THE ECONOMIC SITUATION

HL Deb 24 May 1950 vol 167 cc477-558

2.48 p.m.

Debate resumed (according to Order), on the Motion moved yesterday by Lord Cherwell: That there be laid before the House Papers relating to the Economic Situation.

LORD LAYTON

My Lords, several speakers yesterday gave their diagnosis of the economic situation. There can surely be no doubt that our position is substantially better than when the House discussed it last, and very substantially better than the critics then feared. Devaluation has undoubtedly had a stimulating effect, and its influence has certainly not yet worked itself out. On the other hand, as the noble Lord, Lord Brand, quite properly insisted, our financial reserves are most inadequate. With taxation far too high, personal savings far too low and labour demanding an end of the wage freeze, the equilibrium of our economy is a precarious one. I do not propose, however, to discuss these matters again in detail. With your Lordships' permission, I will ask the House to look farther ahead and consider certain aspects of the long-range problem that faces the industrial areas of the old world. What will be our position when the aftermath of the war has been cleared away, and world production and trade settle down to what may he described as the post-war normal? Will the industries of Europe, including those of Great Britain, be able to sell their products in sufficient quantities in the markets of the world to enable our great industrial populations to earn an adequate living?

In a debate last autumn, immediately following devaluation, I ventured to point out to the House that America's dollar surplus vis-à-vis the rest of the world is not due to her exports of food and raw materials of which she is a net importer, but is entirely accounted for by her net export of manufactured goods. Devaluation has helped us very much by putting what is, in effect, a 43 per cent. tariff wall against dollar imports round a group of countries which together buy something like 40 per cent. of the world's imports, and a rather more moderate tariff round countries which take the somewhat lower proportion of 20 to 30 per cent. of world imports—60 per cent. of the world's trade in which we have a very high preference against the United States. We can do something to close the dollar gap by direct shipments to the United States, but I ventured to put before the House, and I repeat, that our main hope of establishing a stable post-war equilibrium depends on whether Europe's industrial products can compete effectively in quality and price with the products of the gigantic American industrial potential in this large non-dollar area.

In the last few years, the shortages arising out of the war and the absence of German and Japanese competition have made things fairly easy for us as soon as we were able to get our peace-time industries moving again. But the battle for markets is entering a new phase; the sellers' market is passing away. This is true in general, but it applies perhaps especially to coal and steel and the industries built upon steel; and in these cases it is quite evident that the struggle for markets is soon to become more acute. In the case of steel, the Rollman Report, issued not very long ago from Geneva, estimates that there will be a surplus of 8,000,000 tons of production in Europe by 1953, and though the coal surplus is not so apparent, the wide margin between the export and the home prices is getting smaller. The writing is on the wall, even in regards to coal. The steel industry is traditionally a most important and sensitive barometer of economics, and we must take warning in time that there is likely to be a period of keener competition ahead of us, which will have to be faced by Europe as a whole and also by the countries of Europe between one another. Yet coal and steel are the foundations of our industrial existence, as they are also of that of the industrial countries on the Continent of Europe.

That was not always so. Half a century ago, when I first began to study economics, the textile trades were the mainstay of Britain's prosperity. This was still the case in 1920. To-day, however, the picture is entirely changed. In the first quarter of this year—this is approximately true of 1949 also—iron and steel products and manufactured goods made from iron and steel constituted 50 per cent. of British exports. That is a very high figure indeed to be dependent upon two industries—namely, coal and steel—and it is also important in that those are the two main raw materials which we are fortunate enough to possess in this country. That percentage compares with 20 per cent. after the First World War, and the measure of the increase of our exports from 20 per cent. to 50 per cent. shows the economic change which has taken place within the structure of this country. In that situation, it is surely clear that the answers to the questions I pose depend upon the efficiency of the iron and steel trade and of the trades which use iron and steel, and also upon the cheapness and economy with which the iron and steel industry provides the raw material. That is why the Schuman Plan, to which Lord Pakenham made a passing reference yesterday, is of vital importance to this country.

From the political point of view, the proposal to bring the coal and steel of Germany and France under the control of a common authority has quite rightly fired the imagination of people on the Continent, as well as in Britain and America. Indeed, M. Schuman has insisted that its purpose was primarily political. Using his words, if it were possible to devise a plan which will make war between France and Germany forever impossible, it would surely be well worth while for us and for other countries as well to pay a substantial price to bring it about, and we in Britain should certainly foster it. Even if its direct economic effects created difficultes for this country, there would still be big economic dividends from the indirect effects of an act which removed the main source of the friction that has plagued Europe for generations. I do not think, however, that even the direct effects on this country would be bad. On the contrary, I suggest that if the scheme is rightly handled it may bring very great benefits to Britain. I therefore suggest that in our own economic interest, as well as in the wider interest of world stability, Britain should support the principles of the plan and take her part from the outset in working them out and bringing the plan into being.

I apologise to your Lordships for emphasising so much the iron and steel industry, because we really had our fill of it in some very long debates last year. I do not pretend to be an expert in iron and steel, with which many of your Lordships are much more directly concerned than I am, but, for the reasons I have given, it does seem to me to be at the heart of the questions I pose. Therefore, if you will bear with me for a moment, I should like to make one or two further comments on it from that point of view. The background in relation to the Schuman Plan can be very quickly sketched. Last year, the United States produced about as much steel as the whole of the rest of the world put together—in fact, I think, a little more. This great American industry has been built up upon ore whose metallic content, though not the highest in the world, is relatively high in relation to the content of the ore from which most of the rest of the world's steel is manufactured. America is therefore favourably situated with regard to the metallic content of the ore, and equally favourably situated from the point of view of coal, because of the much wider seams that are found in that country. Her steel plants are highly efficient, but the high output per worker is more than offset by the high rate of wages.

I give these figures with all reserve, but they are the outcome of the thorough investigation which has recently been made by the Economic Commission in Europe. Labour cost per ton in the United States is as high as it is in Europe, and the advantage of America's cheap raw material is offset from the competitive point of view by the fact that the finished product has to be hauled a long way to seaboard. While, therefore, American engineering industries have cheap steel, the United States has not flooded the world market with actual steel exports. Devaluation has made it much more difficult for America to compete either in steel exports or in goods manufactured from steel. But even without this currency advantage, which may not be permanent, it is not beyond the possibility of European steel-making countries to compete with the United States.

The European picture, on the other hand, is much more complicated. No single country in Europe contains all the coke or the iron ore needed for steel making. The greatest concentration of steel production is, of course, in Western Germany and Great Britain, both of which have ample supplies of coking coal but neither of which has any high-grade ore—except for a trifle in Cumberland. Neither country has any substantial amount of high-grade ore. They both make a certain proportion of steel from their low-grade ore. On the other hand, France has all the ore she needs, though it is of low quality, but she is very short of coking coal. Before the First World War, when the Lorraine area belonged to Germany, the ore of Lorraine and the Ruhr coke were developed together by German industrialists as a single unit, some works being placed on the ore in Lorraine and some on the coal. Luxembourg and Belgium, though not actually within the German borders, were closely linked by commercial ties. In other words, before the First World War there existed something like the ground for the unity which is contemplated in the Schuman Plan.

The Peace Settlement of 1919 broke up this system, just as it broke up the economy of the Austro-Hungarian Empire; and, as we know, the fragmentation of Europe has been a vital influence in the subsequent history of recent times. From 1919 onward, no steel-making area has been self-sufficient. Not one of the steel-making areas in Europe has been self-sufficient in both coal and ore, and fresh links between the sources of fuel and raw materials have had to be built up across national frontiers. Since the Second World War, the revival of the various national steel industries has been subject to abnormal conditions. Western Germany's steel production, as we know, has been directly restricted by destruction and by Allied control as a matter of policy. It has also been limited by the reduction in the coal output of the Ruhr and by the allocation to other countries of her coke supplies. In these post-war years, also, the output of Lorraine ore has been greatly reduced, and the steel works in Belgium, Luxembourg, and elsewhere have had to replace it, so far as they could, by buying high-grade ore from Sweden in competition with Britain and Western Germany. There are signs of a return to the former pattern of ore and coke production, but the distribution of Swedish ore will remain a matter of great importance to the industrial layout of Europe. There have also been some exceptional features—to which I will not refer in detail—about our own supply of materials, particularly in relation to scrap.

I make those points because it is certain that some further adjustment will be needed in the distribution of the available steel-making materials of Europe in the near future. My thesis is that those changes should be carried out according to an orderly plan, and should not be left to chance or to competitive pressure from rival Governments pursuing their individual national interests. If there is no general plan, or at all events a common point of view about the use of our limited materials and fuel, we run the risk of duplicated plant, faulty location of the industry and uneconomic production. Clearly, Britain is deeply interested in all such plans of reorganisation.

So much for the argument on the supply of material for the steel industry and the need for a plan. But there is another factor which affects all Europe's steel makers. I will not refer to it in detail, but I am speaking of the need for concentrating production in the most efficient areas and works. I mentioned just now the fragmentation of Europe in 1919. That was accompanied by a strong move towards economic nationalism, and in that movement all sorts of small countries endeavoured to establish their own steel works, fearing perhaps to be dependent for steel in the event of war upon a possible enemy. The result has been that there are scattered about Europe uneconomic works. They do not close down, for they are subsidised or protected by tariffs; and all the time they are drawing on available supplies and using them uneconomically. One of the proposals of the Schuman Plan is that of concentrating production and getting rid of uneconomic production—in other words, rationalisation of the industry in Europe as a whole. Let me say here that Britain has nothing to fear from the rationalisation of Europe's steel production. She has ample coal of coking quality. That coal lies near the seaboard to which the world's best ores can be brought cheaply. The full study of the steel industry to which I have referred has shown that Britain's prices are thoroughly competitive—indeed, in general they are equal to the lowest prices in Europe.

I will refer only very briefly to one other argument in favour of the international supervision of Europe's iron and steel trade. It is a powerful one. Even the most devoted advocate of laissez-faire would agree that there must be some control both of the localisation and of the extent of armament industries in different parts of Western Europe. Europe's steel industry has provided the munitions for two World Wars. I do not pretend to know whether the atom bomb or the hydrogen bomb will alone determine the outcome of any future war, or whether these weapons will in fact ever be used. But whatever the answer may be to that speculation Europe's arsenal, the central coal and steel area of Europe, with the chemical industries that are in a sense its by-product, is bound to be a most important strategical objective, and in an enemy's hands a very grave danger. I need not elaborate this point. It is sufficient to say that even if there were no other reasons this alone would be justification enough for some international supervision, direction and canalisation of Europe's steel industry. Again, if that is to happen to Europe's steel industry, Britain's voice must be heard from the outset in whatever arrangements are made.

There are, however, certain difficulties. I will not detain your Lordships by discussing them in detail, but it is clear that if the industry is to be concentrated it will involve certain disturbances. That has been discovered by the National Coal Board with regard to the British coal industry. It is impossible to close redundant pits or redundant plants without creating problems. Therefore M. Schuman has produced a series of transitionary regulations. These smack a little of the old cartel, with its restriction of output, maintenance of prices and so on, intended to keep high-cost producers in existence; but if in the interests of cheapness there is to be a gradual process of concentration in the economic areas of Europe then some provision must be made for easing the transition. The question is whether regulations of the kind which ease the transition for high-cost producers are transitory or permanent. The test of all these regulations is whether they conduce in reasonable time to the central purpose of the scheme—namely, to cheapen the cost of steel.

It is suggested that if the steel market is opened to the free movement of coal and steel, British standards of living will be reduced by cheap foreign labour. That is the biggest fallacy of all, as history shows. When Britain was a free-trade country, our standard of living was far above that of her protected rivals, and to-day the real competitor is not the country of cheap labour but America, with her highly-paid artisan and immense quantities of machinery. The real test is a comparison between the prices of British steel with those of steel made by European countries. I venture to assert that there is no substance in the argument that we should stand aloof from this scheme in the interests of maintaining the standard of living. I believe that an improvement of our own standard of living is much more likely to follow our taking a reasoned part in what, if it is carried through, will be a radical development in the evolution of Europe's basic industry.

I have touched only the fringe of a great subject. The Schuman Plan is an ambitious and far-reaching one. It may possibly point the way to closer union in other economic and political fields. The machinery for carrying it out raises a number of complex issues, including that of how to entrust executive responsibility to an international body without necessarily creating a super-State. The O.E.E.C. in Paris has so far had little success in influencing the development of the plans of its member States and dovetailing them together. That is largely because each country still looks at its own plan, rather than at its neighbour's and at how the various plans will react on one another. It is also due to the fact that the O.E.E.C. is a body purely for consultation and has no executive authority. How are we to obtain more effective executive action than we have had in O.E.E.C.? There are precedents. In the case of the International Bank at Basle, for example, a great measure of autonomy was given to the board of directors in a strictly defined field. The States which set up the Bank reserved the ultimate right to alter the charter, but within the terms of the charter the Bank had a considerable freedom of movement. I do not wish to overstrain the analogy or to pursue the matter further, except to urge that we should not hesitate to carry out an essential purpose merely because the mechanism that is needed seems unfamiliar.

Politically, the Schuman Plan is an historic proposal comparable with, but more lasting than, the plan of Marshall Aid. Economically, it offers the possibility of guiding the coal and steel production of Europe—which is so vital for the flow and exchange of manufactured products for food and raw materials that lies right at the heart of our economic problem—into the most economical channels; and it offers a mechanism that can be adapted both to nationalised industries and industries in private hands. Mr. Schuman said yesterday that he does not think his plan will materialise unless Great Britain takes a hand. I do not ask the Government to accept the scheme as drafted, uncritically and without examination, but I do ask them to accept its purpose with enthusiasm and to confer with France, Western Germany and Benelux, not with a view to creating difficulties but in the determination to carry out the most promising plan that has yet been proposed in post-war Europe.

3.17 p.m.

LORD LUCAS OF CHILWORTH

My Lords, first of all may I apologise to your Lordships for my absence during the debate yesterday? I was fulfilling a long-standing engagement to tour the Development Area of South Wales in readiness for the debate which will engage the attention of your Lordships immediately we come back from the Whitsun holiday. I saw things there which must be an inspiration to anyone considering such a problem as that we are considering this afternoon. The last time I went up the Rhondda Valley was in 1922. When you go up the Rhondda from south to north to-day, you would not think you were in the same country or in the same world. There is a hive of industry in the towns where desolation and hopelessness were present before, In the east of South Wales I saw the new nylon-spinning factor, the finest production factory in this or any other country, which now employs 3,500 to 3,750 operatives. When it started the company brought in four key men, apart from research and administrative staff, and these four men trained miners and policemen to be foremen in thirteen weeks. In the west I saw that marvellous project, the new strip mill at Margam. I was brought up in the engineering industry and I have never seen anything so staggering in my life. It is about the seventh industrial wonder of the world. The main part of the mill is a magnificent building stretching a distance of 100 feet short of a mile.

When I came back in the early hours of this morning, I possessed myself of Hansard as soon as I could and read the debate in your Lordships' House. I should like to congratulate my noble friend Lord Lawson (I do not think he is present) on a magnificent speech. I am sure that if he went down and saw what is happening in South Wales as a result of the economic planning of industry, he would be considerably heartened. When I read in one noble Lord's speech a rather slighting reference to planning, I could not help but recall the inspiring two days I had spent travelling 200 miles in an area which is going to contribute an enormous amount to industry in this country. That is why I was not in my place yesterday afternoon.

We have just listened to a speech from the noble Lord, Lord Layton, of his usual high standard. If the noble Lord will allow me, I will leave it to my noble friend the Leader of the House when he winds up the debate to tell the noble Lord what is the policy of the Government with respect to the Schuman Plan. I am sure Lord Layton will appreciate a reply from my noble Leader rather than from myself. Before I address myself to the main part of what I have to say, there is one thing I feel bound to mention in relation to the reference in the speech of the noble Lord, Lord Cherwell, yesterday afternoon to what he called "a gigantic increase in Government spending abroad." I can only suppose that the noble Lord quoted figures from the latest balance of payments White Paper (Command 7928) because he said (I quote from Hansard, Column 393): But in 1949 it rose by £53,000,000 to £231,000,000, if we discount the non-recurrent war disposals which only confuse the issue. I would say to the noble Lord, with great respect, that he is quite wrong. I think he has fallen into a rather serious error, which he could have avoided had he turned to the explanatory notes in the White Paper. The first is item 2(a) on page 11. The noble Lord seems to have excluded the receipts under the India Defence Settlement, but not to have excluded the payments on the same very large non-recurrent settlement, which amounted in 1949 to no less than £55,000,000. If we exclude them, as we certainly should, your Lordships will see that the gross Government expenditure overseas, far from rising gigantically, as the noble Lord suggested, actually dropped from £189,000,000 in 1948 to 180,000,000 in 1949, in spite of our continuing heavy military commitments abroad which took up by far the largest part of the total. I would suggest to the noble Lord that if he studies the White Paper and the explanatory notes (first of all, paragraph 2(a) on page 11, and then paragraph 2(e) on page 12) he will see where he fell into error. Coming from anyone like me that would be quite excusable, but I am most surprised to hear it from the noble Lord. However, that is by the way.

