Lords Sitting of 21 July 1954

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

  BIRKENHEAD CORPORATION BILL
  THE CHAIRMAN OF COMMITTEES (THE EARL OF DROGHEDA): My Lords, I beg to move that this Bill be read a third time.
  Moved, That the Bill be now read 3a.—(The Earl of Drogheda.)
  On Question, Bill read 3a, with the Amendments.
  THE EARL OF DROGHEDA: My Lords, the promoters of the Bill wish to make a number of further Amendments. They are, I can assure your Lordships, all drafting Amendments, with the exception of three. Of those three Amendments, two are required in order to give effect to provisions which were agreed between the promoters and the parties concerned but which, owing to a mistake, have not hitherto been inserted in the Bill. The third Amendment is needed to bring the Bill into line with the Slaughterhouses Act, which received the Royal Assent on July 5. I beg to move that the Amendments be agreed to.
  Moved, That the Amendments be agreed to.—(The Earl of Drogheda.)
  On Question, Amendments agreed to.
  Bill passed, and returned to the Commons.

V.H.F. BROADCASTING STATIONS
2.36 p.m.
THE EARL OF LUCAN: My Lords, I beg to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government what are their intentions with regard to the development of very high frequency broadcasting.]
THE POSTMASTER GENERAL (EARL DE LA WARR): My Lords, noble Lords will remember that in July last the
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Government agreed that the B.B.C. could make a start with very high frequency sound broadcasting. Since then I have accepted the recommendation of the Television Advisory Committee that frequency modulation should be adopted for this new service, and the way is now clear for some V.H.F. stations to be provided. After further consultation with the Television Advisory Committee, I have now authorised the B.B.C. to proceed with nine stations—at Pontop Pike, Divis (near Belfast), Norwich, North Hessary Tor, Wrotham, Sutton Coldfield, Meldrum (Aberdeenshire), West Wales and Holme Moss. All of them, except Wrotham (where an experimental station has been working for some time), will be on the television station sites serving their areas. They will cover about 75 per cent. of the population.
The B.B.C. hope to have the first station in this programme—that at Wrotham—in regular service by May, 1955; the next will be at Pontop Pike and Divis; and the others will follow at intervals over the following eighteen months. The needs of other areas also are very much in my mind, and I have asked the Television Advisory Committee to let me have their further recommendations about long term plans for V.H.F. development. I should like to make it clear that the opening of these V.H.F. stations will not mean that people in the areas concerned will be unable to use their present long and medium wave sets. They will, in fact, be able to go on using these sets, as the programmes will continue to be put out on long and medium waves—as well as on V.H.F.—for many years. Those listeners who wish to take advantage of the improved service by getting new V.H.F. sets or adaptors for their present sets will be glad to know that the radio industry expect to have these ready in good time.
THE EARL OF LUCAN: My Lords, may I thank the noble Earl for his reply. Could he explain, for the enlightenment of your Lordships, whether this is a part of the policy to clear Band III that was recommended in the First Report of the Television Advisory Committee?
EARL DE LA WARR: The reference to Band III meant clearing it for television. This development of sound broadcasting will not affect that.
THE EARL OF LISTOWEL: My Lords, may I first of all say how gratified we all feel at the statement which the noble Earl has just made, and also ask him one question? Can he give any idea of the cost to the listener of adapting existing sets for the reception of these very high frequency broadcasts?
EARL DE LA WARR: My Lords, I have inquired of the Radio Industry Council and asked them about that point. They find it rather difficult to give me a definite answer. The Television Advisory Committee a little time ago estimated that a set incorporating V.H.F. will cost from £7 to £10 more than an existing set. I am afraid that that does not answer the noble Earl's point, but I will go into that point further and inform him about it.
LORD TEVIOT: My Lords, may I ask the Postmaster General whether he can give any sort of indication as to how soon colour television will be available, and whether the present sets will be suitable for picking it up? Has he any information on that?
EARL DE LA WARR: My Lords, we allow almost any form of irrelevance in this House, but that question has no relation to this point at all. The noble Lord will have read in the Press that we are unlikely to have colour television for some little time to come but I am as out of order in answering his question as the noble Lord is in asking it.
LORD TEVIOT: I am very glad to be corrected by the noble Earl. I did not know that we could be out of order in this House!
LORD OGMORE: My Lords, may I ask one question, which will be in order. I was not able to catch the names of all the nine stations. Is one to be in Wales? If not, will Wales be served by this new service?
EARL DE LA WARR: Yes, one will be in West Wales.

BUSINESS OF THE HOUSE
THE LORD PRESIDENT OF THE COUNCIL (THE MARQUESS OF SALISBURY): My Lords, I beg to move the Motion which stands in my name.
Moved, That Standing Order No. 35 be suspended until the House adjourns for the Recess for the purpose of giving Government Business (except with the consent of the Government) precedence over other Notices and Orders of the Day, and that Standing Order No. 41 (No two stages of a Bill to be taken on one day) be suspended for the aforesaid period.—(The Marquess of Salisbury.)
On Question, Motion agreed to, and ordered accordingly.

ISLE OF MAN (CUSTOMS) BILL
Brought from the Commons, endorsed with a Certificate from the Speaker that the Bill is a Money Bill, within the meaning of the Parliament Act, 1911; read 1a, and to be printed.

FINANCE BILL
2.42 p.m.
Order of the Day for the Second Reading read.
THE PAYMASTER GENERAL (THE EARL OF SELKIRK): My Lords, the Second Reading of the Finance Bill always presents something of a problem to Her Majesty's Government in this House because, as has just been remarked, whilst your Lordships permit yourselves a fairly wide latitude of discussion on most subjects, when it comes to the Finance Bill the rules of relevance are even more liberally interpreted. I do not suppose there is a Parliamentary Chamber in the world which permits itself to wander over so wide and far-reaching a field. That does not make the task of the Government speaker any easier, but this is all to the good. The Government are always most ready to welcome noble Lords who come forward to speak on this Bill and to give us frankly their suggestions and, indeed, their criticisms. I think I can say that the House always enjoys hearing the shrewd and mature judgment which the noble Lord, Lord Pethick-Lawrence, passes on Government policy; and we always welcome the noble Lord, Lord Brand, for the way in which he comes to this House as a business man and tells us in the simplest and plainest language the effect of politics on the business world. Indeed, we are grateful to all noble Lords who take part, and par

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ticularly are we grateful this year because the Government have a very good story to tell.
I am not going to tell that story now. I am going to speak quite briefly and narrowly on the Bill itself and I will reply to points raised during the debate as best I can at the end of the debate. As your Lordships may anticipate, my task in speaking to the Finance Bill this year is rather easier than usual, because as my right honourable friend said in another place, this is a "carry-on" Budget, following the incentive Budget of 1953 and the emergency Budget of 1952. Accordingly, as may be expected, the Finance Bill contains little that is startling or new. Indeed, a great deal of it is no more than technical or administrative changes, some of which implement further recommendations of the first Tucker Report. The remainder of the important recommendations of that Report must await the Final Report of the Royal Commission on Taxation which is now sitting under the Chairmanship of the noble and learned Lord, Lord Radcliffe.
Turning to Part I of the Bill, "Customs and Excise," your Lordships will see that some relief of entertainment tax is given to the cinema industry and other entertainments, including various sporting events. Broadly, the reason for this is that in almost all these spheres costs have been rising without any corresponding increase in receipts; indeed there has been a tendency for receipts to fall. The cinema industry in particular has had to face rising costs, with no increase in income. Although admissions have kept up a little better than last year the trend is not upwards, and it is hoped that this modest concession will be of value to this industry, which is important not only for material reasons of employment, but also because of the part it plays in the propagation of British ideas. The remainder of Part I consists of minor adjustments in Customs and Excise. It does, however, include the extension of the key industry duty.
In Part II we hope to put purchase tax on a sounder footing. As noble Lords will know, much of the structure of this tax grew up during the war, when perhaps the details of its arrangements were not so closely examined as they would have
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been in peace time, and it is hoped that the present arrangements will be administratively sounder. In Part III, as I mentioned, there are included a number of recommendations of the Tucker Report. It also makes, under Clause 15, a sounder arrangement for the repayment of postwar credits, and, above all, it removes the possibility of the eternal continuity of these credits, which I think most of us felt to be highly undesirable. They will become payable as from August 9.
Clause 16 deals with investment allowances. This is much the most important development in the whole Bill, and perhaps I may speak a little longer on this subject. This clause introduces a new type of allowance which may become a permanent feature in our approach to this subject. Its effect is to make the total allowances for tax purposes in respect of capital assets exceed the total cost of those assets. The Government are glad that these proposals have been well-received—indeed, the only substantial pressure has been to make them more extensive. Criticism, though always of value, is not really the test here. The question here is whether, in fact, this clause will encourage greater capital investment. Investment allowances apply at the rate of 10 per cent. to industrial and agricultural buildings and 20 per cent. to plant and machinery, ships, mining works and scientific research assets. To the amount of such percentage they increase, in course of time, the total amount of tax allowances which can be claimed. They apply only to new buildings or equipment and not to secondhand. They do, however, include capital expenditure on the reconstruction, adaptation and modernisation of an old factory. Motor cars, other than those used for public services, are excluded. By "public services" I mean buses, taxis, hire cars and the like, and also lorries, vans, tractors and farm vehicles. These all get investment allowances, but private cars do not because they can be used both for private and business purposes. Frankly, I admit it is a difficult line to draw, but it is felt that vehicles which could be used partly for private use should not qualify.
Agricultural works, which were not included in the provision of initial allowances because they got favourable annual allowances, are now brought within the

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scope of investment allowances. All agricultural works can be included, such as fences, ditches, cottages and farm buildings. All forms of industrial plant and buildings and office equipment are included, but not commercial buildings, garages or hotels. The investment allowance brings important additional benefits to capital expenditure on research. At the present time the annual allowance on research is 60 per cent. in the first year. With the investment allowance that now becomes 80 per cent. in the first year, to be followed by 10 per cent. in each of the next four years, which admittedly confers a considerable advantage and one which will be generally welcomed in all parts of the House.
The measure of benefit which some industries will get will vary according to their nature. The allowance will be particularly beneficial to those industries where a large percentage of their capital is held in qualifying assets. That is particularly true of the shipping and aircraft industries. It is also true of mining, steel-making and highly mechanised industries where mechanical processes have extensively replaced manpower. To some extent this goes towards helping in the problem of manpower which the noble Lord, Lord Pethick-Lawrence, mentioned earlier this year, because it encourages more production by fewer people or by the same number of people. My right honourable friend the Chancellor of the Exchequer hopes that these allowances will be of very real benefit to the shipping industry, an industry which we all recognise goes to the very foundations of our economic strength and which admittedly has to face certain rather special problems at the present time. The proof of the pudding is in the eating, and the success of the investment allowance can be judged only by its effect on productive industry. I know noble Lords in all parts of the House will welcome it if it has that beneficial effect.
Part IV deals with estate duty, and there are two points I would mention. The first is that the lower limit of estate duty has been raised from £2,000 to £3,000. That is the lowest limit at which estate duty has to be paid. Secondly, referring to Clause 28, it has been the practice in this country for some time severely to limit the inheritance of wealth by one person from another. Without in
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any way attempting to discuss the broad general question which this raises, we are quite clear that when the effects of such limitation go so far as to result in prejudicing well-established businesses, then they are going too far. Indeed, the moderate-sized family business, often of long standing, with high qualities and traditions, has formed a most important element of industry in this country; and I believe that most people are anxious that it should continue to do so. Accordingly, in cases where estate duty becomes payable we have reduced by 45 per cent. each rate of duty in so far as it is attributable to industrial buildings or machinery and plant. This applies to individual traders, partnerships in so far as industrial; plant passes on the death of a partner or in the case of a company controlled by not more than five persons whose shares may fall to be valued on an assets basis under Section 55 of the 1940 Act. In such cases, the duty attributable to the assets—that is, industrial plant and machinery—will be reduced by 45 per cent. This brings industrial plant and machinery broadly into the same position as agricultural properties, although here, too, it slightly extends the scope.
It will be seen that the effect of this clause is limited in extent and, like the investment allowance, it is intended to benefit productive industry as such. The need for this clause can be clearly seen from certain figures given in another place by my right honourable friend the Financial Secretary. These show that when trade assets of such a business as concerns us here exceed £10,000, then, in 25 per cent. of the cases, some encroachment is made into these assets in order to pay estate duty. This, of course, is not the extent of the damage, because, quite clearly, the knowledge that such duties may be payable would constitute a considerable deterrent to prudent men from investing further resources in such a business. It may well be that the impending effect of the payment of estate duty will prevent a development that would be, in itself, wholly desirable. Again, the value of this clause will depend on whether or not it is successful in maintaining in existence well-established businesses and in preventing that progressive amalgamation with larger organisations which I know noble Lords opposite would regret as much as we should.

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Clause 34 is of some historical interest. Its practical effects are nil, but it brings the legal position into line with a practice which has stood for a good many years. Under the Act of 1875, which was introduced by Sir Stafford Northcote, accrued surpluses at the end of the year were applied towards redemption of the National Debt. In practice, surpluses have been applied to this purpose throughout the year. The clause accordingly makes permanent a practice for which powers had to be taken annually. The new Sinking Fund under the Finance Act of 1928 was introduced by the present Prime Minister, and it was intended then, by allocating some £355 million a year for the service of the National Debt, to repay it in the year 1978. Unfortunately, a good many things have happened since 1928. Amongst other things, the National Debt has increased from £7,500 million to about three and a half times that figure, £26,500 million, and it has been necessary to make entirely different arrangements for servicing the Debt every year. This clause has only historical interest.
It is too early yet to judge the results of the Budget but we can, I think, say that all the indications in the first half of the year go to show that the policy was framed on the correct lines. Latest figures show civil employment as 1 per cent. higher than a year ago. Unemployment is about as low as it has ever been in peace time. Industrial production is up by 7 per cent., and in the first half of this year exports were also up by 7 per cent. Perhaps what is more important, the trade gap is substantially smaller than it was. Personal consumption is slightly higher—from 2½ to 3 per cent.—in the first quarter compared with a year earlier, with increases extending over the whole range, except for alcoholic drink and entertainment—which no doubt will be welcomed by some noble Lords. National Savings have continued to rise steadily. In these circumstances, my right honourable friend the Chancellor of the Exchequer felt justified, on the Third Reading of the Bill in another place, in saying (OFFICIAL REPORT, Commons, Vol. 530 (No. 146), col. 106):
… the general outlook for confidence and in sterling … have seldom stood higher in our island history."
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I beg to move.
Moved, That the Bill be now read 2a.—(The Earl of Selkirk.)
2.58 p.m.
LORD PETHICK-LAWRENCE: My Lords, we are all indebted to the noble Earl, Lord Selkirk, for his factual description of the Finance Bill, which comes before your Lordships' House to-day, and for the brief remarks at the end of his speech concerning the general prosperity of the country. I have always found the noble Earl a very fair person in debate, and with very little that he said do I find myself in any disagreement. We have often discussed how far the prosperity of the country could be attributed to any particular cause, and as the noble Earl himself did not suggest any particular reason I will not venture one; so that on that we remain not in disagreement. The facts are undoubtedly as the noble Earl said at the close of his speech. Growing prosperity is writ large over the country as a whole. We see rising production, increasing exports, the pound pressing upon the upper limits of the exchange rates, improved sterling balances, a nearly stationary price level, a partial return to cheap money and a minimum of labour unrest. I concur in what the noble Earl said, to the effect that private savings for the purpose of investment have been steadily going up, and in saying that I think that on this particular day we should all wish to pay tribute to one who has passed away from our ranks, whose name is especially associated with the savings movement.
As to the Budget itself, it was regarded from its inception as what I should call a "standstill Budget." The noble Earl perhaps improved upon those words by describing it as a "carry-on Budget," which suggest a little more motion and a little less complete immobility. But it was a standstill Budget. It has undergone comparatively little amendment in the course of its passage through another place, and it comes up to us, as all your Lordships know, in its final shape, because we are not permitted to make any alteration in it. In view of the fact that it is not a very exciting Budget—at any rate, in the sense that it does not incite us to any violent feelings, either for or against—and in view particularly of the invitation held out to me by the noble Earl that we should

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diverge somewhat from the strict matters of the Finance Bill, I shall merely preface these wider remarks with a very few words about the Budget itself.
The first matter to which the noble Earl directed our attention was the clause dealing with post-war credits. Personally, I never did have much belief in post-war credits. I did not think that they were much to the point, even though they were really suggested and pressed forward by a great friend of mine, a man who was at one time a Member of this House, the late Lord Keynes. I never thought that post-war credits were very valuable, because I felt that the people would have been almost as willing to put up with higher taxation if those inducements had not been held out to them. There has been a good deal of feeling that though people were promised the return of their credits, the implementing of that promise has been so long deferred, that it is really a question of "hope deferred maketh the heart sick." In so far as the Chancellor of the Exchequer has made even some slight alleviation of that delay—and I agree that he has—I think that we should be grateful, and welcome the small mercy which that involves.
The noble Earl dealt at some length—and quite rightly, if I may respectfully say so—with Clause 16, which inaugurates a new method of rebates to manufacturers in the shape of what are known as "investment allowances." When we had our debate in this House on April 27, the Budget was already in existence and I gave, provisionally, a welcome to those proposals. Nothing that has happened from then till now has changed my attitude with regard to them. As the noble Earl said, I think correctly, there was very little opposition to them in the other place. I certainly should not offer any opposition to them now. I agree entirely with the noble Earl that it is a new experiment which will be shown to be justified, or modified in so far as it does not prove suitable, with the process of time. I hope that it will be effective and, as the noble Earl suggests, will be an inducement to manufacturers to go further with their extension of fixed capital.
Clause 28 was another clause to which the noble Earl referred. It makes substantial reductions in the estate duty to be paid by certain businesses. That
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clause, as noble Lords who followed the proceedings in another place will know, was the most controversial clause in the Bill, and it met with a good deal of opposition from members of my Party. I think the matter is too detailed for me to go into it at any great length to-day, but I would say that to a large extent I find myself in full agreement with what my Party leaders said in the other place. I think the concession is dangerous, because it singles out special people, special interests, for special concessions. As a good Treasury man, I always remember the Treasury caution on repercussions: that when you give special favours to special people you will always find, next year and the year after, a number of other people, very nearly in the same position as those people to whom you gave those concessions, saying, "If you give them to such-and-such people, why do you not give them to us?" If the Chancellor of the Exchequer is in office next year, I shall not be at all surprised if great numbers of other people approach him and demand similar favours. For that reason, I see a good deal of danger in these proposals. However, this provision has been left in the Bill, and here again, time alone will show what its effects are.
One word about Clause 32. The noble Earl mentioned that, but he did not say that it was included as a result of an Opposition Amendment. I believe that there was also a Government Amendment to the same effect, but it was mainly an Opposition Amendment that proposed this Clause 32, and it was accepted by the Chancellor of the Exchequer. What that Amendment did was to sweep away estate taxation on estates of under £3,000, and halve it on those of between £3,000 and £4,000. I think that was a very good proposal, and I was glad to see that the Chancellor of the Exchequer accepted it. Its effect is to relieve of tiresome calculations and worries people who are left a small estate, and to relieve, at the same time, the Estate Duty Office, a very hard-working office which often gets a long way behind in its work, of wasting its valuable time in procuring a minimum net return to the Exchequer out of a multiplicity of pettifogging investigations. Therefore, I am very glad that that Amendment was accepted and that the clause now forms part of the Bill.

