COST OF LIVING

HL Deb 28 March 1950 vol 166 cc525-604

2.43 p.m.

LORD BALFOUR OF INCHRYE rose to move to resolve, That this House expresses concern at the rise in cost of food, clothes and household goods since 1945, coupled with the decline in internal purchasing power of the pound, affecting the value of wages, pensions, allowances and savings. The noble Lord said: My Lords, the Motion that I beg to move deals with matters which I think your Lordships on all sides of the House will agree affect the well-being of every housewife, every breadwinner, and every pensioner in the country. The reason why I move this Motion to-day is that there is growing concern throughout the country at the steadily increasing cost of the necessities of daily life which every housewife has to buy. We, on this side of the House, feel that it is time to review that serious and deteriorating position and to hear what the Government have to say, for so far very little has been written or spoken by. Ministers—particularly at the Election—on the subject of this Motion. Not one word was there in the gracious Speech from the Throne of any reassurance that the Government intend to tackle this pressing problem. I cannot help feeling that the Government must be very glad indeed to-day to have the opportunity of associating themselves with the concern that is expressed in my Motion — concern at the increasing domestic burdens which now have to be borne.

Let me say that colleagues of noble Lords opposite in the Government feel as I do about this growing concern. There is a new Food Minister, Mr. Maurice Webb, and I am sure we all wish him good fortune in the heavy and responsible duties he has undertaken. This is what Mr. Webb has said about the question of the cost of living: In the great bulk of homes of the lower income classes—the working class, artisans, black-coat workers, and lower middle and professional classes—higher prices mean living on a subsistence level with little margin for amenities. Housewives are having to go out again to seek part-time work to supplement their husbands' earnings. For the first time since the war debts are beginning to be a normal feature of retail business. That was written by Mr. Webb in the News of the World on October 17, 1948. Since that time the position has become worse. First, I should like to make sure that noble Lords on the other side of the House will join me in associating themselves with the concern that I express in this Motion, a concerti which we all feel and which cannot be divorced entirely from the promises on these matters made by the Government to the electors, or front the Government's responsibility for the policies which have fostered this rise in prices.

I submit to your Lordships two general propositions which cannot be contradicted. The first is that since 1945 there have been rises in a wide range of prices. The second is that the Government cannot get away from the fact that they gave unconditional pledges to the electors that Socialism would protect the citizens from the very troubles which now beset us. The situation is that a rise in the prices of food and goods has taken place and is taking place against a background of the steadily falling internal purchasing power of the pound. Housewives have been hit both ways at the same time. The price of the goods they have to buy has been going up and the purchasing value of currency has been going down. I made the charge that the Government had given pledges on this question and it is only right that I should he ready to substantiate what I say. Mr. Bevin, writing in the Daily Herald at the, time of the 1945 Election, said: Labour will protect your savings against rising prices. Sir Stafford Cripps, speaking at Exeter in the same Election, said that the Labour Party wanted to ensure that the people's savings were safer than before the war.

Let us look for a moment at the position of savings, concerning which those pledges were given. These savings have been hardly earned and entrusted to the safekeeping of the Government since 1945. Their value has been described by the Chancellor of the Exchequer in another place. When asked what was the purchasing power of the pound sterling at the nearest convenient date as compared with 20s. in 1945, the Chancellor of the Exchequer said that the value was about 16s. 2d. in January, 1950. He had to admit that a savings certificate which was bought for 15s. in August, 1945, is now, with accrued interest, worth 17s. 0½d., but in purchasing power of 1945 it is worth only 13s. 10d. The Chancellor of the Exchequer rode off this admission, which I think is an admission of broken pledges, by saying that this lower purchasing power reflects only a change in the value of money which has been general all over the world. I suppose we shall hear more about that line of argument this afternoon. But can those who are going to take that line say that the investors were ever told at the time that the pledge about the safety of their savings was subject to outside factors in world conditions? No, those pledges were given unconditionally to those who entrusted their savings to the Government. If we are told that there is a world fall in the value of money and that the dollar has fallen in internal purchasing power in the United States even more than the pound has done in this country, then I would immediately ask, "Why on earth did we ever have to devalue?"

I turn from the question of the drop in the value of money to look at the other side, the extent of the rise in prices. Here I think I shall carry with me the noble Lord who is going to reply on behalf of the Board of Trade. There is no exact cost-of-living measure. The only index of retail prices which has been continuous since before the war is provided by the London and Cambridge Economic Service. The Board of Trade broke the cost-of-living index in 1947 and restarted it on a different basis. The London and Cambridge Economic Service give these figures. Taking the figure for 1938 as 100, they find that by 1946 the cost-of-living index was 150, by 1949 it was 178, and by February of this year the figure was 182. But the index used is a limited one; it is merely a measure of the increased cost of certain selected purchases which those preparing the index think are typical purchases of a working-class family. To my mind, a better way is to look at the typical needs of a household and then see how prices have risen. I do not believe that one housewife going out shopping with another would say: "Tell me, how are the indices to-day?" I am sure she would say "Vegetables cost more than last week, and clothes prices have gone up." That is the practical way of looking at the problem.

The noble Lord, Lord Llewellin, will speak later in the debate with regard to food, and on that matter he is far more authoritative than I. But one can go through a list of foods. Take, for instance, such items as home-produced beef: in 1945 it was 1s. 4d. a pound, and it is now 1s. 8d. One can take a whole series of various products. Dates have gone up from 9d. to 10d., and dried apples from 9d. to 1s. 6d. I will not weary your Lordships with a list, because I feel there is no doubt in anyone's mind that there has been a big rise in the cost of food. I should like to give one or two examples in regard to the cost of clothes for men and women. In 1946 men's socks were 2s. 8½d. a pair; they have now gone up to 3s. 11d. In 1946 a suit of clothes cost £3 14s. 9d.; it now costs £6 19s. 6d.

VISCOUNT ALEXANDER OF HILLS-BOROUGH

Of what grade are those suits?

LORD BALFOUR OF INCHRYE

I cannot say of what grade they are, but these are standard prices which I obtained from one of the large stores. A coat which was £5 has gone up to £6 15s. 0d. Then, to take the case of girls, a gym slip, which many athletic girls wish to wear, cost 16s. 3d. and has gone up to 24s. There is no question at all about the heavy impost on mothers with nurseries. Nursery squares—we call them "nappies"—were 13s. 4d. in 1946 and are now 25s. 6d. Let me give two examples of household goods. Wool blankets, 70 in. by 90 in., were 64s. 4d. a pair in 1946 and are now 91s. 6d. An oak utility bedroom suite cost £36 5s. 3d. in 1946 and now costs £39 10s. 0d. As I say, I do not want to weary your Lordships, and I have just picked out some average increases that we see all round us at the present time. I could repeat those examples over a whole range of household goods. Electricity, gas and coal have gone up; and such luxuries as tobacco and beer have increased to astronomical figures.

While prices rise, the Government are all the time trying to stem the tide of the effects of their financial policy by a wage freeze. We know that the Government obtained the assent of the Trades Union Congress, who in turn received from their constituents only a nominal majority for a continuation of the wage freeze so long as the cost of living figure did not rise beyond 118. But if the wage freeze is not dead, it is very sick, and many authorities, including the New Statesman and other papers supporting the Government think, it is doomed. There are 180,000 railwaymen to-day earning less than £5 a week, and they have a strong sense of grievance. I believe that many noble Lords on all sides of the House sympathise with the men who have that grievance. Engineers are pressing for an all-round increase, miners are pressing their day-wage claims, and civil servants, firemen and teachers have all had their claims arrested. All these claims arise because incomes will not stretch to meet the ever-rising costs of the weekly needs on an accustomed standard of life.

Harsh as it is for the wage earner today, I would submit that the position bears even more harshly upon the fixed income sections of the community. An old-age pensioner who had an old age pension worth 26s. a week in 1946, now has a pension worth 21s. 6d. We have heard that it would cost £33,000,000 to compensate old-age pensioners for the fall in the purchasing power of their pensions, comparing 1946 with 1950. There is the much-abused class called the rentiers— those who live on a fixed income drawn from dividends. They are not all wicked capitalists; many of them are people who have worked very hard all their lives, who have invested their savings and are now living on the proceeds of their investments. The purchasing power of those people is falling lower and lower, and with the dividend limitation there seems no prospect of their position being alleviated. We have all this as against the pledge which was given in the broadsheet issued by the London Labour Party in 1946 and which said: The credit of the country will be conducted so as to prevent any inflation; i.e., a fall in the purchasing power of money. I wonder what the people who gave credence to that pledge feel to-day, when they see their small incomes shrinking more and more in relation to the ability to purchase the necessities of daily life.

I want to pass from the present position to the prospects in the immediate future. We feel that there are more rises in prices coming over a wide field of national life. Domestic coal for London will be raised 4s. a ton if the freight charge application which is at present under consideration is granted. There is a prospect of higher rail fares, higher London bus fares and higher farm prices, which mean higher prices to the consumer. But, bad as the position is, I do not believe the widespread effect of devaluation on retail prices has yet been felt. Since devaluation raw material prices have risen considerably. But the greatest risk for the future lies in the field of manufactured consumer goods, because increases in prices have in many cases been delayed until stocks which were bought at pre-devaluation figures have been consumed. That has caused delay, but it cannot stop the inevitable rise; and control by the Government cannot be so strong that it can compel manufacturers to produce, and retailers to sell, at a loss. Indeed, we have already seen—I do not think the noble Lord with his Board of Trade knowledge can deny this—that in regard to some utility goods the gross margins of profit have become so small that the supplies have dried up. In general, the increases have so far covered goods where the passage from raw material to the manufactured product is swift, as in the case of blankets, towels and knitted goods. But the increase in made up clothing, in a wide range of wearing cloths and in furnishing materials has yet to come.

I cannot help feeling that the country was not told frankly by the Chancellor of the Exchequer about the real effect of devaluation on the cost of living. The impression which the Chancellor gave in his broadcast, and in his speech in another place, was that the effect would broadly be limited to an increase in the price of bread and perhaps a few other articles. Let me remind your Lordships of the Chancellor's words. He said, at the time of devaluation: The immediate effect of the increase in the price of bread and flour will put up the cost of living index by just over half a point, and it may be that by the end of the year, if there are no marked counterbalancing decreases, the index will have gone up a point or so. This method of the Chancellor of confining his forecast to a month or two must have led those of the general public who do not study these matters closely to believe that only a one-point rise in the cost of living need be expected from devaluation. I think it was regrettable that the country was not taken into the confidence of the Government to a greater degree at the time of devaluation than was the actual fact.

I want to turn for a moment to the factors which we feel have brought about this state of rising prices and lowering purchasing power of money. This Government pin their faith on checking inflation by means of a Budget surplus and by means of what we consider penal taxation, coupled with high Government expenditure and strong physical controls. That, in one sentence, I think, is their policy. This Government happily take 40 per cent. of the national income, and have no shame about it—indeed, they are proud of the fact, and say that it is good for the nation that it should he so. Though they pay lip service to other means of reducing the cost of living, which we believe are sound, their policy discourages personal savings and is no encouragement to greater production.

The Government control of industry, the refusal to link incentives to greater production—and other matters, with which I am not going to deal in detail to-day—are lines of policy to which the Government pay lip service but seem to do nothing to foster. Savings are discouraged and have disappointed. There are three reasons for the drop in savings. First, the present high level of taxation makes saving almost impossible for the average citizen. Secondly, the average citizen fears the loss in value of his money put away for the future. We have only to look at the example I have given of the loss in the value of money in the last few years to see that there is substance in that fear. Thirdly, the public fear the possible confiscatory measures which a Socialist Government may in the future take against profit and money.

Noble Lords opposite me here to-day are efficient and sound Ministers, but let me remind them that there are those of their colleagues who are not so sound, or so reasonable in their public declarations of what they would like to do with property. Government expenditure seems to go on, regardless of its relation to the ability of the nation to bear the burden of the constant overhead of Government expenditure. It is axiomatic that there is no wherewithal to sustain our standards of living except the proceeds of a healthy and prosperous industry. The old days of making the rich poorer in order to make the poor richer are gone; there are no hen-roosts to rob. Only from the proceeds of a healthy and prosperous industry can we sustain our daily standards of life, and yet the Government impose upon industry such an overhead as must hamper its competitive ability to manufacture cheaply for home production and for export.

We cannot permanently isolate our economy behind barriers of Socialism from world reactions and results. By artificial means of controls and shock absorbers, and by drawing on our resources, we can for a short time live as a law unto ourselves, but in the long run there can be no Socialist isolation for this country, whose continued existence and progress depends upon our ability to produce more and more. We feel that the only way in which the rise in the cost of living can be checked is by a great reduction in Government expenditure, and there is no sign that the Government accept that point of view. We say that the only other factor which might relieve the present situation would be a strong upturn in the trade position, but unfortunately this possibility also seems remote. In the first half of 1949, in terms of trade, matters had begun to move in our favour, but devaluation caused a sharp increase in our import prices. Therefore, we can look to no upturn in our foreign trade to get us out of the situation, and we feel that only by the Government's cutting their own expenditure can they reduce the burden of overhead which industry has to carry at the present time.

There is one direction in which the Government should at once give some lead, and that is to reduce or abolish the purchase tax on many household necessities. It seems to me extraordinary that with this problem in front of them, with the grave issues which must be faced in order to achieve a halt in the cost of living, the Government still retain purchase tax on so many articles of necessity. Utility fully-fashioned stockings, floor coverings, wallpaper, electric lamps, razor blades—just to give a list of some of those articles—all bear 33⅓ per cent. purchase tax. We are entitled to some explanation from the Government as to why they retain purchase tax on these articles and why at the same time we have to accept the rising cost of living.

There are remedies and suggestions, and arguments and counter-arguments, which might be put forward, but they are more appropriate in a full financial and economic debate, and I do not wish to enter into them to-day. I felt it was right, however, to give one or two broad lines of principle in which we believe. The chief of those is to cut expenditure and to return to sanity from the aura of political illusion that clever planning can get this country out of its troubles. No clever planning can do that. We feel that the prospect for the citizens of this country is grim, because we feel that so long as the Government pursue their theories and policies — which they obstinately continue to pursue—so long will the cost of living continue to rise. We feel that it is our duty to-clay to express our concern on behalf of millions of men and women, and that is what we are doing; we are expressing that concern by drawing attention to this problem. In the past, the Government have given pledges which they have broken, and the people now look to us to see that they have a fair and honest deal in the future. I beg to move.

Moved to resolve, That this House expresses concern at the rise in cost of food, clothes and household goods since 1945, coupled with the decline in internal purchasing power of the pound, affecting the value of wages, pensions, allowances and savings.—(Lord Balfour of Inchrye).

3.10 p.m.

VISCOUNT SAMUEL

My Lords, the terms of the Motion moved by the noble Lord, Lord Balfour of Inchrye, are in themselves unexceptionable. I think we all feel concern at the high prices; I do not suppose the Government spokesman will say that the Government are unconcerned. Whether the Government will thereupon accept the Motion, or whether they will see in it something less innocent than appears on the surface, I do not know; that must be left for them to declare. For my own part, I share to the full the views expressed in the terms of the Motion.

It is now just over two years since I opened a debate in your Lordships' House on the general economic situation. I then devoted my speech almost entirely to the question of high prices and of taxation as a factor in causing high prices. To-day I must speak on much the same lines—but, your Lordships will be relieved to hear, with much greater brevity. Since that debate in 1948 there has been no fall in the general level of prices or in the cost of living. It still remains, in my view and in the view of most people, excessively high. Devaluation last September was, of course, a factor tending towards an increase, and not a lowering of prices. Devaluation could not be avoided, the situation being as it was; but that the situation should have been such as to force devaluation was most deplorable, and devaluation was itself economically a disaster to this country. We are now beginning to see its effects in the rise of the cost of imported materials, and in the consequent rise in many classes of manufactured goods. The Board of Trade announced last month, for example, that carpets were to rise in price by 12½ per cent. as a consequence of the increase in the cost of the raw material due to devaluation. A week later they announced that knitted goods, which are widely used throughout the nation, were also to rise in price by 10 or 12 per cent:

I was recently staying in the West Riding of Yorkshire with a friend who is one of the principal blanket manufacturers in this country. He told me that as a direct or indirect result of devaluation blankets which he had been selling at £3 a Pair last September had now to be sold for £4 a pair. A rise of that kind imposes a very heavy burden upon the population. We have lately had the remaining subsidy on feeding stuffs stopped, in the interest of the Exchequer, but there has been no accompanying reduction in the general level of taxation. That again must be a factor in increasing the cost of living. We remember how the price of coal was raised very greatly a few years ago; now there is strong pressure for an increase in the freight rates on goods carried by rail.