To come to the main burden of what I have to say, I would follow my noble friend Lord Pakenham and deal with some of the effects of devaluation upon our export trade. There is no doubt that immediately before devaluation last August the outlook of the United Kingdom balance of payments in general, and our export trade in particular, was far from reassuring. There was a rapid drain on the central dollar and gold reserves, the volume of our exports had fallen away and the economic outlook in the United States was relatively unpromising. Some remedial measures, as my noble friend Lord Pakenham said, had been taken: there was a reduction in our dollar imports and in the dollar spending by the whole of the sterling area. However, devaluation was unavoidable. It is important not to underestimate the value of the upturn in American economic activity which took place at much the same time, because the resumption of substantial United States purchases of sterling area raw materials exerted a powerful and beneficial influence upon the sterling area's dollar balance of payments. My right honourable friend the Chancellor of the Exchequer has dealt fully with this matter in another place, and I do not intend to occupy your Lordships' time in repetition of what he said.

However, I feel it may be advisable for me to add to the note of warning which my noble friend Lord Pakenham sounded yesterday, that it would be imprudent to rely too much upon a wholesale continuation of recent improvements. It is quite evident that there have been some temporary factors at work, including, for example, the seasonal peak of sales of a number of sterling area primary commodities. Wool is an instance, and Australian wool prices to-day are up by 15 per cent., which has made a great difference not only, I regret to say, to our wool manufacturers in Yorkshire, but also to the dollar earnings and sterling purchasing power of Australia, of which we indirectly feel the benefit. I feel I can rightly say that a few noble Lords, and many people outside your Lordships' House, appear to have viewed the problem of the dollar gap as falling wholly upon the shoulders of the United Kingdom. They forget that this problem must be viewed as a sterling area problem, of which sterling area we are only a part. The United Kingdom has probably benefited directly least of all, compared to the other members of the sterling Commonwealth.

LORD CHERWELL

Perhaps I may interrupt the noble Lord. It was precisely because we recognise that this is a sterling area problem that I asked to have the figures given to us for the balance of trade of the sterling area with the dollar area.

LORD LUCAS OF CHILWORTH

The noble Lord can get them from the very Paper which he quoted yesterday afternoon. If he will turn to Tables 17 and 18 of the Board of Trade document which he quoted, the noble Lord will find them set out.

VISCOUNT SWINTON

Which document is that?

LORD LUCAS OF CHILWORTH

My noble friend Lord Pakenham mentioned it yesterday afternoon. It is the May Report on Overseas Trade, Volume I, Number 4.

LORD CHERWELL

That does not give the figures for the first quarter of 1949 with which to compare those for the first quarter of 1950.

LORD LUCAS OF CHILWORTH

Perhaps the noble Lord will look at the pages to which I have referred, and if he cannot find all the figures I will undertake to supply those which are missing.

LORD BARNBY

Since interruptions are being permitted, and the noble Lord gave wool prices as an example of how the prices of commodities have risen since devaluation, I hope he will not overlook the burden put upon the domestic consumer by the encouragement not to buy given to British users of imported raw materials by the Chancellor of the Exchequer.

LORD LUCAS OF CHILWORTH

I hope that not many noble Lords will follow the very bad example of the noble Lord, Lord Cherwell, and interrupt during every sentence. If they do, those at the end of the long list of speakers will be here at a late hour to-night. I give that warning only because I think it should be given. While we can say that our present economic recovery has been largely dependent upon an upturn of economic activity in the United States, it would be equally true to say that any weakening of United States internal demand would have a serious adverse effect upon the whole position of the sterling area. As my noble friend Lord Pakenham said yesterday afternoon, the recovery of our gold and dollar reserves to nearly 2,000,000,000 dollars is good, but at this level they are still but a small fraction of pre-war; perhaps but one-fifth in terms of present day prices. We must build up our reserves if we are to face with confidence the quite normal and inevitable fluctuations in the dollar income of the sterling area at the end of the Marshall Aid period.

I will quote one or two figures because United Kingdom dollar exports to-day are less than they were in the comparable period of 1949. In the first quarter of 1949 they were running at a monthly average of 58,500,000 dollars; in the first quarter of 1950 they were running at 52,500,000 dollars, and that is a fact which we have to realise. I can assure the noble Lord that His Majesty's Government are very much alive to it. There are one or two other things which stem from our advantageous position following devaluation. I agree with the noble Lord, Lord Brand, and with the noble Lord, Lord Layton, in his opening sentence this afternoon, that devaluation has been a great advantage. It is no good denying that it has put us in a better competitive position. If we compare the figures before devaluation and now, we can see startling evidence of a beneficial effect. In the first quarter of 1949, the monthly average value of total exports was £153,000,000, and in the third quarter of that year—the quarter immediately before devaluation—it was only £141,000,000. In the first quarter of this year, the monthly average value has been £172,000,000, with an all-time record in March of £184,000,000. The noble Lord will agree that there must have been a substantial increase in the volume of exports when I tell him that the average increase in export prices has been in the region of only 4½ per cent. That undoubtedly will go up—we have to face that. But I am just telling your Lordships the position to date. Export prices have gone up 4½ per cent., whereas the volume has gone up very much more.

But if it is prudent to stress these factors which have benefited us immediately after devaluation, I think I should say a word about the splendid effort which this country has made. Our exporters and our manufacturers have made a wonderful effort to take full advantage of devaluation. It is rather invidious to pick out examples, and I hope noble Lords will forgive me if I disclose a rather personal pride in the fact that the leader of this magnificent export trade is the industry with which for many years I was connected. May I just give your Lordships these figures? In 1948 we exported on the average 18,800 private motor cars and chassis a month; in 1949 the number was 21,500, and the monthly average for the first quarter of 1950 was 33,600, with an increase of 100 per cent. in the sterling value of those exports. If we take commercial vehicles, we run from a monthly average of 6,250 in 1948 to 11,230 in the first quarter of 1950: a magnificent performance.

If we take machinery—and this only underlines what the noble Lord, Lord Layton, had to say about our dependence upon our engineering products—in 1948 the monthly average value of our exports was just over £19,500,000; in 1949 it was £23,250,000, and in 1950 it is £26,750,000; a really magnificent achievement. But it does not stop there because our exports of wool manufactures in 1949—a matter in which the noble Lord, Lord Barnby, is so interested—were £8,680,000 a month, and in the first quarter of this year almost £10,500,000 a month. In 1949 food, drink and tobacco exports were £8,000,000 a month and in the first quarter of 1950 over £10,500,000 a month. The noble Lord, Lord Cherwell, must see that there is a decided upswing which we have to maintain at all costs, because we have not only to pay for our own imports, but we have also to provide for dollar-saving by the rest of the sterling area by being able to export to them goods which must otherwise be paid for in dollars. I think that is one of the things we must not overlook, because our exports to the sterling Commonwealth to-day are virtually 50 per cent. of the total exports of this country, and I believe I am right when I say that our imports from the sterling Commonwealth represent about two-fifths of the total.

I do not want to weary your Lordships with a lot of figures about the course of our exports to the dollar area since devaluation. Progress in the United States has been disappointing but the steady and considerable growth of exports to Canada is most encouraging. It is obvious that the United States market is a most difficult one with the vast output of United States industry, but we have done all we can to push exports there. In Canada as I have said, we are doing much better. We are to-day exporting motor cars to Canada at the rate of about 6,000 a month—over 70,000 a year. Machinery exports to Canada are also very good, and we think that therein lies a great chance. Manufacturers and exporters have really done a splendid job of work in their efforts to secure a much larger dollar market in Canada. The expansion of national income and consumer expenditure in the United States has borne little relationship to their demand for imported manufactures. I do not think it is necessary for me to say very much upon that, except that we must express how deeply we appreciate the efforts of the United States Administration and of many leaders in business in that country to persuade the American public and American industrialists that one of their hopes of salvation is to open their doors to more exports, and more exports from this country.

I need not go into the political field and make any comment upon the responsibilities that fall to-day upon creditor nations. We do not like being lectured, and I do not think we should lecture other people too much. But we could say this: that if this duty is going to be discharged in the same high manner as this country discharged its obligations and its responsibilities as a creditor nation for a very long time in the past, with credit to ourselves and advantage to the rest of the world, the result will be to foster the growth of world trade.

I think I need mention only one other point upon which the noble Lord, Lord Cherwell, commented. In terms of sterling our exports to North America are now far larger and even in terms of dollars our exports to North America are down by only 15 per cent. compared with pre-devaluation prices. So there must have been a substantial increase in our sterling prices for many goods. Let me give one or two broad figures: china, 15 per cent.; motor cars, 10 per cent.; worsteds and woollens, 15 per cent.

LORD CHERWELL

Is that for the United States or for Canada, or the average of the two?

LORD LUCAS OF CHILWORTH

The average of the two. I think the noble Lord was under the misapprehension that it was all due to whisky, but it is not; these other commodities have contributed to the situation. Now what have we done to help? I remember that when we had the last economic debate the noble Viscount, Lord Swinton took part—and may I join with my noble friend Lord Pakenham in welcoming him back on the Opposition Front Bench? We have missed him; we even had a debate on films in his absence, which was a terrible thing for this House.

VISCOUNT SWINTON

The film industry, too, has not progressed very rapidly since then.

LORD LUCAS OF CHILWORTH

The noble Viscount's return is going to mark an upsurge in that industry also. I am now going to give a few figures about the Export Credits Department, which I think will be agreeable to the noble Viscount. In October last my right honourable friend the President of the Board of Trade announced that the Department were now in a position to assist firms by guarantees against loss arising from expenditure on various activities undertaken in their efforts to increase exports to North America. Since that time covers have been devised to insure against risk involved in market surveys and product tests, advertising, sales promotion and stock-carrying. Other covers are continually being considered and developed as the Department's officers come across new activities which require this sort of assistance. To date, the total value of the policies issued under these extended facilities is £3,750,000, of which the Department's liability is £2,000,000, and there are outstanding quotations for policies valued at £1,000,000, of which the Department's liability is £570,000. The Department's own representatives have contacted over 2,200 exporters and discussed these facilities with them. That is a very satisfactory result. And with our trade representatives in North America we have done as much as we can and are willing to go on doing as much as we can and as much as is practicable to-day.

VISCOUNT SWINTON

I take it that these sums, for which the Government assumes liability, are repaid progressively.

LORD LUCAS OF CHILWORTH

Yes. I think those noble Lords who warned us that our selling days in quite a number of markets are coming to an end were wise: We must recognise that. I was interested in the comments of the noble Lord, Lord Layton, this afternoon on the growing competition we must expect to receive from Japan and Germany. I do not want to go into any great detail, but Japan and Germany must live and they must export; and we have no evidence to date either that their goods are of lower quality than they were before the war or that their prices will be less keen. I think Lord Layton was right in categorically denying the fallacy that Japanese competition is necessarily based on sweated labour. That idea is entirely wrong. I think that some people exaggerate the extent of unfair trade practices. I believe them to be largely a figment of the imagination. If they exist then we shall not hesitate to look at the evidence most closely and carefully and pursue authenticated cases with the Occupation Authorities; but I think we have to recognise that in future we shall have increasing competition from both Japan and Germany. We must expect this but given expansion of world trade, things will he less difficult.

I do not want to say too much on this subject, because I only underline the warnings that have already been given. I do not think, however, that the ingenuity of the British manufacturer will fail to meet this challenge. We are facing many problems, but I believe that our British manufacturers will face up to them—in spite of a number of things that have been said, I do not know for what reason. I refer to the remarks of some people who apparently like to spread the rumour that British industry has not got its back behind the export drive. I suggest that the figures absolutely disprove that. I agree that there is room for greater efficiency in many cases and I think there may be room for lower prices.

I do not want to discuss the question of profits, but if the financial columns of certain newspapers are any guide, profits are not inconsiderable. We have got to tackle the problem of restrictive practices—on both sides of industry. I am sure there are far too many of them. There is too much thought for the short-term view. We have got to have an expansionist trade policy in this country or perish. We may as well perish by being expansionist as by being restrictionist. We have got to get out of the restrictionist habit of mind—and I think we can, with the help of our fellow-countries in the Commonwealth. With their help, and with the help of America, and with their width of vision, we can meet these difficulties and I think we need not fear. I am not one of those who are mournful about what is going to happen in 1952. I am sure the sterling area as a whole is really going to strive to do its job, and if we pull together we shall succeed.

3.49 p.m.

LORD RENNELL

My Lords, you will probably not expect to hear from me, in the new geographical position that I occupy in your Lordships' House, any very different views from those which you have heard in the past, if only for the reason that, on a great many financial matters, the differences which have separated my late colleagues and my present colleagues have always been of the smallest nature. I do not want to pick up the points that have been made before, except in one case where I should like to expand a little what the noble Lord, Lord Brand, said about saving and capital formation, which as your Lordships know is a subject upon which I have addressed the House in the past.

I should like noble Lords opposite to feel, if they can, that in what I say I am not speaking controversially. I want to mention one or two figures that have appeared in various papers, and also some conclusions which I draw from them. The external situation has been fully dealt with by the noble Lord, Lord Brand, and if I say nothing about it it is not that I do not feel it has a bearing on this question of capital formation in the United Kingdom but that that particular issue seems to me fundamental in our domestic economy, and very much in the context of what the noble Lord, Lord Lucas, has just said about the development of production here in the United Kingdom. We are always being pressed in this country, and we are also pressed from abroad, to expand and modernise production. Those two things require the capital necessary to do them, and, until, that capital has been or can be found, that requirement becomes, if not insuperable, then at least much more difficult, and so puts a much darker complexion on the future which lies in front of us.

On that question of capital formation and savings, a number of figures have been published, notably in the National Income and Expenditure Accounts (Cmd. 7933). The accounts in it are incredibly difficult to follow. A great deal of what I say may be based on an entirely erroneous conclusion, so far as I have been able to draw conclusions from the accounts, but I should like to refer to them to-day. May I first of all say that the amount of savings made in the country as a whole have, of course, very little bearing on the National Savings or the figures that are published in that context? They may be indices of the direction in which saving is going, but they are not the aggregate figures of saving. A distinction must be drawn between particular sorts of saving and the general saving which is being effected by the country. Here, parenthetically, I should like to say that the National Savings figures which have been published are to some extent misleading, and I believe that they have had an adverse effect abroad.

For instance, National Savings figures are reputed to have fallen last year; in other words, there is supposed to have been an actual dis-saving in National Savings. In fact, the figures that have been brought out show that that is not the case. It is therefore rather regrettable that even spokesmen of His Majesty's Government, in certain recent statements, should have used figures which they themselves perfectly well understand, and which those who have taken the trouble to investigate understand, but which abroad are apt to have a misleading effect. There was, for instance, a statement in the Chancellor of the Exchequer's speech in another place on May 16 last which refers to that particular subject and which would lead anybody reasonably to the conclusion that there was dis-saving going on—in other words, that we were living on capital.

If I may quote from Column 1155 of the OFFICIAL REPORT of another place of May 16 last, the Chancellor of the Exchequer says: The number of people who are saving money to-day and the amount they save are almost as great as ever. that is to say, not quite so great— But perfectly naturally people who put aside large sums of money during the war are now withdrawing them in order to spend them as they intended when they put them aside. The conclusion to be drawn from that is that there is a net dis-saving going on. As a matter of fact, even on the National Savings figures that is not true. It is true in the context in which the Chancellor of the Exchequer made that statement, of course, but it is not generally true, because the figures that are published, I think I am right in saying, do not include the interest accruing. Both in 1948 and 1949, there was in fact an increase and not a decrease in the amount saved. Similarly, the figures of personal savings by way of life insurance show very little difference between 1948 and 1949, and certainly do not show a diminution. They run at about £130,000,000 a year. That is the figure which is derived from the net increase of life insurance funds.

