Lords Sitting of 20 July 1959

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Chancellor
The Viscount Norwich—Sat first in Parliament after the death of his father.

DOMESTIC STOVES AND SMALL COAL
2.36 p.m.
LORD FRASER OF LONSDALE: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether further consideration has been given to the question which he raised on 16th December last relating to the encouragement, or subsidy by the Government, of the purchase by house-holders of enclosed stoves suitable for burning small coal and, if so, with what result.]
THE MINISTER OF POWER (LORD MILLS): My Lords, despite considerable experimental work by the Government, research bodies, and private industry, an enclosed stove has not yet been developed which will burn small coal both efficiently and smokelessly. By small coal I mean, my Lords, the fine ungraded coal which forms a large proportion of our coal production. Work in this field is therefore being mainly concentrated on the development of new methods of processing small coal into briquettes and smokeless fuels, so that it can be burned efficiently in modern domestic appliances. This work is proceeding very successfully. Grants are already available in "Smoke Control Areas" to assist householders to install modern appliances in place of those which cannot burn smokeless fuels.
LORD FRASER OF LONSDALE: My Lords, while thanking my noble friend for the interest which he has taken in my Question, may I ask him whether he agrees that the British people are backward in using enclosed stoves and that if, over a period of years, it were possible to persuade them that they
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would get better value that way we might at the same time go some way towards curing the abundance of small coal which is now troubling the coal industry? Will he therefore pursue this matter vigorously, and see whether such encouragement as he can give will bring about this desirable result?
LORD MILLS: My Lords, I cannot say that the British people are backward; that is the last thing I would say. This problem of burning what is known as small coals efficiently and smokelessly is not an easy one. It may be that there is some confusion in my noble friend's mind between smokeless fuels and ordinary small, ungraded coal, where I can assure him that there are technical problems which so far have not been overcome. It is, I know, a common fallacy to think that the price of these small coals could be reduced and that they could be sold easily for domestic consumption; but they are not suitable for domestic consumption.
EARL HOWE: My Lords, may I ask the noble Lord whether his answer refers to the use of anthracite, or to purely smokeless coal?
LORD MILLS: No, my Lords. Anthracite is capable of being used efficiently and smokelessly in enclosed stoves.
LORD FRASER OF LONSDALE: My Lords, are not most of the well-known small, enclosed stoves omnivorous, so that they can burn, one could say, almost anything?
LORD MILLS: No, my Lords; that is not the case. I wish it were the case.
LORD HAWKE: Would my noble friend consider giving some publicity to what the Coal Board and his Ministry are doing, and have done, in the way of the development of smokeless fuel? Because the general public have heard a great deal about experiments, but so far the smokeless fuel on the market is very expensive and by no means always plentiful.
LORD MILLS: My Lords, I am very grateful for that suggestion. I am having, and have had for some time now, the whole question of smokeless fuels, the work that has been done on them and the work which requires to be done on them, examined, and I hope to present a report to the public later this year.

THE ELECTORAL REGISTER AND EX-SERVICE VOTERS
THE EARL OF LUCAN: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government if they are aware of the large number of inaccurate entries in the Register of Electors relating to former Service electors, and whether they are satisfied that the Central National Registration Office notifies Electoral Registration Offices without undue delay when such personnel leave the Services.]
LORD CHESHAM: My Lords, the Register of Electors, which is published annually on February 15, relates to circumstances on the qualifying date for the register—namely, the previous October 10. The register remains in force for a year from February 16 and cannot be amended once it is published. It follows that a person who was a Service voter on the qualifying date will remain on the relevant register as a Service voter even if he has left the Service in the meantime. This cannot be avoided, and the person concerned suffers no disadvantage by remaining on the register as a Service voter. The important thing is to ensure that discharges from the Services are notified promptly to the electoral registration officer at the time the register is being compiled, and Her Majesty's Government are satisfied that this is in fact done.
THE EARL OF LUCAN: My Lords, I thank the noble Lord for his Answer. I think that perhaps I failed to make my meaning perfectly clear. Would he not agree that, owing to the fact that electoral registration officers are not allowed to delete a Serviceman's name from the register until they have authority from the central office, names frequently remain on the register for, not twelve months, but several years after a man has left the Service? In view of that, the Serviceman is misled into thinking that he is entitled to vote, if he has a vote, and the register itself is artificially inflated with names which are useless and out of date. Would Her Majesty's Government go into the question of this imperfection in the system of representation of the people, in order to try to
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remove this delay? Or, if delay cannot be removed under the system as it is, would they look into the possibility of changing the system?
LORD CHESHAM: My Lords, the noble Earl is of course right in that if the Services Register Index fails to send the necessary document to the electoral registration officer, the name will remain on the list. He is right in saying that the registration officer cannot remove it without the necessary document being passed to him. But I have no knowledge of there being great discrepancies in this respect, and if the noble Earl has evidence to the contrary, perhaps he will be good enough to let me know about it so that the matter can be looked into. I should like to say further, in regard to the deletion of obsolete addresses of Service voters, that a Working Party has been working on this matter and the Service Departments have agreed that at the annual check-up in the Services every man who may have made a declaration some time before should be asked to bring it as completely up-to-date as he can.
THE EARL OF LUCAN: My Lords, I am glad to hear that; and I will certainly let the Minister have the instances of which I know.

BRITISH CLAIMS AGAINST JAPAN
2.45 p.m.
VISCOUNT ELIBANK: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether any satisfaction has been received from the Japanese Government in respect of pre-war claims of British nationals against Japan; and what is the position relating to those justifiable claims.]
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR FOREIGN AFFAIRS (THE MARQUESS OF LANSDOWNE): My Lords, the answer to the first part of the noble Viscount's question is, No. As regards the present position, noble Lords will be aware that on the recent occasion of the visit of the Prime Minister of Japan, the hope was expressed to him that it would

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be possible soon to reach agreement on the settlement of United Kingdom claims under Article 18 (a) of the Peace Treaty. This matter was specifically referred to in the joint communiqué issued on July 15, and in it Mr. Kishi gave an assurance that the Japan Government would do their best to bring the matter to a conclusion at any early date.
VISCOUNT EUBANK: My Lords, I beg to thank the noble Marquess for his Answer. Is he aware that under the Japanese Peace Treaty of 1952, Article 18 (b), the Japanese Government expressed its intention to encourage negotiations in respect of pre-war claims and obligations? During most of the seven years since then, the Japanese Government has done nothing to encourage such negotiations, and even last week the Japanese Prime Minister said at a Press Conference that he could not give a date for a final settlement. Is the noble Marquess aware that many of us hope that the Japanese Government will display a greater sense of urgency in this matter of £1 million sterling than it has done hitherto?
THE MARQUESS OF LANSDOWNE: My Lords, as the noble Viscount is aware, negotiations are now proceeding in Tokyo, and I think that the noble Viscount himself would agree that it would be inappropriate at this stage for me to make any further comment. But I can assure him that any impetus that can be given, through the result of the Prime Minister's visit here is being given, and he may rest assured that we are making every effort to bring this matter to a satisfactory conclusion.

Mr. CHIUME'S EXCLUSION FROM NORTHERN RHODESIA
VISCOUNT STANSGATE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they will state the circumstances in which an order was served on Mr. Chiume banning him from Northern Rhodesia; on whose responsibility the order was made; whether the British police were used in the service of the order, and under whose direction they were acting.]
THE MINISTER OF STATE FOR COLONIAL AFFAIRS (THE EARL OF PERTH): My Lords, the Governor of Northern Rhodesia has made an order under Section 7 of the Northern Rhodesia Inter-Territorial Movement of Persons (Control) Ordinance prohibiting Mr. Chiume, who is a Nyasalander, from entering Northern Rhodesia. The High Commissioner for the Federation in London received a request to serve the order upon Mr. Chiume. This was done by two officials of his office. The British police were not involved.
VISCOUNT STANSGATE: My Lords, I am grateful for that reply. May I ask this question in a general way, in preparation perhaps for a debate later? What is the position in regard to Mr. Chiume? The gravest charges were made against him about four months ago. He has no redress. The charges were made under cover of Parliamentary privilege. He cannot bring an action. Is it just that the situation should remain as it is?
THE EARL, OF PERTH: My Lords, as the noble Viscount says, we are very shortly going to receive a Report from the Devlin Commission on the question of Nyasaland generally, and maybe something of this business will be said in that Report, so I think that it would be appropriate to leave the matter for the time being.
VISCOUNT STANSGATE: My Lords, does the noble Earl say that we have to wait for the Devlin Report before we can justify the charges which were made publicly, in a Parliamentary Paper, against this young man?
THE EARL OF PERTH: My Lords, I think that the Answer to that question is that if Mr. Chiume wants to raise this matter, he may; but so far as I am concerned, I will wait until the Report comes out.
VISCOUNT STANSGATE: My Lords, that is all very well. The noble Earl says that if Mr. Chiume wants to raise the matter, he may. If the statement had appeared in a newspaper, he would have raised the matter and possibly would have secured substantial damages—I do not know. But he cannot raise the matter because it is under cover of

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Parliamentary privilege. The Government issued a statement and, moreover, pursues Mr. Chiume with prohibition orders without justifying them or giving him any opportunity to justify himself.
LORD TEVIOT: My Lords, no doubt there are other noble Lords who will remember that Mr. Chiume said in the Panorama programme of the B.B.C. that the Colonial Secretary, Mr. Alan Lennox Boyd, and Sir Roy Welensky were both liars. Everybody knows that he said that. I heard it myself. Therefore I do not think that he has much grievance, whatever the noble Viscount may say. If Mr. Chiume says that about Ministers of the Crown, I think he deserves all that he is getting.
VISCOUNT STANSGATE: I do not know whether the noble Lord has given a correct account of British law, but, if so, I am afraid that a number of persons might come under suspicion.

INTER-GOVERNMENTAL MARITIME CONSULTATIVE ORGANISATION (IMMUNITIES AND PRIVILEGES) ORDER, 1959
2.50 p.m.
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR FOREIGN AFFAIRS (THE MARQUESS OF LANSDOWNE)THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR FOREIGN AFFAIRS (THE MARQUESS OF LANSDOWNE) rose to move, That an Humble Address be presented to Her Majesty praying that the Inter-governmental Maritime Consultative Organisation (Immunities and Privileges) Order, 1959, be made in the form of the draft laid before the House on the 8th instant. The noble Marquess said: My Lords, the purpose of this Draft Order is to confer on the Organisation and officers of the Inter-governmental Maritime Consultative Organisation the legal capacity, privileges and immunities required under Article 50 of the Convention to which Her Majesty's Government is a signatory. In 1955 your Lordships approved an Order in Council conferring on the Organisation and its officers certain privileges and immunities. That Order was designed to extend to that body the type of privilege which is accorded to the Specialised Agencies of the United Nations. It was designed to cover the period pending the approval of the usual Annex which, your Lordships may
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remember, has to be approved by the Agency and by the countries participating in the particular body, and which embodies the general pattern of immunities and privileges set out in the Convention on Privileges and Immunities which was concluded by members of the United Nations in 1947. The Organisation acceded to the Convention on Privileges and Immunities on January 16, 1959, by approving Annex XII thereto.
The effect of the approval of this Annex is to make slight changes in the privileges and immunities which we are required to accord to the Organisation. In order to do this, it is necessary to revoke the 1955 Order and to make the new Order, the draft of which is now before your Lordships. In the present draft Order Articles 1 to 7 are identical with the corresponding Articles in the 1955 Order. The total number of officers affected by this new Order is about 30, and their privileges and immunities remain the same as before. There is no change in the privileges and immunities accorded to Representatives. The experts who are members of the Committees of the Organisation or who are employed on its behalf will get the same privileges as Representatives, but only when they are acting in their official capacities and only in so far as it is necessary for the effective exercise of their functions. I beg to move.
Moved, That an Humble Address be presented to Her Majesty praying that the Inter-governmental Maritime Consultative Organisation (Immunities and Privileges) Order, 1959, be made in the form of the draft laid before the House on the 8th instant.—(The Marquess of Lansdowne.)
LORD SILKIN: My Lords, as the House knows, we on this side, and I imagine many other noble Lords in other parts of the House, always view these questions of extensions of privilege with a certain amount of jealousy: we are not anxious that these privileges should be extended and that people should be above the law. We recognise, however, that there are occasions when it is necessary—these matters are, of course, reciprocal—and on this occasion we do not propose to raise any objection.
On Question, Motion agreed to: the said Address to be presented to Her Majesty by the Lords with White Staves.

FINANCE BILL
2.53 p.m.
Order of the Day for the Second Reading read.
THE LORD PRESIDENT OF THE COUNCIL (VISCOUNT HAILSHAM): My Lords, this is the third time that I have had the honour of proposing the Second Reading of the Finance Bill in your Lordships' House. Before I proceed to do so, I should, with your Lordships' permission first of all ask for a personal indulgence. As those of your Lordships who have held office are aware, towards the end of July Government business sometimes develops rather heavily upon the shoulders of members of the Government, and it so happens that I have been unable to arrange to stay in the House throughout the debate on this Bill. My noble friend Lord Dundee is ready to reply to any points which may be raised. I hope that in the circumstances I shall meet with your Lordships' understanding and indulgence.
The task in this House of moving the Second Reading of the Finance Bill obviously resolves itself into two separate sections: that is to say a review of the current economic situation and a statement of the principal tax and other changes envisaged by or effected by the Bill itself. We have already debated the Budget changes more or less contemporaneously in detail, and, in any event, by mid-July it is, I suppose, inevitable that we should find the economic situation generally a more attractive subject for discussion. I will therefore begin by referring to that, and in doing so, I should like to refer to three general observations before embarking on the rather more solid and reliable material provided for my fare this afternoon.
It was in the first few months of 1957 that I first referred in your Lordships' House to the situation in this country as being one of prosperity balanced on a knife-edge. At that time I was referring to the great vulnerability of the British economy to extremes. If that is less obvious to-day, I would claim that my right honourable friend the Chancellor of the Exchequer, in particular, and perhaps the Government in general, are entitled to take a certain amount of credit. But I believe that the underlying doctrine still remains there. A very narrow margin
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separates us from inflation, on the one hand, and unemployment and recession on the other; and the House and the country are, I would say, now becoming familiar with the successive adjustments in the helm necessary to keep the ship on course.
From time to time some attempt has been made to use the necessity for these adjustments as evidence of indecisiveness or vacillating purpose. But I would say that the nation is becoming sufficiently attuned to our economic situation to be aware that inflation and recession may follow one another in relatively quick succession, calling in moderate degree for opposite remedies, as they do. I believe that it is precisely because we have been prepared to apply the remedies appropriate to the correct appreciation of our economic necessities that we have managed to bring off what my right honourable friend has recently called his two doubles: that is to say, I think we have managed to get the better of inflation without losing full employment, and we have managed to reduce taxation while still expanding our social services.
Secondly, I would say, by way of general observation, that a debate about finance and economics is necessarily a debate about material things. All the same, I am anxious to rebut the suggestion, which I have seen recently emerging as part of the criticism of our economic policy, that we are becoming a nation of materialists in glorifying unduly material standards. If that were true it would be a serious criticism. That, at least, has not been our object. We are well aware (and your Lordships will, I think, agree that I myself have certainly said so on many occasions) that there is a great deal more to civilisation than material things: the standard of life or the various appliances which make our life more easy, or even important things like pensions and particular economic grievances. The value of a sound economic policy is, as I believe, and as the Government believe, that only so, only by pursuing a sound economic policy, can we carry out our moral responsibility both at home and overseas.
Thirdly, I would make this general observation—and here again I must make it plain that this is very much a

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personal assessment. I would say that if one looks at the world between the wars, it would be possible now, looking backwards, to say that the dominant feature of that period was shortage of work, shortage of activity, inadequate activity. I do not believe that that has been the dominant feature of these last 15 years, and I do not think that it will be the dominant feature of the coming years. I believe that the great feature of the world to-day is shortage of capital, and as I see the situation, the calls upon Government credit are not likely to be reduced in the coming months and years. But I regard that as all the more reason why the economic policy we pursue should be balanced and sound, and an example of good housekeeping in every respect.
The broad aim of our economic policy is to maintain full employment and a high rate of economic growth, consistently with the maintenance of stable prices and a satisfactory balance of payments. This is our permanent aim. All the same, as I have said, policy changes with circumstances. Sometimes the stress is on one part of this series of objectives, and at another on another part of them. Between 1955 and 1957, I think we shall all agree, employment was extremely full—some people said overfull—prices were rising steadily, and the balance of payments was precarious, perhaps even with a tendency to crisis. In this period on the whole, therefore, policy was, as I should submit, rightly directed towards damping down excessive demand.
But by the middle of last year—that is, by the middle of the calendar year, 1958—circumstances had changed considerably. The pressure of demand for resources in this country had eased considerably; there had been a drop in world commodity prices; a more satisfactory trend had appeared in our own domestic price levels—a trend which, I am happy to say, has continued in the past twelve months—and there had been an improvement in our overseas balance of payments. Therefore at that stage it became appropriate to remove the various restrictions on demand, and prudent gradually to move over to giving positive encouragement to expenditure. This is reflected in the measures which we took. The credit squeeze, as it was
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called, was relaxed; there was the removal of controls on hire purchase, and, side by side with these steps, we decided considerably to lift the level of the public investment programme.
My Lords, this general trend of policy culminated in the Budget of last April which we are discussing in retrospect this afternoon. The Budget was based upon a fundamental assumption that there was room in the economy for a considerable expansion of demand. In contrast with the conditions of previous years, this expansion of demand was not merely desirable on merits; it was also an objective which could be pursued safely without menacing the value of money or the international position of the pound. Thus the Budget sought to promote expansion by providing tax reliefs and by other repayments, amounting in all to a total of £366 million. One of the principal other matters to which I referred by which the Budget added to purchasing power, was the accelerated payment of Post-War Credits—a problem which had to some extent eluded previous Chancellors of the Exchequer ever since Post-War Credits were initiated. It is, I think, worth noting that, apart from the moral aspects of the matter, this was a measure of carefully calculated and strictly limited effect. It has the additional advantage that in itself it does not add to purchasing power beyond the initial period to which it is related. Secondly, as your Lordships know, there were reductions in purchase tax and in the beer duty, which equally had the effect of increasing the purchasing power of the people. There were also the reductions in income tax and the restoration of the investment allowances; and these too were expected to have, and have had, a stimulating effect on demand.
But in these cases there were other important objectives which it was hoped would be served by the changes brought about by the Budget. The reduction in income tax was, as we believe, calculated to improve the incentive to effort and enterprise. It was, and is, my right honourable friend's wish to do all that he can to make the economy more competitive, and I am bound to say that it is the view of the Government that very high rates of income tax, such as we have had, are harmful from this point of

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view. Under the same broad rubric, the improvement of the efficiency of the national economy, I would include the restoration of the investment allowances, at the rate of 20 per cent. for plant and machinery and 10 per cent. for buildings. These allowances were substituted for initial allowances of the same extent, and I hope they will give a stronger incentive to industry to increase its rate of investment. In particular it was my right honourable friend's hope that they would encourage industrialists to bring forward plans for investment which they would otherwise have intended to fulfil at a later date. Thus the main object of the Budget was to give a strong stimulant to economic expansion, and to do it in a way which would promote efficiency and investment.
My Lords, three months have passed since the Budget, and I think, therefore, it may be worth while to consider how far the picture of the economy is one which suggests to-day that the Government's expectations were well founded and the policies which it then announced were well designed. I should therefore like to review some of the main indicators or indices of our national economic welfare, and first I imagine that your Lordships would like to put production. There is no doubt at all that a very considerable expansion of the national output is now in progress. The index of industrial production rose by three points between the months of February and April, from 107 to 110, and in the latter month it reached a record for all time. The preliminary indications so far available suggest that the May figure will be equal to that of April, or perhaps even higher. In the steel industry, whose importance in such matters your Lordships will know, most of last year's decline in output has now been recovered. Production of cars is at a level much above previous peaks. The chemical industry is also producing at a very high rate, and even in the textile industries there are clear signs of recovery. Private house-building has been going up steadily and other kinds of building work are also going ahead fast.
One of the principal sources of this rise in production has been provided by increased expenditure by private consumers. There has been, as we all realise, a sharp increase in the rate of expenditure on hire purchase. This has
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affected cars, furniture and other consumer durables. Perhaps less generally realised is the fact that recent retail sales figures show that expenditure on other consumer goods has also been going up. Nor is the expansion confined to the industries supplying consumer goods. In April and May there was a very satisfactory rise in exports. Together the two months show a growth over the corresponding period of last year by 9 per cent., and the trade deficit for May was, I believe, lower than at any time in living memory. Then there has been an increase of demand in parts of the investment field. Capital expenditure by manufacturing industry has not yet begun to recover, but other kinds of capital expenditure are going up well. House building, both private and public, is on the increase and other investment in the public sector, as well as investment in the distributive and service industries, has also been going up. On the whole, then, it can be seen that the rise in demand is fairly broadly based. I would say that those who are tempted to picture the recovery which has taken place simply as an inflationary bubble of credit purchases are not really in contact with the true facts of the case.
I now turn to the question of employment and unemployment. At the time of the Budget my right honourable friend took the view that the current level of unemployment was higher than he thought it ought to be. Indeed, it was one of the main objects of his Budget to get the figure down. Between March and May quite a substantial reduction took place, and between May and June the fall reached the remarkable figure of 67,000. In June the number unemployed was 413,000, less than 2 per cent., and throughout these months the decline has considerably exceeded the normal seasonal fall at this time of year. Perhaps I ought to add a cautionary note at this stage. We have now reached the middle of July, with August and September, the school-leavers and the holiday season, upon us. I daresay we cannot expect such a favourable trend to continue.
So far I have been able to tell a tale of expansion and improvement. This would, in itself, be very encouraging, but I am happy to say that there are some particular features of the situation which

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make it even better than would appear from the information which I have so far laid before your Lordships. I would first mention the fact that this expansion is being achieved in conditions of price stability. The retail price index for May was 109. This was the same as for April, and it means that there has been virtual stability now for more than twelve months. The Government believe that it ought to be possible to maintain this stability of consumer prices during the second half of the year. If that can be done it will be a unique achievement in the post-war period. I would say that it is particularly satisfactory to be in this position at the same time as we are enjoying a rapid growth in both demand and production, as I have been trying to show.
Besides price stability I should also mention the balance of payments, since this is another potential weak spot in our economy, another sensitive point. Here again I believe that your Lordships will find the situation fairly satisfactory. We enjoyed in the first quarter of this year, according to the new quarterly series, a current surplus of £78 million. This is in itself quite a good surplus, and it must be remembered that the excellent export figures for April and May have still to be reflected in the balance of payments statistics. So that here, too, I think we can claim that the expansion is proceeding on a reasonably secure basis. We must also remember that we have not yet seen the full effect of the Budget measures, although I am not, of course, claiming that by themselves these deserve the full credit for the progress we have been making in recent months. But for all those reasons I feel that the Government have considerable grounds for confidence that the period of growth, the statistical picture of which I have been attempting to draw, is going to continue in the future. For the time being, at least, the prospects are cheering, and we have good hope that we can maintain the momentum of recovery without running the risk of deterioration in the value of the currency either at home or abroad. I have therefore to say that on the general picture the Government will continue the broad lines of policy which have brought the country into a condition which I can,
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with some reason, regard as very satisfactory.
I now come to the Budget changes and, following the traditional arrangement with your Lordships' permission, I will deal first with the Customs and Excise and then with the Inland Revenue side. In introducing his Budget, my right honourable friend said that he could
"contemplate with safety some tax reductions that will lead to a fuller use of our resources without creating dangerous pressures on the economy."
The principal changes in the Customs and Excise duties were a reduction in the beer duty, accompanied by a reform of the licence duty system, and a reduction in the three top rates of purchase tax. During the passage of the Bill through the House of Commons, the Chancellor has been able to propose two further measures. The first was designed to give entertainments duty relief to the cinema industry, and in particular to cinemas in small towns and rural districts. The second was to provide some relief to small clubs which, under the new flat rate licence proposals, would have had to pay a little more than previously.
The Chancellor of the Exchequer proposed a reduction in the duty on beer, and this, together with the savings resulting from the reform of the licence duty system, enabled the price of beer to the public to be reduced by 2d. a pint. This will cost the Exchequer £40 million in a full year. As your Lordships will be aware, beer is widely consumed in this country—it is indeed, as an article in the Financial Times said, a "staple of mass enjoyment"—and this is reflected in the cost-of-living index; an index which, as I think I said in our debate on the Budget of the time, is not intended as a moral judgment but as a reflection of actual practice. The general reduction in the price of beer by 2d. a pint will, in fact, reduce the index by nearly two-thirds of a point. There are good reasons for saying that beer has not shared in the steady increase which has been shown by most other alcoholic beverages. For a number of years since the war there has been a downward trend in consumption. From the revenue point of view this was not wholly satisfactory, and the reduction in the duty, and therefore in the price of the article, should help to put the revenue on a firmer basis.