The question that is continually being asked, in Parliament and everywhere, is: how shall we he able to meet the rise in the cost of living? That is the way in which the question is usually posed. But why should we accept that question at all? Is not the right question: how are we to prevent a rise in the cost of living and bring about a reverse in that economic tendency? People ask: will it be possible for the Government and the Trades Union Congress to continue to resist pressure for higher wages? That is not the right question. The question is: how can we get rid of the causes that give rise to the pressure for higher wages? If there were to be a fall in the general level of prices, what a relief it would be in every direction! The cost of living would be stabilised, or even reduced; wages might be stabilised without any hardship to the workers; in consequence the cost of production would be decreased through reductions both in the purchase of raw materials and in the cost of labour; and, with the increased use of mechanical methods, the cost of production ought over the years steadily to fall. In those circumstances exports could be expanded, the dollar gap could be closed, and the pound made secure.

Therefore, this question of the rise or fall in the general level of prices is the very essence of the whole matter. Our economic situation, and our future, depend upon that one factor. The purpose we should have in view, therefore—Government, Parliament and nation—should be to see whether it is possible to halt the increase and replace it by a fall. If that is generally agreed, the question then becomes simply a question of what lines of approach are possible. In the first place, I agree entirely with the noble Lord, Lord Balfour of Inchrye, that high Government expenditure and a high level of taxation are undoubtedly reflected in the level of prices. In my speech of two years ago I illustrated that in some detail, and I do not wish to repeat those details now. It is true that the high taxation now maintained by the Government may discourage inflation, or even prevent it, by diminishing private spending. On the other hand, a factor that works the opposite way, raising the general level of prices, is that people try to shift taxation from their own shoulders on to the consumers of their goods, which increases the cost of production with all its consequences; and that tends towards inflation.

The Chancellor of the Exchequer, a couple of years ago, I believe, laid down this general principle, which is as practical now as it was then: These general taxes undoubtedly reduce the expendable portions of all personal incomes, but there is always a tendency for those incomes to rise whenever possible to counter the taxation effect. That is the essence of the whole matter: high taxation puts very strong pressure, throughout the whole economic system, on the individual—whether a workman who is taxed as he earns, a retailer, a manufacturer, or whoever it may be. All of them tend, if they can, to shift the burden on to other people in order that they may maintain the standard of living to which they have been accustomed. That is the reason why, while it may seem that high taxation is justifiable to prevent inflation, it is itself one of the very causes of the inflation that it seeks to prevent. There is also always the tendency for everyone—it is a very natural characteristic of human nature—to wish to pay less for what he buys and to get more for what he sells. He would like to buy in a free market and to sell in a closed market—he is a free trader for what he buys and a protectionist for what he sells. That is so in all countries and at all times. That also affects the price of labour. Labour wishes to raise its own price in the market by combinations—and it is right to do so: in fact it is absolutely essential that it should do so, because the individual workman, in the labour market by himself, is helpless when faced by an employer who has capital at his back and who is not under an obligation to come to terms immediately. Therefore, in this country and all countries it has been found that combinations of labour and the formation of trade unions are vital for the protection of the workman's interest. But when that same feeling leads him to restrict his own output or to oppose the introduction of labour-saving machinery which is economically needed, then that form of protectionism is illegitimate.

The noble Viscount, Lord Hall, when he spoke in this House two or three weeks ago, fully recognised this, and he used these words—he was talking, about incentives for production: Some of us worked under incentives fifty years ago. As a matter of fact, when I did some useful work"— your Lordships will observe the implication!— the whole of my time was spent on a basis of piece work—payment by results. I would not work under any other system. He then went on to say: It can be said that both the managements and the trade unions are doing everything possible to deal with this very important matter. Indeed, the Trades Union Congress General Council endorsed a policy which was agreed to by all the affiliated unions—this was only two or three months ago—"— he was speaking on March 8– and which recommended that a review should he made within each industry with a view to extending systems of payment by results over the widest possible field. Perhaps the spokesman for the Government to-day may be able to tell us how far that campaign is proceeding and whether it tends towards success. For this, as all your Lordships will agree, is again of the very essence of the matter, because if we can get a larger output from the same labour force, then, again, our problems will be solved.

Manufacturers and retailers also have this natural desire to pay cheaply for what they buy and to receive dear for what they sell, and they are in the advantageous position by being able to form combinations for the fixing of prices. That has been proceeding to a great extent in many industries throughout the land. Employers to some extent have been demoralised by the sellers' market which prevailed during the war, and particularly in the building industry, where we were obliged to adopt the method of paying by cost plus percentage. That resulted in terrible waste and, to some extent, demoralised the industry. Here again, the effect of present conditions upon industries is to raise prices. In the building industry that is one of the causes of the continuance of the housing shortage, because we are paying for two houses now a sum of money for which we could have obtained three houses not so very long ago. If the cost of production had been the same, the housing problem might to some extent have been solved. The building industry is not doing its duty by the nation in providing at a reasonable cost the buildings that it requires, whether for housing or for other purposes. I was greatly struck by a report which appeared in The Times a few days ago of the annual meeting in London of the Association of Building Technicians. The President, Mr. Kenneth Campbell, said this of the building industry: The building industry is one of the greatest obstacles to progress. In nearly every way it remains a nineteenth-century anachronism unwilling to face contemporary moods and incapable of meeting them. If that is true—and it comes from the President of the Association of Building Technicians who ought to know—we have there one explanation of the high prices that prevail in that industry.

Again, take what used to be one of the most important and prosperous of all our national industries—cotton spinning. The cotton-spinning industry sent a productivity team to the United States last autumn. Their report has just been published. It was a unanimous report representing, so far as I remember, the whole industry, employers and labour as well. They said that they had found that productivity, was generally higher in the United States than in Lancashire. They made a series of unanimous recommendations, and these are some of their findings., as reported in The Times: on the average, for every 100 operatives needed to produce a given quantity of roving in card-room processes over a given time in the United States, 263 operatives were required in England to do the same work. They stated that if the inquiry had been limited to the best mills in England where the best labour conditions and operating conditions applied, it would have shown that 153 operatives were needed here in England as compared with 100 in America. Similarly, to produce a given quantity of yarn in a given time, where the United States required 100 operatives, here we required 238, or 193 if only the mills with the best labour utilisation were counted. So that our best and most progressive mills employ nearly twice as many operatives as do similar mills in the United States. The team go on to say: The lower productivity in England, does not mean that English operatives work less hard. Some, in fact, work harder. Then they gave a large number of technical reasons why the English cotton spinning, industry is very much behind the American industry in its methods.

That is the line on which we should proceed when we are seeking the causes of high costs in this country. That is the line that we ought mainly to pursue. We used to be proud of our technical capacity, and we used to boast that our industries were ahead of any others in the world. We cannot do that now When one is given concrete evidence from within the industries themselves, and not from foreign competitors or hostile critics, that the building industry and the cotton spinning industry are at fault—and those examples can be multiplied in the case of many others—we have an indication of where the remedy should be sought. The price-fixing associations eliminate competition unduly. They often restrict entry to trade and they undoubtedly produce excessive profits. Their prices are intended to protect the average or even the marginal firms below the average; and firms which are more efficient than the average, which are the most capable and adopt mass production on the largest scale, cannot help making large profits. Even if they were quite willing to sell for less they are not allowed to do so by their trading associations, and the money comes flowing in. We see at the present time the large dividends which are being declared week by week by many firms. It is said: "Well, that does not matter so much because taxation sweeps in most of the money in surtax and death duties, and people cannot grow rich on those profits." That may be so, but the consumer pays. The high prices are there. It is another instance showing how high taxation does ultimately, in a large degree, fall not necessarily upon the individual taxpayer but upon the consumer of the goods. The right and best way to reduce these excessive prices is undoubtedly to allow competition to have its effect, and to allow efficiency to reduce prices all round. The Chancellor of the Exchequer has clearly seen this. To quote him again, he said, I think in the House of Commons: A decrease in prices is far the most satisfactory way to get that reduction of profits. He does not wish merely to sweep it in, and to let people grow rich, and then to take it away in super-tax and death duties; far better to let general prices fall.

Therefore, I come to the point to which I would venture to ask the special attention of your Lordships—that the most necessary thing to be done at this moment is to put into force the principles of an Act which by general consent your Lordships passed two years ago—namely, the Monopolies and Restrictive Practices Act, 4948. For twenty years we Liberals have been advocating a direct attack upon these systems of monopolised and restrictive trade, and the proposals we made have been almost exactly embodied in this Statute, and have at long last been accepted, by general consent, by the Conservative and Labour Parties. The Board of Trade, who are responsible for the appointment and direction of the Commission, have just issued their first report upon the working of this Act, and to my mind it is a document of very great importance. It is only a preliminary report; it cannot yet account for any concrete results, but it explains what work is going on and what inquiries are being made. Six industries have already been the subject of reference to the Commission—namely, those concerned with the supply of electrical filament lamps, the supply of insulated wires and cables, the supply of what are called rainwater goods, the supply of instruments, and so forth, used wholly or mainly in dentistry, the supply of machinery for the manufacture of matches, and the supply of matches. Those are the industries to which the attention of the Commission has been directed by the Board of Trade. There are also a large number of other industries which have been brought to the attention of the Commission by various consumer industries, by the general public, or by associations of consumers. That work is now going on. I should mention that the reference of these particular industries does not carry with it, to use the Board's own words, "any degree of adverse imputation." These are industries which may properly be the subject of inquiry; they are not industries which, in the opinion of either the Board of Trade or the Commission, are guilty of abuses. That ought to be made quite clear, in justice to those particular firms.

In this connection I should like to ask the Government whether they are satisfied with the progress that is being made in this vitally important province. We now have the machinery for investigating these restrictive practices. Are the Government satisfied that the machinery set up is adequate? The Commission consists of two full-time members and six part-time members. Do the Government consider that such a machine is capable of investigating the enormous range of industries and trades which are involved in this question? Or do they think—I make this suggestion—that the Commission would be well advised to appoint sub-commissions to carry on this work, if a delay of years is to be avoided before we get the fruits of their inquiries. Or, failing sub-commissions, do the Government think that a short amending Act might be passed to establish three, four or five different Commissions which might work simultaneously to investigate this very urgent matter?

Lastly, there is the question of supplies from abroad. My noble friend Lord Balfour of Inchrye, who moved this Resolution, is a lifelong protectionist, and he is one of those who must take responsibility for the restriction upon international trade which has cluttered up Europe and the World, and which we are now to a great extent trying to abolish. It is now recognised that tariff protection or any other form of protection is not the solution. The present Minister of Health took credit to himself, as he was entitled to do, when he was faced by a ring, a combine which sent up the price of medicine bottles, and he did not hesitate to bring them in from abroad; and he thereby saved the taxpayers—one is glad to think that he sometimes thinks about them—a very considerable sum of money. Undoubtedly that should be continued.

Are the Government going to do their utmost to restore a healthy competition both in production and in distribution? Will they make that the key word of their policy? When an industry comes to the Government and asks for the removal of controls, will they take that into account and say, perhaps, "We will remove the controls, but conditionally. You say that you will be able to manufacture more easily and more quickly, and will be relieved of difficulties. We will remove the controls on condition that you effect an all-round reduction of price. Or are you going to put the advantage into your own pockets by producing more easily but allowing the price to remain at the present high level?" Will the Government bring pressure to bear from every direction, at all times, to secure an all-round reduction of, say, 10 per cent. in the general level of prices through a nation-wide campaign, as has been done with a certain measure of success in other countries? My Lords, the forces which make for higher prices are too strong for those that work the other way—labour restrictions on a higher output without any increase of production; employers' stopping or lessening genuine competition among themselves; merchants and retailers going back to the old guild system of restraint of trade and making it the exclusive province of a privileged group who can grow rich while the people suffer from dear goods.

Are the Government going to attack the problem from that standpoint? Will the Government give us a specific reply on that point? It is natural for the Opposition to take a gloomy point of view, and natural for a Government spokesman to paint a rosy picture. Despondency is the natural mood of Oppositions, and complacency of Governments. I do not suppose that the noble Lord who will reply will plead guilty to complacency. In fact, if he follows precedent, his first words will be that the Government fully realise that there is no room for complacency. I am afraid I may have robbed him of his introductory sentence, but certainly he will agree to that in spirit and disclaim complacency. Will he go further and detail the concrete proposals with which the Government propose to meet a situation which is undoubtedly one of great gravity?

3.39 p.m.

THE PARLIAMENTARY SECRETARY, MINISTRY OF TRANSPORT (LORD LUCAS OF CHILWORTH)

My Lords, I trust that it will be for the convenience of your Lordships if I intervene in this debate at this juncture to try to reply to the speeches which we have heard from the noble Lord, Lord Balfour of Inchrye, and the noble Viscount, Lord Samuel. I would ask your indulgence if I leave to my noble friend Lord Pakenham the more fiscal side of this debate, and those remarks of the noble Lord, Lord Balfour, which I think might justly be placed into the electioneering category —in other words, for my noble friend the éclairs of this debate; for me the bread and butter.

For once the noble Viscount, Lord Samuel, was wrong. My introduction is going to be that neither the noble Lord, Lord Balfour of Inchrye, nor the noble Viscount, Lord Samuel, has a monopoly of concern in this matter. His Majesty's Government are as deeply concerned as noble Lords opposite at the rises in prices, but I suggest that the rise in the cost of living cannot be considered out of the context of the general economic problems with which this country has had to grapple —in a large measure successfully—since 1945. Rising prices, I am prepared to admit straight away, are on the whole undesirable. But it does not follow that a low and falling cost of living is necessarily good, especially if it is followed by and carries with it depression and a large measure of severe unemployment. That was our experience of a low cost of living in the inter-war years. It is useless for people—I have heard this done, though I do not accuse Lord Balfour of Inchrye of doing it—to compare the purchasing power of the pound in 1950 with the purchasing power of the pound in 1930. We had 3,000,000 people standing in unemployment queues in 1930, and those people had not a pound to spend, whatever the prices were. Another matter to which I think I may properly draw your Lordships' attention is that the prices of goods and services are the incomes of those who make and supply them. I believe that what is worrying the housewife to-day is not so much the cost of the article but the amount of money which she has in her purse to buy it.

LORD LLEWELLIN

It is the same thing.

LORD LUCAS OF CHILWORTH

If the noble Lord will allow me, I will come to that point in a few minutes. Lord Balfour of Inchrye presented to your Lordships a profit and loss account which, if I may say so with respect, I thought was a little lopsided. It set out fully the expenditure side but was not much concerned with the income side. That is something with which I intend to deal in a moment. It seems that the noble Lord's first criticism was that the interim index of retail prices is not very good. I thought he rather jumped about, in his comparison of prices, from 1945 to 1938. I could not make out why he mentioned 1938–perhaps it was in order to embellish his argument. I intend to stick to the prices in this index, because, as the noble Lord rightly said, this was altered in 1947, and altered after consultation with a number of bodies, including representatives of employers, trade unionists, the co-operative movement, retail distributive trades and women's institutes.

Following the recommendation which was made there was set up the Cost of Living Advisory Committee. The components of this present index, which is used for the purpose of measuring variations in the cost of living, are very wide. They include an enormous number of things, among them that article mentioned by Lord Balfour of Inchrye in which all young fathers of newly-born babies are naturally very much interested. In this index it is called a "nursery square." Also included are radio sets, entertainment, entrance to cinemas and football matches. Even whisky is included, as alcoholic drinks come in it. I would suggest that if your Lordships would possess yourselves of this very informative booklet—the title is Interim Index of Retail Prices, Method of Construction and Calculation—which has just been issued by the Ministry of Labour you will see how the index is arrived at, how the figures are weighted and how the averages are worked out. And I think you will find that it is very fair. What are the figures? They say that between 1945 and 1950, retail prices have gone up by about 23 per cent., that is to say, from 1945 to January, 1950, the index figure has gone up from 100 to 123.

LORD BALFOUR OF INCHRYE

My Lords, this is a very important question. I should like to get the matter clear. As I understand it, the Board of Trade index was broken down and re-started on a new basis in 1947. The reason I took the London and Cambridge index was that it is the only continuous one that runs on a common basis from 1938 onwards. The figure which the noble Lord is now giving, he says, is the Board of Trade figure for 1945. Is he speaking of the Board of Trade index as prepared in 1945 and subsequently altered in 1947, or on a 1947 basis, as it were jobbing back to 1945?

LORD LUCAS OF CHILWORTH

My Lords, it is an amalgamation of both, but is on a broader basis, and it includes a number of other items. There has been an enormous enlargement, as noble Lords see.

VISCOUNT SAMUEL

Is it the same basis as the 1950 figure.

LORD LUCAS OF CHILWORTH

Yes.

LORD DE L'ISLE AND DUDLEY

Does it contain all the old elements.

LORD LUCAS OF CHILWORTH

Yes, plus a lot of new ones.

LORD DE L'ISLE AND DUDLEY

Including red flannel material?