The only conclusion that might be drawn is that, whereas figures of new savings in the National Savings schemes have diminished, figures of life insurance have not diminished. It might therefore be suggested by certain people that the general public still prefer to invest their money in life insurance, rather than in the National Savings scheme. But however that may be, those figures have no real bearing on the total amount of saving which is going on. Those are arrived at in quite a different method and are extremely difficult to follow. They appear in National Income and Expenditure of the United Kingdom (Cmd. 7933), notably in Table 14. It is to that particular table that I would like to draw your Lordships' attention, because I think there is here a rather serious and black point. The actual amount of savings is arrived at by taking the national income and deducting from it the known expenditures, leaving, of course, a certain residual figure. That residual figure is the amount which is reputed to have been saved and which is available for capital investment. In 1948 that figure (I leave out of account the effects of investment abroad, and the sale of assets abroad) was £2,440,000,000. By 1948 that figure had shown a steady and, in certain years, a rather spectacular increase. The figure for 1949, however, is £2,395,000,000, which shows a diminution. In other words, it is apparent that there was a lesser amount of surplus available for investment, for capital formation, in 1949 than in 1948.

For a country which is engaged in trying to re-equip itself, in many cases on a more expensive basis because the cost of certain materials has risen, the fact that there is a lesser margin, though by a very small amount, to do all that is extremely serious. The 1948 figure of £2,440,000,000, reduced in 1949 to £2,395,000.000—that is to say, £45,000.000 less—may be either added to or diminished by investment abroad and the sale of assets abroad; but I will come back to that in a minute.

May I at this point interject that in pure theory it is alleged not to matter whether the margin of savings and capital formation in the country is derived from one or other, or from a third source? Equally, in theory at any rate, it does not matter whether that amount of saving and that amount of capital investment is then turned into actual capital investment by personal initiative—that is to say by private individuals—by corporations and enterprises, or by the Government. We on this side of the House may have rather definite views about which of the three methods is most desirable. Noble Lords on the other side of the House will no doubt have their own views, but in theory there is no difference, provided that the amount saved is used for capital expenditure in one form or another. If we are to secure the capital that is necessary to re-equip this country, my contention is that the amount shown in the published figures is insufficient, from whatever source it may be drawn. The saving is in fact drawn from three sources, and expended by three sources which I will give in a moment. There are only two ways by which the amount available for new capital investment can be increased. Those two methods are either to decrease the amount of fixed charges—that is to say, administrative costs of consumption—or to increase the national income. There are no two other ways about it.

We have had a great deal of discussion in your Lordships' House in the last few years about the proportion of the total national income which is absorbed by fixed charges—Government expenditure, administration and social services. We have also discussed the proportion which goes into consumption—for food, clothing, and so on. It has been the contention of noble Lords opposite that the amount, not the proportion, at present being spent on fixed charges in the way of administration cannot be diminished. That is in fact what the Chancellor of the Exchequer said a few weeks ago in his speech in another place on the Budget Estimates. It is our contention that that amount can be diminished, and that the proportion ought to be diminished. It is very much our contention that, having regard to the available margin or surplus, which shows signs of falling at the present moment because on the published figures it appears to be less in 1949 than it was in 1948, it is absolutely essential to diminish the amount of those fixed charges so as to have more of the national income available for new investment. That is one way in which it lies within the power of the Government to secure an improvement.

The second method, that of increasing production so as to increase the national income, is one to which everybody has paid lip service. The national income, in fact, is rising. The noble Lord, Lord Pakenham, was perfectly correct in saying that the total production in this country had gone up. I am inclined to agree with Lord Brand that the amount by which it has gone up over the last year (I think 2½ per cent. was the figure that was mentioned), is perhaps disappointing.

The Minister of Civil Aviation (LORD PAKENHAM)

I do not want to interrupt the noble Lord but he is not quoting me correctly. However, I would rather he pursued his argument.

LORD RENNELL

I was quoting Lord Brand on what the noble Lord, Lord Pakenham, said. I personally think that the amount of 2½ per cent. is disappointing, and probably we are all agreed that the rate of production is not increasing quickly enough to carry the capital investment required by this country together with the fixed charges. Though production has increased, and though we are all anxious to see it increase, there are still the restrictive practices to which the noble Lord, Lord Lucas, referred. They are not limited to any one particular class of person but are still, I believe, the main obstacle to-day.a greater obstacle in fact than the difficulty of provision of new plant and equipment to enhance production. If you can get greater productivity on a machine to-day you get a quicker result than you obtain by substituting for that machine a new one which may take two or three years to install. Therefore, in order to get this greater volume of saving and thereby this greater capital investment, I suggest that both a diminution of fixed charges and an increase of productivity are essential now, otherwise next year we shall run into the difficulty to which the Chancellor himself drew attention—that of being in a static position with no margin. Lord Brand referred to that matter, too.

I am struck by the obstacles which are interposed in regard to this increase of production. I quote as an example a very sad, in fact almost a tragic paragraph, which I happened to notice in a well-known newspaper, the Manchester Guardian, a few days ago. There are three items in that newspaper which have a precise and direct bearing upon what I have been saying. All three appear in the same issue, two of them actually on the same page. On page 9 there is a long article containing a report on textile production in the United States. The article starts with a reference to an exceptional case where 104 looms to the weaver are being run at 95½ per cent. capacity. The figure of 104 is high, but the number of looms per weaver in America is very high. On the same page, lower down, there is a really tragic item. It is as follows: TWO-LOOM WEAVING OPPOSED Proposals for two-loom weaving in the Huddersfield and Colne Valley district were strongly opposed by workers, supported by their union. On an earlier page in the same newspaper I find a large advertisement offering Indian textiles for import into this country. That is an example of what ought not to be happening. This country, which used to supply India and half the world with textiles, is now being developed as a market for Indian textiles, and elements in this country are opposing the reform of the textile industry by refusing to work even two looms to the weaver.

May I return for a moment to the question of savings, as there is another aspect which I think is important? I said that theoretically it does not matter where the saving is made, and theoretically it does not matter by whom the capital expenditure is made; it can, in theory, be made either by the Government, by corporations or by private persons, just as the saving can be achieved by any one of those three categories of people. The sources from which savings are made are referred to in the Table of the White Paper from which I have quoted. The savings are those made by the Central Government—that is to say, the surplus of the current account on the current Budget, not the below-the-line account—and the savings made by corporations and enterprises, and personal savings. I will not go into the question of net and gross personal savings, but the net and gross personal savings include the very odd item referred to yesterday—death duties. That, as a matter of fact, is a statistical device. It is a residual figure. If, after adding up everything on both sides, there is a gap left, that is usually called "personal savings." That is why it varies from £9,000,000 in one year to £157,000,000, or £175,000,000 in the following year. I do not quarrel with that. They are extremely difficult figures to obtain. Many of them are still matters of guesswork, and all that one can get is a general idea, especially of the aggregate.

There is one very interesting and important figure to which not sufficient reference has been made. One of the elements of saving is the annual surplus in the National insurance Fund. The Chancellor of the Exchequer has introduced here one of the greatest reforms that has been introduced in Government accounting anywhere for a long time past, by budgeting for an above and below-the-line account, having a surplus on current account, hoping to achieve a surplus overall as well—the latter is very small, if it is there at all. I am surprised to find that in the below-the-line account the intake and outgoing from the National insurance Fund is not included. In my submission, there can be no reason why it should not be included, and I can show one very good reason why it ought to be included. Contributions to the National Insurance Fund are statutory contributions. A great many people—some of your Lordships in this House and elsewhere—have referred to them as in any event a direct tax. If the National Insurance Fund were short of assets, the obligation to pay would fall on the Government and could come only out of revenue or from borrowing. There is no distinction between the details of this so-called independent fund and the ordinary intake and outgoing of the Budget on current account, and in my view those items ought to be included in the Budget figures. Had they been included, the surplus overall would have been greater than it was in the calendar year—not the Budget year—by £157,000,000. That is the figure which appears in the White Paper. That means that the fund in the calendar year 1949 received £157,000,000 more than it ex- pended. It is likely to go on doing so, naturally, so long as the unemployment figure remains as low as it is.

What happens to that figure is clear from the accounts of the National Insurance Fund. The surplus or excess is invested in Government bonds. That, in fact, means that the Government are repurchasing their own debt. The accounts of the National Insurance Fund which have only just appeared (I think the current ones appeared last week) form a very remarkable document, and if it is not presumptuous on my part I should like to pay a great tribute to the accounting inspectors and all concerned for the clarity with which the accounts are set out. There has been in the past a great deal of criticism about the Fund because of the paucity of the information published. Information is now published in great detail. The accounts also show, incidentally, the holding of the Fund, together with the market values attributable to it. This is an innovation which a great many of us have sought for many years past, and which all of us welcome.

That Fund already shows an accumulation of something of the order of £1,000,000,000. That money invested in Government debt and held in this way in fact represents a sterilisation or diminution of the National Debt. The annual surplus for the year invested represents so much of Government Debt taken off the market and held by the Government under the name of the National Insurance Fund. I believe that if it were realised abroad and overseas, especially in the North American continent, what a very great proportion was being set aside in that Fund for debt redemption every year, it would have a salutary effect on people's opinion about what is taking place in the United Kingdom. I hope that suitable publicity will be given to that point, and the best place to give it publicity would be by the inclusion of those intakes and outgoings of the Fund in the below-the-line account in the Annual Budget. The surplus of £157,000,000 in the calendar year 1949—we may expect at least a similar amount in 1950—is one of the three sources from which savings take place, one of the three sources which make up the fund out of which capital formation is achieved.

But while we are all very gratified that there is at least £2,500,000,000 in that Fund, and while we may still regret, as I do, that it is not greater and not estimated to be greater in 1950, we on this side of the House have in previous years differed considerably from some noble Lords opposite about the source from which that Fund is created. I said that that surplus is made up by Government savings on current account, by corporate savings and by personal savings. I have in the past referred to the undistributed profits tax. I propose to do so again, because it has a very direct bearing. Assuming that the total amount in the Fund on the present scale of expenditure can be only about £2,500,000,000 it is important that the people who use that should be of a corporate variety, rather than a Government. The reason is not political, but purely economic and financial. If you have only a certain amount of money to go round, you naturally wish that capital to be utilised in the most economical manner. The most economical manner in which new capital is utilised is probably when a single individual goes out and buys himself a couple of cows, a horse or a plough, and has no overheads connected with the purchase of that capital equipment for his farm. At the other end of the scale, the most uneconomical user of capital is a Government, not merely this Government but any Government, because of the charges of administrative expenditure, especially in connection with public accounting, which make the use of that capital so much more expensive.

It therefore follows—and this is my thesis—that in so far as we have only a certain amount of capital available for reinvestment in this country, as much as possible should be utilised by the people who can utilise it most cheaply. The people who can utilise their own savings in corporate form most cheaply are the companies themselves. It is therefore an entirely uneconomic method to remove part of their savings by means of the undistributed profits tax and transfer it to Government surplus instead of leaving it to them to utilise themselves in their own industry. That has no bearing, or only slight bearing, on what the noble Lord, Lord Brand, said yesterday on the subject of risk-taking capital. But what is clear in my mind is that, quite apart from being of very doubtful economic worth, the transfer of a surplus from corporate account savings to Government account savings means that some amount of money is going to be used less economically than it would have been if it had stayed where it was earned.

Finally, I come to Lord Brand's point about risk-bearing capital. Apart from the amount of risk taking by corporations extending their own businesses, the source of the bulk of risk-taking capital is personal savings. The tragic thing about the figures I have been discussing is that the proportion of personal savings to the whole is to-day falling as the result of the personal taxation levied on individuals. Therefore I conclude, first of all, that the amount of capital formation is wholly insufficient at the present time to re-equip this country. It can be increased only by diminishing fixed charges of administration (in other words, Government expenditure) or by increased productivity, against which new obstacles have been interposed—or, of course, by both. Secondly, it is our view that of that small amount, which is insufficient, a larger proportion should be expended by people who are prepared to take risk—that is, in the form of risk-taking capital—and by the corporations which hold that capital rather than that it should be collected in the form of current surplus by the Government and spent by them.

4.23 p.m.

LORD MARLEY

My Lords, I think I voice the opinion of the whole House in congratulating the noble Lord, Lord Rennell, on his maiden Conservative speech. I see no diminution in the quality of the contribution he always makes. I find myself, and I am sure the Government find themselves, in agreement with much of what he has said. In particular, I would say that the amount of capital expenditure should be as large as we can manage, though I would remind the noble Lord that much may be done to increase productivity in our industries by the fullest possible use of existing equipment. I agree with him that the way to provide for more capital expenditure is to increase production. Finally, I agree with him on the exceedingly difficult elucidation of the savings account in the White Paper to which he referred. I believe he has helped those of us who are interested in the subject by the lucidity of the presentation he has made.

I should like to express gratitude to the noble Lord. Lord Cherwell, if for nothing else, for the quality of the speeches—among which the last speech stands high—which the annual debate he initiates on economic policy has brought out during the last two days. The noble Lord, Lord Cherwell, is a lucid speaker. He is rather sarcastic; he is often amusing; and I notice that while yesterday he disclaimed any use of what he called potassium oleate, which translated for non-scientific persons is soft soap, he rather imitated what might be called a synthetic detergent, one of those which are sweeping parts of the country in a national battle between the products of one great firm and another—"Wisk" or "Tide." Whichever he represents, he is an admirable example of the value of a synthetic detergent in our debates.

It would seem that almost all the problems that have arisen can be solved by an increase in our national production. Those outside the boundaries of this House who judge our economic position may perhaps form a more optimistic view than has sometimes been shown by noble Lords in their speeches. For example, it is not without interest that the free pound value in dollars in New York has shown a steady rise for the last six months. It has now reached a level of something like 2.65, which is only 5 per cent, lower than the official rate. It has been characterised by the Financial Times in an article some three or four days ago as so satisfactory that it eliminates the danger of sterling area dollar earnings being tapped through triangular deals in sterling commodities by non-sterling countries. This sounds a little complicated, but it has been a constant fear in the past that there should be this leakage, and it is not without considerable importance that the dollar reserves of the sterling area are protected by this rise, though I need hardly say it is not very much at the present time.

May I say a word on the problem of the measurement of production and productivity? A few months ago, on November 2 of last year, there was a dispute about something which the noble Lord, Lord Cherwell, said in criticising the validity of the measurement of production. The measures adopted by various indices in this connection have come much more closely together, and The Times of May 1, dealing with the figures then available up to February and comparing the London and Cambridge "B" index and the Central Statistical Office Index, said: Over the whole period since their inception the two indices have shown a gratifying and reassuring correspondence; without doubt they are giving a good guide to the trend of production … so far as the past two years are concerned there is no clear sign that the rate of increase in industrial production has been diminishing. An extremely interesting article by Professor Ely Devons in Lloyds Bank Review for April of this year was mentioned yesterday. He points out that where there are differences in the indices they are often due to the inclusion of different productive factors. In particular, he points out that agricultural productivity is missed out in some indices, and according to the report of the Minister a few days ago agricultural production shows an increase of 138 per cent. over pre-war. That is a factor which would tend to reinforce the figures of the Financial Times index, which takes a rather more optimistic viewpoint than is generally taken by the other two indices. I feel it is worth saying a word on this, because doubts have been thrown on the validity of these indices, and I believe that, by and large, they are as good as we can expect, judging from the quality of brain, mind and knowledge of those who compile them. I was interested to hear the noble Lord, Lord Brand, pay tribute to the value of their work yesterday.

I want to detain your Lordships for a moment or two on the question of increased productivity. Here we have to face the choice between two differing policies—namely, a policy of restriction or a policy of expansion. I feel sure we shall all agree that the noble Lord, Lord Blackford, made an admirable speech yesterday. It was a speech, full of figures and delivered without notes, which the Daily Herald—a paper which, among others, I read every day—describes as "of enthralling interest." I do not agree with all the noble Lord said, but I was glad that he suggested the lowering of the tax on beer. I do not know whether some day that may be possible—the law of diminishing returns may decide that. Perhaps the reason why there has been a diminution in the consumption of beer may be that, as Mr. Bernard Shaw said in one of his earlier writings: Beer is the chloroform which enables the worker to endure the severe operation of living. As the operation of living has become less severe during the last five years, since the Labour Government have been in office, that may conceivably account for the diminution in the consumption of this excellent chloroform—to the detriment, I regret to say, of those who live upon the profits from it. I think this has been reinforced by one of the most moving speeches I have heard in this House—namely, the speech of my noble friend Lord Lawson yesterday. This change in the physical and spiritual conditions of the masses of the people is of vital importance, and while it cannot be measured in pounds or dollars, I feel that we should have an additional column in some of the Government publications if it were possible in some way to measure human values.