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The Chancellor of the Exchequer also took the opportunity of the reduction in the beer duty to reform the system of licence duties required for the sale of intoxicating liquor. This was done by means of a simple system of flat-rate licence duties, which will in future be regarded as registration licences rather than as sources of revenue. This was done without additional cost to the Revenue, since the cost of these reforms was, in effect, added to the duty of beer. In the course of these changes we have abolished the payment of monopoly value, and we have provided that as from January 1, 1960, clubs should also pay a flat-rate licence duty. In the case of very small sports and social clubs it was represented that the proposed flat-rate licence duty of £5 might cause hardship, as it was greater than the amount paid under the old system of 3d. for each £1 of purchases by the club. My right honourable friend therefore reviewed the position, and during the Report stage of the Bill in another place introduced an Amendment under which clubs would be entitled to a refund of £2 10s. out of the £5 licence duty if their purchases of intoxicating liquor during the previous calendar year did not exceed £200, or to refund of the whole duty if no purchases were made during the year. This arrangement maintains the principle of flat-rate licence duties while at the same time substantially meeting the complaints from small sports or social clubs where the supply of intoxicating liquor is no more than an incidental amenity for members. The overall result of the reform of the licence duty structure as a whole will be a great simplification of what was certainly a complex system, and it permits a substantial administrative saving without loss to the Revenue.
It will be remembered that last year I was able to inform this House that the 1958 Budget changes constituted [OFFICIAL REPORT, Vol. 211, cols. 387–8]:
"an imaginative recasting of the purchase tax provisions";
that they removed a number of anomalies and produced a simpler and more logical structure; and that this made the tax more defensible as a revenue instrument and more easily comprehensible to traders. Last year my right honourable friend said that the new structure
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"would also enable any future changes to be made with the minimum disturbance to trade."
Following on that, this year he was accordingly able to propose reductions which will leave the general structure of the tax unchanged, but provide some stimulus to the economy in accordance with the underlying policy which I have been endeavouring to describe. The three higher rates of purchase tax at 60 per cent., 30 per cent. and 15 per cent. were reduced by one-sixth to 50 per cent., 25 per cent. and 12½ per cent. respectively. These reductions, which should increase demand for consumer goods, will, I hope, play a significant part in encouraging the expansion of economic activity.
There are two special cases in which complete exemption from purchase tax has been provided: commercial vehicle chassis and replacement television tubes. Commercial vehicle chassis have been the only taxable articles of industrial capital equipment, virtually all the purchases being for business use. The Chancellor of the Exchequer felt able to spare the revenue this year, and therefore removed the tax altogether. Television replacement tubes were exempted because their cost is high, their life uncertain and because in some cases the tax represented a serious hardship. Steps have in fact been taken to ensure that part of the tax on new sets is not avoided by delivering them without tubes and inserting them later. The estimated full year cost of the purchase tax reductions is £81½ million, and the effect of the consequential price reductions will be to reduce the cost of living index by about one-fifth of a point.
I turn now, my Lords, to entertainments duty. Your Lordships will remember that during the Committee stage of the Bill the Chancellor of the Exchequer said that he was particularly concerned about the special problem represented by the small rural cinemas and cinemas serving small market towns where there is only one cinema. He therefore introduced a new clause to the Bill, the effect of which was to reduce by £20 a week the entertainments duty payable in respect of admissions to each place of entertainment. This method of giving relief was chosen because, although it will benefit all cinemas, it will divert proportionately greater relief to cinemas of the type my right honourable friend had in mind and proportionately less to

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bigger cinemas in the larger towns. I do not think that it would be possible for me to give accurate figures, but it is estimated that something in the region of a further 1,500 cinemas will be virtually freed from duty by this clause. The cost of this remission is put at about £2½ million in a full year. The total cost of the Customs and Excise reductions is £124 million in a full year, and it is our belief that it will benefit almost all sections of the community. The reductions, we hope, will play their part in stimulating the economy, and we believe that their combined effect will reduce the cost of living index by about four-fifths of a point.
I now pass to the Inland Revenue provisions, which are of course contained in Parts III, IV and V of the Bill. The most important of these is, of course, the reduction of 9d. in the standard rate of income tax, and of 6d. in each of the reduced rates chargeable on the lowest bands of the taxable income of individuals. Your Lordships will find these contained in Clauses 17 and 19 of the Bill. They are intended to resume the process of reducing the burden of direct taxation, a process which was begun in 1952 and continued in subsequent years. The standard rate of income tax will, as a result, have been reduced under successive Governments manned by members of the Party on this side of the House since 1951 by 1s. 9d. in the £, from 9s. 6d. to 7s. 9d. Substantial changes in favour of the taxpayer have also been made in the reduced rate structure.
This year's reductions in income tax rates will cost £192 million in 1959–60, and £229 million in a full year. Individuals, I am told, will benefit to the extent of about £166 million in a full year, and we believe that the effect of this will be to encourage more enterprise, more work and more savings. The relief to the undistributed profits of companies will amount to about £63 million in a full year, and this will leave companies with more resources for productive investment and will encourage enterprise and employment generally. It was the pervasive effect of the reduction in tax rates that decided my right honourable friend to devote to it this year most of the revenue that he could spare.
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It was also felt by my right honourable friend that the economy required some additional stimulus, and his Budget, therefore, contained two other major proposals in the sphere of Inland Revenue duty. First, there was the scheme for a further release of Post-War Credits, which, for the sake of speed, as your Lordships know, was authorised by a separate Bill. My concern, of course, to-day is with the Finance Bill, so I will confine my comments on this topic to saying that the current release of credits will assist the Government's present objectives without prejudicing the Exchequer in the future. Thanks to the economic stability which has been achieved, my right honourable friend has been able to make a substantial attack on this long-standing and difficult problem.
My Lords, the other major proposal to which I have referred is contained in Clause 21, and is designed to stimulate industrial investment in productive plant and buildings. Last year's Finance Act increased the initial allowances for industrial buildings from 10 per cent. to 15 per cent. and the initial allowances for plant and machinery from 20 per cent. to 30 per cent. This year the existence of some spare capacity in industries making capital goods, which may not be available later on, makes it desirable to provide an incentive to bring forward expenditure on new investment which might otherwise take place later. My right honourable friend has therefore decided to restore the investment allowance, which was introduced in 1954 and withdrawn in 1956, for qualifying capital expenditure becoming due and payable after April 7, 1959.
The investment allowance differs from the initial allowance in that it is given as well as other capital allowances amounting in total to the full cost of the asset, and therefore provides, as we think, a more powerful stimulus to new investment. The rates are to be the same as in 1954. They will be 20 per cent. for new plant and machinery, for instance; but, in addition, an initial allowance will be given, where appropriate, so as to bring the combined investment and initial allowances up to the same rate as the initial allowance now in force. For example, capital expenditure on new machinery, which would have qualified under last year's

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provisions for a 30 per cent. initial allowance, will qualify under the new scheme of combined investment and initial allowances for a 20 per cent. investment allowance and a 10 per cent. initial allowance. We believe that this reintroduction of the investment allowance should have an important effect on business sentiment and we think it will thereby affect the timing of investment decisions.
The only other important Inland Revenue changes involving substantial cost are those made by Clauses 30 and 33. The former of these two clauses replaces the present ad valorem stamp duty on sea insurance policies by a flat rate duty of 6d. The cost will be about £3 million in a full year. We hope it will help the overseas business of our marine insurance market and will also give some benefit to our shipping industry and shippers.
Clause 33, the second of the two clauses I have just mentioned, will also cost in a full year about £3 million. It increases in certain cases the amount of directors' remuneration which may be deducted in computing the profits of a director-controlled company for profits tax purposes. The limits concerned are those which apply in practice to most of the smaller companies. At present the scale starts at £2,500 and it rises by steps of £1,500 for each full-time working director after the first, and reaches a maximum of £7,000 where there are four or more such directors. In view of the increases in salaries and wages since 1952, when these limits were fixed, the minimum of this scale is being increased by £500 to £3,000 and the steps are being increased from £1,500 to £2,000, giving a new maximum of £9,000 where there are four or more full-time working directors.
The most important of the remaining Inland Revenue provisions of the Bill consist of anti-avoidance measures. Clauses 23 to 26 are designed to protect the Revenue against unjustifiable claims to repayment which arise through transactions involving the purchase of securities "cum dividend" and their sale "ex dividend" soon afterwards. The clauses contain provisions to ensure that they do not hamper the ordinary operations of the securities market or interfere with legitimate business more than is necessary to keep the door closed against
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avoidance. Clause 29 validates an amendment of the double tax agreement with the Republic of Ireland designed to put it beyond doubt that residents in the United Kingdom or in the Republic cannot benefit from what are known as "dividend-stripping" devices in relation to companies in the other country. In conclusion, I would say that Clause 32 might be noted if only because it proposes the total abolition of one tax, the corporation duty. The yield of that tax has always been small and the Chancellor has decided that it is not worth while maintaining it.
That summarises both the provisions of the Bill and the economic policy underlying it. As I tried to say in opening, the purposes of financial policy are, of course, limited to economic and material things, but they are a means to ends which are not necessarily material and not necessarily economic. Upon the solid basis of a sound economic and financial policy I believe this country can go forward, discharging its duty in the international field and improving the structure of its social justice at home. I beg to move.
Moved, That the Bill be now read 2a.—(Viscount Hailsham.)
3.39 p.m.
VISCOUNT ALEXANDER OF HILLS-BOROUGH: My Lords, first of all I want to apologise for following the Minister to-day. I do so only because of the absence in Germany of my noble friend Lord Pethick-Lawrence, who has endeared himself to the House, I believe, for the manner in which he usually deals with these matters. I am quite sure he deserves the endearment much more than I ever shall in such matters.
The Lord President of the Council, in introducing this debate to-day, has, if I may say so, taken a much better line in the matter than was taken a year or two ago, when we thought that he did not tell us enough because he was going to reply. But to-day he has given us two main sections in his speech: the first dealing with what he considers to be the true economic position of the country now, and the second an explanation of what is provided in the clauses of the Finance Bill, and we appreciate that he has obviously gone to a good deal of trouble to prepare his case for your Lordships this afternoon.

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It is always a little difficult for some one following immediately after such a careful and detailed preparation as that which the noble Viscount has made, to be able to comment at once upon the various assessments which he has made of the national economic position. Nevertheless, if I may say so to him, there are one or two phrases that he used that flash back upon my mind now at the Box, with which I shall very largely agree. Perhaps one of the most notable things he said this afternoon was: on what a very narrow margin we tread—I am using my own words in expressing what he said—as between prosperity and something in reverse. That is absolutely true. Moreover, it brings home to me the point which was referred to, I think a fortnight ago, in an article in the Economist—an article quite remarkable for some of its statements. I am not going into it in any detail, I assure your Lordships, but the article was under the title of "Halcyon Days", and in it the path we have been treading these past few years was rightly described as between a morass on this side and marsh land on the other, or something of that kind.
I must say that when the Government seek to take a great deal of credit for the general economic position, they do not tell us very much about the great windfall (that has become the current description of it) there has been in the way of the fall in import prices from 1951 onwards—quite a remarkable reduction. If you look at the years from 1952 to 1959 and take the period overall, you will find that, taking the figure for 1951 as 100, it would not be much more than about 84 or 85 to-day. That is a very large percentage reduction in the cost of imports of raw materials, of manufactured products, and of foodstuffs coming into this country.
When one looks at what has been happening to the home economy in between all that, then one is bound to wonder whether the policy of the Government on fiscal matters has been altogether correct, and whether we could not have made much better use of this windfall in the way of import prices than has actually been the case. I think the Economist was quite right in that article a fortnight ago to which I have referred, when it suggested that from
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time to time we are bound to face certain changes in such a situation, and that it requires a movement of only 3 to 4 per cent. in our terms of trade to lead to a situation which could change our over-all position by at least £200 million per anum. If you take that into consideration, and if my figures are correct—I am open to correction on them—then in fact import prices have fallen over that period by nearly fifteen or sixteen points, and if a change of three or four points is, according to expert economists, going to mean a difference of £200 million, then that leads to very considerable reflection on what would be the likely effect upon our position here.
Moreover, during the last eight years we have had a number of crises affecting the value of our currency, some of which, of course, were from different causes, but some of which, we felt, were entirely due to the Government's policy. The noble Viscount said during the course of his speech that certain underlying principles had affected their policy all the way through; that at times you must do this, and at times you must do that. Of course, we have to allow to any Government the fact that they will sometimes have varying sets of circumstances to deal with. But what he said was that, above all, you must have at all times a sound economic policy. We do not think that the Government's policy on economic matters has been at all sound all the way through. I wonder myself how we could regard as Sound economic policy the Suez adventure, for example, when one reckons up the aftermath, with regard both to the cost of the actual expendition and to the effect upon our overall finances—first in the borrowing we had to make, and, secondly, in the run upon the pound, which was clearly anticipated, judged by what was revealed in Mr. Randolph Churchill's recent book. I should not regard that longish period—I will not call it an "incident"—With its economic effect, as being a specimen of sound economic policy.
Nor do I regard the general treatment by the Government of our economic policy as having altogether sound economic effects. Take, for example, the general question of price inflation. One would imagine, listening to the defenders of the Government's policy, that price

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inflation is almost entirely due to the demands of workers for a standard of living which keeps pace with the current prices which they have to pay. I know, of course, that nobody could argue that that is the only cause of inflation, but it has frequently been said to be the case. But the beginning of that, in reality, was due to the Government's reversal of the policy which they had promised to the electorate: that was, that they would not reduce the subsidies on food; whereas those subsidies have been abolished and the cost of living raised—and raised accumulatively, because as the cost of living is raised a well-organised trade union community has insisted upon the wages being adjusted to meet it. It may well be, perhaps, that in one or two instances—very few instances—the wage may have gone slightly ahead of that, but only, in the main, where it could be shown that much higher profits were being made in the industries concerned. The task of the trade unions during the last eight years has been to try to keep the standard of life of the worker up to the position which he would have had if prices had not advanced as they have. Now it is a very curious thing, looking back, to feel that we have had for eight years all the benefit from the reduction in the prices of imports coming into this country, and yet have not been able to relate it to the general economic position of the country, and especially to the position of the workers, without the worker having to fight for wage adjustments to be made in relation to his general rising cost of living.
The Government Party's policy at the last two Elections has been, certainly, that they would reduce the cost of living. That was put to the electorate as one of the main planks of their programme and they declared that, whatever we might say, the cost of food would not go up seriously. Yet an answer which was given by a Minister in another place only a short time ago showed that the cost of food alone has gone up by nearly 49 per cent. in the period of office of the Conservative Government. Therefore there is a considerable case to be made for the manner in which the workers have reacted to their needs in these circumstances.
All this has added to the cost of production, with its consequent effect on the export trade. There is something even
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more serious. Here I want to check with the noble Viscount, to see whether I have understood him aright on this point. In dealing with economic policy, he spoke of two periods, the first up to 1957 and the other afterwards. He showed that although there was full employment in the first period, the balance of payments was maintained in a precarious position and that policy was in the direction of damping down production.
VISCOUNT HAILSHAM: My Lords, I do not think that I said that. I said that the object of policy in an inflationary period was to keep demand down. I think that those were the words I used.
VISCOUNT ALEXANDER OF HILLS-BOROUGH: My Lords, I could not possibly write the noble Viscount's words down in longhand, but I had that impression. Compared with the increase in the rate of production from 1945 until 1951 and with the increased rate of production in Continental and other countries, we have not done very well in expanding our production over the whole period. Indeed, in the years from 1956 we showed little increase in production. When the noble Viscount said that he was pleased with the amount of recovery which has taken place in production during the last few months—and nobody wants to take away his pleasure in that—I could not help feeling that, with a different economic policy all the way through, we might be in a very different position at the present time. I look at the announcements made from time to time by the Federation of British Industries, and a few weeks ago I saw in one of their publications that at the beginning of June a large section of British industry was still working at 75 per cent. of capacity. Therefore I was reassured when I heard the noble Viscount utter the warning that we must not be complacent about the matter. In fact, we are coming on to a difficult period of the year, when it is difficult to find all the places desired by the expanding output from the schools seeking employment.
I appreciate that the noble Viscount has taken a good deal of time to explain what he regards to be the position and I find myself in a measure of agreement with him on what are the main problems. The balance of payments, the internal pressure on resources, and inflation—these are the three outstanding problems

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which any Government have to tackle. When we take the balance of payments, it is obvious that when the country is in difficulty about payments certain restrictions have to take place. I think that that would have to be admitted by anybody, speaking for any Government. The question is: what kind of restrictions? When the real trouble began at the end of 1956, the great remedy was to put up the bank rate and to restrict credit severely. When the Labour Government were faced with a position of virtual bankruptcy in the national finances in 1945, we could not have afforded to adopt a policy like that. The only way we could deal with the situation was to push up production at all costs and obtain abstention by the public from unreasonable demand in the face of the overall requirements of the country's stability—and we succeeded.
Let me take the two outstanding features that are in my mind at the moment. The first is that we should have gone on succeeding but for the enormously rising bill for armaments at a time when we were putting into operation the Welfare State. At the end of 1945 the second of the joint armament programmes agreed to by the Labour Government raised the triennial programme to £4,700 million, and that was the point at which the pressure of that cost, combined with the internal pressure of operating growing social services of the Welfare State, came to a peak.
The second thing in my mind is that during the last three years of our first Government, which lasted until 1950, we were being pressed all the time from Conservative sources to give up restraints and "set the people free". It was said that they were not getting a fair share of the benefits of the country. They were pressing us all the time and calling down all the curses that could be uttered on the austerity of men like Sir Stafford Cripps. That was what actually took place.
If we have to meet a wider margin of safety than apparently we may have to face in these halcyon days of the future, we shall need more than the sudden imposition of a high bank rate and restrictions upon capital development; we shall rather need to turn to the general control of economic affairs; when, instead of restricting production, we
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shall have the difficulty of finding economic controls to expand production. I am certain that if we were to have the pleasure of listening to the noble Viscount, Lord Hailsham, in reply (and we quite understand that he could not stay) he would violently combat these arguments. But I have never yet found any statement by a Conservative speaker on these matters that has convinced me that their story of financial success in these last few years is sound, or that, much more could not have been done with the opportunities they have had.
I have not mentioned one serious effect we have had to face in the last few years as a result of Government policy and mistakes, and that is the heavy increase of the cost of the service of the Debt. I did not hear that remarked upon to-day. It is true that some of the special borrowings that were made as part of the Suez crises have been in part repaid; but, at the same time, we have never got away from the heavy increase in the cost of the floating debt. It is a large sum that we have had to pay as a result of those increased charges—I should say probably somewhere near £400 million to £500 million altogether, over the period, in increased charges for interest and the like for the service of the debt. That is a very large sum. It is more than double the sum which has gone out of the Budget this year, for example, to relieve income tax by 9d. in the pound. Yet that is all pure increase. There is no doubt where that money has gone: it has gone to the banking and issuing houses who deal largely in lending for Government purposes of that kind. But it had at certain times a grave effect upon the general line of the public investment in what are called gilt-edged securities of the Government—and I hope that somebody is taking a note of these remarks for the noble Earl, so that when he comes back he will know what I am saying.
There has been a notable effect; and it is that Government securities have fallen disastrously. Why did they fall? Because there was a growing lack of faith in them. There has been a constant move from gilt-edged securities into the equity market. There is no doubt about that. Some of the figures that one could quote, if one had time to go into all these things, are most striking. Having

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a look at the City and the prices in the last twelve months of equities must surely give one cause to think. Equities were at an index price of 167, and quite recently they went as high at 246 or 247, which represents a big margin of increase in their value.
Nor is this merely an internal move, as between the usual dealers on the Stock Exchange in equities. Many people who are investors have turned definitely from gilt-edged securities. I do not know what is the right body to describe as being in charge of Church of England investments, but I suppose it is the Ecclesiastical Commissioners. In the last ten years they have turned very largely away from investment in gilt-edged securities, and from the annual returns now coming to the Church, they seem to have made wide use of their investments in equities, land properties and things of that kind. The effect has been the same.
I am wondering now how far the tremendous developments of great companies like the Prudential Assurance Company will go. In the old days, I suppose, they were almost the largest single outside holder of gilt-edged securities, but they are now investing their life, fire and other insurance funds very largely in equities and industries, while still, of course, retaining a considerable proportion of gilt-edged securities. How is this going to affect the borrowing of the Government in the future? What is to be the policy about that?
I think it would be a good thing if in your Lordships' House, which contains so many experts in matters of which I have only a passing knowledge, the Government could tell us whether they are going to be able to meet the situation for borrowing in the long term without some adjustment in their present policy: whether they are going to have straight undated securities; whether they are going to have dated securities of an altered length of period in various cases, and some means of recapturing the freedom of the Government to be able to borrow at reasonable rates over a long term and not be forced on to a floating debt at high current rates—because it would have a great effect upon the economy of the country if that was actually arranged.
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One of the constant problems of policy which faces any Government in regard to financing the country as a whole is what is the fair method the Government should adopt in the budgetary and trade policies to secure a fair distribution of the wealth of the nation. We in my Party hold that, in the end, all wealth comes from the application of labour to land, with the help of capital savings, and that the people in the country as a whole have a great moral right to an adequate share of what is thus created. The manner in which it is distributed is, however, almost essentially in the hands of the Government of the day. The noble Viscount, Lord Hailsham, said that the present Government can claim a substantial success, because they have been able to relieve taxation greatly whilst at the same time seeing an expanding number of social services. If you just put down certain figures left and right on the two sides of an account you would probably see that, broadly speaking, that statement could be justified. But there are other figures to be considered which show that in fact the distribution is going a good deal more in the other direction.
The noble Viscount has pointed out to us to-day that 9d. in the pound relief from income tax costs the Chancellor of the Exchequer something like £229 million; and that is quite a figure. Although probably that now is a higher global sum in any year than it would have been in previous years, because of the development of population and trade and profit, you have to remember that income tax has been reduced by this Government since they have been in office by as much as 1s. 9d. So that the actual amount distributed, say, in a full year at present rates of income of that 1s. 9d. must be somewhere near £700 million; I have not worked out the exact total, but it is somewhere near that figure.
If you take the record, so far as I have been able to get it (I have not been able to get the figure since 1957; I think this figure was given in the Government statistical returns published in 1958), in 1949 there were 5,200 people in this country who had an annual income, after payment of tax of £4,000 per annum or more. But by 1957 this number had increased from 5,200 to 18,800, more

