Lords Sitting of 2 November 1949

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers

  METROPOLITAN POLICE FORCE
  2.36 p.m.
  VISCOUNT TRENCHARD: 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 what is the present establishment of the Metropolitan Police; when was that establishment fixed; and how much under strength is the Metropolitan Police to-day.]
  THE LORD CHANCELLOR (VISCOUNT JOWITT): My Lords, the present establishment of the force is 19,747 men and 338 women, on which there are at the moment 4,332 and 85 vacancies respectively. An increase of the C.I.D. approved in November, 1946, brought the total male establishment to 19,614 and subsequent minor variations have increased it to 19,747. The last substantial increases of the establishment of police women occurred in 1945 and 1947.
  VISCOUNT TRENCHARD: My Lords, arising out of that answer, for which I thank the noble and learned Viscount, may I ask whether His Majesty's Government realise that if there were an overhaul of the establishment of the uniformed police, another 1,000 could be added?
  THE LORD CHANCELLOR: My Lords, I am afraid I cannot make a statement on that. The relevant matters are, of course, within the knowledge of my right honourable friend the Home Secretary. I will certainly see that the remarks which the noble Viscount has made are referred to him.
  LORD GIFFORD: My Lords, arising out of that answer may I ask whether His Majesty's Government would consider the erection of more traffic lights
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  in order to save the great waste of constables on traffic point duty.
  THE LORD CHANCELLOR: No doubt that matter is under consideration.

PRODUCTION STATISTICS
2.38 p.m.
VISCOUNT SWINTON: 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 what is the evidence for the statement frequently made by Government spokesmen that the volume of production during the last year was 130 per cent. of the pre-war volume.]
LORD LUCAS OF CHILWORTH: My Lords, I assume that the noble Viscount refers to the statement made by the noble Viscount, Lord Hall, during the debate on the exchange value of the pound on September 28, that production in the first quarter of this year was 30 per cent. above the 1938 volume. The evidence for this statement appears in the Monthly Digest of Statistics, which gives the change since 1946 in the Interim Index of Industrial Production. Four hundred individual series of output—such as tons of iron and steel, weight of cloth produced and number of houses built—are used in compiling this index. A full list of these series is given in the Memorandum on the Interim Index of Industrial Production, published by His Majesty's Stationery Office. The figures for many of these series are, themselves, given regularly in the Monthly Digest. They show that the rate of industrial production in the first quarter of 1949 was running at about 30 per cent. above 1946.
The comparison between 1946 and 1938 is more difficult because there is not the same amount of data available. An attempt has been made to compare these two years using about 250 statistical series, and the results are given and explained in full in Part II of the Memorandum on the Interim Index of Industrial Production. One method of comparison showed that production in 1946 was slightly higher than in 1938, another that it was slightly less than in 1938, and, on balance, it is reasonable to assume that the level of production in 1946 was not very different from that in

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1938. That being so, the percentage increase of production between 1938 and the first quarter of 1949 was about the same as the increase between 1946 and 1949—namely, about 30 per cent.
VISCOUNT SWINTON: My Lords, arising out of that answer, I would remark that I will reserve most of what I have to say for the debate. But is it not a fact that the document to which the noble Lord has referred says that it is really impracticable to make any comparison between production in 1938 and production at the present time?
LORD LUCAS of CHILWORTH: My Lords, I am grateful to the noble Viscount for reserving his questions for the debate and not addressing them to me. I will undertake to look into the matter which he has just raised, and perhaps discuss it with him later on.

ABERDEEN HARBOUR ORDER CONFIRMATION BILL
Read 3a (according to Order), and passed.

ECONOMIC POLICY
2.41 p.m.
THE LORD PRIVY SEAL (VISCOUNT ADDISON)THE LORD PRIVY SEAL (VISCOUNT ADDISON) rose to move to resolve, That this House approves the lines of action to deal with the present economic difficulties as outlined in the Prime Minister's statement made on October 24. The noble Viscount said: My Lords, in addressing my remarks to your Lordships to-day I would like to say at the outset that, so far as I can, I will avoid the use of words which are not commonly understood by ordinary people. I confess that I myself have sometimes been a little irritated by the use of phrases such as "disinflation" and others akin to it, which require a good deal of explanation, even to myself. There are, however, certain obvious facts relating to the present situation which can, I think, be very simply stated. In the first instance, there must be a great increase in the production in this country of goods for export, especially to dollar markets, if the dollar markets will take them. Otherwise, we shall be unable to pay for
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the food and raw materials required, both for the maintenance of our standard of life and for the supply of the requisite quantities of raw materials to our industries. Then, as a part of that necessity, we must curtail to the utmost possible extent public and private spending that would conflict with the ability to export, either by an excessive home demand or by forcing up prices and costs, and thereby handicapping our ability to produce at saleable prices. So far as Government expenditure is concerned, we called for a statement of the reduction required, and as a result of that inquiry, it was represented to us that there a reduction of Government expenditure of between £250,000,000 and £300,000,000 was necessary. That was the basis of all the action that has been proposed.
In relation to this matter I was attracted by a formula which the right honourable gentleman Mr. Eden used in the debate in another place. I am quite willing to accept it. He said the Government should ask:
"What is the minimum reduction of expenditure which we must make if we are to halt the growing danger of inflation"—
those were the words he used—
"restore confidence and enable us to bridge the gap?"
We had asked our question in more or less the same words, and the figures supplied to us gave the answer that we must have a reduction of between £250,000,000 and £300,000,000. A friend of mine, like myself well acquainted with political developments, asked me, when we were making these tedious and painful inquisitions, how I thought they would be received. I said, "You may take it as completely certain that whatever we propose will be denounced as inadequate." That prophecy has been completely fulfilled, and and I see that it is sustained in the Amendment to this Motion that is to come before your Lordships. I have read with great care the report of the debate in another place on this subject, and I have searched diligently for some guidance as to those respects in which our proposals are inadequate. After all, if they are condemned as inadequate we are entitled to know in what respect they are considered inadequate—or, at least, to have some guidance.
Without wearying your Lordships with too many details I will glance at some of the proposals that we have made. In regard to capital expenditure, in which we propose a reduction of £140,000,000. I noticed that Sir John Anderson described this figure as "pitifully small." On the contrary, it seems to me that it is very large. If Sir John Anderson thought it was "pitifully small," it would have been expected that we should have sonic indications of the respects in which he thought it was pitifully small, but any such suggestions were conspicuously absent from his speech from beginning to end. We went in great detail into capital expenditure affecting fuel and power developments, and examined what could be slowed down or minimised, and the reduction in that respect is the large figure of £25,000,000. Similarly, there was a close investigation into the expenditure on new roads and other transport developments which might be postponed or reduced, and here there is a proposed reduction of £10,000,000.
Then we come to the very difficult question of housing. Here a reduction of no less than £35,000,000 has been proposed. I am sure that that is a reduction which everybody deplores. I noticed that in another place Mr. Eden himself could not help regretting some aspects of it, as did other speakers. Of course the critical shortage here is timber. In order to provide additional timber for the maintenance of what was intended to be the programme we require a large expenditure of dollars, particularly in Canada, and it is that critical shortage which has dictated the character of the reduction. I must confess that having vivid recollections, notwithstanding my years, of the time when I was denounced from one end of the country to the other because houses had to cost nearly £1,000 apiece, I am astonished at my moderation. However, I confess that I cannot help viewing with serious misgivings the great cost of houses. I do not know in detail to what that is due but, at all events, I can say that the matter is being looked into in a thorough manner. When we were considering the making of this enormous reduction it was necessary to decide where it should operate, and we were bound to take account of the fact that we must continue, as much as possible, the provision of houses for people who cannot afford to pay for them outright, but who have to
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rent them. That is the reason for our proposals, in this direction.
Then there is another group of services where, with great reluctance, we have proposed extensive reductions of expenditure. They will no doubt mean a delay in the provision of additional schools and school buildings, beyond the time when we should have wished to have them available. I am afraid that is inevitable. In this group of social services there is another great reduction—of £20,000,000. Then there was a great group of services of different kinds which were called "miscellaneous." They amount to a vast figure in all. I will not trouble your Lordships with the details (I am still speaking only of cap cal expenditure) but they have been reduced by £35,000,000. I am sure that everyone here will agree that, whatever reductions we make in capital expenditure, we must have scrupulous regard to see that we do not reduce the expenditure on industrial equipment which will enable to compete in the dollar market. Cleanly that is a governing necessity, and we accept that throughout. The expenditures provisionally approved under the heading of industrial equipment for next year amounted to the very large figure of £430,000,000. There, keeping in mind the principle which I have just stated and with which I am sure everybody agrees, the figure has been reduced by only £15,000,000. These are vast reductions, made with immense reluctance. It is fair to claim that if Sir John Anderson, who was once a Chancellor of the Exchequer, describes them as "pitifully small," he ought to bring forward some evidence to show where they ought to be larger. However, that is not supplied.
There is another item of expenditure which will naturally be prominent in your Lordships' minds, as it is in ours—namely, that of Defence. The rate of expenditure forecast for the year was £760,000,000. That is a completely unprecedented figure in time of peace; it is an appalling figure, but it is dictated by the necessity of the times. Moreover, that did not appear likely to be the end of the tale, and considerable Supplementary Estimates were put in amounting to £30,000,000, bringing the total up to £790,000,000. Nor was even that likely to be the end of the story. After a most searching examination, however,

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we have decided that the figure must not exceed £760,000,000, which is a reduction of £30,000.000 in the rate for a full year, or £12,500,000 in the remainder of the present financial year. In another place one item of reduction of expenditure was mentioned with which I should like to express my accord. Mr. Eden suggested that there might possibly be a reduction in our expenditure in respect of Germany. I am not going into details now, but I can say with some confidence that he will not be disappointed.
Another great group of reductions of expenditure is on current services, and I may add that searching inquiries have been made and are still going on to effect other savings. Nobody these days has any right to waste money, and where that waste can be discovered it should be stopped. On these services, outside capital outlay, various educational expenditures have been gone through with great care, and in England and Scotland the reductions proposed amount to something over £5,000,000. There is a considerable reduction of various services pertaining to the Minister of Labour, which I expect will meet with approval—namely, the expenses incurred in connection with Polish emigration, vocational training, labour controls, and so on, where we cannot escape our responsibility. In addition, there are further administrative and other economies in transport of more than £1,000,000. Similarly, as a result of a close inquiry, there is a reduction of more than £6,000,000 in the expenditure of the Ministry of Supply, and more than £4,000,000 in various directions in the expenditures of the Ministry of Works. I am afraid that one item of that reduction will not be very welcome. It means a postponement, for a certain time, at any rate, of the release of some requisitioned premises. In the administrative services there are some items of saving, particularly by increases in the prices of non-basic foodstuffs—egg products, raisins, and so on—and there has been a reduction so far in the expenditure of the Ministry of Food of £5,000,000.
Then we come to the question of food subsidies. I was anxious to hear what would be said on that subject. It is a prodigious figure. I wish that somebody would make some helpful suggestions which, if they were carried out, would not unduly increase the cost of living
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and thereby the pressure for higher wages and other payments, which in turn would mean increases in the cost of manufacture. So far, all we have from the friends of the noble Lords opposite on food subsidies is this. Mr. Eden says:
"The time has now come for a thorough review of the whole food subsidy situation."
I should say that that is interesting, but not very enlightening. We are no further forward, so far as immediate reductions are concerned. However, we welcome suggestions. In connection with the operations of the Ministry of Health, apart from the reduction of £35,000,000 in housing, we have adopted what I am sure will be the unpopular course of charging 1s. for prescriptions. I believe that is estimated to bring in something like £10,000,000. From inquiries which have been made, it appears that the average cost of prescriptions is about 2s. 9d. But a vast number of prescriptions are for small items, like cotton wool, bandages and other small things, which people can obtain perfectly well without prescriptions. It is intended if possible to curtail this misuse—I think you can fairly call some of it that—of the service, and that is the reason why it is proposed to inflict this charge. It is additional to the reduction of housing and other services.
Another kindred economy or, if you like, charge, which, with immense reluctance, we are imposing, is an additional penny on the cost of school meals. I am not quite sure, because I have not refreshed my mind upon the matter lately, but I rather think that in the document for which the noble Lord, Lord Woolton, is mainly responsible, he advocates the other direction with regard to school meals. I am not in the least wishing to draw him on the subject—
LORD WOOLTON: I am not quite sure to what the noble Viscount is referring.
VISCOUNT ADDISON: I mean your "policy for Britain" business. However, that is only by the way, although I believe the Conservative Party proposes to be a little more generous. We have gone the other way, with immense reluctance. It means that parents will pay 6d. instead of 5d. for a school meal. Now on an average these meals cost 1s. 2d., and the charge, even with this additional penny, will, of course, come to less than half the

29
cost. But it amounts to a substantial figure—that penny a day means £5,000,000. I do not expect that we shall be popular for doing this, but at least we cannot be accused of pusillanimity in that regard.
Now I come to the question of agriculture. There are reductions in the services of the Ministry of Agriculture, entirely apart—and I emphasise this—from our arrangements with the farmers. There are reductions in administrative services, costs of agricultural committees and in many other directions, totalling £4,750,000. In addition, next year we propose to abandon the subsidy on animal feeding-stuffs, which amounts to a very large figure. But it is evident that all our arrangements with this industry are wrapped up in the February review, and all those matters will be dealt with at that review. One thing I should like to say with complete emphasis is that we shall be loyal to our pledges to the industry with regard to sustaining production, stabilised prices and so on. It is the most vital of all our producing industries. We want it to produce much more, and these proposed economies are entirely apart from what we should otherwise propose. But we will be completely loyal to all out statements and intentions with regard to this great and vital industry which is the greatest dollar saver of all.
I have given your Lordships a brief summary of some of the chief provisions which go to make up this £250,000,000 or, it may be, even £280,000,000. I note that Sir John Anderson, in using what he said were harsh words—he did not break any bones, but still he used them—reminded us of the fact that prior to the First World War we had a favourable balance of trade. What in the world is the use of that reminder? There has been another war since then, with all the desolation, misery and destruction it has brought in its train, and we are no further on by being reminded of the happy state which existed when the noble Viscount opposite was a member of the Ministry in 1914.
Mr. Eden made one interesting suggestion: that we might relieve the lower-paid workers with children of income tax. I am sure that everybody would like to do that. We should all like to have to pay less income tax. That would be agreed unanimously. But it is no contri-
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bution to the reduction of national expenditure. Mr. Churchill, with his characteristic candour, was, of course, much more illuminating. He said that we should reduce expenditure by £500,000,000—or, at any rate, he talks about £500,000,000. I am not questioning that, but I want to know to what extent our reductions should be increased. Mr. Churchill refused to make suggestions, and he made one of the most delightful statements that I have read for a long time. It was with regard to the reasons why Mr. Churchill and his friends declined to make suggestions as to how we should make big reductions. Referring to the Government, he said:
"They do not ask this in order to gain good advice but in order that their canvassers at by-elections, or at a General Election, can go from door to door and endeavour to accuse the Conservative and the Liberal Parties of being the enemies of social welfare and improvement."
That was the reason he gave for not making any suggestions. In other words, I take it that the Conservative Party in this respect are going to say to the people: "Give us a blank cheque. We will not give you the details of the reductions we intend to effect, because if we did those wicked Socialists might go about and misrepresent our purposes." Well, that is a strange kind of leadership, but apparently it is leadership of what we might call the "pig in a poke" policy of statesmanship. However, we have been frank, and we have told you what we propose.
Before I sit down I would like to say a word about the campaign which has accompanied this business. It has been a widespread and furious campaign. It reminded me very much of what we experienced in 1931.
VISCOUNT SWINTON: Is the noble Viscount referring to the Prime Minister's broadcast?
VISCOUNT ADDISON: No, I am referring to the campaign in the Press, speeches up and down the country, operations in the City and much more. I have not finished with it yet. The campaign we have experienced reminded me very much of the campaign in 1931. I am glad to say that I was one of the rebels then, and there were the same cries that the country was going to be ruined and, above all, that there must be a change

31
of Government. The people did get a change of Government, and they got their economies. But the Government did not ask for £250,000,000: they were much more modest in those days and asked for only £70,000,000. How did they achieve that £70,000,000 reduction? As my noble friend behind me reminded us the other day, they knocked down the unemployment benefit from 17s. to 15s. 3d. a week; they knocked down the women's benefit from 15s. to 13s. 6d. and they knocked 15 per cent. off teachers' salaries. They secured more than half their economies in that way. I have a lingering suspicion that it is the grim recollection of the economies of those days, which were the result of the "blank cheque," that makes some people rather frugal in their suggestions at the present time.
Anyhow, we have not capitulated to the clamour. As an old politician, I can well imagine the kind of comments that would have been made if we had. They would have said, "These fellows here have brought you to the devaluation of the pound, and have run away from the consequences." That would have been the campaign. Anyhow we are not made of that sort of stuff. We have not run away but have made these exceedingly unpopular proposals to which I have referred. I am speaking now, my Lords, not so much as a Party politician but as an ordinary patriotic individual, and I think the campaign to which this country has been exposed for several weeks past has been entirely callous and unpatriotic. We have been represented as being more or less "down and outs." Every little interruption of work has been placarded on the headlines and reported all over the world, regardless of the solid fact that in the last four years the loss of hours of work through disputes has been less than one-tenth of what it was in the corresponding years after the 1914–18 war. This country's great increase of production, whether it is 30 per cent., or more or less, represents a great effort that has been made, and it has been received with no acknowledgment of any sort from the other side. Quite frankly, as an ordinary Englishman I am ashamed at the campaign that has been conducted, not against the Government (we do not mind that, we are used to it) but against the highest and best industrial interests
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of this country. I have gone out of my way to say what I think about that, and I know that your Lordships will receive it fairly.
There is one other fact of the last four years which should not be overlooked. During those four years hundreds of thousands of people have for the first time in their lives had a little money to spend from decent wages. If anybody takes the trouble to inquire he will find that all over the country, in hundreds of thousands of humble homes, people have been able for the first time to equip them with little household necessaries of all kinds; and there are prodigious arrears of demand arising out of the years behind us. I agree that we ought not to lose sight of that demand, but in itself it is dangerous because it tempts people to spend more than it is right they should spend in the national interest. I say again, as I said at the beginning, that for the reasons I have stated we must produce more and restrain our spending. One thing I do feel sure about (and I am glad to see that it is recognised in the Amendment of the noble Viscount) is that cutting down wages is not the panacea which will give us increased production; it never was and never will be. The remedy lies in industry and many recent reports show what can be done by industry. Many more industries require to effect similar improvements.
In conclusion, I would utter this plea, entirely apart from Party political controversy: that industry and the workers should be liberated from this nauseating campaign of disparagement. If they are I am confident that British industry and British workers will respond to the calls of the times.
Moved to resolve, That this House approves the lines of action to deal with the present economic difficulties as outlined in the Prime Minister's statement made on October 24.—(Viscount Addison.)
3.17 p.m.
VISCOUNT SWINTON VISCOUNT SWINTON rose to move, as an Amendment to the Motion, to leave out all the words after "That," and to insert:
"in view of the gravity of the present crisis, this House cannot regard the Prime Minister's Statement as adequate to restore and maintain confidence in Sterling, failing as it does to provide constructive measures to stimulate initia-

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tive and enterprise, and to evoke that united national effort to grow more, produce more and export more, which is essential to our recovery and prosperity."
The noble Viscount said: My Lords, whatever we shall disagree about in this debate we can all agree on one thing and that is the gravity of the crisis. The Prime Minister himself has said that it may be our last chance. To quote his words:
"It may be the last opportunity of restoring our position as a trading nation without a drastic lowering of our whole standard of life."
My Lords, last month when your Lordships debated the devaluation, you passed a Resolution pledging
"support for a sound economic and financial policy which will restore confidence, stimulate production and export, and evoke that united national effort on which the maintenance of full employment and the safeguarding of the social services most surely depend."
When we passed that Resolution we meant what we said. We have waited for the lead which would give us such a policy. Now we have had the Prime Minister's statement, followed by the speech of the Leader of the House. I do not know what the Leader of the House means when he speaks of a campaign, but people make up their own minds. They are affected by what they hear; they exercise their own judgment; and I challenge anyone to deny that when they heard the Prime Minister's statement and his broadcast, throughout the country there was profound disappointment at the complete absence of any constructive policy which could unite us in a national effort. That was deflation indeed! How can we approve such a faltering negative? I shall have something to say about some of the proposals which the Leader of the House has correctly described to us, and I shall have some questions to ask. The overwhelming feeling, not only on these Benches but throughout the country, is that people stand aghast at the failure of the Government to rise to the occasion, to appreciate the character of the British people, and to lead in a constructive policy.
Is that feeling justified? It is now admitted by the Government that Government expenditure is far greater than we can afford. Campaign? Well we have been saying that for the last two or three years, and we were told we were engaging in a "smear" campaign against the social services. But it is the Government who are now saying it; and if there is a
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campaign it is being led by the Chancellor of the Exchequer. But the economies are certainly not adequate. The noble Viscount the Leader of the House spoke of the economies in capital expenditure, not all of which is Government expenditure. But when we conic to the economies on current expenditure, out of Estimates which now total £3,300,000,000 in a year the cut is only £90,000,000—and even that will take a considerable time to fructify. I would ask this question, and I hope the noble Lord, Lord Lucas, will be able to give me an answer to it to-morrow: In the financial year which ends next April will the economies operative by then even equal the amount of the Supplementary Estimates which have already been presented and which the Government know are to be presented before the financial year ends? These are facts which, broadly speaking, the Government must know, and they are facts which we ought to be told in order to test the efficacy of these cuts in expenditure.
The noble Viscount, Lord Addison, asked in what respect we find these cuts inadequate. He said "Take this one and that one." But that is not the way to test a policy; the test of a policy is this: has it restored confidence in the pound? The answer to that, alas! is that it has not. When the Chancellor of the Exchequer devalued, he took a figure which he said he was sure we could hold—a figure, indeed, from which he would hope to see a steady appreciation. That drastic devaluation took place six weeks ago. Can the Government say—arid this is not a "smear" campaign; it is the acid test—that even over that short time the pound has really retained its depreciated value in the most important countries? So far as the national judgment of the efficacy of the proposals goes, it is reflected in the fall in gilt-edged securities. And let nobody say that that is a bankers' ramp; it is nothing of the sort. Devaluation has been in force for six weeks. What has been the effect on our reserves?
I shall return presently to the lack of positive policy; I want now to deal with one or two of the economies. We have always said that we would support hard measures, and we shall do so; but that does not mean that all measures are immune from criticism. Frankly, I regret that it is necessary to make a cut in

