Lords Sitting of 7 November 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 St. Edmundsbury and Ipswich

STATEMENT—THE "LADY CHATTERLEY'S LOVER" CASE
2.35 p.m.
THE LORD CHANCELLOR (VISCOUNT KILMUIR): My Lords, I hope that your Lordships will allow me to trespass on your time for a brief moment in order to express my regrets for having unintentionally misled my noble friend Lord Teviot, and the House, on Thursday afternoon of last week. My noble friend asked my advice as to whether he should discuss a case which ended the day before. I am afraid that my mind was focused on the more general social problems on which I had to reply, and I said that it was our usual practice to wait for the expiry of the time of appeal. It escaped my mind that this case had been tried on indictment when, of course, there is no appeal from an acquittal. I can only suppose that I must have had in mind that most cases of this sort are tried in magistrates' courts from which the prosecution can appeal on a point of law. At the best this is an explanation and not an excuse, and I must express my deep regret to the House for my lapse and publicly to Lord Teviot, to whom, of course, I wrote at once and from whom I had a characteristically generous reply on Friday.
LORD TEVIOT: My Lords, I must thank my noble and learned friend for the very kind way in which he has dealt with this question.

WARSHIP CONSTRUCTION AND THE SHIPBUILDING INDUSTRY
THE EARL OF CRAVEN: 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 it is true that production of warships is up to date for the first time since the end of World War II because of declining orders in the shipbuilding industry.]
THE FIRST LORD OF THE ADMIRALTY (LORD CARRINGTON): My Lords, while the production of warships is now more up to date than it has been since the end of the last war, There are a number of contributory causes for this. Nevertheless, it is true that the naval programme is no longer meeting as severe competition from merchant ship construction as it did earlier when there was a boom in shipbuilding.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, would it not also be true to recognise that since the end of the last war programs of shipbuilding have been very widely cut?
THE EARL OF CRAVEN: My Lords, could my noble friend tell me whether Her Majesty's Government realize the possibilities of the great gains in experimentation and design of propulsive machinery technology which would result from a united policy within the framework of the Common Market?
LORD CARRINGTON: My Lords, that seems to be looking rather into the future, but as a general proposition I would agree that the more we get to know what our neighbors are doing the better.

DECIMALISATION OF THE CURRENCY
LORD FRASER OF LONSDALE: 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, having regard to the debate on decimalization of the currency on Thursday next, they will place in the Library of the House a number of copies of the Joint Report of the British Association for the Advancement of Science and the Association of Chambers of Commerce on this subject.]
THE MINISTER WITHOUT PORTFOLIO (THE EARL OF DUNDEE): My Lords, the Report is not an official publication, but I am informed that a number of copies are now available in the Library of the House. I certainly hope that any of your Lordships who are interested in the subject will study the Report.
LORD FRASER OF LONSDALE: My Lords, I thank my noble friend.

ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH
2.40 p.m.
Debate resumed (according to Order) on the Motion moved on Tuesday last by Lord Dement—namely, That an humble Address be presented to Her Majesty as followeth:
"Most Gracious Sovereign—We, Your Majesty's most dutiful and loyal subjects, the Lords Spiritual and Temporal, in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament."
LORD PETHICK-LAWRENCE: My Lords, I rise to move the Amendment standing in the name of the Leader of the Opposition, my noble friend Lord Alexander of Hillsborough—namely, to add at the end of the proposed Address:
"but humbly regret that the policies of Your Majesty's Government are not conducive to an ordered and expanding economy."
My Lords, I venture to assert that there is hardly any of your Lordships, sitting wherever he may in this Chamber, who would put his hand on his heart and say that he or she is wholly satisfied with the advance in the economy of this country at the present time. The one exception that may be true may be the case of the noble and buoyant Viscount who leads the House, who may possibly take a different view. But those who will disagree with what I have said—and I think there will be very few, if any—should read the leading article that appeared in the Financial Times on Saturday last, dealing with the business outlook. The writer used these words:
"Weighing up all these divergent trends, the most likely forecast for the economy as
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a whole is that industrial production will probably continue on the level trend which it has maintained for most of this year. It is on the whole more likely to decline than to rise, but any changes either way are likely to be fairly small."
I think that is not a very pleasing prospect for the economy of this country.
We have been aware for some time past that the balance of trade has been unsatisfactory, that the exports of this country are increasing at a much smaller proportion than those of other countries land then, last Tuesday, the day when Her Gracious Majesty read her Speech from the Throne, we had the Press release from the Treasury, saying that in the first three quarters of this year there has been practically no change, no increase, in the actual production and productivity in this country. I venture to suggest that that is a grave and serious situation.
The purpose of this Amendment is to fasten upon the Government a part—, I would consider a major part—of the responsibility for this serious state of affairs. It is bad enough that our exports should lag so far behind those of other countries. I was looking at a table the other day and I found that in France, Germany and Japan there has been a far greater increase than we have had here. That is not to say anything about production in the Soviet Union. Even if we take with a measure of reserve all the optimistic views and forecasts of that country, still everyone knows, and those who have visited Russia and have brought back evidence will admit, Chat there has been a marvelous increase in production in that country. It is serious enough that we should have had these two items: the serious condition of our balance of payments and the serious failure to keep abreast of other countries with our exports and our trade. Now we have this Press release telling us definitely that in the last three quarters there has not been any advance in production. After all, our production is the fountain source of our wealth, and if that is not going to increase then our future is black indeed.
Your Lordships who know about these things will recognize that these three sets of facts are not independent facts; they are to a large extent inter-related. But it is worth realizing that whichever index you take, whichever starting point

