THE ECONOMIC SITUATION

HL Deb 06 June 1951 vol 171 cc1059-89

2.43 p.m.

LORD CHERWELL rose to call attention to the Economic Situation; and to move for Papers. The noble Lord said: My Lords, there have been many changes in the Government since we debated the economic situation last year. To the deep regret of all, the country has been deprived by death of the services of Mr. Bevin, who literally wore himself out in our cause. The Government have also for the time being, lost the advice and guidance of Sir Stafford Cripps. His indefatigable industry and clarity of mind are badly needed in present circumstances. The scientific contempt which he so obviously had for the sloppy thinking of some of his more emotional colleagues must have been a most valuable corrective in the Cabinet. I am sure we all wish him a speedy recovery. Other Cabinet changes have been perhaps less unfortunate. After a trial of strength and a period of hesitation, during which the promptings of the inner light seem to have wrestled with the terrors of the outer darkness, the Minister of Labour and some small fry have given up their offices. We shall see, in due course, whether it has been a case of dropping the pilot or of shedding the load.

We all to-day especially regret the absence of the noble Viscount the Leader of the House, Lord Addison. Like many other members of your Lordships' House, I have received many marks of kindness from him, and I am sure I speak in the name of us all when I say how glad we are to learn that his operation has passed off successfully, and how much we hope that he will soon be with us again. In his place there is the First Lord. I expect to be pulverised by the full impact of the First Lord's broadside, directed no doubt by radio from the Treasury predictors and computers, if not in the bowels of the ship at any rate in some other suitable box. We will wish him well in his new post, which may offer so much legitimate scope for his natural pugnacity, which has peeped out occasionally, even in this House. I can only trust that Lord Samuel's forecast will not be fulfilled, that this Chamber will reward rhetoric rather than reason, for the scientist is not trained to be what I believe is known in professional circles as a "tear jerker." Anyone who remembers Lord Pakenham's peroration last year must realise how much I should be handicapped if eloquence, rather than facts and figures, prevailed. As we all know, the noble Lord refuses to see any spots on the Socialist sun. Perhaps he is blinded by the effulgence of his colleagues, seen nearby in the mass. I trust that he will forgive me for giving the impressions of one who regards these matters from outside the sacred circles. I can assure him that any intrusions of reality which I may bring to his rosy dream world do not imply any disrespect.

What really amazes the unbiased observer most is, I think, the Government's extraordinary complacency. They honestly believe that they are doing extremely well. I hope noble Lords opposite will not take it amiss if I venture on a slightly deflationary (perhaps I should say "disinflationary") operation. This is not the occasion to examine their many disasters in foreign affairs. To-day, I propose to deal only with economic questions. In this field, of course, the Government's great boast is the success of "our policy of full employment." Anybody with any sense knows what rubbish this claim is. The Socialist Party have no secret nostrum for preventing unemployment. If they had, surely they would not have allowed it to double, as it did when last they were in office, between 1929 and 1931. Everyone, except perhaps their deluded constituents, knows that there has been such a demand for reconstruction since 1945 that the only thing which could have caused unemployment would have been the lack of raw materials, to which matter I shall allude later.

We have been saved from this during the last five years by the gifts and loans provided by our warm-hearted friends and countrymen overseas. But for these, on the Government's own admission, we should have had an extra 1,500,000 unemployed. Since the war we have received no less than 8,300,000,000 dollars in the form of loans and gifts from abroad—about 1,660,000,000 dollars, or nearly £600,000,000 a year. This is more than the total value of our visible exports in 1938. With this £600,000,000 we have financed a large part of our yearly imports. It represents a great quantity of goods. Broadly speaking, it means that roughly 1,000,000 men overseas, mainly in America, have during the last five years, by their toil, sweat and effort, been producing goods which have been handed to this country free of charge. Never in the whole of history has there been such an example of generosity, and I feel bound to say that the ingratitude of those members of the Socialist Party (I hope only a minority), who so evidently prefer the Communists who are killing our men in various parts of the world to the Americans, who are keeping us and them going, is absolutely nauseating. So much for our policy of full employment. Given the raw materials —and we were literally given a large part of the raw materials—full employment was assured, whatever Party was in power.

Then the Government often boast: "Look at our success in preventing strikes which did so much harm in the years after the First World War." Ministers can really claim no credit for this. In 1919 and 1920 the Socialist Opposition were sitting on the sidelines egging on the strikers. The Conservative Opposition have been too patriotic to take such a course. We do not claim credit for this; but we do blame the Socialists for their share in causing the trouble in the 'twenties, when they urged the workers to strike, instead of advising them to negotiate. In any event the boast is somewhat empty, for more man-days were lost in strikes in 1950 than in 1938. Now let me turn to what I think even Government supporters must admit have been some of their fiascos. In 1945 they boasted that they would get the people homes. In 1946 Mr. Bevan said: When the next Election occurs there will be no housing problem in Great Britain for the British working classes.

Yet the housing lists are longer than ever. Before the war, 350,000 new houses were built in a year. To-day, with a greater labour force, the Government are aiming at only 190,000. If, as Mr. Bevan told us, some 200,000 houses need replacing every year, there seems little chance at this rate of ever catching up with obsolescence. Yet the Government seem quite content with that ghastly situation.

I will not to-day discuss in detail the Government's lack of success in providing the country with adequate food. The noble Lord who is to wind up has such curious views on this subject that it would take a whole debate to clear up the matter. He told us recently that in 1950 we obtained two pounds of meat a week per head. I have yet to meet the housewife who would admit this. But even on the Government's figures we have been consuming in the last three months barely half the fresh meat that we used to consume before the war —and this in a country known formerly everywhere for its addiction to "rosbif." Is this not a miserable result of so-called planning? We have been promised, of course, a great increase in the meat ration in August and September, when the home-killed meat comes into the market. I hope this proves to be true, if only because it will presumably indicate an early General Election.

Another Government fiasco has been the breakdown in our nationalised coal supply. It has been left to a Socialist Government literally to carry coals to Newcastle—and, what is more, bring them right across the Atlantic Ocean. On September 18, the Minister promised that our stocks would reach 16,500,000 tons by October. He seems to have been 1,000,000 tons short; so that having exported 13,000,000 tons of coal at about £3 per ton, he had to import 1,500,000 tons at about £6 per ton, or, rather, about 16 dollars a ton for I believe the coal came mainly from America. Even worse, the resultant call upon shipping has resulted in our being unable to import the normal amount of iron ore, so that for the first time since the war our steel output threatens to drop—not a very good start for the nationalised steel industry; nor for that matter a very good advertisement for "planning." I need not labour the hardships caused to domestic consumers by the coal shortage. The Government claim that 5¼ cwt. was delivered per month for domestic consumption in the first quarter of the year. In my part of the world the small householders—and after all they are in the great majority— were lucky if they got half that amount. If the Government coal monopoly expect people to be satisfied with 10 lb. of coal a day or even their boasted 20 lb., with which to heat their houses and do their cooking in the coldest quarter of the year, they must be singularly out of touch with realities.