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Those are the main provisions of the Bill. Criticism was made at the time—and it is still made—that there were certain omissions from the Bill. I will say just a very few words about those. In the first place, the Bill did not give additional aid to old-age pensioners or to others in receipt of statutory benefits. The increasing difficulties of these people are generally recognised, and they take statistical shape in the fact that an increasing number of them are being forced to seek National Assistance in order to supplement the too small receipts they get from statutory benefits. Only to-day, I understand, the House of Commons are debating this question, and I notice that a Government Amendment has been put down to the Resolution moved by the Opposition. That Government Amendment clearly goes a long way in the direction of a promise that this grievance will be attended to in the early future, and in view of that I do not think it is necessary for me to dilate further on the question. Another matter, which your Lordships know I have at heart, is that of equal pay for equal work, regardless of sex distinction. Here again, since the time of the Budget, the Chancellor of the Exchequer has taken steps which seem to amount very nearly to an undertaking to take the first steps in that direction either before or at the time of the next Budget.
I propose now to leave the question of the terms of the Finance Bill itself and come to one question which is exercising financiers, not only in this country but all over the world—that is, the question of convertibility. Your Lordships will not have failed to notice that only in the course of the last few days an international committee, presided over by the Chancellor of the Exchequer himself, have been sitting to consider certain aspects of convertibility. My own view, which I believe is shared by competent members of my own Party, is that full convertibility is an ideal to be striven after. It has demerits, but in our view its merits outweight them. All the same, in my opinion it would be very unwise to take the plunge into full convertibility until the amount of firm ground on which we are at present standing has been greatly extended. At the moment, sterling is quoted highly on the international exchanges,
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but we do not know how much this is due to "hot money," which any day may be capriciously withdrawn. For some months we have had a small favourable balance of payments, month after month, but a puff of unkind wind, such as an adverse turn in the terms of trade, might put us again in the red. It must be borne in mind that the Randall Commission in the United States, which reported to President Eisenhower last January, said that there was still a gap of 2 to 3 billion dollars in the amount of the balance of payments in the rest of the world as a whole in its relation to the United States. Our United Kingdom gold and dollar reserve has been steadily creeping up, but your Lordships should not fail to realise that, even so, it is still considerably below the peak which it reached some three years ago and which it required only a few months of adversity to dissipate.
All these facts make it incumbent upon us to watch our step with the greatest care and not to embark upon full convertibility until we are justified in believing that we can hold it in bad, as well as in good, days. Nevertheless, there are degrees of convertibility. I should welcome going forward little by little, by lifting such embargoes and controls as can be safely disposed of. I may say, in passing, that these views seem to be the views held by the Chancellor of the Exchequer, and therefore this is not in any sense a Party issue. I think that if the Chancellor of the Exchequer were here, he would not disagree very much with what I have said.
In this connection, I should like to make a reference to the speech made by the noble Lord, Lord Rennell, in our last economic debate in this House on April 27, in which he seemed to me to suggest that an obstacle to our seeking from the world the necessary confidence in sterling was the disapproval of the changes in the social structure of this country already brought about, and the fear that, if a Labour Government were again returned to power, further changes inimical to stability would be carried into effect. This, of course, was a serious charge, not only against members of my Party but against those who have directed the affairs of this country during the last fifty years, and it needs most careful examination and consideration. If I were

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asked what I thought was the most significant difference between the set-up in this country to-day and that of fifty years ago, I should not claim that it was the coming of the social services constituting the Welfare State: I should claim that far and away the most important thing was the revolutionary change in the distribution of the incomes of the people. The facts are matters of common knowledge, and it is only necessary for me to give your Lordships a few figures in illustration.
When I was a young man, the wages of an unskilled male labourer were between 3½d. and 5½d. an hour, and a weekly wage of 18s., or below, was quite common. Women received little more than half this figure, and domestic servants, apart from their keep, often got less than £10 a year. At the other end of the scale, many rich men had a net income of over £50,000 a year—that is to say, something like one thousand times that of the common labourer. I remember that, when I was lecturing in Oxford on economics, at the turn of the century, one of my students asked whether there was any economic reason or principle on which this existing differentiation in income between one man and another could legitimately be based. I told him that I could not discover any. On further reflection, it seems to me that, while there were grounds for some differentiation, say, from 1 to 5 or 1 to 10 or 12, the existing differentiation was fantastically exaggerated; and a great many other people, in all classes, more or less shared my opinion. Broadly speaking, their opinion has prevailed. To-day, most manual labourers can earn at least £400 a year, which amount, if they have a wife and children, is free of tax, whereas exceedingly few rich men can have a net income of over £5,000 a year. That is twelve times as much, as against 1,000 times as much fifty or sixty years ago. It seems to me that these are incontrovertible facts, and there are certain questions which the contemplation of them suggests should be asked and answered. That is what I propose to do during the few minutes more that I shall take up your Lordships' time.
The first question I want to ask is: Has this revolution meant a better country to live in? I answer that question with
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an emphatic affirmative; and I believe that that is the opinion, not merely of the poorer classes of the country but also of a considerable proportion, if not a majority, of the better-off classes. The second question I would ask is: Has this revolution produced a stable country, in which not only we but other countries can place confidence? Again, I answer emphatically, yes. How many other countries are there which have so small a proportion of Communists as this country has?—and I use the word "Communists" as meaning people who not only want considerable change but want to bring it about by disruptive means. I am confident that we have fewer Communists in this country than almost any other country in the world. How many other countries have as little labour unrest as this country has? I have known people who have left this country and gone elsewhere, in the belief that they were going to get away from many of the controls and inhibitions imposed on them here, and would be going to a place where they could get cheap labour, and everything else, But I have known many of them come back, because, after sojourning in a foreign country, or in other parts of the Empire, they have found, after all, that Britain is best.
I am not afraid to put the third question, which is one I have often heard asked. It is: Are there not many workers in this country who are prepared to take advantage of and abuse their new prosperity? I answer that question, quite frankly, in the affirmative. In all sections of the community, and in every class, it is my experience that there is a proportion, perhaps about 10 per cent., comprised of shirkers, slackers and "spivs," who will get as much as they can and do as little as possible to get it. As I say, that is true, not of one but of every class of the community. But, after all, your Lordships will remember that we have the words "fair play" in this country; and, to the best of my knowledge, they are almost untranslatable into any other language. In saying that, I may be maligning some other countries, and, if so, I apologise to them in advance—but "fair play" is an essentially British ideal. Personally (and I believe this applies also to most other people in this country who care for the prosperity of our land) I am willing to trust to that, at any rate in the long run.

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The most important of all, perhaps, are questions which still remain to be asked. Is the present set-up completely satisfactory? Have we reached anything like finality? My answer to those two questions is an emphatic negative. This applies both to what I may call the horizontal differentiation—that is, the ratio of wages within each class—and to the vertical differentiation—that is, the ratio between one class and another. Ideal differentiation should be based on a number of different factors. It should take account of the requisite skill required for the job, and the degree of responsibility involved; the length of training during which ingoings are small and outgoings considerable; the strain of the work, and the probable number of years of working life; its unpleasantness; the number of qualified applicants for any particular work; and the need for leisure, quiet and seclusion, involving more house room. It depends, of course, also, on a great number of other things, but I should become tedious if I attempted to enumerate them this afternoon. In practice, of course, comparative wage rates are only partially governed by such considerations and are often determined on solely historical grounds. I can quite understand an engine driver, on whose ceaseless vigilance not only his own life but that of hundreds of passengers depends, feeling aggrieved if his wage packet falls short of that of some young fellow who, with little previous training, slips into an engineering shop where he performs, almost automatically, what is known as a semi-skilled job. Different kinds of values enter into the claims of authors, artists, doctors, teachers and other members of the so-called "middle classes" for special consideration.
Another matter is whether we may or may not have taken a wrong turning in regarding a mimimum wage level as also a maximum, and thus failing to reward good work. I have occupied already too much of your Lordships' time, and I do not propose to pursue the matter much further. In conclusion, I would say only this. The new differential in rates of remuneration seems to me not only more humane but much more realistic than that which prevailed in the nineteenth century. But it is still to-day far from perfect, and we must
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expect further changes of all kinds. Of course, those changes will, in the main, be brought about not by theoretical discussions, either in your Lordships' House or elsewhere, but by hard bargaining and by the logic of events. Nevertheless, I think your Lordships may agree with me that we in this House have some interest in discussing this question, and therefore I have ventured to lay it before your Lordships this afternoon.
3.30 p.m.
VISCOUNT BRIDGEMAN: My Lords, I think we shall all agree that when my noble friend in front of me repeated the Chancellor of the Exchequer's story of sober success in his Budget, it lost nothing in the telling. When I was listening to the opening remarks of the noble Lord, Lord Pethick-Lawrence, it struck me that "even the ranks of Tuscany could scarce forbear" one or two muffled cheers. The noble Lord, Lord Pethick-Lawrence, will forgive me if I do not follow on what he said about convertibility, because I am almost surrounded by my noble friends from the banking world who will enlighten us on that subject if they think fit.
Nor do I want to follow him in the interesting remarks he made about social conditions and social change, beyond saying one thing. It struck me, as I was listening to him, that whereas he was dealing mostly with the reduction in the gap between the poor and the rich—or the so-called poor and the so-called rich—at one moment he was also dealing with the more recent reduction in the gap between the rewards of the skilled and of the unskilled man, which is a very different thing. I think one may say that, as a rule, it is not a good thing, certainly from the point of view of industry; and that is a matter upon which I shall say a word or two this afternoon. In fact, I am going to follow my noble friend Lord Selkirk, not in precept but in practice, because, like him, I have in mind to deal with one or two aspects of the Finance Bill itself in so far as they affect conditions in industry.
What one can get out of the Finance Bill to help industry may be, and in this case is, very important, but not so important as the really important things which help industry, such as stable wages and, therefore, stable prices, and industrial peace and favourable terms of

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trade. None of those things can be put into any Finance Bill. Had conditions been better, one thing which might have been put into this Finance Bill, but which could not be put in at this time, was a reduction in the general rate of income tax. As my noble friend Lord Selkirk said, in this Bill there are a number of extremely wide concessions which I think we should welcome, especially in Clauses 16 and 17 dealing with the investment allowance. That is particularly interesting because, quite apart from its own value and its own merits, it seems to get us away from what has been a great difficulty in the replacement of industrial plant, namely, the rather rigid adherence to what they call historical cost—the cost of the machine or building when it was first erected. On that cost depreciation is based, and, as everybody knows, historical cost bears no relation, or hardly any relation, to the cost of replacing the same thing at the present time. Hare we have not only a practical concession, but something towards the admission of a principle for which a number of people in many quarters of industry have been pressing for some time.
Another aspect of this subject is the provision for research which, I am sure, will be widely welcomed in every quarter, because up to now it has not been easy to finance research of any kind except from money which is available out of taxed profits, and there is no doubt that that has held back research in a great number of firms and industries. My noble friend was wondering whether these concessions would produce the results which were expected. I am quite certain that if we come to take stock of what has happened in, shall we say, twelve months' time, the answer will be undoubtedly, "Yes." I think those firms who employ the best possible accountants will get the best possible advantage out of the somewhat complicated clauses of this Bill. I think, too, that the use which is made of the investment allowance clause is bound to depend to a certain extent on how the policy of lending and the ease of borrowing go in the next twelve months. It will depend, obviously, to a certain extent on the attitude of the Capital Issues Committee. That, indeed, is largely a banking problem, and all I should like to say now is that I feel certain that, in so far as
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those aspects are a matter for the Treasury or for the Chancellor of the Exchequer, they will be fully considered, and the attitude of, say, the Capital Issues Committee, in so far as it is a matter for the Treasury, will be conditioned by the need to make this investment allowance a success.
My noble friend made one point about its application to agriculture. I may be wrong, but I think that until he spoke there was a certain amount of doubt as to how far that concession applied in regard to that type of expense which is dealt with in agricultural properties on the property maintenance claim. I hope I understood him aright, because if I did I think it will mean that any expenditure in connection with the improvement of agricultural land will qualify for the investment allowance under the proper headings, irrespective of whether or not it comes under the maintenance claim. I am sure that all landowners, farmers and owner-occupiers will be glad to think so.
May I go on to Clause 28, the clause which sets out to assist small businesses and one man businesses in regard to estate duty. I think we should all welcome that provision, because, whatever may have been the arguments used on the other side and in another place, we get back to the position that unless the one-man businesses are in fact protected they will die out, because they cannot be recreated again. The times are past, under present conditions of taxation, where a man could work hard and save enough money to set up on his own, then employ another man, and then become a small business and so a large firm. That cannot happen under present conditions so long as taxation remains as it is—which it will for the rest of our lifetime. Therefore, unless some relief is given, the smaller businesses will progressively die out. I was not quite clear whether the noble Lord, Lord Pethick-Lawrence, complained that this was a new principle. After all, there does not seem to be a great deal of difference between the principle which underlies the grant of investment allowances for buildings and industrial machinery and the principle which underlies this clause, which will encourage those people who have invested in industrial machinery to believe that the business which they have built up will go on after their lifetime.

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It seems to me to be perfectly logical from that point of view.
Even at the risk of seeming ungrateful, I should like to discuss this clause a little further because, although it goes quite a long way and is an important first step, I am not sure whether it will have the full results which are expected if it goes only so far as it does. After all, the rates of duty are still quite high. If the business is a big business, let us say worth between £50,000 and £60,000, the rate, I am told, will be 19¼ per cent. It will be nearly 25 per cent. if the business is worth £100,000, and if it is worth £150,000 it will be 27½ per cent. Therefore, it must be realised that, even under these arrangements, quite a lot of money will be taken out of a business if the business is of any size. Again, there is the question which, from the point of view of the business itself, is really fortuitous—that is to say, whether the value of that business happens to be aggregated with other property belonging to the owner of it. That may be so or it may be not. The owner of the business may or may not own a lot of land or investments overseas. The argument, so to speak, is an inaccurate one in proportion to the severity of the death duty, which varies in each business on grounds which are not strictly connected with the business but are related to the personal affairs of the man who owned it. If the object of the provision is to protect the business, it seems to me that it will not completely succeed so long as those arrangements remain in force.
There are a number of types of business which bring wealth to this country by home production and by export. Many of them—if you like, most of them—are manufacturing businesses which come under this clause, but not all of them: there are the merchanting businesses, a source of great wealth to this country. The question arises how far, even in a manufacturing business, items such as stocks and work in progress do or do not qualify for the investment allowance. Let us take an imaginary case, where a business of the type we are discussing had a contract worth a quarter of a million pounds. When the owner of it died, 95 per cent. of that contract had been completed but could not be delivered until the completion of the whole contract, with the result that 95
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per cent. of the value of that order was represented by work in progress. Let us take another case of a firm which had produced a large quantity of goods which, for some reason or other, could not be sold or exported. There, unless I have read the clause of the Bill wrongly, a state of affairs exists where a large amount of money will be taken out of the business for what might be quite haphazard or fortuitous reasons.
I may have misunderstood this matter, though I do not think I have; but what I am really saying is that this clause, with all its good intentions, will perhaps not produce all the results that were and are hoped of it unless further care is given to these points. I realise that the Bill will now be left as it is and experience will be had for another twelve months as to how this works, but I hope that those points will be watched. If it turns out that I am wrong and that the clause is satisfactory as it is, well and good; but if it turns out that the clause is not giving full value because of what I think are these defects, then I hope that by this time next year the Chancellor of the Exchequer will have looked at the matter again. Those are the main points which affect industry. The background of this Finance Bill, so far as industry is concerned, is, I am sure, a most favourable one and the best that we have had for a long time past. That is so, not merely because of the provisions of the Bill but because Ministers and their advisers in Whitehall not only are anxious, as they always have been, to meet the needs of industry, but are learning more accurately what those needs of industry really are.
3.44 p.m.
LORD GRANTCHESTER: My Lords, I should like to take advantage of the noble Earl's invitation to raise a few general questions which I think arise out of this Bill. First, there is the subject of purchase tax. The only thing that I have heard in favour of this tax is that, administratively, it is easy to collect. In my view, at any rate in a society where we respect free choice, it is a bad tax. It is levied with discrimination and keeps many prices high. The discrimination is applied to distinguish between goods which are placed by authority in a scale of necessity or desirability, in the eyes of the authority. The consumer choice is ignored. The decision is an arbitrary