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you go from, in all those three oases you have this gloomy forecast of what is taking place. The major point is, who is responsible for this? As I said just now, I have no hesitation at all in fixing a large share of the responsibility upon Her Majesty's Ministers and the Government of the present day. That seems to me to require little proof, but I will proceed in the course of my speech to indicate in broad outline the major facts which I rely upon for that charge. I shall deal only in broad outline, and noble Lords from our Benches who follow me will no doubt, from their individual knowledge of different matters, fill in details, and some of them will add matters upon which I do not, for lack of time, propose myself to touch.
I would begin in the first instance by taking the monetary situation. There is no doubt that the uncertainty provided by the fluctuations in the bank rate in the course of the last few years has played a great part in preventing industry from laying its plans ahead. How can any business man, not knowing whether the bank rate is going to be three, four, five, six, or possibly even seven per cent., day his plans satisfactorily? The fact is that he does not; and that is one of the main reasons why our economy is unable to progress in an orderly and expansionary manner at the present time.
For quite a good part of this year we have had a 6 per cent bank rate. We are told that it has now been reduced to 5½ per cent. That step might have been regarded with some satisfaction. but it was accompanied at the time by a statement by the present Chancellor of the Exchequer that on no account must this be regarded as a retreat from the red light; that it was not even an amber light with a hopeful prospect for the future and the chance in early days to come of its being brought down to the green light with a moderate bank rate. I say that, with that unfortunate gloss that was put upon it by the Chancellor of the Exchequer, the effect of this reduction, gratefully received as no doubt it has been, will be of very much less value.
It happened that a few days ago I was reading two speeches, one from Mr. Cobbold, the Governor of the Bank
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of England, and another from the Chancellor of the Exchequer, Mr. Selwyn Lloyd. They both expressed satisfaction. The satisfaction of the Governor of the Bank of England was that he was now convinced that it was patent that the monetary policy of the Government and the Bank of England, the putting up of the bank rate, was having a much greater effect than had been supposed at the time when the Radcliffe Report was issued and a somewhat ambivalent attitude was adopted towards monetary policy. The Chancellor of the Exchequer said that he was glad that the promises that the Conservative Party made at the last General Election were being fulfilled; that they were relying more and more upon monetary policy and bank rate than upon any other thing; and he was glad to think that they were going to eschew, as the Conservative Party thought right, physical restraint, and depend more and more, as I understood his remarks, on bank rate. I venture to suggest that that is most disastrous.
The view that those two very distinguished financiers expressed reminded me of a little story I was told when I was a child. There was a man who had a horse; it was a good horse in every way, but the owner was disappointed that it cost so much to feed. He came to the conclusion that if only he could cut clown the diet of the horse a little at a time, the horse could be trained to live on very much less. He therefore arranged that there should be one wisp of hay less for the horse every time it was fed. The experiment apparently went very well and the amount of the horse's food was cut down, wisp by wisp. The experiment was seemingly going triumphantly to succeed when, just as they had got down to the last wisp of hay per day, an unfortunate event happened —the horse died. It seems to me that it is that kind of position with which these great financiers are expressing their satisfaction, while gradually the economy and health of the country is going steadily downhill.
Some people have told me they cannot see how the bank rate affects the ordinary man in the street. To one of those I gave this answer. Let us take one of the smaller houses that are being built in this country in large numbers, a house costing, let us say, £3,000 When

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the bank rate is at 6 per cent. the interest alone on that money is something like £180 per year; and when (as one must) one has added a lot of other things, like convincing and so on, one gets to a figure substantially above £4 per week for that house. The point I want your Lordships to recognise—and I am sure most of you do—is that someone has to find that money. The tenant has to pay that rent, the taxpayer has to produce a subsidy or the ratepayer has to make it up; but at least £4 per week, and possibly considerably more, has to be found by someone. That means, of course, that not only will all new houses attract that rent but any landlord who is in possession of a comparable decontrolled property which is in good repair can ask up to £4 per week rent, and is likely to be able to get it.
Supposing, on the other hand, that bank interest is only 3 per cent., then, of course, the charges are so much the less—something like one-half of what they would have been—and we get an entirely different situation. Therefore, whether we are dealing with the rent of a small cottage, such as I have taken, or with larger and much more expensive houses, the rents will have gone up, largely because of the bank rate. That has brought this apparently intricate monetary matter to the level at which the ordinary man in the street can understand how it affects him; and it affects not only the ordinary man who rents houses but the whole of the business world in their transactions. As a result, the cost of everything goes up, so that in one aspect, at any rate, a high bank rate actually invites inflation. There we have the whole position. I say, therefore, that so long as we have a Government who rely so implicitly on this monetary method of dealing with the economy of the country, so long are we going to be in trouble and so long are we going to fail to get the expansion to which we are entitled.
Before I leave this purely monetary matter I want to speak on one corollary, a comparatively small point. A high rate of bank interest also affects the price of gilt-edged securities, and Her Majesty's Government have promised to introduce a Bill to enable trustees to invest their resources in securities other than gilt-edged. They are to be entitled to buy equities. I have no objec-
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tion at all to that principle, though whether, in the present state of the Stock Market, it will be a profitable thing for trustees to invest in equities is at the present time a matter between the trustees and the stockbroker. In so far as they do so, however, I maintain that it is something which is contrary to the terms on which people were invited to invest in gilt-edged. They were told that there were two reasons why they should do so. One was that it was patriotic to do so; the other was that the price of gilt-edged would be kept up, by the insistence that trustees, unless there was some different provision in the trust deed, should be compelled to spend their money in buying gilt-edged.
As to the first, I believe that Her Majesty's Government have shown, by their completely callous attitude towards the fall in gilt-edged, that they put no confidence in that view. Now, with this new Bill they are, as I see it, changing the terms on which they got the investment from the people—and doing so after the investor has paid his money. I regard it as, to that extent at least, a breach of confidence. It may be that it is a good thing for trustees to have this power, but if it is then I feel the Government ought to do something for the gilt-edged investor who has paid his money on a contract which, to that extent, the Government are now tearing up.
I leave that question of the monetary matter and turn to something different—the obssession which Her Majesty's Government and the Conservative Party seem to have in favor of private enterprise against public enterprise, not merely where the balance is even but in cases where there is a perfectly good and flourishing business in public hands. I recognize to the full, I believe, the necessity of retaining a very large measure of private industry. I recognize the great service that private industry has rendered in the past and the necessity of keeping it at the present time; but I should like your Lordships to realize that private enterprise and competition—which is one of the great things it is supposed to help —have changed enormously in the course of my lifetime.
When I was young competition was competition. The man, or the company, who was undertaking a venture did so