I would now say a word about something which the noble Lord, Lord Balfour of Burleigh, said in connection with full employment. It is clear that the policy of restrictionism must make for a measure of unemployment, for lower standards of life and, to some extent, for lower production. That is why on these Benches we believe in the alternative policy of expansion, with its result in full employment, in higher production and earnings, and in a higher standard of life. The noble Lord, Lord Balfour of Burleigh, complained that the policy of full employment was really over-full employment. I see his point of view entirely: he feels that we should have a pool of unemployed, so that we should avoid his fear—to use his own words—that "over-full employment means that wages can only move upwards." That is one of the results, and is bound to be one of the results.

But with the rising national income, to which the noble Lord, Lord Rennell, referred—a rise of over £800,000,000 in 1949 as compared with 1948—it is possible to find a means to deal with the rise in wages without inflation, because of the increased production in the country which the increased national income represents. If you increase production, and then increase wages to meet that in- crease, you raise the standard of life of the people and you do not cause inflation. I have made a rough calculation (it may be right or wrong) that somehow or other each year there should be available from the value of the increased production of the country something in the neighbourhood of £300,000,000 to deal with increases in wages following upon increased production. I do not know to what extent we can speed up this increase in production, but I suggest that one medium of which we might make fuller use than we have in the past is the reports of the various committees which visit the United States in connection with the work of the Anglo-American Council on Productivity. Lord Brand yesterday used these words—and I make no apology for repeating them: I do not believe that there is any insuperable difficulty to much more production than we have now. That is the real hope for the 50,000.000 people in this country. It is not because people must work harder or better, but because the methods of wealth production improve year by year. These methods of wealth production to which the noble Lord referred are, of course, improvement in the technical methods of productivity, to which the Anglo-American Council on Productivity has contributed so much. I should like to quote two brief extracts from this morning's News Chronicle on the report of the teams which went to America representing letterpress printing and cotton yarn doubling. The printers say: The American knows that without high output his standard of living cannot be maintained. The cotton team say: Operatives are conscious of the need for high productivity as the means of maintaining their standard of living. I think the deplorable example given by Lord Rennell of certain failures in the textile industry can only lead us to believe that there must have been some failure in the development of joint consultation machinery in that particular section of industry to cause such distressing differences between management and operatives in the industry. Every effort must therefore be made to increase our productivity. I sometimes regret that the noble Lord, Lord Cherwell, has devoted himself so much to the political aspects of our problems, rather than developing the close work which he did, and still does, with the Parliamentary and Scientific Committee. In particular, he has taken a most enlightened view on the problem of technological universities. He had the courage to come out against the idea of linking on to existing universities small technological training centres. He came right out in favour of institutes such as the Massachusetts Institute of Technology and the Pasadena Institute in California—technological institutions of 8,000 or 10,000 students—which would perhaps make the biggest single contribution to a rapid increase within the next few years of our production and our industrial productivity. Meanwhile, while we are waiting for these plans to eventuate we must use what we can. We have the aid given by the Government to the Department of Scientific and Industrial Research, and we have the carrying out of the recommendations of the Barlow Committee to double the output of scientists from our existing universities, a goal which according to the latest report has in fact been achieved.

I want to add my voice, with what value it has, to the plea, published in The Times of May 2 this year, of the leaders of the teams which went to the United States. They say: We declare our profound conviction that the gains to British industry from visits such as these can be vital and enduring. The teams have learned lessons not confined to techniques of productive processes … only uncertainty of the benefits to be derived can explain the failure of many industries to use this generous form of Marshall Aid. The Times itself, in the accompanying leader on the same day, said: The work of the Council is of great value and does nothing to encourage the complacency which tends to be fostered by the steady rise in the production index. Twenty-nine teams have now been over to the United States, and it is interesting to note that the latest team to go over deals with hop growing, picking and drying. Here we have an example of a relatively small industry in this country which is contributing to our production drive—and this I think will appeal to my noble friend Lord Selborne—by an export of hops this year of well over £1,250,000 in value. That is the contribution which a small industry can make, and I hope it will be followed by others from the smallest industries.

Finally, I want to remind the House that the vast bulk of our industries in this country are very small industries and very small firms. For example, out of the total of 258,000 firms, factory and non-factory, in Great Britain, 204,000 employ ten people or under; 236,000 employ fewer than fifty, and 246,000 fewer than 100. I think we must make special efforts to encourage the small firms to make their fullest possible contribution to our production drive. The Industrial and Commercial Finance Corporation have done a good deal, and might do a good deal more. Reference has been made to the growth of factories in our development areas—I think it was the noble Lord, Lord Lucas, who referred to them. These factories, I venture to suggest, have made a very real contribution to the diversification of industries in areas whose main contribution to the national economy hitherto has been a large volume of unemployed. I know that purchase tax has been accused of interfering with certain luxury industries, but I think an industry such as the jewellery industry should be congratulated on raising its exports, which are free of purchase tax, by something like £1,500,000 in the last twelve or fifteen months to a total of rather over £3,500,000 a year.

My last suggestion in connection with small industries is with regard to the British film industry, which is in a very difficult position at the present moment. That industry, which was earning something like 8,000,000 dollars a year a few years ago by exhibiting British films abroad, is now earning less than 2,000,000 dollars a year. I read a letter in The Times of yesterday written by a Mr. Ferris from California. He argued that the British Government and Treasury should demand entry into the American exhibiting market. According to him, we are being deliberately kept out by Hollywood producers who are refusing to show British films on the plea that they would not be acceptable to the American public, whereas the American public are not having any opportunity of expressing their desire to see British films and thereby delivering the dollars they pay to aid the satisfactory economic development of this country. I have detained the House too long, but I hope that we shall bear in mind the need for aiding industry, particularly the smallest industries, to make their fullest possible contribution to increased production and increased productivity.

4.48 p.m.

THE EARL OF SELBORNE

My Lords, like the noble Lord who has just sat down, I should like to congratulate my noble friend Lord Cherwell on having inaugurated a debate fully worthy of this House, and one which has called forth a number of very notable speeches. But I confess that it is discouraging and dispiriting to hear from noble Lords opposite—and particularly from Ministers like the noble Lord, Lord Pakenham—arguments and statements which one expects to hear on the platform at General Elections, but which one finds it very difficult to think that any intelligent or honest man can really believe. I refer, in the first place, to the argument which we heard again from several noble Lords both yesterday and to-day comparing the condition of the wage earners of this country after the first war with what they are to-day. It was amazing to hear that argument from the noble Lord, Lord Pakenham. Noble Lords must know that the conditions are totally different.

After the first war, what caused the great unemployment (which was just as heavy when there was a Labour Government in office as when any other Government was in office) was the world slump and the collapse of our foreign trade. That has not occurred this time because America, instead of not only standing off and cutting herself adrift from Europe, but also making trade as difficult as possible by raising all her tariffs, as she did after the First World War, has thrown herself heart and soul into solving the world's economic problems. That has made all the difference. It is not merely the enormous assistance that this country has received directly from America; it is the help that we have indirectly received through the assistance given by America to other countries. If it had not been so, if it were not for the Marshall Aid that Europe—and other countries too—received we should never be able to carry on as much trade with those countries as we have. Therefore, when the Government boast about full employment and the absence of unemployment and go on to compare that situation with what happened after the First World War, they are making a comparison that every honest-minded man must know to be entirely fallacious.

But I am unjust to His Majesty's Ministers if I do not admit that they have played some part in securing full employment. They have certainly increased the volume of employment—but they have done it by spending a great deal more money than this country can afford. In order to do that, they have taxed the nation at a level that ought never to exist in peace time and that can foe justified only in war time. They have spent in a most profligate manner the money they have 'borrowed and received free from America. They have sold every asset they could lay their hands on, such as the Argentine railways and the like. By that means they have increased the volume of employment in this country. But, surely, their action in that respect is akin to that of the improvident heir who wastes the family estate; he can be very popular with his friends while the money lasts, but the day of reckoning surely comes. When Lord Pakenham was speaking it seemed to me that he and his colleagues are living in a world of their own. They go about in blinkers. They appear to look at nothing except the volumes of statistics with which their own bureaucracy provides them. But when we learn, as we did yesterday from the noble Lord, Lord Brand, that in those statistics death duties are regarded as savings, and personal savings can jump in a few months from £6,000,000 to £195,000,000, we are really entitled to ask what relation those statistics bear to reality.

Ministers come here and tell us that everybody in the country is working harder, when they know perfectly well what the output in the coal mines is as compared with what it was before the war. They know perfectly well that the output per man-shift is not what it was. They must know perfectly well what the output in the building industry is: the same number of men are employed in the building industry as before the war—and something like half the houses are going up. It is so in a great many other industries; wherever you go you will hear people with knowledge of particular industries saying that the output per man is not what it was before the war.

Then the noble Lord asserted yesterday that the high taxation which this Government have imposed is no deterrent to business initiative, no deterrent to people pushing forward, putting their backs into the job and trying to get the most out of their industries. Anyone in business knows the immense difficulty there is to-day in getting, let us say, new directors to till the vacancies on any board. It simply is not worth the time of any highly-paid man to take on new work. That is one of the great headaches in industry to-day—and the noble Lord appears to be quite unaware of it. Any business man will tell him of the great difficulty there is in getting men to work overtime, because they feel that so much of die money they are earning is going into the pockets of the Government. In the same way I feel that when the noble Lord parades his statistics as to the alleged flourishing condition of our trade, any business man would tell him about the frustrations and impediments that this Government are putting in the way of trade—I do not say willingly: of course not. But these impediments exist because the Government are slavishly following their Theories of a planned economy.

I can give an example of a case which has been in the public eye within the last few weeks. The industry concerned is one with which I am connected, and I can, therefore, give the facts at first hand. There is a shortage of cement at the present moment. The cement industry never had a shortage before the war or during the war. Only since the advent of the Labour Government have we had shortages in the cement industry. Before the war the cement industry was always able to plan its production ahead of demand, and it was always building factories to keep pace with rising demands. In those days it took about eighteen months to build a factory. No building was possible, of course, during the war, but in 1945 and 1946 the cement industry submitted plans and applications to the Government for two or three new factories. Owing to the frustrations, the impediments, the delays, the consents that had to be obtained, the procedure under the Town and Country Planning Act, the priorities, the reversals of policy on the part of the various Ministries who had to be consulted, and permits being given and then withdrawn—as the result of all that, only one of those factories is to-day in operation, and the others are still in a building stage. That is the sole reason for this shortage. I quote that merely as an example, but every one of your Lordships who has a knowledge of business could give a dozen other instances. And yet the noble Lord, Lord Pakenham, speaks with the utmost complacency, as if everything were of the best in the best of all possible worlds, and there were nothing for us to worry about in our trade progress.

I am far from decrying the importance of planning in industry or in politics, but the truth is that the extent to which the Government are trying to carry their theories of planned economy is an impossible extent. You cannot plan the economy of any nation, and certainly not the economy of a ration with such a complicated trade pattern as we have, in the detail that the Government are attempting to do. I think part of the evil that this country is suffering from is the fact that, so far as I am aware, there are only two of His Majesty's Ministers who have had practical experience of business in their lives. One is the noble Lord, Lord Lucas of Chilworth, sitting opposite; the other is the present Minister of Works. But I should he very much surprised if they were ever consulted about planning by the Government. If the noble Lord, Lord Pakenham, is right, how can you account for devaluation? If this country was in such a healthy condition, if our trade was booming, if we were living within our income, if we were saving more than we had ever saved before, if everybody was hard at work, does the noble Lord really believe that for the immediate reasons he gave we should have had devaluation? Of course we should not. The pound sterling used to be one of the strongest currencies in the whole world. As bankers, as insurance brokers, as underwriters and as traders, it is essential to our position that there should be confidence in sterling.

THE CHANCELLOR OF THE DUCHY OF LANCASTER (VISCOUNT ALEXANDER OF HILLSBOROUGH)

If I may interrupt the noble Earl for a moment, I would say that if he wants to know what is the real reason, it is the very type of speech which the noble Earl is now making. It is typical of many other speeches and writings which have been made, trying to create over the whole world an impression which is against our own national interests in relation to the volume of our exports, and trying to blame on to this country everything in connection with the dollar position that applies to the sterling area as a whole. I think that any such action is exceedingly unpatriotic.

THE EARL OF SELBORNE

My Lords, I am very glad that the noble Viscount has made that interruption, because he has raised an interesting issue. I should like to know from him whether he thinks that free speech in Parliament should be prohibited—because that has generally been the next stage in a totalitarian State.

VISCOUNT ALEXANDER OF HILLSBOROUGH

I certainly intend nothing of the kind; but it does not mean that we are prohibited from free speech on our side to point out that the noble Earl's speech is unpatriotic.

THE EARL OF SELBORNE

I suppose we may speak perfectly freely so long as we do not criticise His Majesty's Government. But may I suggest to the noble Viscount that what was said on this side of the House or what was said from the Conservative Benches in another place would carry no weight abroad if it did not happen to be true? It is not what we say that foreigners look at; it is the facts. My complaint is that noble Lords and their colleagues in the Government are blind to the facts. I am trying to point out facts to them which are obvious to every foreigner. That is why the pound sterling is not regarded in the same light abroad as it used to be. I find it deeply humiliating that a little country like Belgium is a hard currency country when our pound is in its present condition.

VISCOUNT ALEXANDER OF HILLSBOROUGH

There is a high rate of unemployment there.

THE EARL OF SELBORNE

The noble Viscount says that Belgium has a high rate of unemployment, but I should like to make two observations about that. In the first place, Belgium's unemployment, so far as it does exist, is due very largely to the inability of her old customers, France and England, who were by far her greatest customers, to buy as much from her as they used to buy before. Secondly, Belgium, in grasping its nettles now, is having a far smaller measure of unemployment to-day than we are storing up for ourselves to-morrow. Hard currency is of the utmost value to any country. The fact that our pound has lost so much of its purchasing value is a disaster of the first magnitude. The noble Lord, Lord Lucas, in what I might describe as one of the less realistic parts of his speech, tried to argue that devaluation was of great benefit to our export trade. Of course, it gives an immediate benefit, just as a glass of whisky can make a man feel better for an hour or so. But you can no more live on devaluation than you can live on whisky. At the moment of devaluation we were stocked with raw materials that were acquired when the pound had a higher purchasing power than it has to-day. Everything that we import into this country now has to be paid for in our depreciated currency.

LORD LUCAS OF CHILWORTH

The noble Earl must have missed a passage of my speech where I pointed all that out. I said that devaluation was of immediate importance; I warned noble Lords against thinking that it was of lasting importance. I thought that perhaps I over-stressed my warning note.

THE EARL OF SELBORNE

I am glad that the noble Lord's speech is even more realistic than I have given him credit for. If so, that part of his speech was not one from which His Majesty's Ministers could derive much comfort. We have had the benefits of devaluation, and the troubles of devaluation are in store for us.

The noble Viscount, Lord Alexander, interrupted me just now when I was speaking of Belgium. I should like to resume on that point, if I am not detaining the House too long. Two points seem to me to be insufficiently realised about Belgium: in the first place, her economy is very similar to our own—that is to say, it has a tightly packed manufacturing community which has to export to live. Secondly, Belgium suffered just as much during the war as this country did. It is true that in some ways she did not suffer nearly so much, but in others she suffered a great deal more than we did. In the first place, the country was fought over twice, and that cannot happen to any country without a vast amount of miscellaneous damage occurring.

LORD HADEN-GUEST

Would the noble Earl permit me to interrupt? I visited Belgium immediately after the war, and large parts of the country were absolutely intact.

THE EARL OF SELBORNE

The noble Lord does not seem to have gone where the armies fought. But we never had two armies fighting over England, and I suggest that if we had we should have had a great deal more damage than actually occurred.

LORD HADEN-GUEST

I was with the Army.

THE EARL OF SELBORNE

Then the noble Lord was extremely fortunate where lie went. In addition to that, the retiring Germans took away every horse, every cow, and nearly every chicken they could find. I also was in Belgium immediately after the war, and I saw a Great deal of this damage. It is true that Brussels did not get the bombing that London suffered. Brussels was quite intact. But Antwerp was most severely damaged, very largely by ourselves—I think more seriously damned than any British port. Antwerp is the sole port of Belgium, and the comparison is between every port in this country being treated as Antwerp was.

