Lords Sitting of 8 March 1960

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Ely

LOSSES ON UNDATED GOVERNMENT STOCKS
LORD BOOTHBY: 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 the present policy of the Governor of the Bank of England of withdrawing support for the gilt-edged market has been authorised by the Chancellor of the Exchequer; and whether they have now ceased to accept any responsibility for the losses incurred by those who were induced, on patriotic grounds, to invest in undated Government securities.]
THE MINISTER WITHOUT PORTFOLIO (THE EARL OF DUNDEE): My Lords, it has already been made clear in an Answer given to the noble Lord, Lord Pethick-Lawrence, on February 29, that Her Majesty's Government are entirely content wth the recent action of the Bank of England in the gilt-edged market. It has also been made clear that, in the opinion of Her Majesty's Government, this action cannot be correctly described as a withdrawal of support. With regard to the last part of the noble Lord's Question, Her Majesty's Government have a categoric obligation to carry out the terms of the contract on which the money was borrowed: to pay interest as it falls due, and where a final maturity date is specified, to redeem the stock on that date. But Her Majesty's Government have never accepted, nor can they ever accept, responsibility for profits or losses incurred by those who buy or sell Government securities, whether dated or not, and whatever the grounds on which they made the investment. The best service Her Majesty's Government
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can render to holders of gilt-edged securities, as to all other members of the community, is to direct their efforts towards maintaining the purchasing power of the pound.
LORD BOOTHBY: My Lords, while I appreciate that Her Majesty's Government cannot differentiate between different classes of security, I wonder whether they really appreciate the immense suffering and anxiety that a very large number—perhaps millions—of small savers, who have invested all their savings in Government securities, are undergoing at the present time, not only through the fall in the value of the securities themselves on the market but also through the fall in the value of the pound, which has been superimposed upon it. In these circumstances, I wonder whether the Government could not give some assurance that there are limits below which they are not prepared to see the gilt-edged market fall, and, in the meantime, until conditions radically change, that they will not use the gilt-edged market as an instrument of monetary policy.
THE EARL OF DUNDEE: My Lords, the Government do most sincerely appreciate and sympathise with the losses which have been incurred by all holders of long-term fixed interest securities, including holders of Government stock, and including those affected by the recent loss—the week before last—when War Loan fell from, I think, 6311/16 to 627/8. But this is not a very big loss compared with what has been suffered on account of inflation in the last fourteen years, and I do not think it would help holders of stock if the Government, by buying at an artificially inflated price, were to encourage a renewal of inflationary tendencies.
LORD PETHICK-LAWRENCE: My Lords, would the noble Earl at least go so far with me as this? There are a large number of people of slender means who have suffered grievous loss owing to what has taken place, which has meant that their misplaced confidence in Government stocks has brought to them a serious reduction in the wealth they have set aside for their old age. Will the noble Earl, therefore, convey to his right honourable friend the Chancellor of the Exchequer that he might at least, as a

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measure of good will, offer to persons who have suffered in this way an exceptionally generous arrangement by which they may convert their Government holdings, which have so depreciated, into annuities for their old age?
THE EARL OF DUNDEE: My Lords, I am sure that the noble Lord is better aware than most of us of the difference between dated and undated Government loans. People who desire to conserve their capital, and who wish to confine themselves to the gilt-edged market, will normally buy dated stock. Those who buy undated stocks more frequently do so because they desire to ensure a fixed annual income which is probably slightly higher than they would get from dated stock. I do not see how we could give preferential treatment to one class of investors in undated fixed-interest securities without giving similar preferential treatment to all holders of undated stocks of every kind.
LORD PETHICK-LAWRENCE: My Lords, I am quite aware of the facts which the noble Earl has stated, but the people I am concerned with are quite humble people, with no expert Stock Exchange knowledge, who have invested a few hundred pounds, or maybe a thousand pounds, as a nest egg for their old age. I would suggest to the noble Earl that the Chancellor of the Exchequer might meet the case of these people by exceptional treatment, in enabling them to purchase annuities at better figures than those which would normally be available for them, in exchange for their holdings of Government stock.
LORD BOOTHBY: My Lords, before the noble Earl replies, may I add one word? He was inclined to belittle the fall that took place a few days ago. I admit that it was not substantial, though it caused additional anxiety and alarm. Would the noble Earl agree that the average fall in undated gilt-edged securities since the war amounts to over 40 per cent.? This is a very serious thing for a great many people.
THE EARL OF DUNDEE: Yes, my Lords. But this fall in capital values from round about 100 to round about 63 is a direct consequence of the rise in the long-term rates of interest. One must always expect that the selling value of
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undated fixed-interest securities will go up and down in inverse ratio to the prevailing rates of interest. That is something which is not new; it has always happened all through our financial history. Of course my right honourable friend the Chancellor of the Exchequer has given much sympathetic consideration to people of small means who have invested in Government stocks which have gone down in value. He has not been able to see his way in justice and equity to adopt any of the suggestions which have been put to him; and although I am sure he will gladly consider anything which comes from so old and distinguished an economist and member of past Governments as the noble Lord, Lord Pethick-Lawrence, I do not think, having heard what he has said, that his suggestion would overcome the difficulties of dealing with the one or two special cases of hardship.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, would not the noble Earl agree that the Government have some duty to control very large and grave financial trends? Is it not a fact that the five big banks, or, at any rate, those five plus a few smaller ones, have sold on the market hundreds of millions of pounds' worth of gilts in a comparatively short period; that that has forced down the price on the market; that they, as our principal banks, have put money into hire purchase companies in which they can get a much larger return and that, as a consequence, the five big banks have all been able to issue bonus shares and higher profits in the last few years? Why do not the Government consider the whole situation and exercise some financial control?
THE EARL OF DUNDEE: My Lords, that is exactly what the Government are doing, and that is just what is now complained of by some of your Lordships. The five banks sell not, as a rule, undated stocks, but short-term dated securities, and the week before last they offered an exceptionally large quantity of these securities to the Government broker who accordingly marked down the price by one point, because he felt it was undesirable that an artificially high price should be maintained by the Government when so many securities were being offered. That is precisely the way in which the Government can control inflationary tendencies.
LORD STRATHCLYDE: My Lords, could by noble friend say whether this fall has been occasioned during recent months or whether it has been continuing over a considerable number of years?
THE EARL OF DUNDEE: My Lords, of course it has been continuing over the last ten years, during which prevailing long-term interest rates have risen from 3 per cent. or thereabouts to 5 per cent. or 5½ per cent., and that has the inevitable corollary of an inverse reduction in the capital value of fixed-interest securities which have no date of redemption.
LORD PETHICK-LAWRENCE: The noble Earl seems to forget the fact that Government policy has brought about this change. It is not an accident that the bank rate has gone up and the whole level of interest on gilt-edged securities has decreased. It is part of the overall policy of the Government. They cannot get away from that fact.
THE EARL OF SWINTON: My Lords, before the noble Earl answers, may I put this question, in general fairness? Is it not the fact that the securities which have suffered most are those non-dated securities which were issued by a Government on a wrong idea that you could have artificially cheap Government money?
LORD BOOTHBY: My Lords, before the noble Earl replies, I must reply to the other noble Earl by saying that perhaps the worst case of all was the conversion of 5 per cent. War Loan to 3½ per cent. War Loan on patriotic grounds, by a Government of which he was a member before the war, and which has caused the most catastrophic fall of the lot.
THE EARL OF DUNDEE: My Lords, perhaps I may be allowed to reply before the number of supplementaries reaches double figures. I could not accept the assumption of the noble Lord, Lord Boothby, that the conversion of 1932 was in any way a reprehensible thing. It is true that people were appealed to on
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patriotic grounds not to be paid off, but rather to accept conversion—
LORD BOOTHBY: And it was a fraud.
THE EARL OF DUNDEE: —and it was in their interest to do so, because at that time they could not have got a better yield with the same money from an alternative gilt-edged investment; in fact, for the next twenty years the value of 3½ per cent. War Loan remained round about par, and for more than half the time, from 1939 to 1949, it was substantially over par. So that at any time in those twenty years they could have sold, sometimes at a substantial profit. With regard to the supplementary question of the noble Lord, Lord Pethick-Lawrence, I could not accept at all that the main reason for this fall in long-term interest rates is the policy of the Government. The main reason is that there is a growing demand for capital and that interest rates are going up all over the world; and if we tried to keep them down artificially here, it would mean a run on our reserves and we should have another balance of payments crisis.
LORD KINNAIRD: My Lords, I should like to say one word, because the noble Viscount, Lord Alexander of Hillsborough, has painted such a misleading picture of the banks. As a very old banker—I am no longer one—I should like to ask whether it is not true that the banks in the time of war, at the request of the Government and for patriotic reasons, put their money into Government stocks. Was it not the case that the banks subscribed for these stocks at the price of issue? They were not making money by doing so. It was for patriotic reasons, and they paid dearly for it. That is a truer picture than that painted by the noble Viscount.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I should like to ask the noble Lord whether he is not aware that as a matter of fact in those days the banks never invested large sums by way of share or loan capital in hire purchase firms, to get a higher profit than patriotism would otherwise require. Has the patriotism gone?