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than three and a half times as many. Yet if I look at the same set of returns I find that in 1957 there were 12,630,000 of our people who were receiving less than £10 per week before tax. If you think that these figures indicate a fair distribution of wealth, all I can say is that I cannot agree with you. Take the kind of thing which arises directly from Government policy, like the dealing with rents, company remissions and the like. The income from rents, dividends and interest (I obtained these figures from returns published in 1958) rose by £648 million from 1952 to 1957. And in the last three years, since the effect of the rent legislation of the Government has been felt, great fortunes have been made in land property and rents.
The noble Viscount said that one of the great needs at the present time is capital. Well, if that could be shown to all the workers in the country in an understandable and simple manner, it would be useful. They just look at the take-over bids week by week, month by month. Where does the money come from? If the worker looks at the history of the equity companies in the past five or six years, and takes account of the increases of dividends and of the issues of capital, he says, "I do not see where the shortage of capital is." I am quite sure myself that there is a shortage of capital as a whole, and that we could do with a good deal more saving by the community than we actually get. But, you see, while you have the great mass of people wanting to get modern appliances into their homes, and they can get them only by the exercise of hire purchase operations, it is no good going to them and saying, "You cannot afford it, you know"; because just around the corner in the next street of the suburb people will be buying cars on hire purchase at a very high cost to the borrowers—and some of the biggest accretions of capital come to those who finance hire purchase. When you think of the manner in which the main banks of the country have entered into hire purchase finance in the last two years (every one of the banks has been able, without going to the general market at all, to issue new capital in order to finance their further operations in hire purchase finance) you will get more wonderment of the worker as to what is going on.
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I suppose that this is the last Finance Bill Second Reading debate we shall have before an Election, and I am quite sure that when the Election comes many of these things are likely to be canvassed, and I do not see at all myself why they should not be. The relief to the wealthy has been almost continuous. Not only is there the 1s. 9d. reduction in income tax, which affects all classes of income above a certain amount, but there is also the great relief to the surtax payers—a relief that, in my view, was certainly not necessary in dealing with the great problems of the State to-day. But it is always said that the Conservative Party is well able to take care of those who support it.
I think it is worth while drawing attention to a note I had here of a comparison. This is an extract from a statement in another place by one of the Opposition Front Bench, in which he said:
"The Conservatives gave £33 million tax relief to 200,000 taxpayers earning more than £3,000 a year"—
that is, surtax payers—
"a relief that works out to £165 per year per head. Under the present National Assistance proposals £32 million was being given to 2½ million people who are the poorest in the land, the equal of a sum of £12 16s. per head."
It might well be argued that the relief was not necessary to that class at all, but very good use would have been made of that by an increase in demand, about which we heard so much this afternoon, if more could have been given to those who were getting a slight adjustment in their National Assistance basis.
That is generally how we see the effects of Government policy on finance. I had so much more to say and I have not got time to say it, but I must refer to one other matter before I sit down. Many of my old friends in Parliament know that I have given most of my life to the service of the Co-operative Movement. Somehow or other the Conservative Party seems to be gradually working itself into the position of being the continuing enemy of the Co-operative Movement. That Movement is a great institution. This year it will reach, practically for certain, £1,000 million turnover in the retail societies. It has a membership of nearly 13 million people. It never goes to the finance market for capital; all the capital it has comes from the savings

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effected in the mutuality and thrift of its people, in not overspending those savings but leaving them to finance the business. It is a great asset to the country in that it finances not only retail distribution, but pure finance in the way of banking. It is a great investor in Government stock, and it also controls something over 300 factories of varying size and in varying trades. That is an enormous thing. It is no wonder that the late Lord Home, when he was Sir Robert Horne, Chancellor of the Exchequer, said of this movement that it is one of the most steadying and stabilising factors in the life of the nation. Why is it that suddenly, in the last few years, and the last two or three years before the war, it is made the butt of Conservative administration?
Here is an introduction to your Lordships' knowledge this afternoon by the noble Viscount, the Lord President of the Council: among other budgetary proposals he touched on are amendments to assessment under profits tax. What has the Chancellor of the Exchequer done? He has brought about a change from a system under which the tax was levied in two different ways, 3 per cent. upon undistributed and 30 per cent. on distributed profits. It has been changed about so that it is 10 per cent. all round. Every one of those in industry participating in the effects of this amendment, except the "Co-ops.", are favourably placed—every one of them, so far as I know; I should like to hear some instances where they are not. The claim of the Chancellor certainly was that they would be able to do very much better not only in regard to the immediate effect of the benefits to them, but also in the future adjustments from time to time that might have to be made. Certainly the relief claimed by the Chancellor was going to the majority of those affected. But the only effect on the Co-operative Movement is to tax them another £1½ million. It is a preposterous position, for a great movement with the position in the State which I have mentioned, to be treated like that. Noble Lords opposite must not be surprised if we have to use the platforms this autumn to make sure that people in the Co-operative Movement understand exactly who are their friends and who are not their friends in matters of this kind.
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I apologise for having been led, in much of my dissertation this afternoon, by the good and wise explanation by the Lord President of the Council of his policies and the Bill, into speaking longer than I usually do on these matters. I felt that I had to go on, once I had started with the arguments. I have by no means finished all I wanted to say, but I will finish, and I apologise for having gone on for so long. I end by saying that I hope that the time may not be far distant when we shall have an Administration, whatever it might be called by other sections of the community, which will be known to its supporters as standing for the fairest distribution of wealth.
4.23 p.m.
LORD HAWKE: My Lords, we all miss today the annual objective survey of our economic position that we have been accustomed to receiving from the noble Lord, Lord Pethick-Lawrence. I hope that he is enjoying himself in Germany. The noble Viscount the Leader of the Opposition trotted a vast number of delectable hares across the course, and though I should dearly love to chase every one of them, your Lordships would not like me to do it. I will content myself with two or three only. On the subject of food, which the noble Viscount raised, I most profoundly disagree with him, because I believe that the Government's food policy has been an outstanding success during their term of office. By allowing food to find its own level of price, they have created such an abundance that the problem is what to do with the stuff instead of where to get the next meal. In my bag outside I have a list of the rations in 1951 when the Conservative Government attained office, and, believe me, it is rather shocking to read to-day.
With regard to the terms of trade, we are always told that we have had a great deal of luck over the terms of trade. I am very doubtful whether in fact it is a complete windfall and luck, though I know that some financial writers take that view. The terms of trade, which are affected by fairly marginal buying of commodities can be influenced very largely by the control of credit in the manufacturing countries. Mr. Butler, when he put up the bank rate, burst the Korean boom, and I believe that it is our money policy in this country that

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has largely led to the terms of trade being what is called favourable, though I add a rider that it is not wise to have them too favourable.
Our old friend the bank rate, of course, came up, and I can assure the noble Viscount that the banks do not profit enormously from any increase in the bank rate. It means merely that the people who lend their money get more for it and the banks charge more when they lend it out. The bank rate has become the most potent weapon that we have in riding the trade cycle. If you believe in a free economy, as we do, and at the same time do not want to let things rip, you must have some control; and the bank rate is our most important control. For our free monetary economy has the ability to call into existence the amount of credit it requires at any given time. If that amount of credit is too large for the supply of goods we get inflation; if it is too small we get deflation. The volume of credit can be influenced very greatly by the bank rate, so it really is an essential method of control. The cost of financing the floating debt, to which the noble Viscount rightly referred is, I believe, a small price to pay for the avoidance of the alternative, which would have been the devaluation of the pound. I do not think I will worry any more about any more of the noble Viscount's hares.
The Chancellor of the Exchequer is rather like a mountaineer. He is climbins up a narrow ridge covered with ice, with a precipice on each side; and in doing so he is being buffeted by winds, now from one side and now from the other. The difficulty to advance and keep his balance is enormous. That path has not been traversed by anyone yet, and his guides from the Treasury have not been over the ground either. That path is the path of full employment in a free society without inflation. He has been successful, and I believe that the mountaincraft of the Party is steadily increasing. In fact, I believe that all over the free world the monetary authorities are gaining increasing skill with practice at this business of regulating the world's credit, and the way they have dealt with the last depression, which might have been very serious is most creditable to them.
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In the Budget the Chancellor of the Exchequer took, I believe absolutely rightly, the view that he must increase the power of consumer buying and rely on borrowing or, if necessary, creating credit to meet his capital needs; and the principal part of that policy was met by the cut in the standard rate of income tax. That I believe to be very good. I should expect, with an Election not far off, that allegations would be made that the Conservative Party are always cosseting the rich and grinding the faces of the poor. I never thought that the noble Viscount would respond so quickly to my anticipations. Such allegations have been the stock-in-trade of demagogues for centuries, and are often untrue; but I suppose they will continue to be popular cries so long as man continues to disobey the Tenth Commandment.
It is interesting to see whether there is any truth in the allegation. I took the trouble to do a little arithmetic on the subject. I wanted to compare the rich under Dr. Dalton, that scourge of the rich, with the rich to-day. Since 1947 the cost of living has gone up 68 per cent. I took married couples under Dr. Dalton with salaries of £1,000, £2,000, £5,000 and £10,000, and I found what they had left after paying their taxes. I converted that amount into present day pounds. Then I took similar married couples to-day, but I assumed that by diligence they had in the interval managed to increase their gross salaries by the amount of the rise in the cost of living—in other words, by 68 per cent. The results were interesting. When comparing the purchasing power they had left with the purchasing power Dr. Dalton's victims had left, Dr. Dalton's £1,000 man would be £75 better off to-day; his £2,000 man would be £80 better off; his £5,000 man £100, and his £10,000 man would be £200 worse off to-day. I may add that before this Budget all of those plus figures would have been minus figures. So that I think it is at least arguable that some change was long overdue, because Dr. Dalton can hardly be regarded as a friend of the rich. I think that dismisses the allegation that the Tories' taxation policy is to favour the rich.
I welcome the reduction in the standard rate, and I expect that most members of the Labour Party, in their

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hearts, do, too. This is only one of many changes and adjustments which are wanted. Sur-tax is long overdue for revision. It does not bring in a great revenue and it has very bad effects on the economy. There are two different separate effects. The first one is in the lower ranges. This affects the executives, particularly the young and rising executives. If you want to give a £3,000 a year man a rise and you make it £1,000, the product is only £528. If you want to give a similar rise to a £4,000 man the product is £466. If you want to give a similar rise to a £5,000 man the product is £376.
This puts two different classes of employer in great difficulties. First of all, its puts the Government in great difficulty, as we have seen in regard to senior civil servants, judges and the like. In order to produce some worthwhile increase of net income they have to be given gross salary increases that can appear unnecessarily large. Then particularly to manufacturing and trading companies, it produces difficulty in that if they want a man to take up a more responsible post, and particularly to move to London, they have great difficulty in managing to remunerate him without hopelessly upsetting the scale of the rest of their employees. You can see from the figures that I have mentioned that the whole difference might go in rent in London as compared with a provincial town. That may well involve a person spending the whole of the product of a £1,000 salary increase; and if he is going to take up more responsibility as well, he will probably expect an amount which will upset all his colleagues. This, of course, leads to various ways round, such as expense allowances and so on, which I believe do no good to anybody.
The other harm to the economy is done at the top end, where the very high rates on the top marginal incomes encourage every kind of extravagance, where anything can be bought by the firm or partnership which formerly would have been bought by the individual partners or directors themselves. I believe that a reform of this sur-tax is urgently needed, and I believe that it could be so conducted that the loss in revenue would be negligible or none.
When we come to death duties the anomalies are probably still greater.
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The revenue is far below what one would expect, judging from the figures. For instance, in 1957–58 I believe the product was lower than in 1951, which looks a ridiculous situation. One can only conclude that more and more people are taking good advice on how to distribute their wealth during their lifetime. I accept that modern society demands a measure of levelling down; but if you try to go too fast you defeat your own end. Here perhaps I may take up something that the noble Viscount said. He was comparing the equality of the people who had incomes of £520 a year with those who had £4,000 after tax. To anybody who believes in the perfect equality of income for all men, naturally that must be a grave injustice. But if he does that, how is it possible to justify a Coventry motor worker earning more pounds in a week than an Indian earns rupees in a month? Here, again, in this field of death duties, I believe that, on balance, reforms could be made without loss of revenue. What we want are rates which will ensure, or shall we say encourage, rich men to die possessed of their wealth within the bounds of this kingdom.
I was glad to see a reduction in the beer duty, because I think I am right in saying that the alcohol in beer has for some time been taxed at a higher rate than the alcohol in wine, and that is plainly silly. The British public knew that it was silly and were switching from beer to wine. My only doubt is whether the reduction has gone far enough to safeguard the duty in a normal English summer. I wish that we could re-elect the present Chancellor of the Exchequer for many years, to put through a programme of reform of the revenue; and I hope that he would not ride off on the recommendation of the Royal Commission, because, if I remember aright, the Royal Commission was instructed to make no recommendation for reduction without a corresponding one for increase. That, I think, would be liable to stultify and detract from the value of any report.
The Chancellor of the Exchequer to-day has a heavy burden. The noble Viscount referred to what is perhaps almost his chief preoccupation, which must be the problem of how to borrow enough money to manage his national

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debt. Some dismiss the problem as being only a manifestation of the bank rate, and that if the bank rate went down all would be easy. I rather think that the noble Viscount tended to take that view. But I am afraid this is a view I cannot accept. I believe that there is a deepening divorce between the long-term rate and possibilities for borrowing money and the short-term rate, and that it will take a great deal and a long period of stability to persuade people to lend money to a Government on the long term with the competition that they have from all other forms of investment both here and abroad. So that it seems that, in practice, the capital projects of a long-term nature will have to be financed from the medium and short-term funds, which the purists will not like.
The alternative is for the Government to borrow or to fix rates at which they really could borrow long-term, and the cost, in interest and discount, might rather shock people. But it is very gratifying to see the very substantial increase in the short-term and medium-term lendings to the Government through the National Savings Movement. In fact, they considerably lighten this nightmare of the Chancellor of the Exchequer. I believe, my Lords, that the Chancellor of the Exchequer has made an excellent beginning by showing himself flexible and susceptible to ideas of change in the field of taxation. He has shown skill in his main preoccupation, which is the pursuit of full employment with stable prices, and I hope that he will have many years to run. I support the Bill.
4.41 p.m.
LORD MCCORQUODALE OF NEWTON: My Lords, I had not meant to address your Lordships, but I wish just to refer to one point which I think the noble Viscount, Lord Alexander of Hillsborough, must have made in error. So far as I understood him, he said that the change in profits tax benefited all the companies concerned. Of course, in actual fact the change in profits tax benefits some companies, but for other companies, notably those ploughing back the bulk of their resources, it is very hard indeed, as I know to my cost in the company with which I am associated. On the other hand, the 10 per cent. all
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round was obviously in the long run fair, because different circumstances suited different people best, and it was better to have one standard.
I sympathise, as I am sure everybody does, with the co-operative societies if the change of tax means that they have to pay more, as it does for my own company. But I cannot believe that the noble Viscount would wish the co-operative societies to be treated more generously than any other company or concern in the State. If everybody pays the same, that is proper equality and I should have thought that is what the noble Viscount would prefer. I would otherwise say to him—I am sure my colleagues on this side of the House and many of us who have been acquainted with the magnificent work that the Co-operative Movement has done, especially in the North of England, for so many years would say the same—that we have no hostility to the Movement at all. On the contrary, we think it is a very fine Movement. We only feel that it is a pity it has allied itself to one political Party rather than keeping out of politics altogether.
VISCOUNT ALEXANDER OF HILLS-BOROUGH: My Lords, I am much obliged to the noble Lord. I did say I thought there were perhaps some companies who were not favoured by the change in tax, and I dare say I was a little underestimating the number. But certainly my Movement is to be mulcted for £1½ million a year in increased tax. When the noble Lord says that surely I do not want the co-operative societies to be treated more generously, I would say that I do want them treated more generously than the Conservatives have treated them from the time they altered the tax law in 1933. They were the first Government ever to do so and to interfere with the taxation upon the results of mutual trading instead of competitive trading—I repeat, mutual trading. And so it goes on, we are bound to say.
The noble Lord says that we joined one political Party. So we have, from the point of view of putting over our central views on these matters; but it is only because we were driven to it, and we had to pay tax upon every penny we spent in that way. I wish that all the supporters of the Conservative Party did the same and showed in their

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balance sheets where they got their money from, what companies let them have it and whether they pay tax on these particular payments.
4.45 p.m.
LORD CHORLEY: My Lords, I should just like to say two or three words on a completely non-Party aspect of this Bill; that is, on the most valuable clause which does away with the duty on insurance policies. I have, I think, on more than one occasion in your Lordships' House criticised what seemed to me to be the antediluvian Revenue doctrine of taxing commercial documents. At a time when the impingement of Revenue taxes was not so well understood by economists as it is now, and when Chancellors of the Exchequer were at their wits' end to find revenue, there may have been something to be said for it, but I think that is a long time ago.
I have in the past criticised particularly the maintenance of the ad valorem duties on bills of exchange and, of course, the fixed duty on cheques. The commercial community relieve the Government by means of this commercial monetary paper of a great deal of expense and provide for the business community an exceedingly valuable type of currency without which trade would really be quite impossible. The ad valorem tax on insurance policies has been a similar type of old-fashioned revenue-raising machinery. Whether it is now being abolished for scientific reasons of this kind, or simply because it is being found that foreign insurers dislike the quite substantial amounts which the ad valorem duty requires them to pay when taking out marine insurance policies, in the London market particularly, I really do not know. But it will, I imagine, be very welcome indeed at Lloyd's, which, after all, is still much the largest institution for marine insurance in the world; and it cannot but have a valuable effect in increasing our already largely invisible earnings in respect of marine insurance.
In addition, I am quite sure that the noble and learned Viscount the Lord Chancellor, if he were here on the Woolsack, would agree with me in saying that this matter has given rise to many difficult and tiresome problems in marine insurance where in the case of a time policy the stamp has had to be renewed every
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twelve months. Very often, of course, ships were at sea when the policy expired, with the result that continuation clauses have had to be introduced, and tricky problems have arisen as to when and how far such clauses could be effectively enforced, or whether they were to be regarded as evasions of stamp duties. Your Lordships will see that many problems of this kind, which have been tiresome both to the marine insurance market and to the lawyers who advise them on their cases, will be obviated as a result of the new proposals. I should like to say, although in a sense it is a small aspect of this particular Finance Bill, that it is nevertheless a very valuable one, and I congratulate the Government on having introduced it.
4.48 p.m.
THE MINISTER WITHOUT PORTFOLIO (THE EARL OF DUNDEE): My Lords, I should like to add my regrets to those which your Lordships have already expressed that the noble Lord, Lord Pethick-Lawrence, who always leads for the Party opposite in these debates with so much moderation and such great knowledge and charm, is not here to-day. But I think that the loss is ours and not his, and we must all envy him his holiday in Germany. As your Lordships have a great deal of business before you, and as the weather is rather less conducive to oratory than to what my noble friend chose to describe as the "staple of mass enjoyment," I hope I am right in assuming your Lordships do not desire me to make a very long speech. I am grateful to the noble Viscount, Lord Alexander of Hills-borough, to my noble friend Lord Hawke and to the noble Lord, Lord Chorley, for having been much less interrogatory than I know they all can be if they really try.
My Lords, the first purpose of the Finance Bill—what used to be its only purpose, and what is still its first purpose—is to raise money by taxation to pay for the public services. The second purpose, which has now become perhaps almost as important as the first, is to guide our whole economy in what is believed to be the best national interest. For example, the purchase tax produces a very large amount of revenue: but all the changes up and down which are made from time to time in the purchase

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tax are not made entirely for revenue reasons; they are also made in accordance with whether it is thought right at the moment to stimulate or to check consumer expenditure in the interests of the national economy generally.
My Lords, I think that our system of taxation in Great Britain is much the best, and is the most scientific, in the world. The only trouble about it is that it is much too high. We have devoted a great deal of skill and a great deal of trouble to mitigating the harm that is done by the incidence of excessively high taxation in all kinds of ways—by various rebates, and exemptions, and remissions of every kind, which are designed to temper the wind to the shorn lamb. I think we have done so very successfully. But all these arrangements cannot change or disguise the fact that the total volume of our taxation is far too high a proportion of the gross national product—higher than is good for the economy of any country; and we must aim steadfastly at trying to reduce it.
We know that we cannot reduce it quickly, because our commitments are too great, although the noble Viscount, who mentioned in his speech the cost of administering the National Debt, will no doubt be glad to know from this year's financial statement that the interest and management of the National Debt, which was estimated to cost £695 million last year, is estimated for the current year to cost only £600 million—that is, a reduction of £95 million. The total estimated cost of the Consolidated Fund services is being reduced from £816 million to £728 million—that is, a reduction of £88 million.
We cannot save much, I am afraid, on defence. Our social services will undoubtedly demand increases rather than reductions, if their efficiency is to be maintained, as time goes on; and in order to achieve a better balance between taxation and the gross national product, we must be patient. We must rely on the expansion of revenue and the increase of prosperity. I think, my Lords, it is a matter of some satisfaction that we have this year moved a little way towards that. Taxation has been reduced by £366 million in this Finance Bill, although our estimated expenditure for next year is £120 million higher than it was last year. In
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particular, our estimated expenditure on the National Health Service is going up from £499 million to £533 million; on the National Insurance Fund from £139 million to £170 million; and on National Assistance, in the financial statement, from £114 million to £123 million—although that increase will be greater, no doubt, on account of the measure which has been introduced since the Finance Bill was brought into the other place and the statement prepared.
My Lords, in his remarks on taxation the noble Viscount opposite made two general criticisms. The first was about the reductions in taxation which have taken place. He thought they were badly conceived; and, no doubt, that some of them ought not to have been made. He said that the Conservative Party was very good at looking after its friends. Perhaps it is; but I think it is also very good at taxing its friends. Of the five major increases in death duties which I can remember in my life-time, four have been made by Conservative Chancellors of the Exchequer, and only one by a Labour Chancellor. It has been Conservative Chancellors of the Exchequer who have been mainly responsible for raising the maximum rates for death duties to their present confiscatory figure; and the same applies to income tax and sur-tax.
I think that the only objection which the noble Viscount had against the taxes actually levied in this Budget was the change in the profits tax, which he thinks had an unfair effect on the co-operative societies. I am sure he will not mind if I respectfully remind your Lordships that this change in the profits tax was not made in this year's Finance Bill, but in last year's Finance Bill; not in 1959, but in 1958. I have the OFFICIAL REPORT here, and I see that the noble Viscount opposite said exactly the same on July 29 last year about this profits tax affecting co-operative societies as he has said this afternoon, although he said it at very much greater length—I expect that probably it was not quite such a warm day.
VISCOUNT ALEXANDER OF HILLS-BOROUGH: May I just explain that this matter was raised during the discussion on this Bill in the other place, where they could move an Amendment, and that an

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Amendment was so moved. But I cannot move an Amendment on the Finance Bill up here. I can only repeat the argument which has already been used in the course of discussion on an Amendment in another place. Otherwise, if I could put down here an Amendment to the Finance Bill, I should put it down every year.
THE EARL OF DUNDEE: My Lords, I should like to assure the noble Viscount that we are always delighted to hear what he has to say about this, and I hope we shall often hear him say it again. But I was going to point out that in this debate last year, to which I have referred, my noble friend Lord Hailsham, who replied to the debate, before he came to the main part of his speech, filled exactly two and a half columns of Hansard in replying to this point made by the noble Viscount. Therefore, I hope that your Lordships will excuse me from doing so, and will look instead at Column 437 of Volume 211 of last year's Hansard.
VISCOUNT ALEXANDER OF HILLS-BOROUGH: Does that mean that the noble Earl does not want to be committed to saying it as his own opinion?
THE EARL OF DUNDEE: If the noble Viscount likes I will not read the whole two and a half columns, but I will mention that my noble friend Lord Hailsham pointed out that the Chancellor of the Exchequer had fully taken into account the position of the co-operative societies; that he had allowed, as a special concession, interest on share capital to be deducted on the same basis as loan interest, which it more nearly resembles. And, of course, the trade discounts, which are called dividends, are also omitted. He also pointed out that the profits tax on co-operative societies was therefore on the same basis as that of other companies, and that it might be perhaps unfair on those other companies if the co-operative societies were taxed at a lower rate. However, it is all there in last year's Hansard for your Lordships to see.
Now, with regard to the effects of our annual Finance Bills on the general economic state of the country, the noble Viscount, Lord Alexander of Hills-borough, gave some description of the problems which confronted the Government of which he was a member, and compared them with those which have
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confronted the Conservative Governments which have been in office since 1951. I am not going to dispute that point with the noble Viscount on Party lines at all: I am going to make only one very brief observation about what I think our real problem has been. After the war, for some years we had what was called a "sellers' market." Nearly everybody was anxious to buy almost anything he could get from almost anyone. Now the sellers' market is no longer there, and our difficulty has been that, while the conditions in which our exports have to be sold abroad have been getting tighter and more difficult, the wage-price spiral has gone on, and inflation, which we tried to check, has continued until nearly a year ago. Our efforts to check inflation, although they were continuous, and though sometimes we thought that we had succeeded, did not in fact succeed.
In 1957, which the noble Viscount referred to as a critical year, there was a world trade recession—not a tremendous one as there used to be before the war, but quite an appreciable one. There was a reduction in foreign buying. If, in those circumstances, we had gone on allowing our internal price levels to rise, if we had gone on with an inflationary economy when competition was growing keener abroad, we would have failed to sell abroad what we must sell to keep our economy stable; we would have had very heavy unemployment. There was a crucial imminent danger of that, which perhaps forced the Government in September of that year to take more drastic measures to stop inflation than they had done before. This is always a difficult question to decide—a question of balance and not a question of principle: how far we should go in the direction of expanding economy, or how far in checking inflation.
The fact is, my Lords, that we have checked inflation. The noble Viscount attributed the chief reason for that to what the Prime Minister and Mr. Stanley Holloway call "a little bit of luck", and he suggested that we had not used that "little bit of luck"—that is, the terms of trade which have moved in our favour—to produce the best results. But I think that we have used them to consolidate our position in a not unsatisfactory way. At the end of last month our gold and convertible currency

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reserves stood at £1,133 million, which is £321 million higher than they were at the end of 1957. We paid off £67 million on North American loans at the end of last December, £71 million to the International Monetary Fund in March, and an additional gold subscription of £58 million to the International Monetary Fund in May. At the same time we have maintained our very high rate of overseas investment. Most of this has taken place in the Commonwealth, and it assists the economic development of those countries, and so helps to raise the standard of living of peoples with whom we have such close ties. As my noble friend Lord Hawke said, we do not want the terms of trade to be too much in our favour, because that means that the primary producing countries, who are generally economically backward countries, become poorer and cannot afford to buy our exports. So it is in our interests that commodity prices should not be too low and that our customers should earn enough money to enable them to buy our exports.
After the Montreal Conference last December the volume of investment in the Commonwealth on a Government-to-Government basis has increased. The level of grants to under-developed countries is now running at the high level of over £50 million a year. We can meet these calls on our reserves now without weakening our overseas monetary position only if our current balance is in a healthy surplus, and we had a record current surplus of about £450 millions last year. That is a fact, and even though in the month of June, as your Lordships will remember, we had a large surplus of imports over exports, the strength and position of sterling in the world has enabled us to take that without any concern about the future of our balance of payments position for next year.
We have been able now to release controls on a large number of imports from dollar countries with whom we want to trade. Our export trade with Canada, in particular, and with the United States, has gone up heavily in the last twelve months, and our export trade with
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Western Europe has also gone up. Although, as I mentioned to your Lordships in our debate in April, we expected our exports to the rest of the sterling area to be at their lowest in the first quarter of this year, they also are now beginning to rise. We have this good export position; unemployment is coming down; and production is going up. As my noble friend, Lord Hailsham, mentioned in his speech, the production index, which had risen fairly quickly from 1954 to 1956, then slowed down until in 1958 it was almost stationary. Now, in the first quarter of this year, if has risen from last year's level of 107 to 110, and is expected to be between 110 and 111 in May.
These things may have happened before; but what has not happened before is that the price level has now been steady for about fifteen months: it is the same to-day as it was in April, 1958. I suggest to your Lordships that all these facts lead to the conclusion that the present economic policy which we are trying to pursue is the right one. Now that we have gained this position of stable prices, full employment, increasing production, and increasing exports, we must try to hold that position, consolidate it and use it as a basis for going forward again. In my submission to your Lordships we must resist any proposals which may lead us back into inflation once more or which may destroy the growing confidence in the future of British industry, so that next year we may again move further on towards prosperity.
On Question, Bill read 2a; Committee negatived.

