THE ECONOMIC SITUATION

HL Deb 20 February 1952 vol 175 cc105-85

3.8 p.m.

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

LORD PETHICK-LAWRENCE

My Lords, the debate yesterday on the Economic Situation ranged over a great number of interesting topics. They included questions relating to money, which were dealt with more particularly by the noble Lord, Lord. Brand, and the noble Lord, Lord Balfour of Burleigh, who is not at the moment in his place, but no doubt will be here before long. If I single out these topics for special treatment, it is because I share with Lord Balfour the opinion that they are of supreme importance, and I take the view that if we are pursuing, as I think we are, a wrong policy, it may be fraught with dire consequences for this country and its economy in the future. I made some reference to this question in the debate that we had on the Address last autumn, and I return to it to-day because, quite clearly there are likely to be difficulties, and already the position is one which merits very careful reconsideration. What has actually happened is that the Chancellor of the Exchequer has reversed the policy of cheap money to which successive Chancellors of the Exchequer have adhered for nearly a generation. I might have been pardoned if I had assumed that dear money by this time was not only dead but damned, but because evidently that is not the case I hope that I shall be forgiven if I make a few remarks by way of introduction.

Your Lordships are of course aware that money is said to be dear when the rate of interest one has to pay for borrowing it on best security is high, and cheap when that rate is low. The rates vary according to the length of time the loan is to run, with day-to-day loans at one end and irredeemable stocks at the other. The bank rate governs the former and the price of Consols is the indication of the latter; and, strange as it may seem to many people, there is no direct relationship between the rate of interest paid for short-term loans and that paid for long-term loans at any one particular time, though no doubt over a period these two exercise a pull on one another. In the half century preceding the First World War the Governments of the day allowed the Bank of England a free rein in settling the bank rate, but when the public came up against the grave consequences of the bad finance of that war, and later of the deflation which followed it, leading up to a restoration of the gold standard, Mr. Neville Chamberlain, who was then Chancellor of the Exchequer, took over the helm on behalf of the Government by the creation of the Exchange Equalisation Account, using that power to establish cheap money. It was that decision, made all that long time ago, which remained unaltered until last November.

Now I would ask your Lordships to look beyond the immediate present to one or two years ahead, to the years 1953 and perhaps 1954, in order that one may see where we are likely to be at that time. Without any gift of prophecy whatever, it seems to me that there are just three possibilities. The first is that we then may be facing—which God forbid!—the grim reality of World War No. 3. If that is so, I would ask your Lordships to consider deeply whether any addition to the horrors which are the inevitable consequence of modern war, horrors human, economic, and social, you are really prepared to face a war based on dear money. In order to bring your Lordships face to face with that issue I should like you to contrast what happened in the First World War, the war of 1914–18 which was fought on dear money—much of it at 5 per cent., some of it a little below, and some even above that figure—with what happened in the 1939–45 war which was waged on cheap money at 3 per cent. or quite a considerable amount below that figure. Let me point out to your Lordships what was the result at the end of those two wars.

At the end of the First World War the National Debt had increased by some £7,000,000,000 and the annual service of that debt had gone up by some £300,000,000. At the end of the Second World War the further increase of the National Debt was more than double as much—I should say a round figure of something in the neighbourhood of £15,000,000,000, more than twice the increase in the First World War, and the annual increase in the service of the debt, instead of being £600,000,000 as one might have expected, was only £200,000,000—actually less increased service charge for more than double the total increase in the National Debt. If we are to envisage our emergence successfully from a Third World War, with heads bloody and bowed down by a National Debt of £20,000,000,000 additional, it is just possible that we may be able to stagger along with a service charge for the debt of some £400,000,000 over and above what we pay at the present time. But if the annual additional charge for servicing the debt is £1,000,000,000 we shall be utterly broken. Therefore I say to your Lordships, if I have proved my point, that to enter a Third World War with dear money is to court financial wreckage and disaster.

Let me take the second possibility. It may be—we all hope that it will be—that negotiating from strength in 1953 we may reach some sort of concordat with the Soviet Union, with its satellites and with China—if not exactly a peace, at least some modus vivendi. Should that be so, the year 1954 will see a great reduction in our armament expenditure; and then all over the world, and not least in the United States of America, which exercises so great an influence in the trade of the world, there will be a cessation of buying and we shall be swept off our feet in an orgy of deflation. Heaven help us if we then are caught on the wrong foot of dear money! It might well be in such a case that in the midst of our satisfaction at our deliverance from a shooting war we should find ourselves in a slump compared with which the miseries of the 1920's would seem, in retrospect, like prosperity.

But, my Lords, let me come to the third possibility, which is probably the most likely of the three. No war, no negotiated peace, not even a declared modus vivendi, but a dragging on of a cold war, and a continuation of rearmament—though, as President Truman said the other day, at a steadily declining rate—and running through all our economy the deadening results of dear money, even if, in the light of events at that date, the price of money is then reduced. Let me illustrate this by a few examples showing how events will work out. First, I consider a house for the people. In the past we have talked a good deal about housing, with a certain amount of Party incrimination. I leave all that out of account for this purpose. Let me assume, for the sake of argument, round figures and say that a house such as we contemplate is going to cost £1,300. Let me assume as broadly true that the effect of dear money, both short-term and long-term, is to put up the rate of interest by 1 per cent. Now 1 per cent. on £1,300 is £13 a year. That is five shillings a week. So that the effect of our dear money policy is to increase the economic rent of one of these houses by no less than five shillings a week. That, I think, is a very serious thing to contemplate.

Let me turn next to education. I am not going to discuss it in terms of the recent education circular, but from an entirely different aspect. Assume that a school is to be built at a cost of £100,000. Continuing our assumption that the effect of these changes is to put up the rate of interest by 1 per cent., we find that the interest on £100,000 is £1,000 a year. If we assume that this school was designed to provide places for between 100 and 200 children, that means that for every child who is found a place by building this new school there will be an extra cost of from £5 to £10 in consequence of the dear money policy.

Let us look at it from the point of view of the Electricity Board. On every £1,000,000 of capital for generating purposes, or other things which the Electricity Board are going to embark upon, £10,000 additional every year will have to be paid for loans. All that has to be paid by the consumers of electricity. And, mark you, that does not continue only while the dear money policy continues. On all loans, whether for housing, schools or electricity, contracted in the period of dear money, for all time in the future, until the Sinking Fund pays them off, this additional charge will have to be made. Noble Lords opposite particularly favour private enterprise. We on these Benches have never said at any time that there will not be a great deal of private enterprise right through our economy, at any rate for years to come. On every occasion when a company or a private individual borrows money to enlarge a business, the result of dear money will be that the individual or the company will have to pay 1 per cent. more interest for the loan. That, again, is going to clog up the wheels of private enterprise, and it is going to mean additional cost to those who buy the produce of that free enterprise.

These are the stark realities of the consequences of dear money. What are the grounds put forward for introducing it which are said to be so overwhelming that these consequences must be faced and borne? A great many arguments have been put forward by different speakers. I suppose that the most eloquent were those which fell from the lips of the noble Lord, Lord Balfour of Burleigh, whose exceedingly able and interesting speech we all listened to with such close attention last night. I am deeply grieved that he is not here to-day. I had thought that as he made that important speech he would have been present to hear what is said in reply, but no doubt he is otherwise engaged. I assume, as a matter of course, that if he were not he would be here. The first point in Lord Balfour's argument was that there had to be a reduction in general spending and, in particular, of new capital outlay. I agree absolutely with that. I think it is clear that that reduction had to take place if we were to prevent inflation and balance our account. He went further and said that as a result there must be a contraction of credit, at the fountain source of credit. Again I fully agree.

Then the noble Lord said that, as there was to be this reduction of credit, if it was really to have effect there must be a psychological drive, as well as a purely material effort. Again I agree. Then, he argued that the sole psychological stimulus that would be effective was an increase in the rate charged for money. There, I fundamentally disagree. I really cannot believe that with all the skill, all the eloquence, all the experience, all the judgment of the banking fraternity, backed up by a solid phalanx of members of the Government, men whose whole reputation is based on their eloquent power of appealing to human psychology, it would not have been possible to make such art appeal and to make it effectively. I think it very likely that members on this side of the House who thoroughly agree that this crisis has to be met, and that it must involve some retrenchment and reduction of the fundamental basis of credit, would have helped, and I cannot think that their efforts would have been of no avail. I find myself unable to accept the suggestion that we must go through these incomparable evils which I have shown wait upon dear money just because it seems to certain bankers that it is necessary, in order to produce the right psychological effect, to impose dear money once again on the people.

The noble Lord, Lord Balfour of Burleigh, likened the case to the false scientific theories of people who believed in perpetual motion. I venture to think that that was a very bad analogy because, in point of fact, the theories of those people, as the mathematicians and scientists of the time knew well, were quite untenable. The mathematicians and scientists knew that you could not have perpetual motion, and the experiments which were made in that direction naturally failed. In this case it is the other way round. If a comparison from me is called for I will give it to the noble Lord. I say that it is not necessary to burn down your house in order to get roast pig. There is another point I should like to make in that connection. Suppose that the effect of the psychology created by dear money is—as it may very well be—to bring about a certain measure of unemployment, and not only a certain measure of unemployment but, in consequence, a certain underproduction. Would any of your Lordships seriously tell me that we should have the whole of this under-production for the one sole object of creating a certain psychology which I think the bankers and the Government can perfectly well create without it?

Your Lordships will acquit me, so far, at any rate, of introducing Party into this question at all. I hope you will continue to acquit me of any Party bias when I proceed to the inevitable question of who is responsible for introducing this dear money. Hitherto, I have not distinguished between dear money which is the result of the putting up of the bank rate and that measured by the long-term price of securities on the Stock Exchange; but it is now necessary to make that distinction. It was during the Labour Government that we began to see a considerable fall in Stock Exchange values, and in so far as that could have been prevented, the Labour Government cannot escape responsibility.

I do not think I am disclosing improperly any Cabinet secrets if I tell your Lordships that when I was in the Cabinet we at frequent intervals considered the whole balance sheet of the nation—Government expenditure, municipal expenditure, company expenditure and private expenditure—and we tried to make a balance between the work that had to be done and the labour force, the manpower and capital equipment available to do it. To the best of our ability we tried to keep a balance and not start doing things for which there was neither enough money nor enough labour. We may well have been—and I think the logic of what has happened shows that we were—a little too optimistic in our views, and that we should not have attempted so much. I am not discussing the question of the Welfare State, but of the whole enterprise of the country. That may have been a fault of ours, but I do not think it is a fault regarding which noble Lords sitting opposite can properly sling a stone at us, when I remember that they were constantly taunting us with trying to plan and constantly urging us to throw the reins on the backs of the horses of free enterprise in order that they might get ahead with their business and not be constricted and confined by our planning activities.

It is true, therefore, that when the Conservative Government came into being there had been a considerable fall in the value of Stock Exchange securities, which, of course, is the inverse of the rise in the rate of interest for long-term loans. There was a considerable hope amongst certain sections of the public that if a Conservative Government came in all that would disappear and what many people call the credit of the country, though that is not a very suitable phrase, would be revived and, as my noble friend Lord Strabolgi said yesterday, the Stock Exchange values of securities would rise. We all know that the exact reverse of that took place. So soon as the Government were established and the first cuts were made by the Chancellor of the Exchequer, there began a headlong fall in the value of securities, which was very much increased by the announced determination of the Chancellor to put up the bank rate and a number of other rates, including the rate of interest on loans made to local authorities for various purposes. I do not think it is an exaggeration to say that some people must have murmured to themselves, "The Labour Government chastised us with whips, but the Conservative Government is chastising us with scorpions."

I think I have fairly distributed the blame, if blame it is, for dear money, between the Labour and the Conservative Governments. I think I have stated the unbiased facts. But it is no part of my case to argue that this new policy in putting up the bank rate and in bringing about the helter-skelter fall in the price of securities has benefited any particular body of people. Some people say it has benefited the banks. Against that, it is obviously true that the banks, who have large quantities of gilt-edged securities, have suffered a loss on that account. Whether or not they can make that good in the future, and keep the advantage, I do not know. I have gone into this matter with a good deal of care and I have not found any section or body of people one can confidently say is making a good thing out of this. It is one of the curious facts in finance that surprises some people, that because somebody loses, it does not follow that somebody else gains; and if somebody gains, it does not follow that somebody else loses. And I have yet to be told that it is any merit in a particular financial policy that there is no one in particular who gains anything out of it and that everybody suffers a loss.

What am I asking should be done? Last November I said that we had taken this step, which had had certain consequences. I did not know how bad they were going to be, but they were bad enough. I hoped that in no circumstances would there be a further turn of the screw, and the noble Viscount, Lord Swinton, gave me, not a full assurance along those lines, but an indication that if there were a further turn it would not be turned very tightly. I think that is as near as I can express what he said. I am asking for more than that to-day, although it may not be given by the noble Lord who is to reply, because, obviously, it is a question in the last resort for the Chancellor of the Exchequer. I hope that if I have not convinced your Lordships very far, I have convinced you so far as this—that there ought to be no further turn of the screw. We have re-established dear money, with grave peril to the future, but, for heaven's sake do not let us go any further and make money still dearer than we have made it at the present time. I ask the Chancellor in the first place to make up his own mind that he will not turn the screw any further. But I want more than that. I think the deleterious effect of dear money is so great that the prosperity of the country demands that the Chancellor of the Exchequer should positively state his opinion on that point and go so far as to say that he does not propose to turn the screw any further. I think that would give some confidence to the people of this country.

I pointed out to your Lordships just now that the evil fruits of the dear money we have at present will continue to pile up until the policy is reversed. I hope, therefore, that this reign of dear money will be short and that sooner rather than later it will be done away with I am not charging the Chancellor of the Exchequer with any bad faith; I am charging him with nothing but good intentions to protect this country from danger, but trying to do so in a wrong way. Good intentions, in the last resort, are no excuse. We all know the saying: The road to hell is paved with good intentions. The Chancellor of the Exchequer is a most honourable man for whom I have the greatest respect, but his good intentions in restoring dear money will not save the country from treading the way to hell. If he waits to reverse his policy until we are either immersed in a third world war or caught in the spiral of deflation, his repentance will come too late to save the country from disaster.

3.42 p.m.

VISCOUNT WAVERLEY

My Lords, in rising to address your Lordships for the first time I could wish that I had had a better opportunity of making myself familiar with the forms and usages of your Lordships' House. But the present debate is; so much concerned with matters for which not long ago I had some responsibility that I felt that I should be neglecting a duty if I did not seek to offer my modest contribution. I have no doubt that your Lordships will extend to me the indulgence that is usual on such an occasion.

I hope that the noble Lord who has just sat down will acquit me of any discourtesy if I do not follow him at great length in the matter to which he devoted the whole of, if I may say so, a most interesting speech. I am on record as having, as Chancellor of the Exchequer, expressed myself in favour of a cheap money policy. Such a policy was introduced, and established, as I thought on a fairly firm basis, by the Coalition Government of which I was a member. I thought that a mistake was made by the Labour Government in seeking to press that policy too far and too fast. I thought, in particular, that a rather disastrous blunder was made when, in deciding to redeem the local loans stock, resort was had to an undated security. I feel that that was a very serious mistake. I fully agree with what the noble Lord said in regard to the important part which psychology plays in this matter. The psychological consequences of the undated issue which followed the redemption of the local loans stock were, in my view, very unfortunate indeed. I still hope that the policy of dear money will not be carried too far. I firmly believe that if we once succeed in getting our economy on to an even keel it should not be too difficult to revert to a policy of cheap money, reasonably applied. That is all I find it possible to say on that topic at the moment, because I wish to devote the rest of my speech to other matters.

I fear that I shall have to say a good many things that are depressing, but your Lordships will find, I hope, that before I sit down I shall not fail to call attention to the factors—and there are quite a number—which offer encouragement. The gravity of our present economic situation can hardly be over-emphasised. If loss of gold and dollars went on at the recent rate, we should have no reserves by the end of the year, and long before then we should have lost so much that the confidence of the outside world would be shattered: the sterling area would break up; the pound would, in all probability, fall to such levels that our internal price and wage structure would lose such stability as it still has; and we should be in real danger of runaway inflation. That is not a pretty picture, but it is not, I believe, overpainted. Of course, to say such things is not to predict that they will happen—far from it. To state them thus in cold blood seems to me, in fact, to be the best way of ensuring that they shall not happen, the character of our people being what it is. There may, indeed, be some little danger of a different reaction in certain quarters if people were to say: "Such a thing is unthinkable. It could never happen to us. Before it did happen we should do something to stop it." I would rejoin: "Very well; but now is the moment to take such action. To delay further is to risk being betrayed by just that kind of complacency."