KENYA'S CONSTITUTIONAL DEVELOPMENT
2.52 p.m.
THE MARQUESS OF SALISBURY: 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 their attention has been drawn to the statements by Mr. Tom Mboya, within a week of the ending of the Kenya Conference, that it was a dream that the Macleod Constitution was to last four or five years and that African elected members had given no agreement to that effect in London; and to ask further why, if that was their attitude, the Secretary of State for the Colonies stated in the White Paper signed by him on February 21, that the African elected members were prepared to accept his proposals as the next stage in Kenya's constitutional development.]
THE MINISTER OF STATE FOR COLONIAL AFFAIRS (THE EARL OF PERTH): My Lords, I have seen reports of Mr. Mboya's statements. The African constituency elected members have, in fact, as the Conference Report says, accepted my right honourable friend's proposals as the next stage in Kenya's constitutional development. The Conference did not consider for how long that next stage should last, but Her Majesty's Government would certainly reject any suggestion that the new structure should be pulled down as soon as it had been erected.
THE MARQUESS OF SALISBURY: My Lords, I take it, therefore, that Her Majesty's Government do not accept Mr. Mboya's interpretation of the attitude of the African elected members at the Conference. In those circumstances, have they, or will they, leave him in no doubt that any repetition of such irresponsible utterances will invalidate the present agreement and would certainly render
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futile any further negotiations with him?
THE EARL OF PERTH: My Lords, I know that Mr. Mboya, in speaking, was speaking personally for himself, and not on behalf of the African elected members. Incidentally, the leader of those African elected members was Mr. Ngala and not Mr. Mboya. I looked very carefully at what he said in the statement. It has been shortened, naturally enough, in the Press, and I do not think that it was quite so shortened in its implications as is given in the Question. But it is quite clear, and I repeat, that, so far as Her Majesty's Government are concerned, no further changes will take place unless we find there has been successful working of the present Constitution.
THE MARQUESS OF SALISBURY: My Lords, I am glad that that statement has been made by the noble Earl. But, unless the Press report that I have is incorrect, Mr. Mboya stated—and it is put in inverted commas:
"… the African elected members gave no agreement in London that this Constitution would last four years."
It is certainly going to take three or four years to bring it into operation, and I still regard that as a repudiation.
THE EARL OF PERTH: My Lords, I think we must leave it at that. The question of the duration was not discussed in detail. So far as her Majesty's Government are concerned, what we want to know, before we go to the next stage, is that the Constitution is successful.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, would it not be well if the noble Earl would let the Colonial Secretary know that we on this side of the House, although we may not agree with every word in his White Paper, certainly welcome the progress he has made in this matter of the Treaty?
THE MARQUESS OF SALISBURY: My Lords, may I say that it gives me no confidence at all?

PRIVATE BILL STANDING ORDERS
2.55 p.m.
THE CHAIRMAN OF COMMITTEES (LORD MERTHYR): My Lords, I beg to move the Motion standing in my name on the Order Paper. This Motion is worded in exactly the same way as that which I moved in similar terms on February 16. I have thought it more convenient, in spite of the length of the Order, to move that the existing Order be removed entirely, and that the new Order be substituted for it. Your Lordships will see, on comparing the one with the other, that in the new Order only paragraphs 1 and 3 are new; the remainder of the new Order is the same as the old. This new Standing Order is designed to follow what has become the existing practice which is being followed in this matter. The main feature of it is that the proceedings commence with an agreed factual statement, and that is not provided for in the existing Standing Orders. It may be asked, why should there be the necessity for an agreed factual statement. The answer is, so that the opening statement by the Minister should not be controversial, because it is no part of his case made at that point. His case is made later.
Then it may be asked—and I think the noble Lord, Lord Silkin, was doubtful about this point on the last occasion—what happens if there is a refusal to agree upon a statement. The answer there is that the Committee can, if necessary, waive the necessity for the opening statement, because the words, as your Lordships will see, are "if required by the Committee." Then it may be asked, and I think it was argued on the last occasion, why should not the Minister open the proceedings. The answer to that is that we have to be very careful to preserve the fact that the onus is not on the Minister but on the Petitioner. I think it is so important to make that clear that, with your Lordships' permission, I will quote shortly from what fell from the Lord Chancellor on February 16. It is in column 15 [Vol. 221] of Hansard, and the noble and learned Viscount said this:
"We"—
that is, the Government in 1945—
"were very anxious that this special procedure and the Orders should start with the advan-
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tage of being what was acceptable unless the contrary was proved; that is, we were anxious to preserve the Petitioner's right but not put the onus on the Minister of proving his Order … his Order would never be refused without a case being made out against it."
That shows that there is really no doubt that the onus lies now, and always has done since 1945, upon the Petitioner. That is why there is a difficulty in framing a suitable Standing Order. But I believe this is the most efficient way of carrying on these proceedings.
The House will see that in the first paragraph there are set out no fewer than six separate stages, and I believe that it is desirable to have these. I might mention, in this connection, that the day after our discussion on this matter last time I went to listen to the proceedings in one of these Committees. I found that the practice which I had on the previous day proposed and then withdrawn was being carried out, and I was perfectly satisfied, after hearing this agreed statement read out, that the procedure was satisfactory and, indeed, was the best which, so far as I am aware, can be contrived. The Committee were, by this agreed statement, acquainted quite shortly with the facts of the case which they needed to know about in order to decide the issue and to do justice to both sides. I beg to move.
Moved, That the following amendments be made in the Standing Orders relative to Private Bills, etc.:
Leave out Standing Order 209 and insert the following Standing Order:—
("209—(1) Where under section 4 of the Special Procedure Act any Special Procedure Petition stands referred, or has been referred by order of either House, to a Joint Committee, the Committee of this House shall consist of three Lords to be named by the Committee of Selection and the order of proceedings shall be as follows:—

(a) the Minister shall, if required by the Committee, briefly explain the Order by means of a factual statement, to be agreed with the Petitioner and Counter-Petitioner if any;

(b) the Petitioner shall be entitled to be heard in support of the Petition;

(c) if the Committee are of opinion that he has a case to answer, the Minister shall be entitled to be heard against the Petit ion;

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(d) the Petitioner shall be entitled—

(i) to reply, or

(ii) before replying, to call rebutting evidence, with the leave of the Committee, on which the Minister shall be entitled to comment;

(e) the Petitioner and the Minister may appear by Counsel or Agent:

Provided that the Minister may give notice in accordance with the following paragraph that he desires that the rights and functions conferred on him by sub-paragraphs (a), (c), (d) and (e) of this Paragraph shall be exercised by any Applicant specified in the notice, and thereupon the said sub-paragraphs shall have effect as if that Applicant were substituted for the Minister.
(2) Any such notice shall be delivered, or despatched by registered post, to the Petitioner or his Agent at the address endorsed on the Special Procedure Petition and to the Applicant specified in the notice at his address as endorsed on the Special Procedure Order, within a period of four days beginning—

(a) with the day on which the report of the Chairmen is laid before Parliament under subsection (5) of section 3 of the Special Procedure Act; or