I think, however, that a far greater disaster than all that was that their currency was deliberately depreciated by the Germans who used the printing press to destroy the value of the Belgian franc. If it had not been for the heroic measures taken by the Belgian Government their economy would have been wrecked. They took measures on tae lines of Gladstonian finance. In dealing with these problems, they did exactly the opposite to what His Majesty's Government have done. They used their credits in America to import consumer goods. They did not receive an American Loan as we did. They abolished all controls, thereby killing the black market, and giving an incentive to work. They reduced taxation as far as possible, and they "got going." It is true that they have had some unemployment, but I suggest that in the long run they will have had less unemployment than I fear is in store for this country. They have made their currency a strong currency, which is of enormous importance to any country. It is one of the greatest disasters to us as an island nation, dependent as we are for our livelihood on immense imports from abroad, that we have depreciated the value of the pound.

My Lords, another point that has emerged from this debate is that Lord Cherwell's statement that there has been more inflation in England since the war than there was during the war, has not, so far as I am aware, been challenged. If that is so, and I believe it is, that is surely a tremendous indictment against the policy pursued by His Majesty's Government.

LORD PAKENHAM

I do not want to interrupt the noble Earl, least of all to comment on the various criticisms he is making of me, but I did deal with that particular point in my speech yesterday afternoon.

THE EARL OF SELBORNE

I listened with great attention to the noble Lord—I am most anxious not to misrepresent him—but I did not understand him to dispute Lord Cherwell's statement, that whereas inflation during the war had been at the rate of 4 per cent., since the war it had been at the rate of 5 per cent.

LORD PAKENHAM

I do not want to detain the House, particularly as I spoke at great length on this whole issue in the debate on the cost of living not long ago. Yesterday I went into the point the noble Earl is referring to, and I. am on record, though briefly, in view of my earlier and much longer remarks in the debate that I have mentioned.

LORD CHERWELL

May I explain where these figures come from? I said that during the last four years of the war inflation was at the rate of 4 per cent., and that for the first four years of peace it was 5 per cent. Those figures come from a statement made by the Minister of State for Economic Affairs on April 18, 1950, in Oral Answers, in column 32 of the OFFICIAL REPORT.

THE EARL OF SELBORNE

If my noble friend Lord Pakenham does not agree with Lord Cherwell, it appears that the Minister of State for Economic Affairs does. On that, I would say only that I assure the noble Lord. Lord Pakenham, that it is out of no malice that I have referred so much to his speech. I was greatly interested in it yesterday. Perhaps I ought to be referring more to the speech of the noble Lord, Lord Lucas, but I found myself in agreement with so much of what he said.

Lord Pakenham made a great appeal yesterday for the National Savings Movement. I think it is about time that someone asked noble Lords opposite whether they really consider it honest to invite poor people to invest their savings in fixed interest Government securities if the Government are not pursuing a policy that is going to maintain the spending power of the pound. I suggest that if the Government ask poor people to put their savings into Government securities with fixed interest they should recognise their moral obligation to maintain the spending power of the pound. This Government have not done that. They have taken the easy path of maintaining full employment by spending money that we really have not got. That process, on top of the American assistance, provides full employment; but one of the results has been that the cost of living has gone up and the spending power of the pound has gone down. Moreover, so far as I can see, there is no halt to that process; it is going on to-day. The costs of living are going up, will continue to go up and must go up, as Lord Brand pointed out, as a result of devaluation; yet Ministers are telling people that they can safely invest their savings in fixed-interest Government securities, and that these savings will be quite safe. Of course, the savings will be safe, but the income that they will bring in will be fixed, and the Government are not taking the steps, which are open to them and which prudent finance would indicate are necessary, to maintain the pound so that those savings will buy as much when they are taken out as when they were put in. For these reasons I cannot take the same optimistic view of our national situation as His Majesty's Ministers apparently do. I view the tremendous level of taxation today as one of the greatest millstones round the neck of British industry, and as a severe menace to our future survival.

Lord Cherwell referred yesterday to the firms founded by Lord Nuffield and Lord Austin. He pointed out that it would be impossible for any man to build up such industries under the present scale of taxa- tion. I believe that to be perfectly true. I myself am associated with another industry which was built up in exactly the same way by another man who put back his profits into the business. These are the men who are running British industry to-day. The great industrialists of to-day were the small men of yesterday. The small men of to-day could be the great industrialists of to-morrow, but this Government will not allow them to become so. They are throttling them at birth. That is a disaster to this country.

The Government are living on the moral as well as the physical assets of the old days. Just as they have liquidated the Argentine Railways in order to pay to-day's debts so they are using the ability of our industrial leaders and taking away their earnings. The present generation of businessmen are carrying on in the spirit of Dunkirk because there is nothing else which they can do, and they are hoping for better times. To them idleness would be the greatest evil. But the policy of the Government is preventing the emergence of the new generation of industrial leaders. It is preventing the men who have founded small businesses from building them up into big ones. I cannot see how this country can prosper, how we can secure the increased production which we all agree to be necessary, if the country is to be deprived of its natural industrial leaders.

5.24 p.m.

LORD WINSTER

My Lords, if I may, I would make a very brief comment upon what the noble Earl has said about Belgium. Of course, I entirely agree that impressions derived from a very short visit to a country may not be of great worth, but it so happens that I was in Belgium about three weeks ago. I visited Antwerp, and I know that every word which the noble Earl said about the destruction there is true. But I conferred with trade union leaders and they told me that there is very heavy unemployment in Belgium at the present time. In fact, a figure of 20 per cent. was quoted to me, but I cannot vouch for that, for I had no opportunity of checking it. I can bear testimony, however, to the extraordinarily high cost of living in Belgium just now. I did not seek my meals in luxury hotels or restaurants, I went to very humble establishments indeed, but I was astonished at the high prices charged and I was utterly at a loss to understand how, on the wages which are being paid, people could really afford those prices.

As regards the general tenor of the noble Earl's speech, it was laudatory of the part which business men can play in the conduct of the affairs of the country. I have quite recently been reading an extraordinarily interesting book from America called The Aspirin Age. In that book, a series of writers deal with many of the great events which have occurred in America in recent years—the depression, the crash, the régimes of Presidents Hoover, Harding, and Coolidge and the days of the "New Deal." Each of those episodes in recent American history is dealt with by a different writer, yet I find they agree upon two things: that the Presidents who were most acceptable to the business community in America at the time of their election brought about—or at any rate their presidencies were identified with—great disasters in American history, and that, over and over again, advice tendered by business men to the Administration was proved to be absolutely wrong and to have paved the way to great misfortunes and disasters.

I feel that I am guilty of gate-crashing in taking part in an economic debate, because I make no claims to being an economist. Certainly, if I had any claims they would have been dissipated by the speech of the noble Lord, Lord Cherwell, yesterday. That remarkable and close-packed speech revealed to me how very little I know about this subject. On the other hand, I always feel grateful to the noble Lord when he speaks, because he gives me a gratifying sense that I am a member of the Royal Society listening to an extremely learned paper read by an extremely learned man on a subject about which I know nothing at all. Many novel ideas are being introduced into our industries and into our economic and fiscal systems at the present time. I believe I am like many others in finding great difficulty in always following what is going on and what is at the back of these ideas. One reason, I believe, is this. At times when a country is beset with perplexities and difficulties, as ours is just now, Governments tend, like Wordsworth, to speak with two voices. On the one hand, you get a speech in which it is said that the country is in great difficulties, that we must do everything we possibly can, that we must do this, that and the other, in order to get the country out of those difficulties. Then, side by side with that, you get a speech in which it is said that things are really going very well indeed, that production has increased, that output per man-hour is increasing, that the dollar gap shows signs of beginning to meet, that reserves are increasing and that nationalised industries are attaining their target deficits. Really, one is left wondering which of those two stories is true.

I cannot help thinking that this may be the explanation. In the bad old days we used to have a General Election every four or five years. During the Election period, there was a "free for all," so far as truth was concerned. The Election being over, we settled down to a period when there was, at any rate, some regard for truth. Now we seem to me to be living in an atmosphere of perpetual General Election, and truth is treated as a poor relation. I am afraid that, in consequence, the individual whom we call the "man-in-the-street" really believes very little of what he is told. I make no comment upon that except to say that I think it would be extremely helpful if, when statistics are quoted to indicate increases in production, increases in output per man-hour, and so on, they were related to some idea of what is possible and to some idea of what is the comparative state Of affairs in other countries. Without some such comparisons, I think that statistics are often rather meaningless. If, after walking along a road at a speed of two miles an hour, I accelerate to four miles an hour, that means that I have made a most laudable effort to increase my speed. But I am still being passed by all the bicycles on the road. Therefore, I think it would be extremely helpful if the statistics to which I have referred could be related to certain other factors.

I will give an instance of what people find confusing. I have been re-reading the speech with which the Chancellor of the Exchequer introduced the Budget. I will not trouble your Lordships with quotations—I think' that this is a fair representation of his position. Revenue shows signs of diminishing and new fields of taxation will be extremely difficult to find, yet at the same time our expenditure must automatically increase. I believe people find that extremely confusing. They ask: How do we carry on? As an individual, if it were brought home to me that my income was diminishing, that I had no sources whatever for increasing my income, and that at the same time my expenditure was increasing, I should know that I was walking along Queer Street on my way to Carey Street. People are puzzled to know how the Government can do with impunity something which an individual could do only at the risk of grave personal misfortune.

In reading the Budget speech, I also notice the question of income tax reliefs. What is the principle which lies behind the grant of these reliefs? For the sake of argument I will divide the workers into three categories—it is a rough argument but I think it will serve my purpose. The first category is of workers who are receiving a good pay packet—good luck to them; I am all for it—which is of such a size that, although they are subject to income tax, they can afford to pay it and not be too badly off. There is the second category of workers, whose pay packets are small and to whom income tax represent a burden, and then we come to the third category of workers whose earnings are so low that they are not subject to income tax at all.

It has been decided that the second category should have some relief from income tax. That will cost about £80,000,000, which is being found by a tax upon transportation—that is what it amounts to. Of course, that involves a rise in prices. A fact-finding committee in America have reported that anything up to 75 per cent. of the cost of an article might be represented by movement, so that when we put a tax on transportation we inevitably raise prices. It comes to this: that those who are worst off will find themselves confronted by rising prices and will have to pay for the relief given to those in a better situation than themselves. That is an illustration of the parable of the talents: From him that hath not shall be taken even that which he hath. I can imagine the lowest category of workers saying, "If that is planning, the only remedy is to throw a planner in the works." I agree entirely about fair shares —even equal shares are spoken of—but I feel that what is even more important than fair shares is a fair deal. For instance, 170,000 railwaymen who are earning not more than £5 a week, some of them less, must feel that this is rather a queer way of granting relief.

LORD BALFOUR OF BURLEIGH

Did the noble Lord say that 170,000 railwaymen were earning not more than £5 a week?

LORD WINSTER

That is the figure.

LORD BALFOUR OF BURLEIGH

I should like to have authority for that.

LORD WINSTER

Certainly, I will show the noble Lord the paper in which that statement was made, which I checked this morning when looking through my notes.

These matters lead us to the vexed question of wages and wages policy. Superficially, a wages policy seems a good idea, but it is one of real and considerable complexity and difficulty, involving the question of differentials and the possibility of further inflation. I am not surprised that because of these difficulties those who know a good deal about the subject prefer wage regulation by free collective bargaining to some idea of laying down a hard and fast wages policy. To some extent we have had a wages policy. We have had the wage freeze, the policy of stabilisation of wages, which was an attempt at a wages policy. It placed the trade union leaders in great difficulties and the trade unions under severe strain; and it weakened the belief of the workers in the machinery of negotiation and conciliation. It pressed most hardly upon the poorest workers, for the reasons I have given, and it denied any increases in wages to meet the rise in prices, although 1,700,000 workers are in enjoyment of sliding wages agreements by which wages rise automatically with a rise in prices.

These facts illustrate the difficulty of trying to lay down a wages policy. In fact, we have to admit that that policy has failed. I notice that the General Secretary of the Transport and General Workers' Union, speaking over the weekend, said that we have no such thing as a wage freeze policy because wages have risen by £200,000,000 during the past year. If we aim to have a controlled national economy, how can we arrive at that when we are unable to control the largest item in the national economy—namely, wages? They are the raison d'être of the trade union movement. Are the trade unions to surrender this field of their work to a planned economy? I think that confronts us with one of the dangers of a planned economy, which is, that it must involve a certain urge towards authoritarianism. If we find that plans are breaking down because we cannot control a certain field of the national economy then there must be a great temptation to take that field under control. We may act from perfectly straightforward and honourable motives. We may think that what we are doing is right, and for the good of the nation and everybody concerned. But if we are held up in our plans only because of one particular field of the national finances, then the temptation to go out and take control of that field also must be very great.

Related to the question of wages is the question of incentives. There is a tendency to-day for the Government to regard incentives as unethical. The spirit is that expressed in Kipling's lines: When no one shall work for money and no one shall work for fame … But each for the joy of the doing. Your Lordships ought to be commended as being extremely ethical, because we certainly work without any incentive; though from another point of view perhaps we may be regarded as political blacklegs who do not charge the rate for the job. Having quoted Kipling I must in fairness point out to your Lordships that he was talking about the hereafter and not about the present. Incentives in the present remind me of the little boy who was asked to define a lie, and did so by saying: "It is an abomination unto the Lord, but a very present help in time of trouble." Incentives may be unethical, but they do seem to produce great results. I notice that incentives in the building industry are estimated to reduce the cost of a house by £15, which, at any rate, is something: it is an incentive in practice.

If one looks into the past, one is bound to admit that incentives have resulted in some remarkable things being done. Suppose Drake were proposing to sail to-day for the Spanish Main and he was told that he could take only £50 out of the country; that he would have to queue up outside a good many squalid offices to get his passport and exit visa and, if his voyage was a success and put him into the surtax class, he would be charged 19s. 6d. in the pound for his Spanish doubloons, and mulcted 95 per cent. of any presents he might receive from dusky potentates. He might say: "I am above that sort of thing; I will sail." On the other hand, he might say: "I think I will stay quietly in Devon playing bowls." I do not think we can lightly set aside the value of reasonable incentives in getting things done. There is one point I would like to mention briefly in that respect. I have been very concerned indeed to notice that some authors are declining contracts at the present moment, not only because they would not reap very much from accepting them, but because they would actually suffer a lost by so doing. I feel that we must be very careful about that. The Welfare State must not be a mediocre State, and it is the duty of the Welfare Slate to encourage the humane arts in every way and give full encouragement to the artists.

I come now to what seems to me to he one of the most important matters of all in a debate upon the national economy—namely, the question of full employment. The Chancellor of the Exchequer, at the end of his Budget Speech on April 18, said: So long as we can maintain full employment by whatever measures are from time to time necessary, we shall at least know that our national production is at its highest possible. I feel that there is some error here. I should find it difficult to believe that that is really what the Chancellor of the Exchequer meant to convey—that if you have full employment it is proof that your national production is at its highest. Surely, such a proposition as that is a complete fallacy. That would leave entirely out of account such questions as markets and competitors. You may have full employment, but you cannot have full production unless there are markets for what you are producing; and not only must there be the markets for what you are producing, but you must be producing the article that your customer wants, of the right quality and at the right price, and be able to deliver it at the time when your customer wants it. However much you may have full employment, unless you are meeting those requirements it is surely, impossible to say that your national production will be at its highest possible.

I make no apology for drawing attention to the question of competition. Sir Stafford Cripps said in the same speech: Competition is likely to increase in the coming months. It will increase, and some of it will be from nations which have a very rudimentary idea of welfare. Japan has been quoted to-day. Lord Layton is not in his place, but I should certainly agree with him that we have no right to say that Japanese labour is sweated labour. But I notice that competition is already beginning there. Japan has just secured orders for two turbo-alternators from Pakistan, and has undertaken to deliver them in half the time that was quoted in the British bid. Japan can sell bicycles in Singapore at a price £1 cheaper than we can. As regards factory conditions there, the reports are that there is one cotton factory which is well conducted, with good conditions for the work-people, light and airy, but engaging largely female and young girl labour and paying them £4 a month with board and lodging. There is no question of sweated labour in this factory. Those conditions will make competition from Japan very fierce indeed. No nation in the world can run shipping better than we can—running a shipping line and running shipping is something in which we really are masters—but when it comes to matters upon which the shipping industry depends—that is, shipbuilding and shin repairing costs—I am afraid that as time goes on we shall find ourselves meeting severe competition on the Continent. We need not be too gloomy about the picture, but we must face the fact that there is this competition to meet.

