: The noble Lord, of course, is entitled to make any remarks of that sort he likes. He is incapable of proving them, but I am capable of proving any of my statements. He claims the right to impute unworthy motives. If he chooses to exercise such a right, he may. I have done nothing of the sort.
LORD KERSHAW: Perhaps in a forthcoming debate on social services, there will be an opportunity of proving to the hilt what I have just said about maternal mortality. I did not catch what the noble Lord, Lord Rennell, said.
LORD RENNELL: I said that I did not think it had anything to do with a debate on economic affairs.
LORD KERSHAW: It has a great deal to do with it, because the noble Lord has said, and others have suggested, that under our present economic system we cannot afford our social services.
LORD CHERWELL: I wish the noble Lord would attend to what is said in the House before making statements like that. I said nothing of the sort. I did not say that we could not afford the social services. I said that if we wanted the social services we must make up our minds to pay for them. It is no good the noble Lord saying that I said I did not want them.
LORD KERSHAW: I am quite satisfied. I am unrepentant in this respect: I feel that there are members of the noble Lord's Party who would reduce the social services if they had the power to do it, and I am not sure that the noble Lord is not one of them.
What I want to say in regard to that—and I do not think the noble Lord will dispute it—is that there must be an economic result of the community's improved health. We have, in my view,

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attached far too much importance to the loss of productive capacity caused by unemployment, and too little importance to the loss of productive capacity caused by invalidity. If we can reduce the invalidity, we are helping to increase our production. We believe that, both from the long and the short point of view, we are following the only road which will ensure a standard of life worthy of our people. And I repeat that, while I admit the value of the Survey and comprehend the meaning of the tables and figures which illustrate it, I see in, around, about and above it all that it is a plan to ensure the greatest common factor of happiness, of comfort and of prosperity for our people. That is why I strongly object to criticisms that it is not an honest and straightforward document.
6.35 p.m.
LORD HAWKE: My Lords, I am not going to pursue the noble Lord into speculation in the vital statistics of the past. He has been doing some judicious research into the former speeches of my noble Leader. I only wish that he gave us more opportunity of hoisting him with his own petard. The feature of the debate to-day which pleased me most was that the noble Lord, Lord Rennell, and the noble Lord, Lord Brand, pointed out so clearly to the noble Lord who is to reply that the Socialist State breaks down on the question of voluntary savings. I hope the noble Lord, Lord Pakenham, will ponder the matter very deeply in his mind, and that it will not be long before I am accustomed to looking at the back of his head from this Bench, instead of at his face.
I am going to raise only two points to-night. One is a sectional one, and the other is wider. The sellers' market has nowhere been more apparent than in cotton textiles, but there is a sign that it is now disappearing, and that competition will be felt from Japan and our other competitors. Before the war we had great difficulty in competing with Japan, except on the finest cloths, and that was in spite of the fact that we had the choice of the finest raw materials in the world. A merchant could accept an order to any specification from any part of the world, and knew that he could get it finished and woven in a most competitive manner; that the spinner who
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would spin the yarn would have access to the finest selection of cotton in the world and would be able to produce the most competitive cotton of the day. But nowadays the position is very different. Certainly competition will revive in Lancashire, but the industry is carrying on its back a wasteful system of cotton buying run by the Cotton Commission.
The Cotton Commission try to import the cotton which will be required and then to sell it to the spinner. In practice it has been found that the Commission tend to import not what will be required but what has been required, and they are frequently unable to supply the spinner with the exact type of cotton best suited to the yarn he has to produce. Moreover, their prices are subject to violent fluctuations. All this means waste, because the spinner does not get the most economical type of cotton from which to produce his yarn, and our yarn prices are never exactly in line with the rest of the world. To-day we tend to do business when our prices are too cheap, and not when they are too dear; and the exporters can be caught out at any moment by a heavy increase in price. Of course, the system does not stop us from producing cotton cloth, but it means that the goods we do produce are not so good in quality, and that the price is not so favourable as it might be.
So far, these matters have not been very vital; but the time is arriving when they will be vital, and it will take time to alter our arrangements. We have not seen the trading results of this Commission, but I believe that it will be found that they have a very large stock of unsuitable cotton, bought not so much through their own ineptitude as because of the inevitable fact that when Government come in at the door quality flies out of the window. They will be able in due course to get rid of this cotton, but the home consumer, whether as a consumer or a taxpayer, or both, will have to pay for it. Lancashire is very frightened of Japanese competition—and with good cause. I believe we have not a hope of competing with Japan unless the Americans can raise the Japanese level of wages to European standards. We must therefore do our best to see that we keep at all events the higher quality end of the trade. There used once to be a link from the cotton field to the shop. We have broken that link, and we must restore it

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as soon as we can. The steps to take are, first, to decentralise the buying to the old channels. The next step should be to open the Liverpool spot market and later still we should aim at opening the Liverpool futures market. But even if we do these things, I do not believe we shall be able to compete when competition in cotton goods is once more the vogue.