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housing. Whilst I would not call the Government's achievements in housing "chicken-feed"—though that was the term which some Ministers applied to our much greater rate of housing production—even the Government will hardly claim that housing has been one of their outstanding successes. But if housing is to be cut it is profoundly unwise to eliminate the private builder. It is admitted on all sides that building costs are far too high; the noble Viscount the Leader of the House admitted it and said that he did not know why it was so. One, at any rate, of the reasons may perhaps be that some people do not work hard enough. But much the best way of reducing building costs is to have the private builder operating at his own risk, at no cost to the taxpayer or ratepayer. I should be very interested, if the noble Lord, Lord Quibell, is to intervene in this debate, to hear his views on this matter. Incidentally, I should have thought that building labour was about the most difficult form of labour to transfer.
But there is another aspect of this to which attention should be drawn. The Government are rightly exercised about the reduction in National Savings. The chariness of investors to invest in Government securities under the present Government is understandable when investors see how the value of their investments has shrunk. But one of the most healthy forms of investment, and to-day one of the most attractive, is for a man to buy his own house. That has a real and constant value, and the whole building society machinery is well designed to give the householder the opportunity. But if you eliminate the private builder and the building society you kill this form of investment. I suppose the Government, or at any rate the particular Minister who seems to control the Government, wants to do that. There is another form of small investment I might mention in passing. It is interesting to note its success. Small savings in industrial life insurance are increasing at the rate of £45,000,000 a year. It is notable that in proportion as this enterprise serves and satisfies the small investor it incurs the envy and hostility of the present Government.
I am quite sure that capital expenditure must be cut. It has been too large
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in the past; and particularly so far as Government expenditure is concerned, I think the Government have often been unwise in the projects selected for immediate investment. The right priorities of investment should be expenditure which will improve our productive capacity, and investment which will yield an immediate return. Judged by these priority tests I am a little anxious whether the right selections have been made. Take only two examples. Oil refineries are an urgent need and are great dollar savers, and I sincerely hope that we shall have an assurance that these are not to be cut. Again (and when the noble Viscount referred to this I noticed there was a slight discrepancy between what he said and what was said in another place; I hope it is that wiser counsels are prevailing), we have to be very careful about any curtailment in the re-equipment of industry. I know that machinery is a valuable export, but surely we have to be very careful that in a competitive buyers' market we do not increase the capacity of our industrial competitors while handicapping our own industries. Then there is agriculture. I do not challenge the cut in agricultural subsidies, but it would indeed be short-sighted if the result of that were that we had less dollar-saving production in what is, I agree, the most important of all industries at the present time. The farmer must have a fair and a firm price.
I cannot forbear to mention one omission: there is no cut in Ministerial salaries. Whatever the Government may say now about the cuts made in 1931 (the noble Viscount must refresh his memory of that controversy) before the Labour Government split and went out they agreed to £56,000,000 of the cuts then made. I challenge the noble Viscount on this. Lord Snowden, who certainly knew, has left this on record in his memoirs. I myself happen to have been one of the members of the Opposition concerned in receiving the reports during that fortnight or three weeks of what the Cabinet had decided, reported to us by the Chancellor of the Exchequer. And I assert this: it is important, for we are challenged on this point and stories will go about, as I have no doubt they are going about. The noble Viscount the First Lord of the Admiralty was not very accurate last time about this matter.
VISCOUNT ADDISON: That is not so.
VISCOUNT SWINTON: He was not. I challenge the noble Viscount on this point. Cuts amounting to £56,000,000 had been decided upon by the Labour Government before they went out of office, and that included 15 per cent. on teachers' salaries.
VISCOUNT ADDISON: My Lords, I have not had an opportunity of refreshing my mind on the details, but I was there all through this period. I have the most accurate notes as to what happened. I tell the noble Viscount that, quite apart from the question of going off the gold standard, which is another matter, the split, so far as cuts were concerned, was because of the absolute refusal of some of us to be any party to reducing the unemployment benefit and to similar proposed cuts to which I have referred—
VISCOUNT SWINTON: Let us get this accurate.
VISCOUNT ADDISON: —and our refusal to be a party to the applications of the means test.
VISCOUNT SWINTON: Let us take what was said by the late Lord Snowden. The noble Viscount says he does not recollect; he has not revived his recollection. I am going to put to him what Lord Snowden wrote. Your Lordships will find it at page 948 of the Second Volume of his Memoirs: He says that £56,000,000 was agreed to. It included unemployment insurance with limitation of benefit to 26 weeks; the means test after that for transitional benefit; removal of anomalies and increased contributions—totalling £22,000,000.
VISCOUNT ADDISON: My Lords, I have not got the statement to which the noble Viscount has referred, but I tell him with complete confidence that the split was because some of us absolutely refused to agree to those reductions on unemployment and kindred matters. Whatever Lord Snowden may have said, that is a true statement. I was there.
VISCOUNT SWINTON: Will the noble Viscount make an affidavit about the comparison with Lord Snowden? He really is quite wrong. I agree that they never agreed to the cut of 1s. 6d. in the rate of benefit—that is perfectly true—but in these other matters connected
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with unemployment insurance they did agree to cuts of £22,000,000 and other cuts, such as on education (to which the noble Viscount said they would not agree)—and a 15 per cent. cut in teachers' salaries. As the First Lord mentioned previously, a reduction in the pay of the Defence Forces was one of their proposals. It certainly was; and so it was also with the police.
VISCOUNT ADDISON: My Lords, I am sorry to keep interrupting the noble Viscount, but he is challenging me on personal grounds. Does he really think that seven of us would have resigned our office and gone out into the wildernes of we had not disagreed?
VISCOUNT SWINTON: My Lords, with great respect, I am sure that the noble Viscount is trying to follow me. I may not be putting my case very clearly, but I think I am putting it with reasonable clarity. They did not agree to the reduction in the rate of ordinary unemployment benefit, which in those days was called "covenanted benefit." I am asserting and maintaining, on the authority of Lord Snowden—and my own recollection is exactly the same; the noble Viscount, Lord Samuel, will hear this out as he was representing his Party in those discussions—that they had agreed to £56,000,000 of these cuts, which included the reduction in teachers' salaries and also, I think it was, £22,000,000 in respect of unemployment insurance.
LORD CALVERLEY: My Lords, would the noble Viscount allow me to say—
VISCOUNT SWINTON: No; I really cannot. I have a great deal to say. I will not give way. Already I have given way to the noble Viscount the Leader of the House. The noble Lord had nothing to do with this at the time.
LORD CALVERLEY: I want to speak later.
VISCOUNT SWINTON: The noble Lord will make a speech?
LORD CALVERLEY: I will.
VISCOUNT SWINTON: That is excellent. I will make way for him later if he will allow me to continue.
LORD CALVERLEY: I apologise to the noble Viscount.
VISCOUNT SWINTON: I accept the noble Lord's apology and thank him very much. At any rate, certainly no one has ever suggested that the Cabinet which imposed the cuts were wrong to make the biggest cut of all in their own salaries. It is not the trivial total amount involved in that; it is the force of example, which is very far-reaching.
I want now to pass to two subjects which have figured largely in earlier debates and which are very relevant. The first is the question of unrequited exports. For a long time past, we have been protesting here that these unrequited exports made our true export position unreal and that we could afford neither the granting of the credits which paid for them nor the rate at which we were repaying sterling balances and depleting our reserves. When we first raised this matter, it was pooh-poohed as one to which no attention should be paid. Then that attitude changed and, with the noble Lord, Lord Pakenham, as spokesman, it was succeeded later by one which suggested that a veil of secrecy must be drawn over this matter. That secrecy was quite unjustified. Now that the Chancellor of the Exchequer has come out into the open and stated that we cannot afford either, I hope that we may have a clear account of what we have advanced and repaid in the past, and a regular report of what happens in the future. Estimates of the drawings by individual countries have been made by expert bodies, such as the National Foreign Trade Council in America and the London and Cambridge Economic Service in this country. These estimates have obtained wide currency and credence, but why cannot we have official information? I can see no earthly reason why the Government should not give us a breakdown of the aggregate of the sterling balances.
The other matter relates to the increase in production. What I was referring to in my question was the statement of the First Lord of the Admiralty, but more particularly the statement of the Chancellor of the Exchequer, that the rate of industrial production in the first half of this year was 30 per cent. above 1938 in volume. That has been frequently challenged by my noble friend, Lord Cherwell, who, I may say, has performed a public service by the assiduity with
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which he has hunted this hare. It is a key figure, a vital fact that we should know in basing our judgment of what is possible and our appeal for greater production. Let me put shortly the criticisms which have been made of this figure of 30 per cent. First, it has been said that there are 6 per cent. more people in industry. The Government say that the figure is much higher. If that is true—I am sure it is—surely that reinforces the argument of the noble Lord, Lord Cherwell, on the productivity per man year, which is the only test that matters. Then, if we take into consideration industries we all know about—building and mining—we know that productivity is down, and not up, compared with 1938.
Then we have been told that there are 100 per cent. more people engaged on export work. If the exports are up by only 50 per cent., that does not look like a 30 per cent. increase. Finally, it is admitted that during the second half of 1948 the imports of raw materials were 86 per cent. of the 1938 volume. All these facts do throw considerable doubt on this 30 per cent. figure. We have just had a further elucidation by the Government. I am very much obliged to the noble Viscount—I think it was the First Lord of the Admiralty—for sending my noble friend Lord Cherwell and myself even greater elaboration than that which the noble Lord, Lord Lucas, gave us at Question Time. From this it appears that the actual comparison has not been made with 1938 at all, but with 1946. Then the assumption is made—it is a pretty big one—that the 1946 production was the same as in 1938. But in the very document which has been sent to me I find this—and I think it is taken from the paper which Lord Lucas referred to:
"There have been large changes in the industrial structure since 1938, and no satisfactory comparison can be made with prewar levels until the results of the 1948 census of production are available."
Why publicise a statement based on so doubtful an assumption?
But even if we accept the assumption, I am very sceptical about the veracity or the value of these general averages; production in the utilities and in industry is all lumped together. As a test of industrial production in the way most people understand it, I am bound to say that

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I would not include gas and electricity. As between 1938 and 1948 gas production increased by 44 per cent., and electricity production practically doubled. But when you take what most of us have understood by industrial production—in the factories and the mines—of course there are extraordinary variations. I take only two examples: the increase in steel ingots and castings is 43 per cent. and the increase in commercial vehicles is 63 per cent. Surely it is clear that an overall average figure of this kind is very misleading. It depreciates—"denigrates," I believe is the word the "ordinary chaps" use now—the achievements of industries which are above the average, and it enhances the attainments of those which are below. I suggest that it would be better to hear a great deal less of these overall figures in the future. That is not at all depreciating the magnificent effort which is being made by management and workers in a great many industries, but it is important to be accurate about these matters.
Now I want to return to the charge of the lack of any constructive policy which will give confidence, encouragement and incentive. I do not ignore or underrate the importance of an appeal transcending any incentive of profit, whether it be in wages or interest on capital. No one who had the honour to serve under Mr. Churchill in the last war is likely to make that mistake. Indeed, I am bound to say that I think most people listening to the Prime Minister's broadcast must have contrasted it with the words with which Mr. Churchill united and inspired us in the war. But it is equally wrong to underrate the value of material incentive. If proof were needed, we have only to look at the nationalised industries. Without endorsing the Minister of Transport's general strictures on the workers of this country—and that seems to me more like the kind of campaign to which the Leader of the House was referring than anything else I have read—I would say that the non-profit motive (which might almost be called a loss motive) has not been very successful. That lack of incentive affects the workers and those responsible for the direction of industry. Of course it is true of the worker. The harder he Works the more he is taxed, and that presses particularly hardly where the marginal rate of taxation increases. As Professor
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Robbins has said, it is a day-to-day drag on productivity. It applies equally to firms. The known, certain market gives the known return. It is the easy way of doing business. But we want firms to make risky ventures in new fields. Make no mistake about it, they are risky ventures. Goods do not sell themselves, least of all in the United States. What incentive is there? Indeed, there is every disircentive! Every economist has stated that the rate of taxation is too high. I know it may be said that income tax and the Inland Revenue system is uniform and depends on that for its administration and its revenue. But that is no answer to the claim and the need for a general reduction in taxation.
Reduction in taxation is not inflationary if it is accompanied by reduction in Government spending. On the contrary, in so far as it leads to greater production it is actually disinflationary in its effect. But apart from general reduction, which I believe is both necessary and possible, are adjustments really impracticable both for businesses and for workers? "Where there's a will there's a way," and the need is pressing. I throw out one suggestion only, and this applies to firms. In other countries firms exporting to dollar markets are allowed to keep for their own purposes—I do not mean to "blue," but for use in their businesses—a proportion of the dollars which they earn. I am advised that abroad that has been very successful. I do not think we ought to be hidebound in these matters and say that because one thing has been the practice of the Inland Revenue since Mr. Gladstone's days, it follows that we must not look for new expedients. The Government rather like expedients.
I have spoken about agriculture. Others will do so in more detail. We cannot afford had farming. But there are a great many good farmers, and the good farmer is the best judge of how to get the most out of his land and to keep that land in good heart. But he must have certainty and confidence; he cannot live on expedients. He should be told now. I have heard nothing about this, though I too read the debates in another place, and when the noble Viscount spoke to-day it was the first time that anybody speaking for the Government has given any kind of assurance to the farmers of this country. I do hope he will not be let down.
VISCOUNT ADDISON: I am sure I shall not be.
VISCOUNT SWINTON: I am glad to have that assurance, because the Minister of Agriculture has been let down over and over again. One other thing about which I must confess to some anxiety is the Government's Empire trade policy. I find it difficult to disentangle the results of all these international conferences at Geneva, Havana, Annecy, and so on; and to say with any assurance what has been proposed, what has been recommended, and to what we are committed. But I do say with certainty that to-day Empire trade is more important than ever, and we must have freedom to develop that trade, just as closer Customs Unions have. There is nothing isolationist or exclusive about that; it is essential to our mutual trade and to the strength of the sterling area; and by increasing the prosperity of Commonwealth countries it will enable them to do more trade with the rest of the world. All wise men want both Empire development and European and indeed world co-operation, and these things must go together.
Again on the constructive side, are the Government really going to persist with a policy of nationalisation, particularly with the nationalisation of iron and steel? Is that part of the Government plan to restore confidence and increase incentive? Can any impartial person say that nationalisation of iron and steel and the threat of the nationalisation of other industries can contribute to the efficiency of those industries, to their concentration on the export drive, or to the restoration of confidence and the investment of foreign, and particularly American, capital here? Observe, my Lords, that it is not the inefficient industries which are to be nationalised. Altruism has given place to loot. The present policy is gangsterism; it is the policy of smash and grab.
The Government are always complaining that they are the victims of circumstances. Of course a difficult time lay ahead of them—although I am bound to say they ignored all the difficulties in their Election campaign; and when they were elected they behaved as if the difficulties were non-existent and the day of reckoning would never come. Victims of circumstances, indeed! They have been helped by the United States and by the
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Dominions more than any Government have ever been helped in history. Because they were caught unprepared in a situation partly caused and greatly aggravated by their own extravagant and unsound policy, that does not make them the victims of circumstances. They are their own gravediggers. The Prime Minister pretends that the choice is between his inadequate policy and unemployment. Nothing could be further from the truth. The noble Viscount said something about full employment. The Government have no right to take credit for full employment. That has been due to two things—the sellers' market, which has now gone for ever, and American Aid, which is coming to an end and without which, as Ministers have said over and over again, 1,500,000 people would be out of work. The truth is the exact opposite to what is claimed. Unless the situation is grappled with adequately and constructively, nothing can prevent heavy unemployment and want. It is suggested—and the noble Viscount has been echoing the suggestion in a rather more piano, minor key—that if we criticise Government proposals we are damaging our country and undermining confidence.
VISCOUNT ADDISON: No.
VISCOUNT SWINTON: That is the only attack we have made and that I am making. The Lord President of the Council in another place, had the hardihood—I do not think I should be using unparliamentary language if I said the insolence—to refer to our attitude as one of "economic sabotage." Those words have a familiar ring. In the one-Party slave States, when the Government want to liquidate their political opponents they accuse them of "economic sabotage." I am rather surprised—or am I?—that Mr. Morrison should adopt the terminology and the technique of the Communist trials. Of course the charge is wholly untrue. Our only wish in this national crisis is that the Government would produce a national policy which we could all support. But we have our duty to do, and if we tamely or mutely subscribed to a policy which we know is inadequate we should indeed undermine confidence in this country and in the world. It would be said: "This is the best Britain can do; there is no alternative." But this is not the best that Britain can do.

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Complete recovery is well within our capacity.
The Government's halting expedient will not do. The test by which policy must be tried, which I ventured to put in the last debate, surely stands out more clearly than ever to-day. Will the policy make our industry more efficient? Will it encourage incentive and risk-taking in industry and commerce? Will it make us all concentrate harder on our jobs? Will it unite us in team-work and individual effort? Will it inspire confidence in the world? Can anyone pretend that the statements given to Parliament, either in another place or here, answer those tests? In what it does, and still more in what it leaves undone, this policy is hopelessly inadequate. It is our duty to tell the country and the world the plain truth: that this country needs a policy, both of economy and incentive, which will unite the nation in the effort which it is ready—aye, and eager—to make; and that if the Government fail, as they have failed, there are those who will give the country the policy and the lead it needs and demands. I beg to move.
Amendment moved—
Leave out all the words after ("That") and insert ("in view of the gravity of the present crisis, this House cannot regard the Prime Minister's Statement as adequate to restore and maintain confidence in sterling, failing as it does to provide constructive measures to stimulate initiative and enterprise, and to evoke that united national effort to grow more, produce more and export more, which is essential to our recovery and prosperity.")—(Viscount Swinton.)
3.55 p.m.
LORD RENNELL: My Lords, the Motion proposed by the noble Viscount the Leader of the House is:
"That this House approves the lines of action to deal with the present economic difficulties as outlined in the Prime Minister's statement made on October 24."
Before considering whether your Lordships can afford to approve that Motion I would like to invite you to cast your minds back over what has happened during the last three months, culminating in the statement made by the Prime Minister on October 24. The more one looks at this period through which we have just lived, the more surprising the present situation appears to be.
At the beginning of July it was apparent, and was announced by the Chancellor of the Exchequer, that this
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country found itself in an exceedingly serious situation of unbalance in its balance of payments, with the result that there had been a flowing out, a hæmorrhage, of our reserves, similar to that which took place in the early 1930's and which called for drastic action. That was in the first half of July. After that announcement, which was obviously necessary in the view of everyone who had followed the situation, what happened? Parliament was adjourned; Ministers went away for their holidays or to do cures, and nothing at all happened until September 18 when, after a mission to Washington by the Chancellor of the Exchequer and the Secretary of State for Foreign Affairs—pleading, no doubt, to the rich uncle who had been keeping this country going for so long, that the situation in which we found ourselves was dreadful—we devalued sterling.
From September l8 until October 24, His Majesty's Government again sat back and, so far as we can make out, did nothing except to produce, on October 24, a limited scheme of budgetary economies. Your Lordships will no doubt note that the cause of the crisis breaking out was the very serious unbalance in our balance of payments. We were in fact buying, or trying to buy, conditions, with the assistance of America, more than we could afford to pay for—in other words, this country under the Government which we have had for the last four years, had developed what has aptly been described by American critics as a "champagne thirst on a beer income."
When the plan finally came out on October 24 what were the remedies which His Majesty's Government invited this country to accept as remedies for the situation in which we find ourselves? They invited this country to accept a cut of approximately 8 per cent. in our Budget in order, among other things, to prevent a rise in costs and a rise in wages. And what else? Is there any plan to increase production? No. Is there any proposal by which exports are to be increased, otherwise than at the expense of sales inside the country? No. And if that plan were pushed to its logical conclusion, and we were to export half as much again out of our present production, what exactly would be the effect? There would be so much less of our present production sold in this country as to create that inflationary situation