TOWN AND COUNTRY PLANNING (SCOTLAND) BILL [H.L.]
5.10 p.m.
House in Committee (according to Order), on report from the Joint Committee on Consolidation Bills: The Amendment made by the Joint Committee agreed to.
Then, Standing Order No. 41 having been suspended (pursuant to the Resolution of July 16), Bill read 3a, and passed, and sent to the Commons.

NEW TOWNS BILL
5.11 p.m.
Considered on Report (according to Order).
Clause 2:
Establishment and functions of Commission for the New Towns
(4) Subject to the provisions of this Act and to any direction given to them by the Minister, the Commission shall have power, with a view to the better fulfilment of the purpose mentioned in subsection (1) of this section by the improvement of any of their towns, or to the convenience or welfare of persons residing, working or carrying on business there,—
(d) to dispose of any property for such purposes and in such manner as they think fit.
(7) Where it appears to the Minister, after consultation with the Treasury and with the Commission, that the Commission have a surplus whether on capital or on revenue account after making allowance by way of transfer to reserve or otherwise for their future requirements (including any contributions that may be required to be made in any of their towns under the last mentioned paragraph (b)), the Commission shall, if the Minister after such consultation as aforesaid so directs, pay to the Minister such sum not exceeding the amount of that surplus as may be specified in the direction; and any sum received by the Minister under this subsection shall be paid into the Exchequer.
LORD SILKINhad given Notice of two Amendments, the first being, in sub-section (4), to omit paragraph (d). The noble Lord said: My Lords, with your Lordships' permission, I should like to couple the first Amendment on the Paper with the second one, as the two are related. On the Committee stage I moved an Amendment to delete these same lines, 43 and 44, which give the Commission the power
"to dispose of any property for such purposes and in such manner as they think fit."
I thought those powers were far too wide to entrust to the Commission. It was pointed out that there were the preliminary words,
"Subject to the provisions of this Act and to any direction given to them by the Minister."
But the. words, "Subject to the provisions of this Act" are really no great safeguard, because the provisions of the Act provide merely that the Commission are to do the best for the undertaking, and I do not imagine that any Com-
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mission is arbitrarily going to dispose of the property of the new towns just for the pleasure of doing so. I believe that they may dispose of the property possibly under the mistaken view that it is in the interests of the new towns. Nor do I think that the second safeguard, "Subject…to any direction given to them by the Minister", is really a safeguard, because it might well come after the event. The Commission may well dispose of a property of the new town before the Minister has given any direction or before he is even aware that they propose to do it.
Nevertheless, I felt that the points that were made by the noble Earl, Lord Waldegrave, should be met if possible, and I have transferred those words to the next subsection of the Bill, so that the Commission may dispose of any property, but cannot do so without the authority given generally or specially by the Minister. I should like to ask, in connection with this, what the Government mean by "property". Does that include landed property? If it does, then there is specific separate provision for landed property in subsection (5). Does it then mean chattels only? But "property" is a much wider term than "chattels of land". I wish that the noble and learned Viscount the Lord Chancellor were here, and I think he would take the view that "property" does include landed property. So that, as the clause stands, the Commission may dispose of any property, real or personal, which is the legal term, "for such purposes and in such manner as they think fit". The next subsection goes on to say that in the case of landed property—but I am not clear about that; it seems to be quite separate—they can only do so with the authority, general or specific, of the Minister.
I think, in any case, that this is badly worded and arranged, even if it is to mean what I understand the noble Earl explained it is intended to mean. I still maintain that, for the reasons I have given, it is far too wide, and if it really is intended that the Minister should have control over the sale of property other than landed property, which is already dealt with in subsection (5), then it should come within subsection (5) and be treated in the same way as

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freeholds or leaseholds for a term of ninety years or more. It may be said that we ought to allow the Commission to dispose of surplus material that they do not want; assuming that they are carrying on building operations—which I gather they are not going to do—they might have building materials or something of the kind that they want to dispose of, and they ought to be allowed to do so. But I see no difficulty about their doing that under the terms of subsection (5), because the Minister can give either general or special directions. The terms of his general authority could quite cover that kind of sale of surplus material no longer required.
I object to a body which has not even been set up—and we do not know what its composition is to be—being given so free a hand to dispose of any property "for such purposes and in such manner as they think fit". Incidentally, the words "for such purposes…as they think fit" rather contradict the earlier words, "Subject to the provisions of this Act". I should have thought that those words would permit them to override the provisions of the Bill; but I am not sure about it. At any rate, this is a badly-worded provision, and I should be happier if it were left out altogether. However, out of deference to the case put up by the noble Earl on the Committee stage, I have brought the words back so that they will come under the terms of subsection (5), but I have left out the words, "as they think fit". Therefore they will be able to dispose of the property only in accordance with the provisions of the Act and with the authority given, general or special, by the Minister.
I believe that this is a reasonable Amendment. I hope the view will not be taken that if this Amendment is accepted it may jeopardise the Bill because of the coming Election and of the Prorogation of Parliament, and because we cannot leave any legislation over the Recess. If that is the view, then I think it is making a mockery of our proceedings here and we are all wasting our time and breath in moving Amendments with the object of improving the Bill. I am sure the noble Earl will not say that, and I hope he will not imply it. I beg to move.
Amendment moved—
Page 2, leave out lines 43 and 44.—(Lord Silkin.)
5.20 p.m.
THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (EARL WALDEGRAVE): My Lords, when we discussed these matters with some care in Committee, when it was agreed that we should have a Report stage I gave an undertaking that I would consider these matters again with my right honourable friend. I should like to assure noble Lords opposite that that was not just a phrase. I have indeed consulted my right honourable friend in person, and we have discussed this matter fully. Secondly, I should like to make it perfectly clear that I am not going to ask your Lordships to resist these two Amendments (we will take them together) for the reasons for which the noble Lord, Lord Silkin, said I might—that is to say, that there was not time, and that if we upset this Bill it would not go back to another place before the end of the Session. I am going to ask your Lordships to resist these Amendments on the merits of the arguments I shall try to adduce.
I shall try to be as brief as I can, but I think we will discuss these two Amendments together because the noble Lord said that he had taken something out to put it in again later. I want to try to demonstrate how, in my view, that will not work. Any misgivings there are about paragraph (d) arise from the impression that this paragraph stands alone. I tried to say on Second Reading, and I say again, that this paragraph really does not stand alone, and I have little to add to what the noble and learned Viscount the Lord Chancellor said in the debate last week. The draftsman had two quite distinct things to describe: he had to describe the Commission's powers, and he had also to describe the restrictions that were to be placed on the exercise of those powers. Paragraph (d) relates only to the Commission's powers, and simply describes one of the Commission's powers—a power to dispose of property, and not only land.
The noble Lord, Lord Silkin, asked about the word "property". By "property" we mean land, chattels, money

217
and all forms of legal property, as I understand it, such as property in a lease or in a tenancy. The words, "in such manner as they think fit" are intended simply to indicate that the Commission have powers to dispose of property by a variety of means—sale of freeholds, grant of a long lease or periodic tenancies, or the sale of typewriters. These things have got to be done. The words simply indicate that the Commission are free to decide what form the disposal will take.
LORD SILKIN: And "for such purposes"?
EARL WALDEGRAVE: All within the purposes of subsection (1). In Committee, the noble and learned Viscount the Lord Chancellor explained how the other provisions of the Bill restrict the Commission in their exercise of this power. Subsection (6) of this clause bars them absolutely from giving land or property away, except in so far as they are authorised to make cash contributions:. They must not give land or property away or mortgage it, but they must be allowed power to make contributions, because that is the power on which they are allowed to make contributions towards the welfare amenities that will be dealt with by the local authority, and which we all want them to do so much. Therefore, they are restricted under subsection (5), which makes it clear that the sale of land is restricted.
I come to the second point. Sub-section (5) is restrictive. It is the sub-section which says that they cannot dispose—going gack to (d)—of land without the Minister's consent except, be it noted, that the Commission can sell houses to their occupants. But in all other cases they have to come to the Minister before they sell land. Clause 2 (4) would not be complete unless paragraph (d) remained, because all the powers are listed there. If we take out this important power of disposing of property—that is to say, real property and chattels, as well as land which is restricted by subsection (5)—we should be short of powers.
If we are discussing the second Amendment at the same time—though naturally they will be moved separately—I should like to say this. It is quite
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clear that property in this sense does include chattels and cash, and—I am no lawyer—every form of property. The effect of this Bill, as it stands, is that the Commission have power to dispose of property other than land as they think fit, but they are precluded by sub-section (6) from giving it away except in so far as a cash contribution for amenities.
What is the effect of the Bill as it stands today? This Commission will be a responsible body and must have freedom to decide for itself how it will deal with these assets which, under the previous provisions of the Bill, it has to conserve, maintain and enhance. It your Lordships accepted this Amendment it would require the Minister to consent. That is all that subsection (5) is; it provides that you have to get the Minister's consent to a disposal. If you insert "to dispose of any other property of the Commission" at that point, you are saying that the Commission is fettered by having to go to the Minister even to sell a second-hand motor car or even, as the noble Lord said, some old bricks.
LORD SILKIN: My Lords, I hoped I had dealt with that point. The Minister can give general directions, and he can say in a general authority, "You may sell your second-hand motor cars for all time." I am not suggesting for a moment and, indeed, would not be so absurd as to suggest, that on each sale of a second-hand typewriter they ought to go to the Minister for an authority. The words are already there. The authority can be given generally or specially, and I am suggesting that in matters of this kind it can be a general authority.
EARL WALDEGRAVE: My Lords, I am advised that if you insert, "dispose of any other property of the Commission" at that place it would have the effect of meaning that you must have the Minister's consent to such sales. I do not think your Lordships would feel that that is desirable. I am not in the least making any kind of Party point here, as I am sure the noble Lord would agree. But I should like to point out, and to remind the noble Lord, that in his 1946 Act—Section 2 of the Act, as he will remember—there were provisions as to disposals. The only

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qualification of disposals came in, I think, Section 5 (1) in relation to land. There have never been qualifications for the disposal of those other things before. We think it right that it should be so, as it was in the 1946 Act.
I am sorry if I have not been able to convince noble Lords opposite, but I ask your Lordships to resist this Amendment on its merits—that it would not have the effect it is desired to have; that it would have a restrictive effect, and that it is quite unnecessary, because if lines 43 and 44 are taken into consideration, as the Lord Chancellor said last week, there is no question of a disposals board here and we are perfectly safe. I must ask your Lordships to resist this Amendment.
5.30 p.m.
LORD LATHAM: My Lords, I should like to support the Amendment moved by my noble friend, Lord Silkin, and to assure your Lordships that we do not regard these Amendments as being meretricious or finicky. They really are of some considerable importance, since the Bill confers powers upon the Commission, of which, of course, no one has had any experience at the moment, and no one knows in detail what the constitution will be. The noble Earl said that paragraph (d) of subsection (4) of Clause 2 must not be taken as standing alone. That is precisely the basis of our submissions; it does not stand alone. It purports to give the Commission power "to dispose of any property for such purposes". What are "such purposes"? As I read the clause, the purposes are set out in paragraph (c), which states that they are:
"to promote or assist by any means, and in particular by making advances towards the cost of purchasing land, or of erecting, extending, improving or adapting buildings or works, the setting up or extension of businesses in the town;"
All those are the purposes for which the Commission has, subject to subsection (5), almost unlimited power of disposing of the property of the Commission.
Subsection (5) does not prevent the Commission from disposing of land; it restricts such an operation only if a lease is for more than 99 years; and as regards private dwellings, which could, of course, comprehend 100, 200, 300 or 400 private houses, the Commission does not need to have the authority, whether general or special, of the Minister. The same is the case with other chattels. Therefore land can be disposed of. The transaction can have taken place without the Minister knowing anything about it unless the Minister had previously issued a direction. We suggest that powers of that kind ought not to be given to a Commission of this kind and that the Commission should need the authority of the Minister to dispose of the assets, as has been suggested by Lord Silkin.
My noble friend has dealt with the humorous suggestion that the Minister's authority would be needed for disposing of an individual second-hand car. The Minister, as my noble friend indicated, could issue a general direction, and attached to that direction could be a schedule which could be altered, extended or reduced as time and experience might show, in respect of the assets in regard to which the Commission had power without further leave, and that would leave the other important assets of the Commission disposable only with the authority, whether generally or specially, of the Minister. It is hoped that notwithstanding what the noble Earl has said, this Amendment will be accepted.
On Question, Whether the said Amendment shall be agreed to?
Their Lordships divided Their Lordships divided: Contents, 12; Not-Contents, 50.

CONTENTS

Alexander of Hillsborough, V.

Henderson, L.

Shepherd, L. [Teller.]

Amwell, L.

Latham, L.

Silkin, L.

Chorley, L.

Lucan, E. [Teller.]

Stansgate, V.

Crook, L.

Ogmore, L.

Williams, L.

NOT-CONTENTS

Aberdare, L.

Bathurst, E.

Cholmondeley, M.

Addington, L.

Bessborough, E.

Clitheroe, L.

Ailwyn, L.

Birdwood, L.

Conesford, L.

Auckland, L.

Buckinghamshire, E.

Crathorne, L.

Baden-Powell, L.

Chesham, L.

Digby, L.

Dundee, E.

Harcourt, V.

Robins, L.

Dynevor, L.

Hawke, L.

Russell of Liverpool, L.

Ebbisham, L.

Home, E.

St. Aldwyn, E. [Teller].

Ebury, L.

Jellicoe, E.

Saltoun, L.

Fortescue, E.

Kilmuir, V. (L. Chancellor.)

Sinha, L.

Fraser of North Cape, L.

Lansdowne, M.

Soulbury, V.

Furness, V.

Limerick, E.

Strang, L.

Goschen, V.

McCorquodale of Newton, L.

Strathspey, L.

Gosford, E.

Monk Bretton, L.

Tweedsmuir, L.

Grantchester, L.

Newall, L.

Waldegrave, E.

Hailsham, V. (L. President)

Onslow, E. [Teller.]

Waleran, L.

Hampton, L.

Reading, M.

Resolved in the negative, and Amendment disagreed to accordingly.

LORD SILKIN: My Lords, this Amendment goes with the previous Amendment. The first Amendment having been defeated on a vote, I imagine that this Amendment would suffer the same fate if it went to a Division. I do not propose to go through a Division. I shall move the Amendment and allow it to be negatived.
Amendment moved—
Page 3, line 11, at end insert—
("(c) dispose of any other property of the Commission.").—(Lord Silkin.)
On Question, Amendment negatived.
5.41 p.m.
LORD SILKIN LORD SILKIN moved to add to subsection (7)
"and shall be used for such purposes for the benefit of the new towns or the local authorities in whose area such new towns are situated as the Minister may determine".
The noble Lord said: My Lords, this again is a matter upon which we had some discussion in Committee. I have drafted this Amendment in the light of one part of the criticism which the noble Earl, Lord Waldegrave, brought to bear against the drafting of my Amendment at that stage.
The issue here is this. If, or when, there is a surplus on the accounts of a new town, what should happen to that surplus? The surplus would arise after payment of all debt charges, interest and repayment of capital to the Exchequer. The Bill provides that such surpluses should go to the Exchequer, presumably in relief of taxation. By the Amendment that I moved in Committee I proposed that any surplus should go to the new town, but after consideration I realised that although in some cases a new town has an authority of its own, in other cases there is a local authority which is rather wider than the new town. Therefore, I now propose that the surplus
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should go to the new town or to the local authority in the area of any such new town, as the Minister may determine. It is left to his choice.
I do not wish to repeat all the arguments for the surplus going to the new towns, but I will summarise them. First, the new towns have been created at the expense of the areas concerned. Local authorities have often levied considerably higher rates than they otherwise would for the provision of services over a period of time, from which they have had no particular benefit. It seems right that those local authorities should be able to recoup themselves in respect of such excess rates when the new towns show a surplus. Secondly, the surplus will have been created by the efforts of the population as a whole, and therefore it is right that it should go to them.
Where the undertakings of any other local authority show a surplus, the profits from those undertakings do not go to the Exchequer. They go for the benefit of the town itself, even though the undertakings may have been provided out of money advanced by the Exchequer. I will take the example of Bournemouth, or of many other seaside towns which have undertakings run by the authority. They are often very profitable undertakings, and they have been provided out of loans granted by the Exchequer. It seems to me that the Exchequer would have equal justification for saying that it wanted the profits of, let us say, the swimming baths or little café-restaurants because it had advanced the money; that it was not satisfied with having its money back, and not satisfied with reasonable interest on the money. The Exchequer might equally say that it wanted any profits which were derived therefrom. This would be just as logical and reasonable as demanding the surplus from a new town The new town will have created the surplus, and in my view it is entitled to it.
I have no illusions about whether the Minister will accept the Amendment, because he stated quite definitely in Committee that the Minister of Housing and Local Government had taken a different view. Nevertheless, I think it right That the House should have an opportunity of expressing its view on the principle of the Amendment.
Amendment moved—
Page 3, line 28, after ("Exchequer") insert the said words.—(Lord Silkin.)
5.50 p.m.
EARL WALDEGRAVE: My Lords, as the noble Lord, Lord Silkin, has said, we deployed this point by argument on Second Reading and also in Committee, and this Amendment is very much in the same form as the Amendment that we had on Committee, except that it brings in the fact that the surplus could go not only to the new town or to the group of new towns, or to the whole twelve of the new towns, but could go to the local authority as well. But that still does not meet my basic difficulty, on the principle which the noble Lord, Lord Silkin, has again mentioned; that is, whether or not these new towns have a right—a sort of equity right—to any surpluses.
I think we must just go over this ground as briefly as possible again, because I believe that this Amendment and the thought that lies behind it are misconceived. We are talking about what happens in the Commission, not of the absolute right of towns like Bournemouth—we are talking about a Commission which has a comparatively short life: in any case of ten or twenty years, which was the period that my right honourable friend spoke of in another place. We are trying to decide what should happen to the surplus. The Commission is required to have regard to the convenience and welfare of the local people, and it has power to make contributions towards the cost incurred by local authorities for their amenities, and for welfare, water and sewerage. No surplus can be required to be paid over to the Exchequer until after provision has been made for these things. We really must not consider, therefore, that the Commission is likely to fail in its project—I think that is quite pessimistic and unjustified.
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We do not regard these new towns as primarily profit-making concerns, but it is still necessary to have some provision to regulate the situation if a surplus should arise. I personally think that the whole of this argument is a little ephemeral, because I see no big surpluses being available in any very near future, if we take everything into account. There may be a surplus on one account, but on another account there may be a big deficit. I am bound to say that Section 15 of the 1946 Act, the Act which set up these new towns, provides that, on winding up, the surpluses should be paid over to the Exchequer or that any loss should be borne by the Exchequer. If that was right then, I think it is right now.
Should the local authority have some of the surplus because of the enormous burden (to use the noble Lord Latham's words in Committee) the local authority may have in these new town areas? It is because of the heavy burden that the local authority has while the new towns are in their infancy, and while all these amenity and welfare considerations have so much to be taken into consideration, that the Commission has power to contribute to the cost of the amenities. The fact that it contributes to them will use up that surplus, if there could conceivably be a surplus, if the Commission does its duty by the amenities. It has to be remembered that if the Commission has done its duty by its amenities, and has contributed towards them to a considerable extent, not only will there be no surplus, but there may be a highly increased rateable value, which of course, to put it mildly, the local authority will find convenient.
The Government concede that many amenities are still lacking at the present time, though much of the leeway may be caught up before even the Commission takes over and during the lifetime of the corporation in each new town. As I have mentioned, this Bill is legislating for ten or twenty years, and if the Commission really makes handsome profits—nobody can guess—one has to consider seriously what should be done with these profits at the end of that lifetime, when, by definition, the amenities should really have reached saturation point. It would be ridiculous to go on equipping the new towns with more amenities in that situation Perhaps the

225
surplus is to be used as a sort of undisguised rent subsidy. What do the new towns want these hypothetical surpluses for? We have to consider what that would lead us to. I do not know whether the neighbouring villages in South Wales to Cwmbran, or the neighbouring villages in County Durham to Peterlee, would be particularly pleased. I do not know what they would have to say if there were this special spending of these hypothetical surpluses. They would probably say, "Let us all move to the new towns". I do not think that would be justice at all.
But I come back to my basic point, that no Chancellor of the Exchequer can properly earmark one section of his revenue for one particular point. I must restate that argument as the other argument was restated. It would not be right and it would not be done; indeed,

WESTERN AID FOR UNCOMMITTED COUNTRIES
6.7 p.m.
EARL JELLICOE EARL JELLICOE rose to call attention to the need, which was emphasised by the recent Atlantic Congress, for a definite, long-term and consistent policy towards those countries which lie outside the Atlantic Community and also outside the Communist bloc aimed at en-
I am not really sure that people would want that to be done when the time comes. If the Chancellor of the Exchequer has a surplus on any account we do not want it to be earmarked for new towns or something else on a sort of special pleading; we want it for whatever may be the great thing that the Chancellor has in mind to use surpluses for. It may be for increasing pensions or reducing taxation. I do not think that the principle behind this Amendment is acceptable. No really new argument has been adduced other than that the Amendment has been slightly widened to incorporate local authorities as well as new towns. I must ask your Lordships not to accept this Amendment.
On Question, Whether the said Amendment shall be agreed to?
Their Lordships divided: Contents, 13; Not-Contents, 47.