Allied with the failure to supply coal is the failure to provide us with electricity. Here we are, nearly six years after the war has finished, and in the middle of our so-called English summer, subjected to constant electricity cuts of 10 or 15 per cent., which not only inflict hardship on the domestic consumer but definitely interfere with industry. This sort of thing never happened before the war, before Whitehall took over. The Government, of course, blame it all on the wicked consumer. They say he is using so much more electricity than he used to do. But whose fault is this? About the only articles in abundant supply after 1945 were electric fires. Short of coal, and with the gas pressure reduced, who could blame the housewives for buying them? In any case, why could not the supply be increased to meet the demand? In the first few years we were told that we must go short because it took five years—as against two years in America—to build a generating station. Now, after six years, we are told that we must not expect much easement until 1954. Really, it is difficult to call to mind an equal example of incompetence. Some Government spokesmen shelter behind the excuse that the electrical industry could not produce sufficient generator capacity to meet our requirements. But in the five years of Socialist misrule we have exported £14,000,000 worth of generating machinery—32,000 tons—to Russia. No doubt that is very useful to her in her armament factories, but I should have preferred to see it remain here.

The Government's worst failure of all, the fact that prices keep on rising, I will discuss in more detail later. I mention it here only because it exemplifies once more Ministers' tendency to shift the responsibility when things go wrong. When anything goes well, like the employment situation, they claim the credit and boast of "our policy of full employment"; but if things go wrong it is always somebody else's fault. Houses could not be built for lack of softwood. But who failed to buy the wood? I gather, incidentally, that there is now abundant softwood. It seems to me that some of the noble Lord's followers have been putting their heads together. Meat could not be obtained because the wicked Argentines did not like our devalued currency. Whose fault was it that it was devalued? We were short of coal because we started the year with stocks too low. But who exported 13,000,000 tons abroad, when 1,000,000 more tons at home would have made all the difference? Really Ministers remind me of the gentleman of whom it was said: He took his troubles like a man; he blamed them on his wife.

I turn now to the Budget. Frankly the broad general impression it makes is that the present Chancellor of the Exchequer does not expect to introduce next year's Budget. It looks rather like a caretaker's Budget, if not an "Après moi le deluge" Budget. It is interesting to note the extraordinary change which has come over the whole conception. Formerly, the Budget was designed to find the money required to meet necessary Government expenditure. The idea was to mulct the taxpayer as little as possible. To-day, the whole argument centres around the question, how much money should be taken out of the citizens' pockets lest they have too much to spend, should most improperly spend it, and should thus cause inflation. This approach is reflected in the enormous volume of Government expenditure—4.7 times what it was in 1938–39, and one-third greater than in 1945–46 when Mr. Dalton brought in the first Socialist Budget. In the coming year the Government intend to spend £11,600,000 a day—in two days as much as was spent in a whole year on the pre-war Air Force. They are spending £8,000 a minute, and have spent about £150,000 since I began to speak. That is a formidable proposition.

I see the noble Lord opposite underlining in his brief the threadbare gambit, "On what would you save?" I will spare him the hackneyed reference to ground-nuts, or to the report of the Colonial Development Corporation. I think there is a rod in pickle awaiting for the noble Lord there. These items are too obvious and perhaps too painful. Nor would I dilate upon the incompetence displayed and the losses incurred in providing what that fine flower of Trinity College, Cambridge, the Lord Privy Seal, so elegantly described as "slap and tickle" at Battersea. The short answer is that they could save something on almost everything. Everywhere one investigates one finds things done on a lush and lavish scale. I will give one example—a couple of dozen more can be found in Hansard for April 12, columns 1263 to 1269. In 1938, the precursor of the Ministry of Fuel and Power, the Mines Department, had a staff of 442, and spent £250,000 a year. We then had all the coal, gas and electricity that we wanted. To-day, the Ministry have a staff of 7,222 and cost £6,000,000 a year. We are short of coal, the gas pressure is low and electricity is periodically cut off. And to add insult to injury, the price of all three has gone up.

If another example is needed, one can take Government telephones. These cost £12,000,000 a year; that is, £5,000 every working hour. The number of calls made is 200,000 an hour, if one reckons them at 6d. each. Would anyone claim that this is really necessary, and that this expenditure could not be reduced? We shall be told, no doubt, that these are only small items. Of course, they are, but you find them everywhere you probe. The contemptuous way the Government brush aside a possible saving of a few million pounds in one or other Department shows how utterly unfit they are to run an economy drive.

THE FIRST LORD OF THE ADMIRALTY (LORD PAKENHAM)

My Lords, may I break in for one moment? I am sorry to interrupt the noble Lord when he is scintillating away, but I wonder if he can give us any kind of idea of the magnitude of the order of the total savings which he thinks we could effect by judicious economies?

LORD CHERWELL

Without detailed examination no one could tell what the effective savings could be. Two years ago we were told that there was no room for any saving whatever. But the Government afterwards explained that they had saved £100,000,000. In view of that experience I think that very probably there is a great deal more that could be saved.

I was just going to turn to another item. Why should we choose this moment, of all others, when our economy is stretched to the utmost, to change all our rifles to a 280 bore, especially as the rifle has long ceased to be a decisive weapon in European war? It might have been intelligible if we were going over to a standard Atlantic calibre. But to spend tens of millions—for it will certainly cost so much—in order to change to a new calibre, different from that adopted by the United States and Canada—and also, so far as I can make out, the other Western Allies—must seem the very acme of extravagance, besides being doubtful policy, remembering the difficulty of balancing ammunition supplies in war time. I fear that I have disappointed the noble Lord; he would no doubt have liked me to attack the social services. No one on this Bench has ever done that. If the people want the social services they should have them. But the services are costing £1,600,000,000 a year—£2 10s. a week out of the wage packet of every family in the land. Parliament has assumed the responsibility of taking these enormous sums out of the people's pockets, it is, therefore, its supreme duty to see that the money is not frittered away, and that every—I repeat "every" —economy is made, compatible with reasonable efficiency. I have no doubt that the Government will pay lip service to this principle. But I think that many of us, not without reason, hold that their performance does not match the good intentions with which we are willing to credit them.