In this matter it is necessary to be starkly realistic and to speak plainly. That is why I have been sorry to see in the debate in another place, and elsewhere, some tendency to accuse the Government of working up panic to play down the emergency, and to find comfort in such reflections as are sometimes heard: "It is now admitted," it is said, "that our situation has been deteriorating for the last fifty years." Or again: "The Labour Government, when they took over after the war, faced a graver crisis than this." Again—and this was something like a note of triumph: "We, the critics, have wrung from the Government an admission that our present difficulties are due to external causes quite outside the control of the late Government." It may be worth while to examine these pleas or excuses—I do not quite know what to call them—for a moment to see how flimsy and, indeed, false they really are. There is one respect, and one only, in which our situation has deteriorated steadily during the last fifty years, and that is in respect of our overseas investments. In all other respects, as noble Lords must well realise, there has been a steady and spectacular improvement in the condition of the people, particularly those who are called the under-privileged, in amenity, comfort and every form of material well-being.

Again—and this is a much more important point, because of its practical implications—the suggestion that the situation was worse in 1945, presumably on the termination of Lend-Lease, will not bear examination. It may be that then the prospective gap in our overseas account was no less menacing, but every other circumstance was more favourable: the task of building up our exports was infinitely easier; the field was clear, and we had only to pull resources out of military production to be able at once to sell their products in overseas markets. In such circumstances a foreign loan to give us breathing space and to ease the transition was an obvious expedient. There was a clear prospect, moreover, that such a loan would be forthcoming. The only question was as to the terms. Now the amount of foreign aid that we can expect is obviously limited to such contribution as may commend itself to an ally on military grounds. We obviously cannot expect outsiders to maintain our standards of life any longer. On top of this, the prospects of production for export are much less hopeful. In 1945 it was a question of diminishing arms production to free resources for export. Now we have to increase exports and arms production simultaneously. Furthermore, our export markets are more difficult. Production elsewhere has revived. We are faced with formidable competition from Germany and Japan. Therefore there is really no comparison between the situation at the end of the war and our position to-day, and I hope we shall hear no more of that point.

On the plea that our troubles arise from external causes and therefore that no one is to be blamed, I will say only this. The world, having been left in the state it was after six years of global war, the disturbing factors that have emerged should not have been entirely unforeseen. We were all inclined to take too rosy a view when final and complete victory was achieved. After six gruelling years, the sense of relief was universal. Add to this the buoyancy induced in a Party succeeding for the first time to power after an unexpected, or unexpectedly sweeping, electoral success, and it was perhaps only natural that they should have launched forth, giving hostages to fortune, in many directions. I need not specify those now. What I do regret, however, is the failure to build up reserves against an emergency and, in particular, our failure to preserve or create a margin of taxable capacity as an essential element of strength in our economic situation. I must emphasise this point.

In this connection—and I rather apologise for saying this—I cannot help reflecting rather sadly that when, having announced, as it fell to me to do on behalf of the Coalition Government, our acceptance of the Beveridge Report, I thought it necessary to add a cautionary word to the effect that our first duty after the war would obviously be to look to our budgetary position, I was at once severely taken to task. The noble Lord, Lord Pakenham, may remember this. That was perhaps more significant than I realised at the time of a general trend of opinion which may be responsible for much that has happened since. However, I do not want to be censorious this afternoon, and I fully realise that "I told you so" would not be a very suitable gambit for a maiden speech. In our present situation examination of the past is likely to be profitable only in so far as it shows what are the mistakes to avoid.

Now the problem by which we are confronted has two or perhaps three aspects. There is our own adverse balance. Closely connected with this is the sterling dollar gap, and also connected, but more remotely, is the task of bringing our domestic expenditure, on investment and consumption, within bounds. I shall say something further about this connection in a moment. In my view, the first essential to any proper understanding of the way to get out of this crisis is to realise that we have to depend primarily on ourselves, trusting, of course, that other parts of the sterling area will keep in step. I agree with the noble Lord, Lord Layton, as to the importance of international co-operation, but there can be no question of our seeking further aid from outside the sterling area at this juncture, though, as I have said, I am clear that we were right to seek it in 1945. We may hope, perhaps, that members of the sterling area who have recently left money with us will not withdraw it too precipitately, for that would impose a strain which, in present circumstances, might wreck the whole structure. But we ought not to ask more. In this crisis, I repeat, we must save ourselves by our own efforts.

Once this is realised, the nature of a realistic programme becomes clear. Here it is in all essentials: Immediate measures to diminish the loss of gold and dollars; then, direct cuts in domestic investment and consumption to release resources for arms and export, and, finally, financial measures to arrest inflation. The immediate measures to arrest the loss of gold and dollars have been announced in the shape of the import cuts. These are drastic but they are not more drastic certainly than is warranted by the recent rate of loss. The objection—and it is valid—to measures of this sort is that they are bound to be very crude and clumsy in the limits they impose on individual expenditure. It is to be hoped that, as the domestic inflation is halted, it may be possible to dispense with the rigidity of this kind of control; but for the time being it is essential. This cutting down of imports by direct control is necessary, but at best it is only a palliative. The ultimate aim should be so to adjust our arrangements as to be able to sustain our position without special limitations on particular forms of expenditure. It would be pleasant to think that there were accessible immediate means of increasing production so as to make this possible without any encroachment on consumption or development, but in present circumstances this is out of the question. We must all work as hard as we can and seek to abolish artificial limitations on production. But, for the time being, unless we are prepared to abandon the effort to make ourselves secure, we must be prepared to curtail our consumption and development plans in order to release resources for arms and export.

The first and most obvious method of doing this is by reduction of Government expenditure for purposes other than rearmament, and by direct control of such investment outside the export and armament industries as lies within public control. Mr. Attlee has confessed his inability to understand the reason for this. He cannot, he has said, see the connection between the reduction of expenditure on education and arresting the withdrawal of gold via the sterling balances. This is perhaps rather a surprising disability in one who has held the supreme responsibility for so long. In fact, I submit that the connection is fairly obvious. All expenditure involves, directly or indirectly, the use of productive resources. If we save in one direction we release resources which become available for use in other directions—notably here to facilitate exports. It is, I believe, as simple as that.

But beyond action of this kind on particular kinds of expenditure and investment directly within the control of government, further measures of policy are necessary to restrain consumption and investment in general. The fact is that we are trying to spend more than we can afford in present circumstances. It is this which is causing the internal rise of prices, and it is this, fundamentally, which is responsible for our persistent trouble with the balance of payments. Until it is curbed we shall continue to be in danger. This is part of the programme which, as yet, has not been elaborated. Recent changes in monetary policy have brought into play a mechanism which has been unduly neglected in the last few years. But let no one think that the inflation is yet under control. Either by a further tightening of credit, or by budgetary measures—which, in present circumstances, must consist chiefly in further cuts of public expenditure—excess spending must be curtailed.

In this connection I must join with my noble friend Lord Balfour of Burleigh in pointing out what is not yet commonly or sufficiently fully realised: that, far from diminishing the inflationary pressure, the measures which have so far been announced actually tend to increase it. Thus, for instance, the cutting off of imports means that there will be fewer goods offered against existing money incomes, for imports represent goods against which no income has been created in this country. Similarly, any increase in exports will have the same effect: for the production of exports involves the paying out of incomes with no corresponding release of goods in this market. Hence, our attempts to close the gap in the balance of payments, in so far as they are successful, will actually release forces which will tend to open it again, unless countervailing financial measures are taken. Hold to this the probable increase in armament expenditure this year and you have a situation in which very drastic financial and fiscal policies will be necessary if only to prevent the situation from deteriorating still further.

Now I wish to digress for a few moments to deal with an entirely different topic, one which has not received much attention in this debate or in the corresponding debate in another place. I speak of food subsidies, and I must make it plain that here, as in my other remarks, I speak entirely for myself alone. I realise that what I have to say may not be altogether welcome to some of my former colleagues. I feel bound however to do this, because of the part which I myself played in the matter. Responsibility for the original scheme of food subsidies was shared by three Ministers. I was one. The others were Sir Kingsley Wood and Mr. Ernest Bevin who, unhappily, are no longer with us. This scheme of food subsidies was not conceived as a social service. It was in essence an economic device to keep the level of wages and prices stable. For this purpose it proved wonderfully successful for a time, and for that the credit is due mainly to the leaders of organised labour. Before I ceased to be Chancellor of the Exchequer I had to tell another place that the time was fast approaching when the strain of maintaining the existing price level was proving too great and some upward movement would have to be allowed.

I made this statement with the approval of my colleagues, including my Labour colleagues, but there was a considerable outcry and complaint that I was deliberately putting up the cost of living. The annual cost of these subsidies was then in the region of £130,000,000. The subsequent history is very illuminating. My successor declared that he had decided to maintain the price level throughout the year then current, whatever might happen. This was a notable departure from the original plan. The cost naturally rose rapidly. Mr. Dalton then had second thoughts, and later Sir Stafford Cripps declared that the whole situation was becoming unrealistic and that there must be no further increase. But nothing was done to make the declaration effective, and quite recently we found the late Chancellor of the Exchequer, if he was correctly reported, expressing regret that he could not spend more on these subsidies, the cost of which had meantime risen beyond the staggering figure of £400,000,000. They had entirely lost their original character and had come to be viewed as a social service. I venture to say that, viewed in the light of a social service, anything more clumsy and inefficient could hardly be imagined.

Think what they mean, my Lords. Out of the proceeds of general taxation, which must for this purpose be assumed to be fairly distributed over the community money is to be taken with which to pay for a proportion of the essential foodstuffs consumed by every man, woman and child throughout the country, irrespective of need, merit or appetite. It is not merely the cost that I object to, though that is a heavy burden. I should think it worth while to get rid of them even if the whole cost had to be redistributed for the benefit of the poorer sections of the community who were in danger of suffering hardship on account of their abolition. What I object to is that they obscure the true facts of our economic position, and anything that does that militates against the efforts that will have to be made before we can eventually get things right to bring the truth home to every section of the community. The illusion of unlimited resources must be destroyed, and it must be brought home to everybody that, however liberal the social services may be, a man still has a primary duty to maintain himself and his family—in addition to making his due contribution to the common good—by his own exertions. Widespread misunderstanding of these basic truths is one of the gravest aspects of our present situation. Having said all this, however, I must add that I am clear that, unfortunately, so long as one of our main concerns must be to keep the cost of living down, there is nothing very heroic to be done in this matter at the moment. We shall, I fear, have to be content with a modest beginning. I predict, however, with some confidence that before we finally get out of the wood full effect will have to be given to the views I have just expressed.

There are two further matters to which I should like to refer quite briefly before I come to my final wads. Mr. Gaitskell, while admitting that our present situation both physical controls and what he called monetary controls have to be resorted to expressed a strong preface for the former. He characterised the latter as clumsy, unfair and net well calculated to achieve the precise result that we want. I myself should have put it the other way round. I have spent all my life in public administration, and I think I know as well as anyone the limitations that encompass effective administrative action. All my experience teaches me that to go against natural laws—and economic laws are natural laws—is to court disaster. In my view, the proper function of physical controls is to cheek the operation of natural laws where its effect is likely to be, as it often is, harsh or even cruel, and to supplement natural laws where their operation is beneficent. I believe that failure to observe this principle is responsible for many of the more obvious deficiencies of the system of economic planning to which the late Government pinned their faith. The manner in which the other method should work can be seen clearly from the White Paper on Employment Policy issued by the Coalition Government during the war.

Now a brief word about the social services and the modifications proposed by Her Majesty's Government. I have noticed a tendency on the part of Labour leaders—perhaps I may have the ear of the noble Lord, Lord Pakenham, here—to speak as if these services were exclusively of their creation.

VISCOUNT STANSGATE

No.

VISCOUNT WAVERLEY

Well, that impression is given.

VISCOUNT STANSGATE

Where?

VISCOUNT WAVERLEY

I do not want to be controversial., but the noble Lord, Lord Pakenham himself yesterday used words which I think I can quote, to the effect that the development of the Welfare State under the Labour Government was a shining and brilliant example (or something like that) of which everyone could be proud.

LORD PAKENHAM

I have in mind the strong tradition against interrupting a maiden speech in this House. Therefore, I will not interrupt.

VISCOUNT WAVERLEY

At this point I should welcome an interruption. That is exactly what I should like. I do not want and I ought not to be controversial, but it is very important that people should see these things in their true light and their true perspective. It is very important indeed. I do not want to say anything which injures any feelings, and I certainly do not want to say anything which is not absolutely in accordance with the facts. It is the fact that the foundations of the social services were laid, and the main structure was built, before the Labour Government came into office in 1945. What they contributed in the main, if it is not too unkind for me to say so, was an element of undue haste. As a result of the manner in which the details of what we now call the Welfare State were carried into execution, the late Government did not profit, as they might have done, by the experience of their predecessors. I believe that the present Minister of Health was perfectly right in claiming that the changes now to be introduced will help to eliminate abuses and promote efficiency as well as economy. To suggest that the foundations of the Welfare State are being undermined is a palpable absurdity. The people of this country will still have social services second to none in the entire world.

At the risk of provoking the noble Lord, Lord Pakenham, to an intervention, I venture to express the regret with which I heard certain observations which fell from him yesterday—I have the record here. He said some things which I cannot help feeling he cannot have meant seriously. He spoke of a diversion of funds, presumably, he said, in favour of the rich. Any diversion is from the proceeds of taxation, which must be assumed to be drawn equitably from the whole community, not in favour of the rich, but in favour of the taxpayer at large, and he submitted that the measures that have been announced defeat the whole purpose of the National Health Service. I think those extravagant observations really have no justification at all, and they are being repeated all over the country. They are being repeated for the purpose of arousing Party passions. I deplore that very much indeed, and I cannot think it can be the intention of the noble Lord to contribute to such a result.

I hope that in what I am about to say now I shall be entirely uncontroversial. May I, in conclusion, deal with the question, a question quite vital in this connection, of production? I have noticed that the right honourable gentleman Mr. Gaitskell reproached the Chancellor with having "said nothing—or virtually nothing" on this subject. I suppose that my right honourable friend Mr. Butler regarded it as belonging to the third or budgetary phase of his policy, but that is perhaps no reason against my dealing briefly now with so important a topic. It may fairly be claimed that in this respect the country has done well so far, though there has been a falling off in recent months. But much more is required. Further efforts and some sacrifices will be required from all sections of the community to achieve the desired result. There can be no escape from this, but it is not a question, I believe, of any superhuman effort. Far less will be required than the effort and sacrifice made willingly in time of war, for there are, as I said at the beginning, a number of favourable factors.

Better use can be made of the results of scientific research. There are great possibilities in the sphere of what is known as operational research, by which I mean the systematic study of the effect on industrial operations of changes of method. Experience in the chemical industry, with which I have some connection, has shown that by co-operation between management—with whom the initiative should rest—and workers in work study, which covers method study and work measurement, and in the training of foremen and supervisory grades, notable results in improved productivity can be achieved. New wage structures incorporating suitable incentives can be framed as the result of such studies. May I say that, in regard to incentives, I most profoundly agree with what fell from the noble Lord, Lord Pakenham, yesterday.

Then there is the better use of mechanical aids by which, side by side with a notable lightening of physical effort, greater output at greatly reduced cost might be achieved. May I illustrate this point by referring briefly to experience in the Port of London? I may have an opportunity, on a later occasion, of addressing your Lordships at greater length on this topic. For the moment, it will suffice if I say that there are many appliances—of which fork lift trucks and pallets are a good example—the extended use of which would add enormously to the efficiency and expedition of port operations; and these operations, of course, have a profound influence on the whole national economy. But there are difficulties to be overcome and prejudices to be broken down. With patience and understanding, I have no doubt that the situation will come right in the course of time, but we have no time to lose.