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Entirely at his, or their, own risk. Sometimes they succeeded and made money; sometimes they lost it and went down. It was to some extent a rather brutal system. The weak would go to the wall, and nobody was going to care; and what were called the working classes had a pretty raw deal. But it was economically efficient. Now, to a large extent, competition, in the sense in which I knew it when I was young, has almost entirely disappeared. We have these enormous concerns with which there is really no competition at all, and many of these concerns enter into arrangements with one another, so that competition in that sense has practically gone.
But that is not all. In addition, these large concerns, owing to their power and influence and owing to their importance in the community, go to the Government and get private help. That has made a complete change. It is not a question of private interests trading on their own capital, but, to a large extent, of private interests supported by Government, public money, and of other interests which are of public standing supported by the Government. The most striking and immediate case of that is, of course, the new Cunard liner. The first question we have to ask about the Cunard project is this: would it have been carried out by private means? I take it that the Government would say, "No". What does that really mean? It means that it is not regarded in the City of London as a profitable undertaking. Therefore the Government have decided to subsidize it.
The next question is this: why are they going to do it? They say, I understand, that it is for the national prestige. There are two opinions about that. Some people think that having a large liner in the days to come will be a great feather in our cap; that it will promote our prestige. Other people think that the new ship will be a white elephant when it comes into operation. That view is not one that is shared merely by a few people on this side of the House. I found in reading quite a number of papers including The Times and Financial Times,that they are all doubtful whether it will be an advantage to the country for that money to be spent on it. But
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that is a question, I assume, dealt with in the Chandos Report, and as we are not allowed to see the Chandos Report we cannot judge whether the arguments are good or bad.
LORD BARNBY: My Lords, may I interrupt the noble Lord? It will be within his memory that when the "Queen Mary" was first built difficulty arose regarding insuring the hull. There were so many people then who took the view that the "Queen Mary" was not an appropriate investment by the Cunard Company that the market had great difficulty in effecting the cover, and, if my memory is right, the Government had to go to their assistance.
LORD PETHICK-LAWRENCE: My Lords, I quite realize that. But, after all, the whole position to-day is very different from what it was those considerable number of years ago when the "Queen Mary" was built. What I am saying is that it is a doubtful question. Those are matters which I am not going to deal with, though they are dealt with by The Times and the Financial Times quite faithfully. The question I am going to discuss is whether the financial arrangements are wise—and this question is asked also by both those organs.
If you are going to start sharing out money to one private enterprise, where are you going to stop? Who is going to decide which are the sheep that are to be fed and which are those that are going to be sent hungry away? If you are going to subsidize the Cunard, what about some other shipowner who owns a large fleet of ships and who wants to put them in working order? Are you going to say, "We gave it to the Cunard. We like that company and we do not like you"? I think that that is a most dangerous position. I have a great respect for the shipping industry. I have had many connections with them and I know their great merit, but I do not think they will like this choosing out of one of their number to have a great subsidy and for others to get none. And the Government will have to decide where it is going to stop.
There is another matter which has hardly been mentioned anywhere, but I read to-day for the first time that it was mentioned in the Financial Times last Friday. I was reminded just now that

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there were two ships, the "Queen Mary" and the "Queen Elizabeth", on this Cunard line, and I have it on fairly good authority (if I am wrong I shall be corrected) that it is not economic, not viable, to have only one ship of a certain class; we must always have them in pairs for the purpose of crossing the Atlantic. As regards the grant of these large sums of public money to the Cunard Company, what is going to happen about the sister ship of the "Queen Mary", the "Queen Elizabeth", when she also becomes obsolescent? Does this arrangement to-day really bind the Government when that new situation arises that the "Queen Elizabeth" has to be replaced? Does it carry with it practically an obligation for them to find a similar, perhaps even larger, sum of money when that time comes? I am very much afraid that the Government of that day will find themselves in the position that they are practically compelled to make a similar transaction, perhaps of n even more onerous kind, when that time comes. I leave the question of that for the moment.
I come now to certain questions of foreign policy. The first and most important question of trade is our trade with the rest of Europe. There we have the problem of the Common Market. I want to be quite fair to the Government, and I am quite prepared to admit that it is an exceedingly difficult problem. There are large numbers of issues, which would take us far too far away at the present moment, that have to be considered and decided upon. Nevertheless, the Government cannot get away from their responsibility in the matter, and at the present time the outlook with regard to the Common Market is not all rosy. Rainy be possible that even in the course of this debate some member of the Government may be able to put some light on the thing and give us a more optimistic forecast. But in default of that I am bound to say that there are grounds for thinking that our trade with the Continent will be very seriously damaged in the course of the next few years. And certainly, already, the relationship with the Common Market—or no relationship, whatever it is—has been considerably damaged for this country and its trade prospects.
That brings me, finally, to the case of China. I made some remarks on China
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earlier in the year. They were on political grounds. My noble friend Lord Attlee, I was delighted to see, in his very trenchant speech, dealt with the matter also on more or less the same lines that I took up. But to-day I want to talk about China from the point of view of the trade of this country. There is one thing I have learned in the course of a very long life: that you cannot with impunity ignore physical facts, and if you take actions that imply that certain existing physical facts are non-existent you are asking for trouble and will almost certainly get it.
What are the physical facts in this case? The mainland of China is by far the largest country in the world—I mean in the matter of population. Only the other day they reached the colossal total of 700 million people—one quarter of the whole population of the world. They are an industrious people, and anyone who thinks about it must realize that potentially they are the finest and most important market in the world. Now what have our Government done with regard to trade with China? Out of loyalty to the United States, they have insisted on blocking the entrance of the Chinese Republic into the comity of nations. I know perfectly well that in some ways they have encouraged trade, either through the direct door of China or through the back door of Hong Kong. Nevertheless, this attitude of ours towards their political entry into the United Nations is bitterly resented by the people at the head of the Government of China, and that resentment will undoubtedly be reflected in the trading position.
I made a similar plea last Session, and I gathered from the speech made then by the noble Marques, Lord Lansdowne, that the British Government were not going to carry out what I suggested. They used their vote against the interests of China. I fully understand that they wish to please the United States, but the time is coming when that will no longer be possible. The vote in favor of the entrance of China is creeping up. At the last Assembly of the United Nations a much larger proportion of States than before voted in favour of the China question being discussed—which was, in effect, for China to be admitted.
How much longer are we going to stand on the wrong side? This next time