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which the Chancellor of the Exchequer has been deploring, and rightly, for many weeks. The remedy for this situation is clearly not to export a larger proportion of our production in order to have fewer goods to sell for the same national income and wages here but to create more goods to export and to consume in this country. The test of whether the measures proposed on October 24 are adequate is this: Do these cuts in the Budget create, or help to create, that increased production? If it can be shown that that is an inadequate remedy, then it is fair to say that the plan is inadequate to meet the present situation. And in these circumstances I see no reason why your Lordships should approve the lines of action which have been proposed and which are referred to in the noble Viscount's Motion.
I turn first of all to this question of inflation, because it has a direct bearing on the whole question. The Chancellor of the Exchequer has repeatedly referred, especially in recent weeks, to the fact that a certain measure of inflation has been prevalent in this country for a little time past. In fact, in his speech at the so-called bankers' dinner the Chancellor of the Exchequer said that the Budget surplus of approximately £500,000,000 was disappearing, or had in part disappeared, not as the result of revenue failings—and he gave certain figures to show that revenue returns were good—but by reason of increased expenditure. I could quote the passage of the Chancellor's speech, but I think it will be sufficiently in your Lordships' minds. Obviously, he was referring to the fact that the tendency for the Budget surplus to disappear had been noticeable before the crisis broke out—I think that is undeniable and not controversial. Therefore, what he called the "disinflationary" (I apologise for the word; I agree with the noble Viscount about it, but it is not my word) tendency in the Budget had been going on since the earlier part of the year. That alone needed remedying, in order to keep prices in check; and there has been a certain rise in prices, as your Lordships know.
If that tendency was prevalent before the Parliamentary Recess, how much more prevalent must it be to-day, after devaluation, in view of the rise in prices
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of imported dollar and other hard currency goods! The remedy to-day, after devaluation, involves a cut of about £280,000,000, or nearly 8 per cent. That is not in itself a very large figure, but it can be conceived that, if a remedy was necessary before devaluation a very much larger remedy must become necessary thereafter. If the total amount of correction to-day is only £280,000,000 very much less than £280,000,000 must have been required to correct it before devaluation—indeed, so small an amount as to be scarcely worth mentioning. If it was necessary to refer to an element of inflation which required a corrective before devaluation, it seems to me only reasonable to suppose that the amount of £280,000,000, applied afterwards as a corrective, must in itself be inadequate, apart from the fact that it does not by itself increase production by one ton or one pound of anything at all. And that is the cure we are looking for at the present moment to remedy the position in which we find ourselves.
When we come to the particular savings involved, they fall into two categories, one of which might be called current expenditure and the other capital expenditure. The object of saving on capital expenditure by the Government is presumably to allow at least that amount of capital to be used for other purposes, though I am bound to say that so far as I know that has not been specifically said. Let us see how slender our margin is. In Table 25 of Command Paper 7647 published in the earlier part of this year the amount of capital created is estimated, in very round figures, at £2,000,000,000. Your Lordships will recollect how that is made up. The greater part is made up of accumulations in company reserves, current surpluses of public authorities, depreciation allowances, undistributed profits, and so on. Finally there is a figure of about £200,000,000 of what are called "personal savings." I will come back to that figure, because it has an important bearing on something which the noble Viscount, Lord Swinton, has just said.
Of created capital in this country, we have to invest in one form or another, something of the order of £2,000,000,000. Of that total a substantial part is spent by the Government, the balance being spent by private enterprise and private

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initiative. Of the total spent by the Government, the Government propose to save about £140,000,000 in a full year, though not this year. That is perfectly reasonable. It cannot be done in this year because capital expenditure already engaged in cannot be stopped, and the cuts cannot have their effect until later in the year. That saving represents a very small amount only of the total national capital accumulation, and unless and until the amount saved by the Government can be increased beyond that figure, I do not see how enough capital can be available for the increase of production without which our balance of payments cannot be adjusted. Therefore in my view a saving of £140,000,000 in capital expenditure is also inadequate.
This argument ties up with the proportion of national income which is used and expended by the Government. We know the figures, and I am not going to bore your Lordships with a lot of statistics. Broadly speaking, there is so little left out of which anybody can save that we are to-day facing a situation in which savings have virtually disappeared. The disappearance of these savings is one of the most important elements in our economy to-day, and it is one of the most important indications of what the intelligent public think of the financial and economic policies of His Majesty's Government. I believe that I can show that they display a very considerable lack of confidence.
It is a matter of fact, and not I think a coincidence (no doubt Lord Pakenham will pick on my figures to-morrow), that the figure of personal savings referred to in the White Paper is approximately the same as the amount of what are known as institutional savings in the country as a whole. Institutional savings are, roughly speaking, made up of three main elements—namely, the savings of the general public accumulated by building societies and similar organisations; the accumulations in contributory and other pension funds; and other accumulations by way of life insurance. Those figures have been analysed. If the noble Lord, Lord Pakenham, wants the authority for them, I can give it to him afterwards—they come from a variety of publications. The total figure of institutional savings for 1948 was approximately £200,000,000. That is measured by the actual increase
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of the funds of the life insurance institutions, building societies and so forth, and has nothing to do with the nominal amount of the life policies taken out, which is quite a different thing. It is the actual increase of accumulated funds in the year 1948. Of that £200,000,000, £120,000,000 is the accumulation by way of life insurances in one form or another. Out of that £120,000,000, £45,000,000 is the accumulation by way of industrial life—and, incidentally, £25,000,000 of ordinary life accumulations; but that is immaterial—through industrial offices. That accounts for £200,000,000 of savings.
It is a fact that £200,000,000 is also the White Paper figure for personal savings in the country. It therefore ought to follow—and does, curiously enough, approximately follow—that other savings are not being made. Your Lordships will recollect that in 1948 the net outcome of the National Savings Movement was practically zero. The figures are not easy to reconcile—no doubt the noble Lord, Lord Pakenham, has them—because the National Savings figures are taken over a financial year, and I am speaking of a calendar year. However, the total amount of savings last year was approximately zero; that is to say, the dis-saving and saving approximately balanced. From that it is fair to assume that personal savings in this country took place by way of institutions and through private initiative, and not through the Government. That is a very significant figure, because it represents a tremendous contrast to what happened in 1946 and, I believe, in 1947. This year the tendency appears to be approximately the same, except that up to date there is a net loss on national savings, so far as we know, although, of course, it may change round. Unless it be that the general public have not the confidence that they ought to have in His Majesty's Government, why is it that savings are taking the form of institutional savings, instead of being savings in Government securities through the National Savings Movement?
There is another test which can also be applied—namely, the lack of confidence in British Government securities displayed in the last few weeks in markets generally. Regarding the campaign to which the noble Viscount referred let me say at once that I do not and cannot attribute

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this so-called campaign in any way to a political view expressed by the large mass of intelligent commentators in the economic, financial and journalistic worlds. Nor would it be reasonable to attribute a unanimity of political view to that to call it a campaign, if alone for the reason that precisely the same things are being said in other countries, and not only in America. Lest it should be thought, as it has been said, that the plan of October 24 has been welcomed as being adequate, I could quote a large number of views to the contrary from the American Press. I would, however, with your Lordships' permission, quote one sentence from one of the better-known New York papers. It says:
"If this first reaction"—
that is the reaction in this country—
"accurately reflects underlying public opinion, it is apparent that the Cabinet has underestimated public determination"—
that is, determination in Great Britain—
"to win the battle in the defence of the devalued pound."
That is a current view in America, as it is a current view here.
LORD PETHICK LAWRENCE: Would the noble Lord name the paper from which that extract comes?
LORD RENNELL: It comes from the New York Sun of October 26. Frankly, the reason why the American Press, and people here, have taken this view is the disappointment in what is generally believed everywhere to be an inadequate programme. I have tried to show that this is not a new phenomenon. There is a growing lack of confidence in the ability of the Government to deal with this situation. That has been more particularly the result of the three months' delay to which I referred, in handling the crisis which broke out at the beginning of July. With all respect, it seems to me almost inconceivable that three months should have been allowed to pass between the announcement here of what is one of the major, and possibly the greatest, financial and economic crises in which this country has even been, and the announcement of a remedy which deals only with a budgetary situation calculated to restore an internal balance of prices prior to devaluation.
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I have tried to show that, if it were necessary then, £240,000,000 or £250,000,000 must be inadequate now. But, even so, it is only one side of the picture. It still does not help us to get the production without which we cannot continue, because if we do not have it we are bound to get into precisely the same form of crisis within measurable time. To what is this due? Apart from remarks like "a champagne thirst on a beer income," it is a manifest fact that we are to-day spending too much on a number of things that we cannot afford. In analysing what we are spending in this country, the Chancellor of the Exchequer in another place referred to the broad categories into which our budgetary expenditure falls. He said:
"Let me now pass to Government expenditure and let me remind the House of the figures of our Civil expenditure."
That is out of the budget of £3,000,000,000. He goes on:
"It amounts on this year's original Estimate to £2,021,000,000."—
that is £2,000,000,000 in round figures—
"£1,000,000,000 is for social services. The Ministry of Food Estimate is £410,000,000, largely subsidies."
Foreign services, and so on, account for £370,000,000; analogous services and diminishing services arising out of the war account for £85,000,000, leaving a balance of £156,000,000,
"covering a wide range of activities of Government spread over a very large number of small Votes."
It is perfectly clear that if a substantial budget economy is to be made it cannot be made out of the £56,000,000, because there is not enough out of which to make it. Too much of the effort towards finding economies has come from looking into that particular category. It is perfectly obvious that if there is to be a substantial all-round economy on the things in respect of which we are our own masters to economise, it must come from social services and food subsidies, because they are the only large items out of which the economies can be made, subject to one point which I am going to say hereafter.
The recognition that some of those services have to contribute something to our economies is shown by the imposition of a small amount on prescriptions under the National Health Service Acts. From the report on the operation of the

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National Health Services which was made on October 7, it appears to me that there are a number of other economies which could be made there which would be both profitable and perhaps not very burdensome. The Press release, which no doubt your Lordships saw summarised on October 7, refers to a number of figures. Unfortunately, one figure is omitted which I think of great importance. Among the figures quoted are the 187,000,000 prescriptions dispensed last year, which at the rate of 1s. a time is approximately the £10,000,000 referred to as an economy. Of course, to be fair, the economy may be greater, because it may lead to people dispensing with the prescriptions altogether, so that £10,000,000 is perhaps a minimum figure.
Let us look at one or two other figures, and I would ask your Lordships to agree with me that a similar contribution would not prove burdensome. In optical services, the number of spectacles supplied and paid for was 5,250,000, and spectacles still on order numbered 3,000,000. In answer to a Parliamentary Question the other day it was stated that the estimated number of spectacles to be supplied in the current year was 9,000,000. I suggest that a contribution of 10s. per pair of spectacles would not be out of place. The same sort of contribution might be derived from other sources. There is one figure which I think of great importance. In the same paper, hospital bed accommodation was given as 450,000 beds net. Assuming a 60 per cent. bed occupation, 1s. a day for the occupation of a bed would produce something of the order of £5,000,000, and 2s. would produce the best part of £10,000,000. It would seem to me that under the National Health Scheme, savings or contributions of the order of £25,000,000 would not be impossible and would not be burdensome, more especially if they reduced the admittedly unnecessary demands which are being made in a great many cases. The figure which was not referred to here, and which has a bearing, is the number of out-patients' visits to hospitals, which, as your Lordships remember, in the bad old days of voluntary hospitals provided a source of revenue by voluntary contributions which might now have become slightly better regulated under a national service. But it is quite a considerable sum.
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In regard to the food subsidies—and I know that here we are on a delicate and difficult subject—it is perfectly clear that a substantial rise in the cost of living by reason of an increase in the cost of food would properly reflect itself in a demand for increased wages. But I feel—and I know this may shock some of your Lordships—that some rise in the cost of living, without an increase in monetary wages, is necessary if costs of production in this country are to be reduced. I will show in due course by quotation that I am not alone in thinking so. I believe that with regard to certain essential foodstuffs, such as, say, wheat, meat and certain fats, the subsidies should continue approximately the same as they are now. But I nevertheless believe that in the case of a number of foodstuffs we could and ought to see the subsidies diminished and the prices raised—it is no good mincing words—so that in fact there will be a reduction in real wages. I believe that a reduction in real wages is necessary if costs are to come down.
On that question of costs and prices, I would like to remind your Lordships of extracts from three statements made by the Chancellor of the Exchequer, and you will see what bearing they have on what I have said. They are rather curious statements, because in the order of time in which they come up they show a gradual release of the unpleasant truths, which was not the case in the earlier of the statements. In the Chancellor of the Exchequer's broadcast on September 18, referring to the price of bread, he said:
"Apart from this increase there should not be any noticeable increase in other retail prices, at any rate for the time being. Over the next few months there may be some justifiable reasons for an increase in the price of a few articles which are made mainly from imported dollar materials. … There is no reason whatsoever for any immediate increase in any prices in the shops except bread. …"
That left in the public mind in this country, and was intended to leave, the impression that devaluation would not lead to a rise in prices. It cannot have left any other impression, and it cannot, I submit, have been made with any other wish than to leave that impression.
However, on September 27 he said in another place:
"Apart from this, rises in the price of foodstuffs are not likely to come in large measure or soon. The percentage of dollar cost in foodstuffs is small—about 12 per cent. now. …"

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As a matter of fact, that is not quite the whole story, because the dollar content of the cost of living is 18 per cent., which includes our non-food articles. The Chancellor of the Exchequer went on:
"There will undoubtedly, in the course of time, be some increase of prices, especially in articles made mainly of dollar raw materials. … We must, therefore, expect, as I have already said, some gradual increases in prices over the next few months. …"
That is a slightly different melody to the earlier one ten days before. Finally, however, we come to the Chancellor of the Exchequer's speech at the Bankers' Dinner on October 4. He said:
"There will, of course"—
not "perhaps"—
"be some decrease in consumption due to the fact that the cost of living will rise without, we hope, any rise in personal incomes. That will be a burden which will fall almost entirely upon the wage earner, and will be felt most heavily by those with the lowest incomes."
He went on to say that it would be agreed that the deduction from what he had stated was that we must both increase our dollar exports and maintain our home standards of living so far as possible. In that third statement we get much nearer to the facts of the case. We see first of all a public statement and a public realisation that real wages have got to come down, and that we may maintain our standard of living, or hope to, so far as possible. Of course I agree that it is inevitable, if we are to get the necessary benefit out of devaluation, that not only must costs of production not go up but they must come down, and unless they do come down (and it is largely a question of wages) we shall be in exactly the same position as we were before. It is on the whole of that aspect of our economic situation—the wage structure, hours of work and productivity—that not one tangible proposal has been made, either in another place or here, as to what the Government are going to do. To my mind, the proposals that have been made are entirely inadequate.
I said at one time that a cut in the social services, either by a contribution or in some other way, seemed inevitable, except in one circumstance—and I am now coming to that one circumstance. The most troublesome aspect of our situation to-day is the productivity of
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the country as a whole. Frankly, I cannot agree that this 30 per cent. increase in production, of which we have heard a certain amount to-day and a great deal in the past, is a true reflection of the situation. I cannot believe that that is really a fact. Everything that I read on productivity over here (I am referring to productivity as a whole and not to that in individual industries or individual factories) goes to show that productivity per man in this country is lower than it was before the war. I think that is an inescapable fact. There has been an interesting study of the relative production figures in a number of industries with which the noble Lord, Lord Pakenham, will be familiar. In practically every industry there has been a fall in production since before the war, and there has been a tremendous fall by comparison with America, for instance, where production has risen.
LORD PAKENHAM: To which report is the noble Lord referring?
LORD RENNELL: Rosta's report. I do not want to quote a lot of statistics, but there is one set of figures that to me is very striking. In the Economist of July 9 there appeared a table, with which I am sure noble Lords opposite will be familiar, and connected with that table there are a few sentences which I propose to read. One says:
"To give a simple illustration of this an attempt has been made to estimate roughly how many weeks the average British wage-earner would have to work for his wages after tax to equal the price of five standard British-made objects before the war and now."
In other words, they have tried to estimate the number of weeks' wages required to buy five standard objects before the war and now. The five objects are: a standard council house, the cheapest British car, the cheapest motorcycle, the cheapest man's suit, and the cheapest radio set.
I am afraid that I shall have to quote the figures, because I want to give the American figures in comparison. Before the war, the number of weeks' wages needed for a standard council house was 112; now it is 213—getting on for double. For the car the figures were 39 and 55 weeks; for the motorcycle, 11½ weeks and 17½ weeks; for the suit 5 weeks and 7 weeks. For the radio set

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the figures were 3½ weeks and 4½ weeks. Those figures of the number of weeks' wages required to buy those articles are merely, as noble Lords will realise, an inverse way of saying that the costs of production have gone up in that 'proportion. The figures are not absolute, but they show the trend, the rise, which is from 30 per cent. to 90 per cent. The Economist goes on to say rightly:
"This is a real and fundamental ratio. Until it is put right no amount of juggling with prices and exchange rates will enable the British people to earn as good a living as they did before the war. If the British people cannot afford to buy their goods, how can they expect foreigners to do so?"
Now, my Lords, compare those figures with the equivalent figures for America. The equivalent American six-roomed house which took 182 weeks to purchase now takes 199 weeks, a rise of 5 per cent. The two-door Ford saloon took 36 weeks, and now takes 37 weeks—just about the same. For the motorcycle the figures are 23 weeks before the war and 20 weeks to-day, a reduction. The man's suit took 4¼ weeks and now takes 4½.
LORD LUCAS OF CHILWORTH: Would the noble Lord forgive me for one moment? Do the figures he is quoting include purchase tax?
LORD RENNELL: No, they are costs of production without purchase tax.
The figures for the radio are 2½ and 2½ weeks. It is inescapable from figures like that, and from other investigations, that the whole cost of production here has risen out of all proportion to what has happened in the other parts of the world which interest us—mainly, in these circumstances, America. Whether it is greater productivity per man-hour, or whether it is greater productivity per man-week, we have got to get greater productivity per man before we can afford to have the things which we want to have. As I see nothing in any of the Government's proposals which is even preparing the way for that, I find it impossible to agree to the noble Viscount's Motion. So far as I am concerned, I regard the Amendment proposed by the noble Viscount, Lord Swinton, as much more nearly representing my view and, I believe, the views of those of my friends on these Benches. In those circumstances we propose to support that Amendment.
4.40 p.m.
LORD TEVIOT: My Lords, as there are so many wishing to speak, I shall detain your Lordships for only a moment or two. Before I begin to say what I have written down, I would like to refer to something that fell from the Leader of the House. He seemed to accuse this side of the House of not being patriotic, and suggested that we were making an attack on what was happening here—particularly, so far as I remember, in regard to the work that was being done here in the production of goods. Your Lordships will no doubt recollect that the other day Mr. Barnes, the Minister of Transport, said that the men of this country were not pulling their weight. Nobody on this side of the House, so far as I know, has said anything as drastic as that. My own view is that within a forty-hour week the great bulk of the men are producing all they possibly can. But something more is needed. We must give the men who are working in our industries every facility for earning and producing more by working longer hours if they wish to do so, without any impediment at all. I should like to see some incentive offered, which the Government have not offered so far.
I do not propose to criticise anybody, but I should like to ask one or two questions and to make one or two suggestions; and I hope to sit down within ten minutes, so that others may have an opportunity of speaking. In the first place, I should like to ask why was it that it was not feasible to have a conference before we suddenly embarked on devaluation. Why was not that a reasonable thing to do? There is no doubt that the omission of such a conference has caused some very unpleasant feelings about us on the Continent and within the Empire; people in those countries have the impression that all of a sudden we embarked upon devaluation without having invited others to confer with us beforehand and discuss a matter which was vital to many of them. I should be interested to know why that was not done. There may, of course, be a very good reason; but it certainly seems to me that the United States, the Dominions, the Colonies, and Western European States should have been consulted before we devalued.