I make no criticism here of the dockers or their constitutional leaders; I want to make that absolutely clear. But there are agitators, who keep bobbing up from time to time, who are concerned only to sow dissension and to disrupt our economy if they can. They make a meretricious appeal to the traditional loyalties of the dockers, who too often lend a ready ear. It would help enormously if the gravity of our national situation could be brought home to these people. I am sure that as patriotic citizens they would respond. At present they have no conception of the true state of affairs, and I have no doubt that that is true of many other industries. No one could undertake this task so effectively as the trusted and respected leaders of the Labour Party. I venture to say that a heavy responsibility rests on them. But the impression of disunity created by recent discussions is not a good starting point. That is why I deplore the tone of so many public declarations after the restraint a-id studied moderation of the Chancellor's speech. It may not be very easy to do what I suggest. Many illusions will have to be abandoned, ant some words will have to be eaten. Is it, however, too much to hope that they will yet prove equal to the undoubted demands of the situation?

Finally, I would say this. I believe that the effort necessary to restore our situation is not likely to be such as seriously to upset our way of life, The cuts in consumption, admittedly necessary, are certainly not more than two or three years' normal increase in production in a healthy atmosphere should be sufficient to make good; and this, surely, is not a large price to pay for greater military security and a more solid basis for our economic position in the world. On the other hand, not to make the effort involves the risk of real disaster all along the line. My Lords, now is the time to decide.

4.22 p.m.

VISCOUNT BRUCE OF MELBOURNE

My Lords, I am sure it will be the desire of all your Lordships that I should express to the noble Viscount who has just resumed his seat our deep appreciation of the speech which he has just made. We should also like to congratulate him upon his manner of presenting the case he submitted, and the statesmanlike grasp he showed of the situation that faces this nation at the present time. We in this House pride ourselves that on any great issue of national importance some of our members, through years of experience, are roasters of the subject and can bring to bear upon its consideration the wisdom they have acquired. We have had only to listen to the noble Viscount to-day to grasp the fact that the number of those who can rate among the wise men and who, by their help in debates in this Chamber, can give leadership to the country, has received a notable addition to-day.

I do not want to dwell at great length on the internal situation of this country, or on the steps that should be taken to improve it, but I do want to emphasise what has just been said—namely, that at the present moment there is a deep lack of appreciation of the seriousness of the situation in which we find ourselves. I regret that that lack of appreciation seems to extend to some political leaders. I say that at the risk of being a little wearisome, because I have a feeling that we are always apt to talk a little too generally and not to pin down facts to the everyday life of the nation. The first fact that we have to remember is that the finances of a nation is exactly the same as the finances of an individual. The individual can enjoy only those things that his current income and his savings are sufficient to pay for The same applies exactly to the nation.

Looking at our position a year ago, one finds that our expenditure upon food and raw materials then exceeded by some £500,000,000 the value of what we were able to export in order to pay for our imports. During the game period there was a tremendous reduction in what I might call our savings. By strenuous efforts, and because of the great generosity of the United States, between September, 1949, and the middle of 1951 we increased our savings (by which I mean our gold and dollar reserves) from 1,340,000,000 dollars to 3,867,000,000 dollars—a very notable increase. During the last six months of last year, however, we reduced our savings by 1,532,000,000 dollars and were left at the end of the year with only 2,335,000,000 dollars. We are told that if we do nothing about it, those reserves or savings will, over the next six or nine months, disappear, with the dire results which the noble Viscount has indicated. I suggest that if such were the conditions that faced any family, whoever was responsible for the family would not hesitate to take any step, however drastic, to meet them. I believe the Government realise what are the facts and that they are going to face up to them.

In this regard I wish to say only one thing concerning the social services. All political Parties in this country are taking the attitude that for political reasons they must not say one word which would indicate an intention to do anything drastic about those services. On this I can speak with some experience. I had to face the issue in 1929, in Australia, which, after all, was the laboratory for the social services. The noble Viscount has said that, whatever is done, the social services of this country will still lead the world. I am not going to challenge him on that statement, but I am going to take a pretty careful look to see where Australia, as compared with this country, gallops on the social services field. Certainly in 1929, when I had to face this issue, Australia was well ahead of the whole world in social services. In our desire to launch social services we had outrun our national income, and in July, 1929, I told the people so and precipitated an Election. When the cloud of the 1929–32 economic crisis was seen on the horizon, I said we had to take action because we simply could not afford all we were spending on social services. I was heavily defeated in that Election, but within eighteen months the Labour Government which succeeded me had to do far more drastic things with regard to the social services than I had ever suggested. So your Lordships will realise that I have some reason for refusing to keep off this subject.

I am absolutely convinced that the situation in this country at the present time is such that we cannot afford the level of the social services we now have; that if we insist, for political reasons, on maintaining them, the value to the people of those services will be diminished because of the continuing diminution in the purchasing power of the pound; and that any Government which continues those services as they now are will, so far from helping the people, be doing them a tragic disservice. On the other hand, if only we will face realities at this moment, if only we will take any action that is necessary and as drastic as is necessary, with regard to the social services, irrespective of what the political results may be, I believe we shall be serving the people. When we have set our house in order we can then go forward to the realisation of what is the ambition of everybody, irrespective of his political views—namely, the progressive advancement of the social well-being of the people of this country. That is all I want to say on what I have described as the domestic side.

In consequence of the seriousness of the situation at the beginning of this year, the Finance Ministers of the Commonwealth were called together with the object of framing measures by which the drifting away of our gold and dollar reserves could be stopped and our finances could be put into equilibrium by the second half of the present year. I understand that that Conference was very successful. It recognised that this was only the first step—what I have described as a short-term remedy. The further objective is the achievement of a permanent gold and dollar surplus by the rebuilding of those reserves, working eventually to the convertibility of the pound sterling into dollars or any other currency.

I suggest that while the first step, namely, the reduction of imports and the attempt to expand exports to bring about this short-term equilibrium in the present year is obviously right, it can be no more than an expedient to meet an immediate situation; it cannot be the eventual solution of the problem. Let me take first the question of imports. There is a limit to the extent to which we can reduce imports into this country—for food, there is a very definite limit. We must import a great quantity of food. For raw materials there is also a definite limit because, if we go beyond a certain point we shall defeat our own objective of expanding production and exports. Therefore we cannot go all the way on that route. The problem, to my mind, goes even deeper than that, if we are seeking the long-term remedy. Britain, by her great efforts, to which tribute has been paid, in 1951 exported to the world in volume—not in value—85 per cent. more than she did in 1938. A great industrial expansion has also taken place in a number of other countries, and we are now on the verge of the coming back of Germany and Japan into competition in the world's markets. Unless something really radical is done to expand the volume of world trade, there are distinct limits to the expansion of Britain's exports beyond the 85 per cent. extra that she has already achieved over those for 1938. Therefore, we have to consider how that difficulty can be overcome.

At the end of the year 1945 and the beginning of 1946, I had the honour to be Independent Chairman presiding over what was known as the Food and Agriculture Preparatory Commission on World Food Proposals. This Commission, which consisted of eighteen nations—the United States, the United Kingdom, France and a number of others—when it faced that problem came to the conclusion that it could not confine its investigation to food, because food is agriculture, and agriculture is so mixed up in the national economy of every country that it could not be dealt with in isolation. So, greatly daring, we set out on a whole economic survey of the world position. That Commission's Report was published in January, 1946, and the eighteen nations were unanimous. The Report was subsequently endorsed in August of that year joy the sixty-odd nations in the Food and Agriculture Organisation. I still believe that it is almost the clearest and most concise statement of the problems the world is up against that has yet been evolved, notwithstanding the numerous Reports there have been. The conclusion to which that Report came, put briefly, was that, if disaster was to be avoided, there would have to be a great expansion of world trade but that the only method by which it was possible to get an expansion on the necessary scale was by the development of the resources of the backward countries. That Report also arrived at another conclusion—that it was essential that steps should be taken to create a greater stability in the prices of the main food products and the basic raw materials.

Notwithstanding the fact that that Report was endorsed by sixty-odd nations, nothing happened about it for some time. At the end of 1948, the United Nations in their Assembly in Paris suddenly woke up to this vital point of the development of the backward nations, and passed a unanimous resolution that action had to be taken to get on with that development. Within a month, President Truman had nude his Inaugural Address and in his Point IV proposals had brought out the importance of technical assistance for the backward countries. From that date, thing; have gone at an astounding pace. The technical assistance suggested by President Truman has resulted in about the biggest co-operative effort on an international scale that I have ever seen between the United Nations and all the specialised agencies of the United Nations. The work of technical assistance to the backward countries of the world is progressing at a great speed, and the foundations have now been laid. This step has now to be followed up by actual developments which can be brought about.

On the question of what can be done about the development of these backward countries, there have been four of the most extraordinary important documents and Reports with which the world has ever been faced. The first, published in 1950, is known as the Gray Report, which was A Report to the President on Foreign Economic Policies. The second was the Rockefeller Report called Partners in Progress—a Report to the President by the International Development Advisory Board, and it was published in March., 1951. There was also a Report on Measures for the Economic Development of Under-developed Countries, which was published in May, 1951, by a group of experts appointed by the Secretary-General of the United Nations. Finally, there was a Report, published in November last, called Measures for International Economic Stability, a Report by a group of experts appointed by the Secretary-General of the United Nations. The note which runs through all these Reports is best expressed by an extract which I will take from the Rockefeller Report. That says: The prevailing economic pattern of the under-developed regions could be revolutionised by a constant flow from the Western industrialised world of several billion dollars a year. I am not going into those Reports but if any of your Lordships takes the trouble to read them he will see that that is the note struck throughout, that the money can be found by the Western nations and that it is essential, not merely in the interests of the under-developed countries but also in the interests of the more advanced countries and of all the industrial countries. They go so far as to say that, unless this course is pursued, there is no answer to the economic problems facing Britain and America and the whole world to-day. Personally, I entirely agree with what they have said, because it is what we said in 1945 and 1946, and I have been preaching it ever since. It is startling to find such unanimity in every one of these Reports coming from different sources, all of them stressing that this is the only answer to the world's economic problem at the present time. The last of these Reports—the one published in November, 1951—also deals with the question of stabilisation of commodity prices. After setting out its considered arguments on the action that should be taken, the Report finishes up in this way: for all these reasons we feel that the time is now ripe for a new concerted attempt to achieve greater stability in the field of primary products, and that there are firmer grounds than existed in the past for hoping for success. For the United Kingdom, in particular, and for all the industrial nations, I suggest that this question of more reasonable stability in prices is one of absolutely vital concern. In the second quarter of 1951, the volume of the world's industrial production was about 90 per cent. above the 1938 level. But the world's production of food crops in 1950–51 was only 9 per cent. above the level of 1934–38. It is difficult to obtain accurate statistics with regard to raw material production, but when one considers the prices at which raw materials are selling to-day, even allowing for the demands of rearmament, the suggestion certainly is that there is a shortage in the production of raw materials. And it is vital to the industrial countries that that shortage should be overcome. Look at the effect on this country. It is well known that Britain's balance of payments difficulties are largely due to a deterioration in her terms of trade. In 1951, the average price of Britain's imports was four and a half times the 1938 level, but the average price of Britain's exports in 1951 was barely three and a half times the 1938 level. If the price of our imports had risen no more than the price of our exports, our balance of payments for the rest of the world in 1951 would have shown a surplus of about £300,000,000. instead of an actual deficit of around £500,000,000. It must surely be clear that it is essential to all industrial countries that the production of raw materials should be stimulated and that there should be abundant supplies so that reasonable prices will prevail. Unless action is taken on the right lines these shortages will tend to increase, despite these prices, by reason of the fact that without any certainty as to future prices it is almost impossible to get people to go into the production of the things that are wanted.

The argument I am trying to put forward is that unless a concentrated effort is made to increase the production of food and raw materials by the development of the backward countries, all the industrial countries will find themselves increasingly in trouble, and this country more so than any other. What I want to ask is: What is the attitude of the Government, and what are they going to do about it? The Government have been represented at conferences where these things have been discussed. The United Kingdom has been a party to discussions at the United Nations, notably those of the Economic, Social and Cultural Organisation which called for a Report. What is the Government's attitude now towards the Reports which have been published, and what is their attitude towards the demand for more action and for putting greater drive into this whole effort?

The only other matter with which I wish to deal is this. I know that as a result of the recent meeting of the Finance Ministers in London, as the second stage of efforts to deal with the dollar-gold problem, it is visualised that a great expansion of production in all Commonwealth countries is to be brought about. With that I am entirely in agreement, and I shall look forward with great interest to see how it is planned to achieve this. But I see most frightful difficulties in the way of doing so unless we "go slightly tough" on certain matters. I will indicate where I think we have to be "tough." At the present time, certain ideas to which we all give lip-service are current. We accept non-discrimination, most-favoured-nation clauses, and the principle of no increases in preferences. I suggest that these things will have to go by the board. This, no doubt, will cause considerable outcry in the United States, but to my mind it will be more noise than real fury. These things are to a great extent a survival of the days when Mr. Hull was guiding the fiscal polices of the United States. They have remained in the State Department as an ideal, but America has gone a long way since then and has changed very substantially in her views.

I learned recently of the position of the organised manufacturers in the United States, the apostles of the high tariff, the people who are supposed to be more closely together and to have more power in Congress than anyone else. They invited Mr. Harry Hawkins to make a report on the economic position of the United States. He did so, and his report, which was issued before Marshall Aid terminated, said that Marshall Aid must be continued up to the last possible date, and that after Marshall Aid had ceased America had got to make grants and give assistance to the world to the maximum that public opinion would tolerate. He said that they had got to spend the next five years lending to the whole world—almost lending indiscriminately—and that at the end of the five years they had to be prepared to put up with an adverse trade balance, which was the only possible position for a great creditor country. And the manufacturers "swallowed" what he said—indeed, it was endorsed by the manufacturers of the United States. I venture to say that the United States are moving very far they now realise that, while they are essential to the world, the world is also essential to them. Americans have the intelligence to recognise that anything which is going to strengthen economically and financially the British nation, even the whole sterling area, would best suit them also.

What I am pleading for does not mean interference with the domestic situation—I have said my little bit about that. But on the wider aspect I reaffirm my view that there is no conceivable answer to the problems of this country or the world in the economic field unless we push forward with the development of the backward areas, together with the creation of new food supplies and supplies of raw materials. When these raw materials and foodstuffs are produced they will bring about an enormous expansion of the world's trade, which is the only sure foundation upon which the future can be built.

4.50 p.m.

LORD MACDONALD OF GWAENYSGOR

My Lords, when I left the House last night I was under the impression that I should be following the noble Viscount, Lord Waverley, but overnight, without any consultation with me, the programme was rearranged. Therefore, I do not have the delightful responsibility of offering to the noble Viscount our congratulations on his maiden speech. But, having listened to his speech, I must say that, had I been following him, I should have had to revise what I intended to say. The noble Viscount promised that he was not going to be censorious. He will never be nearer being censorious than he was today. We have many privileges in this House, and new recruits do not always appreciate them and sometimes they appear to take advantage of them. I thought the noble Viscount's references to my noble friend Lord Pakenham went very near the line indeed. I know they were not intended to be a breach of privilege. It seems that one can hardly be guilty of such a thing in your Lordships' House, but on one or two occasions I thought the noble Viscount went very near to it.

I would say a word of warning to the noble Marquess, the Lord Privy Seal. I listened to the noble Viscount's maiden speech in another place, when he made a great impression. I did not hear another speech by hilt from the Back Benches, because he was immediately elevated to the Front Bench and elevated, I think, to the office of Lord Privy Seal. I would warn the noble Marquess that there are occasions when history repeats itself; and this may be one. I thought to-day that the noble Viscount's speech gave indications of policy which ought not to come from the Cross Benches. There was an indication of possible policy in the forthcoming Budget which may, of course, be intelligent anticipation. However, though some parts of his speech did not please us on these Benches, I assure the noble Viscount that whenever he chooses to intervene in debate he will always get a warm welcome.

Along with the noble Lord, Lord Balfour of Burleigh, the noble Viscount thought it necessary to emphasise the need for Labour leaders to take on themselves the task of making the masses appreciate the gravity of the crisis, although the noble Viscount did not go quite so far as the noble Lord, Lord Balfour of Burleigh, and gave us an indication of the way in which we should do it. That was, to applaud everything done by the Conservative Government. That is asking a lot from us. There are some things that we would applaud. In so far as they continue in the footsteps of their predecessors, I should approve, and it is remarkable how they are doing that in many directions. But I should not like the responsibility of applauding everything done by the present Government. I am sorry that the noble Lord, Lord Balfour of Burleigh, is not in his place because I do not like making personal references to noble Lords in their absence. He seemed a little concerned about the attitude of the Labour Party towards the cuts in the social services.