CONTENTS

Alexander of Hillsborough, V.

Lawson, L.

Shepherd, L. [Teller.]

Amwell, L.

Lucan, E. [Teller.]

Silkin, L.

Crook, L.

Macpherson of Drumochter, L.

Stansgate, V.

Henderson, L.

Ogmore, L.

Strabolgi, L.

Latham, L.

NOT-CONTENTS

Aberdare, L.

Ebbisham, L.

McCorquodale of Newton, L.

Aldington, L.

Ebury, L.

Margesson, V.

Ailwyn, L.

Fortescue, E.

Monk Bretton, L.

Airedale, L.

Fraser of North Cape, L.

Newall, L.

Auckland, L.

Furness, V.

Onslow, E. [Teller.]

Bathurst, E.

Goschen, V.

Reading, M.

Bessborough, E.

Gosford, E.

Robins, L.

Birdwood, L.

Grantchester, L.

St. Aldwyn, E. [Teller]

Buckinghamshire, E.

Hailsham, V. (L. President.)

Sinha, L.

Chesham, L.

Hampton, L.

Soulbury, V.

Cholmondeley, M.

Hawke, L.

Strang, L.

Clitheroe, L.

Home, E.

Strathspey, L.

Conesford, L.

Jellicoe, E.

Tweedsmuir, L.

Crathorne, L.

Kilmuir, V. (L. Chancellor.)

Waldegrave, E.

Digby, L.

Lansdowne, M.

Waleran, L.

Dundee, E.

Limerick, E.

Resolved in the negative, and Amendment Disagreed to accordingly.

suring that their political independence is firmly based on a sound economic foundation; and to move for Papers. The noble Earl said: My Lords, I beg leave to move the Motion standing in my name. Last month a rather remarkable Congress took place in London. It was remarkable in that it brought together some 650 eminent citizens from the countries of the Atlantic Alliance. Perhaps I should correct the figure: 649 were eminent, and there was myself. But for me, my Lords, the Congress was chiefly remarkable in that there was an almost unanimous recognition of the

227
fact that perhaps the major task confronting our countries in the future is that of trying to reach a solid relationship with those countries which lie both outside our Atlantic Community and also outside the Soviet bloc; or, to be more precise, should I say the Sino-Soviet bloc?
Which are these countries? They are very varied, yet they have certain marked common characteristics. This great arena of countries, peopled by more than 1,000 million people, lies mostly to the South, in Latin America, in Africa and the Middle East, and in Asia. Very few of their peoples are of European stock. Most of them have a different pigmentation from your Lordships. Almost all live in countries which for 300 years or so have been in one way or another dependent upon Western Europe. All share a passionate belief in political independence, whether they have recently acquired it or still seek to acquire it. Many feel an equally passionate desire to stand aside from the great contest which wracks our Northern societies, the contest between the concept of the free society and the concept of Communism. Finally, my Lords, all these countries are poor and all are under-developed.
This, I feel, is a problem of increasing urgency. In this revolutionary age change of all sorts steals on us much more quickly than we expect. Who of us would have expected ten years ago, for example, that we and other Colonial Powers should find ourselves in such difficulties in Central and Southern Africa to-day? In economic terms the problem is urgent, since at the present time we are faced with two simultaneous revolutions in the world: the revolution of rising expectations of the poorer populations and the revolution of their exploding population. So it is that, as these countries gain one rung on the ladder of economic progress, they are pulled down two rungs by the drag of population. It is still a fact, as my noble friend Lord Strang reminded us vividly some months ago, that the average annual income of an Egyptian is less than the price of a television set. What is more important, these populations are becoming conscious of their poverty. It will not be possible, therefore, my Lords, for this world to continue, half
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rich and half poor, without a series of the most violent convulsions.
The other reason, of course, why this problem is so urgent is that the Communists see in this other third of the world the key to world domination. The bear of Red Russia and the dragon of Red China are waiting impatiently in the wings. We must recognise, too, that the Communists have powerful advantages. They work from interior lines; they work to a long-term strategy; they work with a total tactical unscrupulousness. And, above all, they work with unity of purpose. They have cleverly managed to dodge the stigma of colonialism. Finally, Red Russia has shown, and Red China is showing, how an undeveloped country can, by its own exertions, by the boot-strap technique, albeit at a fearful cost in human freedom, pull itself up to a place in the economic sun. I think that, for Asian and African peoples, our industrial revolutions are rather vieux jeu; but the industrialisation of Red China and of the Soviet Union are taking place before their eyes and, indeed, almost on their doorsteps in certain cases. For hungry people, for thirsty people, these great programmes which they see going on in front of them are an intoxicating draught.
The Soviet challenge is, I feel, a compelling motive for decisive Western action. It sharpens our dilemma and increases the penalties of failure. But it is a negative motive, and the Atlantic Congress felt that there were other, and stronger, positive motives for action. In part these are moral. As we in the West have come to believe that slum conditions in our own societies cannot be tolerated, how can we sit idly by while the rich countries become richer and the poor, if anything, poorer? We must remember that in this contracting world the slums of Baghdad, of Johannesburg, of Karachi and of Calcutta are as close to us to-day as the slums of Liverpool and Manchester were a century ago. There is also the powerful and compelling motive of economic self-interest for us to help these countries to help themselves. It is the great trading nations of the West who stand to gain most by the conquest of world poverty and the extension of world prosperity.
The Congress considered that three principles should underlie our Westerns

229
policies in this field. The first was the recognition of the primacy of politics—and, indeed, psychology—over economics. If the West does not get its politics and its psychology right with these people, it will not get its economics right with them. Our relations with these new and emerging countries must therefore be grounded on a basis of partnership—real partnership. The second principle was the recognition that for poor and under-developed countries political independence is a fiction unless it is buttressed by real economic independence. But to attain this economic independence, which must be mainly won by self-help, massive and sustained assistance from the West will be required. The third principle was that the policies in this field must receive high and continuing priority from our Western Governments—as high a priority, indeed, as we accord to defence or to the Welfare State. This means that we in the West cannot rely, as I feel we have relied in part hitherto, on ad hoc, piecemeal, inconsistent, and unconcerted policies.
In the political field, the application of these principles will involve quick, and sometimes painful, adjustments of policy. They mean that we must "go with the grain of nationalism." In certain areas—in the plural societies of Africa, for example—it means that we must move faster than we or the European communities there may wish to go. In the words which Sir William Hayter used in an admirable paper submitted to the Congress:
"The Western Governments ought to examine quite coldly, in the context of the main world struggle between the West and the Communists, how much positive advantage to their own countries and to the West as a whole continues to reside in each particular case where nationalist forces are still being opposed."
Since our aim is to give aid as between equals, it will defeat our purposes if we attach political or military strings to that aid. We shall defeat them too, I feel, if we seek to tie our aid to the adoption by these new countries of our practice of democracy. Their external freedom is our concern, but their internal freedom is their concern. The criterion which we should apply is rather the efficiency of their administrations; their ability effectively to absorb the aid which is given to them. This presupposes a degree of administrative efficiency; it also presupposes a degree
230
of popular support. But it does not presuppose that Mr. Nkrumah or General Ayub Khan or Mr. Nehru should model themselves on Mr. Edmund Burke or Mr. Stanley Baldwin.
In the economic sphere, our effort, as the Congress saw it, should be deployed in three main fields. The first field is money. Massive injections of foreign capital are required to enable the underdeveloped countries to make the so-called "break-through" (I think that is the term the economists use, though I am not one myself), so that their economies can become truly self-sustaining. The experts suggest that the under-developed countries need to invest a sum equivalent to some 12 per cent. of their national income each year in order to render their economics really self-propelling. They also agree—and it is a remarkable thing, given the fact that they are experts, that they do agree—that in order to do this these countries will need approximately double the amount of external assistance they are receiving at the present time. They will need, in fact, something of the order of £15,000 million extra over the next decade—something of the order of £1,500 million each year. This is a very tall order indeed. But, my Lords, it is not all that tall: it is about one-tenth of what the United States is spending this year on defence.
How is this money to be found? Partly through private investment, and partly through bilateral aid from Government to Government. In addition, the Congress believed that everything possible should be done to reinforce the international agencies of aid—the U.N. agencies, and agencies of the U.N. like the Special Fund, the I.M.F., and the World Bank. Agencies like the World Bank—and the World Bank is perhaps a particularly good example—have great experience and great expertise. They have gained the confidence of the recipient countries. Very often these countries will accept from them advice and conditions which they would not tolerate from a national Government.
In this respect, I should like to ask the noble Marquess who will be replying two questions. The first concerns the newly established United Nations Special Fund. As I understand it, the purpose of this Fund is to act as a spark for

231
development. It is in the safe hands of Mr. Paul Hoffman, of Marshall Plan fame. He came to this country hoping to persuade Her Majesty's Government to raise their present contribution to this newly established Fund, this fledgling, from the present modest figure of about one million dollars. He failed. Could my noble friend perhaps let us know a little more about this?
My second question relates to the proposal for an International Development Association, a proposal which the Congress officially backed. On the whole, the delegates were against the creation of new agencies—goodness knows! we have enough of them already—but they did make an exception in favour of this particular one; and I think they are right. It is a good egg and there seems to be a good chance of hatching it out fairly soon. It would be designed, as I understand it, to meet a very real need; the provision of development loans to underdeveloped countries which cannot be financed on hard currency repayment terms. The International Bank makes "bankable" loans to the under-developed countries. This agency would provide for what is also needed, and what indeed all of us like—"soft" loans. I myself see an advantage in such loans being made available by an international agency, perhaps under the wing of the World Bank. Most important of all, this proposed new "soft" loan agency is a real starter, since it has received strong off-the-course backing from the Americans. I hope that Her Majesty's Government will do all they can to ensure that this egg is conceived in as big a way as possible and that it is hatched out as soon as possible.
I noticed that Sir Oliver Franks has suggested that the initial capital of this proposed Association should be in the region of £1,000 million and that our share of it might be between £100 and £150 million. I hope that Her Majesty's Government are thinking as big as the bankers. There is little point in putting a little money on a lame horse. Money on a great scale is certainly needed. However, the magic wand of capital by itself cannot do the trick. It is equally important that the money should be wisely spent. This is no easy matter, since the rapid development of an under-
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developed country raises actute social and economic problems, as well as purely economic ones. One of the greatest of these problems is that such development, unless wisely directed, can increase the gap between the relatively well-to-do urban populations and the impoverished rural masses. I well remember in Baghdad the unspeakable misery in which the hundred thousand or so peasants, who had been sucked in from the country by the lure of the jobs created by industrial development, were living.
It is true that large-scale schemes of development are needed, but equally badly needed are small-scale schemes, in particular those connected with agriculture—the provision of rural houses, local irrigation and the improvement of small-scale agricultural techniques. Here I am sure our Western countries could do far more to help the undeveloped countries than they have done hitherto—and perhaps make the Communists look a little foolish into the bargain. For although the Communists have certainly evolved a highly successful technique of industrialisation, one fact sticks out like a sore thumb in their world—their failure over agriculture. Men are, in fact—and I should like to insist on this, as the Congress insisted on it—just as important as money.
Some of these men—technicians, economists and administrators—have to come from outside. We have to provide them. And here I believe that we can do a great deal better. I do not suggest that we should flood the underdeveloped countries with a horde of Western technicians. It is not the quantity that counts; it is the quality. I feel, too, that here the West may perhaps be able with profit to take a page from the Russians' book. Their technicians are carefully selected. They are well-versed in the customs of the countries to which they go; and, above all, they speak the language. I do not suggest that we can, or should, ape their methods, but I do suggest that we can, and should, improve our arrangements on the national level for supplying technicians and administrators, and above all that we can make a far better division of effort and far better co-ordination of resources between the Western countries. Perhaps we should seek to establish, as was suggested by Sir Leslie Rowan in his Paper to the

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Congress, an international technical and economic service, possibly under the I.M.F. and the World Bank, but staffed by a few men and women of the highest quality and qualifications.
But again, in the human sphere, it is on self-help that the under-developed countries must ultimately rely. It is their technicians, their economists, their administrators, who must run their development programmes. Yet the West can help these countries to help themselves Nowhere can we help more than in the field of education. We can help by finding more places for foreign students in our colleges and universities in the West. We can help by planning to enlarge our schools, universities and technical colleges in order to cope with this great need. We can help by doing far more than we are doing at present—for example, in Africa—to underpin the Administrations and the economies of the emerging countries with a really solid infrastructure in education. We can help, too, by encouraging and making it easier for our teachers and professors to take up appointments in the schools, colleges and universities of these developing countries.
The third field to which the Congress felt the West should direct its close attention is that of its trade relations with the developing countries. Since the accent is on self help, surely we must do all that we can to organise things so that those countries can make their way in the world by trade rather than by aid. And here we must be consistent. To my mind, it is totally inconsistent for us to adopt liberal aid policies towards developing countries if, at the same time, we pursue illiberal trade policies.
The programme which I have sketched out is undoubtedly a strenuous one. It demands from the West an effort of imagination, organisation and will equal to that which inspired the Marshall Plan. Then, faced with the devastation of Europe after the war—faced with an extraordinary situation—the United States took extraordinary measures to help Europe to help itself. Now, faced with the poverty of the other third of the world, we, in my submission, must take extraordinary measures to help the under-developed countries to help themselves.
I believe that in this strenuous task the United States, Britain and Europe should pull together. This time the lead must be shared: the impulse cannot come only from the United States, but must come also from Britain and Europe. There are many reasons why it should. Europe, with its political, historical and territorial extensions, and Europe, as the largest importer of raw materials in the world, has a vital stake in the prosperity and stability of these countries; and Europe is now rich. To take only one yardstick, in the last ten years the gross national product of the European N.A.T.O. countries has increased by 50 per cent., and in that same period the gross national product of the United States has increased by only 35 per cent. One glance at Paris, or Hamburg, or Vienna, or Milan, or, indeed, London, confirms this prosperity. In Europe, too, there are great untapped reserves of skills and resources which should be harnessed to this yoke. France, it is true, devotes more of her national income to this purpose than we or the Americans do. But it is idle to pretend that Western Europe could not do more. Possibly the French could; I strongly suspect that we could; and I am quite certain that Germany, the strongest economic unit in Europe, could.
I said just now that I thought the lead should come from Britain and Europe. I submit that it should come from Britain in Europe. There are many reasons why we, as the centre of the Commonwealth, should take the lead over this matter, but there is, I think, a particular reason at present. In the European context, the Six, the countries of the European Economic Community are now paying much attention to the development of the overseas territories linked with them. We are trying to organise the Seven. My hope would be that, if we succeed, we should immediately propose that both groups should jointly study this whole problem of aid to the under-developed countries with a view to seeing how the policies and plans of both groups should best be co-ordinated and developed. This is desirable in itself to ensure that Europe's energies and reserves on this front are fully and effectively deployed. But it might also be helpful as opening up to the Six and Seven a field for fruitful and positive collaboration—as strengthening that bridge between the two groups

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which we hope to build. I believe, too, that we already have in the O.E.E.C. the obvious instrument for co-ordinating our policies towards the under-developed countries—a good machine, and one which is lying rather idle at present. it is for these reasons that I should like to suggest that Her Majesty's Government should take the lead, in concert with our friends and neighbours in Western Europe, in initiating high level discussions, possibly within the O.E.E.C., with a view to putting to the Americans at any early date a considered, agreed and concerted European programme.
To conclude, my Lords, I believe that the crisis of our era is largely a crisis of leadership in the West. As a result, what do we so often see?—so often, in fact, that we now seem to assume that it is part of the natural order of things. What we see is the rather pathetic spectacle of the West dancing, a little out of step, to a Muscovite tune. But surely, my Lords, if ever a challenge cried out for leadership, it is this—one of the great challenges of our times—the task of helping half of the world to pull itself up in freedom out of poverty. Of one thing I am sure. I am sure that we in the rich West have the resources for this task. We have the men, and we have the money, too. But have we the will? I beg to move for Papers.
6.35 p.m.
LORD OGMORE: My Lords, we are all grateful—and this is no formal tribute—to the noble Earl, Lord Jellicoe, for putting down this Motion and also for the brilliant speech he has made, splendidly delivered and full of common sense. I hope that the conclusions of it will make the impressions they should do upon the noble Marquess who is to reply, upon the Government and upon a much wider field outside the United Kingdom Government to which, to some extent, his words were addressed. I think the noble Earl was quite right in putting down this Motion to-day, although it is perhaps, by our standards, a little late in the evening for a debate of this character to come on. We are going away for some three months at the end of next week, and it would have been odd and inappropriate, in my opinion, if we had gone away without a word being said about the Atlantic
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Congress which drew this large number of people to London and without a word being said in this House on the problem with which the noble Earl has dealt.
I should like to congratulate the Congress organisers on the Atlantic Congress, and I would pay tribute to the leader of the United Kingdom delegation, the noble Lord, Lord Crathorne, who has just joined our ranks. There has been, I understand, in uninformed quarters some criticism that the Congress was held. There are some, again uninformed, who feel that a good deal too much money was spent on it. Well, it was not Government money but private money, and, in my view, it was well worth every penny that was spent. It was necessary after ten years for representatives of the Atlantic Community to come together in London or elsewhere to examine what had happened in those ten years; to look at the problems which faced the Atlantic Community, and to give some thought to the future. Looking at it from a more parochial point of view, the delegates saw London, which was looking its best at that particular time, and they sampled our hospitality, which, as we all remember, was on a generous scale, both from the Government and from private benefactors. In fact, those of us who were hosts must, I think, pay tribute to the noble Baroness, Lady Elliot of Harwood, who was indefatigable in this field; indeed, any of us who for one moment sought a little refreshment to sustain us in our arduous duties of hospitality found her at our elbow looking reproachful and urging us on to fresh endeavours. As I say, she was indefatigable, and we owe her and all the ladies who helped her in this task a deep debt of gratitude.
I think it was important, too, that the various representatives, not only Parliamentarians but others, should have the opportunity of meeting many of the leaders of the various communities. The Congress had the honour of being opened by Her Majesty the Queen and the Duke, and afterwards they met, or had the opportunity of hearing, a large number of our distinguished figures, including the noble and learned Viscount on the Woolsack, the Prime Minister, Mr. Gaitskell, my noble friend Lord Attlee and others; and, of course, we in this country had the opportunity of hearing

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the distinguished leaders from other countries.
May I now turn to the Motion before the House? In the simplest and most dramatic terms it can be seen at the present day in the ideological conflict between India and China. India's dilemma is of a vast Parliamentary democracy on an hitherto unheard-of scale, with a population increasing every year by that of Greater London; with a national income of less than £25 per head of the population per annum; with a cattle population almost as great as the human, and much of it quite useless; and with an expectation of life steadily prolonged by medical science. Can this problem, which has never been faced before, so far as I am aware, in the history of the world, be faced and solved by the methods of Parliamentary democracy, or must India follow China's example and try to do it by totalitarian means? The same problem with which India is faced faces other countries both in the Commonwealth and outside, although, of course, not to the same extent.
As the noble Earl, Lord Jellicoe, has quite rightly said, the situation is not getting better but worse, in so far as the rich countries are getting richer and the poor countries poorer. We have, in a way, Disraeli's two worlds on an international, if no longer on a national, scale. Mr. Paul Hoffman, speaking in Geneva last week, addressing the United Nations Economic and Social Council, said that sixty of the eighty-two nations in the United Nations could be classed as less developed with a population of 1,000 million and with an average income of about £43 per head per annum, as compared with an average of £285 per head per annum in developed countries. The population is increasing in the under-developed countries by 2 per cent. whereas the increase in their income is increasing by only 3 per cent., or 6s. 8d. per annum. When you get down to brass tacks, that is in fact what is happening-there is an increase of 6s. 8d. per head per annum in the under-developed territories, which is not very much.
As the noble Earl has said, the Atlantic Congress was preoccupied with this problem probably more than any other. There is no doubt about it that there has been an enormous change in
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the climate of opinion in N.A.T.O. circles in the last two years. In the 1957 conference in Paris I made a speech drawing attention to the problems of Asia and Africa, and it made the same effect as a stone makes dropped in a pool of water—that is, none at all. Less than two years later we could see at this conference that the attention of the delegates from all over the Western world was concentrated upon it, so that it shows what an enormous change there has been in the climate of opinion in less than two years. Eight resolutions of the Congress referred to this problem and two of them, as the noble Earl has said, referred to the formation of new organisations. One was the World Development Corporation and the other an International Development Association. A third suggested that the implementation of policies in this field had better be carried out by N.A.T.O. members severally or through joint agencies less associated in the public mind with military policy than is N.A.T.O.
There was general agreement on the last resolution—in other words, that N.A.T.O. itself does not want to carry out these particular policies—but there was not, I think, general agreement on the other two resolutions; that is to say, on the formation of these new organisations. As the noble Earl has said, the United States Government and also the United States delegates at the conference favoured the creation of new organisations for this purpose. I think it is also true to say that, generally speaking, the United Kingdom delegates did not. This was made clear in speeches by delegates and also by speeches at the conference. I thought the Prime Minister made this clear, and certainly Mr. Hugh Gaitskell made it very clear in his speech, that we do not favour the setting up of new organisations for this purpose. He felt that there was no lack of organisations. What is needed is for the existing national and international organisations to have their resources increased, their scope widened and some of their present limitations removed. I note since the Congress was held that Mr. Kishi, the Prime Minister of Japan, has also advocated a new international bank or a fund for Asia, lending in and being repaid by soft currencies. This, as the noble Earl has said, was the United

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States policy at the New Delhi conference.
There you have a difference of opinion, not as to the ends in view but as to the means. I suppose it will have to be threshed out in Government circles of the West, in the N.A.T.O. Conference of Ministers and at the N.A.T.O. Parliamentary Conference which is to be held in November in Washington. Our experience in this field is of value, because we have probably had more experience in dealing with under-developed territories than almost any country in the world. I should have thought that the short supply of funds, hard and soft, of "know-how", of managerial experience—and that is terribly important in this field—of professional men and of technicians was the real problem. At the moment I have this problem personally on my desk, because a country in the colonial territories in which I am interested has asked me to find a technician or rather a professional man of a certain type for them, and I am finding it very difficult even to get one candidate. I am told by those who know best what the position is in this field that I shall be lucky if I get one candidate. So the setting up of organisations in themselves is not going to have much effect if the men and the resources are not there.
Although a few years ago materials were in short supply, I do not feel that that is still the case. It is not materials, but the question of men and money. We have a large number of agencies in the West. We have national agencies in our own country, which are very well tried; that is to say we have the various Government agencies, and we have private enterprise agencies, and then there are the international agencies. Is it going to be of much use to set up a new one which will inevitably be competing in this close and narrow field for the men and the money that we require?
Last week the Commonwealth officials met in London under the chairmanship of Sir Roger Makins, who also played an active part in the Congress, and they met to consider means of mobilising resources for Commonwealth development. I should be interested to know what their conclusions were, if the noble Marquess is in a position to tell us. At Montreal, the Commonwealth Develop-
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ment Bank was suggested. Was this considered, and, if so, did the views of the British Government, which I imagine are similar to those I have now been stating, prevail, or were some of our Commonwealth colleagues inclined still to favour a Commonwealth Development Bank?
Recently there have been two other related conferences which I might mention shortly because they all bear on this problem. There was the study group on Asian and African languages held in London in May, which reported, among other things, that in order to establish a better relationship with the people of Asia and Africa, and to understand them and their cultures, a knowledge of their language is necessary. The study group drew up a list of some seventy Asian and African languages, a knowledge of which they felt was essential. It set out proposals for recruitment and training of teachers and research workers, grants to students, establishment of study institutes and other schools, the provision of materials necessary for the teaching of these languages and good library facilities.
Then there was the Commonwealth Education Conference, which was opened by the noble Earl the Leader of the House, which considered how to deal with the 1,000 new places in Commonwealth universities which were agreed upon at the Montreal Conference, 500 of which are to be in the United Kingdom. I should like just to quote a short extract from The Times relating to a speech by the leader of the Pakistan delegation, Mr. Sharif:
"Mr. Sharif said that some nations were achieving continuously higher standards of living; but others, through lack of resources both in capital investment and in trained manpower, are finding it difficult to maintain even their existing low standards against rising population.
'The only way for us to escape from this misery-go-round of poverty, ignorance, and ill-health is to close the gap between the advanced and the underdeveloped countries by training up to the highest level of quality a host of scientists, engineers, technologists, and agricultural specialists.'"
I mention those two conferences, both of which dealt with education, because I think it shows that it is not just a question of even providing money. It is a question of getting down to bedrock and providing people like teachers before