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My second point is this. In my view, we cannot go on living in this artificial state. Why could we not have freed sterling to find its own level? I heard only yesterday the very unpleasant news that already in the United States there is a black market for the pound at a figure considerably below 2.80 dollars. It seems to me that eventually we shall be driven into having a perfectly free market in regard to sterling; and if that does not happen we shall have a black market in exchange, as we had before. There is a further question. Are the Government certain that if we are able to increase our production (which the noble Lord, Lord Rennell, appeared to think unlikely) there will be markets to absorb that extra production? I cannot see that the United States or any other countries who are in competition with us in the markets of the world are going to permit us to interfere with their internal markets. I should like the Government to reassure me on that point. I hope the answer will not be "What do you propose?"
LORD PAKENHAM: I was not thinking of putting that question to the noble Lord.
LORD TEVIOT: I hope the answer will be something that we can really "bite on." In the past I have ventured to make certain suggestions, and there have been many other suggestions made from these Benches in the last few years. None of them has been adopted by the Government, and I do not suppose that any suggestion that one makes now will receive any better treatment. Nevertheless I venture to make one or two suggestions. First, I should like to see an immediate stop put to the drain on our resources in the form of the payment referred to by the noble Viscount, Lord Swinton, of more than £300,000,000 for so-called debts.
LORD LUCAS OF CHILWORTH: Is the noble Lord referring to sterling balances?
LORD TEVIOT: Yes; and I was grateful to the noble Lord, Lord Pakenham, for giving me such a satisfactory answer to my question on this subject yesterday. Surely it is time that we did something to investigate this matter; and I suggest for consideration that we ask for a moratorium in this connection
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while that is being done. I should like to ask whether we in this country have ever sent in what I might call our bill for the war. Have we ever pointed out the whole-hearted manner in which we went into the war? Did we not save the world, and do not the world owe us for that a debt that they can never repay—a debt of lives, shipping, treasure, and so forth? Have we ever sent in our bill for all that? I know well that some countries made a great deal of money out of us in the war and now have very big debts outstanding against us. I should like to see whether this matter cannot be gone into and some suggestion made that we saved those countries from frightful disaster. Surely there should be some recognition.
LORD LUCAS OF CHILWORTH: The noble Lord is always so scrupulously fair that I feel certain he would not desire to leave this subject without paying a most generous tribute to all the help that this country has had from the United States of America.
LORD TEVIOT: The noble Lord misunderstands me. Of course, I am not referring to the United States of America. The United States, we all know, has done a most magnificent service—a service that we can hardly overestimate, for, after all, every man in the United States is contributing to Marshall Aid. And now, we have devalued and are going to try and get the price of our products down to such an extent that we can push these products into their home market.
LORD LUCAS OF CHILWORTH: I am sure there is a misunderstanding. I was referring to the fact, of which the noble Lord is well aware, that the United States cancelled about £2,500,000,000 worth of debt.
LORD TEVIOT: I am not arguing about that. If the noble Lord wants an instance of any particular country I will mention Egypt for one. I must leave the matter there. What about Russia? It will be within your Lordships' recollection that we and the United States sent vast amounts of war material to Murmansk at great loss of life and shipping. Have we ever been paid a penny for all that? Is there not great credit due to us for having done all those things? Are we likely to receive anything at all as the result of that? I should like to go

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into this matter a little, because we are in such a "jam" at the moment that it seems to me we have to see whether we cannot get something back for what we did during those war years. We seem, alas! to be getting deeper and deeper into economic distress. I suggest that we should now do what the noble Viscount, Lord Bennett, said here at the time of the first American Loan, when he spoke very strongly against our accepting it. He said: "Let us have a family party of all the component parts of the Empire and sit round a table and see whether we cannot evolve some plan by which we can get together and not continue to 'sponge'"—I am now using my own words. But it is true that we cannot go on "sponging" on our friends. If we could get such a conference as I suggest, I would like it to be representative of all Parties. They would come together at once to see whether we cannot do something to draw up a plan, even if it meant tightening our belts, because I can see nothing in the Government's policy today which is likely to help the present situation. I am afraid that I am one of those who take a pessimistic view with regard to our future.
There is nothing in the speech of the noble Viscount the Leader of the House which cheers me up the least; nor was there in either the Prime Minister's statement or the Chancellor of the Exchequer's statement. I cannot see that there is anything we can get hold of which will produce a little bright light on the horizon. I am very distressed about two of the cuts, both of which have already been referred to. The housing cut is terribly bad. I feel absolutely certain that if all restrictions in regard to building were removed, so that anybody who wanted to build a house and could do so was allowed to do so, it would bring down very materially the cost of houses, as my noble friend here has said. On the question of timber, I know one member of your Lordships' House who is a director of a company who will build houses where no timber is required. Let that sort of thing be inquired into. Many of your Lordships see the appalling conditions in which our people all over the country have to live to-day, and I feel that housing is one of the last things that should be affected.
With regard to agriculture, we know perfectly well that we must increase the
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production of food in this country, particularly in regard to livestock. The noble Viscount told us that the Government are going to save from £4,500,000 to £5,000,000 on the administrative side. I believe that can be done, but I say to the Government: "For goodness' sake do not seize that. Push it back into the industry. We are always being told: 'Push your profits back into the industry.'" If we can get some money back there, I would like to see it used to increase food production. There is a debate coming on, in which I hope to speak, initiated by the noble Lord, Lord Lovat. He is going to address your Lordships' House on what he has done on the question of increasing livestock in his properties up in the North.
I want now to make a suggestion with regard to the Health Service. We know that there has been abuse of this Service. This "up to one shilling" is all right, but let me put to your Lordships a suggestion from a lady whom I know well. She said "Well, why not try this? Suppose that in the course of the year an individual man or woman has not been to a doctor at all, why not give him or her a little bonus or 'divi.'?" If this scheme were adopted the Government would soon find out whether or not the person really needed to go to a doctor. I think that suggestion is worth thinking over; it would save a lot of money. But whatever noble Lords opposite may say, we must get back to free enterprise if we are to survive. The Government have been in office for four years. They must know that their policy has not been a success. It has not been able to combat the very difficult problems with which we are faced. I do beg the Government at the earliest possible moment either to go to the country or to change their policy. We have no chance of survival unless either of those two things happens. I strongly support the Amendment moved by the noble Viscount, Lord Swinton.
4.57 p.m.
LORD PETHICK-LAWRENCE: My Lords, before I address myself to the main subjects of our debate and the controversy between this side of the House and the other side which is supporting the Amendment, I should like to say a few words about the extremely interesting speech which has just come from the noble Lord, Lord Teviot. I am sure that

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many of his suggestions will be considered by the Government and, in particular, that the interesting and unusual suggestion that he made towards the end will be given full attention. The points in his speech that I want to take up on the three questions that he asks—I do not pretend to anticipate what the members of the Government will say, but I should like to answer them myself—are these. The noble Lord first suggested that before devaluation actually became a fact, there should have been a conference at which the whole matter could have been debated between this country, the Dominions, the European countries and others. I should like him to put that question to the noble Lord, Lord Rennell, who spoke earlier on and to the noble Viscount who sits immediately in front of him. I should like him to ask them what they think would be the consequences of having a conference as to whether or not this country should devalue at some period in the future. I am sure he would be told that the result would be that the flight from the pound would he far more disastrous than anything that has happened so far in regard to this situation.
LORD TEVIOT: My Lords, I put this aspect of it to the noble Lord. Supposing he and I were in partnership, in close relationship, as the European countries are with us under the Atlantic Pact and various trade agreements that we have with them, and so on; and supposing that I did not tell the noble Lord of a change in my ideas but in the night I altered them all—in fact I "pulled a fast one," as our American friends say, and as, in my view, this was, for it surprised not only the Europeans but also the Dominions, and I understand that it was news to the United States—what would he say to that? I think that that was a bad impression to create.
LORD PETHICK-LAWRENCE: First, I should like to say that the suggestion that it was news to the United States and to the European countries is without foundation, because, as a matter of fact, they were all informed at some period well before the actual public announcement was made. That has been stated in public; I am not revealing a secret. In the second place, the situation which he suggested is entirely different, because there are a large number of people in all
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those countries who would know what was going to take place and would act in advance of the public announcement. The second point he put was: Suppose that, after all our efforts, the United States are not willing to take any of our goods; and suppose that however cheap they are, they cannot find an entry into the United States market. If that really be true, that is a counsel of despair. Clearly, there would be nothing we could do to meet that situation if that were the fact; and all I can say is that the American Ministers did give to our Ministers a positive assurance that they would do everything in their power to prevent that happening.
The third question he asked was: Is it not a fact that we rendered great service in the war, and ought we not to claim credit for that instead of allowing our creditors to demand payment from us for the services that they rendered? It is no good our doing what he suggested. I suppose we could ask for payment from the Russians for our services in the war, but it is quite clear that we should not get it. Our principal creditor is India, which rendered enormous service in the war for which she received no payment. Our debt was incurred by the services which India rendered in the war in the Western field of operations and for which it was agreed, after going into all the facts, that the debt should stand at the figure at which it now stands.
Having said that, I want to turn to the larger issues. It has been said that the proposals of the Government are totally inadequate. Much stronger terms than that have been used in the Press, and the noble Viscount who spoke first for the Opposition described them—and I took down his words at the time—as "a paltry negative."
VISCOUNT SWINTON: I think my word was "faltering." I am sorry I did not speak very distinctly.
LORD PETHICK-LAWRENCE: Of course I accept that correction, but I certainly thought the noble Viscount said "paltry." I am bound to say that I thought he addressed himself fairly to the individual points and did not make the attack that has undoubtedly been made in other quarters, that these cuts and alterations were almost derisory in their smallness. The noble Lord below

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the gangway, Lord Rennell, as I understood him, took the view that the cuts were totally inadequate and that in addition, to some extent, they were irrelevant to the main objects which had to be attained. Then there are the words contained in the Amendment to the Resolution itself, which describe the proposals of the Government as inadequate.
The first point in that regard that I want to make is this. The precise amount of the cuts may be open to discussion; whether the proportion between the different cuts is right may be open to discussion; the timing may be open to discussion; the omissions may be open to discussion, and the general policy may be open to discussion. But I venture to say, that to describe the cuts as so small as to be derisory and to be totally inadequate is contrary to the facts. The noble Lord below the gangway quoted from an American paper which I think he said was the New York Sun. I could not take it all down as he gave it, but it was to the effect that if the reports in the British Press represented public opinion, then it showed how keen were the people in this country to take much stronger steps than the Government had taken.
LORD RENNELL: It did not say the British Press. If the noble Lord will allow me I can extend the quotation and give him the whole text. It said:
"If this first reaction accurately reflects underlying public opinion …"
It did not refer to the reaction of the Press; it referred to the reaction of the public.
LORD PETHICK-LAWRENCE: I do not think I was in any way unfair to the noble Lord in what he said or to the paper from which he was quoting. But I propose to quote from three papers that are at least as important as that from which the noble Lord has quoted. These papers will show what was the reaction of the Press in the United States to the Government proposals, before they had received guidance from some of the papers and other people with whom they got into contact in this country. Let us take the first of the three papers, as quoted in The Times:
"The Washington Post says that the British are putting their budget in order—an act which, for its political courage as well as its economic common sense, reflects great credit on Mr. Attlee and his colleagues.' The New York Herald Tribune asks whether details of
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the programme make it manifestly inadequate or reasonably promising, and decides that 'in our judgment it is unquestionably the latter,' adding that 'Britain can face the corning year with new hope'; while the New York Times says There is no doubt that, judged in terms of broad economic policy, it looks in the right direction and that it is deserving of applause'."
LORD RENNELL: If the noble Lord will allow me to interrupt, I would submit that the first of those quotations to which he refers is not quite relevant. It says:
"an act which, for its political courage as well as its economic common sense, reflects great credit on Mr. Attlee and his colleagues."
But, as matter of fact, there is a reference in the latter part of the quotation to the question of war debts contracted notably in India, and to the fact that certain conversations have been taking place with Mr. Nehru in America about our sterling balances. The other quotation to which the noble Lord refers—that from the New York Herald Tribune—is equally correct, but it goes on to say:
"The principal apparent weaknesses of the programme are its failure to provide positive encouragements to workers and producers to transfer their activities to production for export, its omission of any direct measures to restrain the flow of British goods to the sterling area, and its lack of new measures to improve British productivity."
They are not quite complete without the other part.
LORD PETHICK-LAWRENCE: All I can say is that that is not the interpretation put on them by The Times newspaper from which I drew them in the first instance. The noble Lord can take up the point with the editor of The Times if he likes. In view of that, I maintain that it is quite absurd to assume that cuts amounting in the aggregate to £280,000,000 are to be regarded as derisory or inadequate. I have already said that there may be arguments as to precise items, and some of the points which the noble Viscount, Lord Swinton, made—
VISCOUNT SWINTON: I never used the word "derisory."
LORD PETHICK-LAWRENCE: I was most careful not to say that. I am not quoting the noble Viscount, and I expressly excluded him. I said that comments which had the effect of holding up these cuts as derisory, and an Amendment

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which regards these cuts as inadequate, are contrary to the facts. But, of course, it is open to discuss some of the points which the noble Viscount put forward in his speech. Personally I think the precise amount is about right. The sum of £280,000,000 is a considerable one, and I suggest that there is good reason why no very great increases could have been made above it. In the same way, I think the proportion between the capital budget and the consumption budget is again about right. If noble Lords have read a most interesting article by Mr. Lionel Robbins in Lloyd's Review, they will see that he puts the capital economies even before the consumption economies as one of the essential requirements.
Then there is the question of timing. As I understand it, members of the Opposition, or some of them, find fault with the Government's proposals on the ground of timing. In the first place, they say, the proposals were made too late. But noble Lords opposite must realise that, after all, we are a democracy, and that the actual timing of any Government decision must depend on the Goverment's power to carry the whole people with them at that time. I well remember that the late President Roosevelt, at the height of his power, often refused to move for a much longer period than seemed to many of us in this country to be highly desirable. But he was a very wise leader and statesman, in acting in accordance with public opinion. He used to allow public opinion to ripen to a sufficient extent before taking actions which might have conflicted with popular feeling had they been taken earlier. On the other hand, it is sometimes said —I think the noble Viscount said this—that many of these cuts will not operate for a long time yet. I think the noble Lord, Lord Rennell, said that he did not take exception to that fact because it was clear that many of the things proposed cannot be brought about in an undue hurry.
LORD RENNELL: I referred to the capital cuts.
LORD PETHICK-LAWRENCE: Yes; the capital cuts. Then these proposals are attacked on the ground that there have been certain omissions: omissions to provide incentives, omissions to change the whole policy of the Government, and
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omissions to abandon the Iron and Steel Bill and other measures which divide the Parties in this country. I venture to suggest that a Government must govern according to their own views, and not subject to the Opposition views, or under any sort of obligation not to do anything with which the -Opposition disagree. The suggestion that these proposals fail because they do not embody the reversal of the whole policy of the Labour Government may be a very good one to make but noble Lords on the other side of the House must in their hearts realise that it does not amount to any serious criticism of the Government.
There are two further points which I wish to make. In the first instance, they relate to the question of the relationship between these cuts and devaluation. I listened with great attention to the noble Lord, Lord Rennell, on this matter, but I was not entirely able to follow his argument. No doubt that was due to my own imperfect understanding. But if I correctly interpreted his main point I find my view to be just the reverse of his. If there had been no devaluation, if the stand-still in wages, the cuts in costs, the cuts in subsidies, and things of that kind, had been brought about without devaluation, it would not have done very much to help the export of British goods. But if devaluation, which brings down the cost, in terms of dollars, of British goods, comes first, and upon that is superimposed a wage freeze and a cut in various items in the Budget, then I venture to suggest that that is something much stronger than would have been the case if those measures had been taken without devaluation. So I cannot see the noble Lord's point over that.
He thought there should be some cuts in subsidies and some cuts in the welfare services. With regard to that I would just ask the noble Lord, and also those newspapers which are taking the same line on this question: Can those cuts be made without causing grave industrial unrest? What has been happening in the country of our neighbour across the Channel is an illustration of this. There, they have carried out devaluation, and they are now proposing to take certain further steps. What has been the result? First of all there has been a political crisis, which may or may not have been dealt with at the present time; but much more important

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than that is the underlying fact that all the time there is a seeping away from the constitutional Socialist Party in France to the unconstitutional Communist Party. The way in which the economy of France is being handled is driving trade union workers into the Communist fold. It is because we in this country avoid these evils, are guided by public opinion and retain subsidies for the benefit of the people that we escape the dangers with which our neighbours on the other side of the Channel have been beset.
Another point which I wish to make is this. The Opposition Amendment says that the Government's proposals are inadequate; and that has been the cry in the anti-Government Press throughout the country. It is said that the proposals are not nearly as far-reaching as they should be. What reason is there for thinking that if we had had a General Election, and a Conservative Government had been returned to power, far larger cuts than are outlined in the proposals of the Government would have been made? I venture to suggest that there is no evidence of that whatever—with one possible proviso. It was referred to by the noble Lord, Lord Rennell. He said, and I agree with him, that you may tinker with these amounts which the Government have put forward, you may add to them or subtract from them a little, but if you want to make any substantial change you can do it only by drastically cutting subsidies or the welfare State, or both. That is undoubtedly the case.
The Conservative Party must choose. They have—quite sensibly from the political point of view—declined to state what line they will take. I do not blame them. Politically, I think that is wise reticence. Speech may be silver, but silence is golden, and they may be wise in taking up that attitude. But it is our business to point out that they cannot have it both ways. Either they are prepared to make substantial cuts in the only things which would yield large figures, or they are not. If they are not going to make substantial cuts in the two items of subsidies and welfare, they are not going substantially to increase the cuts made by the Government. In fact, the noble Viscount himself objected to one or two of the cuts, and the noble Lord who sits behind him,
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whose speech enchanted us before I rose to speak, objected to several things which he wanted to cut out. I have no doubt that had the noble Lords opposite been in power, while they might have made certain larger cuts in some directions would have made smaller cuts in others, and, on balance, I have no ground for thinking that the figures would have been at all larger than they are at the present time, unless those two big items were drastically slashed. If the noble Lords opposite say that they would have made much larger cuts and that the present cuts are inadequate, it is open to us to demand from them in what direction would those cuts have been made.
I have taken longer than I intended, because I was subjected to one or two substantial interruptions, which I do not in any way resent, but before I sit down there is one last thing I want to say. I think the Government—and I include my noble friend the Leader of the House—have reason to be most grateful to the anti-Government Press up and down the country. The Government have introduced proposals many of which are really unpleasant, and, as the noble Viscount the Leader of the House said at the beginning of his speech, would naturally be most unpopular; but the anti-Government Press set up such a terrific bogy as to what was going to be in the Prime Minister's speech before it was delivered, that, in comparison with the frightful programme that was expected, all the rather unpopular things the Government have done appear in the form of a great relief. For that I am sure the Government ought to express their gratitude and thanks to the anti-Government Press.
5.23 p.m.
LORD BALFOUR OF INCHRYE: My Lords, we can divide the question we are discussing to-day into two distinct issues which, nevertheless, are interlocked at many points. The first is the dangerous internal inflationary position (I apologise to the noble and learned Viscount the Leader of the House for using that word) with its need, admitted on all sides, for heavy reductions in Government expenditure, for lower production costs in industry, for tax reductions and, above all, for restoring confidence in our currency at home and overseas. The second issue is that of what is called bridging the dollar gap. For this the Government

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are proposing to rely on a dollar import programme for 1950 of £1,200,000,000, or a reduction of £450,000,000 per annum in relation to the rate for the first half of 1949. It is worth remembering that the Chancellor of the Exchequer is on record as declaring that anything less than this £1,200,000,000 import programme means unemployment in this country. It is on the prospect of the success of this bridging of the dollar gap that I would ask your Lordships' indulgence to speak for a few moments, but first, particularly after the speech which we have just enjoyed from the noble Lord, Lord Pethick-Lawrence, I should like to say something on the issue of the internal position.
Until the Prime Minister's statement was made in another place, everyone thought that the Government were going to face the nation with a clear, concise and stark statement of the dangers with which this inflationary situation faced us, coupled with a series of unpleasant and bold cuts which would hurt everyone, but would ensure large immediate Budget economies. Such a powerful declaration, I submit, is needed at the present time, and it was an opportunity missed by the Prime Minister. Professor Lionel Robbins, writing in Lloyd's Bank Review, has said:
"It is improbable that the great mass of the people yet realise at all the nature of the peril which threatens them; it is the nature of the system under which we live that it tends to insulate the man in the street from the premonitory symptoms of danger."
What did we get? We certainly did not have a bold declaration by the Prime Minister, either in another place or on the radio, about the dangers that surround us. And the measures of which we were told, as my noble friend Lord Swinton said, have been generally quoted as inadequate. Someone said to me in the street the other day that the nation was all ready prepared to gird on its armour all that it was told to do was to button up its tunic.
The Government now say, "But we did not intend to startle the nation." The noble Viscount, Lord Addison, said that it was all due to a wicked campaign which has accompanied what he called "this business." If that is so, why does the President of the Board of Trade go to Lancashire and say: "This is Lancashire's last chance. This is Britain's last
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chance." The Government cannot have it both ways. They cannot have their Ministers going to meetings and crying —I am told that the Minister of Fuel and Power was actually in tears at a meeting in South Wales the other week—and the President of the Board of Trade going to Lancashire and dramatically saying, "This is Britain's last chance." The noble Viscount the Leader of the House says that it was all a scare, worked up by the wicked capitalist Press. But I would remind the Government that we are all heavy taxpayers and we are paying for an instrument of the Government known as the C.O.I., the purpose of which is to explain the Government's policy to the people, to give information and guidance. Surely it would not have been impossible for the C.O.I. to have justified, rather more fully than perhaps they have done on other occasions, the very heavy taxation that we are flaying on their behalf, by putting out to the Press a statement saying that this was all wrong and that the Government were very happy about everything and nobody need be particularly worried.
I am sorry for the noble Lords opposite, because I fear that some of these cuts will be very embarrassing to the Government, and to certain individual Ministers. Even The Times says:
"Seldom can so important a proclamation, made in all the surroundings of great national drama, have seemed so sad a tale of opportunities missed."
No opportunity has ever been missed by the Minister of Health to make known his particular views. I fear the question of housing cuts is going to embarrass the Government in general, and that Minister in particular. It is worth looking for a moment at the Government record of housing, as against the promises made. In the five years before the war—five of the twenty years of wicked Tory misrule —the average number of permanent houses built was something over 350,000 per annum. I think that was called "chicken feed" at the last election by the Minister responsible for the housing programme of His Majesty's Government. Last year Mr. Aneurin Bevan's policy produced some 228,000 houses; and I think this year it is estimated to produce 200,000. That Minister said to the people who are wanting houses:
"I confidently expect that before the next Election every family in Great Britain will have a separate house."