Let me make the position plain. We are anxious to know, and I hope that the noble Lord, Lord Woolton, will tell us, what is the precise purpose of the cuts in the social services. The purpose could be to produce revenue. I should hardly think that was the purpose, because the amount that can be secured is so small that I need not dwell upon it. The purpose could be to diminish or remove abuses. That would be a worthwhile purpose. The noble Lord, Lord Blackford, in his usual courteous manner, reminded us that the Labour Government had some responsibility for the initial steps taken. I agree; but in their wisdom they decided not to pursue that policy. They decided that the cost of administration involved was so high it was not worth while. I have heard in this House more frequently than I like references made to "a deluge of medicine" poisoning the country.

VISCOUNT SWINTON

That came from a noble Lord behind the noble Lord who is now speaking.

LORD MACDONALD OF GWAENYSGOR

I know the originator of that phrase. Between 1945 and 1951 the Labour Government brought a new set of people into the number of those who received free medicine for the first time. Any new scheme of this kind of necessity has its abuses in earlier stages. When the first health scheme was introduced before the First World War there were many abuses, and it took time to level them out. The people who were then brought in are now accustomed to receiving free medicine, and it is not that section who have caused the deluge of medicine. It is the new section who enjoy free medicine for the first time. Ask any medical practitioner who are the people who have taken full advantage of free medicine during the last three years and he will say that it was not the old but the new members of the Service who made the rush. If the purpose is to reduce or remove abuses, then we approve of the cuts, though we think it might have been possible to achieve this by a better method. This method imposes a burden on those with slender shoulders to carry it.

The cuts could have a third purpose, which was referred to by both the noble Viscount, Lord Waverley, and the noble Lord, Lord Balfour of Burleigh: they could have the purpose of bringing home to the workers of the country the gravity of the crisis. Sometimes I feel that in this House we have these economic debates in such a rarified atmosphere that it is difficult to breathe, although it is an atmosphere which economists and financial experts seem to find congenial. It seems to me at times to be deliberately created. The late Earl Lloyd George once referred to financiers and bankers as "penguins" and I often wondered why. The possible reason is that penguins have an inordinate capacity for gobbling up everything within their reach. I find that financiers and bankers are gifted with the capacity to give the impression that they are carrying very heavy burdens. I ask your Lordships to believe that the masses whose support we must secure, and whom we are anxious to get on our side, if any programme is to be successful, are carrying heavier burdens than any financiers or bankers I know. We have to realise their attitude to this problem.

The economic crisis and subjects of that type are discussed from time to time at branch meetings, but the approach to the matter at those meetings is entirely different from the approach to it in your Lordships' House. They see the crisis entirely differently. They agree that increased production and reduced consumption may be the means of solving the crisis; but they realise that there is a third factor, which is sometimes overlooked in your Lordships' House—namely, that equitable distribution will help both. The disastrous history of industrial life in this country shows us what it means to have inequitable distribution. I could give instances where the distribution in the coal industry was wholly inequitable. Twenty-two years underground produced for me less than £2,000. But the coal owner of he colliery in which I worked—and I question whether he knew where the colliers was—received over £100,000 in the same period. We can rest assured that we shall not get the production that we are told by noble Lords opposite—anti I agree—is essential to carry us through this crisis, unless we maintain the good will and secure the co-operation of the workers.

It is all very well for the noble Viscount, Lord Waverley, in his maiden speech, to remark how different things are to-day from what they were in 1945, and to say that the ex-Prime Minister had no right to suggest that things were worse then than they are now, because they were not. I would say this to the noble Viscount. Had it riot been for the Welfare State which we have built up since 1945, we should not have received the good will and the co-operation of industry that has led to increased production. It is utterly impossible to separate equitable distribution from production. I suggest that each of these proposals should be examined from that angle. Does it stimulate good will in the industry? Does it give to the worker a sense of fairness which helps him to give of his best? It is tests of that sort which should decide the fate of any proposal; and I am not sure that all the proposals put forward by the Government could stand that test.

The noble Viscount, Lord Swinton, said yesterday that now is not the time to have a Royal Commission m the question of incentives. I agree. But let it be remembered that the Welfare State was, and is, an incentive to the worker. I know there is always danger—and I am afraid noble Lords opposite are sometimes too conscious of the dangers—if you say to a man: "No matter what eventuality arises, whether you fall sick, are injured in industry or become unemployed, you will be well and fully covered to meet all eventualities." There is the possibility that that may demand a higher standard of morality than we enjoy to-day. Of course, there is a danger there. I have never questioned that personal financial gain has been a very effective incentive to human effort; it is not by any means the highest, but it has been a most effective incentive. But we shall certainly need something higher to get through our present troubles. The appeals we make are to a higher incentive than personal financial gain. All your Lordships appeal for something higher than personal financial gain now; and we all know that we shall not get through this crisis without a response to some higher incentive than personal financial gain, which is not a very noble incentive. The noble Lord, Lord Woolton, from time to time has told us, and I agree, that there is nothing wrong in making profits; that there is nothing wrong in getting a return on a financial investment. But what I say is this: the social services, the education of a man's children, the health of his wife and the knowledge that his future offspring are all, to some extent, safe, are incentives to him.

There is a danger that in our anxiety to get rid of this crisis we may weaken that incentive. I agree entirely that it would be disastrous to weaken the incentive of personal financial gain until we can replace it by a higher and nobler incentive which will be equally effective. I sometimes think that the Labour Party did presuppose a higher standard of morality when they introduced some of their schemes. Full employment is a test of morality. When a man knows that he cannot be discharged he may take advantage of that position, and he must have a high moral standard not to do so. Many employers had not that standard with regard to unemployment, but used unemployment as a weapon to beat down those in work. Many of my colleagues in industry, and many coal face workers, realise that. But not all the employers realise it. There are some glorious exceptions, but employers in many cases used unemployment as a means to menace those in employment. What do the workers say? "Very well. If that is what they do in unemployment we are now in full employment; we have now the whip hand, and we will use it." That is very dangerous. Full employment demands a high standard of morality on the part of the worker, and unemployment demands a high standard of morality on the part of the employer.

On the question of rearmament, the financial pundits appear to hold differing views. Some say that what has happened since Korea has intensified the crisis greatly, some say it has intensified it only a little, and others say it has intensified it scarcely at all. But there is general agreement that had it not been for Korea and the warlike atmosphere in the world, this crisis would not be so big a problem. My noble friend Lord Silkin yesterday tried to show that, whatever labour and materials are used up in rearmament, there is so much less labour and materials to be used elsewhere. After all, no one on this side of the House suggests that rearmament as a policy of preventing war is not a sound policy. That was, and still is, our policy. But I do want to emphasise that we are getting it over to the people as a means to prevent war. We are telling them that this is the best method to preserve peace, and I agree that it is.

Reference has been made in this debate to the fact that the Chancellor of the Exchequer said that this country has been deteriorating in the international sphere for the last fifty years. I have the highest regard for the Chancellor of the Exchequer. Many noble Lords saw him assist Lord Templewood (as he now is; he was Sir Samuel Hoare in those days) pilot the tremendous India Bill through the other place, and will remember his stone-walling and his grasp of the subject. When he referred to the last fifty years he was not altogether confining that reference to export and import problems. He saw a world that had changed during the last fifty years, and it is a world which will change much more during the next fifty years. He could see countries which were customers then and were now competitors.

Frankly, I am not very worried—although I believe diagnosis is a vital condition before you begin to apply remedies—as to how we got into this crisis. I am worried about how we can get out of it. I am not concerned about whether it has taken fifty years to get into the crisis, but about how long it will take to get out of it. In bringing the truth home to our people we must not let them believe that this is a short-term crisis. This crisis will not be removed in this Parliament—and that would be just as true if we sat where noble Lords opposite are now sitting. This is a crisis of more than one Parliament. Suppose we achieved our noble purpose of preventing war and we get the Russians to talk. The crisis would still be with us for quite a long while after that. What is happening is that the masses of the world are on the move (it is useless to try to ignore this) and they are demanding a higher standard of life, just as the countries in the Middle and the Far East are saying: "The United Kingdom can have her prosperity, but not at our expense." That is what you and I would say if we were in their position. They appreciate more than ever that much of our prosperity in the past has been enjoyed at their expense, but they sometimes ignore the benefits which have accrued to them from our connection with them. In my opinion, we have given more to the world than we have received. Britain can be proud of her Commonwealth.

Equitable distribution is not easy of achievement. My noble friend Lord Pakenham said how pleased he was that he had not the responsibility for the Bank of England. If he is pleased about that, I can assure your Lordships that I am ten times more pleased that I have not that responsibility. I think he might do something with it, but it is a tremendous responsibility. If we safeguard peace by the effort we are making in rearmament, we shall still have the crisis with us. But we may not safeguard the peace. There is quite a possibility that, despite all the efforts we are making, war may ensue. If that happens, I am sure that the Western Powers will be victorious. But will the crisis be over then? I see no hope of a successful war ending the crisis. It may be that at the end of the Third World War we can deal with the men in the Kremlin as we dealt with Hitler and his cohorts at the end of the Second World War. But we shall not kill Communism by war. We may kill Communists and non-Communists by the million, but not Communism. I ask the noble Lord, Lord Woolton, between now and the end of the debate to apply his mind to the question whether it is wise to do what I am sure the Russian leaders want—namely, to create uneasiness and suspicion in the minds of the workers. I am not one of those who would deny that the Conservative Party have done a great amount of social reform work. But there is a feeling among the workers that they have always done it as a means to keep the worker quiet and satisfied.

THE LORD PRESIDENT OF THE COUNCIL (LORD WOOLTON)

It is very unworthy of them if they think that.

LORD MACDONALD OF GWAENYSGOR

I agree that it may be very unworthy, but the fact that they think that the Conservative Party is not as enthusiastic in support of social services as the Labour Party influences their conduct. It may be wrong, and it may be unworthy, but I know it to be in their minds. There are few noble Lords in this House in closer contact with the rank and file of the workers than I am. I know it to be in their minds, and I am very anxious. If this Government can pull us through this crisis successfully without endangering the morale of this country, I, for one, shall be extremely pleased. I am not concerned with which Party gets the credit so long as the job is done. I know that it is in the minds of the workers that the Tory Party is not as sympathetic or as enthusiastic for social reform as the Labour Party. Let it be remembered that we are very evenly balanced in this country-—rather too evenly balanced. On March 4—I am asking for no disclosures—the Chancellor of the Exchequer will be introducing his third set of proposals. In his maiden speech the noble Viscount, Lord Waverley, made references to food subsidies. He gave an indication that he did not expect much to be done, but he expected a start to be made. I beg the Chancellor of the Exchequer not to overlook the other statement of the noble Viscount: that there will be millions in this country who will "feel the pinch" if there is any lowering of those subsidies. I ask the Chancellor to provide machinery to see that their standard of life is not lowered by any manipulation of the food subsidies.

I am very anxious that this country should do something about the menace of Communism. There is a real menace here. Some fourteen months ago I left New York, having spent three months at the Fifth Assembly. On the right of the United Kingdom delegate sits the delegate of the U.S.A. and on his left the delegate of the U.S.S.R. The alphabet is a little unkind sometimes. I watched my next door neighbours. There were times when I had consultation with them to try and find out what they were thinking. Mrs. Roosevelt sat on my left, and I could get some idea of what she was thinking. I would then turn to my Russian comrade. He would talk, but I was seldom the wiser at the end of the talk than I was at the beginning. Now he is not the only Russian with that gift of saying a lot and giving nothing away. I am satisfied that the Russians will have us, exactly where they want us if we are not more careful. They are getting the whole world involved in heavy rearmament so that the various countries are obliged to inflict cuts on social services on those who are not in a position to withstand those cuts. The Russians are very far-sighted. Communism can be fought in this or any other country by removing those things which create Communists. During last weekend we had instances—very disturbing to me—of workers in different industries deciding upon industrial action to frustrate political policy. No man who loves this country could defend an attitude of that type. We must all do all we can to defeat it. And the leaders of every trade union, to their credit, have done all they can to stamp it out in its early stages. But we cannot afford to ignore those indications. There is evidence that people are at work in different parts of the country, creating these disturbances. In dealing with this very grave crisis I do not want the policy of this Government to play into their hands.

I hope that on March 4 confidence will be given to the lower paid, so that they will do all they can in their particular industries to pull us through. They, and they alone, can get us through this crisis. We in this House can never do so. What the workers do matters a lot. I am anxious that the policy pursued by this Government—I am not concerned with any electoral advantage—shall be a policy that will strengthen and give hope to those who have not had too good a time. I shall leave the matter there, in the hope that the noble Lord, Lord Woolton, will be able to give us some encouragement, without, of course, disclosing the intentions of the Budget to be introduced on March 4.

5.21 p.m.

LORD BLACKFORD

My Lords, may I be allowed, as an old acquaintance, to utter one word of warm welcome to the noble Viscount, Lord Waverley? He has made a most valuable contribution to our debate to-day, and I am certain that on many future occasions he will make valuable contributions, not only on this subject but on the wide range of subjects which his distinguished and varied career has fitted him to expound.

We have listened during the last two days to nearly twenty speeches, most of them able and learned, and some of them highly specialised. Indeed, my noble friend Lord Pethick-Lawrence devoted the whole of his speech to the fact that the bank rate has been raised by one half of 1 per cent., and he described this as a step on the road to Hell. I thought that Mr. Dalton's policy, which was the direct opposite to that, was very definitely an inflationary one in its results, and that Mr. Dalton had not been looked upon as one of our most successful Chancellors of the Exchequer. I was therefore rather surprised that Lord Pethick-Lawrence took a view that seemed to me in accordance with that policy. There have been many other specialised speeches dealing with sterling balances, the convertibility of the pound, and other complex subjects of that sort. But are not all these things ancillary and subsidiary to two main facts—quite simple facts? One of these is that we are spending more than we are earning; and the other that we are buying more than we are selling. If those two processes were each reversed all would be well, and in due course the other; problems would automatically solve themselves. But if those two processes are not reversed, then they will lead us to national bankruptcy, and national bankruptcy leads to dictatorship, to the end of a free democracy and, of course, to the end of the Welfare State.

I propose to devote my few remarks entirely to the consideration of the Welfare State, because that is the only economic fact that is of the slightest interest to the electorate. The first point I would make about the Welfare State is that it is very easy and popular to create. It is created entirely by politicians, who in fact compete in its creation, and have been doing so for many years—until during the last six years the Socialist Party have, as the noble Lord, Lord Brand, described it yesterday, put a roof on a building whose walls were not yet strong enough to carry it. But although it is easy and popular for the politicians to create a Welfare State it is quite a different matter to maintain it; and the maintenance of the Welfare State is not a matter in which the politicians can be of much assistance. The maintenance of the Welfare State depends entirely on the exertions of the people themselves. If the exertions of the people result in the creation of enough wealth to maintain the Welfare State, then it is possible to maintain it. If not, then the Welfare State cannot be maintained.

In listening to and reading speeches of noble Lords opposite, and of members of the same Party in another place, I sometimes feel that very few of them appear to realise the fact that the maintenance of the Welfare State depends not on the benevolence of the Labour Party but on the exertions of the workers. I submit that at present the exertions of the workers in this country are not sufficient to maintain the Welfare State, in view of the increasing competition from so many other parts of the world where the standard of living is much lower and the exertions of the workers are harder. We are already seeing that happen in the fact that unemployment is beginning to rear its head in Lancashire and Yorkshire, owing to competition from Japan. I was reading in my newspaper only this morning that our trade with Pakistan, in both yarn and textile machinery, is dropping to a negligible figure compared to that of a few years ago. We have lost that trade to Japan. The fact is that the exertions of the people in present circumstances are not great enough to maintain both the Welfare State at its present height and our rearmament programme on its present scale.

In the peroration to his very powerful speech last evening my noble friend Lord Balfour of Burleigh said that the Welfare State is "hanging by a thread," which is true. He went on to say that the bulk of the people are quite unaware of that fact—and that is equally true. He made an appeal for the co-operation of noble Lords opposite and their Party in bringing home the real truth of the economic situation to the people. He said, finally, that whether or not events turn out happily for us depends to a large extent on the attitude adopted by the Party of noble Lords opposite. In the light of that peroration—to which I entirely subscribe—I should like to consider the speeches made yesterday by the noble Lord, Lord Pakenham, and the noble Lord, Lord Silkin.