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you can really in many cases get the development that is needed going.
I have always felt that in this field research is absolutely vital. Have we enough of it? And still more, do we make enough use of the findings of research? I remember some years ago reading a report of the United Kingdom Research Organisation which said at that lime the industrialists and manufacturers in this country were ten years behind the findings of our own research organisation; in other words, there was a ten years' gap in which they had not caught up. I always have a suspicion—I may be wrong—that in this field, even in the Commonwealth, still more in other under-developed territories, we are not sufficiently looking at the findings of the research bodies and applying them.
The Americans, at any rate, in their own country, are very good at this. They do get hold of the findings of research bodies or inventors, whether from their own country or anywhere else; and, as we know only too well, quite a number of the advances in material things for which they are famous were invented somewhere else, usually in this country, turned down here and then taken to the United States. I have mentioned before, as an example, Group Captain Whittle and the jet aircraft. The jet aircraft patent was allowed to lapse because the Air Ministry would not put up £5 for it to be renewed; and Whittle was at that time a young man in the Air Force and had not got £5. So this great invention, from which all jet aircraft and turbo-prop aircraft now stem, fell. The first patent fell because no one would put up £5. I cannot imagine that that could happen in the United States.
I do not feel that this is solely a matter for the Government. I believe that this development should be a combined operation in the West. Not only Governments, but nationalised industries, private enterprise, co-operative societies, trade unions and professional organisations should all join in a really combined effort; and without such a combined effort. I do not believe that any scheme will be a success. The noble Earl, Lord Jellicoe, mentioned other Western Powers who have funds. There is one country he did not mention that has enormous funds—Switzerland. Whether anybody will ever get any money out
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of the Swiss I do not know, but they certainly have enormous funds. I have argued this many times in Switzerland with the Swiss and told them in so many words that they have no tradition of development of this kind, of putting money into under-developed countries. Whereas you can get any amount of money in Switzerland at incredibly low rates of interest to build hotels and offices and that sort of thing, nevertheless they have no tradition in respect of the under-developed countries. If this project of the Outer Seven comes off, I hope that one of the things they will be able to do is to persuade one of the seven, namely Switzerland, as well as the other six, to put funds into this deserving cause.
There is very little more I want to say, except that I would emphasise what the noble Earl has said about aid not being sufficient in itself. There must be aid and trade. It is no good refusing the entry of goods of people whose economy we have built up in order to produce those goods; yet too often that is happening to-day. We are here now, one might say, as a Commonwealth or at least an under-developed territories habilitation society; but another day, on another debate, we shall find the protectionist society coming along for some industry or other, and they will not be at all inclined to let the goods come in from these territories. Indeed they are not. Probably there are now on the Order Paper one or two Motions strongly condemning the Government for doing this particular thing, namely, going into this Outer Seven pact.
Another thing we must not do is to allow the West to make artificial products which would compete unfairly with the only products, the raw materials, which they can produce or provide. We have got to be honest. Otherwise we are a lot of international Pecksniffs. We must take great care not to make our aid part of the cold war. People are not really interested in being "anti" anything. We must convince them that we are "pro" them and not "anti" anything. By the same token, we must not attach strings to our aid: there is too much of that going on. Bridges and other similar structures are labelled, "This is put up by such-and-such an aid fund". Even where there is a loan, and not aid, where there has been a grant which has to be

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repaid, there is a label set in the concrete by means of a copper or brass plaque saying that the building, or whatever it is, has been provided out of some international or national fund. That is not the way to do it.
The noble Earl, Lord Jellicoe, has mentioned political stability. I agree that economic stability is a very important adjunct to political stability. Recent experience in newly emerged territories, as well as in older ones, makes us wonder whether perhaps our constitutional model is in all ways suitable to Asian, African and South American countries. In a few years in many cases they have had to superimpose Western-type institutions and ways of thought on ancient tribal or other collective systems. Naturally, as we see for instance in Ghana, stresses and strains have developed. I believe that we must give these countries every sympathy based on understanding of their problems and as much assistance as we possibly can. I am sure that, with this assistance and with this sympathy, they will work out a new pattern of democratic society, one which will harmonise with the old and which will also blend the best of their ancient systems with our own. The fact that so many countries are experiencing these difficulties is no reason at all to my mind why we should not help them. Indeed, it is all the more reason why we should. Only in this spirit, I feel, should our aid be given, and only with this spirit of sympathy and understanding will our aid be a success.
7.0 p.m.
LORD GRANTCHESTER: My Lords, my remarks will be little more than comment from a rather different point of view upon some aspects of the vast problem which the noble Earl, Lord Jellicoe, has posed. The noble Earl has raised political and religious as well as economic questions, and he has done us a service by bringing this Motion to debate in your Lordships' House, particularly following the Congress recently held in London at which a great deal of discussion took place upon the subjects mentioned in the Motion.
I must admit that I was somewhat alarmed at the manner in which the Congress was staged. In many cases the delegates were almost self-appointed,
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responsible to no one and quite unofficial. Thus the door was opened to anyone with a bright idea to canvass, as well as to many organisations engaged in propaganda—well-meaning, no doubt, but propaganda, nevertheless—for such ideas as world government, the reform of the United Nations, federalism, the forcible redistribution of national incomes or physical resources, and so forth. All this would not have mattered, and might even have done some good, through a free exchange of ideas, if the unofficial character of the Congress could not have been called into question. I was afraid that misunderstandings might arise when Her Majesty graciously consented to open the Congress and Members of Her Majesty's Government became associated with it.
Some rather wild suggestions, in my opinion, were made, not only in discussions but in some of the papers presented; and representatives of some countries might, I felt, consider that they reflected the policy of this country, a possibility which might eventually lead to a charge of bad faith. One of the advantages of our having this debate will be to correct any such misapprehension and to enable Her Majesty's Government to state their views on what is sound economic policy. Before territories cut themselves off from those who are associated with them, and to whom they have been looking for guidance in the past, it is at least desirable that they should learn the ways of sound economic development. I shall confine myself to what is, in the broadest sense, commercial development. Defence aid and welfare aid such as that given to our British Colonies through the Colonial Development and Welfare Fund are matters which need separate consideration.
My Lords, I hope that something will be said to expose some of the fallacies current to-day among those who discuss the economic development of the less industrialised territories. The argument usually starts with the proposition that there are in the world developed and rich nations, such as Britain and the United States, and that there are underdeveloped nations, which include most of the rest; that these under-developed nations are caught in what is called a "vicious circle of poverty"; that this circle can be broken only, first, by the

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adoption by the under-developed countries of elaborate planning measures with respect to their domestic economies and, second, by their receiving large injections, as the noble Earl, Lord Jellicoe has said, of Government help from the richer countries.
The term "under-developed" is applied on purely materialist considerations, on a comparison of real wages and capital per capita. Such calculations do not always, I think, reflect the true position. On such a comparison, when we speak of under-developed nations we are really talking of more than half the world—about every nation, that is, except Western Europe, the United States, Canada, Australia, New Zealand, and possibly Japan and Malaya. All the rest are under-developed if one uses per capita real income figures as the basis for comparison. Yet these underdeveloped nations are not homogeneous; they exhibit wide differences of character.
It is not unreasonable to assume that these so-called under-developed countries would benefit from the application of the same economic principles from which the richer nations have benefited. What is not emphasised is that economic progress has occurred in the world; that poor nations have become rich; that there was a time when Europe and America were poor by to-day's standards. There has been, in these so-called rich countries, development on a colossal scale without central planning, without Government aid, with only normal private investment. This applies not only to the development of the United States. Western Europe itself is an example of normal development through market means over a comparatively short period. One could cite also an Eastern country, Malaya, for instance, which showed enormous advance in the early part of this century through the normal processes of the market. A good deal of progress on similar lines has already been made in West Africa.
In considering countries which are still on a subsistence economy, we must realise that it is far more important for such societies to begin to pass to a market economy on an exchange basis than it is for them to undertake huge industrial projects. There is in some quarters to-day a totally false emphasis on big
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and heavy industry, as distinct from agricultural development. Most of the so-called under-developed territories are heavily agricultural: agriculture is their mainstay. It is not desirable to establish in them, without any intermediate stages, heavy industrial plants such as steel mills and the like, as is often proposed, without any regard to economic conditions or to the profitability of such industry if it is established. The big industries in the rich countries have all grown from small beginnings. There was the blacksmith's shop, and, after the blacksmith's shop, a slow building of very small industrial units. To believe that countries advance simply by setting up large industrial units, irrespective of the conditions in which they can operate, is one of the fallacies of the times. Nor, if we are to learn from the past, is development best achieved by Governmental projects. It is achieved by the work and initiative of thousands of enterprising people starting in a small way, with limited capital, and extending their operations as success develops.
That does not mean that, whatever we do and however we behave, all will be well. As we see territories passing from a subsistence economy to an exchange economy, we must be prepared to join in the exchange, as both the noble Lord, Lord Ogmore, and the noble Earl. Lord Jellicoe, admitted. Sound economic development depends upon free trade between territories. It is quite hypocritical to say that we wish to see the backward territories advance and then to erect barriers against the import of the products of developing lands. Moreover (this point was not mentioned by either of the noble Lords), it is equally hypocritical to subsidise agriculture with the same object of keeping out the agricultural products of the developing territories. The provision of gift capital, which is sometimes suggested, even if it were desirable, is no cure if the products which result from the use of that capital are excluded from the markets of the givers.
I have already mentioned the undesirability of judging standards by material tests alone. With all the advances made in the material field during the last 150 years, we have still to ask whether we have progressed, even in the West. Envy, hatred, dishonesty, are more widespread than ever, and if Communism has not succeeded in its aim,

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expressed in the Communist manifesto of 1848, to abolish eternal truths, all religion and all morality, it is significant that it is the absence of ordinary commercial honesty that is probably the greatest hindrance to-day to economic development. A noted American economist recently stated the problem in these words:
"Economically foreign investment has succeeded everywhere and contributed specifically to the improvement of the standard of living in the countries in which the investments are made. But in most countries it has ended in expropriation and confiscation. Some Governments do it openly without shame; others deviously by means of discriminatory taxation and foreign exchange control. If one says today that private investment cannot do the job, it is precisely because of these anti-capitalist policies of the receiving countries."
May I ask, my Lords, whether Her Majesty's Government consider some concerted action by the chief investing countries is possible to draw up a code of honest practice to which all Governments might be invited to adhere in order to make free economic development more likely over a wider area?
May I conclude by reinforcing the plea I have been making for gradual and progressive advance through the enterprise and initiative of many individuals, so that ordinary people may feel the interest and experience the excitement of participating in a developing life; that their enterprise should not be overmuch curtailed by control by so-called experts; that material progress must come stage by stage, in gradual instalments, over a period of years; that it is undesirable, even if it were possible, that Governments should pour vast sums of money into projects which become but the playthings of experts without really adding to the enjoyment of the life of the ordinary people. Even in Europe to-day we see a danger of technical inventions, artificially stimulated by large grants of public money, outstripping the ability of men to digest or put to good use the discoveries that are being made.
7.14 p.m.
LORD SALTER: My Lords, a great deal has been said, both in the brilliant speech of the noble Earl who introduced the Motion this evening and after he spoke, which I should much like to discuss on an appropriate occasion, but at this hour I propose to speak on one
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point only. I want to make a suggestion as to the methods and machinery of arranging loans to under-developed countries. Let me put what seems to me the crux of the problem. In my experience in relation to development schemes in a number of countries, one lesson has been burned into me, both in success and in failure—namely, that it is quite indispensable for success to have an administration that will secure the reasonably efficient use of the money that is supplied, and that there is a Government sufficiently stable and of such a kind as to make that administration possible.
The most successful schemes with which I personally have ever been associated were those in the early 'twenties undertaken by the League of Nations in Austria, in Hungary, in Greece and in Bulgaria. There we achieved great success. We did so because the psychology and political attitude of the beneficiary countries was such as actually to welcome some form of external control during the crucial years. In regard to the countries we now have in mind, that particular advantage is not available, and we have to find something else. But, negatively, I remember that in China it did not matter how good the advice or intrinsically good a particular scheme might be, it had no chance of success because there was no Government with more than the most limited range of authority and the most precarious tenure except within a very narrow sphere
Much more recently, going to Iraq, where every possible technical condition seemed to be quite unusually favourable for an immense and rapid development, one had only one doubt, and that was whether the administration would be sufficiently efficient, and whether the political regime there would be such as to make that possible. Well, everything went extremely well until a year ago. Now, necessarily, a question mark hangs over the future.
Having said that, I must add that I entirely agree with what has been said about the importance of not attaching the kind of political strings that are inevitably so much resented. But I think that we have to make a distinction between political strings and economic safeguards designed for and essential to the success of the actual economic project on hand. This brings us right

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up to the question of how and by what machinery. I think it is rarely that political representatives of a national Government of a country from which capital is coming will be able to negotiate appropriate safeguards as to the choice of project, as to the method of its administration, or as to the environment of fiscal policy which is necessary for the success of that project. What they try to impose will be resented and, if verbally agreed to, will probably be destroyed a little later. However, it is, I think, certainly true that if you can get your arrangements made with the recipient country by an institution that is international, you can go a good deal further, and if the institution is not only international but is essentially of a banking and technical character, you can go further still. Safeguards that would be, and indeed are, accepted when arranged by the International Bank, could not be secured by political representatives of separate national Governments. Can we then entrust this task to the International Bank? Here, again, there is a considerable difficulty to which I will refer in a moment.
There is indeed a great deal to be said against the alternatives that have sometimes been suggested. I entirely agree, for the reasons that have been given this evening, that it is most unsuitable to ask N.A.T.O. to enlarge itself for this purpose. That would underline and emphasise just the kind of political difficulties of voting sentiments which we most need to avoid. I am very doubtful, too. about the creation of a completely new institution, whether we call it an International Development Agency or whatever it may be, independent of the existing international agencies, separate from them, possibly rivalling them, overlapping them and without the experience and technical skill at their disposal. At least I should like to know much more about the composition of such a new proposed body and of its precise relationship to the existing bodies before I personally would be prepared to say that I should be in agreement with it.
Can, therefore, the task be entrusted to the International Bank, the World Bank? There we come up against a difficulty of a different character. The International Bank has a high and a deserved reputation for making sound
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loans which have been successful, without involving loss to the International Bank itself. It has a high financial reputation as well as having done a great deal of work of very great use in the world. Yes; but that of course means that, quite apart from arranging safeguards that are technically good, the loans must be "hard" in the sense that they do not exceed in a particular country a total which makes the risk a reasonable risk for a prudent banker. At the same time it is undoubtedly true that if you limit yourself in regard to the under-developed countries which we have in mind entirely to "hard" loans of that character you will not be able, whatever may be the financial resources at your disposal, effectively to get anything like enough to meet the economic opportunities that exist in these countries, or to satisfy the expectations of their peoples or to give a good show by comparison with others who are making conflicting or competing offers.
How, then, do we resolve this problem? Undoubtedly loans that would not in their amount, at least, satisfy the conditions of a prudent banker need to be made and they must be made at the risk of the public funds of the contributing countries; that is to say, the Treasuries or Foreign Offices or State Departments of the capital-forming countries. But, as I said, if those departments themselves negotiate they will meet such resentment and difficulty as will make their task impossible. If, on the other hand, they hand over the matter to the international Bank and the Bank makes loans that are "soft" as well as "hard", the Bank may lose its present high reputation and destroy its utility for the very valuable and important work it is now, and has been for many years, engaged upon.
Is there any way out of this dilemma? I suggest this principle. I think that perhaps the International Bank, with the Monetary Fund in association with it, could be brought into such relation with the departments of the national Governments from which extra money will come as to negotiate what I think Mr. Douglas Dillon called a "package" deal; to negotiate arrangements which would really be in two parts. The safeguards would be negotiated by the Bank, but the amounts forthcoming would be greater than the Bank as a banking

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institution could prudently provide. There would therefore have to be an arrangement between the Bank and the national Governments which would in effect mean that as far as the loans were "hard" the loans would be the Bank's risk, as its present loans are, but beyond that point, though the loan might still prove to be good, the risk would be taken by the Treasuries of the national Governments.
That, I think, is not an impossible arrangement. The Bank, so to speak, in regard to these loans would be like a lender holding a first mortgage and the Governments would take the position of a lender who was content to take a second mortgage. This, of course, is a complex suggestion that I ought to describe and defend more than it is possible or would be tolerable to your Lordships that I should attempt to do to-night. I should be happy to supplement the suggestion on an appropriate occasion, but for the moment I leave it at that.
7.26 p.m.
LORD BIRDWOOD: My Lords, I am sure we are all very grateful for the exposition which my noble friend Lord Salter has given us. For me, to whom economics is a rather distant kind of magic, I confess I have heard for the first time an explanation of a logical way in which aid could pass from, shall we say, the over-developed to the underdeveloped world, and I would certainly not try to follow him in enlarging in any way on an aspect which he has so brilliantly described.
I think our great regret this evening is that so challenging an aspect of the international scene comes at a time when your Lordships have so many other things to think about, particularly in the domestic field; and it seems bad luck after the noble Earl has presented this matter to us with great skill and care and thought. After all, this is a new problem in the world. As I see it, it has arisen only in the last forty years. When we recall that only within these last fourteen years the United Nations have spread from a family of 51 to 82, and of the new entrants every single one could be, as the noble Lord, Lord Ogmore, reminded us, regarded as either uncommitted or underdeveloped or both, then I think we realise
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the nature and urgency of the problem; and we in Britain, who have great experience in this particular field, surely have our great and imaginative part to play in the future.
I am not going to attempt to elaborate any sort of fool-proof international administrative machinery to meet the needs. We have heard discussed this afternoon whether the United Nations should shoulder the main responsibility in this task, or, not so much the Atlantic community but (and I was interested to note that the noble Earl laid emphasis on it) the European community as such. Personally, I should like to see the European community taking the initiative, provided always, as has been stressed, that in no way the concept of a military or strategic alliance is imported into the very contrasted atmosphere of laying sound economic foundations—which I think is quoting the noble Earl's Motion.
It is, I suppose, true that we should all be governed by that old adage that asks us to remember that one can do a lot of good if one does not mind who takes the credit. I personally should like to see Europe taking the credit, not only for reasons of sentiment but perhaps for practical reasons, practical reasons in that one would start off with a uniformity of approach in regard to the necessary skills and techniques which have to be imported into under-developed countries, which would be more effective and more manageable, as I see it, than aid given and organised and directed against the very diversified background of the United Nations.
It may be that I am quite wrong in this; and certainly I have no set conviction in the matter. In any case, I am not qualified to be assertive. Indeed, all I intend to do in a few minutes is to lay emphasis on certain principles—and here I believe I shall find myself in great agreement with the noble Lord, Lord Grantchester—which I consider are too little understood and which are fundamental to the establishment of a sound economic foundation. I have no specific economic training, but I have had some practical experience in countries which could be regarded as having an economic foundation such as not to encourage the development of those political institutions which we usually associate with progressive communities. Now it seems

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to me that we have been all agreed that to go into a country merely with a set of abstract concepts of high intention, and just hope that it will all come true, is not going to be enough. You cannot dig drains only with a moral intention or purpose.
I think also that we shall this evening have debunked the idea that mere gifts or loans measured in quantities of dollars will by themselves raise the standard of life of a people. I can recall an American statesman whose voice shakes with emotion as he describes how the surplus wealth from the West will pour into the Middle East; the wealth that, in his view, should turn camels and goats into Cadillacs and Coca-Cola. I think we have to realise that in fact real prosperity can never be given by one nation to another nation, or by one set of nations to another nation. And I would disagree profoundly with Mr. Bevan who recently in Hamburg, when addressing the Socialist International, spoke of this country as providing a higher standard of life for the Middle East. For applause at a meeting, or for the purposes of quick popularity in the Middle East, that may be effective. But it is not, in my view, related to reality. Nor will mere material benevolence align a people in a conveniently correct political relationship with the West. Instead, as the noble Lord, Lord Grantchester suggested, we have got to learn this thing the hard way; and it takes a long and careful study and preparation, very far removed from politics, and related to the practical things that men can think out with their brains and do with their hands.
In very simple terms, I see the requirement as, first, one of making a survey of things as they are and not as we should like them to be—assessing the resources, the men and material in a territory; and then, and then only, deciding what can and should be done. One difficulty in deciding these development programmes is this instinct—amounting, as I see it, to an obsession—that heavy industry is the hallmark of wealth and progress. It seems; to become a matter of prestige for a country particularly in its first flush of political independence, to demand an industrial self-sufficiency which its raw materials in no way justify. In those circumstances, I suggest that it is no service whatsoever
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to a country for the West to encourage what I can describe only as disloyalty to a country's environment. If the natural economy of a country is agricultural, then that country, as I see it, will be all the more prosperous for concentrating on improving existing resources, whether for export, to save foreign exchange or to earn foreign exchange, or merely to put more food into the mouths of its people.
LORD OGMORE: May I interrupt the noble Lord? He is making the same point as Lord Grantchester made; but in these countries it is not the difference between agriculture on the one hand and heavy industry on the other. In fact, what they are trying to do is to develop secondary industries which will make use of a lot of their agricultural products. That is what they mean by industrial development; not the creation of steel mills, and so on.
LORD BIRDWOOD: I do not quite agree with the noble Lord. I do not know whether the noble Lord remembers the great Industrial Development Corporation outside and around Karachi. Pakistan is essentially an agricultural country, and there is a mass of big industry there which the country itself has found it cannot sustain.
My Lords, if there be any truth in what I have said, it implies that it may be wiser to develop the existing facilities rather than to create new ones. If I may give an example, we can all think of certain countries where the farmers take water off small, modest irrigation systems; from springs of streams, or from tanks and reservoirs and the like. As often as not, those systems lend themselves to improvement and expansion which could double the productivity of the existing acreage, which, in turn, would put roughly double the income into the farmer's pocket. That, in turn, creates local demand, and stimulates the local industry. So you get a chain reaction set in motion: and the merit of the process seems to me just this: that it remains both indigenous and self-creative.
Now compare that kind of development with the more familiar situation where a Government falls for the temptation of opening up vast tracts of new territory. Along come the Western firms and the

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big engineers, and there is a scramble for the contract. Not unnaturally, the contract goes to the lowest tender, and frequently that by no means represents the most serviceable and enduring work on the job. The final effect usually is merely to create another million mouths or so to feed. So far as irrigation is concerned, I should like to quote what a well-known irrigation engineer, Mr. Michael Ionides, has said of this situation:
"We ought to judge irrigation schemes in terms of new water put on the land rather than in terms of new areas of land put under water."
That, in his view, was a more economic and better use, in the social sense, of the available resources.
I have contrasted those two methods of development, and I do not necessarily say that either is always wrong or that either is necessarily always right. But what I do maintain is that which is right and which is wrong is seldom really considered; so far as I can see, the international machinery for its consideration just does not exist. Nor do I think, my Lords, that social implications of development are in any way given sufficient thought. Without a doubt, any under-developed country which now seeks to integrate itself into the modern mechanised world is bound at some time to transform the whole of its social and administrative structure. The noble Earl has quoted Mr. Paul Hoffman. It was Mr. Paul Hoffman, I think, who said of the Nile that it had been fully and thoroughly surveyed as to the water; that the hydrographic data is all there; the engineering requirements are known, as is the new acreage which will come under development, and its measurements and location. All those things are known, but what no one has bothered to find out is what happens to the lives of the population which might move into the new areas which are opened up. No one has related their economy and their social pattern to that knowledge of the behaviour of the river.
My Lords, I could put this problem of the social development in perhaps a concentrated form by reminding your Lordships of a little story that I heard in Kuwait. When I was in Kuwait two or three years ago they told me that a small Arab boy could draw with perfect
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accuracy the silhouette of a Cadillac car long before he could draw a picture of his own house. I suggest that the task of the Western world and of the world that accepts Western aid is to teach the little boy to draw his house before he can draw a Cadillac.
We in the West—and I think we can take our country as a fair example—have been able to adapt ourselves step by step to the pattern of mechanisation and advance of science, because these advances have come always from within. We ourselves have been the inventors, as often as not, and initiators of these advances, and they have been spread evenly over the land on the basis of local availability and know-how. But exactly the reverse is the process in the under-developed countries. The physical machinery, the training and the basic knowledge usually have all to be imported, and those who have to import them are usually the smallest section of the population, who are fortunate enough to have acquired the education which will appreciate the nature of the modern industrial processes. On them surely rests a grave responsibility, because they happen also to be the policymakers. It is they who have to choose the whole pattern of the development of their land, and it is on their choice and on their judgment which must depend the kind of lives that their people have to live and the general social and economic pattern that their country must develop.
In that task of laying their plans, we can only hope and pray that they will always bear in mind the great truth: that the real reserves of capital, the real prosperity of a nation, rest on the collective skill and will of its own people. Foreign capital, investment grants or loans, whether on an international scale, a governmental scale or a private scale, may pour in. Foreign know-how may help to launch their schemes, and indeed, as I see it, that is its task. Foreign know-how may map the necessary course. But unless the people can use it in the right way, and, perhaps more important, have the will to do so, then I suggest that the schemes will fade away and the house, rather than being built on rock, will be found to have been built on shifting sand.
I think that at this moment I should say a word about a development to