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On another occasion he said:
"I give you this promise: that by the next General Election there will be no housing shortage as far as the mass of the British people are concerned."
The Government must deal themselves with their own Ministers, but it must be very embarrassing for noble Lords opposite to face a housing cut in a programme which has failed so dismally, and in regard to which such promises had been made by the Minister responsible.
LORD PAKENHAM: I do not want to try and transfer the embarrassment across the table, but I do not suppose the noble Lord, who has come so well equipped with statistics on this particular matter, happens to have information on the production of houses after the First World War?
LORD BALFOUR OF INCHRYE: I have not got them. But I am not comparing the number of houses built in the first five years after the First World War with the number of houses built after the last war: I am comparing the promises of the Minister to the electorate with the actual performance of that Minister. In another place, in attacking Mr. Churchill, that Minister said:
"I welcome this opportunity of pricking the bloated bladder of lies with the poniard of truth."
But let us remember another quotation:
"Hold close this cherished lie;
'Tis thine, not mine."
The noble Viscount the Leader of the House, and the noble Lord, Lord Pethick-Lawrence, both said, in relation to our attack on the inadequacy of these goods: "What would you have done? Where would you have cut?" That is a very fair question. Nevertheless, I think it is a false question, because they are asking a question about a situation which we should not have allowed to arise. We should not have allowed Government extravagance to have mounted year by year until the country was faced with the present situation.
Let me put this to the noble Lord, the Minister of Civil Aviation, who is going to reply. Supposing you have a skilled aeroplane pilot spinning to the ground, who is about to crash to his death, and you can say to him on the radio telephone: "How are you going to get the aeroplane out of the spin?"—a perfectly fair question—he could reply—
LORD LUCAS OF CHILWORTH: He would not have the time.
LORD BALFOUR OF INCHRYE: —"I ought never to have got it into this spin." That is our answer to the Government: they ought never to have got us into this position. For one thing, we would never have tolerated the Dalton era of finance in this country, with the issue of Government stock at 2½ per cent., with a loss of nearly half their capital to small investors, who now see their Government stocks worth £68.
The Government now appeal for national unity. We have had many appeals, from the Prime Minister and others, for national unity in an hour of crisis. I submit that it is a farce for the Prime Minister, or any member of the Government to call for national unity in an hour of crisis while many of the Ministers deliberately divide the country into two sections—namely, those who are worthy of praise, because they support the doctrines of Socialism, and those who dare to oppose those doctrines, who must be oppressed and suppressed in every possible way. While the Government obstinately cling to the powers of Socialism—which, after all, have been rejected by more than half the electorate of the country—I do not see why we should be expected to respond to calls for national unity, or to support the Iron and Steel Bill and the Parliament Bill, as we were exhorted to do by the Prime Minister in another place. Whatever nationalisation may or may not have done to our national economy so far, there is no doubt that the passage of the Iron and Steel Bill and the nationalisation of insurance must in the future adversely affect the balance of payments of this country. We on our side are more entitled to appeal to the Government for national unity, to ask them to throw over these measures, than they are entitled to ask us to agree with them.
Let me now come briefly to the second problem, the closing of the dollar gap. Here I can speak only for myself, but perhaps I speak for some noble Lords on all sides of the House, because the solution of the problem of the dollar gap is something which cuts right across Party politics. Many people have ideas which are in accordance with those of their Party leaders; others have ideas which are at

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variance with those of their Party leaders but nevertheless subscribe to a particular point of view. I ask myself two questions. First, is it possible to bridge that dollar gap by means of export to hard currency areas as proposed by the Government? Secondly, if there is a doubt, is it desirable that we should concentrate, as it were, all our first priorities in an attempt to do this in the way the Government propose, or is there some alternative course that we might follow? Personally I very much doubt whether we are going to bridge the dollar gap—for three reasons, which I would like to put before the House. First, I doubt whether we shall be able to produce a sufficiency of goods at the right prices, because I believe we are handicapped by a Government-restricted economy; industry is handicapped from turning out the maximum number of goods at the lowest possible prices. Secondly, I believe that the Socialist economy puts on industry a crushing burden of taxation which must be reflected in production costs. Thirdly, there is in many of the vital export trades a shortage of labour which I cannot see being overcome without grave Government steps in the future in the way of direction of labour.
Further, I do not believe that devaluation is a remedy. Devaluation itself does not restore confidence in the pound. The Chancellor of the Exchequer has said:
"…a new vista of export possibilities has opened up…"
because of devaluation. But I submit that devaluation has already been discounted in the capitals of the world. Your Lordships may have seen in the Financial Times ten days or a fortnight ago that Palestine has now arranged for a special preferential rate of the pound—a low, discounted pound as an inducement for dollar traders into Palestine. Noble Lords in touch with the City know that what is called the dollar-pound switch has already started in Amsterdam with wools —a primary commodity—with the pound at a rate below the devalued rate. I believe that until there is confidence in the pound—and there cannot be confidence in the pound so long as we have this Government, or so long as they pursue their present policy—devaluation will be nothing but a temporary shot in the arm.
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Thirdly, I believe that if we look like being successful in our export policy we run a great danger of the United States raising tariffs against our goods. The noble Lord, Lord Pethick-Lawrence, said that it was a policy of despair to doubt whether the United States would take any of our goods. Of course it is. The question, however, is not whether the United States will take any of our goods but whether they will take enough of our goods to allow us to bridge that gap. I doubt whether Congressmen would see their constituents put out of employment for the sake of better world trade somewhere else. Maybe they should, in the greater interests of internationalism, but human nature being what it is I very much doubt whether they would. Let us remember that President Truman only recently emphasised that the opposition to the removal of trade barriers was not confined to big business, but was shared by the trade unions themselves in America. It is for that reason that I believe that if we ever looked like succeeding, America would campaign politically for higher tariffs.
LORD PETHICK-LAWRENCE: It may be so, but that is a counsel of despair. The noble Lord seems to me to ignore the fact that it is not in the interests of world trade; it is not in the interests of American exporters, because if America will not import she cannot export.
LORD BALFOUR OF INCHRYE: That being so, it is curious that America still has such high tariffs. Maybe America ought to lower her tariffs—maybe she does not know what is good for her—but the fact is that she has not lowered tariffs to any degree since the Hawley Smoot tariff in 1930. I claim some right to be allowed to express doubts of those who now reassure us that everything will be all right; that we shall bridge the dollar gap and that we shall be able to export sufficient goods. They have been wrong twice. We were told in this House in 1946 that the American Loan would bridge the gap until the wheels of world trade turned once more. Next we were told that Marshall Aid would tide us over until our dollar exports paid for our dollar imports. Both those hopes have been confounded, and I can see no reason or sign why those who advocate the continuance of this policy are likely to be right the third time. I

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believe that their assumptions are basically wrong and unsound.
The noble Lord; Lord Pethick-Lawrence, said it was a policy of despair. Not a bit. Let us examine for a moment whether there is not some alternative policy to trying to use all our resources to bridge this dollar gap. First, I would submit to your Lordships that the days of free world multilateral trade have gone. That requires conditions which do not exist, and I believe are not likely to exist, in the post-war world. May I enumerate them? Free prices based on supply and demand is the first requirement. The next requirement is free currency convertibility. The next is free competition. The next is free movements of population. The next is elimination of import controls and, above all, a basic internal economic equilibrium—something which certainly does not exist at the present time.
LORD LUCAS OF CHILWORTH: Would the noble Lord answer this question? Does he think that any of those admirable objects could be achieved with the disequilibria there are in the country at the present time?
LORD BALFOUR OF INCHRYE: I very much doubt it, but I think that disequilibria will continue. I submit that we have neither these requirements for the future, nor a prospect of satisfying the Chancellor of the Exchequer's definition of the essential requirement of pre-war multilateral trade. He said:
"Indeed, the whole system of multilateral trade in the world centred upon this earning by the sterling area of a large dollar surplus."
I can see no prospect of that happening in the future. The Chancellor is reported in The Times to-day as saying:
"Britain had stated frequently that her aim was to restore a world-wide system of multilateral trade with convertible currencies and she had consistently sponsored measures to bring that about."
I agree; but I submit with all deference that because we shall never attain those essential factors for multilateral trade I do not believe we shall succeed in this way. Therefore, I submit that if we are doubtful of being able to bridge the gap in the future we ought to ask ourselves: Should we continue to use our resources towards a target so doubtful of attainment, or should we look for an alternative course?
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May I in a few moments put the alternative course? It is for Britain to use her special position as the political centre of the Commonwealth and the financial centre of the sterling area to create a new system of reciprocal multilateral trade. The Chancellor of the Exchequer in another place postulated this question:
"What is to happen when Marshall Aid comes to an end? How then are we to get the cotton, non-ferrous metals and other raw materials and foodstuffs without which much of our production must stop?"
Surely we might have ensured in the past, and we still have time to ensure in the present, by a bold policy of Empire development, that we shall obtain those raw materials away from the dependence upon the hard currency country of America. I believe that the alternative do striving for the solution which must essentially rest upon dollar dependence—the solution along the lines of which the Government are moving—lies in a stimulation of Commonwealth trade. I can give your Lordships only half a headline so to speak —a bold and vivid Colonial Empire development, an invitation to our partners to expand the scope and measure of Imperial Preference and to get away from most-favoured-nation treaties. These are some of the lines we could follow, and in doing so I believe there would be benefit for all, not only in this country but for the indigenous inhabitants of the Colonial Empire. There would be a constantly growing demand for consumer and capital goods.
There is a lot in the papers about the around-nuts scheme. In my view the conception of great Empire schemes like the ground-nuts scheme is absolutely right and sound. But in having one groundnuts scheme badly situated and extravagantly administered, when there are 500,000 tons of ground-nuts at Kano waiting to go to the coast, I think the Government are vulnerable to criticism. Quite apart from Party considerations, I believe that any men who can put forward schemes comparable to the groundnuts scheme are men worthy of support from all Parties. I would just remind your Lordships that our trade with the Empire for the years from 1932 to 1937, which is the last normal year we can take, was as follows. Approximately half our total exports were to the Commonwealth and Empire and between one-third and one-

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half of our imports came from the Empire. That proves that the Empire is still the predominant single unit in our trade position.
The figures for 1932 to 1937 show that there is nothing inconsistent in the development of Empire policy and the growth of world trade; on the contrary, that general world trade is stimulated and helped by concentration upon Empire development. I personally support fully the idea of freer trade within Europe for the exchange of manufactures, always provided that our own wage standards in this country are not menaced by low wage level products in competition with ours in markets which have previously been our own. I naturally support to the full the idea that we must have the greatest amount of dollar trade we can. I would not like any of your Lordships to think that I am saying we ought not to do the maximum amount of trade with America. But I do not believe that our trade with America will be sufficient to bridge that gap, and I think we ought to turn elsewhere to solve the problem. Let us always give priority of place, resource and effort to an Imperial sterling policy rather than to a policy of trying to bridge the dollar gap by exports to the United States.
I am grateful to your Lordships for allowing me to put forward these alternative ideas. Such a policy is not just one of tariff preferences. It is something of far wider and greater conception. It means a policy of priority for shipping, for aviation, for finance, for railways, for roads. It must postulate Government control of migration. It must postulate a Colonial development in which all parties are partners, sharing responsibilities and sharing benefits. All members of the Commonwealth must be partners in that development. It is worth remembering that there is a spiritual significance, which is as dear to many people in various parts of the Commonwealth as it is to us, in the conception of a great Empire with the same ideals and able to trade brother with brother.
Of course there is no easy way in any direction for Britain, and whether the policy followed by the Government, of concentrating primarily on increasing dollar exports, or that of the Imperial Sterling bloc, which I have tried to put
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forward, is the right one, we must have the greatest possible increase in the productivity of this country in agriculture, in coal, in livestock and in manufactures. I believe that to-day we face in the main the same problem as your Lordships faced in this House in 1946. If we had then rejected the Loan and concentrated on an Imperial sterling policy, where might we not have been to-day? I wonder whether we could not have pulled through that critical year 1946 by getting a Loan from America on commercial terms, in the same way as France did at that time. It is worth thinking about. At any rate, now that we are facing, the same problem as we faced in 1946, let us consider where we might have been to-day had we followed an alternative course; for, after all, we have several times been promised solutions, and each time those who have promised have "fallen down." If we had taken a Loan on commercial terms, as France did, free from the strings of Bretton Woods and Havana, who can say what might not have happened?
LORD BRAND: I hesitate to interrupt but I was present at the negotiations as one of the negotiators, and I feel that the noble Lord is too optimistic in his view that we could have obtained any better treatment than we received at that time.
LORD BALFOUR OF INCHRYE: I must naturally accept what the noble Lord says. Let me say only that if I am too optimistic now, my optimism is nothing to the optimism of those who supposed when we took that Loan that convertibility would be easy. We know what happened then. They said that the Loan would tide us over until the wheels of world trade were turning once more, and they told us afterwards that Marshall Aid would bridge the gap. They were optimists three times, and each time they failed. I am being optimistic only as to what might or might not have happened. I feel sure that the Government way does not provide the final solution, and that within nine or twelve months from now your Lordships will be facing the same crisis for the fourth time; but it will be more severe, and Britain will be less able to cope with it than it is at the present time. I believe that we are not going to succeed in bridging this dollar gap by pursuing a policy which has failed twice,

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and while I want to see the greatest degree of world trade possible I submit that there is this alternative course which, even now, it is not too late to follow.
5.56 p.m.
LORD ELTON: My Lords, I have listened with the greatest interest to Lord Balfour's speech, particularly to that part in which he dealt with the possibilities of the development of Imperial trade. I must deny myself the pleasure of dilating on that theme, however, because I have every hope of occupying your Lordships' attention for as little time as any other speaker in the course of this debate. All that I wish to do is to say a few words on behalf of a class of citizens who are sparsely represented in your Lordships' House but who, I believe, number a good many millions in the country outside—I mean all those persons who to-day, for various reasons, would much prefer to see a National Government to a Party Administration, of whatever complexion: who believe that unless and until we muster the courage to form a National Government we shall continue to fumble and stumble, as we are now fumbling and stumbling, from one stage to another of an ever-deepening crisis.
A year ago I ventured to say in your Lordships' House that I could not believe that this Government, or for that matter any other Party Administration, would be strong enough when the time came to adopt a policy capable of arresting the slide towards the economic abyss. I must say that at any rate the speeches from the other side of the House this evening have gone to confirm the rightness of that view. It would be superfluous for me this evening, even if I were qualified to do so, to deal with particular details of the economic theme which has been and will be authoritatively explored from many different angles in the course of the debate. It is perhaps sufficient for me to say that in general terms I share the view which has been pressed from the Benches opposite, and which I imagine inspired those who framed the Amendment which is now before your Lordships—that is to say, the view that, after a grandiloquent ministerial prologue worthy of an act of formidable parturition, the proverbial mouse to which the mountain eventually gave birth was not ridiculous only, because it was so obviously tragic.
The respect in which I shall probably not agree with the majority of your Lord-
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ships is that I do not believe a simple and satisfactory solution of our troubles would be to replace the Socialist with a Conservative or, for that matter, a Liberal Front Bench. It is asking a good deal of any Party Administration, on the eve of appealing to an electorate long trained to consider its own pockets first, to impose the alarming and formidable economies which many of us (and certainly, I think, most of your Lordships) believe are necessary if we are to survive. How tempting to play for time, to play for their own hand ! How tempting it would be for any Government, not merely the present Government. But, so far as they are concerned, how tempting it is to tide over the few months needed for the maturing of their two major controversial measures by imposing economies which will admittedly do some good but which, whilst not doing enough good to save us, will not antagonise any formidable organised body of voters! In other words, it seems to me that these are economies on which, as has been pressed constantly from the other side of the House, whatever can be said in their favour the ultimate verdict must be that they are in the last resort inadequate. If £350,000,000 can be saved with, comparatively speaking, little inconvenience to anybody, then surely, in view of the state of the national balance sheet, it is lamentable and indeed scandalous that that sum was not saved over three years ago.
LORD CALVERLEY: The figure is £280,000,000.
LORD ELTON: My point is that if these cuts which have been detailed to us and which I understood were at some indefinable point between £250,000,000 and £350,000,000—£280,000,000 is even more to my point—can be imposed with, so far as one can see, comparatively little inconvenience to the general public, then surely, in view of the state of the national balance sheet, they should have been imposed two or three years ago. When the grand object of any Party administration has been achieved, when the next Election has been won, it will, of course, be possible to impose a further instalment of economies, possibly of that vindictive and retributive character which seems to commend itself to some members of the present Government but which it would obviously not be judicious to enforce so near to a General Election.

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What it is so easy to forget, and what I sometimes think His Majesty's Government are in danger of forgetting, is that we are perilously engaged upon two fronts. We are, after all, fighting a cold war which may at any moment burst into flames, and we are combating an almost desperate economic situation. I do not think it is an exaggeration to say that the dangers which surround us now, if less obvious, are not less formidable than those by which we were beset in 1940 and 1916. Indeed, it is possible that just because they are less obvious they are even more formidable. We all know that we should not have survived those perils in either 1940 or 1916 if, like so many foreign democracies from Athens onwards, we had failed to achieve temporary national unity in the face of danger. I am afraid that unless, before it is too late, we have achieved temporary national unity in the face of danger, our chances of survival are comparatively slender.
I know that the task of achieving any sort of political unity bristles with difficulties, but I cannot bring myself to believe that they are as insuperable as they are usually represented to be. At any rate, the gulf of principle between the opposing Front Benches certainly does not seem to a detached observer to be anything like so formidable as it doubtless appears to one who is in the forefront of political controversy himself. After all, the Parties led by both of those Front Benches have repeatedly committed themselves to the nationalisation of various industries and undertakings; and, judging by the promises which both have already made to the electorate, neither will be in a position to reduce the high taxation which is effecting the real social revolution to-day. I can see a difference in degree between the two major Parties, but I cannot for the life of me see any genuine difference in kind. And if the lead towards national unity which many millions of ordinary citizens would desire to see is to be given anywhere, where could it be given more appropriately than in your Lordships' House, which has always set little store by Party ties but has so often set a salutary example in the past?
6.5 p.m.
LORD MARLEY: My Lords, Lord Elton will not expect me to follow him
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in his original, lucid and, as usual, interesting observations. He always gives us food for thought—but that is not sufficient to sustain us without the other kind of food as well. I have noticed in the debate so far that little has been said about the second aspect of the Prime Minister's statement in another place which is under review in your Lordships' House—namely, the question of increasing productivity. The noble Lord, Lord Rennell, posed the question, Is there any proposal to increase production? The answer to this question he himself gave in the negative. He said that there is no such proposal. I was interested in the categorical statement of the noble Lord, Lord Balfour of Inchrye, that it was essential to increase our productivity. But he, who is so capable of making a real contribution to the details of how to do that, did not do so to-night —no doubt because of lack of time. I hope, therefore, that your Lordships will forgive me if for a moment or two I draw attention to an aspect of this problem which has so far escaped analysis in this House.
The Prime Minister devoted approximately one-third of the time of his speech in another place to dealing with the details of increased production, which he called the positive side of the Government's policy. He stated that the Government had been pressing on with increasing productivity during most of their existence. He said also that great advances have been made, but that these advances were spread very unevenly over our industries. He pointed out that in many firms, and, indeed, in some whole industries, little or no advance in productivity had been made. It is, I think, worth spending a moment or two on considering what the Government have done.
I would remind your Lordships that in their very early days the Labour Government appointed a Cabinet Committee on industrial productivity, presided over by a very brilliant expert, Sir Henry Tizard. The first Report of that Committee was published some six months ago. There were four panels in the Committee. I will refer only to one of them —namely, that on human relations, of which Sir George Schuster was and is Chairman. It dealt with the human factors in industry as a vital contribution