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May be the last chance we have of showing ourselves as the trading friends of China, instead of being her enemies. Next time we may be outvoted, and find ourselves dragged along on the wheels of the chariot of the United States. Now I aim a friend of the United States, and this country must remain friends with the United States; but that does not mean that we have to be subservient to her. Where it is a question of doing right or wrong, and particularly where it is a question of blocking our own interests, it is for us to be up and saying, "We are very sorry, but on this occasion we must disagree with you."
That is the last of the points that I wanted to make, but there is just one more thing that I should like to say. Shallow minds— I will not say among your Lordships, but among some of your Lordships' Party—may be rejoicing today at the dissensions in the Party to which I belong. I can understand that; but students of history, whether deep students or those who know only the history of this, present century in our own country, will take a very different view. They know perfectly well that the disappearance of harmony among the Opposition is not good for the Government of the day. It is not good for them to have no effective, united Opposition. It tends to drive them to courses which are not popular with the country: and if a result of the dissensions in my Party is that the Government revert to class prejudice, to Tory idiosyncrasies in the matter of private enterprise; and if, at the same time, out of the perfectly genuine and proper desire to keep friends with our friend and Ally across the Atlantic, they carry on an international policy that is fundamentally wrong and contrary to our interests, then their position as a Party will be in jeopardy. But what is even more important than that is that they will be doing a disservice to our nation and to our people, to whom, in the last resort, whether we are Conservative, Liberal or Labor, we owe our ultimate allegiance. My Lords, I beg to move.
Moved, as an Amendment, to add at the end of the proposed Address "but humbly regret that the policies of Your Majesty's Government are not conducive to an ordered and expanding economy."—(Lord Pethick-Lawrence.)
3.15 p.m.
LORD OGMORE: My Lords, we always listen with interest to the noble Lord, Lord Pethick-Lawrence, owing to his informative speeches, but to-day it seems to me that more than ever are we indebted to him, because not only has he been interesting and informative, but he has also raised some very pertinent questions, and ones which we shall look to the Government to answer. Indeed, I myself propose to follow him in quite a number of the subjects he has raised.
I think that, as he implied, most people in this country who think about these matters feel that there is some impending economic disaster, as it were, in the air. Perhaps that is putting it a little too high, but we are certainly all very uneasy at the economic situation. Why is production failing to expand in this country to the same extent as it is expanding in so many other countries? Why are our exports failing to keep pace with the exports of other countries in the Western world? Why are there these constant "stops" and "goes" in credit? And why does one great industry after another go into a decline? I feel that the Government must take a considerable responsibility for many of these factors; and I believe that it is due, to a large extent, to their lack of drive and leadership that these conditions prevail. Let us take one example: the noble Lord did not give it, but it is one which I think we are all in a position to judge for ourselves—namely, the road question. The roads are the arteries of commerce, and yet those arteries are hardening. We need an imaginative and radical plan which will enable the traffic of this country, whether private or commercial, to flow; and it is high time that we stopped tinkering about with the problem and got on with it in a big way.
The noble Lord, Lord Pethick-Lawrence, mentioned the question of the Common Market. Here again, the Government's voice is completely confused. Last week, we all enjoyed what, if I may say so, was a most distinguished speech by the noble Earl, Lord Home, in the course of which he said [OFFICIAL REPORT, Vol. 226 (No. 2), col. 61]:
"One reason for trying to bring the Six and the Seven closer together is that, in face of the Communist challenge to Europe, we must look at every opportunity to close our

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Ranks, to find fresh means by which we may unite our resources and translate them into action."
A little later he went on to say:
"Of course, in any solution we would carry with us the Commonwealth and the Seven, but I have always thought that for this country to be industrially strong is one of the greatest interests of the Commonwealth, with its members depending so much for capital upon this country for their development."
With that, all Liberals, at all events, would agree completely: we would entirely agree with that as a most enlightened statement of the position. Then I am glad to say that another Minister who has had considerable experience in this field, and who has now been given more responsibility as Secretary of State for the Colonies, Mr. Macleod, said much the same thing. Speaking at Enfield, Mr. Macleod said
"that the Tories were ready and eager for a lead to bind Britain more closely to Europe."
That is taken from a report of his speech. He went on to say:
"The existence of the Commonwealth was no longer an adequate reason for declining to have anything to do with Europe."
With that statement, again, we would completely agree; it is an excellent statement. But that is not by any means the opinion of all the Ministers. As we know, Mr. Heath, at Scarborough, did not come out with anything like that trumpet note. It was nothing like that at all; he wobbled.
Just lately, Mr. Butler, in dealing with this matter, referred to the Liberals in this respect—and also to the Labor people—in most unflattering terms. Mr. Maudling, who has responsibility in this field as President of the Board of Trade, launched a violent attack at Newquay on the Liberals, who, he claimed, wanted Britain to join the Common Market, irrespective of the consequences to the Commonwealth and our own agriculture. As will be remembered, Mr. Butler had already complained that the Six's farm policy did not suit Britain; he preferred our way of helping farmers by way of direct commodity subsidies. Now, what sort of lead to the country is that?
My Lords, all four of these gentlemen are distinguished Ministers. Two of them are saying: "Get into Europe. It will benefit the Commonwealth. There are no restrictions at all so far as the Commonwealth is concerned." The other two,
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Equally important and equally senior, deride such a policy. In the case of Mr. Butler, he actually went so far as to say that it was not our policy to go into the Six; that we preferred to deal with the matter by giving subsidies to the farmers, which I should think is a rather myopic way of looking at a problem of this size. So no lead is given there.
The next question is the one referred to by Lord Pethick-Lawrence: that of the new Cunard liner. We have been given a challenge, as it were, by the noble Lord, Lord Mills, to deal with this subject concerning the Cunard Company today, and we accept that challenge. As Lord Pethick-Lawrence so rightly says, time after time in recent years private industry has come here for subsidies. In fact, as we all know, distinguished noble Lords who are heads of such industries come here asking for money from the taxpayers', and it is the only time we sec them. They come with their begging bowls like a lot of noble Oliver Twists, asking for more. At other times they fail to find any interest in our proceedings.
The latest private industry to do this—or the latest private firm; it is not even an industry—is the Cunard Company, who want to build a new Transatlantic liner. This is a very odd transaction, according to the information we have been given about it up to the present. Of the £30 million that it is expected to cost, some £18 million is to come from the Government—£14¼ million is to come by way of long-term loan, and £31 million by way of art out-and-out grant from the taxpayers' pockets into the pockets of the Cunard Company's shareholders.
I think that if the Government is going to give one firm £3¼ million as an outright grant, it must have very strong evidence of need. But, as Lord Pethick-Lawrence has said, we have had no evidence of this at all. The report upon which this is based has never been published, and we are not aware, taking one thing and another, whether it is the right course to pursue or not. Many noble Lords have been far longer in the public life of this country than I have, but I wonder whether there has ever been a case before where a sum of this magnitude has been given to a private firm without a scrap of evidence of need. It is all done simply on what we are