Perhaps the most interesting aspect of the Budget is that the Chancellor is aiming at a much smaller surplus than last year. He apparently counts on making up for this by running down the gold and dollar reserves which he piled up in 1950. It seems questionable whether this will suffice to prevent inflation, if he actually reckons to spend in this financial year £690,000,000 more than last year on armaments, without materially reducing other Government expenditure. I could not help wondering, as I listened to his speech, whether he had not at the back of his mind some doubt as to whether the Government would really be able to spend on armaments this year the £1,490,000,000 which is quite properly ostentatiously paraded. The immense increase in projected expenditure this year, £940,000,000, is due only as to three-quarters to the Government's belated rush to rearm after their over-hasty stripping of our defences. Of the rest, £210,000,000 is for rising civil expenditure which goes up year by year, seemingly by force of habit. Therefore, even to provide his reduced surplus the Chancellor has found it necessary to increase taxation by £285,000,000.

More than nine-tenths of this increase is direct taxation—three-quarters in the form of income tax, and about one-sixth profits tax on distributed dividends. The other main change is that he proposes to sweep away the allowances of 40 per cent. on new equipment, and 10 per cent. on industrial buildings, which were made to encourage industry to keep its plant up to date. As I have often stated, I am no advocate, in these difficult times, of excessive capital investment; but to start by cutting the equipment needed to keep our industries efficient—after all, only one-fifth of our annual capital investment —is surely to begin at the wrong end. Government supporters who have not looked at the facts may ask: How can you reconcile this attack on capital investment with your increased housing programme? The answer is quite simple. Less than one-seventh of the capital investment programme is earmarked for housing. It is nonsense to say that if capital investment were reduced the cuts would have to be borne by housing. If to Socialists the word "profit" is like a red rag to a bull, the word "dividend" is like a flaming banderilla. The very idea that anyone should be rewarded for postponing the enjoyment of the fruits of his labour, or for risking it in some new enterprise, makes them foam at the mouth. Though, according to Command Paper 8203, wages and salaries have increased by £1,500,000,000 in the last three years, whilst dividend and interest payments have gone up by only £3,000,000, this is the item they have singled out for attack. This is the fifth time they have raised this tax, which stands now at ten times what it did in 1947.

Even more inexcusable is the doubling of the tax on undistributed profits which have to be set aside to replace, at inflated prices, plant as it becomes obsolete. Socialists seem incapable of understanding that their constant attack on profits de-feats its own ends. In every one of their Economic Surveys they say how necessary it is to save, but there is little encouragement to do so when a "one-time" levy threatens your capital and 50 per cent. taxes on distributed dividends assault your investments. Small wonder that annual personal savings have dropped by no less than £414,000,000 in the last four years. An even more fantastic result of the attacks made on anyone who does not work at a loss, not only by Somerset House but by Socialist demagogues and their tied Press, is the fact that it is no longer worth anyone's while to strive after profits. This is a great disservice to our trade balance. For the exporter, apparently, does not bother to get the best price he can for his wares; he would only be pilloried as a profiteer if he did. Hence the unbelievable statement made in the Economic Survey and repeated by the Chancellor that it might be quite a good thing if costs of manufacture went up, be-cause then we could charge and get higher prices for our exports. That the same result might be achieved without inflation, by giving the exporters some incentive to make greater profits, does not seem to have occurred to the enervated intellectuals in control. Or is this another case of the Socialist dogma of envy and hate overriding economic common sense?

A symptom of this, if only in a small way, is the Chancellor's refusal to remove restrictions on travellers' funds for journeys to France and Italy. Notoriously there is no economic reason whatsoever for this. But the Chancellor was congratulated by Mr. Churchill on the lack of hatred and malice displayed in his Budget Speech, and perhaps he had to do something to reinstate himself in the good opinion of some of his less benevolent colleagues. I hope the Government will tell us to-day what is their attitude towards convertibility. Do they wish to achieve it, or do they not? Surely they must have an objective, even if they have not a policy. And surely the country has a right to know what it is. Last year, for the first time since the war, we had a considerable favourable trade balance, and our gold and dollar reserves increased by a substantial amount. The Socialist Party, needless to say, is walking about as proudly as a dog with two tails; and I suppose, strictly speaking, the Socialist Party has two tails, one to the right and one to the left of the rump which controls the meagre Parliamentary majority. The country is concerned, of course, as to which will wag the dog. Sometimes it seems to be one and sometimes the other, which accounts for the oscillating course the Government have been steering.

Naturally, we are all pleased that there has been a substantial improvement in the balance of trade. But it is by no means as spectacular as it appears at first sight and, indeed, seems somewhat mysterious when we endeavour to analyse it. If we begin with visible trade, it seems that we imported the same volume as in 1949, but we exported (again by volume) 16 per cent. more. We were £153,000,000 down in 1950, exactly the same sum as in 1949, so that to get the same imports and be left with the same deficit we had to do 16 per cent. more work. This is, of course, a natural result of devaluation; indeed, the discrepancy may well grow. But no one can rejoice over it. The improvement which enabled us to secure a satisfactory balance is entirely due to the invisible trade, which is £200,000,000 up. Some of the items are intelligible and very satisfactory, such as shipping, interest, profits and dividends; but by far the largest item, accounting for more than half the improvement, is shown under the portmanteau term "Other," which this year amounts to no less than £315,000,000 net. Again and again I have complained about this Government habit of camouflaging major changes in this way. It is impossible to judge the cause of an improvement, or to estimate whether it is likely to continue, when items are concealed in this manner.

Nor are the terms even consistent among themselves. Under the heading "Other" for 1947 we find in one White Paper "minus £20,000,000"; in the next, "£3,000,000"; in the next, "plus £20,000,000"; in the next,"£32,000,000"; and in this year's White Paper, "£98,000,000"—all these for the same item or what purports to be the same item. Surely our account must be kept in a very odd way if what purports to be the same item changes in the course of three years from minus £20,000,000 to £98,000,000. Perhaps the noble Lord can tell us whether the £315,000,000 announced this year, which alone converts an £85,000,000 deficit into a £230,000,000 surplus, can this time be trusted to be the final figure, or whether again it is liable to be altered by scores of millions of pounds, as has happened in previous years. Unless we can discover why "Other" was last year £106,000,000 greater than in 1949, we shall not be able to tell whether there was some compensation brought about by devaluation to make up for the hardship it inflicted on those engaged in visible trade.