Lord Silkin, following the lead of Mr. Bevan, said that we are attempting an impossible task, and that we cannot maintain our rearmament on its present scale and the Welfare State at its present level. I agree with that. I agreed with it when Mr. Bevan first said it—indeed. I have thought it myself for a long time. But Lord Silkin went on to say—again following Mr. Bevan's lead—that the Welfare State must take first place and that rearmament must take second place; and that, having decided on what we thought a suitable Welfare State, we ought to spend what money was left over on our rearmament.

LORD SILKIN

That is not quite what I said. In that context I did not mention the Welfare State; I referred to an agreed standard of living—leaving out of the matter the question of a Welfare State.

LORD BLACKFORD

But the Welfare State creates the standard of living. I take the two terms as being synonymous.

LORD SILKIN

I did not intend to suggest that they were synonymous. I recognise that it may be necessary to reduce the standard of living.

LORD BLACKFORD

That is true. The noble Lord did say that. I noted down what he said and I have his words here. He said that the right approach would have been to see what our total resources were and what was required … in order to maintain an agreed standard of living for our people (it might have been fixed at a lower level than the present one, but it should be an agreed standard of living), and then devote what was left to rearmament. I feel that that would have been much better than fixing what I regard as an arbitrary figure for rearmament and then leaving the remainder for the people of this country to maintain themselves. Surely my interpretation of what the noble Lord said is perfectly accurate? I say that he puts the Welfare State before rearmament: that is quite obvious. It is a most unfortunate thing that Marshal Stalin does not take that view. He takes the opposite view. He puts rearmament before the Welfare State. It is for the people of this country to decide what their view is about it: whether they think it better to maintain their Welfare State. and run a grave risk of being attacked by Russia at a disadvantage which may lead to total defeat and disaster, or whether it is better for the time being to forgo some of the advantages of the Welfare State in order to defend themselves and be prepared to prevent a third World War. I cannot help feeling that the line of opposition likely to be taken by the Socialist Party with regard to our economic affairs is that they will argue more and more that less and less expenditure should be appropriated to rearmament, and that the Welfare State should be maintained at all costs. It will be for the Conservative Party, the Government, to decide to what extent they are prepared to combat that line and take the increasingly unpopular view that for the time being rearmament must come first, that there will not be enough money for both, and that there may temporarily have to be some diminution in the Welfare State until that time of rearmament is passed.

The noble Viscount, Lord Waverley. made some reference to the speech of the noble Lord, Lord Pakenham. in which he talked about the small charge on prescriptions which, after all, was introduced by his own Party. It is true, as the noble Lord, Lord Macdonald, said, that they did not submit it to Parliament, but that may have been due to the fact that they were not returned to power and, therefore, did not have an opportunity of doing so. Anyhow, it is a very small matter, as I submit, but the noble Lord, Lord Pakenham, made it the occasion of talking some rubbish about the rich and the poor and so forth, which is just the usual class hatred "claptrap" wrapped up in suitable language for your Lordships' House. It shows the line of opposition which will undoubtedly be taken throughout the country. If a statesman of Lord Pakenham's stature begins at this early date to talk in that fashion, you may be quite sure that his colleagues in another place, and throughout the country, and the canvassing propagandists all over the place, will be putting that across all the time. The noble Lord, Lord Pakenham, went on to say, in one of the concluding sentences of his speech, that any onslaught on the Welfare State will be resisted fiercely. The idea of that sentence is to persuade his hearers that, if it were not for the wicked Tories, with their horrible ideas, the Welfare State would be all right; that it is wholly those wicked Tories who are trying to take away the Welfare State. That, as I tried to point out earlier in these few remarks, is a complete deception.

Both lines of argument are completely deceptive. First of all, to think that it is possible to preserve the Welfare State merely by further taxation of the rich is a delusion—incidentally, I have often wondered what is the precise definition of "rich". At what point does a man cease to be an honourable, praiseworthy and thrifty citizen, hard-working and beloved by Lord Mackintosh and his Savings Movement, and become a hard-faced capitalist, grinding the faces of the poor and therefore fit to be cartooned and caricatured, misrepresented and robbed, and all that, ad lib.? I assume that perhaps the dividing point is when he becomes a surtax payer. If that is so, he has very few votes as a surtax payer, which is a great advantage.

Secondly, it is a great error to suppose that it is possible to get very much more out of him. Many of Lord Pakenham's colleagues are much addicted to the idea of a capital levy. Mr. Gaitskell himself has been advocating it. Mr. Douglas Jay, who is now the economic adviser of the Daily Herald, has long been a keen advocate. Mr. R. H. Crossman, who has now become assistant editor of the New Statesman, is another. They all come from Winchester—I do not know what it is there that breeds this attitude! Sir Stafford Cripps imposed a 5 per cent. levy on capital way back in 1948. That levy up to date, four years later, has produced exactly £106,000,000. I do not know what is Mr. Gaitskell's idea of a real, good, swingeing capital levy, as advocated by Mr. Kingsley Martin in the New Statesman. Let us assume that it is 10 per cent. Does anybody suppose nowadays that you would collect £212,000,000 in four years; and if it were possible to do any such thing, what does it amount to, compared with an annual Budget of approaching £5,000,000,000 a year? It is child's play. I submit that it is a complete deception of the working classes and the electorate as a whole to pretend that it is possible to maintain a Welfare State simply by further taxation of the rich.

The fact is that the Welfare State is paid for by the masses of the people themselves. The noble Lord. Lord Brand, hit the nail clean on the head yesterday when he said that it was an absolute miracle that people call the Health Service free when, as a matter of fact, it costs nearly £400,000,000 a year, every penny of which is paid for by the taxpayer. All these observations of mine lead me to believe that the noble Lord, Lord Balfour, is certainly far too optimistic in his hope that he will receive any co-operation from the Party of noble Lords opposite in the unpleasant actions which will be necessary on the part of this Government. Unpopular and unpleasant duties will have to be shouldered by the Government themselves, the Conservative Government, supported by the Conservative Party. They will be unpopular and they will be misrepresented. All those of us who have been Members of the Lower House are well aware how uncomfortable and distressing it is to have to go into the Lobby and register votes for measures which you know will be unpopular in your constituency, to have to meet the grumbles of your constituents. Perhaps your majority is only a slender one, you feel it slipping away from you, and it is almost certain that you will lose your seat at the next Election, a fate which all Members of Parliament wish to avoid.

None the less, I hope and believe that the Conservative Party and the Government will do their duty in this matter, however unpleasant it may be, however unpopular, and however it may be misrepresented. It may well be that the effects of the necessary measures which they have to take will not be fully realised during the lifetime of this Parliament. It may well be that they will be defeated at the next Election, just as was Lord Bruce in Australia, as he told us in his interesting speech earlier to-day. That does not matter. The Socialist Government will return to power, and it will be only a short time before the Conservatives are back again. But if they do not do their duty during this Parliament, then in fact they will be out for good, because lifelong Conservative supporters will feel that this is their last chance to do what they believe is right for the country. If we fail to do it this time, then we are not worth voting for another time. Indeed, a business friend of mine said to me only the other day, that if the Conservatives do not do their duty in this Parliament he would himself vote for Aneurin Bevan.

5.42 p.m.

VISCOUNT ST. DAVIDS

My Lords, in these days, when so many great changes have recently taken place, and now that we are in what some people hope, and I myself hope, will be a new Elizabethan Age, with King's Counsel being known as Queen's Counsel, I sometimes think that perhaps I ought to open my address to your Lordships with the words, "Noble, grave and reverend seniors." Certainly it is most impressive to stand here and see oneself surrounded in an economics debate with the bankers and heads of major industries in this country. I am particularly glad to see so many bankers around the Chamber, because I wish to put in a plea, which I hope will be welcome to the Conservative Party, for the small business man, the private enterprise man who really is private and really is enterprising. A great many things have been said from this side of the House, and will be said again, about the disabilities of private enterprise in various matters. But where private enterprise falls down worst, in my opinion, is where it has ceased either to be enterprise or to be private.

Here, perhaps, I may be able to answer Lord Blackford on a point that he made. He asked when does a capitalist cease to be a worthy saver of money and become an oppressor. I have always gone with Bernard Shaw in this matter. Bernard Shaw said that the real basic capitalist is the man who buys a spade to dig his garden, who takes the spade in his hand, works with it, and does something useful to the garden with it—with the aid of his capital which is his spade. That is a useful capitalist. In my opinion, the time when a capitalist ceases to be useful is when he forgets what his money is doing, when his money works behind his back, out of his control. In that case his money may well be used for purposes of which, if he studied them fully, he would not approve. One or two of the worst cases of misuse of capital that I have heard have been due not to the wickedness of the capitalist but simply to the fact that he did not know what was being done with his money.

But the people I want to plead for to-day are the little businessmen, the little capitalists, of whom there are enormous numbers in this country—when I say "business" I mean not only those in industry but also those in agriculture. On occasion I have spoken about the troubles of the farmer, but I do not want to go into that, matter to-day. I understand that Lord Noel-Buxton will be dealing with it, and I do not want to trespass on his ground. Many of my own speeches have been firmly trodden on by previous speakers, and I do not wish to follow suit. The small industrial capitalist is somebody of whom the Government should take more care. He is suffering from a number of things, some of long standing, others comparatively recent. The thing from which he suffers chiefly to-day, of course, is the fact that his capital has to cover goods which have gone up enormously in price. and therefore it is stretched to a limit, The Government's remedy for his trouble seems to be to restrict his bank credit, thus making him less able to carry on. Organisations have been set up to help these little fellows but I have always found them to be blatently insufficient.

My experience in this matter is that of one who carries on as a side-line the business of an industrial consultant. A number of these people come to me in an effort to raise capital. My first question to them is always: "Where have you been?" The first people to whom they say they have been are the Industrial and Commercial Finance Corporation. They say that they have put their case before the I.C.F.C. and that they have been turned down. I.C.F.C. money is comparatively cheap money, even in these days, for a little man. The next person they have gone to see, if they have been to see anybody else, is the Development Areas Treasury Advisory Committee, known as D.A.T.A.C., and this body they have almost always found to be equally inefficient. To begin with, the people applying must, to benefit, be in a development area.

Secondly, the Act under which the Committee was set up unfortunately became maimed during a Committee stage, with the result that, although on the face of the Act this Committee are empowered to advise the Treasury to make grants as well as loans, in the course of setting out the clauses it became impossible for the Committee ever to make a grant; and in fact I do not believe that they have ever done so. In regard to loans, the general trouble with getting loans out of D.A.T.A.C. is that they require all the information which they think anyone may possibly ever ask them for. D.A.T.A.C. is a committee of businessmen, with a Treasury secretary, and, trying to get all the information that he thinks a businessman might possibly ask him for, a civil servant will ask questions of the unfortunate applicant for cash until he dies from sheer want of it. If we really are to use the full enterprise of the little man in this country we must do better than that. What generally happens in the end is that the little man looks round and finally finds somebody who provides the capital at a very much more expensive rate; but he does provide it, and that, with luck, will keep the little man alive.

But there is in all this one enormous disincentive to enterprise for the little businessman. Over and over again one finds a small businessman who has developed some intensely valuable product, who has worked up some electrical invention or some device which will do a great deal for industry. He has had a small amount of capital, possibly family money, at the back of him, and he has sat down and developed his invention and spent £30,000 or £40,000 in working up the device; and when he has finished and has brought it to a fully marketable state, he has the plans of his machine or whatever it is, and nothing else, and he has to go to somebody to get it financed. On paper he has not got his money but he has got the marketable value of the machine. But if he tries to sell the marketable value of the machine to anybody on earth, he will discover that it is not as great as the value of the money that he paid to develop the machine. The result is that some bright lad with a "spot" of capital will come into the venture and buy up the whole thing cheaply, and that second man will make a fortune out of it while the inventor will not. A very fine film was made for the Festival of Britain, called The Magic Box—I do not know if any of your Lordships saw it. It was the story of Mr. Friese-Greene who invented the celluloid cinema film and thus made possible what is now a gigantic industry. Mr. Friese-Greene worked all through his life pouring his small capital into this invention, developing it to the point when it was saleable, and then he had to sell it for a song because he went bankrupt in the course of its development. When the industry was booming and making millions, providing fortunes for all those who had then come into it, Mr. Friese-Greene died in poverty; and the best that we could then do for him was to make a cinema film about him.

It would be of enormous advantage to this country if the present Government, who have always said that they support enterprise, could discover some method of making sure that the successors to Mr. Friese-Greene do not die in poverty, having sold their inventions cheaply. The reason I have risen to say this to-day is that, in my personal experience as a consultant, I have seen this happen several times. In each case the proposition has been one which was very well worth developing, and which was developed to a very fine state by somebody who had spent his whole fortune on it; and then the man who had done all this fine work has been pushed out and somebody with cash has stepped in and carried on. I believe it would do more to push on the industry of this country than many of the present actions of Her Majesty's Government if some way of financing these people could be thought out. It must be done on a basis of some sort, even if an expensive basis, which actually provides the money, because the present arrangements for financing small businesses are hopelessly inadequate. It has for long been a joke in the City of London that it is much easier to borrow a hundred thousand pounds than to borrow ten thousand pounds. It has also for a long time been a joke that the only way to get money out of a banker is to prove that you do not need to borrow it.

I find that these small people just cannot get ahead with the arrangements that now exist. Sometimes I begin to believe that somebody in an exalted position is trying to stop them. If you are a large firm there is something to be said for a method for discouraging small competitors. Large firms can stand crises in a way that small ones cannot, and an occasional squeeze which gets rid of small competition does preserve the big fellow who can stand it. Therefore amongst the small businessmen there is in some quarters a growing feeling that somebody is pulling the levers. Undoubtedly there is a type of businessman in this country—I think he is luckily rare, but he does exist—who owns a business of a largish size which has become fairly static owing to the fact that it is fully developed; and he finds it is much easier to change the circumstances which surround his business than to change his business to fit the circumstances. This can be done if, in fact, he has sufficient power in the industry itself. If a man of that sort is allowed to obtain any further grip on industry—and the Monopolies Commission has certainly shown that there are such cases—then this Government will not receive the support of those by whom it has been supported so far, and it will fall to the ground in very well deserved contempt.

5.58 p.m.

LORD RITCHIE OP DUNDEE

My Lords, I hope that he will not be overwhelmed before the day is out, but I should like to add my word of congratulation to the many which have been given to the noble Viscount, Lord Waverley. He and my father swapped jobs, if I may put it colloquially, some years ago, and I am very happy to have the opportunity of addressing your Lordships' House on the occasion when Lord Waverley has first spoken here.

I propose to make what is not more than a very brief intervention on a particular point in this important debate, and in doing so I am reminded of the fact that the last time I addressed your Lordships' House I was somewhat severely taken to tusk for using words and expressing views which were perhaps not suitable to your Lordships' House. It was suggested hat I was calling into question the sincerity of purpose and good faith of noble Lords opposite. Nothing was further from my thoughts. But, after all, if a man were to break into one of your Lordships' homes in the middle of the night, I do not think anyone would doubt his sincerity of purpose, although at the same time he would still be doing something wrong. I mention that subject only to give myself the opportunity of promising that I will keep my words as honeyed as possible in the circumstances to-day.

I was, unfortunately, out of the House for a few minutes during part of the speech of the noble Lord, Lord Strabolgi, yesterday. I do not want to add to the trouble into which he walked, but I feel that some reply must be given to one or two of his statements about opinion in the City. The Stock Exchange has been accused on a number of occasions of levity and of making jokes. We are, perhaps, a little notorious in that respect. But having regard to the fact that some 3,000 to 4,000 people gather together daily on the floor of the Stock Exchange building, it is perhaps permissible that occasionally a spirit of jocularity should rear its head. One can only hope that the noble Lord's friend, the "prominent stockbroker," as he described him, was making a joke when he said that the general feeling in the City was: "How long before we get this crowd out?"—and I take it by "this crowd" the gentleman meant Her Majesty's Government.