As was stated yesterday, we have the American and Canadian debt service to meet when it begins in 1951; and Marshall Aid ends in 1952. So there is no cause to reproach anybody for expressing anxious concern about the future ability of our trade and industry to meet that competition. Industry must be fully equipped, and able to find new capital for new equipment and modernisation of plant. But I entirely agree with what my noble friend Lord Marley said this after- noon, that that is not the whole of the argument and that a great deal better use could be made of existing equipment if it were more efficiently used than it is at the moment; that it is not merely a question of working harder or longer, or of the modernisation of equipment, but that the prime thing is to use efficiently the equipment we have, and to bring all our industries up to the standard of the most efficient, which is a very high standard indeed. Something has been said this afternoon about restrictive practices and price-fixing arrangements. I am sure that they, also, act as a drag upon our industry and our: production. A committee has been sitting for a year to examine this question of restrictive practices, and I hope that we may soon hear something of their findings.

I conclude with a few observations about the Welfare State. The erection of the Welfare State is undoubtedly a most remarkable achievement, when we compare what is being done with what was done after the First World War and when we remember that that war was to be "a war to end all wars" and to give us a "land fit for heroes to live in." It is no good going on too much about the past, but we know what a mockery those promises became. After this war there has been a real attempt to redeem the promises which were made while the fighting was going on. Not only the Government, but everybody concerned, can feel justly proud of what has been done. There are, of course, the cavemen on both sides. On one side you have the relic of the Stone Age lurking in his cave, ready to jump out and club the faintest sign of progress on the head; and on the other side you have tile men whose minds seem to have stopped with the Tolpuddle Martyrs during the Industrial Revolution.

There is common consent that the Welfare State, with its concomitant of full employment, is something of which we can feel very proud—something which is in direct line with the work of the great reformers of this country. It fulfils a social conscience and, without undue conceit or vanity, we can once more say that we lead the world in this matter. It is an achievement which transcends the mistakes and miscalculations which were inevitable in working out such a great and novel conception. Of course, the benefits will be abused—benefits and privileges always are abused—but that practice will tend to diminish. The Welfare State depends upon a planned national economy which involves in itself many difficulties, and there should be no resentment—and I believe there is no resentment—if questions about the finances of the Welfare State are examined. It is right that they should be examined, and those people who raise questions about the finances and the system of administration which is involved are doing so because they wish to make sure that the thing is being properly established.

Sometimes when I visit cathedrals I hear other visitors admiring particularly the flying buttresses. In contradiction of what they are told, the fact is that the flying buttress represents an error in planning on the part of the architect, who had to buttress up his work which otherwise, through his faulty planning, might in part have collapsed or at any rate fallen into an unsatisfactory condition. If we examine the finances and other matters surrounding the Welfare State, it is only because we want to make perfectly sure that that State is being erected upon completely sound financial and economic foundations which will enable it to stand secure through the weather in years to come.

5.55 p.m.

LORD HAWKE

My Lords, the noble Lord who has just sat down said that people were wondering why Governments could apparently do with impunity things which ordinary mortals could not do. The answer is that they cannot. The rising prices which we have seen in this country over the last four years are the result of the Government's attempting to do things which the ordinary mortal cannot do without ending up in Carey Street. The Government are great adherents of a planned economy. It is all very well to plan an economy, but the great thing is to bring off the plan; and you cannot make certain of a planned economy coming to fruition unless you have far greater control than the Government have at this moment. You must be able to direct labour, and you must have a close control over consumption in order that you may have a control over savings. Therefore, in the existing system, it is impossible for the Government to make certain that any planned economy they propose can work.

Now one of the most important objects of the planned economy is to see that we do not try to spend more than we have; that our resources of material and so on are matched, but not over-matched, by the financial supply. Once a year, His Majesty's Government go into print with an Economic Survey of the nation. His Majesty's Government are "the masters now", but they are modest when it comes to claiming mastery over our economic future. I want to quote from the latest Survey. Paragraph 68, dealing with the national income and the balance of the economy, says: The analysis which follows is based on a number of stated assumptions. The selection of these is very much matter of judgment, and the most important depend on the sense of responsibility shown by the people as a Whole to the needs of this situation. With different assumptions, the conclusions themselves would be different. It then goes on to say that this is what is required if internal stability is to be maintained. It seems to me clear from this Survey, as it was in 1949, and as it was in the Chancellor's Budget speech, that the final residual key to our economy is the matter of the personal savings. But of course that is one thing which cannot possibly be planned in the existing circumstances; it can be planned only with the most rigid control over every other form of financial outlet. The 1949 Economic Survey hazarded a guess that personal savings would be £210,000,000, but said that this was only a balancing item and was not a forecast. For 1950, the Survey does not venture a forecast of personal savings. It lumps together private savings and business savings, and so on, and says that these must go up from £637,000,000 to £805,000,000 if—and again I quote a resurgence of inflationary pressure is to be avoided. The simple truth seems to be at first glance that the nation is not willing to forgo sufficient current consumption to provide for the capital expenditure that it really requires.

I think the matter goes even a little deeper than this. We have put ourselves into a most extraordinary position by our very high taxation. The restraint in spending has kept: Is value of course to the individual, hut it has lost a great deal of its value to the community. Over the field where restraint would usually result in saving—drinking, smoking, gambling, entertainment and so on—restraint merely deprives the Exchequer of a very large proportion of that expenditure which would find its way there anyway. In fact, to-day one cannot finance a programme of capital expenditure by the classic virtues. To be really 100 per cent. useful to the community savings have to be brought about by the restraint in expenditure on things which do not bear heavy taxation, are preferably imported and preferably sub-sidised—in other words, utility clothing and food. That is a very narrow margin to-day for any hope of increased savings.

The situation is a very extraordinary one. It would appear to my Victorian ancestors most peculiar and, I think, particularly so to the pioneers of the Labour Party. The man who is really of economic value to the State might almost be described as the man who dissipates all his substance during his lifetime on drinking, smoking and gambling, and then dies of delirium tremens on the day he is going to draw his old age pension. It goes even a little deeper than this, because labour is not mobile, either by geography or by classification. You cannot turn a camera man in Elstree into a bricklayer in Liverpool; so that it does not follow that by saving, by not going to the cinema and so forth, you can finance any building expenditure.

It follows that the plan must certainly fit the expenditure to the savings available; but it must also fit the expenditure to our material resources. I venture to think that it is in the field of public and private works that the real inflationary pressure exists to-day. We are trying to over-reach our resources, both financial and material, in that field, and it is there that the plan is not working. And, unfortunately, inflation in that particular field does not take long to translate itself into the cost of living through higher rents and repairs, and so on. The remedy, of course, is to make certain that the demand upon our resources for capital goods is neither more than the money available for investment nor more than the resources available for carrying out the work. If the Government have difficulty in cutting down the works in the private sector, then there is all the more reason why they should be extra careful about cutting down the works in their public sector.

So much for the internal situation. To turn for a moment to the external situation, I would point out that the Financial Secretary to the Treasury was reported by the B.B.C. on May 5 as saying that we were dealing with inflation in this country better than were many other countries. That is true; but what flows from that? One would expect to find the pound buoyant against the currencies of the countries less successful than ourselves. But what is the actual position? Over the greater part of the world, the pound commands an exchange rate no better and in some cases worse than it did in 1945. This has meant that we have received no financial reward at all for being less profligate than many others. Steadily rising costs in these inflationary countries overseas have been translated into rising costs in this country through fixed exchange rates.

Why is this? The answer is that most of the world adheres to the International Monetary Fund. The purpose of that Fund was to give us stable exchange rates based on stable internal financial policy. We have certainly had a measure of stable exchange rates, but the Fund has been totally incapable of restricting the financial malpractices of its members. Many of the exchange rates in the world are at false levels against us to-day. Many countries have found that they can isolate their internal price levels from the competition of our goods by using our invention—the import licensing system—to peg their currencies at false levels. They have obtained from us at cheap prices the capital goods which they badly wanted, and they have "soaked" us heavily for the few monopoly goods we must buy from them. It is a new game—a game of inflation behind unscalable trade barriers. I have seen no evidence that our members on the International Monetary Fund are doing anything about this at all.

There is another factor, to which I will merely refer, and that is a factor making for the weakness of sterling—the release of the war-time balances to the Asiatic countries. I submit that it was a false kindness to have released these balances on any pretext whatsoever. It was only postponing the day when those countries would have to make their exports balance their imports; and it has been helping them only to maintain exchange rates which do not sufficiently encourage their exports. We have to pay for it doubly—first, by the release of these balances, which means unrequited exports, and secondly, by having exchange rates against us higher than are necessary. Economists sometimes talk about "importing unemployment." I believe that His Majesty's Government have been importing inflation and have been providing a happy breeding ground for it here. There seem to me to be six factors working for inflation in this country at the moment. First, we are importing inflation. Secondly, we have been shipping abroad goods in payment for war debts. Thirdly, we are permitting more overall demand for resources at home than the size of those resources justifies. Fourthly, His Majesty's Government in their fiscal policy are overestimating the degree of interchangeability between resources which supply consumption goods and resources which supply capital goods. Fifthly', the Government's policy of huge taxation for restricting consumption is resulting in inflation through wage increases. And, sixthly, quite apart from the financial side, His Majesty's Government are not keeping the programme of capital works within our capacity to perform those works both economically and expeditiously.

What is the remedy? First, more realistic exchange rates, preferably with a free pound. Secondly, the funding of the remains of the war-time balances. Thirdly, relief from taxation enough to lower the cost of living sufficiently to stop all demands for further wage increases. Fourthly, a programme of works on Government and private account which will not over-match the resources, both financial and material, available to carry them out. The alternative, of course, is a continual rise in prices.

6.9 p.m.

VISCOUNT SWINTON

My Lords, I should like first to thank noble Lords on the Government Front Bench who have given me, a returned traveller, such a kindly reception. It is very agreeable to me to receive an equally warm welcome from both sides of the Atlantic. We have had a long, wide and informed debate. These economic debates give us an opportunity to review the economic situation of the country and the economic policy of His Majesty's Government. After the masterly review given by the noble Lord, Lord Cherwell, yesterday, and the penetrating comments of the noble Lords, Lord Brand and Lord Rennell, little remains to be said upon the former, but perhaps it would be appropriate, in winding up the debate, if I offered a few observations upon the economic policy of the Government.

A number of speakers have drawn attention, and fairly drawn attention, to the great advance which industry in this country has made in production and export. Whatever may be the correct estimates of production there is no doubt that that is a fine achievement. But I must part company with some of the Government speakers when they seek to claim credit for what has been done. After all, what has been their record? We have had the profligate financial expenditure of Dr. Dalton. I was touched yesterday by the way in which his old schoolfellow rallied to his side. This loyalty to the "old school tie" on the Socialist Benches is indeed touching. Then we had the coal crisis which, on a modest estimate, set us back six months. We have had the rising costs of the nationalised industries, each of them, as the noble Lord, Lord Winster, said, achieving "its target deficit"—and I think sometimes exceeding it—increasing the fuel, power and transport costs of every industry in the country. We have had, in the Chancellor's own words, the slipping from expedient to expedient. We have had the maintenance of controls after they have become superfluous. Finally, we have had the crowning mercy of devaluation. Listening to the noble Lord, Lord Lucas, to-day, I had almost begun to suppose that devaluation was the supreme achievement of the Government and not the confession of failure which the Chancellor of the Exchequer over and over again protested he would avoid at all costs.

These, to which others can be added, are the outward and visible signs of an inscrutable planning providence. I ask the noble Viscount the Leader of the House who is to follow me in the debate which of those achievements of His Majesty's Government are to be reckoned on the credit side of having assisted our production and our exports? I am quite ready to affirm that the Lord Chancellor is the embodiment of the majesty of British law, but I am not prepared to admit that His Majesty's present Government embody all the greatness of the British people. We have had a great advance, but where has it been made? It has been made in the non-nationalised industries; and it has been made in spite of frequent frustration and threats by the Government, and in the absence of incentive.

Judged on the achievement of our industry, of our shipping, of all that network of services—financial, commercial, insurance—which we provide, we are entitled to command a great measure of confidence in the world. If that confidence is not what we are entitled to claim on our capacity and performance, it is due to lack of confidence in the past performance and future policy of the Government. Surely to-day the whole policy of the Government should be directed to creating conditions in which industry and commerce can expand and take risks, and to fostering the confidence of the world in this country. The noble Viscount the Chancellor of the Duchy of Lancaster, a singer who likes an old refrain, tuned in again yesterday on the rather outmoded motif of denigration, as it is now called. He must learn that foreign countries do not judge this country even by his speeches, and certainly not by ours. He said that the whole of devaluation had come about because people on the Opposition Benches had made speeches. Really, the noble Viscount must get a little nearer to reality and the truth.

VISCOUNT ALEXANDER OF HILLSBOROUGH

I never said that the whole of our difficulty was due to that; I said that it contributed.

VISCOUNT SWINTON

It was a contributory cause?

VISCOUNT ALEXANDER OF HILLSBOROUGH

Yes.

VISCOUNT SWINTON

It certainly is not. They do not judge us on speeches. They do not judge us on White Papers. What they do—and they are sound, shrewd judges—is to judge by their own appraisal of the effect, past and future, of Government policy. They judge by what the Government do and what the Government leave undone. They look at our financial policy. It is true that we have a balanced Budget, but they see that we are taxing up to the hilt; they see that we have no reserves available; they see taxation handicapping the initiative and development of business and the enterprise of the worker; they see the Chancellor of the Exchequer preaching economy and reduction of cost to everybody except the Government Departments he is supposed to control. It is quite absurd to say that expenditure cannot be reduced, when £30,000,000 is squandered on failing to grow ground-nuts—and some more is following that; when State farming is losing £6 per acre—which is the figure appearing in the Report of the Public Accounts Committee. Apparently, State farming requires something more than a feather bed. When £140,000,000 is added to the Supplementary Estimates, after the Chancellor of the Exchequer solemnly affirmed in his Budget statement that there would be no, or at least very few, Supplementary Estimates; when engines are converted from coal to oil and then back again to coal because there is no oil; when vast losses are made on State trading because the Government will not let the people do the job who know how to do it—it really is fantastic when we have those examples (and I could quote others) to say that the Government cannot economise and reduce expenditure. A moderately competent Government would be able to economise all along the line.

Then foreign countries look at the economic policy of the Government. There is no doubt that the majority of the people in this country and in the world are opposed to nationalisation. They are opposed to it not on any theoretical grounds but on well-proved experience. The uncertainty and threat of further nationalisation undermines confidence in industry in this country. And it does something more: it deters the investment of foreign capital here, which is the one thing we ought to be encouraging. We still do not know what the Government mean to do about iron and steel. After the speech of the noble Viscount, Lord Alexander, last night. we know even less than we did. It was a most entertaining speech, We shall look forward to hearing him frequently. He claimed that the existing policy governing the steel industry—with, I admit, some contribution from the steel masters and the steel workers—was responsible for the outstanding success of the industry.

But what is that policy? It was not invented by the Government. It was a policy of broad guidance and a certain measure of control, which started long before the war, which was practised by the National Government through the war, and which the present Government inherited and had the good sense to carry on. The noble Viscount commented on how admirably it has worked. I agree that it has. If it has worked so admirably, why do the Government want to change it and substitute nationalisation? The industry is efficient by every test, progressive by every test. in production, cost and price, as Lord Layton, with his great experience, said, it is competitive with any other steel industry; and above all, it is a model in its labour relations. I am glad to hear that the noble Lord, Lord Lucas, has had an interesting visit to Wales, during which he was overcome by the beauty and glory of the prospect of the Mangam Steel Works, and he commented "What a monument to Government planning!"

LORD LUCAS OF CHILWORTH

I said "Industrial economic planning".

VISCOUNT SWINTON

Industrial economic planning? Then it has nothing to do with the Government. Let us pursue this. I am sure the noble Lord would not wish to be misunderstood. Industrial economic planning—by whom?

LORD LUCAS OF CHILWORTH

was impressed at the enterprise; I was not concerned as to whose enterprise it was.