Above all, what of the future? In the first four months of this year, our visible balance seems to have been £175,000,000 down on the corresponding period last year, which would make £525,000,000 in a full year, if it continued at this rate. Can we count on making up for such an immense increase in the deficit by an equally great rise in invisible earnings? The country ought to be told. An even more striking improvement is shown, on the surface, in our gold and dollar reserves, which improved by no less than 2,300,000,000 dollars during the year. It is interesting to see how this total was made up, and to try to discover whether it was a result of devaluation. About 500,000,000 dollars were saved in imports, partly by running down stocks. Right or wrong, this could of course have been achieved without devaluation. About 300,000,000 dollars were gained by so-called capital transactions, whatever this may mean. Instead of paying 276,000,000 dollars to O.E.E.C. countries and other non-sterling area regions, as in 1949, we received in 1950 23,000,000 dollars from them, a net improvement of some 300,000,000 dollars. This, I believe, was due to the old arrangements being superseded under which we engaged to pay certain balances to certain countries in gold. But it had little to do with devaluation. Some 900,000,000 dollars were contributed by the rest of the sterling area.

I asked last year, and I ask again, for an analysis of this item. Surely we should be told what are the imports and exports, visible and invisible, of the rest of the sterling area, and not just the net figure. I would guess that the rise was partly due to a reduction of their purchases from the dollar area induced by devaluation and partly by increased dollar prices for their raw materials. I hope that to-day we may be vouchsafed a few more details. These items account for about 2,000,000,000 dollars improvement. Only 300,000,000 dollars were due to improvement in our exports to the dollar countries, which presumably can be attributed to devaluation. Thus, only one-eighth of the improvement was brought about directly by devaluation; seven-eighths of the improvement was due to other causes, many of which had very little to do with devaluation. Surely we ought to be given the material to form a balanced judgment about these matters. So far, the only thing that is quite clear is that we have raised our reserves by running down stocks and by increasing our overseas debts by £332,000,000.

Whatever the future may hold about the balance of payments, no one can claim that the Government have been successful in preventing inflation. Between 1946 and October, 1949, wholesale prices rose by 35½ per cent. By March this year, devaluation had begun to take effect, and they rose by another 32 per cent., nearly 80 per cent. in all. Eighty per cent. in five years is a lot. Wholesale prices rose only 73 per cent. during the whole war. If the retail prices have not risen so fast, this is due to the inevitable lag, to the curious cost-of-living index, and to the subsidies which conceal, though they do not ease, the situation, since they are reflected in rising taxes. But even the Government admit a rise of nearly one-quarter in prices since the war. Fancy what an outcry there would have been, if five years ago, anyone had proposed to cut pensions and benefits by one-quarter! Yet this is what the Government have done, silently, inexorably, by letting prices rise. Can the Government be blamed for this? I think undoubtedly they can. In their first period of office they positively took pride in their inflationary financial policy. The Chancellor of the Exchequer reduced interest rates and splashed money about as though there were no limit to the nation's spending power. Sir Stafford Cripps, when he went to the Exchequer, did his best to put the machine into reverse; but it was too late. Enormous commitments had been entered into, and Ministers in the spending Departments took as a personal affront any suggestion that they might exercise and impose a measure of economy.

We have been told ad nauseam that inflation is caused by too much money chasing too few goods. One would have thought that, having grasped this kindergarten explanation, the Government would realise that the one sure way of precipitating this undesirable state of affairs was to send goods out of the country without securing anything in return. Yet this is precisely what they have been doing. As I explained last year—and the facts were not denied, still less controverted—between June, 1947, and December, 1949, two and a half years, we exported something like £1,000,000,000 sterling, which was used to purchase our goods, without our receiving anything, save perhaps moral satisfaction in return. Anything more calculated to raise inflationary pressure it is hard to conceive. The Government, of course, true to their principle that when anything goes wrong it cannot possibly be their fault, blame the rise in prices on the cost of imports. To some extent this is true. But it is largely the Government's fault that these prices have risen. For not only were prices at home forced up by this enormous unrequited export of goods but it had the consequential effect of forcing the United Kingdom to devalue its currency, and thus push up the prices of imports.

In 1948 we had a favourable trade balance of £232,000,000, and in 1949 of £284,000,000, with the sterling area countries, and a favourable balance with other non-dollar countries. If they had not been allowed to draw down their London balances, and to demand dollars from the United Kingdom to meet their needs, sterling would have been a very hard currency. The main reason it was not so was that we had flooded the world with free sterling—£1,000,000,000 in two and a half years, as I have said. People overseas had as many pounds as they wanted, and were not prepared to give four dollars for one pound. In consequence, the Chancellor had to devalue the pound, a step that would never have been necessary if only he had stopped all these unrequited exports from going abroad. I have complained before, and I repeat the complaint, that the arrangements by which countries overseas were allowed to draw down these so-called sterling balances, and thus obtain these unrequited exports, were made without Parliament having a chance to discuss them. It is beside the point for the Government to say that we have discussed them in general terms. Each agreement as it was negotiated should have been made subject to Parliamentary approval. Instead, we have never even been told exactly what has been settled, and these huge vital financial commitments which have distorted our whole economy have been made secretly without consultation with Parliament.

Naturally, if you devalue the pound by 30 per cent., you have to give 42 per cent. more pounds for the same imports. And though this rise may be delayed by a good many months, because contracts have been made ahead, and so on, in due course it is bound to take place. I do not deny that the scramble for goods in con-sequence of the Korean war, owing to our failure to concert measures with our Allies, both in purchasing our imports and in restricting imports of strategic materials to potential enemies, has played some part in the 47 per cent. rise in import prices since devaluation. But the major part, in my view, was a direct consequence of this ill-conceived devaluation. The disheartening feature, with all this rise of import prices, is that there has been no corresponding rise in export prices. This, of course, is what one would expect if the rise is due to devaluation. If it were due merely to excess demand created by the Korean war, or to some other cause, one would expect those benefiting by the higher prices of their exports to be ready to pay higher prices to us for our exports. In fact, export prices from the United Kingdom have gone up only 19 per cent. since devaluation, as against the 47 per cent. extra that we had to pay for our imports.