(b) if the report is so laid on different days, with the later of the two days;

and copies of any such notice shall be deposited in the Office of the Clerk of the Parliaments and in the Private Bill Office of the House of Commons within the said four days.
(3) The Minutes of Evidence taken before the Committee shall be laid on the Table.
(4) If any member of the Committee of this House is prevented from continuing his attendance, the Joint Committee may, with the consent of all parties, continue its sittings in his absence, provided that the number of the Committee of this House be not less than two and that the Joint Committee report accordingly to this House at its next meeting; but if the consent of any party is withheld, the Joint Committee shall adjourn and shall not resume its sittings in the absence of such member without leave of this House.").
Standing Order 210—page 85, line 33, at end insert ("either before or after the Minister or Applicant has been heard as the Committee may direct").—(Lord Merthyr.)
3.0 p.m.
LORD SILKIN: My Lords, we are very much obliged to the noble Lord for the statement that he has made. As he said, this new Standing Order came before the House three weeks ago. It had come to us with very short notice, so that those of us who are interested in these matters had had little or no opportunity to study the new Standing Order, and it was natural that we should
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raise a number of questions on it. I may say, in passing, that it would have been convenient, and it would be in future, to insert in special type, if possible, any Amendments that are made to a Standing Order so that we can see at a glance what the old Order was and what changes are being made. As it was, in the time that was available to us I am afraid we had not had that opportunity; hence it was necessary to ask for further time to enable us to study the matter.
May I say, further, that there was never any doubt in our minds, certainly not in mine, that the onus should be on the Petitioner; that it was not for the Minister to make his case on any Order. We perfectly well understood that it was for him to explain the Order but not to justify it; it was for the Petitioner to justify the opposition. Having had time to study this matter, and having had the opportunity of a number of discussions with the noble Lord, Lord Merthyr (and I should here like to thank him for his courtesy and patience throughout those talks), I myself am quite satisfied, and I am sure my noble friends will be (this is not a Party matter anyway), that this new Standing Order is in the public interest, does exactly what the noble Lord says it does, and will, I think, facilitate the business in dealing with these Orders. In the circumstances, we are perfectly willing that this Order shall go through and we believe that it will do the job.
THE EARL OF SWINTON: My Lords, I want to add only one word. I entirely agree that this Order carries out what has been, I think, the regular practice on opposed Orders. I think it is certainly the most convenient and the fairest way in which effect can be given to the 1945 Act. I want to say this, however; I hope that by approving this Order we shall not, necessarily, be held, in every part of the House, to be taking the view that if we were considering the matter afresh to-day we should be prepared to pass the Act of 1945 in the form in which it was passed. That Act, I think, was absolutely necessary, or reasonably necessary, at the time it was passed because there were tremendous arrears of work to be got through. A great many Orders had to be made, and obviously, unless they were objected to, it was desirable, for the convenience of

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administration, that they should go through as quickly as possible.
But I am not at all sure now, when we get into a more or less normal peacetime administration, and when it is up to the Government to justify the administrative action which they take—and an enormous amount of power under legislation is given to Government Departments to do things by Orders, the Act being of a general character and being permissive—that when an Order is objected to, the onus ought always in the first instance to be upon the Petitioner. Where an Affirmative Resolution is required to an Order, obviously the Minister has to make his case in Parliament. And where a Petitioner has a case which is prima facie, I will not say a good case, but a case which it is the duty of the Minister to answer, then I am not at all sure that, if we were considering the matter afresh, Parliament would not to-day take the view that where an Order is being proposed the Minister ought to justify the action which he is taking and make his case, and the Petitioner, of course, would be able to answer it.
I entirely agree with the noble Lord that there is no question of Party in this at all, but Governments, whether it be in taking land or one hundred and one other ways, inevitably to-day interfere enormously, not only with property rights but with personal rights, with the convenience of all of us; and where that is done I think that, on general principles, it is up to the Government of the day, whoever they may be, to satisfy Parliament—and a Committee of this House or a Joint Committee is Parliament—that what the Minister seeks to do is right. I say that, while entirely accepting this Order—and I should certainly support it—I should not like it to be thought that everybody in this House regards the Act of 1945 as a good Act and one which necessarily should continue for all time.
3.5 p.m.
LORD MORRISON OF LAMBETH: My Lords, the noble Earl who has just resumed his seat said that he thought the Act of 1945 was necessary and unobjectionable. I am very glad to hear that, because I think it was one of the measures of the Government of which
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I had the honour to be a member. But my recollection was that it was not treated at the time as a Bill that was entirely uncontroversial. I think there was a fair amount of discussion and some degree of harsh criticism about that measure. But it often happens that, while at the time there is criticism, and even denunciation, a few years later better counsels prevail and, as in the noble Earl's case, it is thought that the Bill was necessary and desirable.
I should like to reinforce one point made by my noble friend Lord Silkin; that is, the desirability, in these proposals to amend Standing Orders of indicating clearly what the changes are, because on reading them there is no indication of what the changes are. There are two words in italics, but whether that signifies anything by way of changes I do not know. I would suggest to the noble Lord who brought in the Standing Order that it is simply done. These things had to be done often, as my noble friend Lord Silkin will remember, in the case of the London County Council. They have many Standing Orders, many regulations and many committee rules. In fact they beat either House of Parliament hollow in the numbers they have; and that is understandable, because a good many of their Standing Orders are really incorporating administrative decisions into Standing Orders so that unless it is otherwise ordered, they will not repeatedly come before committees of the Council. But it was very easily done. When revised Standing Orders came before the General Purposes Committee of the Council, it was stated on the document that new words in the Standing Order were indicated by underlinings—they were not italics, they were underlinings—and omission of words was indicated by putting those words in square brackets. I always found, as I think my noble friend did, that it was perfectly easy to follow those changes that were brought forward by the sub-committee or officers of the Council. I hope very much that the noble Lord will take these suggestions back to the Government, with a view to their being sympathetically considered, because it is most desirable, in the case of either House of Parliament, that we should know as easily as possible what we are doing.
3.10 p.m.
LORD MILNER OF LEEDS: My Lords, there is one factor in this matter which has not been mentioned. As noble Lords will appreciate, the Petitioner is perhaps not always in a financial position to produce plans and drawings or any information that may be called for. I presume, therefore, that it would be the duty of the Minister, in putting forward an agreed statement—indeed, it may be that the Petitioner could insist upon it—to put such information before the Committee as would save the Petitioner money. In this way the proposed new Standing Order may well result in a saving of time and money, and may be of great convenience to people of modest means who desire to put forward a Petition against an Order made by a Government Department. Further, it must be appreciated that where a Private Bill is promoted the onus is clearly on the Government Department. This proposed change in the Standing Orders does not in the least affect that position; it refers only to the case where a Petitioner desires to object to a Ministerial Order. In those circumstances, therefore, it may be that a purely factual statement, putting forward to the Committee maps, plans, drawings and so forth, may save a great deal of money and time and be of convenience to a Petitioner.
3.11 p.m.
LORD MERTHYR: My Lords, perhaps I might be allowed to reply briefly to one or two of the points that have been taken. With regard to the short notice given last time, I should have said before this that I was sorry that the notice was, admittedly, very short. But, as I explained then, I put the Motion down on that day in order to have it, as I hoped, in the Standing Orders by the time a case was heard upstairs. But I was most sorry that the notice was so short.
The suggestion made by the noble Lords, Lord Silkin and Lord Morrison
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of Lambeth, with regard to putting the differences in a different kind of type or by underlining them and so on, I will undertake most carefully to consider; and I will do my best to adopt what apparently seems to be an excellent idea. I hope the noble Earl, Lord Swinton, will forgive me and not think me discourteous if I do not follow him in his discussion on the policy of the Act, simply because I do not think that it is my function to do that. As I see it, it is my function to get the Standing Orders drafted and arranged to follow the policy of the Act, whatever it may be.
With regard to what the noble Lord, Lord Milner of Leeds, said, I am quite sure that, in practice, the Minister's representatives do their utmost to assist a Petitioner in arriving at an agreement, and I feel sure that the major burden of that falls upon the Minister or his representatives. Of course, as I said, there may be occasions when it is impossible to achieve agreement, and in that case the statement can be dispensed with. But the noble Lord did say one thing which, if I may dare to do so, I should like to correct, for fear that a misleading statement may get into Hansard. The noble Lord, as I heard him, said that in the case of a Private Bill the onus was on the Government Department. Of course, the onus is on the Promoter, whoever the Promoter may be; and normally, therefore, it is not on the Government Department, because a Government Department may be adverse to the Bill. I should like to make that correction merely to get the Record right.
LORD MILNER OF LEEDS: My Lords, I am obliged to the noble Lord. It was a slip of the tongue. I did, in fact, mean the Promoter of the Bill.
On Question, Motion agreed to: the said Standing Orders amended accordingly.