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which the noble Earl referred. We are apt to judge this problem on an international basis, as one between a rich country and a poor country, comparing perhaps the wealth of the Ruhr with the Korean countryside. But we have exactly that same disparity within those countries themselves. The new wealth, whether from rubber, uranium or oil, and its management and the management of all the related mushroom activities which come with it, remain concentrated in the towns. That will of the people of which I spoke remains an urban will, and the result is that the peasantry, that same peasantry of whom Oliver Goldsmith said
"…once destroyed, can never be supplied",
desert their fields, and, as the noble Earl reminded us, squat themselves in the most appalling squalor around the towns in search of the opportunities and high wages which never come.
How can that rot be stopped? As I said, only by applying this new wealth to stimulate rural small industries. Alas! such wisdom is neither very spectacular nor has it much voting appeal. I have maintained that the real wealth of a nation resides in the will and brains of its people. If so, the educational service and the pattern of education must certainly be related closely to economic advances. If the system of education is broadly based and tied to the immediate needs of these rural communities, then that town drift will never take place, because the stimulus which creates the necessary will of the people will be their own support and will not have to be sought out in the towns.
I am aware that I have made only a sketchy diagnosis without suggesting any remedy. I have done so in the belief that the modern tendency is to go for the remedy before, or even without, diagnosis. That diagnosis has led me to the conclusion that there are far more problems waiting to be solved within these countries themselves than by a committed world which seeks to help them. At that international conference in Hamburg, Mr. Bevan also spoke of the oil royalties which, he said, could be used for the great advancement of the Middle East. He added that it was to their advantage that the area should be regarded as an integrated unit. That
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is perfectly true; but what Mr. Bevan did not say is that the very first people who have to be persuaded are the Arabs themselves, who have to apply the integration.
As to the scientific initial diagnosis, the United Nations Special Fund has been mentioned, and if, as I believe, it encourages and provides the means by which that essential survey can be made, I would certainly agree with the noble Earl that it merits far more support than we are prepared to give it at present. The noble Earl mentioned an international technical survey. I can recall the proposal for an international civil service coming up at the meeting of World Government at Copenhagen in 1952, and at the 13th Session of the United Nations last year a proposal for an international administrative service was defeated, alas! by an overwhelming majority, which included the whole of the Soviet bloc. Therefore, I would suggest that probably a more practical approach might be to recognise some form of an international research institute which perhaps would be the forerunner of a service. And if the problems which I have only touched upon exist, are little understood and are neglected, surely it is a matter for just such an international institute of public administration, perhaps as a counterpart of our own Royal Institute of a similar nature. I quoted the case of the gap in our knowledge of the Nile. It would be just that kind of problem at which such an international institute would be fitted to take a look.
Finally, I would sound just one note of criticism and warning. I know that it is taboo these days to hint at the merits of colonial systems, but, believing in the logic of borrowing what is good from all systems, as I do, I suggest that there is a missing link in the manner in which we envisage aid passing from an international dispensation; that it would lack those personal associations which, wherever the fate of one country is tied to aid exclusively given from another country, do seem to be effective. The great Gezira cotton scheme in the Sudan is surely as fine an example of progress, economic, social and political, since all its elements were planned together, as one could wish to find in the world; and yet it is built entirely on an exclusive relationship between this country and the

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Sudan. I can see no reason why an international dispensation, or a European dispensation, should not set about evolving their policies, bearing in mind the great value to be derived from a retention of that element of personal relationship which we recognise in systems which are now slowly, but perhaps inevitably, passing off the stage of international affairs.
7.50 p.m.
THE EARL OF BESSBOROUGH: My Lords, the noble Earl, Lord Jellicoe, is to be congratulated on putting forward his Motion to-day and on deciding to pursue it, because I feel that the subjects which have been raised lie at the very roots of our foreign policy and may, in fact, develop into the most important aspect of our relations with other countries, and especially the uncommitted countries. Like the noble Earl, Lord Jellicoe, I was also a delegate to the Atlantic Congress and sat under the wise guidance of the noble Lord, Lord Crathorne, who we are so glad has joined us in this House. I have also, during the past six or seven years, paid a number of visits, albeit fairly brief ones, to the Middle East—indeed I returned only last week from the last one. Although my knowledge of these countries is not so great as that of the noble Earl, I have had some experience, particularly of their economic problems, relating especially to certain aspects of their industrial development. I agree with the noble Earl that perhaps the major task confronting the countries of the Atlantic Community over the next decade is that of striking the right relationship with these developing countries. It is wrong to call them under-developed or even backward. Egyptians quickly became efficient pilots in the Suez Canal; Iraqis were trained more rapidly than anyone suspected in the arts of the electronic engineer.
But the aspect of these problems to which I should particularly like to refer at this late hour is the general attitude and outlook of the Western Powers, and particularly this country, towards the Governments and peoples of these free and independent States. I am sorry to say that I do not feel that, by and large, we have always adopted the right attitude. I do not think that this is the
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fault of the Foreign Office, and certainly not of my right honourable friend the Foreign Secretary or of his Minister of State, or of the noble Marquess who is to reply to the debate. They, I know, take an imaginative view of our relationships with these countries. But I am sorry to say that I feel the attitude of certain members of some of Her Majesty's missions on the spot is not always such as to create the best relations with these newly developing countries, nor to achieve the best results in so far as British industry and our export market is concerned. Some of our representatives—and I can think of one, in particular, in that part of the world—are highly imaginative and robust, who follow out admirably what I believe to be the attitude that Her Majesty's Government would like them to adopt. They know that these countries are proud of their newly won independence. They recognise that in granting aid to them it is a great mistake to attach strings; and in their general relations with Ministers, officials and people on the spot they treat them as equals and partners.
Unfortunately, this enlightened, forward-looking attitude is not universal. In certain capitals the head of a mission and members of his staff, and even, curiously enough, sometimes younger members of the staff, seem incapable of resisting the temptation to take up a kind of patronising "wet nurse" attitude towards officials of the country to which they are accredited. Some of them have even been described by friends of mine in industry as pompous and "prissy" in varying degrees, and even prim and prudish. I know how easy it is to get like that, for I have served in the Service myself. But in no case does that attitude improve relations with that country; nor does it facilitate industrial activity by British firms.
In one capital in the Middle East, I recall that a few years ago a member of the Embassy, in his normal, perhaps unofficial, relations with local officials took up the attitude that such-and-such a country was not ready for a particular form of technical development and advised the British firms not to press on with trying to sell their equipment to that country. Executives of the firms concerned went out to the country and tried to sell their equipment, offering at

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the same time to bring over trainees to this country—and that seems to me to be even more important sometimes than training technicians on the spot. The executives of the firm had to return to this country, but members of Her Majesty's Embassy remained on the spot; and when the executives had gone an official of the Embassy privately discouraged local officials from proceeding with the particular plan, and may also, I believe, have given advice on a matter about which he knew very little. The result in that case was that another company from another country quickly jumped into the breach, and all the orders were lost to British industry. That was disastrous.
In other capitals somewhat similar situations have arisen. I will not burden your Lordships with details, but I should be glad to give them to the noble Marquess or to any of his right honourable friends if they are not already aware of them. In some cases it has been possible at the last moment to retrieve something, but not always. You sometimes find among our representatives, I fear, the attitude that certain, say, types of equipment are rather like dangerous toys with which these less well developed countries would be ill-advised to play. You also find the opinion expressed that the country concerned perhaps cannot afford some particular form of development. It seems to me that in those cases we must stick rigidly to the rule of "no strings", and not even give private advice on the detailed expenditure incurred by such a country. These countries should be allowed to buy what they want and to learn by their own mistakes. Otherwise, if we advise or cajole them, the two unhappy effects which I have mentioned are almost certain to come about.
I did not find our German friends in the Middle East taking up the attitude which I fear certain British and American officials have been known to do. Neither, I need hardly say, do our Soviet friends. They are hard and realistic in their commercial and economic policies. They would not take up any patronising attitude. They take off their coats, roll up their sleeves and get down to business, treating officials on the spot as their equals and comrades in a new enterprise. How different this can be from Her Majesty's Ambassador driving
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down the main street in his upright Rolls, and sometimes in his top hat! I am not saying that an Ambassador should not drive in a Rolls or occasionally wear a top hat. I merely say that, in doing so, he presents a different picture from others, and very different from all the Arabs, who to-day, I am sorry to say, drive around mainly in Cadillacs and Mercedes. What I mean to say is that, while I believe in tradition, we must sometimes, and especially in these countries, break away from it and realise that. we are living in a modern technological world.
But I would not only venture to criticise our own official representatives. Some local representatives of industry also adopt the wrong attitude with labour on the spot. We, the British, cannot sometimes resist the temptation of reverting to a kind of "pukka-Poonah" attitude in dealing with local labour. In this connection, it is significant that some of the more successful British firms in that part of the world feel obliged to employ foreign and neutral representatives, such as Belgians or Swedes, as their agents. But in all this what worries me most are the sometimes unhappy relations between our own officials and representatives of British industry. I occasionally wonder whether our officials, who may have spent long years in the country concerned, may not be jealous of representatives who come out on specific visits and then have to go on to other countries or go home rapidly by Comet. I believe there is a certain jealousy existing there which has not been good for relations.
There are so many Foreign Service officials waiting to make their mark. They themselves recognise that they are fairly thick on the ground. Many are filled with feelings of frustrated ambition. As a result, they feel it necessary to re-analyse and re-assess every problem, perhaps in order to satisfy their own ego. Thus, instead of doing the good which they genuinely desire to do, they do harm. They are so tied up with their clerical procedures. All this should not be; but whether it is the case or not, it is true that officials and industrialists are trained in totally different, often diametrically opposite, ways.
I regret to have to speak thus, for I spent happy years in the Foreign Service

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and I learnt, I hope not too inadequately, the necessary procedure of how to record in minute form, in draft dispatches or telegram, anything which might seem likely to become of any importance. That report may eventually have got back to England with suitable drafting amendments by other members of the Embassy. I was one who was trained, like the noble Earl, Lord Jellicoe, to work like that. Then when I went into industry I found that quite different methods were employed. Instead of referring everything back, you suddenly had to take certain decisions on your own. If you put the lot down on paper, no one read it. You had to telephone at once, and get on with the job, rather than discuss it on paper over a matter of days or even weeks.
It seems to me that this difficult relationship between British official and business man may be at the root of our problem. There are, of course, rights and wrongs on both sides. But I think this is a subject which might well merit a special debate in your Lordships' House. I would propose to discuss the idea of setting down a Motion with the noble Lord, Lord Strang, who must be fully conscious of this particular problem. There are other senior and distinguished members of the Foreign Service who have recently also been in industry. They fully appreciate the problem, and, at the same time, there are officials who have gone into industry. But that traffic is, on the whole, very small, and there is not the necessary flow back and forth. My own feeling is that there ought to be a more regular interchange from the earlier years. For example, a bright young man who had been three or four years in some up-and-coming industry might do two or three years in one of our Embassies abroad, and vice versa. Then, perhaps, we might understand each other's respective methods rather better.
I do not believe that in these days, even in regard to the Foreign Service, the security aspect should in any way be used as an argument against such an interchange, for the secrets of industry are often as important and valuable as the secrets of diplomacy. I feel that we should all, the whole nation, the Government, business and the people go forward together in our attitude towards
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these developing countries more successfully if such exchanges were arranged.
I beg you, my Lords—and I must be forgiven for having detained your Lordships so long—to give this problem your serious consideration. I would beg my right honourable friend the Foreign Secretary, and my other friends in the Foreign Office, to think on these things. One of the most interesting papers at the Atlantic Congress was, as the noble Earl, Lord Jellicoe, knows, produced by Mr. William Clark. Mr. Clark is a distinguished economist and journalist who has spent a good deal of time in Afro-Asian countries, and particularly in the great Republic of India. I do not know whether he would endorse the strictures which I have made this afternoon, but he made one primordial point in that paper when he said that we in Britain and we in the Western countries must mix ourselves up more with the world's poor as partners and as friends, and not as patrons. We should not give things away "for free", if your Lordships will permit the term. These developing countries should have to pay for what they get. It looks suspicious to some if free gifts are offered, even if it is stated that no string is, in fact, attached. And it is true, perhaps, that our American friends have been more guilty in this respect than we have.
I fully agree with the noble Earl, Lord Jellicoe, and I think it is also the view of the noble Lord, Lord Salter, that aid, when possible, should be granted direct through the private channels of finance and industry, or through an international body such as the World Bank, rather than directly from the Government of a specific country. I agree with the noble Earl, Lord Jellicoe, and the noble Lord, Lord Salter, that there should be some kind of improved machinery—if not a new agency, at least improved machinery—for extending "soft" loans by Governments. But this, of course, could not be done through N.A.T.O. Obviously, "hard" loans are not so difficult to arrange. However, if, as Mr. William Clark said, the West simply lends money and various forms of industrial capacity without a psychological change in our outlook, all our plans will crumble. These countries must be brought to develop a wealth-producing capacity of their own. I am told—and I think the noble Earl would endorse this—that it would cost

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the Western countries only about one half of 1 per cent. per annum of their total national incomes to achieve this. This is not a completely unattainable sum. I only hope that an eventual reduction in arms expenditure may help the West to do more. But, above all, we must change our outlook.
8.7 p.m.
LORD ABERDARE: My Lords, so far as national economic policy is concerned the nations of the Western World have learnt the lesson that too great a gap between the rich and the poor is liable to lead to unrest and instability in any country. But this lesson has not yet been learned in our international economic affairs, although I believe that in general it holds true. The existence of wide differences in wealth between nations is just as likely to lead to unrest and instability internationally, and I think it is possible to visualise a much more peaceful world were the present underdeveloped countries able to support their citizens at a higher level of existence. Quite clearly, were a World Government ever to be realised, one of its first steps would be to use the resources of the richer nations to subsidise the standard of living of the poorer nations. Equally true, I think, is the analogy between internal economic affairs and international affairs, in the fact of the economic advantage to us all of a wider spread of purchasing power.
At the present moment the pace of modern industrial development is such that the poorer nations can see the rich increasing their wealth at an evergrowing rate. I do not believe it is any good the noble Lord, Lord Grantchester, or even my noble friend Lord Birdwood, saying that it is not desirable for these under-developed countries to industrialise themselves. These people wish to industrialise themselves, and if we do not help them somebody else will. As the noble Lord, Lord Ogmore, said, they will. certainly be looking with great interest at the progress of China, who has recently abandoned the Western form of capitalism and is making a vast effort towards industrial development under a Communist system. They will most certainly compare it with the progress made in India under a capitalist system. That is the challenge which we in the West must face.
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So far as the Commonwealth is concerned I think we have realised our responsibilities, and if I may quote just a short passage from the Report of the Montreal Conference, it seems to me what was then said about the development of the Commonwealth is equally true in a world context. The Report said:
"We cannot be indifferent to the poverty of some Commonwealth countries. The concern we feel is based fundamentally on common humanity, but it is supported as well by the knowledge that the economic development of Commonwealth countries would be of material benefit to us all. We also know that if the hopes of the less developed countries are too long deferred the democratic institutions which we all cherish might be in danger."
I feel absolutely certain that that applies to the under-developed countries of the world as well as to the Commonwealth countries.
In developing a policy for the future I should like to emphasise one point that has already been made by the noble Earl, Lord Jellicoe, and others; and that is the necessity of taking into account the psychology of the people whom we are trying to assist. Mostly they consist of ex-Colonial territories, highly suspicious of any new form of economic colonialism. Soviet propaganda is constantly emphasising the fact that, in their version, Russian aid is without strings, while aid from the West is "economic Imperialism". It was vividly expressed, although perhaps somewhat exaggeratedly, by a Nigerian recently who wrote:
"If Nigeria must take aids, whether from Washington or Moscow, London or Delhi, she should do so with caution. Africans brought up on the farm or in the open countryside must have watched a bee or fly hovering over honey and subsequently alighting on it. First the legs get stuck and then the wings. Soon the whole insect is completely stuck, body and all. The developed countries are comparable to the honey and the under-developed to the insect."
It is, therefore, very important, to my mind, that economic assistance from outside must be closely co-ordinated with local initiative. It is essential to remove all fear of economic exploitation and to create an atmosphere of joint participation for mutual benefit.
I agree wholeheartedly with what the noble Earl, Lord Jellicoe, has expressed as the means with which we might go about this task. It is, I am sure, especially important to provide skilled

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technicians, although the problem here is acute, for it is so hard to find men of the requisite skill who are ready to accept a short-term contract, to live in a remote area of the world and accept the authority of people whose wisdom they may doubt. It is very much easier for those trained behind the Iron Curtain: they go where they are told, they are trained as arranged, and there is no argument about it. It is therefore very much to be hoped that we shall make rapid progress with the education of the local people themselves in technical skills. And here also I think that the Commonwealth has shown the way, with the Colombo Plan, an excellent example of full co-operation on a basis of equality between nations of varying economic strength, the underlying principle being that those who can afford the most will make the greatest contribution.
Underlying the whole system of aid to the under-developed countries I would also support what has already been said, the necessity of ensuring markets for their primary products in order that they themselves may be able to contribute to their capital programmes. I will not go into the question of whether a new agency is required. I personally do not believe that any one agency can meet the situation. It may well be, as my noble friend Lord Jellicoe said, that a subsidiary organisation of the International Bank is necessary to provide the capital on easier terms. But in general I think that the more sources of capital and skilled technicians, and so forth, there are, the better it will meet up to the varying needs that there are.
What I believe is important is that those who are in positions of responsibility in the under-developed countries should know what agencies there are open to them, and I believe that the United Nations might play a useful role in supplying them with that information. For example, the Economic Commission for Africa would be doing the African countries a service if it produced a survey of the whole field of agencies and institutions able to assist them in their economic development. I would also stress the need not only for aid to be given but for it to be seen to be given, and for the full use of information services for the purpose of educating public
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opinion in the under-developed countries to a realisation of what is being done by the West for their economic assistance. It is very easy at the moment for a comparatively modest amount of Russian aid to be magnified at the expense of the continuing efforts of the Western World: one spectacular effort is always more newsworthy than a continuing process. But, my Lords, our achievements are far from insignificant, and I hope, that they will be given the publicity they deserve.
8.17 p.m.
VISCOUNT GOSCHEN: My Lords, I should like first to correct one impression which the noble Earl, Lord Jellicoe, in his opening remarks, may have made upon your Lordships. He said that there were a great many eminent delegates to this Congress which took place earlier in June, and himself. In fact I know full well that he himself did a great deal of work before this Conference began and was largely responsible for its success. I agree with the Motion and I support it.
I do not intend to go into the economic side of this problem of these conferences and what they stand for at all, but propose to speak for two or three minutes on one aspect which does worry me. Like the noble Lord, Lord Ogmore, I have been a delegate to the N.A.T.O. Parliamentarians' Conference—I think I have been for four years. He is perfectly right when he says that the opinion there has rather changed. In my early days most of the opinion and most of the thought at the Conference was directed to the military side, but of recent years the economic and the scientific—and I think particularly the scientific—sides have been brought out much more clearly. At this Atlantic Congress that was even more noticeable.
Many noble Lords have talked about under-developed nations being suspicious about gifts and being suspicious of the designs of the givers. I think that is absolutely true, and the psychological approach is very necessary. But I believe that one of the most important things is that the people of the countries of the Atlantic Community and N.A.T.O. are themselves suspicious when they hear about giving aid to the under-developed countries, because I do not think they really know what it means. I do not

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think this is the fault of the Press or wireless and television: I believe that a great many people in this country do not take the slightest interest in the affairs of N.A.T.O. or the Atlantic Community. They really take notice of N.A.T.O. only when the question of nuclear weapons comes up or through some crisis; they do not realise what N.A.T.O. is doing on the economic side, and I am quite certain they do not know what this aid to the under-developed countries means to the countries concerned. I hope that the Government will work out some means of educating the public, and that Governments in the other Atlantic Community countries will do the same. To put it in this way, the results of the conferences we hold are very often not known to the general public at all. They should be brought to the notice of people generally more than they are. I am sure that this is very important.
The noble Lord, Lord Ogmore, has already said how important the Congress itself was. I agree with every word he said about that. I think that we are all proud of being Englishmen. Those of us who were at the Congress or who were delegates to the Congress were particularly proud. It was very gratifying when delegates from the other countries represented at the Congress spoke to one and said, as many of them did, that there is only one nation which could have put on such an opening for a Congress like that, namely, Britain. This is very gratifying, and I am sure that noble Lords will bear me out and agree that that was so.
People from overseas were really extremely impressed. Many of them had never been to England or to London before. Some of the old, hardened Parliamentarians are always pleased to come back, and will say so, but many of the business people and the business delegates had never been to England hitherto. They were all very impressed by everything. They saw that we had come out of our economic crisis and that things were really quite good in England at the present time. They were even very surprised at the fine weather provided for them in England.
As to the entertainment side, the noble Lord, Lord Ogmore, has already spoken of this, and I will add my tribute to the noble Baroness, Lady Elliot of Harwood,
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for the magnificent way in which she arranged everything. Both for the delegates and for their wives and families there was hardly a moment when they were not being entertained in some way or another. All of this did this country a great deal of good.
I hope that, when conferences are arranged in other places in the future, they will be attended by representative people who are willing to learn from other countries and to take an interest in how other countries live and what they do.
LORD OGMORE: May I tell the noble Viscount, Lord Goschen, that I forgot to mention in my speech that the Congress gave the British delegation and people a standing ovation, which, I think, must be unique in history.
VISCOUNT GOSCHEN: I, also, had forgotten that.
8.23 p.m.
BARONESS ELLIOT OF HARWOOD: My Lords, I rise at this late hour to make a very short contribution and to apologise at the outset to the noble Lord, Lord Ogmore, for not being present when he, I understand, kindly made some very flattering remarks about the contribution which the hospitality committee, under my chairmanship, made to the Congress. Unfortunately, a meeting in connection with the World Refugee Year clashed with the beginning of this debate and I was not able to be present for the opening speeches. I should like to say how grateful I am for the kind remarks which he and the noble Viscount, Lord Goschen, made.
To the noble Lord, Lord Grantchester, who seemed a little nervous about the appointment of the delegates, I will say that, so far as I know, the Parliamentary delegations were appointed by the Speaker from another place and by the Lord Chancellor. I was very honoured to be asked to be a delegate, and I think, on the whole, that the nervousness which the noble Lord expressed was, perhaps, not justified.
This was the first time that I had been a delegate to the Conference of N.A.T.O. Parliamentarians. It was the first time, I think, that such a large Congress had ever been organised by the N.A.T.O. Parliamentarians. It seemed