The greatest alarm caused by the Chancellor of the Exchequer's Budget speech was created not so much by something which he said as by something which he did not say. No mention was made of raising production. According to the Economic Survey, productivity in the manufacturing industries has risen on the average since 1946—admittedly a bad year—by 6½ per cent. a year. Usually this is taken into account in planning the year's economy, and so far, according to the Government's own showing, industry has not let them down. The Chancellor's ominous silence this year has given rise to the fear that we cannot count upon any such rise in 1951. If we do fail to increase output, this can be only owing to shortage of raw materials, which the Chancellor himself said gave rise to anxiety. Surely this is a most appalling breakdown of planning. One does not have to be a very experienced business man to know that it is no use building factories and allocating space and labour unless there are available the necessary raw materials. Yet in the first half of 1950, despite warnings by the trade, the Government allowed our stocks to run down. One excuse is that we could not afford the dollars. But our reserves rose by 734,000,000 dollars in the first half of the year. Another excuse is that the materials were simply not available. But this was certainly not the reason which led us to abandon our long-term contract with Canada by which we obtained 50,000 tons of zinc a year. And exactly the same applies to the cancellation of the arrangement by which we were to get 100,000 tons of newsprint. The fact is that in the first half of 1950 the Government were so obsessed with the need for gold and dollars that they cut down imports from the Western Hemisphere, regardless of the consequences.

One of the most serious shortages is sulphur—just common or garden brimstone—which we import mainly from the United States. Surely, a Party which constantly protests against any dependence on the United States should have taken earlier steps to provide for a supply from home sources of this indispensable element. The Government are not usually backward in hustling and jostling industry. Surely, they ought to have encouraged industry sooner to build plants to produce sulphuric acid from anhydrite. The least they could have done was to warn industry that they could not guarantee supplies of rock sulphur. But perhaps they were looking too far ahead. In the infernal regions, I gather, there is no shortage of brimstone. Nor do the Government seem to have been very clever about their purchases of raw cotton, which they took away from the Liverpool Cotton Exchange. Here again, a serious shortage seems likely. And their diplomacy seems almost as unsuccessful as their bulk purchasing. For it appears that the United Kingdom has been allocated by the United States less than one half the amount it imported last year, while Germany is to get two-thirds, Italy three-quarters and Japan practically the whole of her 1949 imports. Meanwhile, alternative suppliers are making hay while the shortage lasts, and are clapping on export duties. We are paying something like 60 per cent. export tax on all cotton from Pakistan.

I cannot help thinking that one of the reasons for the Government's remissness was that they hoped prices would fall; indeed, Mr. Morrison hinted as much in a speech last October. Possibly they might have gained a few million pounds if the prices had fallen. But it was not a good bet. For by letting our stocks run down the Government, on their own showing, expose us to "unparalleled industrial disaster." Even a hardened gambler would recoil from such odds—a fraction of one per cent. on the cost of imports if the gamble comes off, and "unparalleled industrial disaster" if it does not. The Government, of course, blame all this on the enormous American demands caused by the Korean war. But why did they not make some arrangement with America and our other Allies to concert purchases and prevent competitive buying? If we are to have the disadvantages of bulk buying, we might at any rate have some of the advantages. Captain Lyttelton suggested this to the Government last September, but apparently no action was taken until February this year, when prices had already rocketed. How can anyone have confidence in an Administration which has been so remiss in such a vital matter? In financial matters confidence is every-thing. Unless England regains the world's confidence, the pound will continue to fluctuate in the exchanges. But will this be possible as long as our present Government is in power?

LORD PAKENHAM

May I break in once again? Since the right honourable gentleman, Mr. Oliver Lyttelton, has been quoted as an authority—which I feel sure he is in many ways—may I ask the noble Lord whether he recalls what Mr. Lyttelton said in November, 1950, rather later than the month mentioned by the noble Lord? On November 16, 1950, Mr. Oliver Lyttelton gave us this advice: The purpose of my argument is to try and show that, until we can calculate the effect of a rise in prices of raw materials, we should be slow to rush in to very much relaxation of dollar purchases. I am afraid that that hardly supports the suggestion that Mr. Lyttelton was at all forward in desiring to go ahead fast last year with the purchase of raw materials from dollar sources.

LORD CHERWELL

I do not think the noble Lord can have listened to what I said. I did not say that Mr. Lyttelton suggested we should make purchases. I said he suggested that we should make arrangements with the United States and our Allies in order to concert our purchases, and should not go in for competitive buying, which would only force up prices.

In its early days, the Labour Party was led by simple straightforward working men, intent, as was their right and duty, on improving the lot of themselves and their followers. But times have changed. The cloth cap of Keir Hardie has been ousted by the mortar board of the economist, as was recently plaintively remarked by a retiring—or perhaps I ought to say, resigning—Minister. The horny hands of the sons of toil have been replaced by the horn-rimmed spectacles of the scholarly but sometimes unpractical "do-gooders." Usually, they are well meaning. Sometimes they are quite able. But they are almost invariably doctrinaire, and not seldom entirely remote from reality. All too often, if I may use an Americanism, it is a case of the ivory dome in the ivory tower.

LORD PAKENHAM

Do not Meadow Buildings qualify?

LORD CHERWELL

Unfortunately, they are not made of ivory. In the economic field their distinctive contribution is the principle that it is better to reduce the total amount of goods available for the community than to accept large differences in the rewards of the individuals forming that community. They do not mind if the poor become poorer, provided they can make certain that the rich do not become richer. Instead of arranging our affairs so that the self-interest of the individual is harnessed to the welfare of the community, they make plans which can work only if all our countrymen sprout wings and haloes and turn into a choir of angels. Pending this, we are to be kept on their idea of the strait and narrow path by restrictions, controls, regulations and penalties, imposed by our complacent masters who, on their own admission, do not care a "tinker's cuss" for any one who does not vote the Socialist ticket.

And look at the result of their planning. Our economy is balanced on a knife edge from which it is apt to topple if there is the slightest change in American demand. In 1949 the Americans stopped stockpiling and there was a slight recession in their requirements. At once, so we were told, this created a terrible crisis in the United Kingdom. Ministers wailed and gnashed their nationalised teeth and the pound was devalued by 30 per cent. Last year the American demand increased. Immediately we were told that we faced "unparalleled industrial disaster" because we might not be able to get all the raw materials we wanted. Apparently all the Government's planning and all our efforts can give us stability only if the Americans purchase just exactly the right amount of our goods—not too much and not too little —to suit Britain's economy. The terms of trade, which were practically the same as pre-war when the Socialists came into power, have deteriorated about 40 per cent. In consequence, we have to do two-fifths more work than in December, 1945, to get the same imports. Meanwhile, prices at home continue steadily to rise and our savings, our pensions and our covenanted benefits are gradually, silently, little by little, filched away. Surely, noble Lords opposite cannot really be content with this state of affairs and, what is worse, with this sinister trend. I do beg them to consider the possibility—remote though it may be—that some of our troubles, at any rate, may be of their making.