EUROPEAN FREE TRADE ASSOCIATION BILL
3.15 p.m.
Order of the Day for the Second Reading read.
THE EARL OF DUNDEE: My Lords, at the end of last July, on a Motion by the noble Earl, Lord Swinton, your Lordships had a full discussion about both the European Common Market and the proposed European Free Trade Association; and although some misgivings were expressed with which we can well understand and sympathise (while we hope they may be unfounded), from one or two industries, particularly the paper-making trade in Scotland and elsewhere. I think your Lordships were generally agreed on the objects of our policy. I think your Lordships agreed that the most important purpose of the European Free Trade Association was to lead eventually to an association which would also include the Common Market, and which we had tried unsuccessfully to get a year before. Obviously, that is a thing which will take time. Of course, it might do more harm than good if we were to press for a reopening of negotiations before the time seemed to be opportune, and there is nothing more that I am able to tell your Lordships about that at the present time.
I think your Lordships were also agreed that, even if we should fail in that purpose, this association of seven countries, in the European Free Trade Association as it is called, would not by any means be useless; on the contrary, it is a perfectly viable economic association, consisting of 88 million people who have a very high standard of living; and there is every reason to hope that, even if it were not to lead to anything wider, it will accelerate to a great extent the growth of material prosperity in all these countries.
The Convention between the seven countries forming the Association was initialled at Stockholm on November 20; it was signed by my right honourable friends the Chancellor of the Exchequer and the President of the Board of Trade on December 29, and we hope to be able to ratify it by March 31. We already have nearly all the powers we need to fulfil our obligations under this Convention by reason of existing legislation,
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and this little Bill is only just necessary. We have powers under the Import Duties Act to vary or abolish import duties by Treasury order; we have, of course, power under the Finance Act at any rate to vary Revenue duties. We have also power under the Import Duties Act to make origin regulations relating to goods subject to protective duties. But that power does not extend to origin regulations on goods which are subject only to Revenue duties, and since some Revenue duties have a small protective element which we agreed to remove at the Stockholm Convention, it is therefore necessary to increase our existing powers to that small extent, which is done by Clause 1 of the Bill.
Clause 1 repeats all the powers we have already enabling the Board of Trade to make regulations for determining the circumstances in which goods are to be treated as grown, produced or manufactured in, and consigned from, the European Free Trade Association area. The origin rules which were agreed on at Stockholm are fairly liberal. The figure of 50 per cent. value has been taken as a common-sense maximum but this rule is considerably liberalised by the fact that materials on the agreed Basic Materials List, whatever their actual origin, count toward the Area content of the product. That is to say, if they are on the Basic Materials List, even though they have been imported from abroad, they count as if they had been produced in the country which is exporting the goods. If your Lordships want to know what the Basic Materials are, I am afraid that I shall have to refer you to the text of the Schedules to Annex B to the Convention Approved at Stockholm. It is a rather long list of materials. It begins with human hair, whether or not washed, and then, after five or six pages, ends with such familiar objects as unalloyed bismuth, chromium, gallium, germanium, hafnium, indium, manganese, niobium, rhenium, thorium, titanium, uranium, vanadium and finally zirconium. There are, of course, a great many others in between with which I shall not trouble your Lordships.
In addition, as your Lordships may find at an earlier part of this Text of Schedules, it has been agreed that if manufactured goods satisfy certain process criteria they will be all right,

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whether or not the materials used to make them have been made in the exporting country. That, of course, may be an alternative which the exporter would much prefer to be judged by, rather than the 50 per cent. of value: the process test is easier, of course, for people who are not expert in accounting practice to understand. I believe that the rules are a reasonable compromise between liberality and restrictiveness. They ensure that Area goods must contain a reasonable amount of Area workmanship but also avoid undesirable disturbance of the existing patterns of trade with the rest of the world. Textiles are rather a special case. In face of the exceptional differences in price levels inside and outside the Area of raw materials for textiles, it was agreed that the 50 per cent. rule should be dropped and that textiles should qualify for Area treatment only if they met the conditions laid down in the process rules which are contained in page 93 and the following pages of this Text, and which are a little less liberal than those for other products.
Clause 2 provides that the Board of Trade may make regulations withholding the benefit of lower rate of duty if certain conditions as to non-payment of drawback are not fulfilled as provided for in Article 7 of the Convention. Drawback, as your Lordships know, means that if an importer of goods pays duty on goods which come in and then uses them to export, he can claim a rebate of the duty which he paid on their entry. Obviously, it would be unfair if he got the rebate of duty here and duty did not have to be paid at the other end when he exported the goods to another country in the European Free Trade Area, and this clause provides for arranging that he cannot have it both ways. Either he can give up the benefit of the drawback or not expect to get the benefit of duty-free entry for his export into another E.F.T.A. country.
Clause 3 contains an entirely new provision providing that Customs and Excise, on the request of another European Free Trade Area country, may verify the evidence of origin or other evidence given in the United Kingdom in support of a claim to a Convention rate of duty in that country. In signing the Convention the members accepted the obligation to do this work on each
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other's behalf and the obligations are reciprocal. We expect that other E.F.T.A. countries will carry out similar investigations in relation to our imports from them. Clause 4 provides that penalties shall be imposed for making a false statement. The penalties are contained in the Customs and Excise Act, 1952, relating to untrue declarations on customs matters.
Clause 5 repeals the Dyestuffs Acts. After the first War, on grounds of national security, the import of dyestuffs was prohibited except by special licence. Owing to the general system of licensing which was established during the war these old Acts have not been necessary and we have continued to keep out dyestuffs under the general licensing system; but we provided at G.A.T.T., in 1947, that we should be allowed, if licensing was brought to an end, to put on an import duty of 33⅓ per cent. instead. Now, owing to the formation of this Association, it is necessary to allow dyestuffs to have preferential treatment if they come from Switzerland or any other E.F.T.A. country; and therefore it is necessary to repeal the Dyestuffs Acts. They will be replaced by a 33⅓ per cent. duty which, in the case of other members of the Association, will be progressively reduced over a period of ten years.
These are all the things which this Bill does. It is a very small piece of machinery which is necessary for the continuance of our commercial policy towards the rest of Europe. That policy suffered a severe setback in December, 1958, but we hope we shall be able to continue our policy, in spite of that, with patience—which will certainly be necessary—and also with the approval of the other members of the Commonwealth and, I hope, with the approval of all political Parties in this country. I beg to move that the Bill be now read a second time.
Moved, That the Bill be now read 2a.—(The Earl of Dundee.)
3.28 p.m.
LORD PETHICK-LAWRENCE: My Lords, after the somewhat controversial arguments that the noble Earl and I had earlier this afternoon it is a pleasure to come to a subject on which we are in substantial, if not complete, agreement; and I have great pleasure in stating, so far as noble Lords who sit behind me are concerned, that we have no intention