VISCOUNT SWINTON

I am delighted. But I am concerned with whose enterprise it was, and I think the people out of doors will be concerned with whose enterprise it was. After what Lord Alexander said, in the prelude to Lord Lucas's speech, I should like to tell him whose enterprise it was. This project is a combined project of Guest. Keen, Baldwin's and Richard Thomas which was conceived in 1936. The whole plan was brought to complete fruition in 1944; and the project was launched in 1945, and is certainly a magnificent achievement. But it had nothing whatever to do with His Majesty's present Government. Lord Lucas reminded me of an incident of which I was told—about a distinguished alderman who visited another marine resort. He was so overcome by the beauty of what he saw, that in gratitude he erected a seat, and on it he had written: This seat was presented by Alderman Buggins. The sea is his and he made it. My Lords, to return to steel, why do the Government want to change that which is going so well? It permeates an enormous range of production and export. £840,000,000 of our exports depend directly or indirectly upon steel. Probably the wiser and cooler heads in the Government realise to-day that to nationalise the steel industry would he economically disastrous and politically suicidal, but nothing is done to dissipate the uncertainty. Bet that is the kind of economic policy, or absence of policy, which is undermining the confidence which this country ought to enjoy. Before I leave steel, may I add one word upon the Schuman Plan? The details of that plan have yet to be disclosed and discussed, but I should like at once to reinforce the welcome, and to extend the most sincere good wishes, to this imaginative approach. If economically it were less sound than I hope and believe that it can be in its development and application, we should still look with sympathy on any proposal which can bring France and Germany together and unite them in the co-operative economy of Western Europe. I would ask the Leader of the House, however, to assure us that these connected with the British steel industry, as well as the British Government, will be associated with all the discussions and negotiations which must now take place. This imaginative plan is another example of the wisdom of seeking economic co-operation by practical reciprocal arrangements of mutual and general benefit. I am sure that the cumulative effect of such arrangements, together with others that I am glad to say have been made, freely entered into, will give us quicker and more solid and lasting results than more ambitious schemes for political or economic unification.

I add one other consideration. Much discussion has centred round sterling balances and the trade in sterling. I do not think that anybody will deny that the greatest boon there could be for the trade of the world would be the convertibility of sterling. That would enable the trade of the world to flow along its accustomed channels and to employ the wide and well-proven facilities of our financial and mercantile institutions and exchanges. But this must depend upon confidence; and confidence depends upon sound financial and economic policy. We have heard a lot in this debate of the "bad old days" and, in particular, of what happened in 1931. It would perhaps be wise if Ministers would recall and tell their followers the whole truth. What did happen then? After we went off gold, a sound economic and financial policy restored the confidence of the world in the pound. The pound steadily appreciated, I think I am right in saying, without drawing a single dollar from the large credits which had been provided for us in America. It was not only a financial appreciation. As confidence was restored, not only did the pound appreciate and foreign money flow in, but production steadily increased, so that in 1938 there were upwards of 2,000,000 more people in work than when the Socialist Government vacated office in 1931.

My Lords, an appeal was made, I think at the end of Lord Pakenham's speech yesterday, to which I would readily respond, as to the spirit in which, whatever our political convictions may be, we should approach our task. But I would add to it just this: that we shall not make a brave new world unless we keep what was good and right in the past as well as change what was wrong.

We may not be able to achieve convertibility in the immediate future, though under a sound economic policy I believe we could do it much sooner than many think. I am quite certain that such a policy would not only maintain but would rapidly appreciate the value of the pound. And what a help that would be all round! The cost of our imports would go down. The cost of living would stop rising and would go down. Production costs would be reduced, and our competitive power would be increased. The dollar gap would narrow. Even this Government could reduce the cost of Government expenditure. Lord Pakenham challenged us on the ground that our policy was clouded in obscurity. Is there anything obscure or cloudy in the suggestions—I hope constructive—which I have now made to the House? If the Government would proceed on those lines they would have a clear policy which would command support and confidence, not only in this country but in the world at large.

6.30 p.m.

THE LORD PRIVY SEAL (VISCOUNT ADDISON)

My Lords, I should like to join other noble Lords in the House in welcoming back to our debates the noble Viscount who has just spoken. Before he rose, I had made a note to the effect that this debate differed from others that have preceded it in the last five years in that it had been marked by an absence of, shall I say, that determined mournfulness which critics of the Government have imported into their discourses. But the noble Viscount has laid about him with refreshing candour, blaming everything on to the Government and reciting all their sins of omission and commission with considerable satisfaction to himself. On one point, I do not quite follow the noble Viscount. He speaks of the bad impression which, he says, our blunders are making on other nations and declares that the result will be that they will lose confidence in us. He has recited, one after another, a number of incidents calculated to give outside people a poor opinion of us. The questions that crop up in my mind, when I hear that, are these: If that is so, why is it that our trade is improving? Why is it that half the trade of the world is done in sterling? It does not seem to fit. I think we shall have to look for other explanations of this gratifying improvement.

Before I give some of those explanations I would reply—and I am very glad to do so—to the question put to me by Lord Layton with regard to the Schuman Plan. I have sympathy with what the noble Viscount who has just spoken has said as to the approach to that suggestion. As he says, quite correctly, proposals are not yet defined. Naturally, one cannot express any opinion upon matters which are not yet formulated. At the same time, our attitude and approach is as friendly as I am sure the noble Viscount himself would wish it to be. I cannot do better at the moment than repeat what the Prime Minister said in the House of Commons. He said: The proposals … have far-reaching implications for the future economic structure of 'participating countries; and this aspect will require very careful study by His Majesty's Government and the other Governments concerned. His Majesty's Government will approach the problem in a sympathetic spirit and desire to make it clear at the outset that they welcome this French initiative to end the age-long feud with Germany and so bring unity and peace to Europe. I do not think I can express our feeling better or more forcibly at this stage. We all hope that some practical, useful and reconciling scheme will emerge.

VISCOUNT SWINTON

Before the noble Viscount leaves that matter, I wonder whether he could answer the other question which I put. I said that I trusted that in the discussions which will have to take place, the steel industry as well as the Government will he brought in.

VISCOUNT ADDISON

I am afraid that I am not in a position to give a definite reply to that question at the moment, because matters have not yet advanced as far as the consideration of who will join in the discussions. It is undoubtedly a very important and practical suggestion and the noble Viscount may be sure that we shall give it most sympathetic consideration. I cannot say more than that.

Perhaps I should now try to summarise, as best I can, some of the criticisms and comments which have been made in the discussion. In the first place, let me refer to one remark which I think fell from the lips of the noble Viscount who has just spoken. He referred to the "precariously balanced Budget." I think those were his words.

VISCOUNT SWINTON

Forgive me, but what I said was that we had a balanced Budget but we had no reserves of taxation against the future.

VISCOUNT ADDISON

I must have misunderstood the noble Viscount, but I will not pursue the point. I may observe, however, that I should not call a Budget with a surplus of £400,000,000 precariously balanced.

VISCOUNT SWINTON

Nor did I.

VISCOUNT ADDISON

I am sure you did not. Let me now say a word with regard to matters dealt with by my noble friend, Viscount Alexander of Hillsborough. He has been taken to task by one or two speakers for his censure of the campaign of more or less denigration in this country. He said that he felt sure—and I entirely agree with him—that it has done a great deal of harm. That sort of thing has, I am very glad to find, been largely absent from this debate. The difficulties of the present situation are fairly obvious. The noble Lord, Lord Cherwell, said—and I took down his words—that never has our situation been so vulnerable. I do not agree with him at all. I think that that is a statement which cannot be supported by the facts. I will deal with the facts in a few moments. Just now I want to quote Lord Brand. I am sure he will not want to question his own diagnosis. This was his diagnosis. It is reported in Column 435 of yesterday's Hansard: Despite the dangers of inflation, I fully agree that we see some encouraging symptoms. The increase in our reserves is striking; the improvement in our balance of payments is great and the increased production is also encouraging, though I personally am not so enthusiastic about what we have done as the noble Lord. That last reference was to my noble friend, Lord Pakenham. I think what Lord Brand said is, on the whole, rather a good testimonial. I was very glad that the noble Lord said that. It is the kind of thing that I should have expected him to say, for I know that he always has a strict regard for the facts. At all events, it does not fit in with the diagnosis of the noble Lord who opened the debate, that never has our situation been more vulnerable. Let me say that I do not wish for a single moment to underestimate the seriousness of the situation or the difficulties that lie before us. We have had the desolate experience of more loss and ruin in war time than any other of the Allies on our side. Considering that and where we started from in 1945, I should say that the position as described by the noble Lord, Lord Brand, is a distinct cause.for encouragement. I will not put it higher than that.

Let me say a word about the increase in production. It has been most notable. I will not pretend to analyse the figures too closely, but in the first quarter of this year the increase is really remarkable. I believe it is something like 9 per cent. The noble Lord, Lord Brand, anticipated that if we obtained an increased production of 2½ per cent.—he thought we might not get much more—

LORD BRAND

I thought we ought to get more.

VISCOUNT ADDISON

I was bringing out that point in order to agree with the noble Lord. I think present indications are that the increase will be more than 2½ per cent.; I think we may reasonably expect it to be 4 per cent. I am putting it deliberately at a modest figure, but I am informed that we have reasonable ground for anticipating that it will be increased somewhere in that neighbourhood, if not considerably more. The noble Lord also said that we must have either diminished public expenditure or increased production, preferably both. There are three sentences in the noble Lord's speech which I have marked and which have already been quoted by the noble Lord, Lord Winster, in which the noble Lord says: I do not believe that there is any insuperable difficulty to much more production than we have now. That is the real hope for the 50,000,000 people in this country. It is not because people must work harder or better, but because the methods of wealth production improve year by year. That is true. It is the immense expenditure on capital equipment which has characterised the last four years which is now beginning to bear fruit. I think that is a fair statement. And in the course of the next year or two, with the still further increase in the capital equipment of industry and the coming into operation of new power stations and other enterprises, I think we can reasonably expect an increase in the facilities for increased production. We ought to take credit for them. The noble Earl, Lord Selborne, was rather hard on us in that respect.

The noble Lord, Lord Rennell, produced some rather disconcerting stories about the refusal to make progress in the textile industry. I agree that the increase in textiles has not been by any means so great as we should like, or as we think it ought to be, but this Government surely cannot be blamed for that. We have made persistent efforts to induce all parties in the textile industry to improve their methods and increase output. We have undertaken, as the noble Earl may perhaps have forgotten, to provide 25 per cent. of new capital for machinery and equipment in the textile industry, tip to the extent of £14,000,000. The response of the industry to that has been disappointing; the total taken up is something in the nature of £4,500,000. But it cannot be laid at the door of the Government. It cannot be said that we have not done everything we can to encourage increased production in this industry.

In an entirely charming speech, the noble Lord, Lord Blackford, unbosomed himself with great and refreshing frankness. I think his animadversions upon the programme of his own Party were interesting. Frankly, and I speak with the same frankness as the noble Viscount, Lord Swinton, would do if he were in my place, I studied the Election programme of the noble Lord's leaders—I do not think he was guilty of any particular programme—and I could not make head or tail of it. The great reductions in expenditure which Lord Blackford boldly stated that he wanted—and we all admire him for saying what he wanted—are mixed up in the Conservative programme with increased benefits to all sorts of people—widows, children, old people, and many others. Though I am sure I studied the programme with as great care and impartiality as I could, I could not see what it meant, and I do not understand it now. But I admire the spirit in which the noble Lord, as a frank Back Bench Conservative, said what he thought about it.

There is another encouraging fact of which I think we are entitled to make something. The noble Lord, Lord Brand, put the percentage of the investment of national income at 20. The figure given to me was 22 per cent. I am not cavilling about the difference. Whatever the figure is, it is an unprecedentally high figure and a cause of satisfaction. The noble Lord could not give us credit for the maintenance of full employment. When we succeed, noble Lords say it is due to private enterprise; and when any failure occurs, then it is all our fault! We might get a little crumb of comfort sometimes, but noble Lords refuse it. We say, without any qualification at all, that the policy of the Government with regard to.priorities of materials, facilities for finance and a hundred other matters which I will not detail, has been largely responsible for the maintenance of full employment, and we take credit for it. And we propose to continue to claim the credit. It cannot be denied that these measures, taken altogether, have greatly contributed to the maintenance of full employment.

VISCOUNT SWINTON

Marshall Aid helped a little.

VISCOUNT ADDISON

I am glad to hear even that; that is something. With regard to the reduction in the weight of taxation, the noble Lord, Lord Winster, who I do not think had studied his case carefully, made some disparaging reflections, and I should like to give the House the facts about the relief in taxation on the lower paid ranks of the community. In the first place, 4,000,000 people who paid income tax in 1945 now do not pay any at all. That is not an inconsiderable contribution—to relieve 4,000,000. I do not suppose they paid very much, but they paid something. Then let me take one or two test cases which I have had worked out for me. Take a man and his wife with no children who have £500 a year. When this Government came in, the tax payable was £126 a year. It is now £49 a year. If the man had two children in 1945–46 he paid £76 in income tax, and at the present time he pays £19. That is the difference for a man with an income of £500 a year. I take now a man with £1,000 a year. It is said that we have no sympathy with the middle classes, and there are all the other aspersions to which we are so accustomed. The man with £1,000 a year, with a wife and two children, paid income tax of £301 in 1945–46. At the present time he pays £169. So those classes of income taxpayers have had substantial reductions in income tax, and they are in the lower income groups.

The noble Lord, Lord Winster, formulated a most remarkable thesis. It was that we did not believe in incentives—or words to that effect. This is the first time I have heard that. I believe that something like half the working classes of Great Britain are on piece rates—and what is that but incentives? I looked up the operations of the recent Budget with regard to incentives, and this is how they work out. The average tax for a steelworker earning £7 2s. 8d. a week has been reduced to 1s. 2d. in the pound with a rate of only 4s. in the pound on his extra earnings. If he has one child, the income tax on his extra earnings above that figure is 2s. in the pound. If he has two children, and earns part of the money by piece rates, or otherwise, he does not pay any income tax on it at all. Those are material contributions to improving the incentive, and I feel that we are entitled to claim a little credit for that.

Here let me say that I hope your Lordships will keep for reading the speech made by my noble friend Lord Lawson, yesterday. It was, on the whole, one of the most moving speeches I have ever heard in this House—and it was a maiden speech. When we have this denigration—to use this horrible word which now seems to be coining into use—

VISCOUNT SWINTON

The noble Viscount invented it.

VISCOUNT ADDISON

I did not.

VISCOUNT SWINTON

Then his Party did.

VISCOUNT ADDISON

I can assure the noble Viscount that I did not commit such an atrocity as that. However, let me make use of the word for this purpose. There is this denigration of the Government—and the noble Viscount opposite is adept at it—but I think the story that Lord Lawson told us yesterday of the transformation (because it is a transformation) of many poor districts where thousands of people have food, clothes and hope for the first time in their lives should be borne in mind. It is wrong to lose sight of that.

I should like to say a word about the dollar gap. The dollar gap for this quarter—I am not going to be oversanguine—has been closed, and there are 40,000,000 dollars to spare I think it is fair to say that one of the main causes of the gradual approach to the closure of the dollar gap, and its closure this quarter, has been the readiness of the people in the whole Commonwealth, partners in the sterling area, including ourselves, to restrain their dollar purchases. Our own scheme of reduction of dollar purchases, which was decided on some months ago, could not affect the balance quickly, because there were continuing contracts in operation. But it is now beginning to have its effect. Another contributory cause is that, notwithstanding this denigration (I will use the word) to which we have been exposed, there is a much greater confidence in sterling arising from the success with which operations are being conducted. These matters should contribute to an improvement in the position and I am glad to say that they are having their effect upon our reserves. We have now happily begun to build up the reserves a little, but I would not by any means suggest that we do not want to go much further—of course we do. However, it is gratifying to be able to say that the reserves in the first quarter of this year have increased by 296,000,000 dollars. That is a very important contribution. Of course that does not bring the total reserves up to what they ought to be. We want them to be much more; but that is, at all events, a gratifying contribution, and it shows that we are moving in the right direction. I do not put it higher than that.