An appeal to the country cannot be delayed very much longer. Naturally, Socialists are concerned to put a good face upon things and not to make admissions which might lose them votes. I am not asking them to make admissions. I am asking them to mend their ways. I appeal to them to cease preaching the class war, to stop trying to set one half of the nation against the other. Without industrial peace and national unity, we cannot hope to survive. Our whole future is at stake. Let them consider the next generation rather than the next General Election.

Not so long ago, London was the financial centre of the world. The solidity and integrity of our institutions was the envy of all, and foreigners rushed from every corner of the globe to invest their capital in the heart of the British Empire. How different are things to-day! Unheard of rates of taxation, combined with Socialist economic acrobatics, have caused such a loss of confidence that people's one idea is to get their money out of the country. Instead of being a magnet for investors, London has become a concentration camp. Instead of having to erect barriers against the hordes rushing to enjoy the Welfare State, stringent regulations and ferocious penalties have to be imposed to prevent those inside from getting out. Surely, nobody can be satisfied with this situation, and this House least of all. For that reason, my Lords, I beg to move for Papers.

3.37 p.m.

VISCOUNT SAMUEL

My Lords, this Motion has become an annual occasion in the proceedings of your Lordships' House. During the last five years, we have had each year a debate on the Motion, "To draw attention to the economic situation and to move for Papers." In 1947 and 1948 I had the honour of moving that Motion, and during the last three years the mover has been the noble Lord who has just addressed us, as usual in a speech vigorous, comprehensive and marked by incisive humour. I think I heard him say that the Government were spending £8,000 for every minute that he was speaking. This, therefore, is the only occasion upon which I would have wished from him a. greater brevity.

My noble friend Lord Layton would have taken part in this debate from these Benches had it not been that he has been detained in the United States and Canada, where he is fulfilling a mission of great importance. For my own part, I shall not emulate the noble Lord, Lord Cherwell, in making a comprehensive survey of the whole subject, but limit myself to a single point, with a little digression at the end—or what would seem to be a digression, but what I hope to convince your Lordships is not a digression but highly relevant. My one point is that which is uppermost in the minds of people of every class, but particularly amongst the poorest men and women in every Parliamentary constituency— namely, the cost of living. It is the subject which arouses throughout the whole of the nation the greatest concern. It affects directly a large class as deserving as any, more helpless than any; all the elderly people who have retired from their labours and are living upon their savings or upon pensions; old members of the Civil Service and people from all origins who have fixed incomes and no means of increasing them. It affects directly in a greater or less degree the whole of the working class and, indirectly, the whole economy of the country, because it tends to increase the costs of production and thereby the costs of the goods which we have to sell abroad; and so it affects our international position.

During all the previous debates noble Lords from all Parties have deplored the high cost of living, and have sought for remedies. But while Parliaments debate and deplore and seek for remedies, while the people are discontented and protest, the prices go on rising remorselessly, almost continuously; and some of them never with greater rapidity than within the last few months. Since we last discussed this subject the Korean War and the military measures necessitated have upset some of the principal markets; and, as a consequence, there has been another wave of claims for higher wages, which again has resulted in higher costs. Some figures I have seen show that in four months—November to February—in this country 8,000,000 workers secured, on the grounds of a rise in the cost of living, increases of wages amounting to a total of £2,500,000 a week, or £130,000,000 a year. And the irony of it is that after they had obtained that increase probably few, if any, of them were any better off than they had been a year ago. Such increases of wages are both the effect and the cause of rises in prices. That £130,000,000 is the consequence of the last rise in the cost of living, and it will be a cause of the next rise in the cost of living.

The fact is that the economic system, not only in this country but in the whole of the Western world, is such that the forces that make for continual rises in the cost of living are stronger than any force that can reverse it. The work of the trade unions is essential to the welfare of the working people. The great improvements that have taken place in the last century in the conditions of the people have been due, first, indeed, to the discoveries and application of science in engineering, chemistry, and physics, but, next, to the work of the trade unions. The mentality of the trade union movement, however, has been concentrated until lately simply upon maintaining the amount of wages, the size of the pay packet. That they regarded as their concern—how to keep pace with the rising cost of living. That was their duty to their members. Greater productivity was not their concern. Larger sales of goods were not their concern. Recently there has been a change, but until then the whole force of the trade union movement was devoted continuously in all trades, at every opportunity, to getting more and more pay—as much as the industry could legitimately afford. That was natural, and it had great and beneficial results.

Now in the United States the spirit is somewhat different. There, with the strong individualistic spirit that prevails, the workpeople and the unions have realised that every effort should be made to obtain greater productivity. They do not resent, indeed they approve of, labour-saving devices of every kind. And they see that this policy has resulted not in less employment for the working-man, but in more employment; not in lower wages, but in higher wages, through increased sales. They are not afraid of over-production. Although there may be over-production temporarily and locally, taking the world as a whole and in the long run there can be no such thing as over-production: there is only under-consumption. Therefore we have had as a simple device in our economic system a linking of wages with the cost of living. The agreements in the great industries, or very many of them, have been based on that principle; and whenever the cost of living index rises, the wages must rise. If there is a fall in the cost of living, the wages should fall. In many of the great industries this principle is acted upon without strikes or special bargaining. And if it is acted upon in those cases it must be spread over all the remaining trades and industries. If you have two men belonging to similar trades—not to the same trade—accustomed to having the same wage level, who live in the same street, whose wives shop at the same shops and buy the same articles at the same price, it is impossible that one should have a wage rise on account of the increased cost of living, and the other be denied it. There is this automatic increase in wages; and because of the wages going up, not long after prices go up once more.

The employers, too, have been trained in the last century in the very simple economics of buying cheap and selling dear. That was a simple Ricardian principle. The trader was always taught to buy as cheaply as he could and sell as dearly as possible, so that he would make more profit. There have been more enlightened and progressive companies who have not adopted that rule but who make it their business to sell as cheaply as they can. But as a general rule, with the present system of price regulation and sales maintenance, although a firm might be quite ready to sell more cheaply and not reap the enormous profits which come to others, owing to their obligations to their trade they cannot do so. Great for-tunes have been made for many years from this source. It is said that this money is taken away in taxation; that the manufacturer is only a tax collector for the Government. But it does not work out that way because there is a process of considerable capital appreciation; and the person who has been accustomed to live at a certain standard will find it necessary to realise only a small part of the accretion of his capital to be able to carry on in much the same way as before.