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one, and a division of this kind has the effect of reducing the incentive to higher productivity just at the point where it is needed, for the tax falls hardest upon a man or a woman where he or she is most inclined to make the effort to secure the particular goods needed.
Extra effort is made in these days, where minimum earnings are high enough to provide the bare necessities of life, to secure the extras which add to the pleasure and gaiety of life. This tax raises the cost of such goods by an average of possibly 50 per cent., and one of its most undesirable features is that it keeps up the level of second-hand prices by a similar percentage. It has also the disadvantage of discouraging craftsmanship in high-quality work. If it is not possible under present conditions to dispense with the revenue collected from this tax, I would suggest that the time may soon come when Her Majesty's Government could consider replacing a reduced yield from this tax by a small tax on retail sales, excluding food, and not exceeding 5 per cent., and that such a tax should be particularly associated with the needs of defence by designating it a "defence contribution."
The second matter which I should like to raise is the continuance of Treasury controls instituted since 1939, and, in particular, the control instituted under Part V of the Finance Act, 1951. I should like to ask the noble Earl who will be replying whether the control exercised by the Treasury was not a major factor in provoking the nationalisation Act which has so disturbed the relations between this country and Persia.
THE EARL OF SELKIRK: I did not quite catch the document that the noble Lord referred to.
LORD GRANTCHESTER: The Finance Act, 1951, Part V. I should like further to ask the noble Earl whether the method and scale of taxation in this country are not a major factor in the reported decision of the new operating company set up to deal with Persian oil to be registered in the Netherlands, rather than in this country. In any event, I suggest that the continuance of the control imposed is a deterrent to what should be the normal development of industry overseas in a partnership between British interests and local interests. Surely, we want for
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British industry in the financial field conditions analagous to the conception for ships of a free port. This country must take a world view in the development of its trade, and we should be content with the tax which we can levy upon profits accruing to resident nationals. There is much more to be gained from a share in world-wide enterprises than in preventing the most sensible method of development by seeking to maintain Treasury control in the forms now imposed.
It is no answer to say that the 1951 Act provides that in, proper cases, permission will be granted, on application to the Treasury. That is the argument for the maintenance of all controls, and their effect is always restrictive. Nor is there any measure of the damage they do in their restrictive influence. What we do know is that the restrictions have led to a number of new enterprises being built up, particularly in parts of Africa and in other territories within the sterling area outside the control of British companies, which otherwise would have been retained within their orbit. The same considerations apply, I suggest, to the maintenance of the Capital Issues Committee. Surely the right course for Her Majesty's Government is to leave to the banks and insurance companies, who can be relied upon to act with just as much responsibility as the Capital Issues Committee, the determination of matters that are now referred to that Committee. This is all the more desirable as the deterrent effect exercised by the necessity of making applications to the C.I.C. has led to a number of less desirable methods of providing capital, and so tended to prevent the financial institutions of this country from spreading their investment risk.
My third question involves administrative economies and potential liabilities upon the Treasury. For example, why are the Ministry of Food continuing to negotiate prices in new Danish contracts for bacon and butter? Surely the Treasury need no longer assume this sort of risk, but should leave the subject to private traders, whom Her Majesty's Government profess to regard as more qualified in such a matter. I would urge that this practice should cease not only because of the administrative costs involved and because of the risk of loss which I believe if the practice is continued will ultimately fall upon the Treasury but also because the practices

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is detrimental to international relations and good will. Any attempt by the Treasury to drive a good bargain creates international ill-will.
My fourth question is whether Her Majesty's Government will set an example (I am not dealing with the effect of it, because there are those more qualified than myself to deal with that aspect) in using the word "convertibility," in the sense in which the ordinary British subject expects. It has become an unfortunate practice for Governments, in their legislation, to give preference to foreign nationals over the citizens of the country whom they represent. To the ordinary Englishman, convertibility means the right to convert a pound in his ownership into any other currency. In considering convertibility, I suggest that it may be found that a common standard is necessary against which to measure the value of a currency, and I hope that in the financial discussions which are taking place the question of a gold standard will be reconsidered. I notice that Dr. Erhardt, the German Minister for Economic Affairs, is reported as stating, as he left this country after the recent conference, that it was no longer a question "whether convertibility would materialise; it had become a fact." I have no knowledge whether this is to be true for Germans; but certainly it is not true for Englishmen. I think that the greatest credit is due to Her Majesty's Government for their part in the restoration of confidence in sterling; but it is most undesirable that the Germans should forestall us by achieving convertibility of the mark, before we achieve the convertibility of sterling—using the word "convertibility," of course, in the sense in which I have defined it.
My Lords, I should like to add one final comment on the subject of the level of taxation. We cannot be content to see it remain at its present level, absorbing as it does so large a proportion of our national income. Expenditure must be reduced to enable taxation to be reduced. We must continue to press this vital matter on Her Majesty's Government and ask them, while overhauling the burden of our expenditure on defence, not to neglect the possibilities of economy, which I feel sure are not inconsiderable if a greater degree of business method is applied particularly, to mention one
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instance, to these development contracts which are being placed in such large numbers by the various Ministries.
3.56 p.m.
LORD SHEPHERD: My Lords, we were all very charmed with the welcome given to us to-day by the noble Earl who leads for the Government on this Bill; indeed we were all glad to know that he had no objection to the discussion ranging widely.
THE EARL OF SELKIRK: I cannot promise to answer it all.
LORD SHEPHERD: Well, I am glad that we are permitted to go somewhat outside the particular contents of the Bill, because there are so many other subjects which are discussed in another place in relation to the Budget and which are not in the Bill; and as the Bill itself has already set the rates of taxation that we have got to pay, there seems little reason for discussing them at this juncture. I think it has also to be remembered that in your Lordships' House we have no responsibility for the Budget. It is quite true that we have to pass it through its normal stages, but we cannot alter the taxes and we cannot include new taxes; and if we fail to pass the Bill within a month of its reaching us, then those in another place can proceed to the Monarch at once and gain the Royal Assent for the Bill over our heads. It is therefore proper, I think, that on an occasion like this we should range a little more widely in order that we can put the Budget in its proper setting.
On a number of occasions recently the noble Lord, Lord Brand, has very gallantly trailed his coat in front of noble Lords on this side of the House. Unfortunately, in most cases we were unaware of the kind of attack that was coming and were ill-prepared to receive it. On this occasion, therefore, I thought it right to anticipate such an attack and, if I could, forestall the noble Lord on some of the important considerations that he will raise. I am not going very far back into the history of the debates in your Lordships' House, because the noble Lord has been rather kind to us in providing us with a recent letter to The Times, two paragraphs of which letter may give us the basis for an interesting and profitable discussion. With the intention of the noble Lord in his letter to

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The Times I am in full agreement, but I thought the leading article which he criticised was going a little bit too far, even for that newspaper. I am rather with the noble Lord in believing that if convertibility is to come it should come in stages and after the ground has been well prepared.
But, as I have already mentioned, there are two paragraphs in that letter to which we must offer some objection. A section of the first paragraph reads as follows:
"Socialists, as I understand, argue that absolute full employment permanently is more important than a stable and free currency;"—
that is the first point—
"that such full employment can be secured in the direct way by the Government maintaining internal demand at all costs,"—
that is the second point—
"and that if this leads to an unfavourable balance of payments and dwindling reserves it is perfectly proper to seek a temporary remedy in the form of further devaluation."
There is a great deal of poison for this side of the House in those few words I have quoted. The charge that we are more favourable to full employment than we are to stable and free currency caused me to ask myself what the noble Lord meant by "a free currency." I was bound to ask myself that question because within the Party opposite to-day there are members who not only believe in a free currency so far as administration is concerned but want the currency itself to be of no settled value. It is rather important that I should know—no doubt the noble Lord will tell us afterwards—whether he is in favour of a currency with a fixed value or a currency without nominal value. If the noble Lord favours a currency with a fixed value then the distance between the noble Lord and noble Lords on this side of the House is a comparatively small one. We desire to see convertibility—the freedom of men to buy and sell our currency—but we believe that if convertibility comes, then the currency to be bought or sold should have a definite value.
The second point in the quotation concerns a stable currency. What is a stable currency? A noble Lord behind me indicated that a stable currency meant the constant value of your currency in buying things over a period of time. We will accept that explanation. But I fail to
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see why one cannot have a stable currency and, at the same time, full employment. Perhaps I had better relate a little experience of mine, because all Parties in the State are now in favour of employment or maintenance. Whether a man works or is idle through unemployment, he is still to be a consumer. The fact that a man becomes unemployed does not mean he ceases to be a consumer; he is a consumer all the time. All Parties in the State are committed to that policy. The first time I entered this Chamber, which was as long ago as 1905, the subject under discussion on that day was the first Unemployed Workmen Act, under which, if a man became unemployed when he was qualified for benefit, he could receive five shillings per week for a period of six weeks. So that the maintenance of unemployed persons did not arrive in the time when we, the Labour Party, had reached the status of Government; it was first introduced into Parliament by a Conservative Government. It is important to realise that we are all committed to that policy.
Perhaps the noble Lord will reply to this question: Which is the more economic: to provide a job for a man so that he can earn wages; or to maintain a man in unemployment at the expense of the State without providing a job? The Party of which I am a member believes it would be ridiculous if a country which prides itself on being a great business nation asserted that it was more profitable to maintain men in idleness than to find them jobs so that they could become profitable workmen. I do not know why the noble Lord gives us the alternatives—either full employment or a stable currency. The noble Lord will doubtless correct me if I am wrong, but I rather suspect he is of opinion that if there is full employment labour becomes immobile. I know one noble Lord who sits in front of the noble Lord, Lord Brand, is of that opinion because he has given utterance to it in your Lordships' House; but we of the Labour Party believe that, if a transference is to be made, that transference should be secured by means other than the empty belly. We ought not to move men from one job to another merely because they are unemployed. If we move men from one job to another we should do it because their services are of the kind required.

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This is what the Labour Party says in its policy pamphlet which has already been mentioned in this House by the noble Lord, Lord Brand, and I hope that permission to read a paragraph of that pamphlet will be given me. It states:
"Full employment enhances a man's self respect. It removes his fear of working himself out of a job. It makes him more willing to change to new methods of work. It is good for other reasons, too. When labour is scarce it must not be wasted, and industry has to find ways of using it to the best advantage, through better layout, better management, better industrial relations and more capital investment. Full employment does not mean that everyone can be guaranteed security in the job he holds. Changes of job are inevitable. What is essential is that that should not come about haphazardly but by planning, so as to keep unemployment down to a minimum. New factories must be built where they are needed. Training schemes and technical education must be provided."
I suggest that in thinking over what the noble Lord, Lord Brand, may tell us of his own viewpoint on these issues, noble Lords should remember what I have quoted, because we want the views of the Labour Party in this country to be taken seriously in this House. Consider, also, whether, after all, there is not something in them that cannot be recommended for adoption in the State. We believe that unemployment is a curse which can bring about difficulties we have not yet imagined. We do not believe that full employment will make for an unstable currency. On the other hand, we believe that if there is to be full employment there must be a stable currency. Unless there is a stable currency full employment cannot be guaranteed.
The second point in this paragraph relates to the maintenance of a high demand internally in order to keep full employment going. It is quite true that the Labour Party is anxious that a high demand should continue in this country. It believes that we cannot conquer world trade, we cannot lead the nations in trade, unless we at home are living in a state of abundance. I use that term advisedly. I do not believe that we are ever going to rise above the common rut unless the men and women at home have all that men and women could wish to carry out their particular jobs. The Labour Party policy on this point will, I think, disabuse the minds of some noble Lords of the idea that it is promising, or striving for, something that will bring about inflation and bring about trouble. This
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is what the Labour Party statement of policy says:
"Our aim must be to maintain a high level of demand. But it must not be so high as to cause uncontrolled inflation—which drives up prices and brings hardship. Also, if home demand is too high, imports increase, goods get diverted from export markets, while our export prices become too high in foreign markets. A balance must be maintained with demand neither too high nor too low."
I sincerely trust that when the noble Lord rises in his place and ventures to address your Lordships' House once more he will not do so as if he thought that the Labour Party desired to play ducks and drakes with the fortunes of this country and were even prepared to do all kinds of outrageous things in order to provide full employment or to create high demand in our ranks.
In addition to the financial controls of which I have been speaking, there will be physical controls as well. I am not one of those who would despise the power of the monetary weapon. But I would say this. If the country depended entirely on monetary control, then it would run into difficulties. I believe that, in addition to monetary control or the use of the monetary weapon, there would have to be physical controls. May I read my last quotation from our programme—and I quote it because I think it will meet with acceptance from some noble Lords opposite:
"To prevent the waste of resources through inflation, Labour must also exercise powers of direct economic control. The most important of these are the powers to regulate imports; to control currency exchange and the movement of capital abroad; to allocate scarce raw materials; to regulate investment, particularly in buildings and also, in the event of acute shortage, in key industrial machinery; to control the location of industry; and to control prices."
I am not asking the noble Lord or other noble Lords to agree all at once to that. What I am asking is this. I want noble Lords to give consideration to those points, and then I am sure they will find that there is a good deal of value in them.
Now I come to the third point of the paragraph, already quoted, and I am going to link it up with the second paragraph in the noble Lord's letter to The Times. The remaining point in that paragraph is:
"that if this then leads to an unfavourable balance of payments, and dwindling reserves it is perfectly proper to seek a temporary remedy in the form of further devaluation."

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I am rather sorry that the noble Lord included that in his letter, because in April last he made a statement of that kind in this House and my noble friend, Lord Pethick-Lawrence, challenged it. The noble Lord, Lord Brand, very politely returned the appropriate answer, namely, that he accepted the view of my noble friend on the question of devaluation.
LORD BRAND: My Lords, may I intervene for one moment? I think I said that if the noble Lord, Lord Pethick-Lawrence, looked up Challenge to Britain he would not find the word "convertibility" in it. I may have been wrong, because I have not verified that since. But that was my statement, as I recollect.
LORD SHEPHERD: The noble Lord said this. Perhaps I had better quote from the Report of the whole incident. The noble Lord, Lord Pethick-Lawrence, said (OFFICIAL REPORT, Vol. 187 (No. 62), col. 53):
"Before the noble Lord sits down, may I say, in the interests of this country and of nothing else, I think he is entirely misrepresenting the position. I have never heard any prominent member of the Labour Party oppose the ultimate object of convertibility or advocate a further devaluation. I interrupt to say that only because I think it would be a bad thing if it went out from this House that any such ideas as the noble Lord has put into our mouths were the policy of the Party sitting opposite him."
Then the noble Lord, Lord Brand, replied:
"Of course, I accept the noble Lord's statement."
He did go on to say that the programme of the Labour Party did not contain any mention of the word "convertibility," but I fail to see what that proves. Either the noble Lord is correct or he is incorrect when he says we were against any form of convertibility or were in favour of devaluation. I want to assure him again that this Party is not out for devaluation, as I shall show in a moment or two.
A further paragraph in his letter to which I want to draw attention is as follows:
"It is in this uncertainty that there lies, it seems to me, the danger of a permanently strong sterling exchange It seems to me of the highest importance that there should be, so to speak, a bipartisan policy agreed to by both Parties in regard to this matter, and an acceptance by both of them that if this country
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returns to convertibility both Parties will be prepared to persuade the public to accept the measures which may be needed in times of stress."
One part of the letter seems to show that the noble Lord still thinks we are in favour of devaluation. In the other part he is suggesting the possibility of a bipartisan policy between Parties. If we are going to get a combination of the two Parties, which Party is going to give way? If what the noble Lord has been saying has a basis of fact, either the Labour Party has to give up devaluation—for which it has no place in its programme—or the Conservative Party is going to accept the policy of devaluation.
I should like to return to the letter which the noble Lord wrote to The Times as there are certain questions which I should like to ask him. First: What does he want the Parties to co-operate about? Is it the fixing of the value of currency? Is it the controlling machinery of the exchange? Is it the controlling of imports? Is it the fixing of the bank rate? Is it negotiations between countries about conditions of trade? Or does the noble Lord concern himself merely with what he especially mentioned in his letter, namely, that if free currency and free competitive enterprise, in which the Parties of the State have no part at all, get us into difficulties, those Parties have merely to say to the people that it is up to the taxpayers to get the country out of trouble?
I have from time to time paid a great deal of attention to the noble Lord's position. I do not think for a moment that he would agree to the latter suggestion. If, however, he should unfortunately say that all it amounted to was that when we are in difficulties the Parties should come together and get the country out of them, then all I can say is that the Labour Party would not play exactly that game. Such a proposal would not be the correct one to put to us. I think the proper question to put to us would be this: "We have been through a difficult time and it may be that further difficulties are lying in wait for us. If we venture forward with convertibility, will the other Parties in the State co-operate with one another to keep the currency on a sound basis?" If the question were put in that form, I think our Party would be the first to answer,