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whatever of opposing or delaying the passage of this Bill. In fact, in another place, where considerable time was devoted to discussion of the various stages of this Bill, my Party never divided against Her Majesty's Government at all and their principal interest was in certain corollaries to the action taken by the Government, to which I shall refer a little later on.
I remember very well, however, a discussion that we had in July, which was a very full one, in which our points of view were carefully put forward. I will not repeat in any detail what I then said, but I will, once and for all, say this. My political lifetime has seen a whole cycle of attitudes towards free trade and tariffs. Starting from perfervid belief in free trade, this country gradually abandoned it and went to fairly high tariffs, and has now conic back to almost exactly the point in the circle where my political experience started. And that, I think, is all to the good, because I believe it is better for nations that they should trade and negotiate with one another, even though that sometimes leads to controversy, than that we should try to keep out one another's products, which oftens leads to very great ill-feeling. So we on these Benches thoroughly support the whole principle that lies behind this Bill and we wish it well.
With regard to the points which the noble Earl made on the different clauses of the Bill, there was the question of the proportion of home-grown product and substitution and re-shipments. We understand that it was necessary, and in fact I imagine that it was those matters which have occupied a very great part of the attention of the negotiating parties; and naturally the conclusion was taken as something in the nature of a compromise, which we understand and, in the main, support. In particular there are the detailed questions of drawback, a matter which was very largely debated in another place, and I think the Government have made out a case for what they have done. But there are certain subsidiary and ancillary matters of which this House should take special cognisance.
In the first place, this Agreement has been largely made possible for us by the co-operative attitude of other members of the Commonwealth. Had the other members of the Commonwealth stood pat
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on their rights under the preferential treatment accorded to them in the past, as I think the noble Earl will probably agree, it would have been exceedingly difficult for us to make successful overtures to the other members of the Seven and bring about a successful conclusion. The members of the Commonwealth have realised that in the prosperity of the whole their individual prosperity largely was improved. Therefore, while naturally preserving some of their rights and some of their privileges, they have felt disposed to take a wide view, a large-minded view, and to further the attitude of Her Majesty's Government instead of continually trying to put spokes in it, which they might easily have done if they had been more short-sighted and less public-spirited in the matter. We welcome the fact that the Commonwealth is standing with us in this Treaty, but we hope that, in view of their broad-mindedness, Her Majesty's Government (and when I speak of "Her Majesty's Government" I refer to any Government, of any Party) will try to accommodate the Commonwealth countries so far as may be possible in the shift-over from the old position to the new.
Equally, we realise that this Treaty will hit certain of our British industries pretty badly, particularly as times goes on and the tariffs are steadily and slowly reduced during the ten years to which the noble Earl has referred. We should like to feel that the Government will sympathetically consider the requirements of different industrial enterprises in this country, while not resiling from their desire to see the E.F.T.A. fully realised in all its bearings. But we believe that any Government—and we hope Her Majesty's present Government—will naturally, within that limit, do what they can to ease any hardship which may fall upon particular industries. So much for the working of the Bill itself and the convention which it is implementing.
There are still one or two other matters which must be discussed, if at all, on the Second Reading because they are not parts of the Bill; they are corollaries of the Bill. Those in another place who take the same view as I do naturally felt inclined to discuss these matters with the Government and to ask for information, and I am bound to say that, so far as I can see, the Government were not able to provide a great deal

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of the information which was asked for. However, perhaps the noble Earl—and I should like to know whether it is so—when he comes to reply, will be able a little at any rate, if not in full, to extend our information on the subject.
The first matter is the relationship between the Six and the Seven, between the E.F.T.A. and the Common Market. We should be very sorry if the formation of this Free Trade Association were in any way to be regarded as a hostile act towards the members of the Common Market. We do not believe that it is intended as a hostile act, and we hope that it will not be taken as such; and we hope everything will be done to prevent that impression from gaining ground. We believe that the E.F.T.A. is formed for our benefit and not as a means of attacking the Six who formed the Common Market. If the Seven and the Six were to be brought into conflict with one another, we should regard that as a very disastrous and backward step, particularly as our interests as exporters and importers are not confined by any means to the Seven as against the Six. If anything, our trade must necessarily be quite as large with both—perhaps greater with the Six than with the Seven, because they are larger trading countries and naturally we must keep up our connection with them.
So, my Lords, I hope that we may have an assurance from the Government that they will do everything in their power to carry on negotiations with the Six, and if they can give us any information on any progress in that matter we shall be particularly glad. So far as the information that has come through up to the present is concerned, I cannot say that I feel very optimistic. The members of the Six have rather resented the fact that we wanted, as they put it—as they thought it, at any rate—to get something of the best of both worlds. They thought we wanted to get all we could out of them while failing to cooperate with them in the way they would have liked us to do. Whether that be true or not, I hope there will be no such spirit in the future; and anything the Government can do to draw nearer to the Six, and any information they can give us to-day to show that they are taking those steps, will be welcomed on
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this side, and I am sure on all sides, of the House.
In that connection, there is a further point which also, I think, needs stressing; and it was one of the reasons why I think successive Governments felt unable to throw in their lot entirely with the Common Market from the start. While in this country these European associations, whether of the Six or of the Seven, are thought of mainly as economic, there is no doubt whatever that in parts of the Common Market there has also been a larger idea of a political union—carried to its fullest, a federation—of some countries of Western Europe, ultimately reaching even such an idea, as a United States of Europe. I am afraid that we, as a member of the British Commonwealth, have found that that idea, in the form in which it appeared to be expedient to some of the countries of the Six, was a stumbling block to us; and, within limits. I do not think anyone in this country would be prepared to go quite so far as to say we wanted 'a Federation of Western Europe, and still less a United States of Europe. We have many political ideas as to which we do not see entirely eye to eye with some of the Western countries in Europe; but, subject to that limitation, if we go as far as we can to meet the wishes of the Six I am sure that most Members of this House will be glad.
That brings me to the last point—it is one that I feel very deeply about—and that is the question of the United States of America. As I understand the position (I speak subject to correction), the United States has shown itself friendly to the Common Market because it favoured, and still favours, something like a Federation in Europe. I have often heard Americans over here boasting of their own United States of America and saying that, with all these little States that there are in Europe, there ought to be a United States of Europe similar to their United States of America on the other other side of the Atlantic. If my information is correct, the United States has therefore shown a good deal of sympathy and support for the Common Market arrangement of the Six, believing it to be largely a political as well as an economic system. But I am given to understand that they are less favourable to the E.F.T.A., which they regard as an economic system almost

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exclusively. They feel that they, the United States, will not only not benefit from concessions being made by this country to other parts of Europe but will actually stand to lose by them. That being, as I understand it, the basic position, I shall be glad if the noble Earl will tell us a little of what he knows (and of what he hopes, at any rate) is being done to meet that resistance by the United States.
I feel myself—and I think it would be the opinion of noble Lords on all sides of the House—that while we should resent anything in the nature of interference, and still more being dictated to, by the United States in matters of our own economic policy in the interests of our industries, and of our own budgetary, financial and social conditions, we should wish as far as possible, subject to that, and by no means allowing ourselves to be over-influenced, that the policy with regard to the Seven should be presented to the United States in a form which would not arouse their resentment but rather would arouse their support and co-operation. If the noble Earl will be so kind, in the course of his reply, to touch on the two or three points that I have made, and particularly on the question of the relationship to the Six and of our relationship to the United States, I feel that it would be conferring a benefit on us, because those questions would be out of order on the Committee stage or on later stages of the Bill. I conclude by saying what I said at the beginning: that, so far as those who sit behind me on these Benches are concerned, we give our support to the principle of the Bill, and our action will be 'to facilitate its passage into law.
3.44 p.m.
LORD REA: My Lords, the spectacle of the Conservative Party and the Labour Party welcoming back, after a period of sixty years, their old love of free trade, is perhaps a little embarrassing to those of us sitting on these Benches. Nevertheless, we welcome it, and we hope that in this case age has not withered nor custom staled this new love—and we think that "custom" is perhaps a very appropriate word. I have very few words to say to your Lordships this afternoon. I could not let this Bill go through without a word of thanks and blessing and gratefulness from these
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Benches, but the noble Lord, Lord Pethick-Lawrence, as usual, has stolen from me all my points and has put them much better than I could myself. I therefore will not weary your Lordships for more than one moment, but I want to say that I support very much what he said about the difference and the relationship between the Six and the Seven. The Six seems to us a little more political in character. The Seven has a very big task in front of it; and I hope the Government will work on the Seven so that things will go smoothly and harmoniously, and perhaps use it as a bridge over to the Six, so that something like a Thirteen may come about. I have nothing further to say, except to wish this Bill well and to thank the noble Earl for introducing it.
3.46 p.m.
LORD BALFOUR OF INCHRYE: My Lords, the Minister without Portfolio, who moved the Second Reading of the Bill, labelled it "a little Bill". I think that the noble Lord, Lord Pethick-Lawrence, has made it into quite a big Bill, and I am glad that he has, because he has raised certain fundamental issues on which noble Lords on all sides of the House would wish to hear the views of Her Majesty's Government. My mind, like his, goes back to the July debate, which was a full debate upon this subject. On that occasion I think many noble Lords on this side of the House, and maybe noble Lords on the other side, gave full support to the proposals then put forward by Her Majesty's Government, having in mind the project, the hope, the ultimate purpose, which the noble Lord, Lord Pethick-Lawrence, and the noble Lord, Lord Rea, spoke about a moment ago—that is, that the Seven is desirable in itself, but that it should be regarded as only a first step towards the association of the Seven and the Six. But I would go further than that, my Lords. I would then say that the association of the Seven and the Six should be considered only in relation to an association of the British Commonwealth, and that there should be a British Commonwealth approach to the economic problems of relationship with the Seven and the Six. That, my Lords, I think, is the ultimate hope of many noble Lords who believe in the political and economic destiny of the British Commonwealth.