LORD LUCAS OF CHILWORTH

Not being interested in red flannel, like the noble Lord, I did not look to see if it was included. I expect that it is.

LORD DE L'ISLE AND DUDLEY

It was in the old one.

LORD LUCAS OF CHILWORTH

Your Lordships may be interested in these figures. I put them forward rather tentatively, for I want to be fair, and a basis of comparison is not easy to arrive at. These are some of the increases in retail prices in other countries over the same period—that is the period from 1945 to the end of 1949. In the United States, it was 31 per cent.; in Canada, 36 per cent.; in France, for food only, 410 per cent.; in, Italy, 69 per cent. The only comparable figures which are below ours—and they are certainly well below—are the figures for the Scandinavian countries. For what it is worth, I suggest to your Lordships, that the rises in retail prices in this country are smaller than in the vast majority of countries in the world.

Let us now consider the reasons for these increases. The first one, I suggest, is the rise in the level of world prices of raw materials. The second is the rise in the level of industrial wages—including wages in the distributive trades. That should go on the other side of the account. I must confess that I was considerably surprised that the noble Lord, Lord Balfour of Inchrye, was so markedly silent on the question of wages. I do not see how we in your Lordships' House can discuss intelligently the cost of living unless we include some consideration of wages. Then the third factor I would put forward is that in some respects the rise in the cost of living has been due to the removal of subsidies. I know I shall have 100 per cent. support from noble Lords opposite in the policy of reducing subsidies and I will indicate how they have been reduced. The noble Lord, Lord Balfour of Inchrye, suggested only two ameliorations in the cost of living, the removal of purchase tax and the cutting of Government expenditure—in what directions the noble Lord, following tradition, was notably silent.

When we look at the level of world prices, we have to take into consideration the inflationary position all over the world. This is one of the prices we are paying for a world war, and we cannot escape it. The pent-up demand has induced world inflation. I should like to give your Lordships a few figures to show its effect. The United Kingdom import prices rose by 35 per cent. between 1945 and 1947 and by another 18 per cent. by April, 1949, which meant a total of 53 per cent. from 1945 to April, 1949. In 1949, the index figure of import prices for the United Kingdom was 24 per cent. above 1947 and about 67 per cent. above 1945. I will be frank with your Lordships. The latter was the effect of revaluation—and I make no bones about it. I should like to give your Lordships two instances of how sharply this has moved against us. The index for raw cotton, taking the figure for 1945 as 100, was 252 in February, 1950. For raw wool, the index rose from 100 in 1945 to 293 in February, 1950. But in order to keep this in true proportion we should not lose sight of the fact that higher prices of sterling raw materials mean higher dollar earnings for the sterling area so that it is not altogether a debit. The noble Lord asked me what was the increase in the cost of commodities due to revaluation.

OBLE LORD: Devaluation.

LORD LUCAS OF CHILWORTH

No matter what you call it it is the same thing. This question is difficult because it depends so much on the raw material content of articles; but we may take it that the average raw material content comes to about 12½ per cent. I think your Lordships will be interested in these examples. I worked out what the effect would be on two common articles—a pair of sheets and al ordinary shirt. I hope your Lordships will forgive me if I read the figures out because they answer so many of the questions asked by the noble Lord, Lord Balfour, and the noble Viscount, Lord Samuel. Take a pair of sheets where there is a much higher raw material content than labour content. The raw cotton before devaluation represented 25.49 per cent. of the cost; spinning,. 11.32 per cent; weaving, 18.84 per cent.; bleaching, 5.19 per cent.; hemming, 1.55 per cent.; convertors' margin, 8.01 per cent.; wholesalers' margin, 9.61 per cent.; and retailers' margin, 20 per cent. After devaluation, these figures were approximately the same, except that the cost of the raw cotton went up from 25.49 per cent. to 30.54 per cent., which means that the result of devaluation was to raise the— retail selling price of a pair of utility sheets by 12.5 per cent., or 5s. 10d. per pair.

The current retail price for the best utility poplin shirt with collar attached is 26s. 9d. The cost of the cloth because of devaluation rose by 1½d. a yard, from 4s. 4½d. to 4s. 6d. a yard. It takes 3⅓ yards to 3½ yards of cloth to make a shirt, so that the price went up 8d., or about 3 per cent. An increase of between 3 per cent. and 12.5 per cent. on a very large variety of manufactured goods is the effect of devaluation on prices. I cannot tell your Lordships when the effect is going to be felt by the consumer. I know that many noble Lords, with their wide experience of manufacturing, know that it takes about six months for a raw material cost to filter through to the retail price.

That is the position on costs, and now I turn to the income side of the profit and loss account, which I suggest the noble Lord ignored. Wage rates have increased by 23 per cent. between 1945 and January, 1950. The average weekly earnings in manufacturing and certain other industries rose from 96s. 1d. in July, 1945, to 121s. 9d. in October, 1949, which is an increase of 27 per cent. In some industries the increase was much higher than 27 per cent. For instance, in coal mining the weekly cash earnings went up by 46 per cent. between these two dates. The fact is that the income of the workers judged in terms of wage rates has kept step with the increase in retail prices, while earnings are a fraction ahead of it. We have also put into the scale upon the side of income the greatly increased social benefits and social services which make real incomes more real. We cannot ignore them.

LORD LLEWELLIN

Does the noble Lord's figures of earnings deduct contributions to Health Insurance?

LORD LUCAS OF CHILWORTH

No, I am taking pay packet earnings.

LORD BALFOUR OF INCHRYE

Overall pay packet earnings? The noble Lord accused me of ignoring wages altogether. In fact, I told the House of 180,000 railway workers whose earnings are under £5 a week. It seems to me that it is to the lower income group that he ought to pay attention, and not so much to the overall figures he has been giving.

LORD LUCAS OF CHILWORTH

I do not wish to dissect every single industry. I could no doubt find one industry where earnings are twice that amount. I now come to the class of low fixed incomes which the noble Lord mentioned. I admit this is a difficult problem, and we are concerned about it. But it is only fair to say that increases in old age pensions, to take one example, have been substantial since 1945 under the Labour Government. In the case of war pensions, forty-seven improvements have been made, not only in grants but in the amounts. In the case of fixed income groups, again we cannot leave out the effect of the social services and food subsidies which also benefit the fixed income group. His Majesty's Government have this question well in mind. I can assure the noble Lord that we do believe in some kind of equality, and this problem will continue to exercise the minds of both my right honourable friends the Chancellor of the Exchequer and the Minister for National Insurance.

Let me now come to the third reason for increased costs—subsidies. As the noble Lord, Lord Balfour, knows, we have removed the subsidies on utility household cotton textiles-1 think it was in June, 1947. That meant an increase in the manufacturers' prices ranging from 20 to 60 per cent. At the beginning of 1948 we removed the subsidies on utility cotton apparel cloth, utility wool cloth and leather. This resulted in an increase in the manufacturers' prices of 40 to 50 per cent. in the case of cloth and 27½ per cent. in the case of utility footwear. But owing to the operation of price control and margin control, the prices to the consumer did not go up by nearly that amount. In the case of footwear, by some odd coincidence the price did not go up at all. I can only think that perhaps it was because in footwear there had arrived that healthy relationship between supply and demand which was such a feature of the speech of the noble Viscount, Lord Samuel. Competition had at last entered into footwear selling, and as soon as competition entered there was no increase in price. I will return to that subject in a moment. The Board of Trade, by price control and margin control, do try to hold down prices. But I freely admit to the noble Viscount, Lord Samuel, that any price control, whether it is operated by the Government or any other outside agency, always tends to make prices higher than they would be if, let me say, the fair wind of competition blew over them.

I come now to the question of bulk buying which I am surprised the noble Lord, Lord Balfour, did not touch upon—perhaps he left it to one of the other speakers—namely, the question of bulk buying. I want to prove to your Lordships that in bulk buying the Government have made a substantial contribution towards keeping down the cost of living. First, bulk buying must be a feature of the Government's policy to ensure that we can make some inroad into our dependence on dollar countries, which has hamstrung us for so many years in the past. Further, bulk buying is essential while we have food rationing in this country. In effect, the Government contract with the people of this country to supply food against the ration, and therefore they must see that they can obtain the food to fulfil that contract. I want to give your Lordships one example of the wisdom that has actuated the Government policy in bulk buying—I refer to the Canadian Wheat Agreement. In 1946 we entered into a four-year contract with Canada for the purchase of wheat. In the first two years the contract price was 1 dollar 55 cents per bushel. During that time the Chicago price was from one-and-a-half times to twice as much, and reached as high as 3 dollars a bushel. For the third and fourth years we have been paying Canada 2 dollars per bushel for wheat, and we are still appreciably below the Chicago price, which is to-day 2 dollars 50 cents. When I tell your Lordships that in the first two years we purchased from Canada 160,000,000 bushels of wheat, and in the third and fourth years 140,000,000 bushels, your Lordships will see the wisdom and foresight of entering into that contract, and what it has saved the people of this country.

LORD DE L'ISLE AND DUDLEY

Would the noble Lord agree that there is an element of gift on the part of the Canadian people in that price?

LORD LUCAS OF CHILWORTH

Not one scrap; it was a hard commercial bargain. I could say something to your Lordships on the question of Argentine meat contracts, but in view of recent happenings perhaps discretion had better take the place of valour. I would impress upon your Lordships that these long-term contracts have enabled us to switch our purchases to non-dollar countries. I would ask your Lordships to give serious consideration to that point. We have been forced to switch these purchases, and in some cases we have had to pay slightly more on our contracts than we should otherwise have paid. But what was our alternative? We have to ensure supplies, and we have to give our Colonies and the Commonwealth some encouragement to supply us with food in future, which otherwise we should have to buy from America. Surely that must be taken into consideration. On this question of bulk buying, let me say this. Bulk purchase will be taken from Government account and transferred to private account as soon as we are assured that it is in the national economic interest so to do. We have no doctrinaire fetish over this. My right honourable friend the Lord President of the Council has made that clear in many statements over the past years.

After listening to the noble Lord, Lord Balfour, make one of his charming attacks on His Majesty's Government, I feel that I am entitled to ask him: What is industry's responsibility in this? Can any of these increases in the costs of materials he absorbed by greater efficiency? As tae noble Viscount, Lord Samuel, so properly asked: What is industry doing to mitigate the position by greater efficiency? Surely, the function of management in industry is not just passing on increased costs to purchasers. There is something more in the skill and the art of management than that. If not, then fourteen-year-old schoolboys armed with ready reckoners could be managers. I suggest that a lot could be done. In talking to industrialists I have been appalled at the alibis put forward. Take, for example, the five-day working week. That has been blamed by a lot of industrialists for a short-fall in production. I was interested the other night to listen to a broadcast to Denmark by a prominent industrialist—I think one of this country's most enlightened industrialists—Sir Charles Bartlett. This is what he said on the subject of the five-day working week: They produced in the first week going on to a five-days basis 12½ per cent. more than they had on any other five days, and we got the same output in five days. Now since we have done that many things have occurred which show rather enlightening shafts on that problem. Our sickness has gone down very sharply. Our absenteeism is almost nil, and one way and another our people are unmistakably better off for working the five-day week. And we have not lost production by it. Since we introduced it our production per person has moved up steadily and is still moving up. I thought that, coming from an industrialist, might be of interest to your Lordships.

The noble Viscount, Lord Samuel, mentioned the cotton industry as an example of one industry where we could expect greater efficiency. Has any industry received more encouragement from the hands of my right honourable friend the Chancellor of the Exchequer than the cotton industry? Let us look at the position. In 1946, when he was President of the Board of Trade, he went to the cotton industry and said: "I will give you 25 per cent. of the cost to you if you will re-equip and modernise the weaving side of your industry." What happened? Practically nothing. Suspicion was immediately aroused on the question of grouping. They said: "This will be a failure because grouping will be unpopular." It has not been a failure, for in the passage of time about 60 per cent. of the spindles are grouped. But it is now 1950, and while the President budgeted for £10,000,000 to £12,000,000, as the Government's contribution to the cost of re-equipping the cotton industry, in the event only a quarter will be expended. What the noble Viscount, Lord Samuel, said about the cotton industry is true. It is no exaggeration of language to say that it needs to shake itself up.

I could cite the same sort of thing about the clothing industry. May I recall to your Lordships' memories the debate we had about that? I have no doubt that the noble Lord, Lord Balfour of Inch-rye, will remember it. In 1943 the clothing industry set up an industrial committee of its own, and invited Mr. Russell Vick, K.C., to preside over it. That committee came to certain conclusions as to what was necessary to help to put the industry on a sound basis. Nothing was done. Seven years passed in footling around—and immediately His Majesty's Government want to put in a development council and give the industry statutory powers to organise itself we have a real storm. If industry took some heed of its responsibility and, instead of trying first of all to remove the mote from the Government's eye, removed the beam from its own, it might encourage us a little more.

The noble Viscount, Lord Samuel, then went to the heart of the subject: What is the effect on the cost of living, and what is the effect on commodity prices of restrictive practices, price rings and price protection associations? If the British public knew how it has been—I find it difficult to use a moderate term—exploited for so many years, I am sure that they would rise in their wrath. Competition in a whole host of everyday commodities disappeared in this country years ago. No housewife can buy a proprietary packed food at other than one price. Let her try to buy a tin of proprietary cocoa, or any proprietary food, at any shop, and she will pay the same price, whether she buys it in the largest and most efficient store in the town or in a shop in the meanest back street. The economies of the efficient shop are not passed on to the public. That is one of our greatest problems. Look at the numbers engaged in retail distribution. They have gone up from about 1,514,000 in 1945 to over 2,000,000. The figure is just about the same in 1950 as it was in 1939.

The noble Viscount, Lord Samuel, quoted my right honourable friend the Minister of Health as saying in another place the other day that, by cutting out some of these unnecessary intermediaries, they have been able to save £2,500,000 on their purchases of requisites for hospitals. He spoke, too, of patent medicines—he gave examples with which I will not weary your Lordships—boosted by advertising based mainly on the thesis that it is very easy to part fools and their money. That is another thing which adds to the cost of living. I myself can quote a report, for which I had some responsibility, on the working of the Agricultural Marketing Acts. I will quote only this one sentence: … it is quite a common thing for the price of lettuces to fall from 6d. to a ½d. in a matter of hours. Sudden falls in the wholesale prices are seldom passed on to the consumers by retailers who find it more profitable to sell a smaller quantity at a larger price, and therefore the price mechanism does not operate to expand the demand of the ultimate consumer in circumstances of glut. The noble Viscount was right. To-day, prices are higher and discount margins are the same, so profits are higher, and an enormous amount of money is being made in the distribution of essential commodities to the British housewife. That is one of the real reasons why the cost of living stays so high.

The noble Viscount, Lord Samuel, asked me about the Monopolies and Restrictive Practices Commission. He has explained—and. I am grateful to him for saving me the time—the set-up as it is to-day. He asked me: Is it the right machine? Is it too slow? Well, it is at least an attempt to deal with a problem in a way 'which has been advocated since 1922, when the Linlithgow Report drew public attention to the high cost of distribution, and these locust years have been wasted. This is a gigantic job. It is a new departure for this country. I am not possessed of all the patience in the world, and so I think the present procedure is, and is likely to be, a bit slow. I do not think the Commission, as at present constituted, will be quick enough to do the job which the noble Viscount envisaged. But we shall all be in a better position to judge whether that forecast is right or wrong by about the middle of the year, when the Commission produce their first report. These sample activities mentioned by the noble Viscount are only to test the machinery: for them to get a suitable organisation together; to find out what difficulties they are up against—and, as the noble Viscount says, in trying to fight lamp rings and things like that, we are up against a considerable task. I think we can leave it and see.

After the report of the Lloyd Jacob Committee, my right honourable friend the President of the Board of Trade went to industry. He went to the Federation of British Industries because in the Lloyd Jacob Report on resale price maintenance, one of the recommendations was this: We recommend that appropriate Government Departments should invite consultations with the principal national organisations of trade and industry, to consider the most satisfactory means of ensuring that this policy is made effective. Accordingly, my right honourable friend approached the Federation of British Industries and asked for their full co-operation. If I were to say that the reception he received was cool, I should be guilty of a gross under-statement. My right honourable friend is now consulting direct with the multitude of trade protection associations, and I can give the noble Viscount an assurance, and these associations a warning, that unless they fully co-operate to put right some of these glaring abuses, then His Majesty's Government will not have the slightest hesitation in taking the appropriate action.

I am now encouraged to believe that in doing so we should have the wholehearted support of noble Lords on all sides of your Lordships' House. I am encouraged not only by the speech of the noble Lord, Lord Balfour of Inchrye, today, but also by the fact that in the Conservative Party manifesto The Right Road for Britain, we read this paragraph: Through the powers of the Monopolies and Restrictive Practices Act, we shall see that the public interest is protected and that prices are not kept up either by inefficiency or by combinations in restraint of trade. And the Liberal Party Manifesto, No Easy Way, says approximately the same thing. And so, if my right honourable friend, supported by His Majesty's Government, finds it necessary to introduce legislation to do away with the evils to which the noble Viscount, Lord Samuel, has drawn attention, I am happy now in the thought that such legislation will fall into the category of the non-controversial.