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to the increase in our productivity—because unless both employers and workers are fully informed and are in complete agreement as to the joint effort that they must make to secure this improvement, we shall get nowhere. Therefore, the importance of the human factor in industry must never be lost sight of if we are to succeed.
The Government, further, started and have subsidised the British Institute of Management. A grant of £150,000, spread over a number of years, was given; and Sir Charles Renold, an extremely well-known industrialist in the north, was put in charge. After all, in the end, productivity must depend upon the efficiency of the managerial side. The Ministry of Labour themselves have emphasised the importance of joint production councils and joint consultation. I would commend to your Lordships a study of the work now being done by Mr. Lloyd Roberts in charge of the Ministry of Labour Department of Joint Consultation and of Joint Productivity Committees, because Mr. Lloyd Roberts has had immense experience with Imperial Chemical Industries. I think we are fortunate in having at our disposal his experience in the work we are trying to do.
I now come to two small points that I want to mention with reference to the Government's efforts to deal with improvements in productivity. One is an interesting monthly publication called the Bulletin for Industry which is published by the Economic Information Unit of the Treasury. Any of your Lordships who has not seen and does not react this publication regularly can receive copies through the Printed Paper Office. It is very simple. It is a little monthly analysis and it represents a means of making the ordinary public aware of what is being done. The last point I want to mention in this connection is a popular publication called Target which gets into the factories and workshops. It is now being displayed in several thousand factories and it contains in its centre a simple illustrated picture of our economic difficulties. The least well-informed can understand the position merely by an analysis of the pictures which are presented on factory notice boards and in the rest rooms of the workers.
There is one other point in this connection which I wish to mention—that
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is, the encouragement given by the Chancellor of the Exchequer and by Mr. Hopkins to the formation of the Anglo-American Council on Productivity. That body issued its first report in November of last year and its second report last April. It has made arrangements for thirty teams to go from this country to the United States to study productivity methods. I may say that there have been born from this Council two exceedingly interesting reports. One is the report on Steel Founding, which was published about a month ago and which is, I think, one of the most exciting and interesting documents that has come into our hands. This morning there was published the report on Simplification in Industry, which again is well worth reading. Any members of your Lordships' House can obtain it by going to the Federation of British Industries, to whom we are profoundly grateful for help in enabling these teams to go to the United States. This report can be obtained at their office, which is within about 500 yards of your Lordships' House.
I shall say a word about steel in a moment or two, but I want to refer first to the Simplification in Industry report. It is an exciting publication. Let me give one example which is there included. By the elimination of items manufactured in the valves and fittings industries in the United States, the total number of items has been reduced by more than 51 per cent. On analysis that 51 per cent was found to represent only 1.5 per cent. of total sales. The result is an immense saving in the cost of production and a great increase in productivity by the simple factor of elimination of all unnecessary items in manufacture. We are doing something along those lines in this country. The Report of the Lemon Committee, which was also issued this morning, is along very similar lines and can again be obtained and read by any members who are interested.
Let me now pose the question: How has industry responded to the efforts by the Government? Let me say at once that, taking into account the extraordinary difficulty of the inherited traditions of the Trades Union Congress, that Congress have made a remarkable contribution. It is interesting that the strikes which have occurred since the war have in almost every case been unofficial strikes

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opposed by the official unions. I want to make a brief correction to a statement that was made a moment ago. The number of days lost in strikes since the war has been only one-seventeenth of those lost in the same period after the first World War—I believe I am right in saying that—and only one seventeenth is not a bad record. We have much for which to be grateful to the T.U.C. in that direction. Here again, the Federation of British Industries has responded remarkably. But we know that a number of firms have shown an unwillingness to be co-operative, or at any rate a failure to reach the level of the best. I was a little sorry to see in the paper the other day a report of an organisation apparently called the Institute of Directors. Two members of your Lordships' House are vice-presidents of that organisation. I would ask them to use their influence to persuade the Institute of Directors to be a little more co-operative than they would appear to be, judging from the report in the Press.
I want to conclude by touching upon two industries in particular. The first of those is the cotton industry, which has been a profound disappointment not only to the country as a whole but also to many of your Lordships. The reports issued by the Board of Trade last month give, as they said at the conference at Harrogate,little cause for satisfaction, and the cotton drive is faltering badly. The Manchester Guardian said that on the latest figures we were down to something like 60,000,000 yards in our exports to countries other than Commonwealth and Empire. There was an interesting item in the cotton conference at Harrogate which illustrates, to some extent, the lack of co-operation that has been shown in some parts of the cotton industry. The Manchester Guardian stated that the most significant point about this conference, at which incidentally the Prime Minister and the President of the Board of Trade were present, for a time at least, was the presence for the first time of many representatives of the merchandising firms in the cotton industry. That, standing alone, is an interesting fact, but let us take it in conjunction with the findings in the Report of the Cotton Working Party, issued in 1946. That Report states:
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"Charges for distribution in the cotton textile industry have been taking a toll of the industry far larger than is consistent with the national interest."
It goes on to say:
"There is room for substantial improvement in the quality of the service rendered by distributors as a whole."
It is not co-operation in a national drive for increased productivity when the merchandising experts in the cotton industry do not trouble to attend the annual conference of the industry to see what they can do to make their contribution to the national need. The cotton industry is one of the oldest and most important of the industries in this country. It is a tragedy that so little has been learned.
In 1944 we sent the Platt Commission to the United States, and they found that the production there per man-hour was twice what it was in this country. They said that in the thirty-six years up to 1939 the cotton industry in the United States had quadrupled the value of its products; had quadrupled its wages; had lowered its labour force by 40 per cent., and, at the same time, had reduced hours of work from 60 to 40. The Platt Commission ended by saying:
"During the period cited labour productivity in Britain has shown little change."
My Lords, that great industry is not making the contribution it might. We want to help those who are in charge to help us. That was why the Government some eighteen months ago introduced in another place a subsidy Bill for amalgamations in the cotton industry, and offered by way of contribution 25 per cent. towards the cost of all new machinery if only the firms would amalgamate for greater efficiency and productivity. I am sorry to say that I understand from the latest figures that less than half of the textile firms engaged in cotton production have taken advantage of that offer. My Lords, why did we lose the shuttleless loom invented by Sulzer in Switzerland? It was a great tragedy that in 1945 that loom, which was available for this country, was lost and went to the United States in 1946. It would have done a great deal to help us solve our problem of productivity in the cotton industry, if only the industry had been a little more alive to the needs of the country.
LORD BRAND: I hesitate to interrupt the noble Lord but might I ask him one

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question, because I would like to know whether the fault is all on one side of the industry? An American friend of mine who runs a textile business in this country said a few months ago, "I have imported new and much better machinery into this country but I cannot get my workmen to use it. What shall I do?" I said, "Persevere, and no doubt in time, they will agree." I mention that because it sounds as if the fault is all on one side—I do not know whether that is so. Perhaps the noble Lord in his very interesting account could say whether he thinks that is the case or not.
LORD MARLEY: I had intended to come to that point. When I say "the industry," I mean both sides of the industry where both sides are involved. The workers, of course, are not involved in management; but in problems of wages, new methods, and things like that, the workers are involved. Let us be quite frank about it. They have been extremely sticky in accepting re-deployment and new methods. I may say that there we inherited a very evil system of internal organisation of methods of production—namely, the Bedaux system. When this system was put into the mills it was resisted by the workers, because they remembered what had been the result on them of the introduction of the Bedaux system, without any consultation with them, years before. The noble Lord is perfectly right: both sides must bear some responsibility in this matter.
Two other committees have dealt with this industry within the last few weeks. The Moelwyn Hughes Commission dealt with re-deployment. I want to quote only this sentence from the Report of that Commission:
"The Commission has found an answer to many of the most pressing problems of cotton manufacturing. There is no excuse for the delay which has already occurred. There is yet time, but it presses. Our last word to Lancashire is: Get on with it."
I trust that, with the help that these various Commissions have given, Lancashire, will, in fact, get on with it.
My last word is in regard to the steel industry. We have heard a great deal about the efficiency of the steel industry. The noble Lord, Lord Balfour of Inchrye, mentioned it again to-night, and other noble Lords have referred to it. I have with me an interesting little booklet
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called Steel News, which is published by the British Iron and Steel Federation and which states categorically that the steel industry is entirely and utterly efficient. The same thing is said in another little publication which your Lordships ought to have seen, called The Iron and Steel Bill, which does not seem to like nationalisation. I may be wrong, but I seem to read in it some criticism of the nationalisation of steel.
I think the most important and authoritative publication that we have had was the publication I referred to a moment ago—namely, the report of the productivity team of the Anglo-American Council on Productivity of Steel Founding. This report is an admirable document. The only objection I have to it is that the cover comes off because it is inefficiently glued on at the back. But the cover does not matter; it is the inside that counts. Anybody can buy this document for three shillings, and it is worth about ten times as much. The publication is described by The Times as a "remarkable and timely document." Its conclusions and recommendations, to which I am going to direct attention for only a second, indicate that there are a good many ways in which the steel founding industry might become much more efficient. After all, the first requirements of greater efficiency are to recognise that perfection does not exist and that there are lines in which there is inefficiency. We cannot put right what we do not know exists, and here is a simple guide to the steel industry. All the lines of production of steel founding are analysed: and where there is a fault it is clearly and sympathetically pointed out.
Before I sit down I will mention only these few points. First, the question is put: Is high productivity really desired by British steel founders? Over what features in the British industrial system does the desire for high productivity take preference? It is a very good question. They next proceed to ask—and I think that the noble Lord who was speaking a few moments ago will be interested—these three questions: Is high productivity more important than the organisation and customs of the trade association? Is high productivity to be sacrificed so as to retain intact the existing methods of the employers' organisations? Are trade union practices, built up over the years

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before the present economic dangers, to remain unaltered at the expense of high productivity? Those are three questions which they pose.
They go on to say that many of the steel foundries in Britain have grown up haphazard into a jumble of buildings in which it is difficult to follow the sequence of operations, let alone design an even flow of work. It is a long-term operation to reconstruct them, but the choice is surely clear—either they are put into more efficient form or they come under the hammer prepared for the inefficient. For there is inefficiency in the steel industry, and I would advise the industry to put it right as soon as possible, lest worse befall. We know that the steel industry has made contributions; we know what has been done in lowering the amount of coal required to produce a ton of steel; we know that there has been good feeling in the industry. But, let us be frank about it, there are other things to be done, and I venture to suggest that this most important industry might make a greater contribution to the nation's need at the present time. It is for that reason that I have emphasised, for a short while, the need for higher productivity in this country. I ask that I may be forgiven for having exceeded, by a few moments, the time which I had intended to take on this matter because of the great importance which I believe it holds in the minds of every one of your Lordships to-night.
6.33 p.m.
LORD HAWKE: My Lords, I cannot help being tempted by some of the succulent hares which have been raised by the noble Lord to follow him on one or two points. I should like to say first that although I am not a member of the Institute of Directors my recollection of the tenor of the passage he mentioned was that the Institute did not wish to co-operate in the nationalisation of insurance and sugar; the passage could not be taken as any statement that they did not wish to co-operate with His Majesty's Government in industry generally. I think that the noble Lord will probably find that that is correct when he looks at the passage again.
I was greatly interested to hear the noble Lord put in his plea for the greater efficiency of British industries in general,
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particularly in comparison with those of the United States. But what is there behind the industries in the United States? In the first instance, there is more capital. Now, you cannot put more capital into an industry until there are more savings or more profits. If there are no savings, and the noble Lord and his colleagues are not keen on there being more profits, I do not see where we are to get more capital to give our men greater facilities to work. The noble Lord has carried cut some interesting researches into the levels of production of industry, the better and the worse. I wonder whether he has had time to look into the achievements of the Royal Ordnance factories, because I should be greatly interested to hear whether all of them are up to the level of the best. I will not follow the noble Lord to Lancashire, where I served my apprenticeship, but I will say that I do not compare Lancashire production with that of the United States. I have always compared it with the production of Japan. In the olden days a Japanese girl would do a lot more work for eightpence a day than the Lancashire lady who was, so to speak, her opposite number would do for five or six shillings a day. That position looks as if it is going to recur, and Lancashire is getting very frightened about it.
LORD CROOK: Is the noble Lord advocating the adoption of the system used in Japan in the matter of employment?
LORD HAWKE: Good heavens, no! I am merely giving warning that that position is coming gack. It is not America that we have to watch in connection with cotton, it is Japan.
I wonder very much whether all the followers of His Majesty's Government fully understand the nature of the present crisis. The question facing us is not whether the measures which the Government have suggested to meet the crisis are likely to meet with the approval of the Labour Party and the Trades Union Congress, or even of the electorate. The question is whether those proposals, together with the Government's proposals on which they seek re-election at the next General Election, taken with the prospects of their not achieving re-election, are sufficient to reassure the holders of millions of pounds in British I.O.U's

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that they can safely leave their money in Britain and add to it. It is these conditions that His Majesty's Government have to meet, and it is by this criterion that they will ultimately be judged.
There are two economic systems in the world which appear to work. There is the capitalist system by which we, in this little island, support 50,000,000 people, where probably providence intended only 25,000,000 to dwell, and there is the Communist system under which, in a large self-supporting area, they are still struggling to provide their employed workers with a living equal to what we were able to give to our unemployed in the past. The holders of those I.O.U.'s which I have mentioned believe in the capitalist system, and they also believe that Communism would mean such a disastrous fall in our standard of living that their hopes of having their I.O.U.'s met would he dissipated. His Majesty's Government have embarked on a third system which they call Socialism. They believe that it contains all the virtues and none of the vices of the other two systems. They are fully entitled to believe that; any man is entitled to his belief. But the trouble is that the holders of the I.O.U.'s do not believe that, and they are the people that matter.
They believe—I must say that I reluctantly share their belief, and we have some support from the major and minor prophets of Communism—that the road called Socialism comes to a fork. The right arm of the fork leads back to humanised capitalism. The left arm of the fork leads gradually to Communism. The holders of the I.O.U.'s believe that His Majesty's Government have just about reached the place where the road forks, and they are apprehensive as to which of these two paths the Labour Party are now about to push them along. If they took the right hand path, that would lead them to a humanised capitalism; it would be considered that they were fit and proper people to lead the sterling area, and then such adjustments as tightening our belts and rolling up our sleeves would probably see us through. But if they take the left hand path in their Election programme, nothing except their resounding defeat at the polls can save us from a continued flight from the pound.
No country in our position can possibly sustain a continued flight from
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its currency. The sterling area certainly cannot stand any such flight from the pound. Unless quickly stopped, the whole system is bound to break up, and Britain will be left in isolation to take those extremely drastic measures to provide a watertight exchange control. The restriction on movement and the restriction on correspondence would be such that we could no longer call ourselves a free democracy. So far as I know, Russia is the only country that has ever produced a watertight exchange control, and that because I believe there is no money exchange to control. This would be the outlook if we failed to convince the world with which we trade that it is safe to leave their money with Britain.
What can His Majesty's Government do at this juncture to reassure their creditors? Nothing in the political field has disquieted them more than the determination of His Majesty's Government to nationalise the iron and steel industry and in so doing to upset the traditional checks and balances of our constitution. The abandonment of these two measures would signify to our creditors that His Majesty's Government had at any rate stopped at the road fork and were looking at the sign post. After that, I think, a programme of rigid economy would create the most assurance. Whatever noble Lords opposite may say, there is no doubt that the Government's policy during the last four years has been tempered-by the fact that Departments have realised that at long last an era of soft going and loving kindness has started with the Treasury; and they have been prepared to make hay while the sun shone. We can all cite instances of money spent which need not have been spent, or the spending of which could well have been postponed. We all know dozens of small instances; in the aggregate there must be hundreds of thousands of such instances and, in the course of four years, these must amount to hundreds of millions. Then the stories which our creditors have heard about the National Health Service have filled them with disquiet. On the whole they are under fewer illusions than His Majesty's Government are about the essential nobility of man. It may be that they come from less noble stock than the British, but the provision of

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free medicine, free teeth, free spectacles and—crowning joke of all—free wigs, has seemed to them to be asking for trouble; while to extend this munificence to foreigners has seemed to them stark, staring lunacy. The charge for medicine may comfort them a bit, but it would have reassured them more if there had been a similar charge for spectacles, teeth and wigs.
So far I have suggested one or two things which His Majesty's Government might do now that would help to reassure our creditors. What about things we can do as a part of national policy, no matter what the complexion of the Government who may happen to be in power at the time? The whole problem boils down to the pursuit of our food and raw materials, the things we need if we are to survive. Of course we shall have to look for very much more from our own fields. I will not elaborate this matter, because other noble Lords are well qualified to do so. I am glad that my noble friend Lord Balfour of Inchrye made certain statements about the dollar. I was one who would have voted for the American Loan, but I had no idea it would ever be spent in the way it was spent. I would have voted for a Loan, believing that it would be used to develop the sterling area, and on such a ground I think I should have been justified. I wonder whether we should not regard the Canadian market as more important than the American. After all, there we have logic on our side. The United States would not die if they did not export a single thing. Canada would. For that reason their economics are much more biased on our side. But in the search for dollars we must not neglect those markets which have stuck to us through thick and thin. Nothing would contribute more to break up the sterling area than the belief that all the best goods and best deliveries were going to America. The American market will always cause us anxiety. It will at times cause serious losses to our exporters; it is, in fact, a fair weather market. I feel that in pursuing the American dollar to the exclusion of everything else we might be gaining the shadow and losing the substance. However, even if we look towards the sterling area our prices have still to be competitive with America and our
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other competitors if we are to keep the sterling area together.
What about our trade relations with the rest of the countries who are producing our food and raw materials? They are completely overshadowed by the existence of import licences, a weapon of our invention, but the veritable atom bomb of trade. This frightful obstacle to our trade, however, brings us one compensation: it brings a more hopeful prospect to those people who believe in Empire free trade. I think most of us believe that the manufacturing industries of our Dominions are too strong a vested interest ever to hope to eliminate inter-Empire tariffs. But tariffs are no longer the first obstacle to trade; the import licence has taken their place. If in a licence-ridden world we can create an area within the Empire where we trade with each other to an unlimited extent, entirely free from licences, subject only to the usual tariffs and tempered by flexible exchange rates based on supply and demand, we shall have created a freer trade area than can exist outside and we shall have achieved the substance of Empire free trade.
My noble friend Lord Balfour of Inch-rye said that convertibility and multilateral trade had possibly passed for ever. I ask noble Lords who advocate, and rightly so, convertibility and multilateral trade whether they think that import licences will ever cease in our time. If not, they must consider whether convertibility and multilateral trade can exist when at any moment our goods can be completely shut out of a market where it is necessary for us to send them to pay for our food. However cheap and good these goods may be, they are still likely to be shut out. In fact, the cheaper and better they are, the more likely they are to be totally excluded.
In face of those facts it is difficult to believe that we can ever get back to the old system. I do not believe that we can restore confidence in our currency by holding out hopes of its convertibility. But surely we can restore confidence by making it able to buy cheaply and in quantity the goods that the world requires, both in this country and in the free sterling areas.
I have not much more time, but I would like to say in conclusion that if any words of mine happen to be read by individual

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members of the Labour Party I beg them to consider carefully where they stand. A creditor nation can possibly afford to seem to want to pull the roof down over its head in order to build a better one; a debtor nation cannot afford to do so. In the strugggle for the survival of 50,000,000 people in our little island the real point at issue is not whether the electors of the borough of Blank or the county of Blankshire approve this or that policy: it is whether the present and future policies of His Majesty's Government, from whichever Party they may be drawn, can reassure our creditors that they can safely trust us with their money. Every statement of policy by the principal political Parties is now weighed up, together with their chances of gaining power, as an indication of whether or not we are likely to be 'able and willing to honour our I.O.U.'s. If ever the world decides that our credit has gone, nothing can save us from more and more regimentation, until we finally end up in Totalitaria. Most members of the Labour Party have come to Westminster to look after the interests of the under-dog (they have no monopoly of those sentiments) and it would be a terrible irony if in their zeal to tread these paths they put back the clock a hundred years. After all, in the marathon race of social progress I think history shows that the tortoise is a better bet than the hare.
6.53 p.m.
LORD CALVERLEY: My Lords, I would not have intruded in an economic debate if I had not known beforehand, after reading newspaper after newspaper since the devaluation scheme was announced and the Prime Minister announced his plan, that it would be a political debate. I do so because, first and last, I do not apologise for the policy of the Labour Party since 1945. Every word of the noble Lord who has just sat down must be listened to with interest, because I understand he occupies a very responsible position in the Conservative Party: I believe he corresponds to what we had in the House of Commons—namely, the 1922 Club. Lord Beaver-brook, if he reads Hansard, will be interested in what he has had to say, and also in what has been said by the noble Lord, Lord Balfour of Inchrye—which I do not think will be approved by another leader. But I have not risen to say that exactly.
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In my view, this debate has been a political debate especially initiated by the noble Viscount, Lord Swinton. I intruded while he was speaking because of something he said in interrupting my own Leader and then quoting the memoirs of the late Lord Snowden. I have a vivid recollection of that crisis and, whatever may have been said in Lord Snowden's memoirs, I say in all kindliness to Lord Swinton that it was the Labour Party who decided to reject even the £56,000,000 suggestion of Lord Snowden; and they rejected with contempt the suggestion of the right honourable Member for Darwen in Lancashire (I am sorry he is not here: we now know him as Lord Samuel), who was in a position to put the Labour Party out or in—he held the balance of power in the House of Commons. When his terms were announced at the Labour Party meeting the House of Commons were in Recess. Nevertheless, we had a meeting at Transport House, and we decided to support the seven Ministers who were resigning. We would have liked Mr. Snowden (as he then was) to have been there, but he refused to come, as also did his Prime Minister.
That was the almost unanimous decision of the Labour Party then; and it was the unanimous decision of the Labour Party the other day to support the present Prime Minister in making some very uncomfortable suggestions to cut this, that and the other to the tune of £250,000,000. It is the Labour Party —not even the Cabinet—who decide what is to be the policy of the Party. The Prime Minister at the present time has behind him a united Party, notwithstanding what is said by the Press which oppose us—they have a right to oppose us; it is a free country. As for the suggestion that there should be an Election in November, the Prime Minister would have been daft if he had accepted the invitation and fought a General Election on a date suggested by the Party opposite. We shall never do that. But I did not exactly rise to say that.
I want to say this: the noble Viscount, Lord Swinton, was less than kind in his reference to the Prime Minister's broadcast. The Prime Minster smokes a pipe, but he has the confidence of the Labour Party. He also has the knowledge—it is unprecedented, I know—that the