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Now I have four very simple questions to ask of the Minister without Portfolio: so simple that I am quite convinced he will have no difficulty in answering them fairly and directly and to the complete understanding of your Lordships on all sides of the House. My first question is this. As the noble Lord, Lord Pethick-Lawrence has said, and as noble Lords will see if they look at Hansard of February 15 dealing with the proceedings in another place, Her Majesty's Government have admitted, quite rightly, freely and frankly, that this Bill makes difficulties for a number of British industries. The policy of all political Parties in this country is to retain full employment, and I would therefore ask the Minister this question: can he say which of the main industries, in the opinion of Her Majesty's Government, are the ones which are going to be faced with difficulties? We all have opinions, which we expressed in the debate last July, as to which industries might be adversely affected; but, of course, our views may not coincide with those of the Government. Therefore I think we should like to know what industries the Government think will be in difficulties, and what measures the Government have in mind to assist those industries if they are particularly badly hit: what emergency protectionary steps can be taken in case of hardship.
My second question is: could the Minister explain something of the effect of this Bill on Imperial Preference, divided as to primary products and manufacturing goods? As I understand it, the present Imperial Preference on manufactured goods will gradually disappear over a number of years, so that in ten years' time Commonwealth manufactured goods will have no preferential entry into this country, but the preference for primary products will continue. I think that this is a matter on which your Lordships' House would like some clarification and I would ask the Minister to make it clear.
My third question is: Are the Government satisfied that the Commonwealth countries are with the Government in all this? The words used—carefully no doubt, as indeed is right—by the Ministers responsible is that the Commonwealth "were continuously informed." You can be continuously
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informed of something and be strongly opposed to it; you can be continuously informed of something and support it very fully, and you can be continuously informed of something and be rather lukewarm about it. I have shortly—next month—the privilege of going to Australia, where I shall meet, in association with the Chambers of Commerce of the Commonwealth, many Commonwealth industrialists, and I should be happy to know that Her Majesty's Government are quite satisfied that the Commonwealth countries, while being continuously informed, are also continuously satisfied.
My fourth question is this: Do Her Majesty's Government agree with the authoritative view which was expressed in the Economist last August, to the effect that in the light of these new developments the time is now ripe for a general review of the General Agreement on Tariffs and Trade, which allows for customs unions and for free trade areas with tariff barriers wholly removed from within, but makes no provision at present for preferential zones with barriers only partly dismantled? Not for the first time, the exigencies of European grouping seem to call for a revision of G.A.T.T. I will repeat my last question. Could the Government say whether they consider that this new set-up does or does not call for a revision of the now out-of-date provisions of the General Agreement on Tariffs and Trade?
3.54 p.m.
THE EARL OF DUNDEE: My Lords, I am grateful to the noble Lords, Lord Pethick-Lawrence and Lord Rea, for the support of this Bill which they have expressed. I hope very much that this may be a matter on which the Liberal Party may find itself unanimous. I will reply as briefly as I can to questions which noble Lords have asked. My noble friend Lord Balfour of Inchrye said that he was going to ask four questions which were so simple that I could not possibly have any difficulty in answering them. Whenever I hear that, it always arouses my deepest suspicions and makes me think of Election meetings. But I do not think that my noble friend's questions were either unreasonable or particularly difficult.

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Which industries do the Government think are adversely affected? I said a good deal about that on July 28. We do not want to appear in any way unsympathetic towards the natural apprehensions of industries like that which I mentioned, both then and in my opening remarks to-day—that is, the paper industry—but we honestly think and hope that its apprehensions are unfounded. I do not think that your Lordships will wish me to go very fully into all the arguments. For one thing, the fears of the paper industry were only on the basis that this European Free Trade Association of seven would not succeed in merging into something bigger. If we could have got the European Free Trade Association all over Europe which we wanted, then they would not have minded. They were quite happy about that. What they are afraid of is that the Common Market may keep Swedish paper exports out of Germany and France, and that may have the effect of directing the whole volume of Swedish exports here, instead of to Germany and France. That is what really gave rise to their misgiving. We have had many discussions with them on this subject. I think that it would be fair to say that we do not think that any industry is likely to be adversely affected to a serious extent as a result of what we are doing. But there is a provision in the Convention that if there is exceptional hardship or unemployment, then special action by agreement may be taken to relieve it. The noble Lord, Lord Pethick-Lawrence, also asked the same question about cases of hardship.
Then my noble friend asked what was the effect of this Bill on Imperial Preference. I do not think that it will have any effect on Imperial Preference, except, of course, that the preference will not be effective upon goods coming into Great Britain from the other members of E.F.T.A. at the end of the ten years' period. There is no distinction arising out of the E.F.T.A. Treaty between the preference we give on industrial raw materials and on manufactured goods. The preference will still be effective in regard to goods coming here from the rest of the world. All that will happen is that goods coming from Sweden, Norway, Denmark, Switzerland, Portugal and Austria will not pay any
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duty at the end of ten years. Therefore to that extent, the Imperial Preference which we give against all other countries may be less valuable to the Commonwealth.
Are the Commonwealth with us? Yes; we have consulted the Commonwealth all along. They did take the view about the proposed European Free Trade Area (which we failed to get), that in the long run it would be to the benefit of all of them as well as of us and of Europe; and they are equally with us, now that we have failed to get the greater objective, in what we are doing to secure the lesser one and at the same time to continue to work for the greater one. It is only my noble friend's fourth question which I am afraid I cannot answer now. I sometimes agree and sometimes disagree with the Economist, but the question of whether this European Free Trade Association Treaty calls for a general review of the General Agreement on Tariffs and Trade, is a major question of policy which I should certainly not be prepared to answer upon a Bill of this kind. The noble Lord, Lord Pethick-Lawrence, to a certain extent covered the same ground. He mentioned Commonwealth agreement, but I think he took the right view of it, and what he said was correct. He also asked about the cases of possible hardship which I have already mentioned.
Then the noble Lord particularly wanted to know about the relationships between the Seven and the Six. He was very anxious to know that we were not trying to act with any feeling of hostility towards the Common Market; not trying to divide Europe into two opposing camps. Perhaps I might be allowed, with your Lordships' indulgence, to reply by quoting what I said about this in a debate last July: [OFFICIAL REPORT, Vol. 218, col. 731]
"The last thing we are thinking of doing is to use this as a kind of threat against the Common Market to force them into negotiations, by threatening to injure them if they do not do it. What we want to do is not to start a trade war of any kind, but to help Europe to unite and to show the Common Market Powers by our example, by the way this Stockholm Free Trade Area works in practice, that they have nothing to fear and everything to gain by agreeing to the larger association which we all want".
It was, as your Lordships know, largely the apprehensions of French industry