The noble Lord, Lord Strabolgi, concluded this part of Ms speech by saying that he was making no attack upon the Stock Exchange. I beg to differ, and to say that in my view he was making a very damaging attack in suggesting that the general opinion in the City, and in particular on the Stock Exchange, was in favour of the return of a Government by whom the members of what I beg leave to call an honourable profession were day after day subjected to ceaseless and somewhat cheap gibes, and under whose auspices the country was brought to the position which it is in to-day. It is never very amusing to lose money. None of us likes it. But I can assure your Lordships that we in the Stock Exchange—and, in fact, I think, everyone in the City—are perfectly prepared to face whatever is to come to us under Her Majesty's Government so long as efforts are being made to get us out of the grave position in which we now find ourselves. To suggest that members of the Stock Exchange would welcome a return to the follies of the past six years is, if I may say so, both unworthy and untrue.

6.5 p.m.

LORD NOEL-BUXTON

My Lords, I should like humbly to add my congratulations to those which have been tendered to the noble Viscount, Lord Waverley, on his maiden speech, and to say that I consider it a privilege to be speaking in the House on the same day. It is easier for measures to be drastic than fundamental, but measures to meet the present crisis must be both drastic and fundamental. I think we tend to be mesmerised by the present unbalance of payments. Far be it from me to under estimate this crisis and the need for drastic measures. Nevertheless, in respect of the unbalance of payments, I think we have to develop a really fundamental policy, a radical policy, and I should like, briefly, to suggest what I feel are the right lines for this policy. Reference has already been made to a sentence from Mr. Butler's speech in another place. That sentence was to the effect that our economic position in the world has been deteriorating for about half a century. I think we should consider whether this deterioration is accidental or whether it is part of an inevitable evolution. Mr. Butler gave us considerable confidence when he said that: Restrictions and cuts are only palliatives, and that, as the result of the meeting of Commonwealth Finance Ministers we have formed groups to put into practice some of the ideas which we discussed and to study their implications. That seemed to be a very fruitful remark, and in view of the formation of these groups we shall look forward to Mr. Butler's further thinking with enthusiasm. But I think there is a tremendous danger that any slight easements of the position may encourage us to postpone the reckoning and to forget the new course that is needed. As I said, I think a radical, new course is needed, but, to look back for a moment, we still tend to bark up the wrong tree—and we do so for three fairly distinct reasons.

In the first place, we are tending to go back to the opinion, and to perpetuate the notion, that we are the main workshop of the world, just as we were at a certain stage of the nineteenth century, with a secure lead and everyone waiting for our products. Secondly, we tend to imagine that cheap food can continue to come our way without limit, and that its production is the sole mission (it has often been considered by them to be the sole mission) of the food producers. Thirdly, we tend to think that the terms of trade are, in some secret way, generally speaking, going our way. But what really is the position, and is it reasonable to foresee any easement? If not, we are deceiving ourselves, and the people, if we assume that the Ship of State can continue on its old course and that we can continue with the same type of regime in terms of numbers and types of production. I am not suggesting that it cannot; I am suggesting that the matter is sufficiently uncertain for it to be necessary for our leadership to consider the possibility of an alternative course from the point of view of the terms of trade.

Briefly speaking, can it be denied that the terms of trade are turning against countries which are predominantly manufacturing countries? Whether in Britain or the United States, or anywhere else in the world, the rate of productivity is increasing enormously through technical improvement. This clearly means more competition and a reduction in the prices of the products concerned. But this is not happening in the case of food. Can there be any denying that the population of the world increases steadily, but that food production does not keep pace with it? I assert—and I want to be challenged if this is not the case—that, as a result of the simple law of supply and demand, the position must be gradually favouring the food-producing countries, because they have the goods which are so much wanted in other countries and the terms of exchange are in their favour.

My second point—and I think it is one to which we show great blindness—relates to the tendency to export capital goods, rather than consumer goods. They are the goods, on the whole, that the world wants, and if I may I would quote for a moment what was said during the economic debate in another place. Mr. Harold Wilson said: What the world warts to-day, and what the world insists on having, if it is going to buy our products, is engineering goods.… It is no good the President of the Board of Trade telling them that they must take textiles, clothing, aspirin tablets and all the rest of it …. He spoke of the "clamour" of other sterling areas countries for capital equipment from this country and said that if they do not get it from us, undoubtedly they will turn to the United States or elsewhere. I think this wish to encourage the sale of capital equipment, of engineering goods in particular, is a dangerous thing in the long run, on the assumption that we intend to revive and maintain the traditional set-up of the Commonwealth with Britain as the main workshop. Does anybody think that if New Zealand imports a particular type of machine-tool she will go on wanting repeat orders of that? Only if she were to set it up in boggy ground in which it would disappear. The whole fact is that this is a gateway to independence, which I think we ought to encourage. In the meantime, we are drastically cutting our own investment in industry and agriculture in order to increase our sale of machinery and tools to our competitors. Is that not cutting our own throats, if we are doing this on the assumption of the continuance of the existing type of economy? It is really immoral on our part to assume that this is the way the ship will continue to go, although I am not suggesting that it cannot go that way. When I was in a small settlement on the Labrador Coast just before the war there was a big forest fire, and it was decided on which boats we should go down river—the Broad Hamilton Inlet—if it should be necessary. It did not become necessary, but it was obvious that local states manship should and did rise to this task of preparation.

In view of all this, I should like to say what I think are our real assets and the way in which they ought to be developed. I regard them as the land, the great skill of our people, and the Commonwealth. From the point of view of the land, we may have to build a much smaller industrial house, or move into a wing of the old one, but there will still be the same amount of land. The fertility of our island is our sheet anchor. It would be the greatest tragedy if we had a poor soil, but nobody can argue that that is the case. It was the land and not industry which first made modern Britain and in my opinion it will re-create it in terms of a community of more balance between agriculture and industry. Why do we go on nibbling at this rural problem, as we are nibbling at it in terms of marginal land and hill land? Grass is as important as coal. I think of the remark of G. K. Chesterton: That enormous vision of the ploughed hills. Why cannot we go "the whole hog" in relation to arable and grass land at both low and high elevation? On the point of skill, there can be no doubt that we have in this island the biggest reservoir of skilled labour and technical knowledge in the world. Therefore is it not reasonable that we should concentrate on the production of goods requiring the smallest amount of raw materials and the largest amount of skill? I suppose that proposition is generally accepted, but it should be more specifically developed.

On the question of the Commonwealth, it should be obvious, from what I have already said, that I do not believe in a Commonwealth with the Mother Country as an industrial community and the Dominions sticking to the rôle of primary producers. I think that is a hangover from the Colonial Age. Obviously the Commonwealth will have to be decentralised; the Commonwealth as a whole matters more than the Mother Country, or any other of the family partners singly. This question bristles with problems. That is why it is a paradox, but true, to say that I hope this crisis may be kind by being severe, so that we shall take this new route, and not be deflected by easements. One final point, which is also a paradox, relates to dependence or potential dependence on America. We are more likely to become chronically dependent on America by maintaining a very high population on an unstable, unjustifiable and impossible footing than with a smaller population that can pay its way and become satisfactorily integrated. My conclusion is that with the present set-up we always shall be vulnerable to crisis, and the Empire never will have a proper chance to develop.

6.16 p.m.

LORD GIFFORD

My Lords, when I read in the New Year Honours List that Sir John Anderson had been elevated to your Lordships' House, I looked forward to the day when we should hear him make his maiden speech, and we have not been disappointed. I am sure we have all listened to it with great interest. I propose to detain your Lordships for only a few minutes, to raise two specific points. Before I do so, I should like to say one word to the noble Viscount, Lord St. Davids. I was astonished to hear him tell us that he was an industrial consultant and then proceed to bemoan the fact that his clients who wished to develop some invention or project were not able to get capital or help. If he were earning his fee, that is what his clients paid him for—to find capital to develop their projects. I feel it is up to him to look after his clients and not expect the Government to do so. However, that is only by the way.

The specific points I wish to put to your Lordships are in connection with foreign travel allowances. I should declare that I have an interest in the matter as I am the managing director of a travel agency. I am not proposing to argue against the decrease in the main basic allowance, though I would point out one unfortunate effect which it may have. It may prevent those who normally wish to stay in first-class hotels from travelling abroad. Noble Lords opposite may say that that does not matter and that it is probably a good thing. It may have this effect, however: that they will occupy rooms in luxury and first-class hotels in this country which would otherwise be let to Americans and other visitors from overseas who would bring dollars into this country.

The first point I wish to ask Her Majesty's Government to look into is the children's allowance. At the moment this is £15 for a child under sixteen years of age. In view of our financial state at the present moment, I do not suggest that that should be increased, but I feel that the age at which the allowance is applicable should be reduced. I suggest that instead of being under sixteen, it should be under eight years of age. I can assure your Lordships that an hotel charges just as much for a boy or girl of eight years of age or over as for a grown-up person. I feel that this small allowance for older children unfairly penalises the family man. Certainly the family man going abroad saves money on the fares, but they are payable in sterling; and he does not save any money on hotel accommodation. That is a small point that might be altered and it would mean only a minute increase in the amount spent overseas.

The second point, on which I feel sure I shall have the sympathetic agreement of the Government, is this. The present allowances go on until next November. I would ask that ample notice be given—I suggest at least two months before then—as to what the allowance will be after November, so that travel agents and transport companies may have the opportunity to make their plans. They have to make up their programmes and catalogues and calculate the prices of their tours, and that takes some time. It is only fair that they should have reasonable notice of what the allowance is likely to be next year. I will not detain your Lordships longer, but I should be most grateful if those two points could be given consideration.

6.22 p.m.

LORD SEMPILL

My Lords, all noble Lords who have joined in this debate have rightly stressed, and more than once, the need for higher productive efficiency in every activity, whether of brain or hand. I should like to suggest one or two ways in which this urge to a higher efficiency, without which we shall collapse, can be made more rapidly effective. Your Lordships have listened to-day and yesterday to speeches of those with a unique knowledge of banking, finance and international trade, and beside this wealth of talented advice I venture to lay the experience of a production engineer. We live in an age of power production, and yet all too often we fail to apply that science in practice. Take, for example, the case of the loading and the unloading of ships. In this country, and, in fact, over the British world, labour-saving devices are welcomed so long as they do not save labour, with the result that passenger ships, say, between Britain and the Antipodes, all too frequently have to sail with half their cargo space empty. Yet the equipment to speed loading is not infrequently stored, but not used, at the dockside. That is a very bad state of affairs, since it entails locking up valuable equipment that might be exported elsewhere. This situation must be met, and can be met, as I hope to convince your Lordships.

I should like to say a few words about the coal mines. The present £500,000,000 fifteen-year programme of modernisation and mechanisation in the mines will eventually yield 30,000,000 tons more coal a year with 68,000 fewer miners. That means an increase of less than 2 per cent. a year per person employed. Now consider this other aspect, of a medium-sized power station consuming, as such a station would, some 1,600 tons of coal per day—the output, in fact, of a medium-sized pit. In the last fifteen years the efficiency in handling the coal in a power station has increased as much as 1,800 per cent. In the next fifteen years, in the mines, as I have already mentioned, it will be less than 2 per cent. Why is this? At one northern pit the number of men has recently been reduced from 1,400 to 800. This took some twelve months to accomplish, and the output during that period remained the same. Now, by effective mechanisation, it has been considerably increased. Those rendered redundant were absorbed into adjacent pits. That shows what can be done with existing equipment, efficiently used. The oft repeated high-level statements that a man will not work himself out of a job in the non-expanding industries are not true. If the production engineering techniques are effective and are efficiently applied, he is bound to do so in time. The high efficiency in coal handling in power stations, units in an expanding industry, shows what mechanisation can do where redundancy of labour does not arise.

I suggest that the problem of the resistance to the adoption of new techniques in the non-expanding industries, such as those of coal, railways and docks, can and will be swept aside as soon as it is accepted: first, that modern techniques are such that, if fully used, as they must be, man-power will become redundant; and secondly, that a practical solution has been evolved and can be applied without delay, so that redundant hands can be attracted—and not only attracted, but welcomed—into other industries which are expanding. This, of course, involves investigation into the amount of labour to be absorbed, the amount of capital per person employed and the amount of purchasing power to absorb the production of such labour. I suggest that until this is done—and it can be and must be done without delay—the efficiency in the non-expanding industries will remain as now, in the red. I should like to make one final remark. On November 18, 1941, similar matters were before your Lordships' House, and I had the honour of initiating the Motion that was then being debated. I should like to suggest to the noble Lord, Lord Woolton, that the points then made might be given further consideration at the present time.

6.28 p.m.

VISCOUNT HALL

My Lords, this debate has extended over two days and has been of a most interesting character. There has been no doubt at all that there is a crisis, and one which must be dealt with efficiently, and we have had varied opinions as to how best to deal with it. In the course of the discussion we have listened to some interesting speeches, and points of view have been put clearly and, indeed, forcibly. It is noteworthy that the speeches, with one exception, have given rise to very little controversy. I am not going to stress that exception, because it was a maiden speech. It was a speech to which there is a complete answer and such an answer would, I feel sure, do quite a lot of good in the country. I would say without hesitation that, whatever influence any of the best trade union leaders—or, indeed, some of the most respected leaders of the Labour Party—may have, it will be very difficult for them to dissociate the speech to which we listened this afternoon from the attitude of the Government; it will be regarded as a pointer to what might be a policy involving a considerable amount of damage to the industrial workers of this country.

It is not for me to refer to the experience of the first of the post-war years after the First World War. It was not an ugly situation left as a legacy after the first post-War Government; it was a legacy of misery, poverty, unemployment, discontent, industrial strife—indeed, it was the blackest twenty-year period in the economic history of this country. It is true that the present situation may be regarded as an ugly one, but after the handling by the economists, the bankers and the experts, with their rapid deflation and rapid inflation, of the situation after the First World War, then I am sure that the majority of the people of this country will appreciate what has been done for them during the last six years by the late Labour Government. I hope that that will be the last note of controversy I shall strike during the course of my remarks.

I have pointed out that there has been no dispute at all as to the crisis and, indeed, very little dispute as to how the crisis should be handled. But I should like some information from the noble Lord who is to wind up the debate for the Government as to the prospect, say, for the export trade during the course of the present year. We have had many speeches—particularly the speech of the noble Viscount, Lord Bruce—pointing out the difficulties which are likely to arise in the export markets. Indeed, it might be said that the trade returns for the month of January were not too promising. It is true that there was a substantial increase in the value of exports, but there was a very large increase in imports. notwithstanding the fact that nearly three months have elapsed since the Chancellor of the Exchequer made his announcement about the import cuts.

Now the Government must have some idea as to what is expected in relation to the import and export trade, not only to enable this trade gap to be wiped out, but also to ensure that we shall be able to build up the reserve of dollars and sterling which is so necessary. I know that great emphasis is placed upon the value of engineering products in the export market. That is true. But it must be remembered that last year two-fifths of the total value of our exports lay in engineering products. I think they earned something like £1,070,000,000. It is hoped, I understand, that there will be a 20 per cent. increase in that type of export. Unfortunately, that type of export has not brought in the highest price. I believe that the average increase in price for the engineering products exported last year was something like 11 per cent., whereas the average increase in price for other exports—particularly towards the end of the year—was something like 27 or 28 per cent. That was far above the 19 per cent. which was the increase in the early portion of the year. The increase in the import prices, however, was somewhere between 30 and 34 per cent. I hope that the noble Lord, Lord Woolton, will give us some information in relation to that matter.

The only thing with which I am going to deal in relation to the proposals of the Government is the question of the raiding of the stockpile. I must say that, to me, the statement made by the Chancellor of the Exchequer was somewhat alarming. He said that the reduction of the stockpile will be kept within reasonable proportions, but he also said, in the course of his statement, that he was not able to give any information as to how the stockpile is to be reduced. The Minister of Health, in winding up that debate, said that nothing which is essential will be sacrificed. But everything in the strategic stockpile is essential, otherwise it would not be there. These stockpiles consist of the essential necessities imported in time of war. They have been accumulated after much consideration, and at heavy cost, and they are very valuable as military equipment. In the event of war, they would represent a very great saving in shipping space, in the number of naval vessels required to protect that shipping and, possibly, hundreds of valuable lives. They are vital to our defence programme, and it is these stores which the Government are talking of raiding. If it is a question of loaning any material to the United States of America or any of the North Atlantic Treaty Powers with a view to its being returned, not the slightest objection can be taken. But we should have some information as to how far they are to be raided.