I do not wonder that (apart from the noble Viscount, to whom I give full credit for his faithfulness to his traditions), with these things in mind, the attitude of determined mournfulness which has previously characterised these debates has been rather absent on this occasion. These are good reasons for that. I do not think it can be denied that we have had a large measure of success in controlling inflation. On this there is a matter to which I should refer. It was the noble Earl, Lord Selborne, who complained particularly of the rise in prices. If the noble Earl compares this country with some others he will find that they are considerably worse off than we are. Since the noble Earl made his statement I have made inquiries as to the rise in prices, and the purchasing power of the pound as compared with that of the dollar between 1946 and 1949, and I find that the comparison is in our favour. The statement given to me is that the price of the goods which a consumer buys rose rather less in the United Kingdom between 1946 and 1949 than it did in the United States. While we all deplore any increase in the cost of living, I do not think the noble Earl is entitled to blame this country, because this is a phenomenon which has occurred all over the world. All things considered, I think we have kept it in check remarkably well. Since devaluation the cost-of-living index has gone up only about two points, which is a good deal less than some of us expected.

It is obviously right that we should do everything we can to keep down costs. Here we ought to pay tribute to the action of the trade unions. I am not talking about the wage freeze or wage policy—I am not dealing with that kind of thing at all. They are vague phrases. But it is a fact that the leaders of the trade unions have courageously taken upon themselves to restrain demands for increase of wages, particularly for the higher paid workers, because they knew it would tend to increase prices. The nation is greatly in their debt for their action. I am not forgetting that there are a large number of workers who receive the smallest wages and for whom a different consideration should quite rightly apply. But I think it right that we should pay tribute to the trade union leaders for the patriotic action that they have taken in this respect.

As a matter of fact, notwithstanding all the discouraging comments of some noble Lords opposite, I think the country has pulled together in a remarkable way in the last three or four years, and I gravely question whether, if noble Lords opposite had been in Government, their policy—whatever it is—would have commanded the co-operation of the working, organisations in the same way as has this Government. At all events, I think this debate has been encouraging. We have had some signal and valuable contributions, and I particularly express my gratitude to the noble Lord, Lord Brand. I am not going to follow him into the question of savings or the different types of savings. I spent a considerable time this morning trying, to unravel these matters, and I frankly admit that I did not succeed. But it is a fact that these notable improvements in our financial situation are characteristic of the present year's efforts, and there is every reason to believe that they will continue. I think they should afford us, without any Party considerations, real satisfaction.

7.3 p.m.

LORD SEMPILL

My Lords, I hope your Lordships will be good enough to bear with me for a minute or two while I make some observations. I was very pleased to stand down at an earlier stage in this debate for the convenience of the noble Viscount who leads your Lordships' House. I join with your Lordships who have already spoken in thanking my noble friend Lord Cherwell for once again initiating this "vital annual spring exercise" in the economic field. Your Lordships have listened to remarks from noble Lords with immense experience in the scientific, economic and administrative fields. My few words will be those of a production engineer. Our national economy remands more effective and efficient production, but such can only be achieved by a more rapid adoption of the science, art and practice of production engineering. As one who has spent several happy years working at the bench, I yield to none in appreciation of all that is being done to-day on the floor of the shop. That we are not making the fullest use of the techniques available, both psychological and practical, is emphasised by the reports of the productivity teams which have recently visited the United States of America. There, for example, excess productivity over Britain in steel founding was between 50 per cent. and 90 per cent., and in drop forging as much as 400 per cent. These figures surely explain why the United States national income per head is roughly twice as much as ours.

Just why is this? Do we exert ourselves less? I think not. A leading official in the Bureau of Labour Statistics Department recently wrote: When you compare the personal productivity in the two countries, there is nothing in it. The quick and almost complete answer with regard to this question is our slowness in applying the equipment for power production—in other words, there is not enough horse-power for the man on the floor of the shop. Just consider that matter for a moment. The United States provides him with seven horse-power, Canada with five horse-power and Great Britain with three horse-power. In short, in the United States of America high productivity is conscientiously sought under the compulsion of a keenly competitive spirit and encouraged at all levels by real, and not imaginary, incentives. More horse-power per man is needed and the abandonment of all restrictive practices, so that, as in the United States, operators can work more than one machine.

Your Lordships may have noticed that Mr. Perkins, the Chairman of the Association of Supervisory Electrical Engineers, said in a speech to his Association on Saturday: Restrictive practices are now more prevalent than at any time. Obviously, that situation has to be remedied. The Hoover Company, with factories on both sides of the Atlantic, provides a unique example from which we should all learn. If, therefore, production in the United States were to remain static—which of course it will not—at our present target of 5 per cent. increase in productivity per annum we should catch up with them in 1980. By our making the figure 10 per cent. instead of 5 per cent. per annum we could be level with them by 1960. We can do this by the realistic and effective approach which I have suggested, by using the production engineer techniques and providing incentives. I would say, in conclusion, that the greatest challenge to our achievements to-clay is the fact that we still persist, with complacency, in assessing what we are doing as against what has been done, rather than accepting ourselves—as we must—the challenge of comparison with what could be done.

7.8 p.m.

LORD CALVERLEY

My Lords, I have the very unenviable task of winding-up, and I promise your Lordships I will not keep you long. I have listened attentively to practically every speaker during the last two days, and I have learnt a great deal. I want to bring before His Majesty's Government the position of the woollen and worsted textile trade in this country. The noble Lord, Lord Layton, said that in 1921 textiles were the largest exportable product of this country. I want to remind your Lordships that today, in proportion to the number of operatives employed, it is the largest dollar earner.

Our exports to the United States of America and Canada have been increasing over the last four or five years. I have some figures here, and, having listened to the noble Lord, Lord Cherwell, for five years, I know that if you mention money he asks, "What is money worth?" I have brought details of the yardage of the wool textiles exports to Canada and the United States, but it would be cruelty to your Lordships if I inflicted the figures upon you. All I want to say is that we in the textile industry are proud. I suppose that I am the only operative textile worker in this House. I admit that I am out of practice, both as a spinner and as a weaver, but I have always been proud that we in that industry produce beautiful cloth. I want to ask His Majesty's Government to realise the difficulties facing the wool textile industry. In 1939, a bale of Australian wool cost £5. In 1945 it cost £20. And last week Australian crossbred wool—not a wool of the finest texture—was sold in Australia at £55 per bale. I want His Majesty's Government to try to understand the problem of these people, with no additional capital, in having to produce cloth when the cost has increased in such a degree.

Before I give my next example, perhaps I may explain what a "top" is. A "top" is the finished article in the wool-making industry, but it is the raw material of the spinning and, afterwards, the weaving industry. A certain merino top of fine texture in 1939 cost 26d. per pound. Last week in the West Riding that same top was sold for 168d. per pound. That is one reason why the cost of living has gone up. When the cloth is produced for our own people, if it is non-utility cloth such as that in which some noble Lords are clothed, they pay 66⅔ per cent. purchase tax, and 18⅔ per cent. in addition for what is called "uplift"—though I dare say the Board of Trade description of this cloth as "uplift" causes the average purchaser a sinking sensation.

I want to impress upon your Lordships that the textile industry, woollen and worsted (there is a difference between the two), has been set a target of increasing its exports by at least 4 per cent. We shall accomplish that easily. When I say "we," I do not mean that I have anything to do with the trade at the capitalist end; but one cannot lose one's interest in a trade such as this when one has been brought up in it. We are already surpassing the 4 per cent. increase target. I notice from the March figures that to Canada and the United States £567,000-odd worth of woollen fabrics were exported. Woollen fabrics are different from worsted fabrics, which usually men, as distinct from women, wear. Worsted fabrics amounted to £562,000-odd of export value. There was a slight slump, which was called 4: frustrated exports," in woollen goods before devaluation; but now the export of woollen goods is taking a new lease of life.

In order to impress the point upon your Lordships I should like to follow the example set the other day by the noble Lord, Lord Sempill, when he produced for your Lordships' edification some loaves of bread. I should like to show your Lordships in passing a sample of a woollen fabric which is manufactured by a firm known to me, though I have visited them only twice. They started to manufacture it three years ago. If your Lordships will give me your indulgence I would mention that this is called a "Royal Standard" tartan. In three years this firm have designed another hundred-and-one tartans. I will not indulge in detailed figures, but I should like to tell the House that during the last three years six hundred miles of this cloth has been sold in New York for making into dinner jackets for the aristocracy of that city. I understand that that custom is going to spread to this country. I should like to offer my services to the Conservative Party and say, in view of the fact that there were eleven different descriptions of the candidates of that party at the General Election, that if they give me the order I will produce a tartan bringing in all the colours—it might be called the Woolton tartan.

I thank your Lordships for listening to me. I ask His Majesty's Government to see whether they can help the wool textile trade. The United States have bought £43,000,000 sterling worth of Australian wool, and this enabled the Australian Government to obtain sufficient dollars to provide petrol for anybody who wanted it—though at a much higher price than they would have to pay in this country. This figure of £43,000,000 represents an increase from £33,000.000 worth in the purchase of wool in the United States. And last week the Russians, by spending golden roubles, have sent the price of wool well up. It has in fact reached danger point. I should like to warn the House that if there is not a reservoir of at least 300,000 bales of Australian wool in this country, as it were on tap at the London Docks, there might be very serious unemployment, not only in Yorkshire but in the South of Scotland and the West of England also. It would be a crying shame if we had unemployment in a flourishing industry capable of earning dollars and were to allow unemployment o creep in merely because the Australians do not find themselves in a position to verve the old country with sufficient wool to keep things going.

While listening to the debate I made copious notes. I will not use them to reply to some of the points made; but I say in passing that there is one lopsided aspect of our economy—that is, the expenditure of £700,000,000 on gambling. I could mention others, but I will not pursue the matter further. I earnestly beg His Majesty's Government, however, to see what can be done to help an industry where both the operative side and the management side are working in the closest harmony, for in these days that is something to he proud of. I conclude with the slogan of the noble Lord, Lord Woolton, when he set off for America last Friday. He said that he went to America not to apologise for this country of ours but in fact to boost it. I want to do the same.

7.21 p.m.

LORD CHERWELL

My Lords, I am glad that my analysis of the way the dollar gap had been closed was confirmed by the noble Viscount the Leader of the House. I was not surprised to hear him claim credit for our full employment; it is open to anyone to do so. I believe that the witch-doctors, who used to claim credit for the good weather which they had brought, were also thanked and admired by the tribe so long as they were kept in office. The noble Viscount said he did not think that our situation was vulnerable. I listed five contingencies all of which had to come into a favourable conjuncture in order that we should be all right. They were not challenged and even those who—

LORD PAKENHAM

I apologise for interrupting, but the noble Lord opposite is not quoting the Leader of the House correctly. He did not say that our situation was not vulnerable. He disputed the statement of the noble Lord opposite that it had never been more vulnerable than it is now.

LORD CHERWELL

I should be glad to hear when in the historical record it was more vulnerable. If you back five horses and they have all got to win for you to get your stake back, I call that a pretty bad bet. Government speakers have their emotional ups and downs. Sometimes they are cheerful and sometimes, as I pointed out yesterday, they are depressed. In the spring the noble Lord's fancy lightly turns to optimistic views—and we are all glad to see it.

It is so late that I do not wish to detain your Lordships long. I was pleased to hear the noble Lords. Lord Marley and Lord Selborne, say that we should help the small industries and the small manufacturers. I also think it most important that they should be encouraged and fostered. The noble Lord, Lord Lucas, is unfortunately not here, and after his late night about which he has told us I do not complain that he should have read my speech rather superficially. If he were to waste his time on re-reading it, I think he would find that he said very little that was cot stated in my speech. He complained that Government expenditure abroad was quoted by me without my mentioning the fact that one of the items was reputed not to be likely to recur. I hope he is right in that, but I have known items of that sort to come up year after year. I trust that he may be right and that this one will not appear again.

Like the noble Viscount, Lord Alexander, I have so many agreeable recollections of our collaboration in the war that I hope and trust we shall never clash in this House, certainly in ally personal way. He agrees that our economic situation is grave—inched, he compared the position to the critical periods of the war. That is my view. He told us that international bodies had all praised Britain's contribution. I am not surprised, considering the hundred; of millions of pounds we have contributed to their recovery. He told us that the taxes on lorries and petrol were imposed in order to restrict their use. In other words, controls have proved inadequate and rationing by the purse, which is so often condemned, has had to be called in.

He gave credit to the Socialist Government for the fact that in the first five years of peace after the last war there were sixteen times fewer man-days of work lost through strikes than after the 1918 War. I must point out that there are two very big differences. Since 1945, as the noble Earl, Lord Selborne, said we have received nearly £400,000,000 a year in generous gifts from America and the Dominions. This did not happen after the 1918 War. Even more important probably is that this time the Conservative Opposition have assisted the Government in maintaining industrial peace. After 1918, the Socialist Opposition supported the strikes and encouraged them. Indeed, I am not at all sure that the Foreign Secretary was not amongst the leaders in some of the great industrial disputes. As for the speech of the noble Lord, Lord Pakenham, I am afraid that I do not agree that Parliament has had a proper opportunity of discussing the transfer of sterling to various foreign countries. Whether sterling balances should be released or not has been raised in debate, but in America the amount to be transferred to each country is published in advance, and Congress decides whether or not to approve. Surely something like this should happen here.

I am surprised that the Government cannot tell us the import and export figures to the dollar area of the various sterling area countries. Since we hold the gold and dollar reserves of those countries, I should have thought we would know what is happening, but I shall be grateful if the noble Lord will give the best figures available, without necessarily guaranteeing their accuracy

LORD PAKENHAM

Perhaps the noble Lord will wait to receive the figures, which I will send him forthwith, before he decides whether or not he finds them adequate.

LORD CHERWELL

I thank the noble Lord. I am sorry if I hurt the noble Lord's feelings yesterday by failing to keep a straight face when he used the terms "fair shares" and "social justice" with such fervour. But honestly I think he would find it difficult to define what is meant by either term. Who is to decide what shares are fair? I consider it perfectly fair that the noble Lord should get £100 a week for his work, as opposed to the £5 a week that an unskilled labourer may get. The Daily Worker considers that this is a most unfair distribution. For a scientist, terms of this nature, which suggest something accurate that can be measured yet which in reality depend merely upon the impressions of different classes of people, have very little meaning. A similar instance of an abstract noun qualified by an abstract adjective is "social justice" Justice is something inherent, in my view, which has a deep ethical and, indeed, religious significance which everybody recognises. Social justice appears to be something different which has to be invoked when people are not content with justice and want to override it. I think that the noble Lord's analogy saying that social justice compared with justice is as social credit compared with credit is quite sound. For the Douglas Scheme, or whatever we like to call it, is now rather discredited.

LORD PAKENHAM

Since the noble Lord has returned to that subject, may I say that I am very good at appreciating his jokes, which are excellent? I only wish that occasionally he could appreciate one of mine, even if it is not quite so good. I would place that before him. As regards social justice, I would point out, since the noble Lord has wisely climbed on to an ethical plane, that all Christian theologists may agree that such a thing as social justice exists. The next time we return to this perhaps we can consider it along that line in particular.

LORD CHERWELL

I will not dispute with the noble Lord about the views of all Christian theologians—I daresay he is an expert—but I do dispute about the meaning of the words. If justice is to be over-ridden by social justice, then I think we ought to have a definition of what the words mean.

LORD PAKENHAM

It is not over-riden by social justice.

LORD CHERWELL

Perhaps the noble Lord is really talking about Socialist justice.

LORD PAKENHAM

May I say that it is reported that way in the Daily Express, if you look at this morning's issue. It is not the same thing. There is a distinction between the two. Social justice, as I explained quite clearly yesterday, means justice in the distribution of wealth. That is one particular kind of justice. There are other kinds as well. Social justice has, of course, to be compatible with justice in general. Socialist justice, of course, is the justice which is applied by a Socialist Government, and, therefore, certainly in the political field, the purest form of justice of all.

LORD CHERWELL

The noble Lord is evidently extremely pleased with his purity. I hope his friends will agree with him on that. It seems to me that these are all phrases designed not so much to convey thought as to induce a comfortable frame of mind. In fact, they are slogans which, on analysis, cannot he shown to mean anything definite at all. I hope the noble Lord will not mind my saying this in a friendly spirit.

LORD PAKENHAM

Not in the least, so long as I am allowed to reply next time.

LORD CHERWELL

I listened to all the speeches with great interest, with the exception of one or two, which I was compelled to miss. I still believe that the fact that we devalued was most unfortunate, that it was not to the advantage or credit of the country, and that it could have been avoided. In the old days people used to hold pounds as they now hold dollars, and considered them as good as gold, which is something they no longer do. That, I think, is a disaster. But, having listened to the debate and having gained a good deal of knowledge and information from it, I now beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.