4.23 p.m.

LORD HAWKE

My Lords, I want to approach this problem in the first instance from the angle of personal savings. Rising prices can affect savings from two different angles: they can make for sheer inability to save, and they can make for lack of confidence in the future value of money and, therefore, of savings. I have taken some figures of personal savings for several years from the figures of the last national survey. In 1938, they were £143,000,000; in 1946, £678,000,000; and in 1947, £165,000,000. In 1948 they had gone down to £6,000,000. The new publication is not yet out, but from the Statistical Digest we can get figures of small savings—which are, of course, included in the totals I have given. They were as follows: in 1938, £49,000,000; in 1946, £517,000,000; in 1947, £165,000,000; in 1948 minus £2,000,000; in 1949, £17,000,000; and from The Times to-day I see that the total this year so far is minus £64,000,000. These figures show that savings by individuals in this country are at present running at a derisory total—in spite of the fact that personal incomes, wages and salaries have doubled.

What is the reason? Is it that people feel that saving is not worth-while? I do not think that that applies to small savers, though undoubtedly it may apply up to a point to larger ones, because, after all, you cannot maintain an atmosphere of capital levies, nationalisation and penal death duties without disturbing psychologically the will of the potential victim to save. Moreover, the proof of the pudding to some extent is in the eating: as the noble Lord, Lord Balfour, said, the Chancellor of the Exchequer has given the value of a 15s. War Savings Certificate purchased in 1945 as being only 13s. 10d. now, in 1945 currency value. Therefore purchasers of War Savings Certificates might well, on reflection, consider that they had been rather "mugs" to invest in these things rather than in goods of some sort. But I think that at present people just have not the money to save. It is all very well to say that according to a comparison of the cost-of-living index with the rise of wages and salaries, people ought to be able to save. I must say that I regard that cost-of-living index as a most fallacious document. There is no doubt that this is one of the cases in which "the gentleman from Whitehall knows best." He sits at his desk and does his shopping there, and therefore knows where to buy, where things are cheapest. But the housewife has not that advantage.

I think it is inability to save which is the root cause of this fall; and the reason for that, of course, is that the cost of living has been steadily rising. Why is that? The noble Lord, Lord Balfour, and the noble Viscount, Lord Samuel, have put forward various explanations, and the noble Lord, Lord Lucas, was, I thought at one time, starting to argue what I believe is the Socialist line taken by some Socialist economists—that to achieve full employment or prosperity for the community, you need essentially a rise in wages and prices going on for ever. Then he said that the reason why our prices are rising was because prices are rising in every other country in the world. If those other countries are following inflationary policies, why do we tie our good, sound pound at a fixed rate to their currencies? If they were really inflating, our pound would have been rising against their currencies and the cost of living would not have risen in this country as it has done. The noble Lord went on to claim that the policy of bulk buying had kept the cost of living down. No one can prove that, one way or the other, and the noble Lord's argument was irrelevant. He compared prices of bushels of grain in the Chicago market after all the millions of Canadian bushels had been taken off the market, with the price before they had been so taken. It is not comparing like with like. Our instinct tells us that prices are higher, but his examples tell him the reverse. Bulk buying is not a necessary accompaniment to rationing or subsidies. The Board of Trade has carried on rationing of clothing and subsidisation of clothing without a Government agent necessarily having owned the raw material. The noble Viscount, Lord Samuel, thought high prices were largely due to combinations. There is another sort of combination, which I will mention in a moment. I am always a little careful on this subject of combinations. I think it may be that the cause of the downfall of one of the great industries in this country, the cotton industry, was from too strict an adherence to the sound Liberal principles of competition. They killed themselves stone dead between the wars through senseless competition.

What are the other reasons? Of course, devaluation has undoubtedly been a cause, but I believe that the main cause is the high taxation in this country. I believe it is a complete fallacy that for any length of period you can take 40 per cent. or more of the national income in taxation. If you attempt to do so, the national income just blows up like a balloon and that quantity of taxes becomes a smaller percentage of the whole. I think I am supported by some of the economists in this theory today. Now that the national income has got this ballooning tendency, there are very heavy wage demands all over the industrial field. They are kept under only by some of the weightiest men in His Majesty's Government sitting on the safety valve. What I believe is required to-day is an entirely new approach to the Budget. The old approach of His Majesty's Government—" How much money must we have?"—I think is obsolete. We want a new, more scientific and planned approach. It is not the first time in your Lordships' House that I have suggested to a Government of planners that they should plan. They must say to themselves, "What is going to be the national income, and what is the largest percentage we can take of that national income without further inflation?" They must then decide what they can afford to do with the proceeds of taxation.

Undoubtedly, they will have to take some unpleasant decisions. They will have to make economies; that is inevitable. I suggest that, in the first instance, they should aim at what I call cumulative economies—that is, economies in Government spending which may be immediately reflected in corresponding economies in the private sector. What I mean by that is that when there is one controller in Whitehall there are many controlled people distributed round the country. If there is one form demander, there are many form fillers; so if we get rid of the controller and the form demander, we are enabling industry to reduce its overhead charges correspondingly. I do not believe that more than the merest handful of controls over industry are really necessary to-day. Controls, which are another form of combination, probably more vicious than any spontaneous one, are the feather bed of industry. They make it easy for the most inefficient. They fix prices, and the maximum price becomes the minimum price. If we can get rid of those controls, not only will Government staff be decreased but there will be more competition within industry which will force industry to prune its own overhead charges.

In addition to controls, there have been other overhead charges which have grown up in recent years consequent on the cost-plus result of taxation and profligate post-war Government finance. Press, public relations and statistical agencies abound everywhere in Government circles and in industry. I doubt very much whether they are really pulling their weight. The layman, even one who has served in Whitehall, has great difficulty in understanding how the Departments can need the number of people that they have to-day. Is it necessary that the Service Ministries should have one man in Whitehall for every seven men they administer in the field? Moreover, many of those seven men are themselves administrators, sitting at desks. The Services, including their Ministries, must be simply riddled with administrators. I feel that there is a wide field for economy there. The other Ministries, of course, have staffs at least appropriate to their functions, and if you want to get rid of the staffs you a must prune the functions. It is noteworthy that the Board of Trade, which has always been a model of efficiency and good administration, seem to have a very moderate staff compared with some of the more mushroom war-time Ministries.

However, the main point is that His Majesty's Government must reduce the functions, and then they can start reducing the staffs. Perhaps the noble Lord, Lord Pakenham, may not agree with me when I say that I cannot see why the Ministry of Transport should not swallow up his Ministry, the Ministry of Civil Aviation. Nor do I see why the Ministry of Works should not revert to its old-fashioned idea of merely looking after Government buildings. Nor is it easy to see why the Ministry of Fuel and Power need so many people just to administer the fuel and petrol rations: they have hived off the three main industries into bureaucracies of their own. Surely, they are not, in their own office, maintaining a close control over those as well. There are many more economies on that line which can be made.

The National Health Scheme is a wonderful idea. That no man should suffer because he cannot afford treatment, and that no man should fear crippling bills from doctors, is a magnificent idea. It is one that I have had for years. But to fulfil that idea it is not necessary that all treatment should be free. I cannot help feeling that the time has arrived when patients should make a contribution commensurate with their means. It should be done by the users of the scheme, not by all and sundry. If we add to the poll tax—that is, the National Insurance stamp card—we are merely imposing a further tax burden upon the community.

By a programme of simplification of this sort and by the most careful economy in capital expenditure on everything except housing, I am absolutely certain that the Government could make very substantial savings, and I feel that that should be passed on straight to the consumer. The view which has been advanced by the Liberal Party—that there should be a big surplus in the Budget—is, to my mind, completely unsound when we are faced with rising prices, and so on. In any case, I would never trust a surplus in the hands of a Government which contained the present Minister of Health. There would never be a surplus at the end of a year.

I started from the savings angle and I return to it. I do not think the situation is yet catastrophic, but it is definitely symptomatic, and unless we restore the ability to save we may find that all investment saving will die from disuse. Then there is a danger that it may be replaced by a movement from currency into material goods which may even be outside this country. That, of course, would lead again to devaluation. There is already talk of this in some foreign countries, and of the break-up of the sterling area which would be quite disastrous. His Majesty's Government inherited the tradition of a strong, sound pound sterling. That was achieved by successive generations of Governments providing careful finance, and by the traditions of the British people, too. As the banker of the sterling area, it is the business of the Government to maintain that tradition, and it is part of their duty in doing so to give attention to the question of the vicious circle of rising prices and rising wages which looks like breaking out in this country to-day.

4.41 p.m.

LORD PETHICK-LAWRENCE

My Lords, the debate which is taking place to-day has certainly been interesting, and we are greatly indebted to the noble Lord, Lord Balfour of Inchrye, for bringing this question to your Lordships' attention. But I venture to think that in some respects it has been an attempt in the more polite and courteous atmosphere of this House to reproduce the polemics of the General Election; and a great many of the arguments that have been produced from the Benches opposite have been those which we heard, less politely and more vigorously expressed, at the hustings and the meetings of the Conservative candidates throughout the country.

The noble Lord who has just sat down made a rather remarkable statement which I took down. He said that he would never trust a surplus in the hands of the present Government, and that there would never be a surplus so long as the present Minister of Health was a member of the Government. I do not think I have altered in any way what he said. That apparently is his view. If it really is his view there can only be one explanation—that he does not read the figures which appear weekly or annually in the Statement of the National Account, because in fact he would find that, for the year ended March, 1949, not only was there a surplus running into several millions of pounds but the Chancellor of the Exchequer did something which has never been done before, at any rate on the same scale. He not only produced a very considerable surplus above the line, but he also produced a very considerable surplus, running into millions, below the line, which means that after the capital expenditure undertaken by the Government had been taken into account there still remained a margin on the right side.

Pursuing that matter right up to date, every Wednesday we have a statement in The Times showing the precise Government figures for the preceding week. Of course I have not access to them but if my recollection serves me aright, on Wednesday of last week the latest figures showed a surplus to date on the two sides of the account of over £600,000,000.

LORD HAWKE

Above and below the line?

LORD PETHICK-LAWRENCE

I am coming to that. I will give the statement perfectly correctly. In last week's account the surplus above the line ran into something like £600,000,000. I do not carry the exact figures in my mind, and I would not like to be too precise, but I think the surplus below the line was over £200,000,000. That seems to me to be an achievement of which any Government can justly be proud; and it is a very remarkable fact. For the noble Lord to suggest that this Government could never produce a surplus with the present Minister of Health as a member of the Cabinet, seems to be quite devoid of fact.

Then, following upon that, the noble Lord told us that the pound sterling had always been defended, and that it would be one of the duties of a Government of his Party to defend the pound. That may well be true. I remember that several years ago, about 1925 or 1926, that was precisely what Mr. Winston Churchill boasted that he was going to do. He restored the pound to its precise parity with the dollar as it had been, and he was glad to declare that he was making the pound look the dollar in the face once more. The consequence of that action of the then Chancellor of the Exchequer was that we had all sorts of evils in this country. It is true that prices began to drop, but in consequence we had vast unemployment, great misery, and if not starvation we did at any rate have malnutrition in the presence of national plenty. Years later, no other person than Mr. Winston Churchill himself admitted that he had made a great mistake in taking that action, and that his officials had over-persuaded him against his better judgment.

LORD HAWKE

I hope the noble Lord is not suggesting that I was proposing that the pound should be up-valued to any fixed level, because I was not.

LORD PETHICK-LAWRENCE

No. What the noble Lord suggested was that his own Party—

LORD HAWKE

All Parties.

LORD PETHICK-LAWRENCE

—were the Party that kept up the value of the pound. I am agreeing with him. I say that his Party have been the Party who have kept up the value of the pound.

LORD HAWKE

Excuse me, I did not say that. I said that all Parties, successive Governments, had maintained the value of the pound.

LORD PIETHICK-LAWRENCE

That may be so, but I thought the whole point of the noble Lord's criticism of the Labour Government at present was that they had not kept up the value of the pound. If the noble Lord says that all Parties did so—

LORD HAWKE

In the past.

LORD PETHICK-LAWRENCE

As a matter of fact, it was the Conservative Government, headed by the then Chancellor of the Exchequer, Mr. Winston Churchill, who restored the value of the pound to its pre-war parity. And the point I am making is: at what price did he do it! He did it at the price of the people of this country; and he himself admitted later that his action on that occasion had been injurious, and that he had taken it against his own opinion because of the advice given him by his officials.

We all know that prices have gone up in this country; we all know that there is a shortage of purchasing power; we all know that there are difficulties arising from queues and rationing. But the question about which we differ is whether the present Government are deserving of the support of the country for their attitude towards these difficulties. In every country there have been rises in price; in every country there are sections of the population who find it difficult to live on their means. But I would maintain, taking it as a whole, in these respects the people of this country are better off than those in other countries of the world. Noble Lords in times gone by, and members of the Conservative Party in particular, have pointed out how much better off people were in the United States than in this country. It would not be in the least surprising if they were because the United States never suffered either the physical material losses which the people of this country suffered during the war, or the loss vis-à-vis foreign countries that we suffered. But in a debate that we held in this House about three or four weeks ago I was able to give some surprising figures of the position of the people of the United States at the present time. I showed that, so far from their being so very well off and contented, large masses of them were in great difficulties. I have had the opportunity of presenting my figures to others who have come from the United States, and in almost all respects they have been substantiated by what I had been told.

In this country the middle class are the class who complain most of what the Labour Government have done (I do not altogether wonder at them; certainly they are not as well off as they were before the war) but it is clear that the middle class in the United States are no better off. Large numbers of people in that class over there have the greatest difficulty in making ends meet. Therefore, what we suffer from in this country is not due to the particular sins of the Labour Government, but is due to the unfortunate results of the war, in which large masses of the world's substance were destroyed and in which we in particular, standing alone as we did, suffered frightful capital losses. Our main sources of income from all over the world were lost, and in place of them we incurred a net debt of something like £3,000,000,000. It is impossible for such things to happen without suffering to be caused, without prices going beyond purses, without the people of this country having to put their shoulders to the wheel and to strain every nerve in order to make the carriage of State go up the steep hill on which it is travelling in these post-war days. This country has done magnificently and, under the wise guidance of the present Government, has gone a very considerable way to recovery. Let me quote one or two figures in support of what I am saying. Production has risen more steeply in the last few years than it has ever risen before in the history of the country. It is now something like 30 per cent. above the pre-war standard. Capital investment—a very striking guide—has been at the rate of £2,000,000,000 a year, and it goes in matters of great value to the country. It goes in farms, industrial equipment, factories, machinery and transport. And it not only goes in those material forms but it also goes in human forms, which after all are the most lasting things that affect a country.

The noble Lord criticised, not, it is true, the principle, but the working of the National Health Services in this country. I notice that members of the Party to which the noble Lord belongs, often seem to want to have it both ways. They say: "We who sit on these Benches have had a hand in this scheme; you cannot claim any monopoly. We are just as much for the Health Services as you are." When it comes to details, they say: "You ought not to spend so much money there, you ought not to do this, that or the other." In fact, they assert, the whole conduct of the scheme has been wrong. I deny that that is so. I say that the state of the health of the country at the present time is largely due to the way in which the Health Services have been administered. I say that the fact that infantile mortality has been steadily declining until it has reached a record low figure, and the fact that the mortality of mothers in childbirth has come down to its present low figure, are due, first of all, to the effects of the Health Services and, second, to the fact that we have had fair shares. This last, of course, has been the main principle on which the Labour Government have acted. The absence of unemployment, which is so largely due to the refusal of the Labour Government to make retention of the exchange value of the pound the main principle of economic policy, has been of lasting benefit, not only to individual people but to the production of the nation as a whole.

Let us now turn to the question of prices. Ordinary retail prices which people have to pay have gone up, but our Government have kept them down to their present levels by food subsidies, by rationing and by controls. Some noble Lords may dislike subsidies; they may say that they are too high, and that they involve high taxation. As a matter of fact, the Labour Government have been preeminent in keeping food prices down by means of food subsidies, and keeping the prices of other commodities down by means of rationing and controls in various instances. Putting food aside for the moment, take the question of petrol. I cannot remember whether it has been mentioned to-day, but one of the criticisms of the Labour Government which members of the Party to which noble Lords opposite belong; are fond of making, is that, whereas in almost every other country in the world petrol is free of rationing, we have retained it here. What has been the price for taking petrol off the ration? What we find, in fact, is that in those countries which have not continued the rationing of petrol, the price of petrol has been allowed to rise phenomenally. Petrol is 2s. 3d. a gallon here; in Italy it costs 5s. 8d. In West Germany the price is 4s. 7d.; in France it is 4s. 4d.; in Norway it is 4s., and in Belgium it is 3s. 11d. In fact, we are selling seven times as much here as is being sold in Italy, six times as much as in West Germany, twice as much as in France, and half as much again per head as in Belgium and Norway. In view of those facts, I doubt whether a great number of people in this country would like to see petrol rationing removed, if it could be removed only by allowing the price to soar so high that many people would be unable to buy it, because of the cost.