The other point I want to make covers rather a wide field; it concerns our trade with Canada. It seems to me tragic that that great Dominion, from which we could derive such an enormous proportion of the vital raw materials we need, should be cut off from us by reason of the fact that we cannot pay for their goods in dollars. I believe that very grave choices lie before the Canadian people, and that before Marshall Aid comes to an end they will have to decide their course. This would appear to be their dilemma: Do they wish to remain a country of great producers of raw material, and if so are they prepared to hazard being able to sell those raw materials in the United States market, or are they prepared to rely on the much safer and more certain market that we can afford in this country? If their choice lies in continuing with Britain, I think they will clearly have to take certain steps. They will have to make sacrifices—not in the same form as Marshall Aid, because we do not want to ask for any more charity; but the Canadian Government must be prepared to enter into some form of reciprocal arrangement with our own. It will be a form of sacrifice, if you like, by urban Canada on behalf of rural Canada.
I believe, and many good judges believe with me, that the prospects of persuading the 12,000,000 people in Canada to buy an enormously increased selection of British goods are quite chimerical; and we have to increase our exports there by a minimum of £100,000,000 a year—and it may well be more. That can be achieved only by inter-governmental arrangements, and this is possibly the only area of the world where such an arrangement would be justifiable. In consideration of our giving an assured market for Canadian goods, the Government of Canada would have to agree to accept sterling, which would be laid out in purchases in this country, either by themselves or by their nationals. There are ways of doing this. Either course that I
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can envisage would, in the initial years at any rate, involve the taxpayers of Canada in substantial expense. But that is the price of an assured and certain market, and I believe that it would be a cheap price for Canada to pay for that market and for an assurance of internal prosperity.
6.46 p.m.
LORD MONKSWELL: My Lords, I should like to say a few words on a subject which I do not think has been mentioned before in this debate. There seems to me no doubt: that a great part of our financial troubles is due to the enormous expense of the social services. To me it seems almost certain that a struggle will shortly arise between youth and age on this subject. The benefits of the social services are enjoyed almost entirely by the old; the young get very little. They get education, of course, but education is poorly esteemed by our young people—and I think rightly so, because although education is supposed to fit them for competing for better paid jobs than they already possess, the number of better paid jobs will not increase and there will merely be more competition for the same jobs. At any rate, it seems to me extremely probable that youth will not consent to sweat to produce for the constantly increasing comfort of the old and to the detriment of the prospects of their own children. I read in The Times the other day an article on this subject which appeared to me to be extremely appropriate. It said that in a few years' time old age pensioners and those about to qualify for old age pensions would together constitute 42 per cent. of the electorate, and their principal object would be to enforce greater payments to themselves. I should like to ask the Government whether they have considered this subject and what they propose to do about it.
6.48 p.m.
LORD PAKENHAM: My Lords, this has been an important debate, and I hope that before we proceed much further the Front Bench opposite will recover its previous form and that I shall not be left alone—except for the support of my own colleagues—in possession of the battlefield. I am slightly inhibited by the absence of the noble Lord to whom I had one or two things to say, but in his absence (for which I have no doubt there

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are good reasons) I return to the more immediately practical and less controversial aspect of the subject.
There is no doubt that there has been a very great improvement in the fortunes of this country in the last year. The noble Lord, Lord Cherwell, says it is unfair to make the comparison with the previous year; but it would surely be strange if we did not compare it. However, if the comparison with 1947 is not appreciated, let us go back to 1946. We find that there has been a very great improvement since 1946. I well remember the debate in May of that year, the first of this long series, when Lord Cherwell took his usual gloomy line—and he was rebuked effectively to-day by the noble Lord, Lord Rennell. So it has gone on for three years, the noble Lord, Lord Cherwell, saying that everything is going to the devil—he, you might say, constituting himself the "devil's advocate" for that purpose—the noble Lord, Lord Rennell, balancing things, while we on this side have taken a reasonably optimistic view. Looking back over the last three years, I think that everyone would agree that, by and large, the optimists have been more right than the pessimists.
I should like to endorse what has been said by noble Lords on these Benches who have paid tribute to the workers of this country, and by other noble Lords who have done the same. Let us give credit to the workers, to the managers, to the "risk-takers" (if they are to be regarded to-day as a separate category) and to all those who have played their part. But credit should not be withheld from the Government whose policies appear to have succeeded, and we on this side are not going to withhold credit from the Opposition who have goaded us, spurred us and "chivvied" us and may be considered in those ways to have played a most useful part.
Unless your Lordships press me, I do not intend to give you the kind of economic survey which the House of Lords might on certain occasions expect when we are discussing economic affairs. There has been a great outpouring of figures, and I do not think anybody can complain that during the last few weeks Ministers have not communicated sufficient information to the general
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public. Noble Lords who have waited till this late hour have no doubt studied all that has fallen from the Chancellor of the Exchequer, the President of the Board of Trade and other speakers. It is perhaps just worth observing that in February of this year the figure for production was 30 per cent. over the figure for 1946. If February is to be regarded as an exceptionally good month, then let us take January, where we find that the figure was 23 per cent. over that for 1946. Those figures are indicative and illustrative of the great improvement in production. I do not think the noble Lord, Lord Cherwell, attempted to whittle down the figures very much, though I thought at one point he was going to. The House is already aware that the exports in the first quarter of this year were 156 per cent. above those of pre-war. That is really a tremendous achievement.