The only items of the additional £150,000,000 cuts to which the Chancellor of the Exchequer referred were, first, tourism, where something like £12,500,000 would be saved; the reducing of the import of coal by £2,500,000; a saving of £500,000 on the foreign information services, plus, of course, the raiding of the tobacco stocks by something like £22,000,000—making a total of about £40,000,000. Does that mean that the difference between that £40,000,000 and the £150,000,000 is coming mainly from the stockpile? That is the assumption to which one is forced. Without the information for which I am asking, it is difficult to draw any other conclusion. What must be understood is that the benefit of such capital cuts as the raiding of stocks is non-recurring. This cut cannot make a lasting contribution to long-term saving: it can only aggravate the position.

I want now to come to what will be regarded as one of the most important matters. It is one which has not been dealt with, except for a brief mention by the noble Lord, Lord Sempill, and that is the question of production. Whatever the economic, financial and business theories may be, unless we get the production form the men in the fields, in the mines, and in the factories, from the industrial workers and the management of this country, then all our other efforts are bound to fail. I am convinced that insufficient attention is being given by the Government to this very important matter of industrial production. Whatever may be said about happenings since the War, it is true that there has been an increase in our industrial production of something like 43 per cent., In view of the difficulties, I think that is a notable achievement in six years. As compared with the six years after the First World War the number of working days lost through industrial disputes has been infinitesimal. And let it be said that during this six years there have been scarcely half a dozen industrial disputes in this country which could be regarded as official or backed by trade unions. That is the contribution which has been made.

I should like to knew what the prospects are. Our most vital export industries depend upon steel and coal. Steel has begun the new year with production at a level below that of last year. The production of ingots and castings in January was at an annual rate of 15,234,000 tons, compared with a rate of 15,907,000 tons in January of last year. This means that there is a reduction at an annual rate of about 700,000 tons. Unless this can be dealt with, and dealt with effectively, we shall lose the effect of the million tons of steel for which the Prime Minister negotiated when he was in Washington. I appreciate the difficulties. Scrap is very difficult to obtain. From reports I have received recently I gather that it may not be possible to get more than a very little scrap from the Continent, particularly from Germany, after the next three or four months. And it is evident that the Government have many difficulties in maintaining the output of steel which we achieved in this country during last year. I should like to ask whether the noble Lord can give us any information about the steel which is expected from Japan. There have been rumours in the Press that we are not likely to get it. I am sure every Member of your Lordships' House would like to see as much steel as possible. There is the question of substituting other material for steel. During the week-end I saw a report in a journal that the soft timber situation in this country is very much easier, that we have fairly good stocks, and that there is no world shortage of this kind of timber. It was suggested that there was a possibility of saving some hundreds of thousands of tons of steel in our building operations by the use of this soft timber. I am sure that both the noble Lord and the Chancellor of the Duchy are fully seized of the importance of this matter.

The industry about which I am very much concerned, the industry which can make a very great contribution to our great problems, is my own old industry—the coal industry. It seems strange to me that during the course of my lifetime I have seen what might be regarded as the rise and fall of the coal industry. I spent half my life in the coal industry and the other half in politics—and I am not sure in which of the two I have been more happy. I certainly had a very happy time in my industrial life. I agree with the remarks of the Chancellor of the Exchequer that there is little prospect at the moment of seeing any increase in the export of coal. He said that plans are on foot, and I should like to know what these plans are. I am sure that the noble Lord, Lord Leathers, is fully alive to this situation—and he is not so much tied to Conservative propaganda as is the noble Lord, Lord Woolton. I am not going to chaff Lord Woolton on promises which he made at the time of the General Election. But I did hear of one Tory who went for a holiday in Italy—only members of the Tory Party can afford to go there.

SEVERAL NOBLE LORDS

Oh!

VISCOUNT SWINTON

The others go to Yugoslavia.

VISCOUNT HALL

This Tory went on to Naples, and a boatman there asked him whether he was going to have a look at the Blue Lagoon that day. He replied, "No, I can't afford it." The boatman said "That is very strange. Six months ago you told me that if you could get the Socialist Government in Britain out you would have all the money you want by now. The Socialist Government are now out and the Tory Government are in, and you have not got any money at all. What fools you are!"

LORD WOOLTON

I do not see what the moral is.

VISCOUNT HALL

You have not far to look.

The Chancellor of the Exchequer rightly said that the spirit of the miners is excellent and their production first-class. He went on to say that to export coal is of more value to the Government at the present time than money. That is true. The President of the Board of Trade went so far as to say that the battle of the sterling area will be fought out in the coal faces of the country. He could have gone a little further and said that it will be fought out by the production achieved by the industrial workers and the managers of this country.

A NOBLE LORD

And the farmers.

VISCOUNT HALL

They are industrial workers. What is the position? I should like to make this point: that the decrease in our export of coal is not caused by lack of production. Strange to say, the production of coal in this country last year—and in this, of course, I include open-cast coal—was higher than the production in this country in 1931, 1932, 1933 and 1934. In 1931, we exported from this country 57,000,000 tons of coal, with a production less than it was this year. In 1932, we exported about 50,000,000 tons of coal. In 1933, 1934 and 1935, we exported annually between 40,000,000 and 50,000,000 tons of coal, also with an output lower than the output of this country at the present time. Where has that coal gone to? It has not been fully realised that there has been a rapid development of inland consumption of coal. The whole consumption has increased from 1937, when it was 157,000,000 tons, to 210,000,000 tons at the present time. Indeed, had it not been for open-cast coal last year we should not have exported a single ton of coal from this country. That is a very serious matter. Indeed, to me the importation of coal into this country for any purpose is most annoying.

How are we going to overcome this difficulty—because overcome it must be. It is pleasing to note that the man-power of the industry is gradually increasing. It has gone up by about 8,000 during the last month. The average at the present time is 705,000, compared with about 696,000 or 697,000 during the course of last year. But what is happening is this—and this is very largely as a result of the application of machinery—that youths are no longer going into the pits. In 1938, there were over 70,000 young people under eighteen years of age working in the pits, serving a trade, having an apprenticeship. Those of us who have been through it did not dislike it to that extent. It was a rough life, it was a very unattractive industry, but there was nothing else for us to do. These young men, who will not go in when they are younger and get the training which the application of the machine to production cannot give them, are not going into the pits. One cannot blame them. The result is that, whereas the average age of men employed in the pits of this country in 1938 was twenty-eight, it is now over forty. We are retaining in the industry men of sixty-five, seventy and some over seventy years of age. Some of them have been doing a job of work in the pits of this country for over sixty years. I should like to spend a considerable amount of time in dealing with this matter, but I cannot take up any more of your Lordships' time now, other than to say this: whatever Government are in power in this country, this question of the production of coal, both for the inland market and for the export trade, is of the greatest possible importance.

Now a word about the use of coal. I would that some attention be given to the increase in the consumption of coal inland. I am not referring to consumption by the householder: if there is any person in this country who has had a very, hard deal as a result of the shortage of fuel, it is the householder. Indeed, at the present time I understand that the ration for the householder is 36 cwt. a year. During the war it was 47 cwt. It is impossible to cut down the supply of coal to the householder, but I am wondering what can be done in relation to some of the industrial concerns of this country. Some of the bigger concerns could install fuel efficiency plant. Others are very wasteful in the use of coal, and I am convinced that, if there were a close scrutiny, it might be possible to reduce the consumption of inland coal by something like 10,000,000 tons a year. I am hoping that we shall be able to export something like 25,000,000 to 30.000,000 tons of coal if something on those lines is done, and if a greater drive can be made in the recruitment of labour into the industry.

One other matter and I will conclude—I refer to the question of man-power, the transfer scheme. I agree that it is essential to transfer men to work, but have seen so much of that transferring during the last fifteen or twenty years that sometimes I think much can be done to transfer the work nearer to the homes of the men. From South Wales during the wars, we transferred 500,000 people into England. Indeed, at the present time, we have the highest percentage of unemployed in the country for any area and we feel that something can be done to effect an improvement, because we have some up-to-date factories in South Wales at the present time. Work can be transferred to some of those factories. The Labour Governmert early last year gave a directive that not less than 20 per cent. of the Defence orders should be given to works in the development areas. I hope that the present Government are carrying out that policy. Indeed, I go further and say that something ought to be done, particularly in relation to the electrical trades. In my own home town, where we have a very large Royal Ordnance factory, we have three substantial factories which have been built and which give satisfactory employment in the making of radio and television sets. It ought not to be difficult, by bringing in some of the specialists and technicians, for the people who have been trained in that electrical work to be kept on the job.

I think the Ministry of Supply and the Admiralty are looking into that matter at the present time. If noble Lords can give them just a hint as to what should be done in connection with this matter, it will be a good thing, for it is not easy to transfer men. I saw a report only yesterday about some men who were transferred from one place in the Midlands to another. It is true that the distance was only fourteen miles, but here were men skilled in their jobs. They were earning, with incentives, about £11 per week. They were sent to a job fourteen miles away and they were given £7 a week. It cost them between 12s. and 15s. for transport, they had to pay for their lunches, and they were away from home. My Lords, these skilled men do not take very kindly to a transfer of that kind, and if the Government want this scheme to work smoothly they must look to matters of that sort. I know the Minister is keeping in close touch with the trade unions, but there are a great many snags. If you take work to the homes of the people it is very much better. Indeed, a, huge proportion of the industry of this country was built up by taking work right into the homes of the people. It is easier to transfer a few specialists than to transfer a thousand others into districts hundreds of miles away from their homes.

My Lords, there is nothing more that I am going to say. I could say a good deal about the social services, but my noble friends, Lord Pakenham and Lord Macdonald, have said all that is necessary to be said. I would add just this. There is no question but that the eyes of the country are on the present Government. I think it was a mistake that one of the first things they did was to make a reduction in the social services. I know Lord Balfour of Burleigh's view. He is very strong in his views, but. I entirely disagree with them. There is a sincerity about his views for which we cannot help having some respect; but he is all wrong. After all, the social services are services which the workpeople, the employers and, indeed, the State, pay for. Were it not for the contributory principle, it may be that the Government would have to provide all that was necessary. But here is a voluntary contribution of hundreds of millions a year, from the workers, from the employers and from the State.

LORD BALFOUR OF BURLEIGH

Would the noble Viscount forgive me for interrupting? I do not understand why he refers to me in this way. I have never attacked the social services. My one aim is to save the social services.

VISCOUNT HALL

Well, the noble Lord wants to save them by attacking them.

LORD BALFOUR OF BURLEIGH

I have never attacked the social services.

VISCOUNT HALL

Not in principle.

LORD BALFOUR OF BURLEIGH

Never.

VISCOUNT HALL

But the noble Viscount, Lord Waverley, himself said that he thought that they were introduced too speedily, and there is no doubt at all that there is that general feeling about the social services. I have here the very words of the noble Lord. He said: Did the Labour Party go too far and too fast?

LORD BALFOUR OF BURLEIGH

Hear, hear!

VISCOUNT HALL

The noble Lord continued: I answer that with an unhesitating affirmative.

LORD BALFOUR OF BURLEIGH

That is not an attack on the social services.

VISCOUNT HALL

Then I do not understand what is. Whatever may be the noble Lord's view, I hope that the Government are going to be very careful about this matter. After all, it must be remembered that they have no majority in the country; they must remember that, notwithstanding all the propaganda of the last Election, 14,000,000 people voted against them. I am not holding that out as a threat. At the same time, the working people of this country regard these services as something which they have won, something which will have to be maintained, and something that they will not give up without a great struggle.

7.5 p.m.

LORD WOOLTON

My Lords, I will do my best, during the strength of your endurance, to reply to some twenty speeches to which we have listened, including two maiden speeches which we have been very glad indeed to hear in this House. If it is not presumptuous of me to say so, the debate that we have had will surely reflect great credit on our House when, as I hope it will be, it is read in the country. We have been dealing with subjects of the greatest moment and of such complexity that it is very difficult for the layman to understand them. Indeed, sometimes it has been difficult for us to understand all the financial implications of the problems that have been raised. However difficult it may be for people to understand them, it is really true of all the subjects with which we have been dealing that the end product, as I believe they call it in the engineering world, is in the homes of the people of this country.

The debate has been a distinguished one. There has been very little Party politics in it, for which it has probably been all the better. I always notice that when a Government are in power they think it better that there should be no Party politics in the discussions. I learned that lesson from noble Lords opposite when they were in power. When the noble Lord, Lord Pakenham, stopped trying to be a Party politician and gave us the benefit of his advice on economics and of his great erudition, for which the House is always grateful, I think he rendered us a service in initiating this debate; and I must say that I heartily agreed with his excessive language when he talked about this "infernal" business of the balance of payments. My Lords, this is something about which the nation cares. If the noble Lord, Lord Macdonald, will not think that I am being presumptuous—because he is a very old Parliamentary hand—I should like not only to congratulate him but to thank him for the speech that he made. I am not quoting his precise words, but your Lordships may remember that he said something to the effect that he did not care what Government it was that brought us out of our present troubles. I am sure that that has been the general sense of those who sit opposite to us. I do not care to go into any question as to who has the responsibility for the present state of affairs. What the public cares about is how we are going to get out of it. That is a matter that is full of complexities, and I hope that this debate, instructive as it has been to all of us and to the public, will do something to help us to find some of the solutions, and the best solutions.

I am always grateful to my old friend, Lord Layton, when he comes to give us the benefit of his advice. When he and I first met, he was an economist and I was trying to be one. When he comes here, with his great academic knowledge and his long practical experience, he always gives us something to make us think a great deal. I can assure him that we are very conscious of the possible harm to the economies of our European neighbours that might result from the cuts we have had to make our imports. I am sure he must know how very reluctant we were to make those cuts. They deprived this country of quantities of food, of meat, which was very greatly needed and which was available for us if we could find the gold to pay for it. Nothing but the most rigorous compulsion of the exchange position would have made me agree to import cuts of that nature.

In the meantime we have to face the position as we find it, knowing full well that if we do not face it now worse things will befall us—a serious increase in the cost of our imports and much suffering and deprivation to the people of this country. Day by day until this drain on our reserves ceases, we come nearer to the danger of disaster. That is not exaggerated language: that, in fact, is the position which faces the country. It is so serious that, as this debate has shown to-day, it overrides all the other issues that divide us. If the position were less complicated, and indeed if the public understood it better, I have no doubt that every section of the people of this country would do as the noble Lords opposite have done during the course of this debate. Every section, except the Communist Party, I think would throw all their energy into some great national effort to get over these difficulties. I am sure that it call be done. Such a national effort would call for temporary inconveniences, perhaps for some loss of leisure, but not for loss of necessities. The sooner we get down to it the more quickly we shall get out of our trouble and the more quickly we shall restore our standard of living. I was interested to notice that Lord Waverley said in his speech that he thought we would be able to get over these troubles in a period of three years.

Now if I do not refer to all the speeches I am sure your Lordships will acquit me of discourtesy. The noble Lord, Lord Rochdale, asked me whether we were prepared in the allocation of supplies of steel and other raw materials and in the regulation of credit to give preferential treatment to those industries that would help us to adjust the balance of payments. We must do so. Indeed, we should not be facing the reality of the situation if we did not. The noble Lord addressed some very wise words to the Government (people at this season of the year do address wise words to the Chancellor of the Exchequer) on the subject of maintaining the standard of our industrial plant. It is quite obvious that, whilst we have restriction, we must, in the first place, do everything that is possible to secure the expansion of those industries that have particular power to satisfy the special needs of the country, and, in the second place, devote all our brains—and this is a question of brain and not brawn—to increasing our manufacturing efficiency.

I greatly regret—and I hope noble Lords will accept my apology—that I had. yesterday a long-standing engagement at Guildhall which took me out of your Lordship's House for an hour, and I therefore was not able to hear, although I have read, the speeches of the noble Lords, Lord Silkin, Lord Brand and Lord Strabolgi. I was much impressed by Lord Silkin's speech. He rightly warned us that the short view was not enough. I assure him that we recognise that fact. I do not know how many hours a day noble Lords opposite worked when they were His Majesty's Ministers, but we are finding that the hours are rather excessive and are thinking of forming some union to protect us. Therefore we are not at the present time able to tell you all the things that hope we shall be able to tell you in the near future, but I can assure Lord Silkin that we are working on and developing a comprehensive programme, though at the moment I am bound to admit that our attention is considerably concentrated on the immediate and urgent problems that are facing us.