The noble Lord, Lord Hawke, reverted, among other things, to the charge that one of the causes of our high prices was bulk purchase. I think he said he "felt it in his bones," or something of that kind. That is a charge that has been levied against the present Government by the Opposition for several years, and a great deal was made of it at the General Election. What are the facts?—after all, facts are what really matter, and not what you feel in your bones, or what is the theoretical aspect of the question. The facts are these. This question of prices came before an international body, the Research Division of the Economic Commission for Europe. After examining British prices, and comparing them with prices in other countries, that body came to the conclusion that British prices for purchases from foreign countries were extraordinarily low. This is what they gave as the reason for that: The explanation of the relatively low prices paid by the United Kingdom for its imports of food and raw materials appears to lie largely in the extensive use which it has made of long-term contrasts and bulk purchase agreements covering a large proportion of its purchases. I prefer the considered opinion of that international Commission to what the noble Lord, however eminent and strong he may be, feels in his bones.

I come to the whole crux of the matter. The real cause of high prices and of our difficulties is the war experience. We cannot expect to wage a war, to wage it alone, and when we are standing alone to have our houses destroyed, our capital ruined, the means of existence of our people obliterated, our foreign investments lost and to incur debts all over the world—and then expect after all that is over to he in a financially strong position and have the falling prices and increased profits which we should naturally like. I maintain that, considering all these difficulties, this country has stood up magnificently. Of course, that is not due alone to the policy pursued by His Majesty's Government, but the policy pursued by this Government has prevented the evils which took place after the last war; and it has enabled the magnificent courage and heroism and pluck of the British people to achieve the steady progress of this country towards the stronger position, both materially and in physical well-being, that it had before the war.

5.3 p.m.

LORD DE L'ISLE AND DUDLEY

My Lords, the noble Lord who has just sat down suggested that the noble Lords who had spoken from this side in this debate were repeating their Election speeches. I had not the privilege of hearing the part the noble Lord took in the Election, which I am sure was a notable one, hut I heard echoes of very many Election speeches in the remarks that have fallen from his lips. The noble Viscount, Lord Samuel, said he thought that the Government were complacent. Although I expected some complacency on the part of Government speakers, I did not quite expect so persistent a vein of complacency as we have heard from the noble Lords, Lord Lucas of Chilworth and Lord Pethick-Lawrence. The Motion before the House expresses concern at the rise in cost of food, clothes and household goods since 1945, coupled with the decline in the internal purchasing power of the pound, affecting the value of wages, pensions, allowances and savings. So far as I can gather from the speeches of noble Lords opposite, while all have expressed concern, which is what we might expect, they seem to think that they have done pretty well, that on the whole there is not a great deal to worry about, and that the Government can pat itself on the back and everybody can go home happy. I wish I could share that feeling of complacency about the situation; but I am seriously perturbed that the Government should be so complacent as they are. It is all very well to say that the cost of living in France has risen 410 per cent. or that certain people in the United States known to the noble Lord, Lord Pethick-Lawrence, are suffering from the results of inflation. As the noble Lord, Lord Hawke, has justly pointed out, there is no country in the world which is more dependent for its international trade and its place in the world than this country. If it is to remain a trading nation and the banker and centre of the sterling area, it must be our concern to safeguard the pound sterling.

I do not know whether the noble Lord, Lord Pethick-Lawrence, preferred to misunderstand the purposes of the argument. He took us back to Mr. Churchill's period of office at the Exchequer and said that because in his view a mistake was made in revaluing the pound upwards, we must be content now that the course of the pound during the past live years has been downwards. That seems to me a form of inverted logic, but perhaps my apprehension is incomplete. By a singularly perverted logic, what was at the time regarded as a very serious step on the part of the Government, the devaluation of the pound, has now almost become a cause of merit, a matter of duty rather than a step forced upon a reluctant Administration. I remember the noble Viscount the Leader of the House declaring, almost with his hand on his heart, that the Government would never take so rash a step. The devaluation of the pound was a disaster and we on this side must hold the Government responsible, at any rate in part, for the causes of that devaluation.

I hope not to detain your Lordships very long. In these debates on economic subjects the long experience and wide knowledge of many of your Lordships have given to these discussions, and I hope will continue to give, a value which has won a wide recognition. If sometimes more pedestrian and less brilliant minds like mine try to make a contribution, I hope the darkness of our ignorance will be a background to the brilliant stars. I think it will be agreed on both sides that the cost of living has risen, is rising and, at any rate in theory, ought to be diminished; but there is a difference about the proper methods of reducing the cost. The only perturbing element is that some noble Lords on the other side do not seem so gravely concerned about this as I think they ought to be. Certainly no Party advocate higher prices for consumers as a deliberate policy. Certainly no consumer enjoys paying more than formerly for goods, and no shopper, least of all the feminine shopper, enjoys getting an inferior article at the same price.

On the other hand, almost everybody enjoys the sensation of having rather more money in purse, pocket or bank, that he can spend. Therefore, it is not surprising that the advocates of better pay, of what in the modern genteel jargon of politics is called "higher personal incomes," should receive a favourable hearing. But, as every schoolboy knows nowadays, you cannot get more into a pint pot than a pint pot will hold, and you cannot get a larger share of the national cake without depriving somebody else of his share unless you make the cake larger. We have had that preached to us in pulpit and on platform on many occasions. But I am afraid that intellectual apprehension of this rather and doctrine is one thing and the actual submission of the individual will to self-denial is quite another. It is not that men and women do not want to get a little more pay—probably by working harder and longer—but that they have an understandable eagerness to retain that extra money they earn, and a grave dislike of paying it away in taxes. So, in my humble view, while the general public think there is money to be got, I am afraid that in varying places there is likely to be a spiral of rising wages and prices. I think that is what was feared in the Statement on Personal Incomes and Prices issued by the Government in 1948. It says: Moreover, experience has shown that, when it comes to a race between rising prices and personal incomes, prices will always win in the long run, so that conditions become progressively worse for the holders of all personal incomes but particularly for the wage earners. Therefore, if I may say so in passing, I was rather surprised to hear the particularly complacent (as I thought) remark of the noble Lord, Lord Lucas, when he seemed to prove to himself, and perhaps to members of his own Party, that people in 1950, certainly in the wage earning class, were not worse off but better off.

THE MINISTER OF CIVIL AVIATION (LORD PAKENHAM)

Better off than when?

LORD DE L'ISLE AND DUDLEY

Better off than in 1945. I accept the correction of the omission in my statement. For nineteen years or so we have been enjoying what I believe is called a "managed currency." I am inclined to think sometimes that this is a euphemism. At any rate, the volume of credit and currency has since 1931 been varied by deliberate action on the part of the Government rather than in obedience to any changes in the country's reserves of gold. Nineteen years is not a very long time in the history of our country, and during six of those years the country was at war. Despite the despondent views of noble Lords opposite—because it was about that period that they were in the Opposition—between 1931 and 1939, taken as a whole, there was a period of rising employment, increasing international and imperial trade and an advance in the real value of wages. Then came the years of the war, which were clearly exceptional years. For various reasons war, as we readily acknowledge, always brings in its train strong inflationary forces, but I think we ought to remember when we recall this period that those inflationary forces were to a great extent mitigated by the successful savings movement, with which the name of the noble Lord, Lord Kindersley, is so intimately associated.

I want to be fair, and I admit right away that inflationary tendencies, once set in train, are difficult to halt. The habit of spending with few questions asked is easily formed by the great Departments of State, and much less easily checked—although I must admit that I was rather shocked to read in a debate in the other place that the Chancellor of the Exchequer seems to think that he has not yet been able to check this habit after five years. Moreover, there are great claims to be settled, international trade to he revived, and internal balances to be arranged. But the measures to deal with these problems, and the speed with which they are dealt, are matters within the sphere of governmental responsibility. As we have abandoned the practice and have been taught to hate the theory of the automatism of the old gold standard, a special responsibility rests on the Government, in my view, for the management of our currency and thus for the course of prices and the value of savings.

The fact that the Government possess such an immense power over the lives and fortunes of the citizens of this country as their control of money and credit implies, is in theory a source of strength. But it is of the greatest importance in a democratic country that everyone should know the inherent weaknesses of the rulers as well as their virtues, real or supposed, for these are bound to be loudly extolled. I have spoken of the natural inclination of the great majority of our kind towards a little more money in the pocket to burn. In my view, it takes a determined Government—I freely admit this—to resist these inclinations, especially when it is fairly generally realised that it is pretty easy to create extra money. If the Government are not determined, they will speedily find themselves at the mercy of people with all sorts of demands to spend money, very often on objects which are in themselves highly desirable, politically or socially. A Government who are not determined will readily find close at hand the strongest possible objection to cutting down public expenditure. We all know in our private lives—and it is the same in public life—that this is very disagreeable.

THE LORD CHANCELLOR

Hear, hear.

LORD DE L'ISLE AND DUDLEY

I am glad I carry with me the noble and learned Viscount wino sits upon the Woolsack. Fortified by his sympathy, if not by his support, I hasten to acid that economies do entail discomfort and sometimes suffering for particular individuals and sections of the copulation. We all know it is much easier to praise the principles of economy than to enforce them. Last year in his Budget speech the Chancellor of the Exchequer said that we must have a ceiling and no Supplementary Estimates, and that careful regard must be had for expenditure and wise and prudent housekeeping. We now have Supplementary Estimates of a very large character which, to my mind, make nonsense of the so-called programme of "cuts" last autumn Wafted along by a favourable breeze of a sellers' market, by dollar loans and Marshall Aid—indeed, I think, aided in some degree in the export markets in the non-dollar countries by the shortage of dollars—our national economy remains—I was going to say at full stretch, but that would be changing the metaphor too much, and I ought to say under full sail. The old derided, outworn automatism has been destroyed, and there are no buffers. The difficulty over falling reserves is met by devaluing the currency. Apparently great diffidence is felt before the devaluation, but as time goes on we see that it is claimed almost as a victory. So prices are given another hitch upwards. I believe that, conforming to the general practice of the past, we shall see not an avowed abandonment of the wage freeze but what may be called a modification of it. This modification will bear the same relation to the abandonment of the wage freeze as the revaluation did to devaluation.

I am not going to predict—because prediction is always unwise in a politician—whether the disaster which apparently waits for us in 1952, when Marshall Aid runs out, will come upon us or will be diverted by the appearance of another deus ex machina. I do not know whether the crisis can be postponed by yet another adjustment—I hesitate to use any other word, in case I am said to be denigrating our currency—of the external value of the pound sterling. But one thing can be positively asserted. The value of past thrift, past abstinence, past efforts for the National Savings Movement—in a word, the value of savings—is diminishing and will continue to diminish as long as present policies continue. At all levels and in all classes, quite continuously during the past five years, it is the interests of the saver which have gone to the wall.

The situation was clearly revealed by the Chancellor of the Exchequer when he gave that reply which was quoted by my noble friend Lord Balfour of Inchrye. The present value of a 15s. savings certificate, with accrued interest, is to-day 13s. 10d. It has often been said, and I think truly, that the public are not fools. Is it surprising that with that knowledge—or if they have no knowledge statistically, with that apprehension—the fall in savings is as fast and as catastrophic as the noble Lord, Lord Hawke, has shown the House to-day? Indeed, what inducement is there for anyone to abstain from expenditure now so that he or his children can enjoy the fruits of this abstinence at a later date? The most remarkable thing is the admirable persistence of the saving habit in the face of such continuous discouragement. I myself—and I think noble Lords on this side of the House—regard thrift as a virtue, and a social virtue at that. I believe it to be an essential part of the fabric of what nowadays is called "the free way of life." I fear that the compact between the past and the future, which is implied when the Government assume without check or hindrance the management of the national currency, will be seen to he valueless.

Although there was some difference on this matter between the noble Lord, Lord Hawke, and the noble Lord, Lord Pethick-Lawrence, perhaps there was only a verbal difference. I agree that the great achievement in the sphere of finance for the past hundred years has been that our policy has created at home and abroad a strong confidence in the pound sterling, and I believe that our great expansion of trade and the foremost place which we assumed in the world largely depended upon that confidence. This feeling of confidence in the pound has certainly been severely shaken abroad, but I think that at home, although it has been weakened, it has not yet been shattered. I hope that I have sympathetically pointed to some of the difficulties which faced His Majesty's Government in 1945. I have referred, not too critically I trust, to the inevitable pressure which bears upon a Government who enjoy the power of a managed currency, especially during the period of great industrial activity which normally follows a great war.

But my gravest fears arise from the suspicion, almost amounting to a belief, that fundamentally His Majesty's Government do not really care about the saver, the man who is prepared to go without now in order to advance himself or his children in life, or to make provision for his old age. Certainly aggregrate savings are necessary as a balancing item in the national accounts. If people, despite the discouragement which they have received, are willing to save, so much the better in the view of the Government. They pat them on the hack, and give high praise to the people who manage the Savings Movement. But if people are obstinate enough to prefer spending to saving, then there must be a bigger and better Budget surplus, and a form of centralised saving must be substituted for private thrift.

Although again there was an interesting passage between the noble Lord, Lord Hawke, and the noble Lord, Lord Pethick-Lawrence, in principle I am inclined to the view of Lord Hawke—that a big Budget surplus inevitably encourages the cupidity of the spending Departments who immediately set about helping themselves. We have these great Supplementary Estimates, for which very little explanation is proffered to Parliament. But, as usual, political practice is elevated by the theorists to the status of deliberate policy. Left-wing economists now see a system of continuous inflation, checked by the perpetuation of physical controls, as the proper way of conducting the economy of the collectivist State.

I confess that I see in this thesis—whether it is foresight or hindsight I do not know—no deviationism from the doctrine of Socialism. It confirms my belief that the outlook for the thrifty in the Socialist State is not very bright. It is all the blacker because Socialism, with its programme for the progressive acquisition of our industries by the State, substitutes for individual ownership of real things money contracts, in the form of Government stocks, by way of compensation. Even if adequately compensated, the former owner becomes completely at the mercy of the Government who by their monetary policy can value these obligations as they wish. Methods of control of industry which fall short of nationalisation, coupled with systematic dividend limitation—which I see is also advocated in certain Left-wing circles—will also place the former shareholder, the former holder of an equity, completely at the mercy of the State economically.

I have so far spoken chiefly of the saver, and especially of those who hold in one form or another monetary obligations. It cannot be denied that during the past five years Government policy—or the absence of it—has imposed on all holders of Government and other similar stocks a capital tax of perhaps 15 per cent. Similar disadvantages have been suffered by pensioners, and all other persons living on fixed incomes. In many cases the plight of such persons is pitiful. I regard the diminution which is taking place in the value of savings on fixed monetary incomes as a grave matter. It is all the graver because its effects are often not obvious and the sufferers not always vocal. In my opinion it bodes ill for the future, because the discouragement of the disposition of our fellow-countrymen to save will work grave moral as \N ell as economic harm I have, I hope, made all the allowances which a reasonable member of the Opposition should make for the Government. I hope that I have made it clear that they cannot in the least be held responsible for the inflationary tendencies, which may be regarded as a hangover from the war. But in so saying, I cannot absolve the Government from all responsibility for the events of the past five years. Nor, when I remember the great powers which they had or assumed over the economy of our country, do I think it is fair for them, when things go wrong or when trends are not as they should be, to say, "We cannot help it," and when things go right, to take all the credit. If I may give an example from another sphere, it is all very well to claim the credit for reducing infant mortality and then to seek to escape blame for the rise in juvenile crime. They cannot have it both ways.

I hope the noble Lord who will reply, will take the House into his confidence on future Government policy; and I hope that he will recall that he is speaking for the Government and is not there merely to bait the Opposition. On previous occasions he has sometimes found irresistible the temptation to quote extracts from speeches of members of the Opposition to prove to his own satisfaction that they are intellectually inconsistent. He has then closed the discussion, without feeling the necessity to explain in any detail the plans of the Government for meeting the particular difficulty which was the subject of the debate. Meanwhile, prices rise and mart of our difficulties remain unresolved. We are still in the dark as to the Governments real intention deal in a fundamental manner with our grave economic difficulties. We on this side are beginning to be forced to the conclusion that it is not so much the noble Lord's desire to correct the exercises of the Oppositior as a device to conceal the total lack of capacity of His Majesty's Government to deal with the situation. We shall see to-day, from the matter and the manner of his reply, whether the noble Lord still regards twitting the Opposition as a proper substitute for a considered answer to a matter of great public importance.