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"Yes." If by co-operation we can achieve something to make the currency sound, then we will work for it; but if we are asked to come in only at the end to a funeral, then that is a kind of co-operation we shall not be prepared to undertake.
I should like to quote a statement of the T.U.C. on the subject of convertibility, because the unions of the T.U.C. are the strongest factor within the Labour Party and their votes more often than not determine the policy of our Party. This is what the T.U.C. have to say about convertibility:
"Until there has been a substantial strengthening of the gold and dollar reserves, until there have been important changes in the pattern of production Britain and the rest of the sterling area to enable the dollar gap to be closed by trade, and until steps have been taken to overcome the shortage of dollars in the world generally, even a partial restoration of convertibility could not be permanently sustained without accompanying measures of deflation or devaluation."
All we would ask the noble Lord is whether he has made up his mind to give us a lead in this debate on the kind of steps we should take before convertibility comes into operation, because the T.U.C. evidently feel that if convertibility comes too soon and without preparation the Government of the day, whether it be Socialist or Conservative, might be compelled to face, not as a matter of policy but as a last resource, a further devaluation—a devaluation that we want to avoid. I was going to deal with another subject, namely, the bank rate, but as I have already spoken for a considerable time, I shall reserve it for another day. I think I have said sufficient to enable the noble Lord who is to follow me to make a speech which will be of value of everyone present.
4.24 p.m.
LORD BRAND: My Lords, I knew the noble Lord, Lord Shepherd, was going to talk about my letter in The Times, but I did not know that he was going to attack me for three-quarters of an hour, or was it half an hour?—I am not sure. I will not say what I had proposed to say to your Lordships on convertibility, though I may have time to come back to that, but I am happy to say something about the noble Lord's remarks in his attack upon me, and also something about the remarks of the noble Lord, Lord Pethick-Lawrence. If my speech in your Lordships'
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House some time ago and my letter to The Times have done any good, it is in bringing about a statement in this House that the Labour Party will support any measure of convertibility and that they put (as they have to put it, if they are going to give that support) the maintenance of a free, stable exchange before any other requirement of the country. The noble Lord said (and I am glad to be able to agree entirely with him) that the Labour Party believe that convertibility and full employment go together. That was the whole point of my speech and of my letter. I do not believe that full employment can be maintained if we ignore the need to maintain a stable currency.
The great problem before this country is how to make itself competitive with other nations and how to keep itself competitive. If it does not do that, this country is sunk. Britain has to sell something like 50 per cent. of its total industrial production to secure the raw materials and food which it requires from other countries. If it is to be able to do that, clearly it must remain at all times competitive. It has to sell against Germany, Belgium, France, the United States, Japan and other countries; and it must be competitive. If it ceases to be competitive, the first thing that will happen is that unemployment will appear in the export trades. How do we cure unemployment in the export trades? Do we do merely what the United States is in a position to do to meet unemployment there and increase home demand? If we increase home demand, home consumption, we put up prices and begin inflation, thus producing further disasters in the export trade, more unemployment and more misery. Who in the world wants unemployment? Certainly I do not. The whole object of any policy that I would support must be to avoid unemployment.
As I say, to my mind, unemployment can be cured only by the maintenance of our export trade, and the thermometer of whether we are pursuing the internal policy we ought to be pursuing is the rate of exchange. In this country we cannot possibly separate internal policy from external policy. What we do internally will either make us non-competitive with the rest of the world or enable us to maintain our competitive position in it. We have to restrain every movement towards inflation, so long as

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other countries are not inflating also, every increase of wages, salaries and other income above a point where the increase puts up costs to a level where our prices become non-competitive with those of other countries. I repeat, therefore, that, in order to assist towards the maintenance of full employment we should restore to the world a stable international monetary system, by means of which an increase of international trade will best be helped. We must rely on a free stable exchange to help to prevent unemployment, and keep our export industry in a position in which it is able to afford full employment to the men who are making the exports.
Where the noble Lord, Lord Shepherd, and I differ—although I was not always able entirely to follow his argument—is that I think the control of internal policy is a difficult matter, and apparently he feels it is not a matter of any difficulty at all. Suppose, for instance, that a great slump took place in the world, and that all over the world prices fell. I can remember quite as well as the noble Lord what happened in the disastrous years from 1929 to 1933, when international trade fell by two-thirds of its total value, and, in consequence—not in consequence of a "bankers' ramp," or anything like that—unemployment in this country rose to enormous heights.
Every great country in the world must co-operate in avoiding deflation or inflation. But suppose that deflation does take place in the United States, and extends to other countries; and suppose that prices fall, or begin to fall, in Germany and elsewhere. When we see that coming, what do we try to do in this country? Do we say that we will put up home demand; that we can get all the employment we want by increasing internally the consumption of this country? That would lead to disaster. Then what do we do? I believe that what we should do straight away would be to increase home demand, so far as possible, and in other respects see that our goods are competitive with those of other countries with which we are competing. That may need the use of the monetary weapon; indeed, a certain amount of deflation might be essential here in order to keep up employment. But the object of us all is to keep full employment, and I say that the instrument of monetary
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policy is the best instrument available for that purpose. I do not know whether the noble Lord, Lord Shepherd, agrees with that. He quite misunderstood my letter if he thinks that I put as an alternative either a stable rate or full employment—to my mind, they are the same thing.
I feel convinced that the future of world trade depends not only on this country but on the co-operation of the United States, Germany, France, Japan, Switzerland, Sweden and all countries in seeking to maintain a stable international monetary policy. By that means we should maintain full employment, due to the fact that under those conditions international trade is likely to increase and prosper. If we pursue any other policy, or if one great country deflates—for example, if there is a slump in the United States—nothing the noble Lord can do, and no policy contained in Challenge to Britain will prevent unemployment in this country; because either our export trades will have to cut prices, and we may suffer all the horrors of deflation, or there will be a great deal of unemployment through our keeping costs well above those of our competitors. Therefore, I do not withdraw anything that I said, either in my letter or in my last speech. The Labour Party in the past have certainly preferred physical controls and, when it was inevitable, devaluation. It did become inevitable—
LORD SHEPHERD: Perhaps I may interrupt the noble Lord. The Labour Party did not prefer devaluation when it was inevitable. If it was inevitable, then no preference was required at all. It was adopted because it appeared to be the only alternative.
LORD BRAND: It was the policy of inflation that led to the inevitability of devaluation. Dr. Dalton's policy of inflation led inevitably, in the end, to devaluation; and a similar policy would in future lead to the same thing. We have got to face the fact that if we inflate, and other countries do not, we shall be in difficulty. I question, indeed, at this moment whether we have entirely conquered the influences of inflation: prices seem to me to be rising a little. If they rise in other countries, that need not bring difficulty; but if they do not rise in other countries, we shall be in diffi

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culty. I do not know whether I have answered the noble Lord, Lord Shepherd, sufficiently; he asked me so many questions that I have some difficulty in remembering them all. I noticed that at the end of his remarks he referred again to physical controls as something that might have to be put into force. But as soon as you get a lot of physical controls, you get away from a free international monetary system. I have done my best to answer the noble Lord, on the spur of the moment. Perhaps we can resume the discussion at some other time.
I hardly feel that I have time now to say to your Lordships all that I had intended to say, but I will say something of what I had in mind. I believe that something further should be said about convertibility, in view of the importance of this question and in view of the recent meeting in London and the statement that the Chancellor of the Exchequer made after it. As your Lordships know, there has been a general improvement in conditions, not only in this country but in most other countries—in all European countries, for instance. Prices are now stable in European countries, and there is an upward trend in activity and production in all Western Europe. In 1953 (and this, I think, is a remarkable figure) the world, excluding the United States, added 2,600 million dollars to its gold and dollar reserves. Of that total, Western Europe took 1,700 million and we, including the rest of the sterling area, took about 760 million. In 1951 (and this again is a remarkable contrast), Western Europe, including the United Kingdom, showed a balance of payments deficit of nearly 2½ million dollars. In 1953, two years later, it had an overall surplus of 1,446 million dollars, and a surplus with the United States of 850 million dollars, exclusive of aid from the United States. These are great changes and show that the world is recovering—and all this at a time of growing defence expenditure of many countries.
These favourable results are due to stopping inflation, to the change in the terms of trade, about which everyone knows, and generally to the abandonment of physical controls in favour of greater freedom—in other words, the elimination of direct physical controls by Government and freer market conditions
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generally. Finally, there has been a large capital investment in Europe at a high rate in recent years, and the consequences are now showing. Industrial production in Europe is now 40 per cent. above prewar, and this new capital expenditure, has gone very largely towards saving dollar imports. The Economic Survey pointed out that last year there was a 5 per cent. increase in European production. As regards the sterling area as a whole, last year, as your Lordships know, was one of consolidation and improvement.
My view is that our Government, and particularly the Chancellor of the Exchequer, are to be congratulated in leading this movement for greater freedom. Wisely they have carried out liberating measures by gradual steps, instead of taking any great plunges. As a result, and because of the better outlook in the United States, the pound sterling has recently improved its position very greatly. The result, as your Lordships all know, is a great deal of talk about convertibility for sterling and other European currencies.
I should like to go a little further into this question of convertibility. I myself do not understand all its intricacies, but I think something useful might be said about it. If I may, I should first like to read a few extracts from The Times report of Mr. Butler's statement. The report states:
"Mr. Butler said that the group had been studying the steps that might be taken in the future towards the convertibility of currencies, but that no country was committed to precipitate action. Many conditions had to be fulfilled before any currency could be made convertible and it was evident that not all of these had yet been met. Questioned later on the degree of convertibility envisaged for sterling, Mr. Butler said that it had been under consideration in the Commonwealth plan"—
that, I think, is at the Sydney conference—
"to make all sterling acquired by residents outside the sterling area fully convertible eventually, but there had been no question of fixing a date …
"Mr. Butler explained that there was no question other than preparing the way from the present compartmental system of the European Payments Union and O.E.E.C. to a wider system of trade and payments. They were trying to adopt with Europe an attitude such as had already been adopted with the Commonwealth—namely, that these controls could be relaxed only by degrees."
I welcome that statement. I consider that progress step by step, testing the

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ground at each step, and in co-operation with other countries, is very wise when there are so many "unknowables" in the situation.
What I gathered from the statement was this. First of all, there is no question of full convertibility of sterling, or indeed of any greater freedom than now for residents of the United Kingdom or of other countries in the sterling area, either for current or capital transactions. Therefore, we shall not be able to have any more money for travel; no emigrant from here will be able to take money abroad, and none of our restrictions is to be lifted, although I should hope that, as things progress, we might possibly get a little more than £50 a year to go abroad. As I have said to your Lordships before, for the English, the Scots, the Northern Irish and the Welsh to travel abroad with only £50 each, while all other people coming from other countries have "lashings" of money to spend, is not the greatest imaginable tribute to our confidence in sterling.
But what about the other two great categories of holders of sterling? First of all, there are the residents of the dollar area, and then there are the residents of all the rest of the world—what is generally called, I think, the non-dollar, non-sterling area. My knowledge of the intricacies of exchange control is limited but I venture on a few comments as to these categories. Their circumstances seem to me quite different. As regards the residents of the dollar area, we control our liability to find dollars for them by restrictions and discriminations in trade against dollar imports, rather than by exchange control. If an American importer is allowed to import anything, then he can, automatically, at once change into dollars the sterling he receives for the imported goods. So far as the dollar area is concerned, therefore, more freedom means a reduction in import restrictions on American goods rather than any alteration in exchange controls.
In relation to this point the Chancellor of the Exchequer said in his statement:
"We agreed that if we are to move into a period of free trade and convertibility of currency, member countries should move towards non-discrimination in imports—for example, from the dollar area. We were quite clear that the speed of any such advance must
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depend on action taken within the dollar area, as well as on developments in our balance of payments situation."
He went on to say:
"… but there is a great deal more to be done in that direction"—
that is in the American direction—
"before we can be satisfied with the conditions."
Roughly, that means that we cannot de much about dollar imports unless America does something in other respects—at least, that is how I interpret the statement. It is true that the dollar gap in the world has been considerably reduced. For instance, excluding military equipment and remittances and other gifts, the United States current balance in 1953 was reduced from a surplus of nearly 2 million dollars to a deficit of 62 million dollars. But the effect of abandonment, or any great diminution, of restrictions on United States imports by us, and perhaps also by other countries, with a consequent increased demand for dollars, is quite unknown. We might have to find on behalf of ourselves, the sterling area and possibly other countries, a great many more dollars, and the effect on our reserves might be very serious. As I say, what this liability might be is quite unknown.
Then there is the third category, the holders of non-resident sterling; the holders of sterling coming from all the rest of the world—what is called the non-dollar, non-sterling area. This sterling is called "transferable sterling"; it cannot be exchanged into dollars in any way, but it can be sold anywhere within the transferable account area—that is, in Western Europe, the O.E.E.C. countries and in other countries. Transferable sterling is now quoted in all markets abroad where it is dealt in at somewhere near par. Conditions have improved so much—there may be a certain amount of speculation also in favour of the pound sterling—that transferable sterling now stands at about par. This area of transferable sterling is highly important, because the countries who are interested comprise an area with which we do more than one-third of our total import-export trade. At present the United Kingdom is running a surplus with these countries, and that is the main reason for the strength of sterling in those markets. Only two years ago, however, the United Kingdom had a deficit of £200 million

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with them. We cannot yet tell whether we have reached a position of stability or not. That, I think, is where the point of difficulty arises.
I should like to ask the noble Earl, Lord Selkirk (perhaps he will not be able to answer the question to-day): what does "convertibility" mean in relation to this "transferable sterling"? The Chancellor of the Exchequer does not state clearly what is envisaged, and I confess that I am unable to say what the "convertibility" of this particular class of sterling means. It cannot mean that sterling from those countries would be exchangeable into dollars because it would be absurd that our sterling could not be exchanged into dollars and the sterling held by residents of those countries could be. Does it mean that they can be assured of a fixed rate of exchange always for transferable sterling equivalent to the rate for ordinary sterling? I do not quite know what "convertibility" means in this case with that great class of countries.
I feel reassured by the Chancellor's evident prudence and by the way in which he is dealing with this whole matter. I regard prudence and caution as indeed very necessary. It is no good comparing us with other European countries which are responsible only for their own internal position—Germany, Switzerland and so forth. The United Kingdom has much greater responsibilities. There is a widespread use of sterling all round the world. Speculative movements for or against sterling have greater possibilities than in the case of the German mark, the Swiss franc or other currencies. We have, moreover, heavy obligations to the sterling area, and we have also undertaken to provide a great deal of capital abroad. As your Lordships will recollect, the Chancellor of the Exchequer put £300 million surplus a year as the sort of surplus we should have; and that, I understand, is after deduction of any additional sterling liabilities in respect of the same year. Last year, excluding United States aid of about £100 million, we had an increase of about £125 million in our gold and dollar reserves, and an increase on our sterling liabilities of £218 million.
LORD SHEPHERD: I am sorry to interrupt the noble Lord but, before he finishes, I wonder whether he would
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reply to a question I raised as to whether he believes that the pound should have a definite value in terms of dollars?
LORD BRAND: I do not quite follow the noble Lord.
LORD SHEPHERD: Does the noble Lord believe that the pound should continue to be worth 2·80 dollars and that it should be our endeavour to keep it to that rate; or does the noble Lord favour the new creed—namely, that the pound should be without nominal value?
LORD BRAND: I do not follow the noble Lord. The present exchange rate, which was fixed by the noble Lord's friends when they were in office, is 2·80 dollars to the pound. Stability means, in my view, maintaining that rate. I do not know what the noble Lord means when he says that the pound should be without nominal value. Of course, the dollar is fixed on gold, and the sterling rate of 2·80 dollars is fixed in relation to the dollar; so we are all, in a way, fixed on gold. What I mean by stable exchange is maintaining the present exchange.
Our liabilities are such that I think that the reserves of 3,000 million dollars that we now have are nothing like enough for full convertibility. The Chancellor of the Exchequer mentions possible credits, and we hear a good deal about stand-by credits, and about getting a credit from the International Monetary Fund, or in some other way. If we do obtain those credits from others, we must treat them practically as non-usable: we must have them as a final reserve, in case of catastrophe. We must not live on them again. They must be like the reserves of one of the "Big Five"—there to protect the position in case of catastrophe.
LORD WILMOT OF SELMESTON: I should like to ask the noble Lord this question—it is a most important point—for the benefit of laymen. Would he tell us whether he is seeking legal freedom to buy and sell foreign currencies at a fixed, predetermined rate, or whether he is seeking a return to a free market in which the currencies find their relative values in accordance with the balance of payments of trade?
LORD BRAND: I mean the first, if I understand the noble Lord's questions. There are economists, including friends