LORD PETHICK-LAWRENCE: That is not right.
LORD PAKENHAM: I stand corrected by the famous mathematician sitting behind me. As soon as he spoke, I realised that I was wrong. I must apologise to your Lordships. The figure is 56 per cent. increase over pre-war. Who of us thought—certainly not the noble Lord, Lord Cherwell—who of us was really certain three years ago that we were going to achieve a figure of that kind? Do not let us underestimate it for a moment. Let us express satisfaction with it and congratulate those concerned. Nevertheless, satisfaction must not at any price lead us into complacency. I hope that, if I do emphasise the good that has happened, no one will accuse me of putting up my feet and saying: "All is now over bar the shouting." Of course it is not. There are still tremendous problems facing this country, and none of us In the Government would attempt to conceal them from the country. If we did, we would rightly be hurled from power. There are difficulties of selling our goods, and those difficulties may well increase, although I do not agree that the sellers' market has decreased already. I do not know what significance to attatch to that phrase. Our exports are still going up and I am not going to agree that the sellers' market has disappeared. Nevertheless, let us face the fact that it might disappear, and let us look at the whole problem with our eyes open.

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We are all well aware that the overall trade balance that had been achieved by the end of last year contained within itself a very serious deficit with the dollar area. Again and again we must hark back to that, and I hope we can do so with general approval. That is the crucial problem confronting our country. As I have indicated, the dollar deficit is still very heavy. The United Kingdom deficit with the dollar area in 1948 amounted to £311,000,000, even though we had cut down our imports in a most drastic fashion. It had fallen from £655,000,000 in 1947, but still there it was, the very high figure of £311,000,000. We are absolutely determined and pledged, both as a Government and as a country, somehow or other to become self-supporting by the time Marshall Aid comes to an end. I hope I shall not get into trouble if I say that, while we as a country would have suffered calamitously if we had not had Marshall Aid and would still suffer calamitously if it were withdrawn, we must not exaggerate the proportion of the national income represented by that Marshall Aid, It represents about 3 per cent. of our total national income, but it is a marginal figure. It is absolutely vital; we could not have done without it, and we should be hard put to it indeed if we had not it now. It is not that noble Lords here will be misled, but do not let us create an impression abroad that almost one-half or one-quarter, or some colossal figure of that kind, of our national income is being lent us or given us by way of charity from abroad. It is about 3 per cent. of our total national income. It is vital that everyone should understand that.
From reading the Survey, the House is aware of the various approaches that are being made with a view to ending the dollar deficit before Marshall Aid ceases. To-day I want to stress particularly the drive into the markets of North America, about which the noble Lord, Lord Hawke, spoke so interestingly but, if I may say so, all too briefly. I hope we shall hear from him more fully on another occasion. But before coming to that matter, I would offer the opinion that we can never hope to balance our trade with Canada and the United States. What we must do is increase our exports to that area greatly, remembering that in 1948 our exports amounted to £136,000,000, but our imports from the
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United States and Canada came to over £400,000,000. We must do everything we can to increase our exports greatly. We must try to do everything we can in addition to increase the exports from the sterling area. I will not detain the House with many facts about what is being done to develop the dollar-earning power of the Colonies as we have recently had a Colonial debate, but I certainly must not pass ever that point. I should stress that Colonial production is seen by all of us to be able to make a great contribution to the dollar balance, and it is with that very much in mind that the Government's great Colonial development projects have been undertaken. Last year the Colonies earned considerably more in dollars than they spent, the chief dollar-earners being Malaya with tin and rubber and West Africa with cocoa and non-ferrous metals.
LORD BRAND: May I ask one question on that point? Does the noble Lord include oil companies' production in his Colonial figures, or not?
LORD PAKENHAM: I should like to look into that matter before giving the noble Lord an answer. The chief dollar earnings which I have been given are tin and rubber, from Malaya, and cocoa and non-ferrous metals, from West Africa. The importance of this Colonial dollar surplus is emphasised in the United Kingdom long-range programme, which shows that, even if all goes well, the United Kingdom will still have a deficit of over £70,000,000 with the Western Hemisphere in 1952–1953.
LORD HAWKE: Does that deficit allow only for the present meagre trade between Canada and ourselves?
LORD PAKENHAM: No. It is reckoned that the trade will be increased. But that is part of the plan, that when we reach that stage there will still be this deficit on the part of the United Kingdom with the area in question, which will be compensated by the Colonial surplus. I should, of course, mention that the Colonies are also increasingly helping the United Kingdom, and other parts of the sterling area, to save dollars by supplying more food and raw materials to replace imports from the Western Hemisphere. Last year over 10 per cent. of

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the United Kingdom imports came from the Colonies, compared with 5 per cent. before the war.