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which frustrated a desire for a larger European Free Trade Area. We entirely understand their feelings, and we do not want to quarrel with them about it. But we think that they perhaps also had the feeling that superimposing the Free Trade Area on the Common Market was altogether too complicated and tiresome a procedure. We think, however, that, by the example of this Free Trade Association we are now forming, we may be better able than by argument to overcome the objections among the Common Market countries to forming a larger association with us.
I agree with the noble Lord, Lord Pethick-Lawrence, that some members of the Common Market may have thought that we ought not to be allowed to join them commercially if we did not also come into the political union which he mentioned. I think there is probably something in that. One reason why we cannot come into the Common Market is because it would be incompatible with our membership of the Commonwealth to do so. What we tried to do before December, 1958, and what we are still trying to do, is to move in this matter with the Commonwealth and to form a European Free Trade Area which will be consistent with, but not identical with, the Common Market.
LORD PETHICK-LAWRENCE: The noble Earl has not quite satisfied me by quoting from what he said in July. What I wanted to know was what progress they had made since July, and that is a question which he has really put aside. I want to know whether they are making any headway with an approach to the countries of the Common Market; and if not, what steps they are planning to take in the early future not to allow the matter to go by the board.
THE EARL OF DUNDEE: I thought that I had already answered that point in advance in my remarks when moving the Second Reading. I think I made it plain to your Lordships that we must act with great patience and that I could not now tell your Lordships anything more than I was able to tell you last July about progress towards a larger European Free Trade Area. Surely, in view of the sensitive feelings and perhaps misunderstandings with which we have got to deal, it is a matter in which we
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must act with great patience and circumspection. If we keep on rattling their windows and banging on their doors and saying: "Are you not ready to negotiate yet?" it might do more harm than good. I think it is a matter on which we must go slowly; and as I have tried to say, I believe that when this association of the Seven gets working—and it has not done so yet—that in itself will be a stronger practical argument for getting other people to agree with our aims than abstract discussion at the present stage.
LORD PETHICK-LAWRENCE: I do not want to keep interrupting the noble Earl, but what I am asking is something not quite so foolish as he would seem to suggest. I am not suggesting that we should keep on telling them that we must have a definite agreement between the Seven and the Six. But in the process of working out the arrangements for the Seven, there must be a large number of points which directly concern our other neighbours in Europe. What I want to know is how far in the negotiations that are taking place—and negotiations must be taking place—we are making headway: not, as the noble Earl suggests, banging on their doors and saying that they must agree to our coming in, but whether the contacts which necessarily arise are bearing fruit.
THE EARL OF DUNDEE: None of the arrangements that we are making under the Conventions we have signed, and under which we are undertaking to reduce duties until they are finally abolished at the end of ten years, is in any way incompatible with a larger European Free Trade area; they are all entirely consistent with it. We hope that our friends in the Common Market will before long come to see that that is so.
The noble Lord asked a particular question about the United States. We have, of course, discussed with the United States our aims in forming this European Free Trade Association, and we are sure that they understand that we have a liberal object in mind which will not harm them economically. They are participating in discussions about the future of European trade with members of the O.E.E.C.—that is, the larger European organisation—which we hope will in due course lead to fruitful results, including the improvement of economic relations with the Six.

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Of course the larger Free Trade Area which we had hoped to form, and which we still hope to form, was co-terminous with the O.E.E.C. countries. That is still our object, and I do not think there is any reason to expect hostility towards it from the United States.
My Lords, although none of the interesting questions which your Lordships have asked has arisen out of the Bill, I entirely agree that it is proper that on any occasion of this kind we should discuss broad questions of policy which your Lordships may wish to raise, and I have been glad to do my best in replying to those few questions which have been put. It is still our purpose, and will continue to be—and I assure the noble Lord, Lord Pethick-Lawrence, that we are not slackening in it—to see that this Association will eventually lead (as we all hope it will) to the larger union which we unfortunately failed to get a year and a half ago.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

LOCAL EMPLOYMENT BILL
4.8 p.m.
Order of the Day read for the Bill to be considered on Report.
THE EARL OF DUNDEE: My Lords, I beg to move that this Report be now received.
Moved, That the Report be now received.—(The Earl of Dundee.)
On Question, Motion agreed to.
Clause 2:
Provision of premises and sites
2. For the purposes of this Part of this Act the Board shall have power, in order to provide or facilitate the provision of premises in any development district for occupation by undertakings carried on or to be carried on there or for otherwise meeting the requirements of such undertakings (including requirements arising from the needs of persons employed or to be employed therein),—
(a) to acquire land by agreement or, if so authorised, compulsorily;
LORD MESTON LORD MESTON moved in paragraph (a) to leave out "or, if so authorised, compulsorily." The noble Lord said: My Lords, I rise to move the Amendment standing in my name. I should really apologise to Her Majesty's Government for not having put down this Amendment on the Committee stage, because
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it is essentially a matter for that stage. However, I can only say that such is the speed of legislation in modern times that one is liable to be rather overtaken by it. The object of the Amendment is to delete the compulsory purchase powers from this Bill. I want to be frank about this matter. If the compulsory purchase powers in the Bill are essential in order to create more employment, then indeed there is no ground for the Amendment.
The question really arises whether these compulsory purchase powers are essential to the Bill. I think your Lordships would all agree with me in principle that any extension of compulsory purchase powers should always be used with great jealousy. The position in the present case is that where land is zoned for industrial development, and an industrial development certificate is obtained, there is in practice no shortage of willing sellers at fair market value. Furthermore, it is always open to the Government to present to Parliament a special Bill to acquire land in a particular area. I feel that the need for this procedure will probably be so very occasional that no compulsory powers need be included in the Bill. There is a great deal more that one could say, but I have tried to put the salient facts as shortly as possible. I beg to move.
Amendment moved—
Page 2, line 41, leave out ("or, if so authorised, compulsorily").—(Lord Meston.)
LORD SILKIN: My Lords, I hope the Government will not accept this Amendment, because by doing so they might nullify the whole purpose of the Bill. The noble Lord, Lord Meston, said that there will be few cases, if any, in which it will be necessary to acquire land compulsorily. In that case, I presume that the Government will exercise their powers in very few cases. Moreover, in every case where it is sought to exercise compulsory powers, the owner of land has the opportunity of making objection and a public inquiry will be held. It will be for the Government, or whoever seeks to acquire the land compulsorily, to prove that acquisition is essential. If they do not prove that they should acquire the land, I hope they will not succeed in obtaining the order.
But there will be cases where it will be necessary to acquire land for the purpose of carrying the functions of this

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Bill into effect. If we are to offer industry factories in special areas, we must have the land on which to build the factories, or land to offer to industrialists on which they themselves can build. While it is hoped that in most cases it will be possible to acquire this land by agreement—and I am sure nobody wishes to exercise compulsory powers for the sake of exercising them—there will be cases where that will not be possible. If the purposes of this Bill are to be carried out, the authorities must have the power to acquire land compulsorily in those cases, subject to the safeguard that a public inquiry will be held where there is objection, and if the case is not made out, then the order will not be obtained. I hope that that is the kind of case the noble Earl was going to make himself. I thought I would say it for him and to some extent save him the trouble.
THE EARL OF DUNDEE: My Lords, the effect of this Amendment would be to deny the Board any power to acquire land compulsorily for the purpose of providing industrial or commercial premises in listed places. As the noble Lord, Lord Silkin, has said, that would destroy the purpose of the Bill, and I am grateful to him for making my speech for me in advance. We cannot, of course, accept an Amendment of this kind. It is no part of our policy to use compulsory purchase powers indiscriminately, and the noble Lord was right in saying that there have been few occasions on which they have been exercised. In fact, there has been only one effective exercise of the compulsory purchase orders conferred in the Act of 1945. On two occasions these powers were resorted to with the agreement of the landowners in order to overcome conveyancing difficulties. That was simply a technical procedure. In a fourth case compulsory purchase proceedings were initiated, but the land was subsequently acquired by agreement. Although, as the noble Lord, Lord Silkin, said, we do not want to exercise compulsory powers for the sake of using them, and although they have been employed only in rare cases, the fact that they are there in the background may provide a motive for large numbers of landowners to negotiate who would otherwise refuse to sell. That is the real
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reason why we are imposing these powers in the Bill.
Clause 14 of the Bill provides the usual safeguards for landowners by applying the provision of the Acquisition of Land (Authorisation Procedure) Act, 1946, and the proper statutory procedure must be followed. Compensation on the basis of current market value must be paid in accordance with the provisions of the Town and Country Planning Acts. Moreover, Clause 14 (2) also precludes the Board from exercising compulsory purchase orders at all if the land in question is already being used in a way which provides substantial employment in relation to that use. The Board can acquire land directly only for the purposes of the Bill. It cannot acquire land just on the chance that it may want it, and then hold it for some other purpose. I think everything reasonable has been done to protect owners' land against unfair treatment. I consider that the power of compulsory purchase is necessary to the Bill, and I hope that your Lordships will not agree to accept this Amendment.
LORD MESTON: My Lords, I thank the noble Earl for his reply. If there had been a betting shop in the little village where I live, I would have gone there and taken a bet of 100 to 1 in favour of the noble Earl against myself. Nothing remains for me but to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 28 [Repeals and transitional provisions]:
LORD SHEPHERD LORD SHEPHERD moved, after subsection (4) to insert:
"() Any locality in relation to which an application for a loan or grant under the Distribution of Industry Acts, 1945 to 1958 has been made and neither granted nor refused at the commencement of this Act shall be deemed for the purposes of this Act to be a development district until the said application has been granted or refused".
The noble Lord said: My Lords, like the noble Lord, Lord Meston, I must apologise to the Government and to the noble Earl for bringing forward a new Amendment at this stage of the Bill. I am doing so in one last effort to relieve some hardship which will be incurred by the passing of this Bill in those areas which were once covered by the previous provisions, and which are now excluded.