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told are the resolutions or recommendations of a Committee presided over by one of our number, the noble Viscount, Lord Chandos, who, so far as I am aware, is not himself a shipping man, although naturally he has had a great deal of experience in business life.
The excuse given for this by the noble Lord, Lord Mills, was that if the evidence were produced, we on the opposite Benches were too dull to understand it. That may be so in regard to some of us; but surely others of us on these Benches are able to consider these things, and, I should have thought, equally able to do so as the noble Viscount, Lord Chandos, because although he is a big business man he has neither a degree or a qualification in chartered accountancy nor any particular experience in the shipping industry.
The next point is, is it going to end there? Once we start "dishing out" money from the till, where is it going to end? It will be remembered that in a supplementary question last Thursday I asked about this. I had, of course, no previous knowledge as to what the statement would contain nor did I know that the statement was going to be made, but this thought immediately occurred to me, and this is why I asked the supplementary question. I asked: how do we, as taxpayers'—because it is our pocket from which this money is going to come—and as Parliamentarians know whether the tenders come from efficient firms; whether there is, as it were, proper competition?
I inquired whether foreign firms would be allowed to tender, though they would not necessarily get the contract, because I thought that, with our vast experience, if British firms tendered they would be efficient and would get the tender. But this aroused great hostility from the noble Lord, Lord Mills, and I regret very much that the noble Viscount, Lord Alexander of Hillsborough, regarded it as an extraordinary suggestion that there should be any competition from other countries. We have always been among those who object strongly to the Americans doing this sort of thing. If British firms tender for American orders and are granted the tender, we always object strongly when the Americans say, "No, you cannot have this order. It is in an area of great unemployment and an American firm
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must have it." But when it is the other way round there is immense hostility from both the noble Viscount, Lord Alexander of Hillsborough, and the noble Lord, Lord Mills, and I want to quote what they said, because it is indicative of their attitude of mind. The noble Viscount, Lord Alexander of Hillsborough said [OFFICIAL REPORT, VOI. 226 (No. 3), col. 153]:
"My Lords, from the point of view of using public assistance for British industry and employment, may I say that I hope the noble Lord will not accede to the request of the noble Lord, Lord Ogmore?
"LORD MILLS: I thank the noble Viscount."
Now, what did he thank him for? Was it for saying that the shipbuilding industry needed public assistance? Is that what we have come to in this country—the shipbuilding industry needing public assistance? Without any sort of comparison, a vast sum is apparently going to be handed to the shipbuilders so that they can make this new vessel. All I can say is that with the Tories behind him and the Conservatives in front of him Lord Mills has sewn this idea up very well. I hope that the Government and my old friend the noble Viscount will have second thoughts on this issue, and should it go out for international tender I hope that our British industry would be proved efficient.
I am a little alarmed about this matter because there are rumors that British shipbuilding is not efficient. The D.S.I.R., which is a Government organization, made an inquiry into the shipbuilding industry, and it is an odd and significant fact that the Government have never published that report. It would, I think, be right and proper now, since the Government are apparently not going to allow this tender to go out to international competition, to publish the report. The D.S.I.R. report, if published, would enable everyone to be quite satisfied that there was no allegation of serious inefficiency on the part of the British shipbuilding industry. If the report was not published everyone would have the feeling that the Government were trying to cover things up and were afraid to let this contract go out to international competition.
THE LORD PRESIDENT OF THE COUNCIL AND MINISTER FOR SCIENCE (VISCOUNT HAIESHAM): My Lords, may I say that the D.S.I.R. report