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of mine, who think that, as there must be some "give" in an economic situation somewhere, the sort of "governor on the machine must be the rate of exchange: that, for instance, if you are in trouble, you move your rate down to get out of it instead of using other measures. I do not agree with that.
LORD WILMOT OF SELMESTON: You do not?
LORD BRAND: I think that, practically, if followed by everyone, it would lead to a hopeless situation. It would be like taking drugs: you would never get rid of the habit. I always say the excuse would be, "We can always reduce our exchange; we can make it worth a little less." We should try to maintain our exchange within fixed limits. It might be possible to have a little wider limits, perhaps, than we have now. The Bank of England would set wider limits and would set its internal policy so as to remain within those limits. But it would really be a fixed exchange, so long as the limits were not wide. Therefore my view, shortly, is that nothing is more important than a return to a stable international monetary policy. I believe that only so can we secure the greatest possible increase of international trade, my opinion being that the greatest possible increase of international trade is, above all, favourable to this country.
We have to sell our exports. The bigger the markets in which we can sell them, obviously the easier it is to sell them. If the market is small, and Germany and other countries have to sell in a smaller market, obviously there is much greater difficulty for us. Therefore, my support of an international monetary trade is based on two reasons: first, because of the need for a greater international trade, and secondly (and it is almost the same thing), because, with fixed exchange rates, you increase the possibility of international capital movements—America lending to the world and ourselves lending to the world and so on. The more capital that is available for the world, the greater the improvement in trade and the greater the improvement in production, all of which redounds in our favour. Therefore the Chancellor of the Exchequer is perfectly right in his policy of moving towards freedom and a free exchange, but moving with prudence and
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caution. This policy is also wise from another point of view: the more a country is freed from other controls the less it is possible to run an effective exchange control.
5.0 p.m.
LORD KENSWOOD: My Lords, we have been listening to a large number of interesting speeches, based largely on broad economic and industrial problems. I hope your Lordships will bear with me for a few moments if what I say may seem to be rather "small beer." My excuse for speaking is that what concerns acutely even a small group of human beings is significant. Two years ago, in a debate on the Finance Bill, I raised the question of extra allowances for blind persons, on account of their generally reduced earning capacity and also of the extra expenses that they have by reason of their lack of vision. At that time the noble Viscount, Lord Swinton, drew my attention to the fact that there was sitting a Royal Commission on Taxation of Profits and Income—I hope that is the right title. I took his advice and sent my memorandum to the Royal Commission, in the hope that the matter would receive their earliest and immediate attention. I put my claims as modestly as I could compatibly with efficacy. I fully realised that the Chancellor of the Exchequer had then—and still has to-day, in spite of improved circumstances—a very difficult task to balance the many claims made upon him, and I did not dare to put my claim any higher than the lowest that seemed necessary. I have now read the recent Second Interim Report of the Royal Commission. I was delighted to see that not only had they accepted what I suggested to them, but they had actually widened the scope of my appeal. My question now is, whether the Chancellor of the Exchequer or the Government, or whoever decides on these matters, will accept the recommendations of the Royal Commission; and, if so, will those recommendations be implemented in the foreseeable future?
If I refer particularly to the blind in this matter, I do so not because I am callous about the claims of other damaged and handicapped people. I fully realise that they, too, have some ethical claims on the community—ethical, I say, because people who come in contact with them have a feeling that their

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consciences are not quite at ease. I know very little about the administrative circumstances concerning other handicapped people, but I do know something about the administrative circumstances concerning the blind. If I ask for the blind to be considered first, it is on this assumption: that I know the machinery exists already whereby the recommendations with regard to them can be put into practice immediately. Every blind person who could lay claim to the suggested minimum of £100 extra allowance on income tax is already registered; he already has to make an income return. Therefore, administratively it will cost practically nothing to bring the two into contact with one another. I can assure your Lordships that it will not cost very much at all.
We are about to pass a Bill the provisions of which permit of three-quarters of a million pounds being devoted to a new concern. Those provisions will seem inequitable to many blind people. I and everybody who has a television set has to pay the full television licence; every blind person has to pay his contribution towards the extra three-quarters of a million pounds annually, when he knows very well that he will not benefit from the immeasurable joys of seeing advertised "Snooks's Stout." He will not be able to see that; nevertheless, he has to pay for it. My Lords, is it asking too much that the Chancellor of the Exchequer should give immediate consideration to this matter which I have brought forward and which is recommended in the recent Report of the Royal Commission?
5.7 p.m.
LORD TEVIOT: My Lords, I have been considerably entertained by the great battle which took place between the noble Lords, Lord Shepherd and Lord Brand, but a little disappointed that it took place here, because I was most anxious to hear Lord Brand deliver his full speech, which I am now quite certain was cut very short owing to the attack which was made on him by Lord Shepherd. However, what he did say was cheering in a way, although rather sad to listen to. A good deal was said by the noble Lord, Lord Brand, and also by the noble Lord, Lord Shepherd, in regard to convertibility. It is quite
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evident that neither of them really knows a great deal about it. Lord Brand said he did not, and that there were many doubts in his mind as to what would happen in one set of circumstances as opposed to another set of circumstances. There it is. This most complicated currency question exists, and nobody really knows enough about it to enable him to dare put forward a formula which would seem to suggest: "You can go on and work towards something to that end. "I remember when I was in another place, many years ago, that I said something of this sort, namely: "Until we can get questions of this sort simplified to the extent that the ordinary man in the street like myself can understand them, we shall never get anything done satisfactorily." Then that great man, Mr. George Lansbury, jumped up and said, "I entirely agree with my friend." He agreed that everything involved in that word was most complicated.
I am not going to follow these very technical discussions on currency, and so on; I am going to try to put forward some ideas which will help the country generally. As your Lordships may know, I wish to refer to the fact that we Peers are denied the privilege of helping to elect those who spend our money—public money; and that this House is denied the privilege of exercising any control over it. But, in common with the man in the street, we have the right to grumble and to pay our full share of taxation. Therefore, to-day, I propose to put forward what I hope will be a few constructive grumbles. At present—I am going to speak firmly on this—methods of administration are extravagant and would not be tolerated for one moment by shareholders in any business. As an instance, I am told there is to-day, in the War Office, one man for every eleven men in the Army. Look at the extent to which that staffing could be reduced and efficiency still maintained. The noble Lord, Lord Brand, spoke of sinking. If we go on in that way, then we are certainly going to sink; that is an absolute certainty. All Government Departments should be told by the Chancellor that 1s. in the £ must be saved as compared with last year's Estimates.
I agree that one cannot do these things in a very drastic way. One has to nibble at them. I want to see a four-year plan of economy. As noble Lords will know,

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that is an idea at the back of the minds of most good Liberals and of most good Conservatives to-day. The Government has done well in reducing controls. Further control reductions are essential. There is still plenty of scope. A determined drive against this appalling and excessive paper work is needed. Think, for a moment, of the morning post and the number of letters and papers that we all get with regard to every conceivable question in our lives. How many of them have any relevance to doing any good at all? Most of them go straight into the wastepaper basket. Ministers should try to inculcate into their staffs the outlook well represented by this slogan: "Suppose this money we propose to spend were my own," and get them thinking along those lines all the time. Unless we do that we shall get nothing done. Ministers must keep rubbing that into their staffs.
We must remember that as taxation goes up, purchasing power inevitably goes down. In 1914 taxation was 1s. in the £ (or one-twentieth) of what it is to-day; so where the Government is spending £1 to-day, in 1914 they were spending 1s. Figures are always tiresome, but there is a plain and distinct fact from which we cannot get away. There may be a little controversy with noble Lords opposite over the Welfare State, but I would ask my noble friend, Lord Selkirk, who is to reply, to tell us, if he can, how much it costs under the Welfare State to put £1 in a beneficiary's pocket. It seems to me incredible that in this fully employed nation, with continually rising wage rate, no fewer than 1,750,000 people should require supplementary benefits from the National Assistance Board, over and above all the benefits provided under the normal machinery of the Welfare State.
There are here certain things that can be tackled, I believe with great advantage to the Welfare State as a whole. I believe there is much exploitation—and indeed abuse—of the whole system. Cases are frequently reported of British citizens from overseas who travel to Britain and settle down here without any serious prospect of employment, apparently quite content to live on the bounty of the Welfare State. What is essentially wrong is that universal benefits are provided without any serious regard to individual needs, resulting in many—notably old age pensioners—receiving much less than they need and many receiving what they
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do not need at all. To give an instance, noble Lords will know that a married man with three children under 16 years of age and earning £11 a week pays no income tax; but he receives from the State under the family allowances scheme 16s. a week—that is, nothing for the first child and 8s. a week for the next two children—while a widow or a wife who has been deserted by a husband either unable or unwilling to support the family, receives exactly the same, although her family is of the same size as that of the man who is earning £11 a week. Those are cases I want carefully looked into. If the whole field of the Welfare State were seriously tackled with a view to saving money now unnecessarily spent, we could, in a very short time, save £100 millions a year, with no injury at all to those seriously in need of help.
One really terrible aspect is that we seem to have become quite complacent about a Budget of roughly £5,000 millions per annum. Quite certainly we cannot continue on this scale and remain solvent. Yet we are thankful when we read in the Budget that no further imposts are to be put upon us. Instead of concentrating in every possible way upon reducing that £4,500 millions to £5,000 millions to which it is now coming, we are pleased merely at avoiding further imposts. The national income is now more than six times as great as in 1914, but taxation is more than twenty times greater. No man in his senses believes that the value given in return is twenty times as great; but all are aware of the heavy decline in purchasing power which has inevitably ensued from it. We seem to have fallen into a state of mind when we are grateful that no further impost is put upon us.
The old Gladstonian principles have long since gone out of fashion. The Budget is now regarded as the principal instrument for influencing and directing national economic policy and as a means of redistributing the national income on a more egalitarian basis—a completely new idea. If we go back to the sound economics of Mr. Gladstone, we find that the use of the Budget for the first of those purposes will remain inevitable until the conditions of a free economy are restored in full. In my opinion Her Majesty's Government have earned the warmest congratulations of the country for the steps they have already taken in

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freeing the economy. They have done much in what, after all, is a very short period. The opening of the Liverpool Cotton Exchange and the abolition of food rationing are spendid examples. But much still remains to be done, and I trust that the course so successfully embarked upon will in the future be pursued with the same kind of wisdom, energy and zeal.
My Lords, I come to my last point. It deals with an industry in which I am personally interested. I want to say this before I sit down, and it is customary in your Lordships' House if one is interested in anything to declare one's interest. As I say, I have an interest in this. I refer to shipping. The noble Earl, Lord Selkirk, I noticed, referred to this subject in a short sentence in his speech. No doubt the Treasury has been watching with considerable concern the great difficulty which has been mentioned by the chairmen and boards of our large shipping companies, of obtaining sufficient capital for the replacement of their existing ships. I know it was a matter of great disappointment to the shipping industry generally when, in his Budget, the Chancellor announced the establishment of the investment allowance but found it necessary to withdraw the special initial allowance of 20 per cent. which had been allowed for tax remission hitherto. I consider that had he been able to see his way to leave the initial allowance in being, and to institute the investment allowance as a further attraction to the investment of additional capital in the industry, this might have been of immense benefit to the country generally.
My reason for saying this is that, looking ahead, it seems to me that eventually in two or three years' time we shall find our shipyards short of orders, with a consequent depreciation in the number of ships at the disposal of our country and also a depreciation in the amount of work available for our shipyard workers. Those who are familiar with the present situation will know that shipbuilding yards are in full work at the moment, but they have not got orders for two or three years ahead. I feel that that is a matter which we should consider very carefully indeed. With great respect, I appeal to the Chancellor of the Exchequer to look at the shipping position again and see
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whether something can be done, taking a long view in this matter which is vital to the interests of the country as a whole. I have great admiration for the Chancellor of the Exchequer who has extricated us from an appalling situation, but I do urge on him that drastic further economies are necessary and, I believe, possible.
5.25 p.m.
LORD RENNELL: My Lords, the noble Lord, Lord Pethick-Lawrence, with his usual courtesy, to which we are all accustomed, wrote and told me that he proposed to refer to what I said on April 27 in the course of the debate in your Lordships' House, which touched very substantially on the same subject as we have been dealing with this afternoon—namely, convertibility. If I may say so, with great respect to the noble Lord, I was very surprised at what he finally said. In the first place, I expected someone to pick up points which I had made on April 27. I did not expect the noble Lord to make a point on something which really was not the main part of my speech. And I was extremely surprised at the mildness of the remarks of the noble Lord generally about what I said, which I thought was sufficiently provocative to require an answer.
I should like to point out to Lord Pethick-Lawrence that about two and a half columns of what I said dealt with two matters that were, in my opinion, the principal obstacles to convertibility. One was the very high level of taxation, which made it difficult, if not impossible, for anyone to conserve profits made over here, and, therefore, if there were convertibility, would make investment in other countries more attractive both to nationals in this country and to nationals in other countries. The second point I made, which I thought was adequately provocative, was that the economic doctrines and programme enunciated by some members of the Labour Party would make it impossible for convertibility to be maintained if it were brought about, in one form or another, just after or just before an Election which produced a Labour Government.
The noble Lord took exception to my remarks—at least he so implied—because he seemed to think that I had some objection to social reforms which had taken place in this country over the last fifty

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years. I have no objection—indeed how should any of us on this side of the House take any exception to those reforms, which were all substantially introduced by Liberal and Conservative Governments? That those reforms produced a very much happier country is absolutely undeniable. There is nothing I can find in my remarks to suggest the contrary. Those reforms have undoubtedly brought a great deal of stability. I thank that perhaps the noble Lord is a little uncharitable to-wards the achievements in economic stability and well-being in other countries. I do not think that we in this country have been unique in that respect. I can think of very considerable advances in social and economic stability and well-being in, for instance, Scandinavian countries, in Canada, in the United States, in Australia, in South Africa and in a few more countries. I do not think that we are entitled to claim the sole credit for it. Nor do I think that the noble Lord really meant that. But he did say that we, above all, had enjoyed those benefits.
However, leaving that particular point, may I say that if I had attacked myself in regard to what I said on April 27, I think perhaps I could have made a much better attack than the noble Lord did. However, I thank him for the mildness of his remarks, and, express wonder that they were not perhaps more severe. I now wish to reiterate what I said on April 27, to the effect that I do regard the high level of taxation and the policies expressed by prominent members of the Labour Party, both before April 27 and since—on the subject, for instance, of nationalisation, and what they would do if they got back into power—as one of the principal obstacles to convertibility at an early date, even if that were desirable. As a matter of fact, I agree with Lord Pethick-Lawrence, Lord Shepherd, and indeed with Lord Brand and other noble Lords who have spoken to-day, that convertibility (whatever that may mean) is something that should come only gradually, and that any rushing of that particular fence would be as fatal this time as it was last time. What I feel has not been brought out clearly enough perhaps—even, if I may say so, with all respect, by Lord Brand—is the inwardness of what Lord Shepherd said, Lord Shepherd had this in common with Lord Pethick-Lawrence. They both wish to see (and Lord Shepherd stated that it was the
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policy of the Socialist Party) a move towards convertibility, but slowly. They were not opposed to it, though, as Lord Pethick-Lawrence said, there are one or two disadvantages.
The noble Lord, Lord Shepherd, then went on to quote from various documents about some of the things that would be done by a Socialist Government if one came back into power. He referred, for instance, to the desirability—not the necessity—of reimposing financial and physical controls. If you were an American who wanted to invest money over here, would you do that if you thought the Opposition, if they came into power, would impose financial and physical controls? I should not. The noble Lord, Lord Shepherd, appeared to think that financial and physical controls were good things in themselves. He admitted that though his Party were in favour of convertibility, in his view physical and financial controls would be necessary to achieve stability. That is not our view—that has been made very clear by the noble Lord, Lord Brand. The sine qua non of convertibility, what-ever form it takes, is the enlargement of freedom, and not restriction by control, if only for the reason that the imposition of controls inevitably leads people to find legitimate or other means of escaping them, which creates the very lack of confidence that is the primary condition of convertibility.
What I think has entirely escaped the noble Lord, Lord Shepherd, in his, I hope, beloved innocence, is that it is not a question of whether the Labour Party are or are not in favour of convertibility, but a question of their not being able to see that the consequences of what they do must lead to a suspension of convertibility. That is precisely what happened when they were last in power. No-one is going to suggest, either in this House or anywhere else, that Sir Stafford Cripps wanted to devalue the currency. That man must have found it harder in his conscience to do what he did than any other man I have known. He did it because he was obliged to do so, as the noble Lord, Lord Shepherd, said—because it had become inevitable and, therefore, no longer arguable. But why was it inevitable? It was inevitable because of the inflationary policy adopted by his predecessor and the spending on

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the new reforms introduced at a time when this country could ill-afford them, for which purpose the credits from North America were used in an utterly reckless manner, with nationalisation superimpose later on, which made every foreign investor in this country want to get his money out of it, by hook or by crook. In developing the programme which the noble Lord, Lord Shepherd, stated was the official programme of the Labour Party, he does not himself see that the development of that programme produces the very conditions under which convertibility becomes impossible, or, if it has been introduced beforehand, must lead to its suspension. That is a view which I believe is not peculiar to myself. I believe it to be shared by noble Lords on my right and by everyone else on this side of the House.
What puzzles me is the difficulty that appears to exist in persuading Lord Pethick-Lawrence's Party that in this context we do not object so much to their policy as to their inability to see what are the consequences of that policy. It is completely incompatible to say that, although they are in favour of convertibility and do not want to devalue the currency, yet they want to do A, B, C and D, that which will produce inflation and devaluation, and therefore make convertibility impossible. There seems to be a gap in the process of reasoning of a number of the noble Lord's friends which I find difficult to understand, because I believe them to be as intellectually competent and as well trained as those who do not share their views.
I had intended to be present only to hear the noble Lord, Lord Pethick-Lawrence, make his (as it turned out) mild remonstrances about what I said earlier. I think the ground has been so well covered that there is nothing I can add, except to mention one other matter which I hope perhaps the noble Earl will emphasise in his reply. The discussions on convertibility which have been going on in London and in Sydney are inevitably discussions which deal with the mechanics of convertibility. Many people in this country seem to expect that when our gold and dollar reserves reach the figure of x we shall be in a position to make sterling convertible—whatever that may mean, as my noble friend Lord
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Brand says. Nobody knows what is meant by that expression. Four or five thousand million dollars do not mean anything: they can be dissipated in a few months. They are only a piece of machinery by which we make foreign exchanges work freely at a stable rate. They are not more than that. This reserve is the water in the system, which must be kept at a sufficient head or pressure; it is not the motor that drives the system.
All other highly technical subjects, like the convertibility of non-sterling and non-dollar balances, are presumably under discussion. If solutions are reached, they are only bits of the mechanics of the question. Convertibility does not depend solely on the provision of mechanics, or on how big our dollar and foreign exchange reserves are. As the noble Lord, Lord Brand, has said, it depends primarily upon our balance of payments with the rest of the world and with North America; and that, in turn, depends to a large extent—because the balance is made up of visible as well as of invisible trade—on the confidence that other people have in this country. It depends very considerably upon whether North America wishes to invest in this country, producing an invisible import in the form of the movement of capital over here, and is willing to leave that capital over here. It depends, first and foremost, on confidence in this country. Secondly, it depends on whether people will be allowed to make any money and keep it when they have made it. That raises the point about taxation that I brought up in our debate in April. The last thing it depends on is the machinery.
I would ask the noble Lord, Lord Shepherd, if he reads what I say, to think whether the measures which are proposed by his Party, and the statements made by some of the leaders of his Party about what they would do if they came to form a Government, are calculated to produce confidence abroad in what we can do in this country. If they come to the conclusion that their policies give confidence abroad, let me beg them to think about them again, if they are convinced, as we are, of the desirability of convertibility. I regret to think, from statements that have been made, that some of them appear to pay only lip service to convertibility.