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I am sure the House will appreciate that when this Bill was discussed fully in another place the Government had not then disclosed the localities or the areas which the Bill would cover. Another place was given to understand that at least 14 per cent. of the insured population would be covered by the Bill, but we now find that it is not 14 per cent. but is down to 12 per cent. We discover, when we go through the list, that many areas which have hard, small pockets of unemployment are excluded.
The Minister, speaking in another place, recognised that there were many borderline cases; that there were localities which just fell on one side of the line that was drawn by the Government. They had pockets of unemployment, but they were excluded because of the line drawn by the Government. He mentioned a number of them. There was Dunfermline, Tyneside, Plymouth and Hull. Then take Scotland: there are 100,000 unemployed in Scotland, and I understand that, under these provisions which we are being asked to pass, only 70,000 people will be covered. Therefore, 30 per cent. of the entire unemployed in Scotland will not be covered by this legislation. But we appreciate that it is too late; the Government insist that this Bill shall go through and that we must at this stage accept the list the Board of Trade have produced. But on the Committee stage the noble Earl spoke of the flexibility of the Bill, and I am now asking the Minister, at this late hour, to be flexible.
I am asking him to include in this Bill the areas which came under the previous legislation where the local authority were in negotiation with companies to start new industries or extend existing industries. It is the case that on quite a number of occasions industry and local authorities have been in consultation. We all know that consultation takes a fair length of time. But the applicants under the previous legislation have now been informed that, because of this legislation, their applications must be refused. I think this is extremely hard. I appreciate that the Government must draw a line somewhere, but there are these borderline cases; there are cases which are covered by the previous legislation, and if the noble Earl is sincere in talking about this Bill being flexible and in saying that the Government are going to be flexible in its application, I believe
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there is a very great case for the Government's saying: "All right, in the case of those areas where there is unemployment, where the local authority has started negotiation prior to the passing of this Bill those applications, if accepted, should be put to work and new industry brought to those areas." I beg to move.
Amendment moved—
Page 16, line 22, at end insert the said subsection.—(Lord Shepherd.)
4.23 p.m.
LORD STONHAM: My Lords, in supporting the Amendment moved by my noble friend Lord Shepherd, I feel that there is no question of these cases being borderline in the sense of the facts. They are borderline only in the sense of a time limit, the limit being the coming into operation of this Act. When this matter was raised in another place a few days ago, the Parliamentary Secretary made it perfectly clear that a number of applications were under consideration—"active consideration", I think was the term used—under the existing legislation, and he indicated that it was expected that some of those would be refused and some accepted under the existing legislation before this Act comes into operation. Therefore, it is merely a question of how quickly the Government Department works; it is not a question of the individual merits or demerits of a particular application which may be under consideration. As I see it, therefore, the Amendment moved by my noble friend will be entirely in accord with the spirit or: this Bill and surely entirely in accord with the Government's intention to provide special facilities in all those cases. Some may be pockets of unemployment in larger areas where these conditions do not generally exist.
I would point out to the noble Earl that for a variety of reasons—changes in industry, automation and the like—there have been changes of quite recent character in the incidence of unemployment in particular areas. Therefore, some applications have been made recently by local authorities in whose areas the conditions justifying such applications did not exist some little time ago. It is not that they have been dilatory; it is that the conditions which have prompted such applications have only recently arisen. There are some cases—not only Lancashire—where pits

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are to be closed within the Coal Board's programme. Quite definitely, as local authorities are becoming aware, that will lead to serious unemployment in small areas where alternative employment is not presently available, nor likely to be unless there is Government help. If such an application has been lodged, then it is surely mere justice, and indeed far-sightedness, for the Government to say that it will not be refused, and excluded from assistance under the terms of this Bill, but will, in accordance with the provisions already made in the previous subsection, subsection (4), be considered. If the applications are no good then they are turned down in accordance with the terms of this Amendment. But if they are all right, they can be approved and will not be arbitrarily excluded. It is therefore an act of simple justice and common sense, and I hope that the Government will accept the Amendment.
THE EARL OF DUNDEE: My Lords, I sympathise very much with the noble Lord, Lord Shepherd, in wishing to raise this matter, even at this late stage of the Bill, and I certainly appreciate that it would be hard luck on a firm if it put in an application only to find that the application fails not through any lack of merit but simply because the place has been de-listed, taken off the list, before a decision has been arrived at. It was with that in mind that my honourable friend the Parliamentary Secretary announced in the House of Commons on February 3, more than a month ago, that D.A.T.A.C. was not taking on any new applications since it already had enough in the pipeline to occupy it until the appointed day, which we expect to be at the beginning of April. Administrative arrangements have been made to deal as expeditiously as possible with all outstanding applications from the places in question, and it is expected that very few, if any, of those received before February 3 will be outstanding on the appointed day. In fact, I hope there will be no cases which will lapse, except perhaps for a few which may not have been accompanied by sufficient information to enable the Committee to deal with them expeditiously.
The position resulting when the Bill becomes law will be this: that all outstanding
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applications for D.A.T.A.C. assistance will lapse (if there are any outstanding) because the Distribution of Industry Acts will be repealed and the Treasury's power to grant assistance will come to an end. Of course, where a former D.A.T.A.C. place is one of the new development districts, no difficulty arises. The Board will be prepared to treat any outstanding cases, if there should be any, as new applications made to the Board under the new Act and will deal with them on that basis. The problem arises only on former D.A.T.A.C. places which are not development districts. In those cases the Board will have no power to deal with outstanding applications, because the Board can exercise their powers only in places in which high and persistent unemployment exists or is threatened; and ex hypothesi this is not the case in those areas in question. But, as I have said, I hope there will not be many cases which will lapse for that reason.
If I may take up in conclusion the final point of the noble Lord, Lord Shepherd, he said that although it had been generally accepted that the new development districts would comprise about 14 per cent. of the working population, those contained in the first list comprise only about 12 per cent. The noble Lord will remember he asked me about this point on Second Reading, and I replied that this was not half a list waiting to be completed in a few weeks; that it was a complete list, but one which could be revised from time to time. Of course, it could be revised by including new districts without leaving out any old ones. It is conceivable that it might be brought up—there is nothing sacrosanct about 14 per cent.—to 14 per cent. in course of time without anybody dropping out; or it may be that somebody would be dropped out and that the replacements would exceed the number of workers who were dropped out, so that it would come up to 14 per cent. But that does not mean that the districts which were then brought in would be those which were in the D.A.T.A.C. list and which have now been left out.
They might equally well, and perhaps even probably, be other districts—possibly some districts containing the balance of 30,000 unemployed in Scotland which the noble Lord mentioned. We do not know that: the test will simply be

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whether they have a high and a persistent unemployment or whether high unemployment is to be expected. I think it is true to say that this measure will be flexible. It may be flexible either in the sense of leaving out areas which may no longer need help and bringing in others, or bringing others in and leaving nobody out. But the people who are brought in would not necessarily be those who were under D.A.T.A.C. and are not in the first list of development districts under this Bill.
LORD SHEPHERD: My Lords, may I thank the noble Earl for his courteous and detailed reply to the points that were raised by myself and by my noble friend Lord Stonham. I was pleased to hear that in his view and from information he has, there will be few districts in the D.A.T.A.C. areas in the course of negotiation which may—not so much suffer but lose the opportunity of bringing in new industry because of the Bill. There may be a few of them. But will the noble Earl undertake, before the Third Reading of this Bill, to approach the Minister concerned and try to impress upon him the strong feeling on this side of the House that those areas which are on the borderline, which were
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in the D.A.T.A.C. areas and in which the local authorities have worked hard to bring in industry, should have their applications treated with the greatest sympathy?
THE EARL OF DUNDEE: Yes; I will certainly make those representations.
LORD SHEPHERD: Then I beg leave to withdraw my Amendment.
Amendment, by leave, withdrawn.

MANCHESTER SHIP CANAL BILL [H.L.]
Committed to a Select Committee.
DERBYSHIRE COUNTY COUNCIL BILL [H.L.]
Reported, without amendment.

NORTHAMPTON COUNTY COUNCIL BILL [H.L.]
Reported, with Amendments.
House adjourned at twenty-six minutes before five o'clock.