All these forces, both among the workpeople and among the manufacturers, work one way. There is no possibility of return. Goods and services become dearer and dearer—and, to look on the other side of the medal, currencies become cheaper and cheaper. The French franc, which, as we all know, was once nearly the equivalent of a shilling, is now worth a farthing. The Italian lira which was worth about the equivalent of a franc, has now sunk to a great deal less. We ourselves have not experienced such inflation as that, but when we put a 2½d. stamp instead of a 1d. stamp on a letter, that is an object lesson in inflated prices and depreciated currency. This economic system, so badly adjusted, has to face the shocks and the stresses of an international political system that is even worse adjusted. The Korean war, with fear widespread over the world, and particu- larly acute in America, that it may lead to another world war, has upset the economics of our supply and demand. The people and Government of the United States, determined not to be caught unprepared as they were at Pearl Harbour, immediately made provision for the possibility of a general war, and, fearing that their armies and navies might be engaged in a winter climate in Arctic regions, bought up all the wool available at any price in order to provide uniforms for their Services. Other commodities similarly will be required for rearmament. In other countries the same conditions prevail.

I do not wish to trouble your Lordships with any statistics except just these figures. They are so striking and so relevant to the whole situation at this moment that I would ask your Lordships' leave to give them to you. They are taken from the current number of the Lloyds Bank Review. They show the effect of the Korean war upon some main commodities. Within a short period, lead has risen 48 per cent., cotton 31 per cent., wool 120 per cent tin 147 per cent., rubber 219 per cent. I am always rather suspicious of percentages. Percentages, like averages, may be very misleading. I remember something that Bernard Shaw once wrote to a friend about his early novels. When he was a very young man he wrote two novels, Cashel Byron's Profession and An Unsocial Socialist— not at all good novels and they had practically no sale. But he wrote to a friend that he was encouraged by the increase in his royalties during the previous two years, 1889 to 1891. He said that his royalties had risen by 170 per cent, but, he added, "That is even an understatement, because in 1889 they were 2s. 10d. and in 1891 7s. 10d." I will therefore give your Lordships not the percentages but some actual figures.

I will go back now, not to the beginning of the Korean war, but to pre-war, 1939. Mark these points. These were dollar commodities, and the figures are in cents per lb. Lead (I am leaving out all the fractions and the figures on the right-hand side of the little dots) was 4 cents per lb. in 1939; it is now 16 cents per lb. Cotton was 9 cents per lb.; it is now 45 cents per lb.

LORD PAKENHAM

At what date was it 9 cents?

VISCOUNT SAMUEL

In 1939. Cotton was 9 cents and a fraction per lb.; it is now 45 cents per lb. Wool, which is quoted in pence per lb., was in pre-war years 19 pence per lb.; it is now 308 pence per lb. Rubber was 8 pence per lb.; it is now 72 pence per lb. Tin was £227 per ton; it is now £1,457 per ton. Jute was £30 per ton; it is now £182 per ton—and there are many other commodities of the same kind that could be quoted. That is catastrophic. Some of it may be temporary. It may be that there will be a fall soon. That may be so but, while it lasts, the effects are disastrous. Furthermore, owing to the fear of a greater war, great numbers of men are being withdrawn from the production of commodities that are really wealth-making commodities, and are being devoted to making munitions of war and the equipment of armies. This lessens production for the rest of the community and thereby injures our whole economic system. The Government are entitled to take credit for various actions that have been taken and have been taken successfully. The dollar exchange, which was a source of great anxiety not very long ago, has been much relieved. The dangerous unbalance between the gold and dollar resources of the sterling area has been greatly improved, thanks largely to an intense effort and vigorous and effective support from the United States.

Then the trade unions, in answering the appeal from the Government, have shown great restraint in not pressing for wage increases until the higher cost of living following the Korean war made their position untenable. There has been a voluntary freezing of dividends also in answer to the appeal of the Government. But that, again, shows signs of giving way owing to the conditions of the present moment, and the wave of higher prices has largely swept away those restraints. One obvious measure has been taken, but taken too late—very late: that is, co-ordination among the Atlantic Powers in the purchase of raw materials. All of them went into the market simultaneously. There was competitive bidding and almost a cornering of certain commodities. The Governments of Britain and the United States acted by suspending wool purchases for a time, which caused an immediate deflation of the market, but the prices there are still most excessive. Now the Government have appointed a new Minister, the Lord Privy Seal, Mr. Stokes, whose special charge it is to concentrate on this particular problem. But that has been done very late, and drastic measures have been taken causing a great deal of discomfort and even hardship, difficulty and loss. Those measures might have been much less drastic if they had been taken much earlier. Furthermore, the Government, with the assent of all Parties, have passed into law the Monopolies Act, but the action of that Statute for restricting the activities of monopolies, price rings and the like, has been limited and very slow. The machinery is ponderous and it has, as yet, made no impression upon the situation.

I am not going to-day into the question of taxation, a subject into which the noble Lord, Lord Cherwell, went in some detail and on which I spoke on the last occasion that I addressed your Lordships on this matter. I would only repeat the view that I expressed then, from which the noble Lord, Lord Pakenham, dissented, that as regards the whole theory of taxation for the sake of taxation, apart from luxury taxation or balancing the Budget or trying to remedy the gross injustices of our social system, the theorists have urged that what is called the surplus purchasing power should be withdrawn in order to prevent inflation. That is a theory which has been acted upon and to which I, for my part, have never subscribed. It results in the accumulation of hundreds of millions of pounds in Budget surpluses and it has the effect very often of making people draw upon their savings to buy anything they want. It does not really prevent the purchasing of a great many luxury and semi-luxury commodities. One cannot say whether it has done more harm than good, but certainly I believe that it has probably caused more inflation than it has prevented. It is rather like the 16th and 17th century practice of blood-letting. Whenever a person had fever they practised phlebotomy and rid him of so much of what was regarded as surplus blood; and the worse the fever the more blood they had taken away. They cured the fever, but they killed the patient.