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I believe firmly that this is not the case with the noble Lord, Lord Pethick-Lawrence, and that he undoubtedly means what he says. I beg him to go and look at the policies, the consequences of which make impossible what he wants to see, and to use his influence with his friends and colleagues to restrain them from saying anything which even some of the noble Lord's colleagues do not think is desirable.
5.40 p.m.
LORD BALFOUR OF BURLEIGH: My Lords, I am sorry that the noble Lord, Lord Shepherd, is not here, because I feel that in the course of his speech he made a veiled allusion to me, and that some slight reply from me is perhaps called for. First of all, I want to assure noble Lords opposite that there is no disagreement between the two sides of this House as to what one of the objectives of our economic policy ought to be; that is, to secure the highest possible, and the most stable possible, level of employment. I use that phrase, and I wish that other people would use it, also, instead of using the words "full employment." "Full employment" is rather a "King Charles's head" of mine, because it really is a silly phrase. Anybody who thinks it out knows perfectly well that, literally, "full employment" does not mean anything which exists in this world; "a high and stable level of employment" is a much better phrase. The use of the other phrase leads to disappointment and frustration.
I believe that the whole question of our debate is how to secure and improve our standard of living. I would rather put it that way and get rid of the immediate question of employment and unemployment. The whole point is: How are we to secure and maintain our existing high standard of living? Here I think we can come direct to the heart of the difference between noble Lords opposite and ourselves. Let me preface my diagnosis with a statement of what is really a complete platitude—namely, that we can survive only by competitive efficiency. My noble friend Lord Brand has already made the point that competitive efficiency is much more important for us than it is for our friends in the United States of America, because of the peculiar circumstances of our industrial set-up—
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and I need not enlarge upon that, because noble Lords opposite know exactly what I mean.
I am sometimes distressed to hear noble Lords opposite speak. I have heard the phrase used from the Front Bench opposite—for fear of misquoting the noble Lord who said it, I am not going to mention his name—"the standard of living to which the British working man is entitled." Nobody owes us a living. There is no standard of living to which any one of us is entitled unless he is prepared to work for it. I do not know anybody in the whole world who is going to keep the British lion as a pet. We have jolly well got to work and earn our keep in an increasingly competitive world. Noble Lords opposite have one idea of how to do that, and noble Lords on this side of the House have a different one. Much turns on how we are to make the most efficient use of our resources (I suppose the most valuable of our resources is our labour force), and I include the whole of our resources, material, human and anything else that there may be.
The noble Lord, Lord Shepherd, read out a list of measures in which the Labour Party believe. I admired the smoothness and consecutiveness of his speech, but, like my noble friend Lord Rennell, I am puzzled. I feel quite sure that noble Lords opposite are just as intelligent as we are, but what we cannot understand is why they do not see the inevitable consequences of all these smooth measures which they propose. They want central planning of all our resources. Centrally to plan in such a way that it would be successful would require such superhuman wisdom that it is beyond our compass. It would require more than superhuman wisdom; it would require the power of foresight. It would be necessary to have the power to foresee what other people are going to do, and what quite unforeseeable events are going to happen in the physical and the political world. All these controls and central planning which the Labour Party advocate with such eloquence, and I am sure with such sincerity, involve the greatest rigidity. We on this side of the House believe that rigidity is one thing that we have to avoid. We feel that the only hope that our industry will be competitive is that it should be dynamic and able to adapt itself to the changing circumstances of this extraordinarily complicated world.

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I had not intended to speak in this debate, and I should not have done so but for what the noble Lord, Lord Shepherd, said. I have a definition here of what I believe in for the best use of our resources. It may be an imperfect definition, and therefore I must reserve the right to alter it if it does not meet all the criteria. I should say that the best means of securing the most efficient planning of our natural resources is the operation of world-consumer choice in a condition of competitive efficiency.
At this late hour I do not intend to make a long speech, but there are one or two other points I should like to make. Of course, we know that devaluation is not a part of the programme of the Labour Party. The noble Lord, Lord Shepherd, told us, with the most disarming sincerity and charm possible, that the Labour Party are not committed to devaluation and are not in favour of devaluation. But, as my noble friend Lord Rennell said, the noble Lord, Lord Shepherd, must be blissfully unconscious of the past history of the last few years. What happened? And why did it happen? What led to devaluation? What was it except Mr. Dalton's cheap money policy? And this is how it worked. There was any amount of cheap money, and prices rose—they could not help rising. Rising prices encouraged businessmen to increase their stocks, and the thing went on and on. Easy money made it easy to increase stocks, and it was only when monetary discipline was restored that we had a correction of those circumstances.
This is not the time to debate the benefits of monetary discipline, but there is at least one example which I feel carries with it great conviction: that the use of the bank rate greatly helped to put a stop to that terrible inflation for which the Labour Party were responsible. I do not want to speak in a Party sense, and I speak my sincere conviction when I say that I believe that post-war inflation, induced by the cheap money policy of the Labour Party, instituted with the best intentions in the world, in order to save money on the cost of interest, and so on, led to greater difficulties than anything else that was done by them.
To sum up, I have two reproaches against the Labour Party. First, I feel that noble Lords opposite are not sufficiently
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mindful of the dangers of inflation. Inflation has suited the Labour Party; and it has suited the worker. A high degree of employment has been a product of inflation, and it has enabled the workers continuously to secure higher wages. I do not think that noble Lords opposite are really mindful of the dangers of that position. Secondly, I say, with all the politeness that I can command, that I do not think noble Lords opposite are sufficiently aware or mindful of the need for increasing efficiency in industry. From the point of view of our industry, this is going to be the most difficult time in our history. We shall have to face greater competition than we have ever had to face in the past, and the greatest need at the moment is the need for education, both of the employing side and the labour side. I say, quite frankly, that that is primarily a job for management. I constantly find that the most efficient results come from firms which have the best management, and it is a vital duty of management to educate their labour in the need for efficiency. My reproach against noble Lords opposite is that they do not, in their public speeches, make that fact sufficiently clear. I pay tribute to the leaders of the trade unions. If I may say so, with respect, they are showing a real awareness of the realities of the situation. We have not heard a word from noble Lords opposite in any speeches that have been made to-day indicating the awareness of the importance of the labour part in that efficiency.
Just to bring this speech back to the Finance Bill which, after all, we are supposed to be debating, may I say that an essential part of the maintenance of our standard of living and the improvement in the future standard of living which we all desire is a freely exchangeable and stable currency. Somehow or other, we in these islands have to earn our share in a larger world trade, and I, for one, do not believe that that is possible unless we can restore the pound to its old position of undoubted supremacy and convertibility. If I may add one to my reproaches which I have directed against noble Lords opposite, it is that although they pay lip service, as my noble friend Lord Rennell has said, to the desirability of a freely convertible and stable currency, I do not believe any of them say in their speeches that it is an objective which may require sacrifices. There we

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touch this very difficult question of the high and stable level of employment. We must have a dynamic industry, and we have to get our share in a larger world trade. If necessary, as one of the essential ingredients in that freely convertible currency, sacrifices may have to be made which will weigh hardly on many of us.
5.54 p.m.
LORD WILMOT OF SELMESTON: My Lords, I am sure we have had a most interesting discussion to-day, but I am rather astonished that the noble Lord, Lord Balfour of Burleigh, should have thought it was in any sense in the national interest to make the sort of speech which he has just made. The same is true of the speech of the noble Lord, Lord Rennell. I believe, with him, that it is of vital interest to this country that we should secure—to use his own excellent definition—the highest continuing level of stable employment. I believe, as the whole Labour Party believes, that we should move towards conditions which make it possible to maintain convertible currencies. This requires several pre-requisite conditions, and certainly those conditions should produce, if they are to be effective, an increase in confidence in the British economy generally. Does the noble Lord, Lord Balfour of Burleigh, think that he is making much contribution to the belief of foreigners in a continued sane financial policy of this country if he completely misrepresents the policy and the objectives of the only possible Opposition? It seems to me that no greater disservice could be done to the causes which he professes to have at heart than deliberately, with the full weight of his authority in the commercial world, to misrepresent the objectives of the Party which commands half the votes of the citizens of this country.
LORD BALFOUR OF BURLEIGH: I must take exception to that. I do not think I did misrepresent the policy of the Party opposite. They say they are in favour of central planning and an enormous quantity of controls. We say we are in favour of consumer choice. Is that not fair?
LORD WILMOT OF SELMESTON: If the noble Lord will do me the honour of listening to what I am going to say, I will tell him how he has misrepresented
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it. What he has just said is not the truth of the matter. There is nothing to be found in any authoritative Labour Party document, emanating either from the Executive Committee of the Labour Party or from the governing body of the Trades Union Congress, which suggests or says that the Labour Party are in favour of reimposing physical controls because they want to do it. There is not one single word of that to be found anywhere. I would therefore ask the noble Lord to what he refers when he makes that statement.
LORD BALFOUR OF BURLEIGH: I refer to all the things the noble Lord, Lord Shepherd, read out. I was not able to write them all down, but they all sounded like that. If I misunderstood, I am sorry, but perhaps the noble Lord would read them out again.
LORD SHEPHERD: It is quite true that I read paragraphs from the Party policy which indicated that we were in favour of certain controls. But the noble Lord puts a gloss upon them by saying that we are in favour of "an enormous quantity" of controls. We would ask the noble Lord to be quite temperate in his reply to us when we make a plain statement.
LORD BALFOUR OF BURLEIGH: Then the difference between us is entirely, a matter of degree. The noble Lord, Lord Shepherd, says that he is in favour of controls. I say that he is in favour of a lot of controls. I do not think there is much between us.
LORD WILMOT OF SELMESTON: The noble Lord, Lord Balfour of Burleigh, is himself in favour of controls. He just explained one which he regards as an essential piece of control mechanism, and that is the use of the bank rate in order to adjust certain disharmonies which appear. The bank rate is a direct financial control.
LORD BALFOUR OF BURLEIGH: I talked about physical control.
LORD WILMOT OF SELMESTON: The noble Lord was talking about control mechanism generally, and the bank rate itself is in effect a physical control.
LORD BALFOUR OF BURLEIGH: Then is the noble Lord in favour of never using the bank rate?
LORD WILMOT OF SELMESTON: That is a complete misrepresentation. Of course I am in favour of using the bank rate. As to whether a control is justified and should be used or not, depends not upon a theory but upon the facts of the situation as they are. Food rationing was continued by the present Government for years after they came into office—a physical control of the most oppressive kind. Why did the Government continue it after they came into office in 1951? Because the circumstances made it necessary to continue it. I venture to suggest that if, through some unforeseen happenings, those circumstances should recur, this present Government would immediately reimpose that form of control. Of course, they would. And it is therefore nonsense, if I may say so very bluntly, so to misrepresent the policy of the Labour Party as to make foreigners believe that, if there were a change of Government as a result of the next Election, there would be wholesale reimposition of war-time controls.
LORD BALFOUR OF BURLEIGH: Did I ever say that? I never said anything like it.
LORD WILMOT OF SELMESTON: It was the whole implication of the noble Lord's speech. The greatest obstacle, he said, to creating the conditions which would lead to convertible currency was the belief that no continuing sanity in these matters could be found owing to the policies of the Opposition.
LORD RENNELL: I think it was I who said that.
LORD WILMOT OF SELMESTON: It may have been the noble Lord, Lord Rennell, who said it.
LORD RENNELL: I meant it, too.
LORD WILMOT OF SELMESTON: I know. I think the noble Lord, Lord Rennell, should be very careful of the effect of statements of that sort, repeated by responsible people in this House and elsewhere, upon foreigners who have every reason to believe that those statements are being made soberly and not for the purpose of Party propaganda.
LORD RENNELL: The publications of the Labour Party are read in America, without any assistance from me.
LORD WILMOT OF SELMESTON: I hope they are read more carefully than they appear to be read by some Members of this House, because there is nothing at all to be found to support any statement which the noble Lord, Lord Rennell, made about the effects of the Labour Party policy. Both noble Lords referred to the devaluation in 1947. What was really the cause of the financial difficulties of that year? Surely, the real, basic cause was the American reason, in discontinuing American support from the day the war ended. It led to an enormous increase in the necessity for dollar payments which could not be met in the ordinary way. That was the basic cause, plus all the other legacies of the war which were accumulating during the two years immediately after the war, which led to the financial stresses, which had to be met, as the noble Lord admits, in the only possible way. Whoever had been the Chancellor of the Exchequer, for whatever Party, would have been bound to take exactly the same action in circumstances which he would have been powerless to prevent.
LORD RENNELL: I do not subscribe to the fact that devaluation was inevitable. I think the correct measure that ought to have been taken was, among other things, the use of the bank rate. That would possibly have made that devaluation unnecessary, or, at any rate, necessary to a very much smaller extent.
LORD WILMOT OF SELMESTON: It is easier to have hindsight rather than foresight. Looking backwards is always a pleasant exercise. But, without making a Party point, it was the hangover of war conditions into peace time which was basically responsible for the financial events of 1947. If we examine the Labour Party policy, which is largely fashioned by the trade unions, to whom the noble Lord pays a tribute, we find it is full of a belief that the very conditions which the noble Lord lays down as essential for stability we should do our utmost to attain. The result is that increases in wages and purchasing power must be limited by the amount of goods available to be bought; that consumption must not be allowed to seek to outrun production. Those are hard doctrines for men who have been trained in the art of bargaining for higher wages, and it is statesmanship, and not the opposite,

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which leads them to incorporate that as a keystone of the whole economic policy. I very much regret that noble Lords should so distort the whole tenor and purpose of the Opposition policy: not that it matters here in this House—we have fun in debate—but I think it militates against the very objects which noble Lords in all Parties have in mind.
As for central planning, there is nobody in any responsible office or in control of any responsible business to-day who has not some sort of planning organisation. The present Government have maintained the central planning machinery which was instituted during the war and continued afterwards. This is not a Party matter. Nobody to-day can conduct a business, national or private, upon any scale, unless he locks ahead, thinks ahead and provides himself with all the necessary informations available. There is little more to add on that matter. I see no justification for detaining your Lordships longer upon it at this time of day.
To return to the Finance Bill itself, I, too, welcome the investment allowances, but I think further consideration should be given to the whole question of replacement of wearing-out plant and equipment. As things are at present, in pressing for higher and higher export trade we tend, in effect, to send abroad some fragment of our inherited wealth in the form of plant, equipment and fixed assets; and, unless some means can be found to enable commercial undertakings to retain, before taxation, sufficient revenues to replace their depreciating fixed assets, we shall quickly see our whole equipment becoming obsolete—and equipment is the most essential requirement for world competition.
One of the things that perplexes one in visiting foreign countries, particularly Germany, is to see that the net result of the war upon Germany is that the victorious Allies are fitting her out with new machinery while their own is gradually being worn down by the pressure of high taxation as a result of the war. There is no purpose in seeking to show, as some have sought to show to-day, that the high level of taxation in this country has anything to do with the Labour Party. The cost of taxation in this country is due entirely to the cost of the war, and what has flowed out of the war. While I think there is something to be said, as the noble
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Lord, Lord Teviot, said, for an overhaul of administrative expenditure, which I think has grown as a result of war conditions and has not been cut back since the war, broadly speaking the burden of taxation is due to the fact that we stood alone in the war; and that taxation we cannot avoid. I hope that this review will be undertaken. We all hope that the general level of taxation will be surely and sharply reduced, for it is having effects which are far-reaching in many directions. There is no doubt that the taxation of professional people is resulting in their being completely unable either to maintain the educational standards, which are so important, or to provide for their old age a standard of living which will not result in a sharp and tragic fall when they finally cease to be able to earn their professional fees.
I should have thought that it would now be possible, having regard to the revealed balance of payments, for the limitation of travellers' allowances to be abolished. Surely we must be reaching a point at which the administrative cost is out of all proportion to the benefits accruing from this continued control, which, in my view, the Government are keeping on longer than is necessary. After all, the £50 allowance is more than most people can afford to spend in foreign currency on top of the sterling cost of a holiday abroad. There must therefore be only a minority of people who would spend more if the restriction were abolished, and of that minority we know that quite a proportion are able, by one means or another, to augment the amount of currency available by combining necessary business activities with holiday journeys.
Therefore it seems to me that this very elaborate mechanism by which every single person who wishes to spend a weekend abroad must go through the business of applying on a "T" form to the Bank of England affects only a minority and at the same time it must have a most derogatory effect upon British prestige abroad. We all know the damaging effects of this now somewhat trivial thing. I would therefore press the noble Earl in his reply to say why it is that the Government have felt it necessary to continue this irksome, damaging and, I should have thought, now unnecessary control over the liberty of movement of people, who are