I will detain the House for more than a few minutes, because it is a very important subject, with some discussion of the Government's North American export drive. I take it that the House are already aware of, and have studied closely, the steps that have been announced by my right honourable friend the President of the Board of Trade. It will be remembered that in the Budget debate he announced eight different ways in which the Government were assisting the attack on those markets. But I would like to stress, and on behalf of my right honourable friend the President of the Board of Trade to make it plain, that if this great enterprise is to succeed it can only be on the basis of the most intimate co-operation between industry, the City and all the Government Departments concerned. It cannot be done by the Government. The Government can create the conditions by which it can be accomplished. Industry and finance have come forward, as noble Lords who read the papers are already aware, and both the industrialists and the financiers are showing themselves anxious to play a part in this great merchant adventure—an expression at which a certain amount of mild fun is poked.
I wish that the noble Lord, Lord Blackford, were here. I may be wrong, but it seems to me that a merchant adventurer can be animated equally by a desire to serve his country and by a desire to make a profit for himself. I break off a little, late though it is, to say that many of the champions of private enterprise always seem to take a rather unfairly low view of the human nature of these gentlemen that the noble Lord, Lord Brand, has called "the geese." I think these gentlemen are often very capable, and when I look round I see very good examples, including, indeed, Lord Brand himself, who has served alternately in public service and in private business, if I am not mistaken, for a number of years. I look around and I see many gentlemen who have proved conclusively that they do not require the profit motive to render a great service to the country, or even to produce most important commercial results.
LORD BRAND: I would like to point out to the noble Lord that of course one must consider loss. A merchant adventurer who decides with patriotism and makes a loss would do it once, or perhaps twice, until his capital was exhausted. But he cannot continue on patriotism alone. It is not only because he wants to make a profit; he has to make a profit to do it again, because he may make a loss some time. Noble Lords on those Benches have perhaps never had the experience of being in business where you have to consider with every transaction you undertake what is the chance of loss. If you do not consider that, you are lost; you may certainly go on till your capital is exhausted, but then you stop. You must consider that. The nexus is there the whole time. If you go into business, you may make a profit or you may make a loss. A man does not go into business to make a profit, ignoring the possibility of loss, because the question of loss is always there.
LORD HAWKE: As an ex-merchant adventurer, may I point out that when the profit comes along in normal times it varies from 1 to 5 per cent., but when the loss comes along, very often it is 20 or 25 per cent.
LORD PAKENHAM: The noble Lord is not quite on the point that I, no doubt imperfectly, was trying to expound to the House. I was referring to what I thought the noble Lord, Lord Blackford, was suggesting. He asked how these people are to be encouraged to show this enterprise unless they are animated by the spirit of making a profit, which generally inspired the merchant adventurers of early days. The noble Lord has raised the question not of the profit motive, but the profit test, which is another matter. I was addressing myself to what I understood the noble Lord, Lord Blackford, to say.
LORD BRAND: They must hope to make a profit because they may make a loss. They cannot say, "We will ignore both profit and loss, and we will do it for fun," because fun is not any good in business. You have got to do it for something.
LORD PAKENHAM: At any rate, they seem to be doing it now. They seem to be anxious and willing to play their part, and I seem to be the only noble Lord,

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apart from my colleagues, who has a sufficiently high appreciation of the moral worth of these gentlemen. However, that is how it seems to me. Now, my Lords, whatever view we take of that, we are all agreed in desiring to push forward this great enterprise, and I will say just a word or two, that perhaps has not been said quite so clearly elsewhere, about the prospect confronting our business men in the markets of Canada and the U.S.A.
The major difficulties in the Canadian market are, first of all, the United States domination of the market while the United Kingdom was out of it during the war; and, secondly, price. On the first of those points, we are doing all we can, as the President has explained elsewhere, to familiarise the Canadians once more with the excellence in quality of British products. On the question of price, one cannot stress too strongly the importance of our remaining fully competitive in this most competitive market. Certainly I would be the last person to say that our costs are low enough, or that our productivity is high enough. We must go all out to keep up the productivity and keep down the cost. If I may allude to my own industry, that of civil aviation, we are there in prospect a dollar-earning industry. We should be able to earn a good many dollars for the country in the years ahead. There, our costs are falling rapidly, though we must get them down faster still. A further adverse factor is delivery dates, though there has been a good deal of improvement in this field throughout 1948. But in the past, I am afraid we have sometimes been behind with our deliveries.
In the United States there are two aspects of the general problem. First, there is the urgent need to widen, both in type and quality, the range of goods which we sell in that market, and to find new selling lines. In some of our staple lines we are already faced with more intensive competition from United States manufacturers, and from producers in other European countries. In many cases, we require new designs, new production techniques, and increased Government facilities and insurance cover for the manufacturers. The second point that I would stress with regard to the United States concerns distribution. Unfortunately, it is a fact that in some parts
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of the United States British merchandise is still relatively unknown. In many instances there are good reasons for this. When supplies are a limiting factor, and when all we can produce can be readily absorbed by established customers on the Eastern seaboard, there has clearly been little incentive to push our distribution arrangements any further. But now that goods of types suitable for the United States market are becoming increasingly available, we must strive to ensure that they and their way into every single corner of the American market.