What, then, is needed at the present time? I believe that what is needed above all is throughout the nation a lower cost of living campaign; that the whole nation, led by the Government (and this should not be regarded as a matter of Party controversy), should be-come cost-of-living conscious; should not accept this rise as inevitable and merely devote itself to measures for meeting the rising cost of living, which is the usual phrase; but that the search should be for measures to prevent further rise in the cost of living and to reverse the trend. This can be done by reducing costs. And that, in turn, can be achieved by cheaper production. I think that greater efficiency of production, together with freer competition in supply, is the essence of the whole matter. Given these two things we may have the prospect of a general fall in prices. At present we have very large margins on which to work. Your Lordships will have from time to time seen reports, all too brief, of the Anglo-American productivity teams, consisting of employers and employed, of Americans and British, who have been examining the working conditions in one industry after another. So far as I know, all of them in their reports say the same thing —namely, that the fault in this country, compared with America, is that we have so much obsolete machinery; that wherever this country has up-to-date machinery it is worked too few hours— it is not, as it should be, working two, or even three, shifts—and that there are inadequate incentives to the individual working men and women to do their best and produce to their utmost. The reports say that the workman in America works no harder, that he often works shorter hours; but in trade after trade they point to the actual fact of a much higher production per man-hour in American industries as compared with British industries.

A few days ago, I had a long conversation with one of the largest manufacturers in the Midlands, a man who has for many years adopted progressive principles, by paying high wages and ensuring lower prices through efficient production and up-to-date methods. He is a manufacturer of tractors, especially agricultural tractors. In 1948, a time of rising prices, his firm reduced their price for a tractor by £50, and they maintained that price all through this period of rising prices until the end of last year, when an in-crease in the cost of materials, especially of rubber, compelled them to increase it by £35. But still their tractor is selling at £15 cheaper than four years ago. Thanks to this system of extreme efficiency of production and continual reduction of price wherever possible, his firm are now supplying nearly 80 per cent, of the whole of the British market. There is the main line of progress for the future. That is our chief hope. We must come up to American standards. If it is possible in America, it is possible here; and the example of firms such as that which I have mentioned shows that it is possible. We must get rid of the restrictions on supply and price maintenance, and sell as cheaply as the articles can be sold; then the cost of living will come down.

There is one other point in this connection. We must concentrate to the utmost on the development of our trade with the Dominions and the Colonies. There are there immense possibilities of the supply of materials which are not nearly sufficiently realised at the present time. We have good will and certain connections which will enable us easily to develop our trade. I do not propose that that should be done by the crude, primitive and inefficient method of imposing customs duties, and especially not by imposing hindrances on our trade with foreign countries merely for the purpose of exempting our Imperial and Commonwealth trade from similar restrictions; but by such means as the Colombo plan and Point Four of President Truman's international policy. Those are the methods by which we ought to increase our supplies. I am sure the Government will agree heartily in all of this, but I do not see the sense of urgency, the sustained and unremitting effort on the part of Ministers and the public departments generally, which the imminence of our difficulties and the urgency of the whole problem essentially demand. When a crisis arrives, there is a spurt of intense activity. If the dollar exchange seems to be in peril, if there is a scarcity of essential raw materials, and if suddenly there is no coal in the cellars and no meat in the shops, then drastic measures are taken and everybody gets busy. But when the immediate crisis is over we relax again into the rut. We have a Government of spurts and scrambles, and we want a national lower-cost-of-living campaign in order to ensure that whatever is needed is continuously pursued.

I come to my last point, and my digression: to my mind, it is more important than any of the others, because the others I have dealt with are needs of the moment, but the point I am about to touch upon is permanent. It does not affect only the present Government. Much that I have been saying could be applied to any other Government, of any Party; or even to a Coalition Government. The fault lies in the governing machine. It is an example of obsolete machinery, of 19th century methods extending into the 20th century. The present Cabinet system, the old simple 19th century single Cabinet, of anything up to twenty members, cannot cope with the enormous complexities of a Welfare State in a world which is in turmoil. At the present time we have a Cabinet of seventeen members, most of them with heavy departmental duties. Outside the Cabinet there are sixteen other Ministers, ten of them heads of Departments which have no proper co-ordination. I believe that the main cause of our failures is the lack of any proper system of thinking ahead, and the shocking cases of administrative inefficiency that we have seen from time to time—the groundnuts scheme in East Africa, the Gambia poultry scheme, and also, I would add, the failure of the Government to meet the needs of the people in the matter of housing, and the financial muddle at the Ministry of Health in the establishment of the National Health Service. I believe that if we had a proper administrative system of control and co-ordination, all these mistakes, and many others on a smaller scale, about which we know little, might have been avoided.

More than thirty years ago, this vital matter was examined by a Committee appointed by the Government of the day to consider the machinery of government. The Committee which sat under the chairmanship of Lord Haldane, advocated that there should be a small policy-forming Cabinet of some ten to twelve Members. When I first raised this question of the economic situation in your Lordships' House in 1947 I then urged reform of the Cabinet system as essential if we were to be well governed. I wrote an article, which was published in The Times in September of that year, in which I advocated a Cabinet of ten mem- bers, of whom five should be Ministers without any heavy departmental responsibilities. I suggested that there should be five groups of departmental Ministers, one group dealing with commerce and financial subjects, one with production and labour, one with the social services, one with the Commonwealth and Foreign Affairs and one with defence. Each of those groups, I suggested, should have a chairman who should be a member of the Supreme Cabinet—one of those five members without heavy departmental responsibilities. These five groups would, in effect, constitute five sub-Cabinets. Each should have its own secretariat, and each should have powers of action, subject, of course, to Cabinet direction and control. Each Minister should retain, as now, his own statutory responsibilities within his own Department. The interrelationship between these live sub-Cabinets should be elastic, not rigid, and should develop as experience required.

This course was adopted—at all events a small Cabinet, with members having few departmental duties, able to think ahead and to deal quickly with urgent matters—has been formed three times when we have faced a great emergency. During the First World War, in 1916, in the economic crisis of 1931, and during the Second World War, in 1940, we saw that the ordinary Cabinet system would not suffice. On each ocasion a small working Cabinet was formed, and departmental duties were dealt with by the Ministers for particular Departments. But each time there has been a relapse. When the emergency has come to an end, we have slipped back to the Victorian system. It is true that with regard to the Defence Ministries the principle has been adopted. The three heads of the Defence Services—the First Lord of the Admiralty (and may I take this opportunity of congratulating the noble Lord, Lord Pakenham, on having such a post of such great national importance as that conferred upon him?), the Secretary of State for War and the Secretary of State for Air, form a group under the Minister of Defence who himself represents the whole group in the Cabinet. That is the proposal which I made in the article in The Times. I must confess that it received little support from any quarter, except in The Times newspaper itself. Before long, however, we shall have a General Election; and I make this very earnest plea. When a new Government is formed after that Election, whether it be a Party Government—a Government of one Party or another—or a Coalition Government, the Prime Minister of that day should give most careful consideration to this proposal. I venture to-day once more to submit it to your Lordships, for I firmly believe that it is the only way to deal effectively with complex and intractable problems such as those with which we have been dealing to-day.