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is a very interesting subject, but it has no bearing at all on current production. It is a report on the extent to which adequate research was going on. Of coarse, it is a subject which we should be happy to debate, but it could have no conceivable bearing on the allocation of contracts for the Cunarder.
LORD OGMORE: My Lords, of course I am happy to be interrupted by the noble Viscount, but I do not see any objection to the publication of the report. As we have now heard from the noble Viscount, the British shipbuilding industry does not spend nearly enough on research. How can any organization be efficient in these days which does not spend nearly enough on research? I think that the intervention of the noble Viscount the Leader of the House shows conclusively that this is a document which Parliament ought to have before they approve a proposal such as this with regard to the Cunarder. I leave it there, but it is very odd that at this very moment, when the Cunard Company has got £18 million from the Government in one way or another, they are applying through a subsidiary company for a license to engage in air traffic across the Atlantic, in a Blue Riband route by air. It does not seem that the Cunard Company are entirely satisfied with their future as a shipping company when at this moment they are asking for a license to take passengers by air across the Atlantic, and I feel that this is another point which we ought to consider when dealing with the Cunarder.
Is this ship not going to be far too big? This is a matter on which I do not feel entitled to make any particular comment, because I have not had the Report of the Committee, but it is said in many informed quarters that it would be far better to have two ships of 35,000 tons each rather than two of these monsters, which, owing to the amount of passenger traffic now carried by air, do not seem to be justified any longer, as they were 30 years ago when the original "Queen Mary" was built.
I move on to the next point which I wish to make and which has already been touched on by the noble Lord, Lord Pethick-Lawrence. The question we ought to ask ourselves is: what sort of economy do the Government wish this country to have? We had one clear-cut exposition by the noble Earl, Lord
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Home, in his speech the other day. He made what I thought was an excellent summing up of the position. It is the only speech by a Foreign Secretary I have heard for a good many years which does ask these very pertinent questions. The noble Earl said [OFFICIAL REPORT, Vol. 226 (No. 2), cols. 59–60]:
"I have asked some pointed and rather uncomfortable questions because, if the Foreign Secretary is to be the architect of a successful foreign policy, he must know what rôle the people wish to sustain. In a world of strain, are we willing to bear additional strains upon our resources and upon our capital? Are we willing to endure the risks involved in the nuclear deterrent, and to arm ourselves with nuclear weapons and with conventional arms, so that the Communists can never gain an advantage and be tempted to aggression? Are we willing to stand by our colonial responsibilities, ensuring that the path from dependence to independence is one of law and order and justice? Are we ready to forgo some of our own welfare and wellbeing at home in order to span the gap in the standards of living between the countries of Asia and ourselves?"
These are pertinent questions and splendidly put, but, of course, they are not questions that the Conservative Party have asked the electorate at all. The Conservative Party did not win the last Election by asking the people to "stand by our colonial responsibilities" and to be ready to forgo some of our own welfare and wellbeing at home in order to help the countries of Asia. None of those questions was put at the Election, which the Conservatives ran to a large extent under the leadership of the noble Viscount who now leads the House. The Conservative Party won the Election on the slogan, "You never had it so good".
VISCOUNT HAILSHAM: My Lords, I am sorry to interrupt the noble Lord, but since he referred to me, perhaps I should be entitled to do so. I should like to say categorically to the noble Lord that never once in the Manifesto or, so far as I know, during the Election campaign was that slogan used by any Conservative leader. It is an allegation invented against us by our critics. Secondly, every one of the questions, which he has said were never asked, was in the Conservative Party Manifesto and can be found there, with the policies attached to it.
LORD OGMORE: My Lords, I read the Conservative Manifesto and Mr. Macmillan's speech, and I would ask the noble Viscount to look at it again

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to see what was the general tenor of the speech and the Manifesto.
VISCOUNT HAILSHAM: My Lords, the noble Lord said in terms that we had won the Election on the slogan "You never had it so good". It is that which I am categorically challenging him to show. It is true that in 1958, in quite different circumstances, and once at Oxford three days ago, the Prime Minister used these words, but they were never used as a slogan during the Election or at all in that context.
LORD OGMORE: As we are completely in contradiction, we shall have to turn it up. The whole point is that the Prime Minister had used these words. It was the whole tenor of the Conservative Party at Election time. For anybody to say that they were not means that a certain amount of amnesia goes with success in an Election. People are inclined to forget what they said during the Election which caused them to win it.
VISCOUNT HAILSHAM: My Lords, the noble Lord is accusing me of amnesia. I challenge him to produce a single thing which was said during the Election to that effect by me or by anybody else for whom I was responsible. It is all very well for the noble Lord to try to ride off after making categorical statements of fact and having been challenged on the fact. He will find, if he takes the trouble to verify the reference, that the Prime Minister used these words when he faced a highly hostile audience which had criticized the standard of living which they said they were suffering from. He said that the fact was that the standard of living had never been so high. That was the context and the only context. The noble Lord accuses other people of forgetting what they have said, when he is unable to establish a single thing said during the Election campaign which justifies the remarks he has made.
LORD OGMORE: My Lords, I will turn them up and look, but I thought that they were so well known that nobody would challenge them. This is the first time I have ever heard anybody challenge the fact that the Tories won the election on the slogan, "You never had it so good."
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One thing the noble Viscount will not deny, because in this case he and I were on the same side and I went into the Lobby with him when he voted against his own Party, and that is that this Conservative Government introduced into this country commercial television, with its immense influence in stimulating domestic consumption. Will he get up now and challenge me on that point? I wait for it. Will he deny that commercial television has had a tremendous effect on domestic consumption, quite apart from its effect in other ways—the very thing the Government did not want to happen? The noble Viscount cannot deny it, because that was one of his chief arguments during the debate, as it was one of mine and of other noble Lords. We said that commercial television, with its ability to create an enormous demand for consumption goods, was going to defeat the Government's own object, which presumably was to keep down demand. The noble Viscount cannot deny it.
What is the result? Every night the commercial features pump out the demand for people to have more cigarettes, more chocolates, to use this sort of soap and become irresistible, to use this sort or that sort of detergent—and your clothes become unwashable! I will ask the noble Viscount this. There are six by-elections on at the moment, or perhaps more. In how many by-elections is the Tory candidate getting up and repeating the wise words of the noble Earl, Lord Home, and saying: You must tighten your belt and go in for austerity. You must not have any more washing machines or motor cars. We must spend more on the Colonies and we must spend more on credits for other countries"? I very much doubt whether in any one case that sort of argument is being used.
VISCOUNT HAILSHAM: I am sorry to answer the noble Lord, but he should not ask questions. I am speaking at one to-night and I hope at another in a fortnight's time. I cannot speak for the other four, but those arguments will certainly be advanced to-night and in a fortnight's time.
LORD OGMORE: Perhaps then there is something that this debate has done, and I shall look in The Times to-morrow to see the result. I may say, as a result