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controlled quite enough by the smallness of their income and the slender margin they have for holiday expenditure. I do not think it necessary to detain your Lordships any longer, except to say that I hope the next time we have an Economic Debate in this House we may turn our minds to finding a common solution to our difficulties, instead of resurrecting a lot of Party bogies which have no foundation at all in fact.
6.13 p.m.
THE EARL OF SELKIRK: My Lords, I should first like to thank the noble Lord, Lord Pethick- Lawrence, for his speech, which I think we all enjoyed very much. He came very near to saying that this was an unexciting Budget. There is a saying "Happy is the country without a history. "I wonder whether he would not agree with me, perhaps, that "Happy is the country with a dull Budget." I think in the long run that will be true.
I will not say very much to-night about the general position. In fact, I have been in the singular position of a spectator watching the battles going on in the corners—battles in which I personally was not concerned at all, or very little concerned. In dealing with the general position perhaps I may say just this: that the improvements which I have mentioned, in exports and production, are general over the whole field—it is not only in one sector that the improvements which I have mentioned apply. In regard to the lessening of the trade gap, the improvement does not apply to only one part: there has been an improvement over the whole area—in North America, in Europe, in the non-sterling and in the sterling areas.
The noble Viscount, Lord Bridgeman, who is not here now, asked me about investment allowances and maintenance claims. In that connection I would say that investment allowances apply to capital, and on the whole maintenance claims are applicable to revenue expenditure; they may overlap in a small area, but only to a slight extent. The noble Lord, Lord Grantchester, asked me a large number of questions, each one of which by itself would have been a fit subject for a full debate. I hope that he will not consider me discourteous if I am somewhat short in answering what I think
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are the most important subjects he mentioned. But I think it would have been fair if he had said that we have already done quite a lot about almost all the points which he raised.
For instance, in regard to purchase tax, there was a reduction last year. I do not know whether the noble Lord would prefer to see a further reduction in purchase tax before any reduction in income tax. That is an interesting point which he might give consideration and tell us what he thinks. The Capital Issues Committee is much less exacting than it used to be. State trading is one of the things which we are giving up, and I think the noble Lord is being most exacting in saying that we have not completed the task. He referred to the Finance Act of 1951. I think that one Finance Act is quite enough for me in one afternoon, but perhaps I may just say that the points he has raised will be considered by the Royal Commission on Taxation when it makes its Final Report. I think I am right in my understanding of the points he was making.
One noble Lord mentioned taxation. Of course it is the object of this Government to reduce taxation. I was glad to see that nobody opposite put forward the policy of defending high taxation as a good clarion call. As nobody put that forward, I think we are all agreed that we should like to reduce taxation. But I think it is worth remembering that since this Government came into power they have done quite a lot in this respect. For instance, tax relief given to individuals and improvements in personal reliefs amount annually to a reduction of £325 million. Let me give one or two examples of what that means. For instance, a single person earning £500 a year will now get a reduction in taxation of about 30 per cent. If he were a married man with two children he would, on £500 a year, have a reduction of 91 per cent. With £1,000 a year a married couple with two children get a reduction of 39 per cent. I give those as examples of the reductions which have been made. With regard to industry the reduction is less marked, but I think it fair to say, taking the illustration of direct taxation and investment allowances, that there should be a reduction annually of about £130 million.

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Lord Teviot and Lord Wilmot of Selmeston emphasised the importance of saving on Government expenditure. I am bound to say that since noble Lords opposite were in power we have done quite a lot in this field. Earlier this year I quoted figures to show reductions in Government establishments, but I can assure the noble Lord, Lord Teviot, that this matter is being actively considered over the whole range, and I am sure that the points he has raised will be given full consideration. It is not simply a question of taxation; it is also a question of what can be done on the expenditure side.
The noble Lord, Lord Kenswood, again raised the question of an allowance for blind persons. I am sure the House has the greatest sympathy for the views which he expressed. I would point out, however, that the Second Interim Report to which he referred was received only in April and was clearly too late for incorporation in this year's Budget. Successive Governments have considered that the most valuable way of helping blind persons is by making a direct contribution to those who are disabled, rather than by providing tax remissions. We have taken that view. Of course, there is also the assistance given through the National Health Service by way of training or welfare services. In any case, the Royal Commission makes it clear that individuals would have to choose between tax relief and tax-free payments under the pension scheme. What I think is clear is that it is no good tackling this problem by itself. This is the broad problem of disability over a much wider field. Many of these problems were developed in another place by my right honourable friend the Economic Secretary. Of course, one cannot deal with 100 per cent. disability without in some measure dealing also with a 70 per cent., an 80 per cent. or a 90 per cent. disability. In this general position it is necessary to have some measure of equity of treatment. I can assure the noble Lord that the Chancellor of the Exchequer is considering this problem.
There has been a great deal of talk about convertibility. Perhaps I may content myself by saying this. As I think your Lordships know, there was a meeting of O.E.E.C., under the chairmanship of the Chancellor of the Exchequer, quite recently. It was just one of a series of
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meetings which are taking place on this subject; and there is not, and never has been, any question of any finality about it. What I would say is simply this: that I believe that the Chancellor of the Exchequer will be reporting shortly in another place on the meeting which has taken place. In any question of this kind the widest measure of support is obviously extremely important and necessary. I should like now to turn to what is happening in the United States. So far as we can see, the decline in American activity appears to have stopped. Industrial production was steady between March and April, rose, one point in May and was steady again between May and June. The fact that the recession has halted is encouraging, but the future is still rather uncertain, and we must hope that activity in the United States will now rise.
Other noble Lords seem to have entered into this debate rather more than I have. It is interesting, however, that the Government should not have been "under fire" in any way at all. I find it very difficult to know what the noble Lord, Lord Wilmot of Selmeston, meant by "physical controls"—whether he includes the bank rate, income tax and protective duties. I never looked upon those as physical controls, but the noble Lord seems to suggest that they are.
LORD WILMOT OF SELMESTON: The noble Earl will remember that I did not refer to the bank rate as a physical control. The noble Lord, Lord Balfour of Burleigh, spoke of physical and financial controls—or it may have been the noble Lord, Lord Brand, who used that phrase. Certainly the bank rate is a form of financial control. That it has physical consequences none would deny.
THE EARL OF SELKIRK: I am grateful that the noble Lord is not putting the bank rate forward as a physical control. He asked was it impossible that this Government might return to rationing. Would he agree that we were correct in removing rationing?
LORD WILMOT OF SELMESTON: We do agree.
THE EARL, OF SELKIRK: I am delighted to have that statement from the noble Lord. I was afraid of the possi

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bility that he might go to the country with a cry of "Restoration of Rationing!" to the housewives.
LORD WILMOT OF SELMESTON: I am sorry that the noble Earl has joined in this point. There was no shadow of suggestion on my part that that was what I thought. In my view, the amount of control necessary should be determined by the circumstances. I said that if there should be a return of the circumstances which made rationing necessary, then any Government, whatever its colour, would be bound to reimpose rationing.
THE EARL OF SELKIRK: I am grateful to the noble Lord for telling us he thinks we were perfectly right in what we have done.
LORD WILMOT OF SELMESTON: And if we had been in power we should have done the same thing.
THE EARL OF SELKIRK: Well, that is the interesting thing that we do not know; but for myself I am doubtful. One noble Lord mentioned the question of old-age pensions. If the Labour Party could have stabilised prices as we have done, without sacrificing economic and social progress, the old-age pensioner would have been very much better off now. This emphasises the importance of maintaining stability in prices.
My Lords, I have had so few criticisms to-day that I am inclined to make some myself, to show the difficulties we are facing, because, strong as our position is, there can be no question of complacency. There are a number of very real problems to-day. The favourable trend in the terms of trade is no longer there, although we still retain the benefits of improvements last year. Increased production and increased consumption necessarily mean increased imports. Again, there is some increase in basic costs, notably 2 per cent. in the price of coal last May. Since 1950, coal prices have risen by 36 per cent., and iron and steel prices by 39 per cent. These are problems to be faced. Moreover, production of our most important raw material at home, coal, still remains unsatisfactory. These are all important points which must lead to a need for increased efficiency at home. There is no need for pessimism. We have to-day great opportunities. These opportunities are fortified by the stability of
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our prices and the confidence with which our currency is viewed—and, of course, by the ample supply of materials.
It has been in many ways a great year. We have tasted a measure of liberty and shown ourselves strong enough to prosper under it. We have seen our identity cards disappear; our ration books have gone and lots of forms have been removed. We have removed something like 60 per cent. of war-time regulations which weighed us down until this year, yet we have still been prosperous. We have seen what many thought to be a miracle, stable prices and full employment. We have not seen that before. We have borne an increased burden of national defence and yet reduced taxation. We shall certainly not retain these advantages unless, in place of the discipline imposed by the State, we grasp the opportunities which come with the greater freedom that we now have, and with it undertake the self discipline which freedom necessarily demands. In so doing we shall make ourselves competent, on economic merits, to stand firm in a world which is, and always will be, competitive.
On Question, Bill read 2a: Committee negatived.

BAKING INDUSTRY (HOURS OF WORK) BILL
6.27 p.m.
Order of the Day for the House to be put into Committee read.
Moved, That the House do now resolve itself into Committee.—(Viscount Woolton.)
On Question, Motion agreed to.
House in Committee accordingly:
[The LORD MERTHYR in the Chair]
Clause 1:
Hours of work at bakeries other than night-bakeries
1.—(1) Except at an establishment with respect to which a notice under subsection (1) of the next following section is for the time being operative, and subject to the other provisions of this Act, a person shall not be employed as a bakery worker between the hours of ten o'clock in the evening and five o'clock in the morning:
Provided that a person may be so employed on dough-making or oven-firing at any time in the morning not earlier than three o'clock.
LORD AMMON LORD AMMON moved to add to subsection (1):
"and that a person may not be so employed between the hours of six o'clock and ten o'clock in the evening during more than twenty-six working weeks in any one year."
The noble Lord said: For those who were not present during the Second Reading debate, I would explain that this Bill deals with a subject which has been before the public and Parliament for as long as one can remember. Seventeen years ago in another place a Bill on somewhat similar lines was introduced. Since then the Rees Committee has inquired into the matters concerned. As the noble Lord, Lord Rea, pointed out in the Second Reading discussion, it very succinctly set out in the interpretation clause, Clause 11, of the Bill that:
"'night bakery worker' means a person employed as a bakery worker at a night bakery."
I am sure that that has made quite clear what the purpose of the Bill is. It is a pity that, having waited so long, and admitting that we have an excellent Bill in many ways, it should be marred by certain blemishes. However, seeing that we have a member of the Cabinet in charge of the Bill, I am hopeful. I hope that he is going to say that he will grant that for which we are now asking.
The Bill, as it stands, has, in a very large way, met grievances of which complaint has been made, but it is somewhat marred because it takes away a good deal that has already been given. A permanent "back shift," as it is called in the Report, is something that would in fact be as great an evil as a permanent night shift. This clause of the Bill, as it stands, is contrary to the Rees Committee's Report. In paragraph 66 of the Report, the Committee say, with reference to "back shift" working:
"We think that as a permanent working period it is open to many serious objections, some of them perhaps different from those which are put forward to night work, but in their practical effect not much less disadvantageous to the operatives, We believe that any action which had the effect of substituting a permanent back shift for a permanent night shift or an alternation between those two shifts would not in fact be a worthwhile solution of the problem."
In paragraph 211, the Committee emphasise this yet again. They say there:
"We recommend:—
(1) that legislation should be introduced to provide that every bakery establishment
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should be required to adopt one of two courses as follows:—
EITHER
(a) It should employ no person in the manufacture of bread and flour confectionery between 10 p.m. and 5 a.m.
OR
(b) It should employ no person in the manufacture of bread and flour confectionery between 6 p.m. and 6 a.m. for more than half the weeks worked in any particular calendar year."
Apart altogether from questions of remuneration, health and hygiene, the great problem that arose was because the people who were on permanent night work in this particular trade were divorced from all social contacts and had to live a life that was not as full as it might be. That has continued for very many years until at last we have the opportunity of passing this Bill. The purpose of the Report and of the Bill is to lay it down that night workers are entitled to a minimum of twenty-six weeks' day working in a year. It is in accordance with that purpose that this Amendment has been framed. It is designed to ensure that the clause shall carry out fully the purpose of the Bill—to give these men at least half a year in which they will be free from night work. I beg to move.
Amendment moved—
Page 1, line 13, at end insert the said words.—(Lord Ammon.)
6.34 p.m.
THE CHANCELLOR OF THE DUCHY OF LANCASTER (VISCOUNT WOOLTON): The noble Lord has told us that after seventeen years he is in a state of hopefulness, and I must congratulate him on his optimism if he thinks that because a member of the Cabinet is taking this Bill at this stage the argument which he has put forward will be admitted. I do not think that at this hour, when I know your Lordships have other matters to occupy your attention, matters on which I have been given to understand some of you feel rather deeply, I am going to enter into long arguments about this Amendment. In this Bill there is a good measure of what many people have been hoping for a long time. I have had some association with this trade. I remember very clearly my experiences with it during the war. I remember with gratitude the way in which the trade unions at that

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time postponed their efforts to get legislation until the circumstances of the country were more suitable.
This Bill has been based on the Rees Report. That Report was drawn up by very competent people. The Bill which has been discussed in another place and has now come here is the result of an endeavour to carry out what was recommended by the Rees Report. I do not think that the noble Lord opposite can quite get away with the idea that the members of the Rees Committee really wanted something which they did not express quite clearly in their final conclusions. In point of fact, I am given to understand that if they had made the recommendations that the noble Lord is suggesting, they would have been going beyond their terms of reference, which were, in fact, limited to night work.
LORD AMMON: I hope the noble Viscount is not challenging what I have read. I read it from the Report of the Committee. They made that recommendation. I have given the reference.
VISCOUNT WOOLTON: It would not have been within their terms of reference. It is not a matter upon which they were invited to report. I hope that the noble Lord is not going to press this Amendment. I cannot agree to it. I hope he will join with me in feeling glad that we have got so far in this quite admirable course. I hope that the Committee are going to enable me to get this Bill through this House to-day in order that it may be brought into law at the earliest possible moment. I beg the noble Lord not to press me further on this matter, because I cannot give way.
LORD HADEN-GUEST: May I say a word on this matter as one who originally introduced a Bill in another place in 1938? I have just been reading through the Report of the debate that took place. I find that I made a ten column speech at that time which was answered by a nine column speech on behalf of the Government. I do not propose to repeat that speech or even half of it. But I do suggest that we have had a large amount of experience since then, and I should like to draw attention to one or two points. In Scotland, they have managed, by industrial arrangement between employers and employed, to abolish night baking altogether. If I am
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not out of order in referring to it, may I say that I hope some attention will be given to that fact. I said on Second Reading that I welcomed this Bill, and I welcome it because it effects an improvement. But it does not go far enough. Legislation on this matter has been going through this House, or rather has been discussed in this House, for something like a hundred years. I think it is time now, in this century, that we should come to a final conclusion and emancipate the bakers from night work.
LORD GREENHILL: I wonder whether the noble Viscount, Lord Woolton, would clarify the doubt as to whether the Rees Committee really did make a recommendation which was not in keeping with their terms of reference. As my noble friend, Lord Ammon, has said, he quoted from the actual Report of the Committee.
VISCOUNT WOOLTON: My information is—obviously I have not been through the whole matter myself—that they were not entitled to make a recommendation on the lines which the noble Lord, Lord Ammon, has suggested, because it was not within their terms of reference.
LORD GREENHILL: But a recommendation was made?
LORD AMMON: I must say that I cannot quite accept the point which the Minister has sought to put, because the terms of the recommendation were for the abolition of work between 6 p.m. and 6 a.m. for a certain time. The proposition in the Amendment is that the hours 6 p.m. to 10 p.m. fall within that period, and the recommendation is specifically made along that line. However, I have to accept the fact that the noble Viscount cannot see his way to agree to the Amendment. Though not at all convinced by what the Minister has said, I accept the position and ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 1 agreed to.
Clauses 2 to 4 agreed to.
Clause 5 [Notices, applications, records, etc.]:
VISCOUNT WOOLTON: This is a drafting Amendment. I do not think I need occupy your Lordships' time with it, and I hope you will be good enough to give it to me. I beg to move.
Amendment moved—
Page 6, line 15, leave out ("paragraph (b)or (c) of subsection (2)") and insert ("subsection (4)").—(Viscount Woolton.)
LORD AMMON: May I be magnanimous and say that we accept this Amendment, with thanks?
On Question, Amendment agreed to.
Clause 5, as amended, agreed to.
Clause 6:
Officers
(2) An officer acting for the purposes of this Act shall have power for the performance of his duties—
(b)to enter any premises or place at any time when, or when there is reasonable cause to believe that, any persons are being employed as bakery workers thereat;
6.41 p.m.
LORD AMMON LORD AMMON moved, in subsection (2) (b), to leave out "there is" and insert "he has." The noble Lord said: Perhaps, with your Lordships' permission, I may discuss the next Amendment together with this one. They concern the same point. This Amendment proposes to put in words that were in the Bill when the Government originally introduced it in another place. The alteration was made on Report stage, and during the discussion a promise was given by the Minister in charge of the Bill that he would seek advice to see whether or not it was sound, because there was a good deal of doubt about the matter. Both the Attorney General and the noble and learned Lord on the Woolsack were consulted and they were not wholly in agreement with each other. To be fair, I should quote what was reported on the matter:
"The Lord Chancellor's opinion is that the Amendment is desirable. The Attorney General said he did not think it makes much difference."
If that is the advice given, it looks as if there would not be any harm in restoring this clause to its original form.
Among other bodies, the Trade Union Congress regard this phrase as touching on a vital principle, and after considerable discussion they took the view that the original words were necessary. They differentiate between the factory inspectors engaged in inspecting night bakeries and the factory inspectors who deal with other businesses. In the latter case, the word of the factory inspector would be
1318
final, but in the case of night bakeries the factory inspector will not be able to give a final verdict and the matter may have to be taken to court. It is thought that this will cast a reflection upon the factory inspectors themselves and will introduce confusion into a matter where we had hoped we were getting rid of confusion. There is both this question of the standing and position of the inspectors who have the right to inspect night bakeries and the possibility of all sorts of complexities which will make the working of the Bill more difficult than it otherwise should be. The words proposed in the Amendment are incorporated in the relevant sections of a number of Acts of Parliament and I would ask that they should be re-inserted here. I beg to move.
Amendment moved—
Page 7, line 8, leave out "there is" and insert "he has".—(Lord Ammon.)
THE LORD CHANCELLOR (LORD SIMONDS): I have been quoted as saying that I approve of the words "there is reasonable cause"; and so I do. With all respect to the right honourable and learned gentleman the Attorney General, who said that there was no difference, between "there is reasonable cause" and "he has reasonable cause," I think there is a strong difference. If we said, "he has reasonable cause," we should have to look at the state of the inspector's mind, to see what he knows. It is much easier if the words used are "there is"—that is purely objective. One can ask oneself, "Is there reasonable cause?" and if there is, then the provision of the clause is satisfied. I would suggest to the noble Lord, Lord Ammon, that the object that he has in mind is far better satisfied with the words "there is" than with the words "he has," and I strongly recommend him, if I may venture to do so, to withdraw the Amendment.
VISCOUNT WOOLTON: I am grateful to my noble and learned friend for having cone into what would otherwise have been a battle between amateurs. When I spent a long time this morning trying to find the difference between these simple words, I came to the conclusion that the best thing was to go and see how it worked. I inquired about the attitude of mind of the inspectors who are going to have to deal with this matter and I was assured that they are completely satisfied with the words in the objective form