5.35 p.m.

LORD WINSTER

My Lords, we have listened to many arguments this afternoon but the one which has most attracted my attention came towards the end of the speech of the noble Lord, Lord De L'Isle and Dudley. I understood the noble Lord to deplore the decrease in infant mortality because as they grow up juveniles take to crime; and therefore, I gather, the noble Lord's view is that the more infant lives we save, the greater will be the volume of crime with which we shall find ourselves having to deal. That, I thought, was strongly reminiscent of that delightful book 1984. The one fact which has gone completely uncontradicted this afternoon is that prices have risen and are showing a tendency still to rise. I remember the Chancellor of the Exchequer's broadcast after devaluation when he said that except for a rise in the price of bread he did not anticipate any very serious rises in price. I am certain he was completely sincere and was acting on the best advice available. But next morning my village grocer told me that the Chancellor was wrong, and that he himself was absolutely certain that there would be considerable rises in price for many other things. I am compelled to think that in matters concerning rises in the price of food the village grocer is possibly a better guide than the Chancellor of the Exchequer.

The noble Lord who introduced this valuable debate said that the subject was one which affected the life of every man and woman in this country and especially that of every housewife. But I think the noble Lord would be the first to agree that the matter goes deeper than that, and is one which affects very seriously indeed the economic and financial life of this country. I would go so far as to say that these high prices have a certain effect upon the moral life of the country, for there is little doubt that shortages and high prices between them are responsible for much of the serious wave of pilfering which has overtaken this country of recent years. It is now worth while to steal things which at one time had little intrinsic value. No doubt these high prices and shortages are partly responsible for the very serious pilfering on the docks and railways, though I was glad to hear recently that pilfering on the railways had shown a decrease. But the fact of high prices and shortages cannot be left out of account when we are considering this wave of pilfering.

Now for the economic side. If prices are to go on rising, how is the policy of wage freezing to be maintained? There must undoubtedly be the utmost difficulty. It will be well-nigh impossible to maintain a policy of wage freezing if prices continue to rise, and if wage freezing goes, then price stabilisation also goes, and the result will be more inflation: there can be no alternative to that. On this question of wage freezing, I would refer to one matter. So far as I recollect, the announcement about the policy of wage freezing left a certain loophole concerning the lowest-paid wage earners, and I would enter a plea that the case of one body of workers—there may be others—may be carefully considered by the Government. I refer to the lower-paid railwaymen, who are receiving almost a starvation wage. I have made all the inquiries that I could about these lower-paid railway workers, and I find that there are men who are receiving a wage of 92s. a week. These men have no possibility of increasing their earnings by tips or by overtime. Ninety-two shillings a week is their wage; that is the extent of what they can earn. To-day a married man with two or three children, with a wage of 92s. a week, must, in the face of these rising prices, have a very grim time of it indeed. I fully recognise the difficulties. If you once start some snow moving, it may develop into an avalanche; yet I hope it may be possible to use that loophole in the announcement and that something may be done to improve the wages of railwaymen and other men who similarly may be earning a very small wage indeed.

LORD BALFOUR OF BURLEIGH

The noble Lord will forgive my interrupting, but the statement he has just made about railwaymen getting 92s. a week is one of great importance. Would it be possible for him to give the authority for the statement he made to the House, or alternatively may I ask whether we can have some official information on the point? Because I have heard equally authoritative doubts cast upon that statement. I should like to know what the truth is.

LORD WINSTER

I can assure the noble Lord that I did check my statement from what I regard as a completely authoritative source. If the matter is in dispute, perhaps there should be an official reply on the subject to set the matter at rest.

What are the causes of these high prices? Shortages of materials, the demands of exports, high Government expenditure, high taxation, high costs of materials, high labour costs, high costs of transport—all these, of course, are contributory factors to the rising cost of living. Prices are bound to rise when these expenses are rising also. They are bound to rise in order that a certain margin of profit may be maintained. Profits do not pass entirely into the pockets of the directors or of the shareholders. Profits are necessary in order that reserve funds may be built up upon which the stability of great industries must depend. Profits are required in order that industries may be kept abreast of modern equipment and modern machinery. Profits are also necessary in order to pay the higher costs to which I have referred. Therefore, as these prices and these costs rise, industries are bound to raise their prices accordingly in order to maintain that balance of profit which alone enables them to keep their industries in being.

Then there is the point of the high labour costs. High wages are an excellent thing, as I have always maintained, so far as I have had to raise my voice on these matters. All through my connection with politics, I have always been an advocate of good and high wages. But what I am puzzled about is this: I had always thought that, as wages increased, there would be a progress in technocracy, in the invention and development of machines which would enable industry to pay these higher wages while at the same time getting an increased efficiency and an increased productivity which would enable them to keep prices level or even, as I had hoped, in some cases to reduce them. I confess I am very puzzled indeed as to why that has not come about, because clearly there has been no lack of great inventive skill and no lack of engineering skill; moreover, while not in all respects what we would wish it to be, there has been a great development in technocracy.

To that question I confess I should very much like to know the answer. Is it that high taxation is preventing some of our industries from re-equipping themselves or from installing the most modern machinery which is available; or is it also possible that restrictive practices, about which we have heard a great deal this afternoon—restrictive practices on the part of the employers quite as much as on the part of the unions or of the workers—are preventing industry from reaping the full benefit of modem invention and of modern technocracy? I ask that question because in recent months I have been going carefully into the situation in the docks. I am told that the turn-round of ships in the docks is much slower than it should be, and that the expense to which many ship-owners have gone in rebuilding their merchant fleets and putting greater speed into their ships is largely negatived because of the slow turn-round of ships in the docks. Also, I ant told that mechanisation in the docks has not gone nearly so far or produced nearly such good results as it should have done and that there is a reluctance to accept the economies in man-power which should be made possible were our docks thoroughly mechanised or the machines used to their full potentialities. That is a point upon which it would be extremely interesting to have some information—as to how far and to what extent restrictive practices are responsible for the high prices prevailing to-day and, if they are in part responsible, what can be done to tackle that problem. I have mentioned these restrictive practices before in debate in your Lordships' House. I have had the feeling that the evil of them is admitted, but I have not had any clear acknowledgement of that fact or any clear suggestion of what can be done to tackle that matter.

Then there is the question of high Government expenditure. We are told that it is impossible to reduce it. Let us agree that the Budget of over £3,000,000,000 a year, for the sake of argument, cannot be reduced, and that every penny of that expenditure is necessary. Even if that is so, its effect upon high prices is very obvious. It will be difficult to get prices down substantially while expenditure is running at that rate. There has recently been a great deal of criticism about expenditure on the Health Services, which is running at nearly £400,000,000 a year. I see that the New Statesman and Nation in the current issue says: There is no doubt that by energetic action large sums of money can be saved. We are not begrudging the necessary funds for the Health Services or for any other form of social welfare but, over this vast field of expenditure of, as I say, £3,000,000,000 a year, is it really the case that there are no possibilities whatsoever of pruning or economising without sacrifice of efficiency? That is a question which is very much in people's minds. I am not begrudging expenditure upon the social services; I am asking whether some pruning and economy are not possible. It is impossible to ignore, too, the constant instances of waste and of inefficiency which are brought to notice and which certainly go uncontradicted. We are told that it is quite impossible to reduce expenditure; and yet, under pressure, expenditure has been reduced. There was pressure about the food subsidies and the food subsidies were reduced. At the time of devaluation of the pound, it was found possible again to announce considerable economies in order to offset the effects of devaluation. Quite recently we have been told that a ceiling is to be put on expenditure for the Health Services. With those examples before one, I think one is again entitled to ask, is it really the case that, with careful scrutiny over the whole field of economy, no pruning or economies are possible?

We have this afternoon heard a great deal of the reasons for high prices. If I may say so, I thought the reasons were ably and cogently put. Undoubtedly, there are very serious and good reasons to put forward in explanation of the high prices. Certainly the reasons are good, but there is a more important question still—namely, is there no prospect whatsoever of reducing living costs? Is the answer to that: "No, the Government cannot see the way. These high prices are here and they must continue"? Is that the prospect which lies before us? If we are to be told on the other hand, "Yes, the Government do see the way. They are working on this matter and prices are going to be brought down," then one would like to hear what the plan is and in what way this task is to be undertaken.

There are many factors which the Government will have to fit into its plan for reducing high prices, if such a plan in fact exists. There is the policy of full employment. Nobody would wish, for one moment, to see that affected. As I understand it, we are all committed to the policy of full employment and, similarly, to the policy of short hours. To that there is general agreement. I have spoken about restrictive practices. I am not quite so sure about that matter. I think there is a feeling that something could be done by an effort to check some of the restrictive measures which, as I have pointed out, are practised on both sides of industry. I do not know that much can be done about purchase tax because, as I understand it—I shall be corrected if I am wrong—its main purpose is anti-inflationary. The wish by imposing this tax is to reduce spending. Sometimes, purchase tax seems to contain a great many anomalies and to produce some extraordinary situations. I read recently of a firm of stationers who had been selling a very good combined pencil case and rubber eraser in the shape of a dachshund dog, the nose being the pencil and the tail being the rubber eraser. Up to quite recently, the purchase tax on that article was 33½ per cent., but the firm has been notified that the tax is now increased to 100 per cent. because the dachshund is a statuette and might be bought as an ornament instead of for the purpose for which it is manufactured. I cannot help feeling that if the whole range of purchase tax were examined, a good deal of pruning could be done. There is taxation of 40 per cent. That is a very high taxation indeed, but no prospect is held out of any possibility of a reduction, although I see that in regard to beer, we have arrived at a state of diminishing returns—or perhaps one ought to say, diminishing intake. At any rate, that tax has been raised so high that the consumption of beer is falling.

No one wishes to see the benefits of the Welfare State reduced. There are the losses on nationalised industries. It will be some time yet before the nationalised industries are through all their teething troubles and begin to show profits instead of losses. There are the food subsidies. There is the end of Marshall Aid looming a short distance ahead. All these are lions in the path of any reduction of the high prices from which we are suffering. If it is the case that the Government have this matter very much at heart, and are anxiously considering what can be done about it, it would be interesting know how they propose to deal with all these very serious factors in the plan upon which, I have no doubt, they are working. We must all wish them success in that respect, because these high prices affect our ability to compete in the industrial markets, and if we lose our ability to compete we shall have something very much worse than rising prices to face.

5.56 p.m.

LORD WOLVERTON

My Lords, there are many things in the speech of the noble Lord, Lord Winster, with which I would agree, but there is one thing with which I am not in agreement. While I wish to see good wages to-day in every industry I am very doubtful about raising the wages of the lower paid railway workers without raising the wages of other railway workers. If that were done the technical grades on the railways would have a genuine grouse; it would not give anybody encouragement to train himself so that he could rise to the more technical grades. I believe that it would be a very grave matter suddenly to raise the wages of the lower grades, although I agree that their wages are very low indeed. I think there is great danger in that and, speaking for myself, I am not in favour of it. There is a great deal in what the noble Lord says about high prices, which we all agree have been causing a large amount of pilfering and juvenile delinquency, but we hope the situation will improve.

In supporting this Motion, raised by my noble friend Lord Balfour of Inch rye, I agree entirely with everything he said about rising prices in regard to food, clothing and household goods, and about the decreasing purchasing power of the pound. It is a situation of extreme difficulty, and if not checked it will become very grave. We have got to face the hard realities that all our raw materials are costing us much more money, with all the inevitable consequences. I wish to deal to-night with only one aspect of this important debate—namely, the ever-increasing price of coal, electricity and gas, because upon these main basic sources of power depends the manufacturing success of the secondary industries.

My Lords, all those industries have been nationalised, and belong to the State. Earlier on in the debate the noble Viscount, Lord Samuel, drew attention to the rise in the cost of blankets. He said that recently at least £1 had been added to the cost of a pair of blankets. He also raised the all-important point of the increased price of imported wool which, as we know, is still bulk purchased. But there is another aspect besides the production of blankets, and that is the increased cost of coal which in the last three and a half years has risen at least 6s. 6d. per ton. I would also draw your Lordships' attention to the great increase in the price of electricity. In the first annual report of the British Electricity Authority published in January of this year, it is pointed out on page 114 that it is difficult to make complete comparisons. Comparisons were, however, drawn between the figures of the Electricity Commissioners for the years 1946–47 and 1947–48 and the B.E.A. figures for 1948–49, the first year under nationalisation. For the years 1946–47 and 1947–48 one sees that the average price per unit of electricity sold rose by 5.8 per cent., whereas in the year 1948–49 it rose by 9.6 per cent. That is a very disturbing factor.

On another page of the report it was stated that from 1932 onwards to March 31, 1949, the price of coal for generating stations has risen by no less than 316 per cent. The cost of generation, of course, has not risen in proportion, it has risen only by 71 per cent., owing to the greater thermal efficiency of power stations. In those years the cost of generation has risen by 71 per cent. This also is a very disturbing factor. And that is not the whole story. If I may detain your Lordships for a few more moments, I would return to page 114 of the report. There, under the heading of "Other expenses, less miscellaneous income" we are shown that the expenses of running an undertaking, other than working costs of generation, fuel and so on, rose in the year 1947–48 by 4.7 per cent. and in the year 1948–49 by 14.3 per cent. As I say, I think that these are very disturbing factors.

We have not yet had the first accounts relating to gas, but I am credibly informed that in many areas the cost of gas has gone up. It is not easy, however, to see the picture properly when one has nothing on which to base facts. I should like to ask the noble Lord, Lord Lucas of Chilworth, what the basic producers are doing about this, and whether he does not think that these basic industries (I refer to the basic industries which are nationalised) should be looked at first because manufacturers are entirely dependent on these other industries for fuel and power? If they cannot get their fuel and power at more reasonable prices then I do not see very much hope of their being able to reduce some of their prices, especially as in our decreased currency we are having to pay very much higher prices for raw materials.

6.4 p.m.

LORD LLEWELLIN

My Lords, I intend, now that we are nearing the conclusion of this debate, to deal mainly with the question of food and how prices have risen. But before doing so I would like to put this point. The noble Lord, Lord Lucas of Chilworth, whom we were glad to hear speak for the Government so early in the debate, said that noble Lords on this side of the House had not a monopoly of concern in regard to rising prices. On that, I completely agree. The noble Lord did not go on to say, however, that it followed, therefore, that the Government were going to accept the Motion on the Order Paper. If they were to do so, they would, of course, fully associate themselves with that concern. If they do not, we shall naturally think that the words of the noble Lord, Lord Lucas, mean rather less than perhaps he intended to imply by them, and that the Government's concern is rather halfhearted and is not going to be translated sufficiently into action to accept the Motion. It is, if I may say so, an extremely innocuous Motion, and it does not even necessitate advising His Most Gracious Majesty to allow Papers to be laid, because the Motion has not that usual appendage. It will be interesting to see whether Lord Pakenham accepts this Motion—he ought clearly to embrace it if the Government are whole-hearted in their concern—or whether he passes it by or rejects it, as he may be inclined to do.

In 1945, when I left the Ministry of Food, we had estimated during the summer that the food subsidies would cost that year some £245,000,000. In actual fact, they cost, I believe, £265,000,000 for the year 1945. They have now gone up to, I think, £465,400,000. In view of the additional costs of subsidies, it is as well to ask how we are getting on and how prices stand in comparison. In April, 1946, what had been the 2 lb. loaf was reduced to 1 lb., the price remaining the same. It was thought, I believe, that by these means it would be less apparent to the consumers that they had to pay more for their bread. At any rate, that was the way in which, on that occasion, the price was raised. After devaluation, as your Lordships are well aware, the price went up from 4½d. to 5½d. Similarly, flour went up by ½d. a lb. as the direct result, as the Chancellor of the Exchequer told us, of the devaluation of the pound. Apart altogether from that, and apart from these high subsidies, in June, 1947, tea went up by 4d. a lb., after last year's Budget, cheese went up by 4d. a lb., meat by 4d. a lb., margarine by 1d. a lb. and butter by 2d. a lb.

I would now like to compare the average cost of certain foods to a household at the moment with what it was pre-war. In 1937–38, an inquiry was undertaken by the Ministry of Labour in order to obtain a representative collection of family budgets giving particulars of the weekly expenses of households of weekly wage earners in Great Britain and Northern Ireland. The budgets supplied enabled the average to be worked out for a household of 3¾ persons. It was shown that in each house in those days, average amounts of foods taken per week were: bread, 13.5 lb.; flour, 4.4 lb.; meat, 4.7 lb.; bacon, 1.4 lb.; fresh milk, 11.2 pints; butter, 1.8 lb.; potatoes, 13.8 lb.; eggs, 14.1; and margarine, cheese and tea, 7 lb. each.