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of all this, that I entirely agree with the noble Earl. I believe that sacrifices are required: that it is necessary to channel investments overseas, and it may be necessary to channel investments in overseas countries. In other words, to-day less money should be spent on skyscrapers in New York and Toronto and more money should be spent on Africa. It is a question not only of overseas investment but also of where that investment is going to be. I cannot help agreeing with the noble Lord, Lord Pethick-Lawrence, that the stagnation of industry is not only accompanied by but is caused by the Government's monetary controls and their policy of dear money. I think it is too blunt a weapon to be used by successful Chancellors of the Exchequer: it is like using a bludgeon instead of a rapier to prick a balloon, and very often it is the wrong part of the balloon that gets hit; it is sometimes the hand of the man holding it.
I said that I thought it was mainly the Government, but it is not always the Government who have responsibility in this important field: industry, both private and nationalized, and the trade unions, have responsibilities, too. I believe that in private industry there should be a great extension of profit sharing, co-partnership and joint consultation; and that, when redundancy happens, as unhappily we saw recently, there should be proper compensation, with adequate notice and, where necessary, training to obtain new skills. I feel that industry needs to reorganize its attempts to secure an adequate part of the export trade. It needs more energy. And it is quite possible that common services will have to be supplied for many of the small firms to enable them to compete satisfactorily. It is obvious that a small firm which may play a considerable part in the export drive is not in a position financially to support research or investigable ion of its own, but if some organization of that kind could be expanded it would be a good thing. There is one in existence, but that possibly does not go far enough.
As for the trade unions, here they, as well as the industrial firms, have a great duty to do all they can to make themselves fitted for the export drive and for better production figures. They should look at their restrictive practices. Many
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of these bear no relation to modern needs and they should be dealt with in the light of modern conditions. We on these Benches feel that there is a moral obligation on a worker to join a trade union, but it should be his or her right to decide whether to join a union; and any appropriate union of his or her choice, provided that it has enough people in the industry, should be recognized as being able to represent its members. We feel also that payments to a political fund should be made only by those expressing an affirmative wish to do so; the matter should not, as now happens, depend upon a negative wish. This all relates to industrial development.
LORD SHEPHERD: My Lords, would not the noble Lord agree that in that case the shareholders of companies should also be consulted before money is devoted to political funds?
LORD OGMORE: I entirely agree with that, and for much the same reason. Then we should like to see the rules of the various trade unions under the supervision of the Registrar of Friendly Societies, so as to ensure safeguards against electoral abuses, such as we have heard about, and misuse of funds. We feel that this is most necessary in these days. It is apparent to us on these Benches that the Government, industry and the trade unions all have a considerable part to play, and all should put their own houses in order before we can really get on our feet.
Finally, the United Kingdom is always in a delicate, position. It is difficult for a country of this size, with no raw materials except coal, and with a population of over 50 million people, to pay its own way. In some ways it is a miracle that it does; but it has done. In order to ensure an ever-increasing standard of living it has to do a great deal better than it is doing now. To some extent, what is true of our position is true of a number of other countries in Western Europe, all of whom, except that they are not islands, have much the same conditions that we have: they are comparatively small; they carne into the Industrial Revolution quite early and they have large populations to keep content. Our complaint against the Government and their supporters is that they look at the world through 19th century eyes,

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whereas to deal with the vexed problems of our times the eyes must be those of the mid-20th century.
3.47 p.m.
LORD LUCAS OF CHILWORTH: My Lords, in the peroration to his usual excellent speech my noble friend Lord Pethick-Lawrence had a word or two to say about haw much the Government would miss a strong and virile Opposition. I intend this afternoon to make a modest attempt to redress the balance. We stand here to-day at a time when we have had nine years of Tory Government, and for the past twelve months we have had the rule of the present Government. What is the position? We are in the grip of a credit squeeze; our exports are falling in relation to the world; a balance-of-payments problem weighs heavily upon us; and the grim specter of unemployment is rearing its ugly head in same parts of the country and in some industries. That is the position, and I do not think anybody will say that I have exaggerated it one iota. I intend to offer proof of what I say. Both my noble friend Lord Pethick-Lawrence and the noble Lord, Lord Ogmore, have complained of the rigidity of the Government's fiscal policy. I agree with them. There is one common factor running all through the problems that confront this country, and it is that the total of taxation which we as a country have to bear is far too high. It has now reached the startling figure of £7.000 million a year—37 per cent. of our national economy.
During the speech I made in your Lordships' House on the economic debate when we had occasion to debate the Finance Bill, I made a plea to the Government to re-think their fiscal policy. I even had the temerity to suggest that the Treasury had to learn a few elementary lessons. I remember that one of them was that the curtailing of home consumption never yet increased exports. I was right, and I have since been proved right. I venture this afternoon to ask them to learn another lesson: that the way to cure inflation is to increase production, not to curtail spending—that is another thing. I also ask them to get out of their quill-pen mentality. The one thing this country is lacking—and it is one of the things that is preventing increase in our
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Productivity and leading to quite a lot of our troubles—is incentive. I have always been brought up in the school—and I have said this to your Lordships many times—that it is the hope of reward that sweetens labor. It is no good telling the British workman that he must work harder and then say, "You will earn more money, and when you have earned it we will take it prom you in one form of taxation or another." I remember citing the case of the young executives who are now in their thirties, the best brains we have in this country, and who are sure-tax payers. I repeat the words I used before, when I said that when they want to join this noble army of property-owning democrats, they find they have to pay Schedule A tax. Everything is a disincentive to work. These are some of the things I should like the present Chancellor of the Exchequer to think about.
Exhortation is just not good enough. An army of Ministers has been going round the country exhorting everybody to export more, and yet exports are going down. The President of the Board of Trade made a speech the other day—one of those my noble friend Lord Alexander of Hillsborough must have been referring to when he quoted the comment in the Financial Times, "Too many speeches"—in which he said he had come to the conclusion that British exports were not expanding because they were of bad quality, indifferent quality or not high enough quality, and that their salesmanship was bad. In other words, after you have deafened the poor wretched beast by shouting in its ear, and whacking the poor wretched beast's backside with a stick, you have failed— you do not know any other remedy. I am going to suggest that increasing the carrots might increase the effort. That is one of the troubles with the Government's fiscal and monetary policy.
It is no good the Chancellor of the Exchequer saying to our greatest export industry, "I cannot do anything to help", because we must increase our exports at all costs, and the majority of the exports of this country are now provided by a handful of firms. It is the small man who should be encouraged to export, but it is the small man who is hit the hardest. I remember the noble Lord, Lord Brand, making a speech on this subject twelve