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in which the paragraph now appears. If the inspectors are satisfied, I do not think the noble Lord, Lord Ammon, need be unduly worried on the subject.
LORD AMMON: What is a layman to do when eminent lawyers do not agree? I do not suggest that two other lawyers would be equal to the noble and learned Lord the Lord Chancellor, but the Minister of Labour is also a lawyer and he is responsible for the drafting of the original Bill. My information is not quite in line with that of the noble Viscount, Lord Woolton. The inspectors are a little doubtful about this. They feel that to a certain extent it is derogatory and lowers their prestige a little. But in the light of the noble and learned Lord's statement, I can do nothing but withdraw my Amendment. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 6 agreed to.
Remaining clauses agreed to.
House resumed.
Then, Standing Order No. 41 having been suspended (pursuant to Resolution), the Amendment reported: Bill read 3a, with the Amendment, and passed, and returned to the Commons.

LANDLORD AND TENANT BILL
6.50 p.m.
Order of the Day for the Third Reading read.
THE LORD CHANCELLOR (LORD SIMONDS): My Lords, I beg to move that this Bill be now read a third time. I have it in command from Her Majesty the Queen to signify to the House that Her Majesty, having been informed of the purport of the Landlord and Tenant Bill, has consented to place Her Majesty's interest, so far as it is concerned, on behalf of the Crown, the Duchy of Lancaster and the Duchy of Cornwall, at the disposal of Parliament for the purpose of the Bill.
Moved, That the Bill be now read 3a. —(The Lord Chancellor.)
LORD MANCROFT: My Lords, even though the hour is Parliamentarily late, I think it would be wrong if the House
1320
were asked to give this important Bill merely a formal Third Reading—because it is an important Bill. Her Majesty's Government do consider it important, and they go further: they consider it to be a document of major social significance. I think the Bill was a good one before it came to your Lordships' House, and after the scrutiny to which your Lordships have submitted it I suggest that it is an even better Bill. I think even noble Lords opposite are beginning to suspect that it is a good Bill. In the course of his Second Reading speech the noble Lord, Lord Silkin, welcomed Part II of the Bill and described it as "a big step forward." I am beginning to hope that he may now extend that congratulatory expression to the remaining portions of the Bill. Your Lordships have given this measure a detailed examination. Those of us on this side of the House would like to thank the noble Lord, Lord Silkin, and his colleagues for the helpful, if necessarily critical, examination to which they have subjected the Bill—and in one respect, notably that of the noble Lord, Lord Silkin, a quite spectacular examination.
We had on the Marshalled List of Amendments some eighty to ninety Amendments, of which fifty-six have now found their way into the final draft of the Bill. Five of those Amendments were important. Amongst them there were two which the Government brought forward: one, the new clause dealing with the question of property held on trust, which will be valuable to many religious and charitable bodies; and another to enable the National Trust to make the best use of property in their hands. Three of the five Amendments to which I refer found their way into the Bill at the instance of the Opposition. There was the Amendment concerning the tenant who wishes to carry out his initial repairs; there was the deletion we made to one of the grounds on which a landlord can get possession of business premises; and thirdly, there was the question of the tenant's right to make a written representation opposing the grant of a certificate when a Government Department or a public authority desire to take action under the Clause 57 procedure. I think it will be admitted that these are important Amendments. I would not go so far as to say they are radical

1321
Amendments, or vital Amendments, or Amendments that go to the root of the Bill; indeed, it would be odd if at this stage, after the details put into it, and the scrutiny to which it has also been subjected in another place, we should be able to find five radical Amendments. But the fact that we have been able to put into the Bill at this stage five important Amendments is, I feel, full justification of the time and trouble which your Lordships have expended on this important measure.
Three points which the Opposition made in the course of our discussions remain uppermost in my mind, and I should like to make one short reference to them. The first is the question of scarcity value, of which the noble Lord, Lord Silkin, and his noble friend, Lord Ogmore, spoke at some length. They made the point that scarcity value should be excluded from the rent payable by a tenant who retains possession after the end of a ground lease. We argued this backwards and forwards for some time, and we maintained that it was impossible to achieve what noble Lords wanted by means of a valuation formula. May I attempt to solve their problem by reminding them that the only real way to eliminate the scarcity value problem is to eliminate scarcity itself? That is what the Government are trying to do in other portions of their domestic and housing legislation, and I think we are entitled to claim, with some pride, that we are making notable progress towards the elimination of scarcity.
The second point was this. The noble Lord, Lord Silkin, came to the Dispatch Box time and time again, and when one of his Amendments was unsuccessful he would shake his head sadly and say: "This is one more example of the Government's bias in favour of the landlord" I want to do away with that point once and for all. This Bill is not a Bill in favour of the landlord; indeed, if I could show the noble Lord some of the protests which have been received from landlords' organisations I am sure he would change his tune considerably. This Bill is practically a tenants' charter; it is biased in favour of the tenant to a marked degree, a point which my noble and learned friend the Lord Chancellor made forcibly on the Committee stage. If the Amendments of the noble Lord, Lord
1322
Silkin, had been, say, 50 per cent. in favour of the landlord and 50 per cent. in favour of the tenant, and the Government had accepted only those Amendments which he put forward in favour of the landlord, he might have been justified in shaking his head sadly, as he did. But all of his Amendments, without exception, were in favour of the tenant, and if we had accepted them all great injustice would have been done to the landlord. We have tried to strike a balance, of justice in this Bill, and whenever we were in doubt we have favoured the tenant. I hope that will set the noble Lord's mind completely at rest.
The last point I want to refer to is the question of leasehold enfranchisement, which was raised time and time again on all the discussions on the Bill. May I remind the House that the independent Committee set up by the Socialist Government, of which noble Lords opposite were members, recommended against enfranchisement by eight to two? Although we have not gone so far as the Opposition would have liked, I would suggest that Her Majesty's Government have gone a long way in this Bill to ameliorate the position of the occupying tenant by reducing his liability for dilapidations and by giving him security of tenure. That is what we set out to do, and that is what I believe we have achieved. I, for my part, will be surprised if we hear much more in the future about this old bogy of leasehold enfranchisement. This is a complex Bill; in many ways it is a technical Bill and a lawyers' Bill. But, for all that, it is, I submit to your Lordships, a very good Bill. If your Lordships are good enough to see it into law, then I hope we shall sit back and watch these complex provisions working themselves out with the good will of all concerned and to the great advantage of all concerned. It is a courageous and, I suggest, a far-reaching measure, and with confidence I recommend it to your Lordships for a Third Reading.
6.58 p.m.
LORD SILKIN: My Lords, I do not think the noble Lord, Lord Mancroft, really feels that he has convinced me by the few remarks that he has made at this late hour, and at this late period in tile progress of the Bill. I admit—and I admitted it at the beginning—that this Bill seeks to improve the position of tenants of dwelling-houses of certain

1323
classes, and of business premises. It is an improvement, and it would be wrong to deny that. The whole burden of the case that has been made from these Benches is that a good many of the benefits which this Bill seeks to confer upon tenants are illusory, because the terms on which those benefits are provided are, in our view, unfair and beyond the means of many of those for whom they were intended.
I do not propose, however, to enter at this late hour into a controversy with the noble Lord about the detailed Amendments. It would be ungracious on my part not to recognise that some advance has been made by the Government on a number of (may I say without disrespect?) relatively minor matters. The noble Lord was quite right in saying that it was difficult, if not impossible, for the Government to make any concessions on major Bills. That is a matter which I believe is worthy of the consideration of the House on general lines. The noble Lord was quite right when he said that this Bill has been scrutinised very closely in another place. It had sixteen days in Committee, and either one or two days on the Report stage. There were on this Committee a number of eminent lawyers, both on the Opposition side and on the Government side. I do not complain that it has not been examined in the closest possible way, and I must say that it was exceedingly difficult, when this Bill came to your Lordships' House, for us to discover any point that had not been threshed out.
Does that not bring us to consider what is the function of this House? If, in fact, we have been told: "Here is a Bill which has been closely scrutinised in another place, and there is really very little for you to do here," is that not an admission that the position of this House needs closer consideration? Perhaps the noble Viscount, Lord Woolton, can give us information as to whether there is a possibility of the reform of this House being considered in the present Parliament. We were promised, or threatened—whichever way you like to put it—that it would. When we do come to consider the question of reform, is this not a matter that we should consider very carefully? After all, if the noble Lord is right—and I think he is—that there is
1324
really not much scope for a Committee stage in this House—
LORD MANCROFT: I never said that.
LORD SILKIN: I think the noble Lord said, "not much." I say that there is not much scope for a Committee stage or a Report stage here. I said it on the last Bill in which I was personally concerned, the Housing Repairs and Rents Bill, where there was even less scope. If it is true that that is the position, is it worth while our spending a large amount of time in carrying out what is virtually a drafting operation? The noble Lord referred to some of the Amendments which we have passed. He referred to two of them as being Government Amendments. They were, I believe, Amendments which the Government had undertaken to insert in this House. They had given the undertaking in another place, and we acted merely as instruments for carrying out their undertaking. A number of other Amendments were drafting. The three Amendments that might be regarded as being of substance were all right, but I do not think the noble Lord himself put them forward as being especially important. I think they were an improvement, but I cannot help feeling (I hope that I am not being ungracious) that even they were regarded as being some sort of crumb that ought to be offered to the Opposition as a reward for the hard work they had put in during the Committee stage.
Be that as it may, I personally am having increasing doubts as to the value of these lengthy Committee and Report stages of Bills which have been through another place. It is, of course, different where the Minister who is directly responsible for the Bill is in this House—we had an example of that with the Television Bill. In the case of that Bill, a considerable number of Amendments were put down here on Committee stage, and there was an offer to consider a number of points that arose during that stage. There was a discussion at which the Minister himself was present and took part. I had the privilege of being present at that discussion, and I am bound to say that that private discussion, which took place after the Committee stage, was a valuable stage in the progress of the Bill—far more valuable than the Committee stage in the House itself. The Minister

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was able to make a number of concessions to the point of view of the Opposition and, as a result, the Bill has been considerably improved.
In the case of a Bill like this, the spokesmen in this House are of necessity limited by their instructions—they are not their own masters; they are given briefs. I myself have seen these briefs in the past, and I have been through the same process. They are told to resist an Amendment, or to agree to an Amendment—though of course it is rarely that they are told that. Mostly they are told to resist and to give the reasons why. They do it most courteously and graciously, but they resist; and it is very rarely that there is an undertaking to consider. I hope the noble and learned Lord on the Woolsack will not mind my saying this, but when we do come to reconsider, what we meet with—and, I suppose of necessity it is all part of the organisation of this House—is not really a reconsideration but a decision. We are told what is the decision of the Minister on certain matters which the Government have undertaken to reconsider. There is no possibility of further discussion of the matter; we just accept what is offered to us. We can, of course, put down further Amendments on the Report stage, but when we do that we are told that the Government have fully considered all this and that there is nothing more to be said.
If that is the position, I would seriously suggest, as I suggested on a previous occasion, that we ought to reconsider the value of these proceedings. Nobody is going to continue indefinitely to take part in a farce, and if these proceedings do result in the farce of people giving all their effort and their time, with no more result than has been secured in the case of the two Bills I have mentioned, the Housing Repairs and Rents Bill and this Bill, then this House will find that they will not have an effective Opposition. I do not know what the answer is, and I am not at this hour putting forward an answer. I am merely putting forward a problem and a dilemma. I am not in the least being critical of the noble and learned Lord, the Lord Chancellor, who has been courtesy itself in every possible way, or of the noble Lord, Lord Mancroft, who has also been most courteous. Both of them have treated seriously every argument that has been
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put forward, and have not attempted to brush it on one side. But it is a dilemma that we have all to face in this House. Having put it forward, and put it forward in conjunction with the possibility of the reform of this House, I must leave it at that.
Let me conclude as I began, by saying that undoubtedly this Bill will bring about an improvement in the position of tenants. I am not going to be drawn into a discussion as to whether or not there has been bias in favour of the landlord. I think that probably a certain amount of bias in favour of the landlord has existed en the Government Benches, and I am prepared to admit that most of the Amendments that we put forward from this side were favourable to the tenant. Your Lordships can have it that way if you like. This Bill had it in its power to mark an immense step forward in the relationship of landlord and tenant, It has not gone anything like so far as we on this side could have wished, and I am convinced that we have not seen the last of legislation of this kind. But we do things gradually. On the last Bill, the noble Viscount made the same statement. Let us be thankful for what we get, even if it is only half a loaf. I suppose that, on that principle, we are grateful for half a loaf or a quarter of a loaf, as the case may be.
7.10 p.m.
THE LORD CHANCELLOR: My Lords, it falls to me to wind up the long-drawn-out proceedings on this Bill. I confess I feel some difficulty, and indeed some diffidence, in answering what the noble Lord has said, for I do not think it falls to me but rather to the noble Marquess who leads the House to deal with such questions as the reform of the House and what function the Opposition may usefully play when it is unfortunately—shall I say "unfortunately"?—in a small minority. I cannot help thinking that the greater part of the complaint that the noble Lord has made is founded simply on the fact that the Labour Party is in a small minority in this House. But that does not mean, I beg him to believe, that we do not consider the suggestions which are made by way of Amendment or proposal of any kind by the noble Lords on the Opposition Benches. We treat them with the utmost consideration; and may I say to the noble Lord, Lord Silkin.

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that, after all, it is quality and not quantity that counts. Nothing could have exceeded the acuteness of his examination of the provisions of this Bill or could diminish in any way the value of the suggestions which he has made.
There is only one point where I join issue with him (perhaps because for so long I had a more or less independent position), and that is when he tells me, as he has told us, that we did nothing but accept our instructions and nothing more. I do not recognise that as the position in which I stand in relation to the Home Secretary or any other Minister. If I think that the Amendment proposed by the noble Lord is a good one, I do my best to get the Home Secretary or whatever other Minister is concerned to accept it. That is what I did in this case. Then, when, as the noble Lord says, he came to a conference—and I enjoyed it, as I hope he did—and we discussed matters together, I was able to tell him that upon consideration some of his proposals were accepted on their merits. Equally, I had to tell him that certain proposals that he made were not acceptable, but that did not mean that the door was closed. After all, it is not I that the noble Lord has to persuade. This is a debating Chamber and he must satisfy the House. I cannot take it as a defect in our system that, if he is unable to persuade me, that is the end of the value of this House as a debating Chamber. I do not want to travel now too far into the matter. After all, it far transcends the circumstances of this particular Bill. I would only say to the noble Lord that I hope that he will labour in future as he has in the past, and
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I believe that, as a result of his labours, other Bills will be improved, as this Bill has I think been improved. I would only repay him the compliment that he has paid me by acknowledging the courtesy with which he has always treated me and my noble friend, Lord Mancroft, in this very difficult and intricate Bill.
On Question, Bill read 3a, with the Amendments.
Clause 37 [Compensation where order for new tenancy precluded on certain grounds]:
THE LORD CHANCELLOR: My Lords, there is one small Amendment, purely drafting. It is, at page 28, line 24, leave out "on" and insert "of". I beg to move.
Amendment moved—
Page 28, line 24, leave out "on" and insert "of".—(The Lord Chancellor.)
On Question, Amendment agreed to.
Bill passed, and returned to the Commons.

SLAUGHTER OF ANIMALS (AMENDMENT) BILL
7.14 p.m.
Read 3a (according to Order), with the Amendments, and passed, and returned to the Commons.

HARTLEPOOL PORT & HARBOUR BILL
Reported, with Amendments.
House adjourned at a quarter past seven o'clock.