I always remember that the noble Lord, Lord Pakenham, accused me one day of not making constructive suggestions as to how the Government ought to do its job, and I pointed out to him at the time that that perhaps was not the responsibility of the Opposition. I say this to the Opposition: that if they know of any means by which they can help us, if they are happy enough to know the solution to our problems, then we shall welcome the stimulus that they will give us. The only thing I would beg of them is not to let there be any doubt in the public mind that all sections of this House, wherever they sit, are united on the importance of overcoming these immediate problems. This is not really a Party matter. Whoever had been in power instead of us, they would in the major issues have been taking precisely the same steps that we are taking now, though in the minor issues there would have been a difference of point of view. Indeed, these short-term measures are things that I believe are forced upon us by circumstances.

The noble Lord, Lord Silkin, asked me quite a number of questions. He asked me whether I thought it was going to be necessary to work harder. I do. I am one of those who have always believed in hard work, but I have also believed that when people work hard they should have the rewards for working hard. We call them incentives now. Of course, all progressive employers have believed in this for a very long time. The noble Lord said that I sometimes talked about profits. I have always held the belief that high wages, high rewards in industries, were good, not only for the people who were called workmen, but also for the people who were the managers of industry. The noble Lord raised another question. He asked me what we were going to do about rearmament. He asked whether it was possible to maintain our standard of living and at the same time to rearm the nation. Of course it is the most potent question that has been put during the course of the whole debate. Noble Lords opposite know perfectly well that when they as a Government took responsibility for saying that they would spend £4,700,000,000—I think my figure is somewhere near right—in rearming this nation, in order, as the noble Lord so wisely said, to preserve peace, they were facing this most teasing question as to whether we could afford to do that and at the same time maintain the standard of living that we all desire. The noble Lord and others, during the course of the debate, raised questions which I am not going to answer because if I did reply to them there would be an implication that I knew something about what was going to be in the Budget. In that respect, I have the honour of being in close company with the noble Viscount, Lord Waverley, in knowing absolutely nothing about what the Chancellor of the Exchequer is going to say when he presents his Budget. Those of your Lordships who have been in a Government know that the Chancellor of the Exchequer does not broadcast his views beforehand.

The noble Lord, Lord Brand, who always enhances the value of these debates by the breadth of his knowledge, and, as it seems to me, the impartiality of his approach, said many things which I personally found it difficult sometimes to follow. I am all in favour of the convertibility of the pound, but I am always glad to know that there are experts to tell me just how that is going to be brought about and what will happen when we have it. One sentence used by the noble Lord impressed me very deeply. He said: The real enemies of the people are those who reject all plans, and not those who in the face of great difficulty take measures to deal with that situation. That is a statement which might well receive much wider publicity. I was most interested to note the noble Lord's views on the price of gold.

The noble Lord, Lord Balfour of Burleigh, made surely the best speech that he has ever made in this House, whether your Lordships opposite liked it or not—and he was not speaking particularly in your favour. To my mind, one sentence in Lord Balfour's speech stands out, and it is one that all of us can certainly understand. The noble Lord said: We are all of us in this together. I must digress for a moment to the subject of the Welfare State, and I would say to noble Lords opposite: Do not claim too much; we have all been in this together. It goes back to the time of Shaftesbury. We have all been developing a Welfare State, but I think noble Lords opposite have the credit of the christening. It was they who called it the Welfare State.

LORD STRABOLGI

It goes back to the time of Queen Elizabeth I.

LORD WOOLTON

It is something that has grown up over many generations. Do not let us make it a Party matter. Let us be proud of the fact that it has grown up, because it is something that has arisen from the instinct and the conscience of the people of this country. Its friends are those who want to see it persist but want to see it built on a solid and enduring foundation. Its enemies are those who want to develop it so quickly that it may produce a false sense of personal reiponsibility—which was the issue which the noble Lord, Lord Macdonald of Gwaenysgor, raised this afternoon. Another sentence from the speech of Lord Balfour of Burleigh that stands out in my memory was this: The text six months will be the most critical that we have ever had to face. That was a serious thing for a man with his knowledge of the financial position of this country to say. I only pray that we may have the wisdom, the knowledge and the courage to face the situation.

The noble Lord, Lord Strabolgi, asked me what we were doing about the Crown Film Unit. I have a brief on this subject but it is so long that I do not think I will read it to your Lordships: I will try to give you the essence of the matter. If the noble Lord would like me to go into further details with him privately, I will gladly do so. The total cost of the Crown Film Unit in the financial year 1950–51 was £218.000. The expenditure of the Central Office of Information on film distribution was £200,000 a year. We thought that this was a subject about which other people knew a great deal more than we did, and that, since we were forced to a position of economising, this was one of the things that we could leave other people to do. But, in saying that, I want to pay a tribute to the Crown Film Unit, because it has produced some extraordinarily good films, some documentary films that I think will prove to be quite historic. The Unit has done a good job and I hope that the work will be continued. But it will not be continued at the expense of Her Majesty's Government.

EARL JOWITT

May I ask a question, because I want to be clear about this matter. Is the Crown Film Unit to disappear, or is it merely that the system in existence to-day of marketing their films is to disappear? That is something I should like to know.

LORD WOOLTON

The position is that the Crown Film Unit as a unit will disappear. The noble Lord says it is a great pity that this should be the position. I think all these economies are things about which we shall say: "It is a great pity." But the sum of money involved in this was very large. I listened to the speech of the noble Lord, Lord Gifford, about the children. I will tell the Chancellor of the Exchequer what the noble Lord said, and I will also tell him what the noble Earl, Lord Wavell, said about the importance of encouraging people to go climbing in Switzerland.

With regard to the contribution of Lord Sempill I will say only that I will certainly look at the Report of his speech, for it is my duty to do so, arid I hope that at some other time I may have the opportunity of telling your Lordships something of what Las happened in the Department of Scientific and Industrial Research. I think that the civil scientific work of the Government is the only departmental responsibility that I have. I am going around these units and I am most impressed by the work that they are doing. The technological work of this country is in a state of considerable advancement. The real difficulty is to get the industries of the country to make the fullest use of the discoveries that are being made.

I come now to to-day's debate. I never hear the noble Lord. Lord Pethick-Lawrence, speak without being instructed and without realising what a great advantage it is to come to this House after having served a long apprenticeship in another place. His speech was so clear, he enunciated an economic doctrine so convincingly that I had constantly to pull myself up in case lie carried me away with him. I said to myself, "What is he talking about when he talks about dear money?" Because during the period in which I was carried with him, I was thinking of 5 per cent., 6 per cent. and 7 per cent. But we are talking about an increase from 2 to 2½per cent.—not a very serious position as it stands, though the purport of the noble Lord was not so much to complain about the present as to warn about the dangers that may come if money went dearer. We are fortified by the noble Lord's substantial agreement on the main principles. He agreed that there must be a reduction in capital expenditure and in credit.

The only time that I parted company from him was when he suggested that instead of using the operation of the bank rate we might have achieved the same object by psychological means. If we all had the persuasive tongue of the noble Lord, we might he able to do it by psychological means, but that is a difficult thing to carry out.

LORD PETHICK-LAWRENCE

My Lords, that was not my point. I thought there were other means of restriction. I brought in the question of psychology only because it was a point made by the noble Lord, Lord Balfour of Burleigh. who said that the only object of having dearer money was that it was necessary, in addition to restricting credit, to have a psychological influence. I did not particularly advocate psychology.

LORD WOOLTON

I am sorry, and as the noble Lord knows, I did not willingly misinterpret him. I part company with him here because I believe that we must have this new money rate, but that is the only issue on which we need part company. I was grateful to him for the little political comfort he gave me when he said that when the Conservative Government came in there had been a considerable drop in Stock Exchange prices, which makes it perfectly clear that we have not been looking after the people who are reputed to be our friends. I have spent some part of my life in this business of banking, and I recall that in the past, when the bank rate was put up, it used to go up by 1 per cent., and when it came down it used to come down at one-half of 1 per cent. The fact that the bank rate has gone up by only one-half of 1 per cent. may give the noble Lord some inkling of the fact that we are not anxious to run into dear money. No Government with a National Debt of the size we have can want to run into dear money. I give him this firm assurance, that we have no intention of letting money become the master of the situation. I make that statement quite categorically. I imagine that my banking friends—and they are my friends—will agree with me on that as a piece of social policy.

I come now to the maiden speech of my noble friend Lord Waverley. There was warning in it. There was the characteristic realism which those of us who served with him when he was Chancellor of the Exchequer learned to expect from him. I am in a little danger here, because whatever I say regarding his speech may so easily be misinterpreted, and may be considered to have some relation to the Budget that is to come. Therefore, he will not think I am being discourteous if I leave his speech by saying how glad we are that he has come to this House and that we hope that we shall be able to profit constantly by his advice. The noble Viscount, Lord Bruce of Melbourne, talked to us about volumes. I see that the noble Lord is not in his place and that saves him from providing the volumes for me, because I have not seen some of the Reports about which he spoke and I am anxious to get hold of them. I think that the outstanding point he made was that the extent of the social services is not so important as the purchasing power of the money given through them to the public.

The noble Lord, Lord Macdonald of Gwaenysgor, asked me some questions. Are these charges for the social services made in order to raise revenue? No. Are they to stop abuses?—the noble Lord recognised that there were abuses. There is, of course, a perfectly obvious reason for doing this: the expenditure on the social services has to be kept within bounds. It is rising all the time, and all we are doing is keeping it within bounds. Forgive me, my Lords, if we have a little straight talking here, because we are anxious to get unity in the country in the present circumstances. It has been suggested that the workers are doubtful whether the Tories are in earnest about the social services. Noble Lords opposite ought to know, for they are the people who have been giving them that doubt. It is their speeches that have encouraged that doubt.

Why should noble Lords opposite assume that there is any doubt about it? Our hearts are just as tender as theirs. Our desires for the welfare of other men are just as strong as theirs. We are human beings just as they are. Why should they assume that there is some division between us that makes us into hard-hearted people who do not care for our fellow men, while they have all the virtues on their side? I know they do not claim the virtues, but they do not credit us with having any real feeling in this matter. Noble Lords opposite should remember that we founded the social services. Go back over our history and they will find that Conservatives and Liberals brought in these social services before ever we had the Labour Party as the Government of this country. Tell that story to the people of the country, and then you will get rid of this suspicion that when we charge people one shilling for prescriptions we are aiming at cutting the social services. I hope that I have not spoken with undue heat on this subject, but I feel some straight taking is called for. It is right that we should defend ourselves on this matter, and I have every intention of continuing to do so.

I have kept your Lordships a long time. The noble Viscount, Lord Hall, entrances me whenever he talks about the coal trade and the miners, because he speaks of what he knows, and he speaks from his heart. I can assure him that our mutual friend Lord Leathers is giving most detailed consideration to this very worrying problem. One of the reasons why the problem is so worrying is that we are wasting so much coal. I inquired the other day of the Department of Scientific and Industrial Research: "What have you clone in these years? Have you not found some means whereby we can waste less coal?" The answer was: "Yes. It is the application of the knowledge that is wanted." I do not think it is any good telling the housewives of this country that if they will give up coal fires then we shall be able to save a lot of coal. That is not the way we shall do it. But I think we might use many fewer electric radiators, which are consuming coal—and perhaps that remark is not addressed to the poorer classes of the people. The waste in industrial coal and the waste in electricity are matters which we might tackle at an early stage.

The noble Viscount, Lord Hall, asked me to say something about strategic stocks. I think he knew when he asked that question that I should find it difficult to talk about strategic stocks in public. I will just say this to him. The figures which he quoted with some fear have no justification. I am sure that the noble Lord will be relieved to know that. We are very conscious of the work which the previous Government did in the building up of strategical stocks as part of their rearmament programme, and we will continue that work. I have one final thing to say, and that is on the subject of home production. I am sure we must lock much more to our own land than we have been doing for a few generations. We have to look to our own land for the increase, particularly, in feeding stuffs. The noble Lori, Lord Hungarton, made a speech from the Benches opposite the other day which was full of wisdom. I am sure he was pleased—in fact, he told me so—to find that the advice that he then gave had been accepted. We have to grow more feeding stuffs, and produce more pigs and more cattle in this country; we have to depend more and more upon ourselves, and upon our Empire. If your Lordships pay me the compliment of recalling the last words I used when I last spoke on this subject, you will remember that I appealed to the Dominions to help us. It was most encouraging to find an immediate response to that appeal from the people of New Zealand. I believe that we can develop our own land, the Dominions and the Colonies, and from there get many of the things that will help us to balance our payments and get away from this "infernal business." My Lords, I apologise for the length of time I have had to occupy in replying to the debate.

7.45 p.m.

LORD PAKENHAM

My Lords, I am sure that all of us on these Benches, and, I think, on other Benches, are grateful to the noble Lord who has replied in such a friendly and sympathetic fashion. It cannot have been easy, so near the Budget, to tell us much of what is in the mind of the Government. If I may say so, I think he has made an excellent job of it in the circumstances. I should also like to express my gratitude to the noble Viscount, Lord Swinton, for the trouble which he took over his reply yesterday. As one who initiated the debate, though, of course, on behalf of the Opposition, may I thank all those who have taken part in a debate which has interested me greatly, and has probably interested a good many people inside the House and out of it? I do not propose to make another speech, because the winding up speech on this side was made, in my opinion very effectively, by my noble friend Lord Hall. I should just like to express my pleasure at the appearance of two maiden speakers. Next time one of them will not be, as it were, protected from me; though I am sure he will be well able to look after himself and will probably be more controversial, if that is possible, than on this occasion. I will merely say on behalf of this side of the House that our criticism of the cuts in the Health Service remains unchanged. I do not want to try and extract any further statement on this point from noble Lords, because reading what was said yesterday again. I see that the noble Viscount did not take up a tremendous stand on behalf of the existing cuts: and, putting two and two together and reading that Conservative M.P.s are rather critical, I draw hope and consolation from the whole prospect. I leave it there, and I hope that I shall not force anybody to his feet. As regards the question of whether substantial cuts are planned in the social services, I must repeat with emphasis that we would regard it as a tragic error if that were done.

At the risk of a moment's controversy—but only for a moment—I must take note of the fact that the noble Lord, Lord Balfour of Burleigh. whose eloquence held the House, as somebody said, spellbound, represents, as I see it, a point of view fundamentally opposed on this issue to that which we hold on these Benches. I hinted at that yesterday, rather hoping that the noble Lord would not go far. But, in fact, he went very far and, as my noble friend Lord Hall pointed out, said in regard to the social services, in answer to the question: "Did the Labour Party go too far and too fast?" I answer that with an unhesitating affirmative. And he went further and said: That is the cause of our trouble. That is the noble Lord's opinion: that the late Government went too far and too fast with the social services and that that is why we are in our present difficulty. All I say is that I beg the Government not to accept that point of view.

LORD BALFOUR OF BURLEIGH

I hope the noble Lord will forgive me for interrupting, as he really has misunderstood my argument. My argument is that the Labour Government have endangered the social services by their very unwise financial policy. If the Labour Party persist in misrepresenting me as attacking the social services, as they have done so often in the past, they will be deliberately sinning against the light. I am just as much in favour of the social services as the Labour Party. I say that the Labour Government endangered the social services by their financial policy. I am not attacking the social services. The Labour Government put the whole fabric of the social services—those which other people brought in as well as their own—in danger by their financial policy.

LORD PAKENHAM

All I did was to read out a quotation from the noble Lord's speech. If that is misrepresentation, I do not see how we can conduct the debate. I attributed no motives to the noble Lord; I simply read out what he said. His view is that we carried the social services too far and too fast. In that I rather assume he regards noble Lords opposite as accomplices. I do not know, but that is what he said yesterday. All I am saying is that, while I am ready to agree that the heart of the noble Lord is as tender as that of anyone here, so far as I can judge, if he were the Government he would feel bound to cut the social services substantially. That is the only conclusion I can draw. I am in the judgment of the House, and so is the noble Lord. All I say on that point is that I hope and pray that the Government will not adopt the noble Lord's attitude.

I do not wish to end on a controversial note. We are all agreed about the gravity of the situation, and upon the necessity for drastic and urgent steps to put it right—to redouble our efforts, whether on Government or Opposition Benches or whether in some other capacity, to pull the country through this most difficult period. Once again may I say that I am most grateful to all who have taken part in this debate? I beg leave to withdraw my Motion.

Motion for Papers. by leave, withdrawn.