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Labour Party have not lost a by-election since 1945, while Lord Woolton has the one small crumb of comfort of a moral victory at Edmonton—or was it moral? The Party opposite have been blowing their trumpets through the medium of the Press. I want to suggest that it is a great compliment to the British public that they prefer the still small voice even to the trumpetings of the Party opposite. Since August, 1945, the Party opposite have suggested that everything was wrong. The Prime Minister can pride himself upon the fact that every worker in this country has a bigger pay packet and that every competent firm is making bigger profits. Those are the incentives which they have had, and we believe that to be a better incentive than that of the empty belly, which we will not accept.
We have accepted the cuts. Even the British Council is going to suffer. I believe we can save money on the British Council especially beyond the Iron Curtain, if they are still in business there. Then there is the £1,000,000 we are going to save out of the £2,000,000 which was to be spent on legal aid, which I think is a good thing. I should like the Prime Minister, if I could reach him—I have spoken to him only about twice in the last five years—to inquire into the workings of the Arts Council. The Arts Council is depriving the Exchequer of money by licensing theatres and saying that they need not pay entertainment tax. I refer to one in the West End in particular, where one of the most sordid play s which has ever been staged has been certified by the Arts Council as a work of art. The noble Lord, Lord Hawke, mentioned wigs. I expected that. It is the "fall back" of nearly every fifth-rate comedian in this country.
LORD HAWKE: I do not think the noble Lord rates me highly at fifth-rate. When I go on a public platform I get no pay at all.
LORD CALVERLEY: I want to refer to aural aids, the most expensive of all. The noble Duke, the Duke of Montrose, and the noble Viscount, Lord Cecil of Chelwood, can take credit for enabling poor people who could not afford these expensive sets to hear, perhaps for the first time far many years. I hope the Prime Minister will take a small tooth
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comb and see what else he can do in order to reduce expenditure. Last August there were 340,000 people in the city of Leeds who received prescriptions and bottles of medicine. I was shocked that in eight months 2,384,000 people in Leeds alone were wanting prescriptions and bottles of medicine. On Sunday one doctor said that three of his patients had seen in the Press an advertisement for a patent medicine costing 23s. 9d., and he had three applications for it. He refused them. Something needs doing to jolt our people—they want jolting at times—to stop them abusing this great scheme, the credit for which noble Lords opposite claim when anything good comes out of it, but they debit us with any abuses.
I will close by making a plea to the Board of Trade for more flexibility in its regulations issued to some of the staple trades in this country. The trade I know best, the worsted and woollen trade, has worked steadily since 1939. It exceeded every target Sir Stafford Cripps set for it when he was President of the Board of Trade, and the Working Party was a great success. I was told early this morning that goods worth £23,000,000 were sold in the U.S.A. and Canada. If the present President of the Board of Trade would accept the proposal of both operatives and employers to continue the present splendid spirit of co-operation, I think he would do far better than by making compulsory orders. Here I believe I shall be treading on somebody's corns, but I do ask the Government to give the textile trade a chance to try out a Development Council, which has been agreed to by everybody except the Board of Trade. The Board of Trade agree to it, except that they want it to be compulsory. You can sometimes achieve better results from a horse if you ride it on the snaffle instead of on the curb; and I believe you should do that when dealing with Yorkshire.
One or two noble Lords have said that there was no response to the Prime Minister's broadcast. Within a week nearly every minefield north of the Trent exceeded its target. There have been improvements in almost every branch of industry in the industrial north. They have done that, not with the incentive of an empty belly or of increased wages, but because they realise that there is a call for them to do it in order to save

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this country of ours. I feel very much in earnest about this when I find some of my fellows deliberately going slow. The unofficial strikes do more to undermine industry than some of the major things which may happen to disturb us. In conclusion, I would say that the Conservative Party is not going to defeat the Labour Party. We cannot be defeated unless we defeat ourselves. If these people go slow they not only deteriorate in character themselves, but they have a bad effect upon the whole nation. Those people can perhaps upset and defeat our Party, but I venture to say that when the General Election comes, on Thursday, July 6, 1950, noble Lords opposite will have to remain sitting where they are.
7.10 p.m.
THE EARL OF ROTHES: My Lords, as one who ventures to address your Lordships but seldom, it is with some trepidation that I intervene on this important occasion. I am emboldened to do so, however, because I am one engaged in industry and the export trade of this country who is profoundly disturbed at the present state of affairs. I should like to refer to some practical aspects of the present crisis which I sometimes feel are at risk of being overlooked. I believe it to be true to say that the ordinary men and women of this country—that is, the great majority of the working population—whose co-operation is so vital to national recovery, remain both bewildered by and ignorant of the real causes of our present and continuing difficulties. To them such terms as dollar shortage, productivity, devaluation and unilateral trade mean very little. In their bewilderment as to what it is all about there may linger in their minds an impression, possibly due to propaganda during the inter-war years, that it is in some way just another bankers' ramp, or that it is due to some other kind of financial jugglery. It seems to me therefore imperative that the real issue should be made abundantly clear, in terms which will be understood by all and sundry.
I would suggest, with great respect, something like this. Prior to the First World War, as a country we were rich; we worked hard; we were thrifty as individuals; and Government expenditure was on a comparatively modest basis. Now, seriously impoverished by two great wars and, as a nation, deeply in debt, we
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work less hard; we are less thrifty; and the Government spend on a prodigal scale. That is the road to national bankruptcy, and devaluation is merely a milestone on it. The only lasting cure for our ills, of course, is to work harder and more effectively and to spend less. If that had been the Government's message I believe the response would have been immediate and widespread; moreover, I venture to think that much of the existing bewilderment would have been dispelled. As one engaged in the management of an industrial enterprise it is my honest belief that managements continue to strive and strain to build up and improve the businesses for which they are responsible, and that in spite of many disincentives—being told their plant is obsolete, that they are incompetent, that they do not know the right goods to sell or where to sell them—they are full of energy and enterprise. As an example of that your Lordships may be aware that in September there was a Scottish Industrial Exhibition, and at this moment the chairman of the Development Council and leading officials of that exhibition are in America and Canada, doing their best to export Scottish goods.
Quite apart from the fact that it is largely untrue to blame managements or any other part of industry for the mistakes and shortcomings of which we hear so much, blaming then is surely no way to encourage them. In spite of frustrations unknown to earlier generations of their kind they go on struggling. They do this, I believe, because of the urge, instinctive in people of enterprise, for progress of every kind. It is a matter of history, although it is sometimes overlooked, that our growth into a great and prosperous industrial nation before the First World War was a result of the cumulative efforts of people who gradually built up great industrial enterprises, plants, shipyards, merchant houses, banks, insurance companies and the like. This building up was financed largely by the ploughing in of profits, and for the remainder it was financed by the investment of the savings of private individuals. At the present levels of taxation real personal savings have almost ceased to exist, except perhaps in the form of life insurance premiums. In fact, as some of us are painfully aware, the reverse process has set in—that of living on capital.

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This unfortunate result of penal taxation and death duties on individuals is serious enough, but what is perhaps not so generally understood is that taxation of industrial profits has now reached such a pitch that the wholesome and traditional process by which in the past expansion of industry was financed by profits ploughed in has now almost been brought to a halt. Sums put to reserve by a company now have to bear both profits tax and income tax, but it is the incidence of profits tax in particular which is so crippling. Under existing revenue law any profits placed to reserve have to bear not only the profits tax at 10 per cent. on undistributed profits but also profits tax at 25 per cent. (shortly I understand to be increased to 30 per cent.) on any profits which are distributed. It is, of course, unnecessary for me to remind your Lordships in passing that if a company does not make a reasonable and regular distribution of profits by way of dividend it is almost impossible for that company, when the time comes when it needs it, to raise additional capital. Bearing that in mind may I give your Lordships brief examples of the point I am trying to make about profits tax?
If a company makes a trading profit and decides to distribute two-thirds of that profit by way of dividend, and to retain one-third in the business, the one-third retained in the business will suffer tax at an effective rate of no less than 83½ per cent. Or again, if that company were to decide to distribute half of the profit by way of dividend, and to retain half in the business, the half retained in the business would suffer tax at an effective rate of no less than 67 per cent. For the purposes of those calculations I have adopted the new rate of profits tax on distributed profits of 30 per cent. The effect of this heavy taxation renders it well-nigh impossible to plough back into the business sufficient money either to purchase new plant or to effect many other desirable improvements of that kind. Moreover, it tends to make the business short of essential working capital in times such as the present, when the cost of plant, machinery and building have all risen substantially, and when it is often necessary to finance increased stocks at enhanced prices. In the long run, therefore, it may inevitably lead to higher selling prices in order that money
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may be obtained to pay taxation. In fact the Government who urge lower prices are levying taxes on such a level that it may have the reverse effect.
Whilst on the question of prices, may I say a brief word on the subject of devaluation with regard to industry? In some quarters it seems to have been hailed as a cure in itself. It might have been helpful as part and parcel of a comprehensive scheme to deal with our present difficulties, but alone, or accompanied by entirely inadequate economies, it is but little more than a sign of the gravity of the situation which confronts us. It is true that it may give temporary advantage to some branches of industry. It is equally true that in other branches it merely raises prices in terms of sterling. For example, in the silk industry, with which I happen to be connected, the supplies of raw material come from Japan—a dollar area. Consequently, the price of the best raw silk has risen since devaluation by about 40 per cent. The same applies, I believe, amongst other commodities, to some branches of the cotton and woollen trades. Some of us, therefore, are now faced with the prospect of selling goods at higher sterling prices—which may not be acceptable at those prices to our customers overseas.
On the other hand, there are those who do not obtain their raw material from hard currency areas and who need not raise their prices on that account. But they will have to sell 40 per cent. more goods in hard currency areas in order to bring in the same quantity of dollars as they earned before devaluation. It is possible that both of these problems could have been eased or helped by the installation of more modern processes or more modern plant and machinery. But the money that might have been available to effect these desirable changes has been taken away from us by the excessively high taxation of profits. It follows, therefore, that owing to taxation the healthy progress and the building up of the resources of industry over the last century, partly by ploughing in profits and partly by individual savings, can no longer continue. In my view this is clearly one of the underlying causes of our present difficulties. The main cause, I suggest, is the lavishness of Government expenditure, which necessitates taxation on such an unprecedented

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scale. That taxation, as I have already said, is bleeding industry white, and has all but extinguished personal savings—and all this at a time when inflationary tendencies of themselves demand increased working capital merely to maintain, let alone increase, the output of industry. Until Government expenditure and consequential taxation are reduced to tolerable limits, until industry is given reasonable freedom and both industry and individuals are given reasonable incentives, I see no alternatives but that we, as a nation, shall continue to go downhill to final disaster. For these reasons I wholeheartedly support the Amendment before the House.
[The sitting was suspended at twenty-five minutes past seven o'clock and resumed at a quarter to nine.]
8.45 p.m.
LORD ROCHDALE: My Lords, I must admit that I regret that I am not following the noble Lord, Lord Quibell, who usually entertains us so much on these occasions. In the course of an instructive speech on the productivity committee, the noble Lord, Lord Marley, referred to the Bulletin for Industry, which he commended to many of your Lordships who, I have no doubt, already read it. In the October issue there are two sentences of which I would like to remind your Lordships and which I think call for some discussion. The first is a sentence which reads as follows:
"Manufacturers and exporters should not hesitate to divert goods from non-dollar markets if that is necessary to achieve an increase in dollar sales."
The question I want to ask, which I am sure not a few manufacturers will themselves be asking, is: What exactly is implied in that statement? I do not suggest that it means that individual manufacturers and exporters are expected to default on existing contracts with non-dollar markets. I would, however, like to ask whether it means that, where these exporters can see their way to export more of their production to dollar countries, they should do so as a patriotic gesture, even if they know that they could sell those same products more profitably elsewhere. In other words, what is the incentive to exporters to export to dollar countries when they can export more easily, and possibly more profitably, elsewhere?
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This, I believe, is an important question, more especially when considered in the light of the second sentence which comes in this Bulletin for Industry and which reads as follows:
"At the same time, devaluation should make it more attractive for other sterling countries to save dollars by switching purchases away from North America to the United Kingdom."
Obviously it should; but surely the effect of this increased demand for British goods, together with the efforts that are now being made—and I suggest laudably made—to open up inter-European trade, and of the issue of these open general licences for that same purpose is likely to make it even more attractive for British exporters to sell in those non-dollar countries. I suggest that, as things are at the moment, these two sentences are incompatible, and they would only become compatible at an early date if it were possible so to increase our production that both demands could be fully met.
The noble Lord, Lord Marley, discussed at some length the efforts that were being made with regard to the increase of productivity generally hut, as I understand the work of the committee that he described, that must necessarily be fairly long-term in its effects. The question that one must ask oneself is: How are we to secure the immediate substantial increase in production that we require if our remaining reserves are not to disappear entirely in the meantime? As your Lordships know, we already have full employment. It may be possible in certain industries, though I suggest not by any means in all, to increase hours of work; but otherwise I find it difficult to see where any immediate and substantial expansion in production can be achieved. I suggest that it may more than ever become a question of appealing (I have used the word "patriotism"; I use it again) to the patriotism of exporters to go out of their way to sell in dollar countries rather than elsewhere; unless, of course (and I hope this is not the case), His Majesty's Government have it in their minds to direct them to do so without option, or they are to be given some reasonable incentive that makes it equally worth their while to sell in dollar or non-dollar markets.
My Lords, I can see that in time of extreme crisis individuals might reasonably

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be asked, and could certainly be relied on, regardless of what their competitors were doing, to take the patriotic line, even at the expense of a lower return for their goods, and be prepared to divert a greater proportion of their production into dollar countries. One can admit that such a supreme effort is required to-day, first to halt us in the direction in which we are going and, secondly, to enable us to change our direction. I think that I can also admit that such a supreme effort, if successful, would more than justify one more such emotional appeal to exporters. But this is not merely a short-lived crisis; it is a struggle which will last in some degree for many, many years, and to expect any such artificial spur to our trading effort to go on indefinitely is not merely to expect the unreasonable but to expect the unsound.
If in order to earn more dollars there is to be any sacrifice by individual exporters—and that might well be so without some special incentive as a quid pro quo—then I suggest that that sacrifice should be borne not merely by the more patriotic or more efficient firms, not merely by those firms who happen to produce articles for which there is a demand at a price in dollar markets, but by the country as a whole. I know that it raises very difficult problems if one carries that argument to its logical conclusion, and I am not suggesting that. But it is not by any means a hypothetical question, and I am sure that to the individual firm it is a very real problem which, even after devaluation, places the firm in somewhat of a dilemma. I believe that those exporters are entitled to some lead from His Majesty's Government on this matter. It may be that His Majesty's Government feel that they already have adequate opportunities for offering such exporters a suitable incentive. It may be that they feel they can offer this incentive in the form of export credit guarantees; or in a way which has been referred to by more than one noble Lord this afternoon—in the way they control the issue to exporting firms of licences for capital expenditure, withholding it from some and allowing it for others on condition that they export to dollar markets; or it may possibly be in the way in which scarce raw materials can be allocated. I understand that an example of this exists in the case of the motor car industry
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where, if I am not mistaken, additional allocations of sheet steel are given only on the understanding that the resulting additional motor cars built go to the dollar markets.
Whether or not such a procedure can be made to work in the way indicated remains to be seen. Personally, I have my doubts about it. Surely, the point is that if we are to make a substantial increase in our exports to dollar markets we can do it only with high-class, high-quality goods. That, of necessity, means that there must be a big variety of different types of products to be sent to these countries. It must also mean that there will be cases where the sort of discrimination in raw material allocations which I have suggested would not in any way be applicable. In the case of sheet steel, which I have just mentioned, I believe that in order to obtain the extra quantity required by the motor trade it is necessary to purchase some steel from the United States of America itself. Therefore a stipulation as to its use in the export of finished cars to dollar markets would not be unreasonable if it could be made to work. But in the case of other raw materials that do not come from dollar areas, or in the case of raw materials not in short supply and not otherwise controlled, it seems that some different approach to this question of incentives is necessary.
If the control of raw materials were to be generally adopted as the main means, I do not see how that could be effected without a further number of controls, with all the expense and delay that must necessarily be involved in operating them just at a time when, I should have thought, we were becoming more alive to the fact that the artificial trading atmosphere created by controls can result in the long run only in inefficiency, abuse and even stalemate. Artificial trading conditions may be excusable and necessary in war; they may be justified to meet particular short-lived crises, but as a permanent feature of our economy they can end only in putting a brake on initiative and progress and encouraging wasteful effort to see how they may be by-passed.
The inducements which I have suggested that His Majesty's Government may invoke—control of raw materials, control of capital expenditure, the use of

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export guarantees—I regard as inducements of a purely negative character, whereas I suggest that we want something in the form of positive inducements. The question which I wish to put briefly is this: Are individual traders, in an attempt to make an immediate increase in our dollar earnings for the national wellbeing, expected to seek in dollar markets the trade which, from the point of view of their own firms—that is to say their own workpeople and their shareholders—and, in the long run, also, from the point of view of much wider interests, may well produce less remunerative and less stable business than they can find elsewhere? That is the Question. If the answer is "Yes"—and I hope that when he speaks to-morrow the noble Lord, Lord Lucas, will say something about this—then I think they are entitled to know to what extent they are to go in that direction and what incentives His Majesty's Government propose to offer them in return.
My noble friend Lord Swinton referred to-day to a similar step taken by other countries—the allocation of a proportion of dollars earned to the particular firm that earns them. That may be one form of incentive. From the point of view of the exporter who has been accustomed in the past to operate in the dollar market. but to sell where it paid him best and where he found the best security for the capital invested, either in his works, warehouses or machinery, this is a difficult question; but for a firm who are going into the dollar market for the first time, and who in order to do that may have to incur very heavy capital expenditure which, when trading with a democratic country, with the best will in the world on both sides, is bound to some extent to be at the mercy of changing political opinion, it becomes a question which, to say the least of it, will be bewildering. I have no doubt that this consideration is one of the many that the Dollar Export Board are considering and upon which they may advise His Majesty's Government. But the existence of that Board, I suggest, can in no way absolve His Majesty's Government from their ultimate responsibility in this matter. I hope that to-morrow the noble Lord will have a word to say on this question.
9.1 p.m.
LORD CROOK: My Lords, in view of the lateness of the hour, I propose to curtail the remarks I would have addressed to your Lordships. Indeed, I would not have inflicted myself on you at all had it not been that, as the only member of the Trades Union Congress in the House, I feel that some responsibility falls on me to refer to statements which have been made about that body. Far too many reports have appeared in the Press in the last week or two that there is a conflict of policy between the Government and the Trades Union Congress. In the interests of everybody, I want to say categorically that those statements are entirely without foundation; nor is there any justification whatever to be found for the rumours and speculations Which have appeared in the Press that there is an acute division inside the General Council of the Trades Union Congress itself. The General Council is divided neither in its evaluations of the causes or consequences of the alteration of the sterling-dollar rates of exchange, nor upon the need for economies in the public services, nor upon the difficulties of the present economic situation.
The trade union movement, through the Trades Union Congress and its General Council, has throughout the period of the last four difficult years shown a measure of restraint and has paid careful regard not only to the needs of those it represents but also to the needs of the country as a whole. At the Bridlington Congress the General Council set down its clear views, the first of which was that the Government had been successful in keeping the cost of living remarkably steady in view of the condition of world prices; secondly, that a remarkable degree of price stability had been achieved which had been of inestimable value; thirdly, that the threatened inflationary spiral, which the previous year's Congress had feared, because of the risks that both wage rates and prices would get out of hand, had been held in check; and fourthly—and from the point of view of the trade unions perhaps even more important—that these results have been achieved without a wages standstill, without a wages freeze and without Government interference with the principles and practices of collective bargaining, to which the trade union movement attaches

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so much importance. I do not think your Lordships will withhold a measure of appreciation of the courage which has been demanded of the leadership of the trade unions over the last years. It is not easy, and it needs a lot of courage and strength of principle for people who are organising millions of workers in a trade union movement to say to them at this time that whatever may be the objectives of their organisations, there must be no departure from the policy of moderation and restraint which the Trades Union Congress have consistently urged upon the trade union movement.
To-day new problems confront the trade unions as a consequence of devaluation and the economy proposals of the Government, about which we are talking this evening, but I venture to say to your Lordships that the courage and restraint which have been notable features of the policy in the past of the Trades Union Congress will not be found wanting in this new situation. I counsel the Press not to speculate too much; and I counsel everybody to leave the trade union movement to deal with what must be divided views on problems of this kind in an organised movement of the type of the trade union movement. The Trades Union Congress's views about the matters which are the subject of the Motion before your Lordships this afternoon are crystal clear. They are that the proposed economies, far from representing an insignificant contribution to a solution of the country's immediate difficulties, will, if vigorously applied during the course of the next twelve months, have the effect of reducing substantially the present inflationary pressure on prices and of encouraging the diversion of the country's resources to production for export. I would have your Lordships understand that from the leadership of the trade unions that is a great deal more than mere lip service to the causes that they have at heart. The principle of restraint on wages will be present in every consideration in their minds.
I know from my day-to-day contacts as a trade union secretary, who has been moving among trade union members for nearly thirty years, that the fact that devaluation gives an immediate price advantage to many British manufacturers in selling their products in hard currency
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countries is well and truly understood by the workers who are engaged in manufacture. What I would say to your Lordships (and if I repeat anything I said in the economic debate of a few months ago, I am sorry) is that if we are to encourage the workers and get from them all the work we want, they must not be subjected to so much vilification from some of the organs of the Press. Nor must they see, on the other hand, that, however much responsibility they have for things, a number of the manufacturers are completely unmindful of their responsibilities. A week ago to-day I read in the daily Press a report of the American Federal Reserve Board's analysis of industry. What a thing for workers to read! This is what it said:
"Devaluation has not boosted sales here, because too many exporters in Britain raised their prices and cancelled out the advantages of the cheaper pound."
They are not my words; they are not allegations that I make. I would not make that the basis of any general charge against exporters. They are the words of a body that one may assume pays some regard to the matters which it considers and puts into words. Clearly we cannot win through if this is a one-sided business, if owners sabotage while calling upon the workers to do their part.
Some of your Lordships may have seen the report of the two salesmen from the Hambro Trading Corporation who came over here with orders from New York stores in their pockets, waiting to place those orders in Lancashire and Yorkshire. They trotted around those two counties this summer and went back to America with the orders still in their pockets. They could not have the best lines, because the best lines were being sold in sterling areas where the manufacturers made better profits. The manufacturers were not prepared to fashion designs to suit that market, because there was no need to fashion new designs—they could make a profit without doing anything of the sort. Those of your Lordships who read the financial columns written by the financial editor of the Manchester Guardian will have seen, four weeks ago to-day, the report that a substantial dollar contract was lost because of failure to deliver to time. It is not the familiar allegation so often inaccurately made that delivery to time was impossible because workers had slacked. As the