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to me that there were two themes running through the whole Congress, which struck me very forcibly: first, that all the N.A.T.O. countries present were anxious to co-operate together in the non-military field as well as the military field, and, second, that the countries known as the free world countries realise that freedom is not defended behind a Maginot Line somewhere in Europe but that, all over the world wherever Communism gains a hold, freedom is in jeopardy. The most recent example, the tragedy in Tibet, is a case in point, where the methods were all too obvious and, alas! successful.
The theme running through all the committees of the Congress was, inevitably, how we might co-operate to preserve peace and protect freedom. This is all the more complicated since the language used by Communist politicians is the same as that used by the free world—"liberation from Fascist aggression", and the "establishment of true democratic government"—the words in both cases being unexceptionable but the results being exactly the opposite, as we know from Hungary and Tibet. This means that, among the N.A.T.O. countries and further afield, if we are to build up nations capable of withstanding Communist blandishments we must look to methods other than military and to points of view other than these of defence. That is why I was glad that the noble Earl, Lord Jellicoe, put down his Motion, which was the subject of the committee on which we both served and the implications of which are very far-reaching.
If the under-developed areas of the world were coloured red on the map, as used to be the British Empire in school atlases when I was at school, vast areas would be revealed, and, in the twentieth century, when the skill of man is so great, it is almost impossible to say that potential wealth does not lie everywhere. When the State of Israel can make the desert sands bear fruit in abundance, and the Trucial Coast produces millions of gallons of fuel oil, the Sahara may not be a desert except to the eye. One can look at no place on the map and say that this is barren land of no use for anything, for who knows?
Thus, the speed with which twentieth-century developments take place is so
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great that, if one thinks of one aspect alone, namely agriculture, which was mentioned by Lord Birdwood, it is clear that the mechanisation of cultivation and the increasing of yields through the skilful application of fertilisers and so forth can increase the potential production of the under-developed countries very rapidly. Men who cannot read or write can easily be taught to drive a tractor or a truck. In many spheres of modern development, machinery driven by unskilled labour does what skilled men had to do very laboriously fifty or more years ago; and the same can be said of many industrial developments to-day.
I will not weary your Lordships at this late hour with any further amplification of this matter, but I feel that there is needed one thing which has not, I think, been much mentioned in the debate, namely, the education of the people of the newly emerging States to be able to do what is necessary and use modern skills wisely. Here, in education, speed is more difficult. If the enthusiasm of new nations and the new and violent nationalisms spreading like bush fires across the world are to be used for the benefit of the countries themselves and not leave a trail of disaster along which Communism will quickly follow, then far more attention must be paid to training and education in the underdeveloped countries. I refer to all types of education, but especially to the education and training, through universities and technical institutions, of men and women to take on the responsibilities of government, the civil service, medicine and the law.
Illiteracy, I know, presents us with a vast field to conquer, but we must try to fight the battle. All too often we hear in this House and outside reference made to the lack of people trained to become political leaders or to run a Government Department, and, therefore, independence is not granted. But how much of the success of the self-governing States of the British Commonwealth is due to the universities which we started there? Among these are the University of Ibadan in Nigeria, with just over 1,000 students, Makerere College in East Africa, with 800 students, the University College of Rhodesia and Nyasaland, the Hong Kong University with 1,000 students, and the University College of the West

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Indies with 600 students. As well, there are the universities in India and the countries which we call affectionately the "old Commonwealth", where the training of men and women to take part in the most difficult of all skills, the skill required for government, takes place.
In spite of what is being done in all these universities, from the colonial countries alone 11,000 students come to Britain every year. One of the best things agreed at Montreal in September, 1958, was the establishment of 1,000 new Commonwealth scholarships, of which 500 are to be British and 250 Canadian, and at the Oxford Conference, which I think has either just started or is starting immediately, the distribution and content of these scholarships will no doubt be discussed. But I feel that in the long run and in the end the more satisfactory method is to build up universites and technical colleges in the new States themselves. I know that there is the question of staffing, and in the beginning, no doubt, many of the staffs of these new institutions would need to come from outside the countries concerned, or be nationals trained outside in the universities of the free world. But it would surely be worth while for the investment of funds, called for by the Atlantic Congress and subscribed through the World Bank, the United Nations and its agencies, and in other ways, to invest a lot of money in education, and in particular at university level, to provide the personnel to run the emergent States. In this sphere the Commonwealth countries can be proud of what has been done, particularly, as I mentioned, in West Africa; but it is not enough to develop the land and the resources of the world and to leave behind higher education as a kind of Cinderella in this development.
I would plead that there should be equal opportunities for the education of women, for the standard of development of a nation is determined as much by the education of a woman as of a man—the days of a one-sided educational development are over. The content of women's education in these new countries need not be the same, but the opportunities should be. The example of India in this matter is very striking.
My Lords, action by our Government in co-operation with the Commonwealth
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and the other N.A.T.O. countries would, I am sure, meet with a great response. When we read in the Press the speech by Mr. Paul Hoffmann, which I think Lord Jellicoe quoted, of the sixty nations classed as less developed, with more than 1,000 million people living in these countries, we appreciate that the magnitude of this problem is very great indeed. So I believe that if only we can increase the present development of these countries for these 1,000 million, in whatever way is considered to be the best way, even though vast sums of money are quoted and required, it would be worth while, for the emergent territories themselves will make the contributions as well as the highly-developed countries. It can be an investment and not an extravagance—an investment in health, food consumption and industrial development, in rising standards and in free nations. Poverty and misery is a good seed-bed for Communism. Rising standards of living and an educated public opinion is a stony ground for Communism.
So I hope that Her Majesty's Government will continue to support and increase their support to the United Nations agencies designed to help this development, to the World Bank and any other special fund that they may think appropriate for the job, although I agree with Lord Salter that existing monetary machinery should be studied in the first place. Time is not on our side in this particular matter; speed is essential. I hope that we shall push on with a policy that we have always advocated, and which is more necessary than ever.
8.34 p.m.
THE MARQUESS OF LANSDOWNE: My Lords, at the outset of my remarks I should like to give a warm welcome to the Motion which has been put down by my noble friend Lord Jellicoe. I think that your Lordships in all parts of this House will agree that we have had a valuable and really important debate; I am only sorry that it was not possible to hold it earlier in the day, so that we might perhaps have gone into this matter in even greater detail.
The declarations that were made at the recent Atlantic Congress, and which have inspired the Motion which the noble Earl has put down to-day, have, I think,

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high-lighted a subject to which Her Majesty's Government have for many years been giving close attention. As noble Lords are aware, the United Kingdom has played a leading part in promoting and supporting international techniques for assisting less developed countries throughout the world. In this we have a good record. I was interested by the observation of the noble Lord, Lord Ogmore, when he called our attention to the fact that in the Atlantic Congress, at least among N.A.T.O. Parliamentarians, this seemed to be a subject which until a short time ago received less attention.
LORD OGMORE: It received none at all.
THE MARQUESS OF LANSDOWNE: I think the noble Lord said that he threw his pebble in. Let me assure noble Lords that if that was the case among N.A.T.O. Parliamentarians, it has certainly not been the case with members of Her Majesty's Government. As was stated by my right honourable friend the Prime Minister, we in the Commonwealth believe in giving help to each other without patronage and without conditions. I think it is natural that, so far as Her Majesty's Government are concerned, this help has been directed first towards fellow-member countries of the Commonwealth which are less developed than ourselves; and it is our firm belief that this help should be given in a spirit of equal partnership.
Under Article 55 of the United Nations Charter, the industrial nations of the West have accepted a moral commitment to help nations improve their living standards. Substantial efforts have been made, both within the United Nations and by countries individually, to implement this commitment, by Government-to-Government loans, by grants and by technical assistance. Encouragement has also been given to private investment and to the expansion of trade. None the less, many of the under-developed countries—call them what you will—still have a desperate struggle even to maintain a mere subsistence. We believe that helping the under-developed countries is in the interests of world economy as a whole; but we also believe that there rests upon us a moral obligation to help
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them. The efforts which the United Kingdom are making are prompted solely by these considerations.
I should like to remind your Lordships of some practical steps which have been taken by Her Majesty's Government. First let us consider for a moment the field of Government investment. In this our record is second only to that of the United States, and our bilateral contributions and contributions within multilateral international arrangements have been steadily increasing. In the financial year 1957–58 the United Kingdom Government aid to under-developed countries totalled £77·8 million. In the last financial year we increased our aid by 45 per cent., to approximately £115 million. As I have said already, it is natural that the major part of our efforts has been devoted to Commonwealth countries. Many of the countries which have been helped through the Colonial Development and Welfare funds and the Colonial Development Corporation are now close to achieving independence. Her Majesty's Government will continue to give priority to those countries with which we have a special link in our Commonwealth.
The Colonial Development and Welfare funds cover just the sort of development which I think the noble Earl, Lord Jellicoe, wishes; and since 1946 we have voted over £300 million of funds for this purpose, including £95 million for the five year period ending in 1964. This is a steady and continuing source of help on which, subject to Parliament's approval, the colonial territories can rely for their development. Then there is the Colonial Development Corporation, with authorised capital of £150 million to invest, alone or alongside private enterprise, in colonial ventures, be they industrial or agricultural. There is the London market, and the colonial territories can also have recourse to Exchequer loans over the next five years up to a total of £100 million. Then there is all the money that may come from private industry making direct or indirect investment in the territories. Perhaps even more important, there is the technical assistance, the providing of know-how; and last, but certainly not least, there are the international institutions to which noble Lords have referred in the course of many speeches

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this afternoon. All these add up to a very considerable total of United Kingdom effort; and while I would not pretend for a moment—nor indeed, would any member of Her Majesty's Government wish to pretend—that we believe that what we are doing is sufficient, we do believe that we are making a very great effort, and a great effort in the right direction.
Much has been said about the importance of technical assistance; and naturally, through our long history of association with overseas territories and our tradition of service abroad, we in the United Kingdom have the necessary experience to render technical assistance to countries in the process of their development. This assistance usually takes the form of supplying instructors and providing, in the United Kingdom and elsewhere, training facilities for students—a matter to which my noble friend Lady Elliot of Harwood has just referred. In addition, we also provide training equipment to colleges and institutes abroad under the technical assistance programmes not only of the United Nations and the Colombo Plan, but also of the Baghdad Pact.
Within the last seven years the number of overseas students training in the United Kingdom has trebled, and it now stands at a figure, I am told, of approximately 38,000. Between 10 and 12 per cent. of all the full-time places available at the technical colleges and universities are held by overseas students, and two-thirds of these overseas students come from Commonwealth countries. A large number of these students are directly financed by Her Majesty's Government. Since 1950 Her Majesty's Government have financed 2,500 trainees from the countries of South-East Asia under the Technical Operation Scheme of the Colombo Plan. Training in the United Kingdom is being given under the Baghdad Pact and under the Mutual Technical Assistance Agreement which exists between Ghana and this country.
The United Kingdom plays an active part, as your Lordships well know, in the N.A.T.O. finishing scheme and in the N.A.T.O. pocket for the support of advanced students. It is our hope that by 1970 we shall have twice as many highly qualified scientists and technologists as we had in 1955. University
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places are to be increased from 90,000 to 130,000 in a ten-year period, and the output of advanced courses for technical colleges in England and Wales is to rise from 9,500 to something over 15,000. It is estimated that about 11,000 United Kingdom teachers are serving at this moment overseas. Since 1957, 550 United Kingdom experts have been employed under the United Nations expanded technical assistance programmes. Up to now the United Kingdom has provided more candidates under these programmes than any other country.
As a founder member of the Colombo Plan technical co-operation scheme, the United Kingdom gave technical assistance up to December, 1958, to the value of £3·3 million to Commonwealth countries, and nearly £900,000 to member countries outside the Commonwealth. Our annual contributions to the United Nations technical assistance and specialised agencies totals more than £2 million. Under the Baghdad Pact the United Kingdom contributes £850,000 annually, out of which £50,000 is devoted to the exchange of students between member countries and also to the provision of training facilities for them.
Even at this late hour I do not apologise for calling your Lordships' attention to these figures, for they represent, as I think your Lordships will agree, a very commendable effort on the part of our country; and an effort, as I have said, in the right direction. But I feel that I must, in honesty, issue a word of warning. We must be careful not to provide, in one way or another, more than our balance of trade and our sterling reserves will allow. If we were to lend to such a point that our reserves became low and the pound became suspect, it would do harm to all in the sterling area and to the cause of economic development. For this reason we have always, as your Lordships are well aware, to keep this in mind; and in a debate such as we have had this evening, ranging over such a wide field and where, naturally, enthusiasms have risen, I felt that perhaps there was a risk we might forget that our resources are, in fact, limited.
Naturally I have talked mostly about Government aid, but that does not mean that I in any way underestimate the

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importance of private aid; nor that I underestimate the importance of what can be done by individuals. A number of your Lordships have referred to this aspect in the course of this evening's debate, and I entirely agree with them. This is not a problem which can be shouldered by Governments alone; it is a problem, as I believe the noble Lord, Lord Ogmore, said, in which every facet of life and every country of the West should participate. And with that view I can assure your Lordships Her Majesty's Government are in entire agreement.
Your Lordships may think that, because I have given you these figures of our very substantial effort, there might be in the heart or the mind of Her Majesty's Government some degree of complacency. Let me assure noble Lords at once that no such thing is the case. Her Majesty's Government are fully conscious that this whole subject of under-developed countries is a subject of enormous importance and of gigantic proportions. We are constantly considering the desires and the needs of these emergent countries, and we also have to consider the risk of the misuse of their aspirations for political purposes which might be inimical to their national independence. As to the observations made by the noble Lord, Lord Grantchester, with which I am afraid I could not find myself wholly in agreement, I think perhaps he was wishing to draw attention to the dangers of a misuse of the aspirations of these emergent countries. I can assure noble Lords that Her Majesty's Government are well aware of this risk.
I have said that we in the United Kingdom believe that we have a moral duty to help under-developed countries, and that we further believe it to be in the interests of the world economy as a whole that we should do so. Now for a number of years immediately after the war the Soviet Union, under Stalin, seemed to be trying to impose its will on the world by the threat or the use of military weapons. This method was used to dominate Eastern Europe: it was also used in the Far East. Gradually, the free world organised its defences against such aggression, and in Western Europe, in particular, the strength and unity of N.A.T.O. has provided an obstacle against Communist advances which has
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now held for ten years. In 1952 in the Communist Party Conference, there were signs that Soviet thinking was turning towards an economic offensive to supplement, or perhaps replace, the strategic offensive which had come up against such determined resistance. But apart from an attempt to influence elections with cargoes of grain, there was not much sign of these thoughts being translated into activity. However, from about 1954 there have been increasing numbers of Communist offers of aid to carefully selected uncommitted countries. There have also been signs of increased Communist commercial activities.
In several respects aid from the Communist countries must be welcome. It is in the spirit of the present time that the "haves" should contribute and help the "have nots". This spirit has been acted upon by the countries of the free world for years, and the Soviet Government are latecomers in the field. I submit, my Lords, that we must be vigilant, and I believe it is our duty to unmask the ulterior motive—the attempt to achieve economic or political domination. I do not believe that we need fear Communist competition. Where we can do better than the Communists, we should demonstrate the fact; and where their contributions can be genuinely helpful, we should recognise it.
Nevertheless, we should not forget that in May of 1957, in an interview to a correspondent, Mr. Khrushchev said this:
"We think that capitalism should be destroyed not by means of war and military conflicts, but through an ideological and economic struggle."
Some of the aspects of Communist aid must make us think that this statement was not purely a piece of political theory; for whereas Western assistance has been spread over no fewer than 70 nations, nine-tenths of the Russian aid is given to only six countries. This, of course, does not mean that aid from the Communist bloc is always useless or should be refused. The point is that the selection made suggests a basically political objective. Soviet aid, as we know, and as has been mentioned in speeches this afternoon, usually is offered with the label "no strings attached". But we also know that a number of countries have found this label to be very nearly a false prospectus: and we cannot forget that in 1957 Soviet aid to

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Yugoslavia was suddenly cut off when the policy of the Yugoslav Government did not satisfy the leaders of the Soviet Government.
So, my Lords, we have to be vigilant, and I think that it is our duty to disclose the fact when we feel that aid is being given for no other purpose than the motive of political and economic domination. As the noble Earl who moved this Motion said, we believe that the passionate belief in political independence of the emergent nations is a perfectly proper and natural thing. We also understand that their conduct of their internal affairs is a matter primarily for themselves, and if we are able to help them develop their economy that is all we should seek to do
My Lords, there is one particular recommendation which emerged through discussions in the North Atlantic Congress to which I wish to pay special attention, and that is the question of a possibility of the creation of an International Development Association. The question has often been raised—indeed, it has been raised this afternoon—whether a new international financial instrument is needed to provide economic assistance to the under-developed countries. Although it is obvious that no new institutions will of themselves produce additional capital, Her Majesty's Government are of the opinion that such a proposal as the I.D.A. is likely to be able to grant aid to underdeveloped countries on terms that are more flexible than are at present possible. We believe that the I.D.A. might possibly operate as a further affiliate of the International Bank, and that it could supplement the Bank's existing operations without duplicating all the institutional and organisational arrangements, since there could be a substantial sharing of facilities and a close relationship between the operations of the Bank and of the I.D.A.
As your Lordships know, this matter was discussed at last year's annual meeting of the International Bank in Delhi. It is expected that it will be further discussed at this year's annual meeting in Washington; and it is probable that a step forward may then be taken towards bringing the suggested association into existence. Her Majesty's Government are prepared to join in
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working out plans for such an association, and if acceptable plans could be worked out it would mean that the United Kingdom would contribute to the capital of the association just as it contributes to the capital of the International Bank.
It has been suggested that the capital of the I.D.A. should be of the order of 1,000 million dollars. This, I think, we shall all agree, is a minimum figure; and it is not the figure (as those of your Lordships who were listening to Lord Jellicoe's speech will be aware) which the noble Earl quoted as having been given by Sir Oliver Franks. Be that as it may, we believe that there are possibilities here. Now if the United Kingdom were to contribute to the I.D.A. on the same basis as we contribute to the International Bank, our subscription would be in the neighbourhood of £50 million—that is to say, 14 per cent. of the whole. I hope that your Lordships, even at this late hour, will consider this figure of £50 million against the background of the figures which I have already given to your Lordships. We must be realists in this business, and we must see, as I have said earlier, that we do not so overtax ourselves that, rather than being able to help, we in fact weaken our own financial position; and it is only through the strength of sterling, and it is only through the ingenuity of our traders, that we are able to make the contributions that we do.
LORD OGMORE: May I interrupt the noble Marquess? This is a very important statement that he has made, and I am very grateful indeed to him for making it. I think it ought to be widely known. And if nothing else does, I think this statement justifies Lord Jellicoe's Motion. I take it that what the noble Marquess is implying is something on the lines suggested by the noble Lord, Lord Salter. This is a considerable departure, is it not, from the original view of Her Majesty's Government? May I ask whether this Association will be able to lend and receive in soft currencies?
EARL JELLICOE: My Lords, before the noble Marquess replies, may I ask him one question on what was a very encouraging reply on this particular point? He gave the figure of a possible £50 million as being our proportional

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share of the subscription. That, I assume, would be on the basis of 1,000 million dollars.
THE MARQUESS OF LANSDOWNE: My Lords, I do not wish in any way to disappoint the noble Lord, Lord Ogmore. I think that if he reads what I have said in the OFFICIAL REPORT tomorrow, he will see exactly where Her Majesty's Government stand. We look upon this proposal with favour, and it will be most carefully scrutinised, but naturally I cannot this evening commit any of my colleagues to anything definite. As I have tried to explain, we are prepared to co-operate in seeing whether it is possible to work out a scheme which will be practicable. I go no further than that.
I am afraid it is possible that I may not be able to answer all the points which noble Lords have raised and indeed it may well be that your Lordships will not wish me to do so. Some noble Lords who took part in the debate have been obliged to leave. But I should like to answer one or two specific questions, and if there are others which I have forgotten I hope that noble Lords will not hesitate to ask me. The noble Earl, Lord Jellicoe, referred to the question of the co-ordination of our efforts with other European countries. I listened to that part of his speech, as I did to the whole of his speech, with great interest. As the noble Earl may well be aware, various ideas are being considered, and the noble Earl's suggestion about the possibility of using O.E.E.C. is one of the schemes that is being considered. We will certainly take note of what he has said. I think that the noble Earl made a valuable suggestion when he said that he thought that perhaps the co-operation of the countries of the Six and the countries of the Seven on aid to underdeveloped countries might help to constitute the bridge that we so much desire between these two economic organisations.
The noble Lord, Lord Ogmore, asked me about the Commonwealth Development Bank. Officials met here last week to review the availability of resources to help economic development in the Commonwealth. They reviewed the idea of a Commonwealth Development Bank. I have no doubt that in due course they will
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be reporting to their Governments on their conclusions, but I think the indications are that they found the difficulties no less than the Ministers found them when they were discussing this matter at Montreal. In particular, there is no certainty that the creation of a Commonwealth Development Bank could increase the funds available to the Commonwealth. But no doubt the Finance Ministers, when they meet in September, will discuss this matter further, though I think, that we may once again find that the creation of another organ does not create more wealth.
The noble Earl, Lord Jellicoe, asked where Her Majesty's Government stood in relation to the Special Fund. It is true that our subscription to the Special Fund has been of the order of one million dollars. This was for the first year of the Fund's operation. At present we are discussing what our contribution for 1960 should be. This, of course, we have to consider in the light of our other commitments. I think that there was perhaps a slight mis-statement when it was suggested that Mr. Hoffman had been unable to persuade us of the need. That, I must assure the noble Earl, is not the case. We are fully aware of the need, but we have to make calculations. I think that it is safe to tell the noble Earl that it is our hope that Her Majesty's Government will be able to make an increased contribution.
The noble Earl, Lord Bessborough, felt obliged from his experience to call attention to certain shortcomings which, he considered, existed in some of our representatives overseas. Surely an adult country like ours can afford self-criticism. I do not find it possible to agree with all that the noble Earl said, but it may be that we should be wise to consider whether our attitude is always the most suitable attitude in modern times. The reports that I have from overseas are nearly always good, but I suppose that it may be that at times, such as in the instances the noble Earl gave us, our representatives may fall below the level of events.
The noble Lord, Lord Ogmore, paid compliments to the organisers of the Atlantic Congress, and the noble Viscount, Lord Goschen, associated himself with these compliments. I should like to say, both personally and on behalf of

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Her Majesty's Government, how much we admired the way the Atlantic Congress was organised. I heard of the standing ovation which was given to the British contingent, a wonderful tribute of appreciation from our visitors from abroad.
I am certain that there will be a number of questions with which I have either not dealt with at all or dealt with inadequately. I am not going to attempt this evening to go into the interesting details of the methods and machinery for arranging loans, which were developed by the noble Lord, Lord Salter. These are suggestions that obviously deserve consideration and they will be given that consideration. I should simply like to say this in conclusion. I repeat our thanks to the noble Earl, Lord Jellicoe, for having moved this Motion and our gratitude to noble Lords who have taken part in this debate and made valuable contributions, all of which will be carefully considered. I sit down leaving with your Lordships this thought—that we in the United Kingdom are not ashamed of the efforts that we have made. We are not satisfied with what we have done and will certainly bend our minds and our energies to making further contributions towards a cause which has nothing whatever to do with politics, but is a moral obligation, to help those who are less fortunate than ourselves. I think that if we approach this problem only from the angle of arresting a type of government in which we do not believe, we shall be making a mistake. Naturally, we must see that aid is given unconditionally, and that is the way in which Her Majesty's Government are attempting to make their contribution to this gigantic task.
9.10 p.m.
EARL JELLICOE: My Lords, before I beg leave to withdraw the Motion I should just like to put your Lordships' minds and digestions at rest; I am not going to make my speech or those of your Lordships again. I just want to say three things. First, I should like to add my word to those which have fallen from other noble Lords in praise of the work done by the noble Lord, Lord Crathorne, and the noble Baroness, Lady Elliot of Harwood, in helping to organise and to make a success of the Atlantic Congress. Secondly, I most sincerely thank the noble Marquess, Lord Lansdowne, for his courteous, very full, considered and, to my mind at least, very positive and rather encouraging reply. It was encouraging, at least to me, because so far as the three suggestions that I put to him are concerned I think I scored three inners, or perhaps two inners and a magpie, on the target presented by the noble Marquess. Thirdly, and in conclusion, I would thank all noble Lords and the noble Baroness who have spoken in the debate. I think their speeches, together with that of the noble Marquess, have done what the Motion was intended to do, which was to focus attention on this really vital problem in our whole international relations. I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

HUMBER BRIDGE BILL
The Queen's consent signified, and Bill reported, with Amendments.
House adjourned at twelve minutes past nine o'clock.