It is important to re disc that the share of imports in the total supplies sold in the United States market is very small indeed. A recent estimate of the United States Department of Commerce showed that for 1947 it would amount to about 14 per cent. of the market for pottery, 13 per cent. for "notions, novelties, and specialities" (including sporting goods, bicycles, etc.), about 4 per cent. for table glassware and musical instruments, 3 per cent. for jewellery and 2 per cent. for toys and games. Our percentage is negligible for such categories as office equipment, hardware, electrical appliances, scientific instruments, furniture, and so on. In other words, British products at present account for only a very small proportion of the total supplies in the United States market.
Before the war we supplied about 2 per cent. of the United States' requirements in worsted cloth, 7 per cent. in pottery products and less than 1 per cent. of table glassware. We must, somehow or other, make very big improvements both on the pre-war figures and on the figures which we have so far achieved. The figures I have quoted certainly show the enormous size of the American market. They show that there are in it colossal opportunities for us, in spite of competition which we may regard as likely to grow and grow continually. The Government fully realise the many difficulties which will be facing British trade and industry in its attack on the hard core of the American market. Whatever view we may take of the sellers' market, whatever the particular date at which we may regard it as likely to disappear, undoubtedly the day of the sellers' market is nearly gone. Buyers are becoming more and more price conscious and more and more particular

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in regard to the quality of their purchases. On the other hand, many of the bottle-necks in our own industry have been eliminated, and production has been rising steadily during the last two years. The figures show that our manufacturers are delivering the goods as well as taking orders for them. Therefore, I repeat, the North American market represents a challenge which we must meet and an opportunity of which I believe we can and will take the fullest advantage.
The debate has ranged very widely, and though we now have the noble Lord, Lord Cherwell, with us we have lost the noble Lord, Lord Rennell, which makes it impossible for me to play them off against each other quite in the way I had anticipated. I am bound to say—though it is not pleasant to do so—that we, on these Benches, do feel that the noble Lord, Lord Cherwell, with all his brilliant gifts, displayed as usual to full advantage, made a very unfair speech. I am bound to say that. I should be concealing from the noble Lord what is in our minds and, I think, is in the minds of many here, all of whom may not necessarily be on these Benches. I realise that Lord Cherwell conceives it to be his duty on this occasion to take the gloomiest possible view of everything. It is not for me to interpret his duty for him; it would be impertinent for me to attempt to do anything of the kind. But we, on these Benches, feel that a speech of the kind which he has delivered casts a reflection not only on the Government—and Governments must look after themselves—but on the workers of this country.
I must add that Lord Cherwell was rather severe with Lord Kershaw and, so far as we could judge, seemed to be casting imputations on the way in which the Survey had been organised. But I am not quite sure about that. It may be that his remarks were playful. It is possible that he was not seriously suggesting that figures had been "cooked" and that there had been a switch round to assist the purposes of the Government. I am quite ready to take it that way, to accept what he said as humour which he felt to be appropriate and in place. But if it were meant seriously it would be a very shocking charge to make against the Government, to suggest that they had deliberately
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altered the basis of comparison so that people could not find out how many civil servants there were. But as I have intimated, I take it that the noble Lord was being whimsical and was not serious. I ask him to realise, however, that some of us on these Benches, not unnaturally took him to be speaking seriously.
I would like to endorse Lord Cherwell's final remark in the interchange which was provoked by my intervention. I agree that in the latest edition of the Digest the old table is given and the new table is given. The noble Lord's final observation on that was correct. I accept that absolutely. I perhaps understood him wrongly, but I was asking for information. I understood him to be implying in some way that the old figures were being withheld. Since I misunderstood him I express my regret. I gather that that was not really his intention. Export figures were given and they are still given, though I do not know how much longer they will be. The noble Lord made great play with them, and indeed it is doubtful if these figures can be taken as completely valid until they are more thoroughly corroborated. There seem to be good reasons—reasons which have been brought forward on previous occasions by the noble Lord—for not using them. That would seem to be an argument for not including them in future Surveys. But we must wait and see whether the figures are regarded as firm enough for future use.
May I now come to the general issues of the debate? If the House wishes me to detain it at length I will gladly be detained, but I am not pressing for that in any way at all. It is true, I think, that a debate of this kind brings out a very wide measure of agreement. It also brings out certain points of disagreement. Certain noble Lords opposite, including Lord Cherwell, become very hot if we suggest that they want to reduce the social services. That is regarded as a somewhat villainous charge if it is made from this side of the House. I am not sure if that charge is fair or unfair, though I am clear that the noble Lord himself did not to-day suggest any reduction of the social services. The noble Lord, Lord Brand, who spoke with his customary weight, detachment and objectivity, clearly regrets the introduction at this date of health services, so it is fair to say that if he had had his way the

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social services would not have reached their present level. But he does not speak from the Benches opposite. The noble Lord, Lord Blackford, wished to cut the food subsidies down to £370,000,000—that is, roughly £100,000,000 below the present figure. So I think it is fair to say that he wants to bring down the figures. Lord Cherwell informed us, if I heard him correctly, that it is not a matter on which he cares to express a strong opinion. In his view, it is something on which the people must choose, and not an issue on which he is either desirous of giving guidance now or would care to do other than to make the general suggestion that the people must have what they want. I hope that I am interpreting the noble Lord correctly.