Let us now compare the retail cost of those commodities in those days—when of course there were no food subsidies—with the cost of similar amounts to-day. In some cases, of course, it is not possible to get similar amounts, because the same amount of food, through rationing, is not procurable, but I am taking what would have to be paid if similar amounts could he obtained. The comparisons are these. For the amount of bread which I have mentioned, which then cost 2s. 8¼d:, you now have to pay 3s. 6d. Other figures are as follows: flour, 10d, then and 1s. ld. now; meat, 4s. 8d. then and 6s. 8d. now; bacon, 1s. 11d. then and 3s. 1d. now; milk, 3s. 0¼d. then and 4s. 8d. now; butter, 2s. 5½d. then and 2s. 7d. now; margarine, 4¾d. then and 7d. now; cheese, 7d. then and 9d. now; tea, is. 7d. then and 2s. 4d. now; sugar, 1s. 0½d. then and 2s. now; potatoes, 1s. 1d. then and 1s, 7d. now; eggs. 1s. 10d. for 14 then, and 3s. 6d. now. These are considerable rises in the cost of living to weekly wage earners.

The Government may say that the increases are much less than those in other parts of the world, and to some extent that is true. But when we come to look at the figures which have been published by the Food and Agriculture Organisation of the United Nations, showing the success of food subsidy payments in controlling inflation, as measured by the general wholesale index, the United Kingdom's payments, although the highest, are among the least successful by this measure. Taking the general wholesale index as being 100 for 1937, the United States, with no food subsidies, went up to 176 in 1948. On the other hand, this country, with subsidies working out at £8.1 per head of the population, went up to 202. The Netherlands, with food subsidies of £5.8 per head, went up to 259.

LORD PAKENHAM

Is the noble Lord quoting the wholesale figures or the cost-of-living figures, because he appears to be quoting the wholesale figures?

LORD LLEWELLIN

The first figure I quoted is the food subsidies given in pounds per head of population. The figure of food subsidies per head of the population in this country is £8.1. I am not sure that we should not have done better if we kept that £8 in our pockets and made up what the food subsidies come to. Then I quoted the general wholesale index of prices, which, taking 1937 as 100, which I think is fair, shows that in the United States the index rose to 176, in the United Kingdom to 202, in Sweden to 175, in Norway to 172, in the Netherlands to 259, and in France (which was a case the noble Lord quoted, and quoted rightly from his point of view), the index went up to 1,712, without foci subsidies. In Denmark the index went up to 213, and in Australia, with a very small subsidy of £1.4 per head, to 169. The figures in this table show that, despite the fact that we are spending more on food subsidies per head of population than any other country, our cost-of-living index has risen, and risen higher than that of the United States.

The Government may also say, as the noble Lord, Lord Lucas of Chilworth, has already said, that wages have similarly risen. I have no doubt that the figures which the noble Lord gave were right, but he was rot on such strong ground when he dealt with those living on fixed incomes—old-age pensioners, those living on disablement pensions, and those retired from business who are living on their savings. He said there has been a number of increases. So far as I know, the increase given to old-age pensioners is given according to a means test. That is not a matter in which members of the Labour Party have always delighted. As your Lordships will remember, before the war, in the days of the Conservative Government, a measure was brought in to supplement old-age pensions in cases where necessity was shown. That was opposed by the; Opposition of those days, and it is pleasant to think that now such a scheme; is in operation they are taking some credit for it. Equally, the basic pension of a disabled soldier has not increased, despite the fact that your Lordships, ably led by the noble Earl, Lord Cork and Orrery, passed a Motion in the last Parliament that that should be done. It is these classes of people who are most affected by the rise in the cost of living, because the man who has his labour or some other service to offer can easily bargain if he wishes to do so. If I am wrong about the old-age pensioners—

LORD PAKENHAM

The old-age pension has been increased from 20s. for a married couple to 42s., since 1946. without a means test.

LORD LLEWELLIN

If I am wrong, I apologise to the House. At any rate, a point to be watched is the effect of any further rise in the cost of living. I gather from that particular fact that the pension was 20s. before the war, and increased to 42s. in 1946.

LORD PAKENHAM

For a couple.

LORD LLEWELLIN

I am obliged to the noble Lord. All the cases I have given of increases in the cost of food have occurred since 1946. Therefore, I have at least made out a case for that problem to be considered. For my part, I would sooner see it tackled on the line that the noble Lord, Lord Winster, suggested, of the Government trying to prevent an increase, rather than by paying out more money to compensate old-age pensioners and others who suffer when the increase has taken place.

I believe that the rise in the cost of food has to some extent been due to the system of bulk baying. I am not one of those who oppose bulk buying root and branch; it would be silly for me to do so, because I was the Minister who made the first contracts with Australia and New Zealand. I believe it was absolutely right to do that. If we wanted to get increased production within the sterling area, and from our folk across the seas, it was right that we should give them, a guarantee that we would take the extra they produced, just as we guaranteed our own farmers at the same time. I am a believer in that sort of Government guarantee and that sort of bulk purchase. I was a little horrified to hear the noble Lord, Lord Lucas, say that the wheat agreement with Canada was a hard commercial bargain. I do not believe it was. When I was dealing with the Canadian Government I never found that they were at all hard commercial bargainers. The present Government have had to deal with the same body of persons and with the same Minister, and I believe it was a generous gesture on the part of Canada to agree to sell us wheat at that price. The noble Lord, Lord Lucas, is shaking his head in dissent, but the noble Viscount, Lord Addison, seems to be more inclined to agree with me, and he had more to do with that particular negotiation than did Lord Lucas. I should not like it to go out from this House uncontradicted that Canada had come to a hard commercial bargain with us, for I believe it was a very generous gesture.

However, sending people to places like the Argentine to carry out bulk buying is a very different matter. In those cases, it is much better to send people who will come to a hard commercial bargain, rather than to carry out the transactions partly through diplomatic channels. In a time of rising prices, I believe that the sooner we get rid of this bulk buying the better, except where it is to encourage further production from our own British stock overseas—or, indeed, from Britishers, whether they are our own stock or not, because I would do it with the coloured producer of sugar in Jamaica.

VISCOUNT ADDISON

Does the noble Lord want us to get out of it in the ease of Queensland?

LORD LLEWELLIN

No.

VISCOUNT ADDISON

I thought the noble Lord said he did.

LORD LLEWELLIN

No, I said except for our own people overseas. If I may say so, Queensland is covered by the arrangements I made with regard to Australia as a whole. I would not get out of it in the case of Queensland. I would carry on these arrangements in any case where, by giving a future guarantee to the farmers of such places as Queensland, we could increase the production of food in the sterling area, both for their needs and for ours. Some of this bulk purchasing I dislike intensely. In my view, we made a very bad bargain over the Algerian wine. It was very lucky that in the end the Minister of Food was able to get rid of it in Germany. I am told that there were some Germans who did not realise they had lost the war until they found they had to drink the Algerian wine sent over to them by the kind permission of the then Minister of Food!

We are all concerned to try and stop the rising prices. That they have risen is beyond dispute; that they are tending to rise still further is beyond dispute; and that the rise ought to be stopped is also beyond dispute. The noble Lord, Lord Winster, dealt with several of the contributing causes, and I could not agree with him more when he says that one of them is high Government expenditure and high taxation. Those are things with which the Government should find it easy to deal, because they are completely under their control. I suspect that, having said that, when the noble Lord, Lord Pakenham, speaks he will say: "What would you do if you were sitting here?" I am sure we should all agree, if we were honest, that that is much easier to answer if you have Treasury advice than if you have not got access to all the facts that the Treasury advisers used to have, and I suppose still have to-day. At any rate, I should make some cuts in Government expenditure. I was surprised to read that the Chancellor of the Exchequer said at the time of the Election that no cuts were possible, and that it was absurd (I have not his exact words) for the Conservatives to go on talking as they were talking. I am not quoting him verbatim, but I remember his making some remark of that sort. I am afraid he is the sort of man who has exhausted himself by economising—because we all know he does that, and I am speaking quite genuinely. I do wish he would take a little more to eat himself and exercise a little more vigour on making some of the big spending Departments economise.

May I give one or two examples of the way in which I should cut down? I should first of all eliminate the £16,000 000–I believe that is the figure—which the Government spend on publicity. I maintain that a good Government require no publicity beyond the good they do; it is a sign of weakness if a Government have to spend £16,000,000 on publicity. So let us all agree, from one point of view or the other, that if we were to govern, we should not need £16,000,000. I hope that the noble Lord, Lord Pakenham, in his reply, will say: "We are just as good a Government as you would be, therefore we do not need it either, and we will cut out this £16,000,000." Another matter I would cut down severely is the £4,000,000 a year which we spend on the British Council. I believe that that service is extravagantly run, and somebody ought to look into it. We have these charming people in practically every capital in the world; they run a lending library well, and they are very nice, but I doubt whether they are worth fall the money we now spend upon them.

I would also cut out—for the moment I have forgotten the figure, but it is an appalling one—civil service travelling. May I tell your Lordships of a case which happened the other day? I am not certain whether this young lady would be termed a civil servant, or whether she is part of the savings movement. A friend of mine farms in rather a wild part of Dorset, between Blandford and Salisbury. A lady turned up there in a car and said, "I should like to see Mr. John X." The wife, thinking that she meant her husband, said that he was working in the fields, and asked whether she could answer any questions. The young lady said: "Perhaps you can tell me. Last year he put some money in national savings certificates and he has not put any in since. I came because I should like to know whether he is dissatisfied, and if so why he is dissatisfied and whether he does not think he is getting his money's worth." The wife remembered that her husband had not put any money in, and she said: "You have come to interview my boy. I do not know that he will be able to tell you what you want, because he is only four years of age. We put in some money for him the first year, and we did not put any in the next year. I do not think he will be able to tell you whether he is dissatisfied or not." I do not know who sends a woman like that in a car to visit people, who have difficulty in obtaining petrol to go into their market town, to ask questions of a small boy four years of age. It may happen by putting a pin in a list, but I do not know why these journeys are necessary. We all know why people either do or do not put money into national savings. One may be that money is tighter—as we all know it is; they may be able to afford something one year and not the next; they may decide not to have a summer holiday one year and to have one the next. But it is not worth while sending people on a journey for things of that sort.

I have quoted a few cases in which I would certainly cut down on Government expenditure, and I am certain that if I were sitting on the other side of the House I should find a great many more. I do not believe that a real search has been made. With great respect to him, I do not believe that after a Chancellor of the Exchequer has said that there are no savings to be made ye are likely to see many savings made. The Chancellor is a man who should be saying all the time: "There are more savings to be made, and I insist that you make sonic more."

LORD PAKENHAM

Just for the record, I am sure the noble Lord would wish to quote the passage if he has it available. I cannot remember anything quite so bald as that coming from the Chancellor of the Exchequer.

LORD LLEWELLIN

I am sorry that I cannot supply the actual quotation, but I could certainly get it for the noble Lord. I did not mean to quote it verbatim, and I am sorry that I have not brought it with me. I remember that it was in a speech made during the Election. It was to the effect: "It is no good the Conservatives going out and saying that they can make all these economies, because I can assure you that things have been cut as much as they can be," or words to that effect.

LORD PAKENHAM

My noble friend believes that the Chancellor said there were no major savings to be made.

LORD LLEWELLIN

I do not know what is meant by a "major saving." At any rate, I will have the cutting turned up, and I will hand it to the noble Lord or give it to my noble friend Lord Balfour when he winds up this debate. Be that as it may, the Chancellor should say to the spending Departments: "I know there can be major and minor savings, and you must look for them both. In that way we shall get a Budget in which taxation will not be so tremendously high in time of peace." That would affect the cost of living, which we all want to see come down, and that would indicate that the Government were showing some concern over this problem. To end up in the way I started, if noble Lords are really earnest in their concern about the matters referred to in the Motion of my noble friend, they will not only pursue that policy but will gladly accept with us the Motion that is on the Order Paper to-day.

6.39 p.m.

LORD PAKENHAM

My Lords, the noble Lord who has just sat down has spoken to us, as he always does, in the most reasonable and friendly way. I hope that the noble Lord, Lord De L'Isle and Dudley—if he is with us—is not going to press too hard the demand that I should not twit the Opposition, because if we were not allowed to twit one another across this Table I feel that we should very soon come to blows. I hope that that particular demand is not to be taken in all seriousness.

All of us who have sat through this debate have enjoyed it and profited from it, but I am bound to say, while paying my tribute to the Parliamentary skill with which the noble Lord, Lord Balfour of Inchrye, set the ball rolling, that I was surprised by some observations which fell from him. I am always particularly ready to make allowances for the noble Lord, because he has been so kind to me, helping me with all his expert knowledge in my present office. The noble Lord said he did not feel that the Labour Party had talked enough at the Election about the cost of living. I do not know whether he read our propaganda. If so he would have found on page 3 of Labour Believes in Britain that we promised a square deal for consumers; and very many measures were set forth with precisely the object that he has in mind. In my recollection, we talked a good deal at the Election about the cost of living. I cannot agree that we did not talk enough about it. But I hope the noble Lord will not mind my saying that it is a pity noble Lords opposite and their colleagues talked as much as they did on that subject during the Election.

I am sorry the noble Lord, Lord Woolton, is not here to-day. I sent him word that I was going to allude to his famous broadcast. Perhaps a few words on that subject might not be out of place. Your Lordships will recollect what was said on this very subject in the very readable pamphlet This is the Road. On page 6, near the bottom we are told: In any approach to the problem of food subsidies, made necessary by the urgent need to improve the purchasing power of the £, we shall be bound by this pledge. There will be no reduction which might influence the price of food without compensating increases to those most affected. These compensations will take the form of larger family allowances, pensions and other social benefits … It is clearly admitted here—I would ask the noble Lord, Lord Balfour of Inchrye, to correct me if I am wrong—that the Conservative proposals would lead to a rise in food prices. Otherwise, what would be the point of these allowances and compensations?

LORD LLEWELLIN

That was done, as my noble friend Lord De L'Isle and Dudley said (anticipating the line that the noble Lord was going to take in his winding-up speech—and apparently he foresaw it well), to get ahead of the rumours that we knew would be put round by Labour speakers during the course of the Election!

SEVERAL NOBLE LORDS: Oh!

LORD PAKENHAM

I think I must be content with the cries of "Oh," and leave it there. But Lord Woolton was obviously not content with this line of argument, because it may not have proved quite as infectious as was hoped. I must say, in passing, that I envy the noble Lord his powers of broadcasting. I attempted to broadcast only once, and then the announcer took away my notes—with disastrous results. And I was never asked to broadcast again. Lord Woolton is, I believe, a delightful broadcaster. When he got into the studio he took a very bold line and repeated, as he became more and more excited towards the end of his broadcast, the statement that the Conservative Party would reduce the cost of living. This was not promised in the official pamphlet. The noble Lord also said: I repeat it: we will reduce the cost of living and we will cut down extravagance in Government spending. We will restore competition in the food trades and we will cut the cost to the Treasury of food subsidy.… In fact Lord Woolton went far beyond what I understood to be his brief in promising that not only would food subsidies be reduced, and in that way expenditure reduced, but that the cost of living would come down. Well, my Lords, I do not think that even on the high authority of Lord Woolton—and he is respected everywhere—many people were found to believe that both these things were possible.

THE MARQUESS OF SALISBURY

I think it is only fair to my noble friend Lord Wootton to say that Lord Pakenham is giving the noble Lord's conclusions and omitting all his arguments. His argument was—I speak from memory—that the Conservative Party considered that by going back to traditional methods of buying they would be able to buy more cheaply and that therefore a smaller subsidy would be necessary to produce the same results. It might be possible, if they bought cheaply enough, actually to lower the cost of living. That argument was left out entirely by the noble Lord, Lord Pakenham, merely said dogmatically that Lord Wootton said he was going to reduce the cost of living, but he did not give Lord Woolton's argument as to how it could be done. I do not suggest that Lord Pakenham will agree with Lord Wootton, but he will, I am sure, agree that Lord Wootton's argument was a perfectly reasonable one to put forward.

LORD PAKENHAM

It was not an argument that was put forward in the Conservative document. That document offered compensation for those who would have to face a rise in the cost of living. Lord Woolton's argument must have been worked out between the publication of that document and his broadcast. But I would exonerate myself of the charge of concealing anything. The noble Lord, Lord De L'Isle and Dudley, accused me of a certain evasiveness—

LORD DE L'ISLE AND DUDLEY

That observation showed great restraint on my part.

LORD PAKENHAM

We all have our faults, but that particular one is not usually attributed to me. I read the passage as the noble Lord read it. … we will reduce the cost of living and we will cut down extravagance in Government spending. We will restore competition in the food trades and we will cut the cost to the Treasury of food subsidy. I went through the Election frankly assuming that the Conservative Party, with all their virtues, were not a Party who were likely to lower the cost of living. But here they come forward and raise this very grave issue, which is one. I am bound to say, in which perhaps the advantage lies with us.