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Manchester Guardian pointed out, the manufacturer in question had sold his goods elsewhere and broken his contract in the dollar area, because he received a better profit by selling in the sterling area. Apparently, the American profit margin was not high enough to satisfy his greed.
Now it would be very wrong of me to talk of this as a generalisation, and I should be committing the grave error that others make in making allegations against the workers. I want to say that in contrast with those who act in that way are the acts of firms like Courtaulds who, to the knowledge of many of us, went into the American market and deliberately sold at a loss in order to get the dollars. Trying to speak with a sense of responsibility in bringing these points to your Lordships' notice, I would not for one moment let it be thought that I am making the same wild kind of allegations against employers and manufacturers as are sometimes made against the workers. But the picture is there and your Lordships ought to look at all sides of it.
I was very interested in the references the noble Lord, Lord Marley, made earlier to the Moelwyn Hughes Report of 1946, and by the interjection of the noble Lord, Lord Brand. I do not pretend to be an expert on this subject—I am merely a trade union secretary who reads what is going on in the trade union movement in these problems which are of great importance to this country at this time. The Moelwyn Hughes Report, which was a unanimous Report arising out of the original report of the Working Party, worked out a new wage system and a rearrangement of work which would increase productivity, raise the weavers' earnings and give a reduction in costs, and achieve all this without undue work load being placed on the operatives.
That was in 1946, and because I do not want myself to make wild allegations I have taken the trouble, since the reference was made by my noble friend Lord Marley, to look at The Times of October 22 and find the words about this Report uttered by one who, unlike myself, is an expert on these matters and who will be accepted by your Lordships as such—I refer to Sir George Schuster, of whose work in this field we all know. He said:
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"The plans have been pushed with great courage and energy by the trade union leaders. Yet to-day, three years after the Commission's appointment, only the merest fraction of industry has introduced the new system."
He goes on to ask where this slow complacency is going to take this country. Again I quote:
"It has often been too easy for the inefficient firms to make money. There have been too many cases of protected positions which have given opportunities for large profits without any corresponding contribution to national production."
They are not my words, they are the words of a responsible industrialist. If the workers are to be encouraged, they must hear less vilification of themselves and some facing up by their opposite numbers to some of these great problems which are being neglected to-day.
Workers, for instance, see a constant reference to the way in which their five-day week is supposed to be restricting industry. Let me say two words about the five-day week. First of all, it is not true that the five-day week has meant a reduction in hours for workers. En most instances all that it has meant is a reorientation of the hours, and they are now being worked in five days instead of five and a half. Nor is it true that the five-day week comes only from the fertile minds of trade union leaders. Large numbers of employers are emphatically in favour of the five-day week for their workers. They get a better rhythm of output, they secure economy in their administration, they keep down their production costs; and in other instances they keep down transport costs. Allied to the allegation about the five-day week are the allegations about hours.
I should be wrong to sit down, even at this late hour, without reminding your Lordships that anyone who likes to take the trouble to find out the facts about the hours worked by workers in America, and who contrasts their hours with those worked by workers in this country, will find that hours worked in this country are very much greater than those in America. A postman in this country works forty-eight hours a week; in America a postman works forty hours a week. A telephonist in this country (here I am speaking of my own field, because I represent the Civil Service trade union in the trade union world) works forty-eight hours, and her counterpart in

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America works thirty-seven and a half. In spite of all that has been said about my right honourable friend's Catering Wages Act, a waiter in this country still works a forty-eight hour week. But go into one of the hotels in America and see whether you can get service from a waiter one minute after he has worked forty hours—you will be unlucky. A bank clerk in this country works forty hours; in America bank clerks work thirty-five at the till or the counter. Shop assistants in Britain work forty-six hours, and in America forty hours. If your Lordships want perhaps one of the best comparisons that you can have, take Ford's who, after all, produce in America and also have a modern plant producing in this country. The Dagenham plant works forty-four hours and the American plant forty hours a week.
I will not keep your Lordships any further. I have spoken longer than I should have done at this late hour, but I have tried to show your Lordships that these attitudes of bias, either against workers or against manufacturers and employers, are not the way to solve the problems of this country. There are workers who insist on restrictive practices; we know that, but we pardon them for it because we know on what their fears are based—a long history of unemployment and of the fear of redundancy due to the introduction of new machines. But, by and large, the majority of them are all right. So it is among employers. The mere fact that manufacturers may belong mainly to the Party of the noble Lords opposite does not mean that they are devoid of incentive, devoid of desire or devoid of intention to help this country through. My last words to your Lordships must be that it is the duty of all of us who talk about the unity of the country to which we are proud to belong to try to see that both sides of industry play their part to help the country through.
9.19 p.m.
LORD AILWYN: My Lords, the noble Lord will forgive me if I do not follow him in his extremely interesting, thoughtful and informative speech. His contributions are always extremely agreeable to all of us, in whichever quarter of the House we sit. The hour grows late and I propose to detain your
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Lordships for very few minutes more, particularly as half the speech which I had intended to make has already been made far better than I could have made it by the noble Lord, Lord Elton.
I believe that His Majesty's Government have missed a great opportunity. I thought that the people of this country were braced, almost as never before in peace time, ready to accept and to meet the shock of almost anything that might be coming to them, so long as they were assured that the inconveniences, privations even, were necessary at the present time to keep the ship of State on an even keel. Then came what I can describe only as the anti-climax, the mouse instead of the mountain. The measures which have been proposed seem to me to be inadequate and somewhat insipid. I feel that His Majesty's Government have failed to grasp the nettle; their approach, in my view, has been timorous, and instead of taking the stern measures and the ruthless steps which surely any sane man must see are essential to make the country solvent once more, courting unpopularity, if need be, and even abuse, they have taken quavering steps which fill me with misgiving. My Lords,
"Where there is no vision, the people perish."
His Majesty's Government have, in my view, shown themselves to be woefully bereft of vision.
The question of food subsidies is the most glaring and, I admit, the most difficult case of all. We are spending something of the order of £450,000,000 a year, ostensibly to keep food prices down to a level at which all may buy and none will want. We are told that this works out at something like 3s. 2d. per individual—I shall no doubt be corrected if my figures are wrong, but they were given in another place. At the same time we are told that the average individual expends on such things as tobacco and alcohol 11s. 6d. a week; so that, in effect, as was pointed out in another place, a considerable part of this vast sum of £450,000,000 appears not to be subsidising food at all, but to be subsidising the purchase of alcohol and tobacco. What are His Majesty's Government doing about this? They are proposing to eliminate, at the end of the winter, the subsidy on fish. Can it really be contended that such a trivial

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measure is commensurate with the seriousness of our position? Talk of
"sounding brass or a tinkling cymbal"…!
Cannot His Majesty's Government see that there is all the difference in the world between a wholesale slashing of food prices, with the inevitable hardship that that would bring to the lowest-paid section of the public—the aged, the sick, and so on—and a considered, progressive reduction, with the necessary safeguards for the needy? Surely it is time to break away from this world of make-believe and "let's pretend," and get down to solid foundations of reality. To regard these food subsidies as sacrosanct at a critical time in the economic life of the country is, I think, a measure of the deplorable incompetence of His Majesty's Government.
Why has the net not been spread far wider in this quest of ways and means to balance our expenditure? There must be countless directions in which the activities of the nation as a whole can be made to contribute something towards the country's urgent needs. Let me give by way of illustration just two examples which occur to me. They may seem small and insignificant, and may well be unpopular; but they are certainly not harsh in the circumstances in which we find ourselves; and they would produce revenue. I estimate that there are something like 3,000,000 dogs in this country. A dog owner pays 7s. 6d. for a dog licence. Increase that by half a crown—that is, to 10s. a year—and it would bring into the kitty an additional £375,000 a year. I would go further and decree that an owner of two dogs should pay 10s. for the first dog and 20s. for the second; and that an owner of three dogs should pay 10s. for the first, 20s. for the second, 30s. for the third, and so on.
LORD ASHTON OF HYDE: What about hounds?
LORD AILWYN: That would probably increase the yield to the Exchequer from £375,000, the figure I mentioned, to approximately £400,000.
VISCOUNT SWINTON: Would that be levied as soon as the litter was born?
LORD CROOK: Does the noble Lord make allowance for the large number of dogs which might not be licensed?
LORD AILWYN: That would have to be dealt with in certainly a far more efficient way than it has been dealt with up to the present. Would anyone contend that an individual of the very lowest income group could not afford an extra half-crown a year for the privilege of owing a dog? And, incidentally, if I may be allowed an irrelevancy, being a dog lover myself, I strongly advocate that progressive increase for owners of two or more dogs in order to discourage the over-breeding of dogs that exists at the present time.
My second suggestion is one at which many of your Lordships will hold up your hands in horror, but I consider that there should be a taxing of bicycles. I estimate, very broadly, that a 5s. tax would produce something in the nature of £2,000,000 a year to the Chancellor of the Exchequer. Is there anything unreasonable in this, bearing in mind the very heavy taxation on motor vehicles to-day, and is there anybody to-day who can afford to buy a bicycle who cannot afford to pay 5s. a year in order to contribute something to help the country through? There might be administrative difficulties but they should not be insuperable.
These are just two small illustrations of the kind of way that the community could be called upon to contribute something. Many of your Lordships could no doubt think up many others of the same sort. There must be many directions in which the net could he spread, with useful results and negligible sacrifice. I do not know whether it is their timidity or their poverty of imagination that I complain of most in His Majesty's Government. I am not in the habit of making strong statements. They have alienated the not inconsiderable volume of sympathy that many of us felt for them four and a half years ago, when they were faced with the stupendous tasks arising from the war. That good will has evaporated. It has been killed stone dead by their own vacillation and complacency. To-day, we indict them for sheer ineptitude and incapacity for leadership. I know that there is a General Election in the offing, and one appreciates the frailty of human nature. Only a celestial Party in office could, I suppose, be expected to ignore completely the probable effect of unpopular legislation at the present time, and I should be surprised if even the

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present Government would go so far as to claim haloes around their heads. All the more reason, then, for some of us to go on hammering away for a National Government. I have urged this before in your Lordships' House. For my own part I am persuaded that nothing less than a Government of all Parties and no Party can be expected to move unswervingly along that strait and narrow path to which patriotism and common sense, and not expediency, point in order to achieve the only end that matters, the extrication of this country from the mortal peril in which it stands.
9.30 p.m.
VISCOUNT BRIDGEMAN: My Lords, the first part of this debate will shortly draw to a close, and I think your Lordships will all agree that we have had some extremely interesting and important views expressed, although I, for one, would like to express my disappointment at not having heard the views of the noble Lord, Lord Quibell, who we had hoped was going to address us this evening. We are the poorer by his failure to give us his views. As in all debates of this sort, perhaps one tends, as the debate goes on, to get further and further away from the original point, which was to discuss the Government's economy measures, which, in turn, as I have always understood, were prompted by the adverse balance on the dollar payments and which in its turn caused devaluation.
It has always struck me that a great number of the measures proposed by His Majesty's Government to deal with the situation may be related to the inflationary position in this country—a matter to which I shall come in a moment—but are only remotely related to the business of improving our balance of dollar payments. I will take one obvious example—namely, the demand on the National Health Service for medicine can be related only very remotely to the business of equalising our dollar payments. That leaves me to say one or two things: first, that I feel that many of these economies (which, let me say, in my personal opinion are very rightly made) have been made not because they are related strictly to the matter in hand, but because they are economies which everybody can see ought to be made and made quickly, and because an obvious way in
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which to bring them in is under what might be called the cloak of the national crisis. That, I think, is a fair comment.
The noble Lord, Lord Crook, in a very interesting speech with which as to a large part of it I, for one, agree, was at pains to call for national unity. It was interesting to hear what he said about the attitude of the T.U.C., for example. But, here again, I could not help feeling that although one or two speakers from the Benches opposite rather bravely declared that there was no dissension in their ranks, if there had been a greater measure of agreement, what one might call the highest common factor would have been a little higher, because I do not think that the highest comon factor—in fact, it is implicit in the Amendment moved by my noble friend—is high enough to meet the situation. However that may be, let me come back to what the noble Lord, Lord Crook, was saying, and say how very much we welcome his words in regard to the attitude of the Trades Union Congress at the present time,
He said, as other speakers from the Benches opposite have said, that there are manufacturers who are not playing the game. He instanced the case of manufacturers who were stated to have raised their prices. I would not deny for a moment that some manufacturers may have raised their prices. What I would say is that if they did so, they were acting in good company, because immediately after devaluation the Minister of Supply, the Minister of Civil Aviation and one or two other people raised their sterling prices, and the prices of metals were also raised. You cannot have it both ways. If it was right for Government-controlled organisations to raise their prices, was it so improper for certain manufacturers to follow suit? I leave that to the House to decide.
Of course, it is true that everyone, whether on the employers' side or on the workers' side, will not do absolutely the right thing on the first time occasion. I think it is also true to say that this great adventure of going and selling goods in the dollar areas is, in fact, much easier for some people than it is for others. It is a great deal easier for big firms like Courtauld's, who were instanced by the noble Lord, Lord Crook, than it is for smaller firms who cannot spread their risks and who would find it very unwise

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—I know a little about this matter—to disappoint valued customers, who stand by them in bad times and good, in order to chase some business which may or may not remain with them. Therefore, in business, if you are a small firm you have to be a little realistic about going all at once into the dollar trade. It may be all right, but again, it may not. Every so often, hastily conceived commercial measures turn out, in the long run, to be not so good as people thought they were going to be, and in the end what looks to be the obvious thing to do—like going after these dollars now—may turn out to be not so sound a policy for the smaller firms. On this point, we had a very interesting speech from my noble friend Lord Balfour of Inchrye. I think that speech brought out the pattern of the first day's debate. That pattern, as I see it, was that it was completely wishful thinking that we should suppose that measures proposed by the Government, or indeed any other measures, would close the dollar gap within measurable time. So Lord Balfour of Inchrye turned our attention—I am sure rightly—towards what we can do in non-dollar areas, not as an alternative to exporting to the dollar areas but as an indispensable supplement to it.
VISCOUNT ADDISON: But they do not grow cotton.
VISCOUNT BRIDGEMAN: Some sterling areas, I think, do grow cotton. In what he said, Lord Balfour of Inchrye was supported by at least two of my noble friends, Lord Rochdale, and the noble Earl, Lord Rothes, both of whom have practical experience of the business and of the risk involved in carrying on export trade. The noble Lord, Lord Marley, spoke to us about measures for increasing production. He spoke a great deal—I am sorry that he is not in the House now—about increasing the efficiency of the steel industry. I do not want to go over the business of steel production again, because we had our fill of it before the Recess. I wish to say only one thing. The noble Lord did not mention a matter which we all remember. In our discussions on the Iron and Steel Bill, it was made clear that a plan involving a sum of well over £200,000,000 was put forward by the Federation for modernising steel works, apparently on exactly the lines which the Committee, to which the noble Lord referred, had in
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mind. So far so good. No one denies that we are right to do everything we can in the steel and in every other industry to increase our production by the most modern methods. If we agree about that, we ought to take a realistic view of the financial steps which are necessary to that end. I really do not think that a realistic view is being taken of the situation in regard to profits.
The noble Earl, Lord Rothes, in particular, put this matter extremely clearly, speaking with full first-hand knowledge. We can never develop an industry unless there are some means by which the industry concerned can provide capital. The incidence of the profits tax (and I advise your Lordships to study the figures given by Lord Rothes when they appear in the OFFICIAL REPORT, because I believe them to be entirely correct, and they illustrate the point far more clearly than I have ever heard it put before) shows how impossible it is for an industry which wishes to be progressive to do what is in the interests of everybody concerned—the management, those employed and even the shareholders. We shall not have development so long as the profits tax remains where it is; we shall have only forced production and a wasting of our capital assets.
I now come to a matter which I had hoped would be dealt with more fully by one of my noble friends; that is, the question of agriculture. I hope noble Lords will not think that because relatively little has been said in this debate by my noble friends about agriculture we attach that much less importance to it: far from it. I think we should all agree that if we are looking round for ways of increasing our power to pay our way, apart from dollar exports, then the prosperity of our agriculture is one of the things we should look to first. In the measures announced by the Government we are told that the subsidy on feeding stuffs is coming off. I do not think, though I stand open to correction, that the farming industry were told in terms that that loss of subsidy was going to be taken up in the farm prices review.
VISCOUNT ADDISON: The whole thing will be discussed together.
VISCOUNT BRIDGEMAN: By which I take it is meant that there will be an examination of how the extra expense

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put on farmers by the loss of the subsidy will be taken up in the farm prices review.
VISCOUNT ADDISON: Deliberately, the whole case was put off until February, for the reason that there will then be a review of the whole situation. So far as we are concerned, that stands. We are taking no steps that will prejudice that review.
VISCOUNT BRIDGEMAN: I am sure we are all greatly obliged to the noble Viscount for reassuring us so far as he has. But this particular question is a case in point. If anything has emerged from the treatment of agriculture by His Majesty's Government since they have been in power, it is that agriculture is, and must always be, a long-term industry: any attempt to introduce short-term calculations are bound to go the opposite way to that in which we all, on both sides of the House, want to go; that is, to make agriculture more efficient. I am not for a moment complaining. I do not think many of my noble friends are. But since we all realise that agriculture is on the upward trend, since we all feel, particularly in the case of marginal land, that there is a great deal more productivity to be got out of our agriculture, and since figures can be produced to show that our effort in certain ways is not really so great as it was back in the 'seventies, we believe that in agriculture, as in all other industries, we should have no discordant note—not even that sounded regularly from certain quarters in respect of tied cottages. There is no room for it, any more than there is room for failure—which I am glad there is not to be—to deal fairly and properly in the farm prices review with the loss of subsidies. Personally, I am glad to see the subsidy go, for the reason that I always am glad to see any subsidy go—so that realistic prices can appear before the public, both producer and consumer.
We feel that national unity and joint national effort are of paramount importance; of so great importance, indeed, that no avoidable discordant note should be struck, and several discordant notes are now being struck which we think are avoidable. We also feel that the measures which have been announced, however
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good or bad in themselves, cannot really rank as constructive measures to stimulate initiative and enterprise and achieve the results which we have to achieve, either now or never. For those reasons, my Lords, I hope that the Amendment standing in the name of my noble friend Lord Swinton will receive your Lordships' approval to-morrow.
9.46 p.m.
LORD LUCAS OF CHILWORTH: My Lords, I beg to move that this debate be now adjourned.
Moved, That the debate be now adjourned.—(Lord Lucas of Chilworth.)
On Question, Motion agreed to, and debate adjourned accordingly.

MARRIAGE BILL [H.L.]
Amendments reported (according to Order).
COAL INDUSTRY (No. 2) BILL
Brought from the Commons; read la; and to be printed.
NEW FOREST BILL [H.L.]
Returned from the Commons, agreed to with Amendments, the said Amendments considered and agreed to.

WRITTEN ANSWERS ROAD OFFENCE FINES
LORD LLEWELLINasked His Majesty's Government what sums have been paid into the Exchequer in respect of fines for road offences for the years 1946, 1947 and 1948, respectively.
THE LORD CHANCELLOR: The figures are, respectively, £253,865 15s. 11 d,. £343,480 17s. ld. and £352,067 3s. 6d.

TAXATION RECEIPTS FROM SCOTLAND
THE EARL OF MANSFIELDasked His Majesty's Government whether they will state the amount received from Scotland by the Exchequer, in income tax, surtax, and death-duties, for each of the last three financial years; together with

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the percentage these amounts represent of the total sums collected in the United Kingdom from these three taxes.
LORD PAKENHAM: The noble Lord will find such information as is available in the 91st Report of the Commissioners of Inland Revenue (Cd. 7738), a copy of which I am sending the noble Lord. I would remind him, however, that so far as the income tax is concerned the
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figures relate to tax collected on assessments made in Scotland, and provide no necessary indication of the contribution made by Scotland to the Exchequer, for income belonging to a person resident in Scotland may be charged to tax under an assessment made in England and vice versa.
House adjourned at twelve minutes before ten o'clock.