In that state of the argument, noble Lords must forgive us if we are not always quite sure whether they do regard the social services at the present time as representing a desirable level or whether they feel that they have been pushed forward too fast. It may be that noble Lords, while they would not wish to cut them down to-day, may feel that they should not have been expanded so quickly as they have been. I am ready to accept from what the noble Lord said to-day that the modern doctrine is that there the social services are, and there they will stay; and that they must not be cut since the people desire to have them. I am bound to say, however, that on this and on certain other matters in the last few years in these debates I have sometimes entertained opinions about the policy of the noble Lords opposite which might have been unfair. At one time it was in my mind, and perhaps it appeared in my language, that they had what I can only call a very had policy. In the words of Mr. Winston Churchill, it was the policy of "Set the people free," though, heaven knows, we are all in favour of freedom. Later, I attributed to noble Lords an absence of policy. But now I am inclined to think that they have the same policy as ourselves—at any rate in very important respects. I hope it is so. I am not trying to widen the area of disagreement or put words in the mouths of noble Lords which are not there.
In these concluding remarks, I can indicate only our own policy, and I hope that it will carry noble Lords with us to
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a very large extent. The main distinguishing character of the Government's policy, compared with any pre-war peacetime Government that have had a chance of carrying out their programme, is the adoption of the principle of planning. In that connection, I would like to raise, first, the object and, secondly, the mechanism of planning, and then to mention briefly what I would call selective nationalisation, national foresight and social justice. The object of the Government in planning has been the fullest and best use of the national resources in the interests of the whole community. No doubt, in a sense, every past Government worthy of the name have always believed that their actions, or inaction, were those best calculated to secure this very result; no Government ever believed they were conducting a policy to distribute the national resources in any other way than the best. But this Government have done something that no other Government have done in peace-time; they have specifically accepted the responsibility for seeing that this result is secured. When publishing our targets, we have never concealed from the public the uncertainty attached to all such human predictions, especially in the case of a country such as ours, so dependent on trade with other countries. But we have accepted this responsibility and while I cannot tell what noble Lords would have done in our place, it is a new step in our history to have done that in peace time.
I should describe the mechanism as one of democratic guidance. We have often discussed its various aspects—the system of controls and various other factors. I will not detain the House with an elaborate account of them to-night, but there is a difference in principle between the approach we have adopted and any approach that we have seen hitherto in this country in peace time. The basic problem is this: Do we leave it to a large number of people, each pursuing quite lawfully his own individual interests, to make countless individual decisions, which we hope will produce the best possible result in the interests of the country as a whole, or do we insist that the State play an active part in guiding individuals towards certain defined ends? We have chosen the later course, and try to do it in a way which I may fairly describe as democratic. By that, I mean

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that it will be carried out in consultation with both sides of industry, and will involve as little as possible of direction or industrial conscription, which is repugnant to our feelings and instincts. According to the old economics, there was a force operating called "the invisible hand"—it was Adam Smith who coined the expression. The only trouble about the invisible hand was that, in practice, in the years before the war it had become a visible handicap, in the form of a very large number of unemployed. We decline to carry that handicap, and have set about this policy of deliberate planning by democratic guidance.
That is not the whole story, because any kind of plan could have that general object, and could pursue that general method. There are three features of our plan which will be noted by future historians. First there is the nationalisation of selected industries. On this point I would submit only my own opinion, which I am not asking noble Lords to accept. I am of the firm opinion that in every case the arguments in favour of nationalisation are stronger now than they were at the time when the nationalisation Acts were passed. The second factor I have called national foresight. Some call it austerity and some the policy of abstention. This policy to his eternal credit is associated with the present Chancellor of the Exchequer. I mean not only the re-distribution of national income between different sections, I mean the choice when in doubt between the future and the present, and the insistence that because of our peculiar position in the world we must on no account run risks with the vital elements in our economy.
I would instance the restriction on imports, concentration on the export market, sometimes admittedly at the expense of the home consumer, and planned expansion of investment. I am glad that we have the noble Lord, Lord Rennell, with us again, because on this point there was a considerable difference of emphasis between him and the noble Lord, Lord Cherwell. If I am not exaggerating, I gather that the noble Lord, Lord Cherwell, took the view that we are promising too much investment and the noble Lord, Lord Rennell, thought we were promising too little.
LORD RENNELL: I was not in favour of more investment. I was doubtful whether there was enough to cover the existing commitments.
LORD PAKENHAM: At any rate the noble Lord seemed anxious that the investment mentioned in this Survey should be achieved. He seemed to be certain that we required that amount, and the noble Lord, Lord Cherwell, was doubtful about it. Be that as it may, we are trying to maintain a higher level of investment than in the pre-war years. Comparisons are not easy, but it seems true to say that in 1948 the percentage of the national income put into gross investment was some 22 per cent., as against 15 per cent. just before the war. We are trying to secure a higher and, above all, a more stable level than we have seen in the past. That means taking in the belts of the present in the interests of the future. I say this without any Party implications. We have, as a Government, stood for the policy, when in doubt, of taking care of the future. Our investment policy is one example of that.