May I return to another point which the noble Lord, Lord Balfour of Inchrye, made, and which was taken up by another speaker, Lord Hawke? The noble Lord expressed a certain impatience of these indices. My Lords, we are all inclined to sweep away figures which do not appeal to us and to invoke them when, they are more helpful. In this case the noble Lord preferred not to have recourse to the official figures. He referred to the housewife. I know that the housewife is very important: she has to be wooed in her millions. But the housewife cannot, I think, be looked upon as a reliable statistician. That is not her function.

LORD SANDHURST

Has the noble Lord ever consulted his wife?

LORD PAKENHAM

My wife and I have just had influenza together, and have been in very close touch. If that is not what is now called "joint consultation" I am not certain what is. The housewife cannot be invoked to settle this; matter one way or the other. I made my own little inquiry this morning, having in mind the possibility that this point might be brought up to-day. I asked a small provision merchant about the price of foods, and he said that the prices of three foods have gone down recently, and that no food price had gone up. An argument of that kind would be, I ant sure, considered frivolous by the noble Lord, Lord De L'Isle and Dudley. I do not rest anything upon an argument of that kind. I think that we must deal with the official figures, unless we attempt to challenge them—and they have not been seriously challenged. As the noble Lord, Lord Lucas, explained so clearly, since 1945 there has been a rise in tht! retail prices—that is, the prices of food, clothing, household and miscellaneous goods—of 23 per cent., and the rise in the prices of food has been 31 per cent. since the middle of 1945. I venture to suggest that we should work on that basis and not on the strength of certain information we have picked up in one way or another through chance encounters.

I should like to pass on to one or two particular points before coming to the broader themes. The noble Viscount, Lord Samuel, returned to his old argument that high taxation produces inflation. That argument may be regarded by him as very stimulating but, so far as I know, it has not received support from many economists. It is not a point that one can prove in vacuo, one way or the other. The Colwyn Committee many years ago decided that you cannot include a tax on profits in working out costs. The noble Viscount will no doubt have many recollections of that kind. May I approach it in a different way? I know that I shall not convince him, but I should like to lay one point before him. Let us go back. One of the greatest Liberal eras, when Liberalism was in its heyday, was the period 1850 to 1873. (I take those years more or less at random, but perhaps not entirely so, as the noble Viscount will appreciate.) That was the era of Cobden and Bright. Prices were rising the whole time. For twenty-three years there was a steady rise in prices and it happened shortly after the introduction of Free Trade in this country. It may or may not have been due to Liberalism, but, as a matter of actual fact, there was a secular rise of price from 1850 to 1873. To take another more recent period, from 1896 to 1914, prices were rising steadily, and all through that famous Liberal era from 1905 to 1914. I beg the noble Viscount not to put the recent rise in prices all down to the present Labour Government. Those things have happened over a much longer period, when the Liberals were in power in their most glorious moments.

VISCOUNT SAMUEL

Not to so disastrous and sudden an extent.

LORD PAKENHAM

My Lords, anybody can use the word "disastrous." I certainly would not argue with the noble Viscount as to whether he could find any parallel for a sudden rise in prices of this kind—23 per cent. I do not know whether there was any time during those years when they rose so fast. But you can find many periods in the past. Just after the First World War there was a very sudden and disastrous increase at the time when there was a Liberal Prime Minister, the famous Mr. Lloyd George. Then there was a very sharp rise, followed by a collapse. That is what we want to avoid by the policy which we are pursuing on this occasion.

May I return to another point that was made by the noble Lord, Lord Hawke, and also taken up by the noble Lord, Lord De L'Isle and Dudley—the question of savings? I have no doubt that we shall be coming back to all those subjects very shortly. The Economic Survey is published to-day and I shall allude to it in a moment. The House will not expect me to say the last word on any of these matters now, but may I say two things, and two things only, about saving? In the first place, let me reiterate that there is absolutely no truth in the hypothesis of the noble Lord, Lord De L'Isle and Dudley, that the Government are not concerned with the saver. We are most anxious to do everything we can for saving, and to enlist the aid of noble Lords opposite in encouraging saving still more. I hope the noble Lord will take it from me in all seriousness that on behalf of the Government I repudiate absolutely the suggestion that we have no concern with the saver.

The other point I can deliver more calmly, and I hope the noble Lord will readily accept it. It is simply a question of fact. I agree that the savings movement has encountered many difficulties which we must attempt to overcome. This fact is one which has not been mentioned to-day and is not usually mentioned in these discussions, and it goes along with other facts which have been stated. With accrued interest the amount invested in national savings at the end of the year was £52,000,000 more than it was the year before. The amount remaining invested at the end of 1949 was £52,000,000 more, the total standing at £6,097,000.000. In other words, there was more invested in national savings at the end of the year than at the beginning of the year. Therefore, we must not go away saying that national savings are going down in that sense, because really that is not the case.

LORD DE LISLE AND DUDLEY

That is with interest?

LORD PAKENHAM

With interest.

LORD DE L'ISLE AND DUDLEY

I want to get the facts right. I take it that the figure given in The Times financial column to-day is accurate, that the net withdrawal was £64,000,000 in the last year. That is published. I should like to know the noble Lord's views upon that.

LORD PAKENHAM

My Lords, I have not read that particular article in The Times but, if the noble Lord quotes that figure, he is probably right. But the figure I have given is a fact which the public should know—that there was more invested in national savings at the end of last year, on the latest date available, than at the beginning of the year, If we choose to take the amount remaining invested in national savings as a criterion of public confidence, then, judging from the figures available, public confidence stands very high.

Perhaps the speakers on my own side of the House will forgive my not alluding to them as I should like. I will only thank them for their contributions. May I go on to one point before finally reaching the bigger issue—one particular point raised by the noble Lord, Lord Llewellin, where I think he is under a misapprehension? He took the subsidies per head of the -population in this country and other countries, and then took wholesale prices as indicating what the consumers have to pay. Surely, if the noble Lord thinks that over, he will agree that what matters is the retail prices—that is, the subsidised prices as far as the consumer is concerned. A comparison between wholesale prices is not relevant. We are establishing a case between the cost of living here and in other countries.

LORD LLEWELLIN

So far as I know, the figures I quoted were figures after the application of the subsidies. I meant them to be.

LORD PAKENHAM

I have not his figures in ray hand, but the noble Lord when I questioned him repeated that they were wholesale prices. We are discussing retail price; this afternoon. May I come to a point that was made by the noble Lord, Lore De L'Isle and Dudley? The noble Lord, with an air of kind patronage, if I may put it that way, was ready to acquit us—we all being members of the same House and having to live together—of some of the responsibility for what had happened. We on this side of the House are not shirking our responsibility in any way. That is really the difference between us. Noble Lords regard this last period as disastrous, and the most generous thing that the noble Lord cal think of to say is that all the blame does not fall upon us. Frankly, we are ready to stand by what has happened and to take our stand on the results.

I say quite boldly and in a friendly spirit to the noble Lord, let us just look at one or two facts. I will not detain the House much longer at this late hour. The noble Lord, Lord Lucas, has brought out the fact that leaving aside rent, which is excluded from our discussions to-day, while retail prices have risen 23 per cent., the weekly earnings have also risen 23 per cent., and to that, of course, has to be added the immense extension in social services during the same period. I appreciate the point raised by the noble Lord, Lord Llewellin—I think in an intervention—when he asked whether taxation had been allowed for. That is quite true. If you take the weekly wage earner you would have to take the taxation out of that; but on, balance nobody—and certainly the noble Lord I am sure does not—disputes my general point. The wage earners of this country regard the social services, including the contribution, as a great benefit and a great asset to them, and something very solid which must he included in any comparison of this kind.

LORD LLEWELLIN

I meant only that if you added it on one side you ought to add it on the other.

LORD PAKENHAM

Yes, but if you do acid it on, you have still a great benefit.

As a nation we are producing much more than before the war, and as we have not the noble Lord, Lord Cherwell, with us to-day, I think we can say, without destroying your Lordship's chances of dinner, that the increase is of the order of about 30 per cent. But owing to the necessity for securing increased exports, and the considerably larger capital investment, the standard of life of the whole population per head, so far as one cad recognise these things, may be said to be about the same, while the national in come is far better distributed and the poorer section of the community are vastly better off than they were before the war. That is the fact; and because we have had such a share in that fact, we are very proud to accept whatever measure of responsibility is accorded us.

Sometimes the discussion has strayed a little but the comparison to-day, of course, is primarily with 1945. The production in 1949 was 29 per cent. higher than in 1946. Owing to special post-war difficulties, which any Government would have had to face, and of course to the necessity for wanting back our economic independence, there has not hitherto been a corresponding improvement in consumption. But the Economic Survey published to-day—I believe noble Lords may have it in their hands—shows that during 1949 there was at least a real improvement in the food position and in certain other respects. I think I may put it rather briefly to the noble Lord, Lord Llewellin, and perhaps we may have a further opportunity on another occasion of going into it in greater detail. The standard of consumption for the population as a whole is back to prewar, and of course for the poorer sections is very much better than before the war. I will quote from the Economic Survey: Food production in 1949 greatly improved in almost every section. Greater quantities and more kinds of food became available… Expenditure on food increased substantially and there was a marked increase in real terms. So that in 1949 we have a clear improvement in the food position, and that I think is an answer to a good deal that the noble Lord, Lord Llewellin, said. The noble Lord, Lord De L'Isle and Dudley, I believe it is fair to say, went so far as to denounce the noble Lord, Lord Lucas, for claiming that there had been an improvement since 1945. I am afraid the statistics are wholly on the side of the noble Lord, Lord Lucas. If we take the working classes—and the noble Lord, Lord De L'Isle and Dudley, was talking of the working classes—we must agree that on the average their standard of life is better than it was in 1945, bearing in mind everything that I have said, including the great extension of social services since that time.

I will not take the House through the world situation because it was explained so well by the noble Lord, Lord Lucas. I am a little surprised that people did not pay perhaps somewhat more attention to what seemed to me an extremely forceful explanation. The fact is that we have come through better than other countries, so far as the cost of living is concerned. Our increase is 23 per cent., the American increase is 31 per cent., that of Canada is 36 per cent. The Italian and French increases are very much higher. That is all on the credit side and I refuse to adopt any attitude of apology on behalf of the Government. I refuse to get into a white sheet, but I am perfectly ready to agree with noble Lords who expressed concern, not only at what has happened but at what might happen if we do not take extreme action.

Before I come to answer the question put to me, are we going to accept the Motion, I would explain to noble Lords where we differ from them. We have proceeded on a definite policy. What might be called the physical aspects of it, the trade aspects, have been handled effectively by my noble friend Lord Lucas, and I shall not say more about that at the moment. We have stood for fair shares; we have stood for price control; we have stood for controlling the margins of profit of wholesalers and distributors. On the financial side, we have adopted a definite budgetary policy throughout this period. Standing here in the presence of noble Lords, I simply do not know where noble Lords themselves stand in regard to food subsidies. Perhaps the noble Lord, Lord Balfour, will tell us. At times a word or two pops out to suggest they might cut them down. Certainly for a moment in the Election they adopted a very bold line, but I do not know whether they are in favour of cutting them or not. Perhaps I may put that one question to the noble Lord: Is he in favour of a large reduction in food subsidies?—because if he is not, having studied his literature and that of the Conservative Party with great care, I do not see how they are going to effect these large economies about which they have been talking.

We have stood for a large Budget surplus. Last year even that was derided. The principal speaker for the Opposition, Mr. Oliver Stanley, was distinctly contemptuous of the policy of a large surplus. He said last year: Under the kind of conditions and under the kind of Government which I want, I'd take a chance—a chance we certainly couldn't take now. I'd take the chance of reducing the surplus, and then I would use all this money to reduce taxes. That is what he said the Conservative Government would do last year.

My Lords, we have stood for fair shares; we have stood for planning. But we have also stood for austerity in difficult times (and have been derided by noble Lords opposite for doing so), and for keeping down the cost of living as we successfully have done. There is a lot to be said for the operation of the control on increases in personal income not related to an increase in productivity, and the noble Lord will find that point reiterated authoritatively in the Economic Survey. I hope noble Lords will join us in that. But there is a genuine difference of political outlook between us. I do not believe that it is possible to bring about these slashing economies that noble Lords talk about without slashing the incomes and the standard of life of the poorer sections of the community. Noble Lords have not told us how, in comparable circumstances, they would bring about these economies. They have told us only of trifling connections. But we believe in our policy, and intend to persist with it. Noble Lords opposite dislike that policy. They regard that policy as having been unsuccessful—indeed, I think the noble Lord, Lord Balfour, said that if the same policy continues the cost of living is bound to rise. I would refer to the fact hat the cost of living has risen considerably more in all the other comparable countries. We believe in our policy and we intend to go on with it. But while we all aim at the same goal, there is so sharp a difference about method that we cannot accept this Motion. We feel that if we did so we should be betraying principles which to us are vital if the nation, which all Parties are equally concerned to save, is to pull through this difficult period of time.

7.10 p.m.

LORD BALFOUR OF INCHRYE

My Lords, at this late hour I will not detain your Lordships for more than a few moments. I have, however, been asked a question, and I think I am entitled to seek your Lordships' indulgence for just a few moments more while I try to reply. I thank the noble Lord who has wound up this debate on behalf of the Government, but I am sorry that the Government feel unable to accept the Motion, for, whatever the arguments may be one way or another, the words of the Motion are words conveying a concern at the rise in cost of food, clothes, and household goods since 1945, and the Government have themselves expressed concern to-day. It seems to me rather peculiar that, having expressed sympathy with the purpose of the Motion, and having found no ground for difference with regard to its drafting, they still feel unable to accept it. However, it is for them to decide. There are just one or two corrections I should like to make. The noble Lord, Lord Pakenham, used the words "question of fact" in a certain connection. Let me say at once, on this question of fact, that I said it had not been stated in speeches at the Election. I made a particular point of saying that there was nothing in the gracious Speech from the Throne which gave any reassurance that the Government were going to introduce drastic measures to put this matter right. Of course, it is in the Labour pamphlet, but I think that had only a limited circulation in the country, and I do not consider that it gave the matter adequate publicity such as speeches of Cabinet Ministers and others would have given it. Speeches were not, ire fact, made upon it.

Next as to the value of indices. The noble Lord suggested that I swept away figures and talked in generalisations. If he would kindly refer to-morrow to what I did say, he will see that I gave figures front what is in fact the only continuous economic survey which we have had in this country from 1938, because the Board of Trade Survey broke in 1947. I gave figures from the London and Cant-bridge Economic Service.

LORD PAKENHAM

In my recollection—I may not have followed the noble Lord's figures correctly—there was an increase of 150 to 182 in the Index during the relevant period, which would be just over 20 per cent. There would not be a big difference between our figures.

LORD BALFOUR OF INCHRYE

I was not, as it were, shooting wide. I was basing my remarks on what were, possibly, better figures.

The noble Lord, Lord Pethwick-Lawrence, seemed to strike the note which is popular with all those who defend the Government's policies relating to the cost of living, when he said that, virtually, all was well in the best of all Socialist countries—in fact, everything was really very fine. The noble Lord backed up his words by the generalisation that the vast majority of the people of this country were better off now than they were four or five years ago. He even went so far as to suggest that the increasing good health of the country and the reduced rate of infant mortality were not due to the advances which medical science has made in the last fifty years, but to the Health Services which have been operating fully only in the last year or two. I think that to use that as a supporting argument is taking the matter rather too far.

I thank the noble Lord, Lord Pakenham, for his winding-up speech. I admire his technique immensely. It is to make the most of his case fully and then, when he comes upon a rather difficult argument, to point his political gun at it, turn it away quickly from the main target and shoot a series of red herrings around the room on matters which are entirely irrelevant. It is a very fine technique, but it did not cover certain of the arguments which we have put up to-day. It did not in a single sentence give a refutation of the charge which I made, supported by evidence, that the rise in the cost of living, which hits all sections of the community—including those people not mentioned by the noble Lord, the fixed income members of the community—has taken place against a background of unconditional promises given on this matter by the Government at the 1945 Election, which have not been fulfilled.

LORD PAKENHAM

I am afraid I must interrupt the noble Lord again. I do not accept his statement to that effect at all. I am very sorry to interfere with the noble Lord's peroration.

LORD BALFOUR OF INCHRYE

It may well be that the noble Lord does not accept it. But I made a particular charge, and gave specific evidence to support it, that there was an unconditional promise given, not dependent on the outside circumstances of the rest of the world, that Labour would protect the savings of the people, and I showed that the savings of the people had gone down consistently since 1945. The noble Lord did not devote his efforts—I know he may not have had much time—to refuting that charge, but he made many interesting comments on matters which I think are less relevant and less serious for the Government.

On Question, Motion negatived.