The noble Lord, Lord Rennell, asked me about investments in the Colonies. As he is aware, the figures for investment in the Colonies are not contained in the figures he was discussing. It appears that in 1948 the gross capital investment in the Colonies was in the neighbourhood of £190,000,000. No doubt the noble Lord will ask me to split this up. I should like to pursue the whole subject rather more carefully later, and I will gladly go into it with him.
Then again, we have the stern anti-inflationary Budgets, the Budgets that people have called brutal and unpolitical—and I think everyone has called them courageous. I echo the last adjective. We have stood for this policy of what I would call self-denial in the interests of the people, not only to-day but in the years to come. It is a definite policy. It conflicts with the policies of most other Governments that we have seen in this country, and I do not suggest whether noble Lords opposite would or would not have adopted it. I say only that it has not been adopted in the past, but it is the policy of the Government at the present time. I will just add, while I am on the subject of these very large expenditures, the great sums which we all agree must

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be expended on defence, and which will undoubtedly have to be expended on defence for a long time to come. However, I do not agree with one noble Lord who spoke of this expenditure as being permanent. I do not say that this expenditure will be permanent, but I should judge that it will continue for a long time to come.
Finally, there is social justice, the great schemes of social betterment, in bringing forward which men of all Parties have played a great part, although we take a special pride in them, and leave it to noble Lords opposite, if they choose, to claim that they are still keener on these schemes than we are. It would be wrong—the noble Lord, Lord Cherwell, brought this out—to talk of these schemes as merely redistributive. In any case they represent a great constructive effort by those concerned—the administrators, doctors, nurses, teachers and all the others—and, of course, they represent a means of increasing in the long run the productive power of the country by making us healthier, happier and more secure. But there is an important redistributive element. On the one hand there is this re-distribution among the population, whatever their class, when they are well, of working age and in employment, and, on the other hand, the same people when they are old, sick, or unemployed. In that sense, of course, all the classes bear the burden equally, whether the money is raised by contributions or by taxation. There is also in this legislation—I do not want to conceal this from noble Lords at all; we must leave them to say whether they would have done the same—a re-distributive element of another kind, a re-distribution between the rich and the poor. We achieve that through the way in which the taxation is levied more heavily on the richer members of the community.
THE MARQUESS OF SALISBURY: That always has been so.
LORD PAKENHAM: I would not agree with the noble Marquess that all taxation has always fallen more heavily on the rich than on the poor. I should say that it has varied at different times. But certainly under the schemes of social service, where contribution has been supplemented by the grant from the State, and when at the same time we have
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adopted re-distributive principles of taxation, then one may speak of it as a redistribution between classes. I repudiate with some heat the suggestion of the noble Lord, Lord Cherwell, that we have gone about telling people that they could have this for nothing. That remark astonished us a little on these Benches. It is the sort of remark which we feel the noble Lord throws off in order to irritate. We cannot think of any other reason why he throws it off, because it really bears no resemblance to the facts. We beg the noble Lord, if he feels able, to try and eliminate that sort of observation from subsequent deliverances. The noble Lord accused us also in this connection of stirring up hatred and envy. I do not know why he should say that. I do not suppose—I do not want to become involved in the names of individuals—that any Prime Minister has ever been more moderate in speech, quieter, milder and less prone to attack his opponents than the present Prime Minister. I am something of a student of history, and I cannot recall anybody who was at greater pains to be careful of what he said about his opponents.
Nevertheless, there is re-distribution in these two senses, and it has been part of our policy that it should have taken place. We are told that it has now got to stop; and certainly the Chancellor of the Exchequer has spoken very plainly on this subject. I recall the words in his speech, familiar to the House:
"… there is not much further immediate possibility of the redistribution of national income by way of taxation in this country.… We must therefore 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."
But that does not mean (I would like to emphasise this) that we have travelled too far or too fast, or that the Chancellor has reason to think so. There seemed to be some suggestion in one of the speeches that the Chancellor himself had implied that we had pushed on too fast and had spent too much money. There is no view of his on those lines that is known to me, and I am certain it is not his personal opinion. There we are. At the present time we have these services, and they have to be paid for. We are receiving a measure of assistance from Marshall Aid. We have got to become self-supporting by the time Marshall Aid

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ends. We have, therefore, to increase our productivity per man, whether we be workers, management or anyone else.
As I draw to an end, I would make this point about the burden of taxation. It is very heavy. The Treasury, as I know from first-hand experience, are taking a very tough line that will commend itself to noble Lords. When these vast sums are spent, I agree with any noble Lord opposite who says that we have to be all the more careful about the way in which every penny is used. But I cannot agree with the suggestion that has been made in the debate, that as a result of this great burden of taxation savings have been inadequate. The investment, actual and planned, as I have submitted to the House, is greater to-day than in pre-war years, and the savings required for that investment are coming forward. In other words, the savings for investment, whether made by the Government, by local authorities, by private corporations or by private individuals, are coming forward, and, so far as I can judge, will continue to come forward. But that in itself is no automatic process. I agree that we must encourage the Savings Movement and redouble our efforts to persuade others to save and to save ourselves. If any words of mine can lead to still greater activity in that respect, let them be said, and said again and again.
I think with what I have said—and I have tried to be perfectly candid with the House, as noble Lords opposite have been candid with us—there is a very wide measure of agreement. I suppose when we get to nationalisation the disagreement is most obvious. I realise that noble Lords are not in all cases happy about the equalitarian form that taxation has taken. I realise also that, both in this House and outside, in business and elsewhere, they have not allowed their political views to colour their national activities. I hope that all of us on these Benches are equally aware of that fact. There is this great humming enterprise abroad throughout the land. In the last few months I myself have visited, for one purpose or another, Edinburgh, Glasgow, Liverpool, Manchester, Cardiff, Birmingham, Durham and Sunderland, and I defy anybody to say that this country is slacking, or is depressed or downhearted about the future. I believe that since the war we have been faced with
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greater difficulties than have ever confronted us in peace time, and that we, as a nation, have faced up to them, as we should have done whatever the Government. But I do beg noble Lords to believe that the Government have sought to provide the conditions and the inspiration to produce and facilitate the maximum effort from the people of this country. We believe that we have succeeded, in so far as success can be attributed to human efforts of that kind. We cannot expect noble Lords opposite to share that view in its entirety. But let us at any rate agree that the people are doing well, and that we and they and all of us have to do still better. Let us also agree that this debate has been useful, and let me thank the noble Lord who has been so good as to initiate it.
7.42 p.m.
LORD CHERWELL: My Lords, until to-day I had never realised what a lot of prima donnas sit on the opposite Benches. I suppose I ought to have been guided by appearances. But I did not realise how upset they would be because I sometimes asked for accurate and exact statements instead of making exaggerated complimentary remarks. It is a very different thing to cry "stinking fish" and to call attention to the difference between a salmon and a trout. I must admit that the noble Lord, Lord Pakenham, who perhaps best fits the description of a prima donna in appearance, acted least like one and was far the most reasonable in his approach. I should like also to take this opportunity of telling the noble Lord, Lord Kershaw, that whatever his impressions are, he has to accept our statements. What Lord Kershaw thinks is like what the soldier thinks and even what he says: it is not evidence. The evidence he must accept is what we say is our intention, not what he thinks we wish to do.
I will not go into the details of all the various errors and misapprehensions that were obvious in some of the speeches opposite. The noble Lord, Lord Kershaw, asked me whether I had re-read my old speeches, and whether I realised that my gloomy prophecies were not fulfilled. On the contrary, if he remembers the Autumn of 1947, he will see that what I forecast the year before was exactly fulfilled. I do not want at this late hour to explain to him the old fallacy of which he was guilty in comparing output per man-shift

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instead of output per man-year. As I have said before, we do not judge Lord Kershaw by the length of his interventions; we multiply the length of the interventions with the number of them before we try to assess the value or at any rate the amount he contributes to the debates in this House. As I have said, the noble Lord, Lord, Pakenham, showed a very moderate and reasonable approach to the matters we have been discussing, and that perhaps explains why some noble Lords opposite are more accustomed to looking at the back of his head than at his profile. I am glad to learn that the Government in future intend to give us the same distribution table of man-power that we have had in the past.
LORD PAKENHAM: I hope I did not give the noble Lord an assurance on that point. I was not intending to give him any assurance, and if words emerged from my mouth to that effect they slipped unawares. I am afraid I am not in a position to do so. I have not had an opportunity of consulting my right honourable friend since the point was raised, and I certainly could give no fresh assurance to-day, except to say that I will convey it to those directly concerned.
LORD CHERWELL: I hope the noble Lord will be successful, because it is quite impossible to form any opinion as to the progress of events if all the categories are suddenly changed half-way through the process. I will not go into all the matters he raised about planning, and so on. Obviously, when you present a Budget you are planning to a certain extent. The noble Lord seemed to suggest that it is more a matter of emphasis; that he goes in for more guidance, and more sharing if it comes to that, rather like the Buchmanites, than we do. That may be. All we say is that there is a difference between good and bad planning, and in many respects we think that some of the plans which have been put forward and put into effect have been bad plans.
The noble Lord complained that I suggested that his Party had given the impression to the manual workers that they could get all the benefits of the social services for nothing. If that is not so, why should there have been so much outcry and why did the manual workers get so excited when they found that they were not getting any reliefs in
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the Budget? He may not have intended to give the impression, and I certainly would not accuse the present Prime Minister of being one of the wild propagandists who have given this sort of impression, but nobody can deny that some of them did. We have heard that rhetoric is the art of carrying conviction without recourse to logic. I do not suggest that to-night the noble Lord who answered availed himself of his great rhetorical powers, although I hate known occasions where he has perhaps displayed them. I am grateful to the noble Lord for his full and courteous reply, and I beg leave to withdraw my Motion.
Motion, for Papers, by leave, withdrawn.

OLDBURY CORPORATION BILL [H.L.]
Reported, with Amendments.
LONDON COUNTY COUNCIL (WOOD LANE SITE) BILL. [H.L.]
Presented (pursuant to leave given this day by the Standing Orders Committee), and read 1a.