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months ago, when he said that the small exporter does not mind having a gamble with the Government, fifty-fifty, but if he takes the additional gamble to increase his exports or go into the export market his reward is whittled away. He pays 70 per cent. to the Government if he succeeds, and if he fails he walks into Carey Street by himself.
What is the Government's answer? We are not increasing our exports and the Government have not a magic wand. Taxation is too high in all its forms. The Government are in a dilemma. We have got to produce in this country. As I said in a letter that I wrote to The Times during the Recess—and I wrote it only because I could not say it in this House—it is not only mass production we must have in this country, it is massive production. That is the only way we shall bring down our costs. But what do the Government do? They go to the motor industry and, using the taxpayers' money as the bait, let the noble Lord note, they induce it to carry out its expansion plans in Scotland, Lancashire and South Wales, increasing its capacity by doubling the amount it is producing at the present time. But at the same time as they were inducing the British motor car manufacturer to double his capacity, and put up his production cost by spreading his production over the country, did they tell him they were going to institute a credit squeeze which would prevent his selling what he would produce? Is that economic planning? Surely the Treasury do not say one thing with one voice and the President of the Board of Trade say something else with another voice.
Taxpayers' money has been used to build the additional factories in these depressed areas. As the noble Lord, Lord Ogmore said, the porridge bowls are going to be filled with the taxpayers' money. Have the Government paid any attention or given thought as to how the product of those factories are going to be sold? There is a lesson to be learned over this week-end. One of our great British manufacturers who produces a car—I will not mention the name—which threatens to be a world beater, goes into the Italian market and shows at the Italian show at Milan, and trims his price to the bone to get exports. What does he find? As soon as the show opens, all
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the Italian manufacturers have slashed their prices by 33⅓ per cent. That is the competition you have to meet in the export markets, and you do not learn how to meet that competition either at the London School of Economics or at the Economic Unit of the Conservative Party. You learn that by hard and bitter experience.
If the Government do something in this matter I dare swear that they will do it the wrong way and do the wrong thing; because what did they do before? They lifted hire-purchase controls. The Government's economic policy for this last few years has been foot hard on the throttle or the brake hard on! It has been one thing or the other what did they do on this occasion? They lifted all hire purchase controls in this country overnight. And what did that do? It brought all the rogues and thieves of the country into the hire-purchase business, and at a rough guess the finance houses of this country lost between £6 and £8 million through fraud, wrongful conversion and default. My Lords, relieving hire purchase, making hire purchase easier, is not the answer to our economic problems; because there is one sound principle in hire-purchase business—and I have lived with this all my life: always make the merchandise value a little greater than the debt outstanding. That is, as Mr. Micawber would have said, happiness. When the value of the merchandise is less than the debt outstanding, it means chaos—and the noble Lord, Lord Mills, does not need me to tell him that.
The only thing the Government in wisdom could do to-day would be to extend from two to three years the period over which payments are made on all hire-purchase contracts. But if they go back and vary the present deposit sum it will only bring upon them the tragedies that have happened in this country over these last two years. So when the Chancellor of the Exchequer says: "I cannot afford to remove taxation from the motor car industry"—and there are other industries I could name—I ask: what is he going to do? The trouble is that purchase tax is such a blunt instrument; it damages our best export industry precisely the same as it damages the industry about which the Government do not care. There was a Chancellor of the Exchequer two or

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three years ago who lowered the purchase tax on silver candlesticks to assist the export trade—at least that is what he said he did it for.
Perhaps when the Chancellor of the Exchequer says, "I cannot afford to reduce taxation, whether it is of the individual or whether it is purchase tax", he may be right. Because if there is one lesson we have learned—I will not say only since this Government has been in power, but since the war—it is that no modern Government has ever proved capable of controlling its own expenditure. While the Chancellor of the Exchequer is responsible for the high level of taxation he is also responsible, surely, for seeing that the money the taxpayer pays is spent to the best advantage. I have been studying some very interesting literature which I would commend to your Lordships, a Report from the Committee on Public Accounts. I have picked out an example. There was an estimate for a rocket base which was going to be provided by the Ministry of Works for the Ministry of Supply. The estimate was £11 million; in the ultimate the cost was £24 million, and the Permanent Secretary of the Ministry of Works was asked why. This is what he was asked—and I am now quoting from page 133 of the Report:
"The estimates you gave to the Treasury, or the Ministry of Supply gave to the Treasury, or both of you gave to the Treasury at the beginning, then, in your view, were rather tentative?"
And this is what the Permanent Secretary said:
"They were, and they were not merely rather tentative—I am quite prepared to say this and have it recorded—they were a wild shot at something we really knew nothing about."
Is that the basis upon which estimates of public expenditure are prepared? Is that the way the taxpayers' money is treated? Then I come to guided missiles. Look at the discussion there has been about this and the colossal waste of public money. The Seaslug now is reported as going to cost 70 times the amount originally estimated. No wonder the Chancellor of the Exchequer, with such profligate spending, cannot afford to look at the other side of the picture, our dire necessity to export.
I listened on the wireless the other night to a sad story about five British
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soldiers being killed in some manœuvres in Western Germany, and the War Office spokesman was reported as having said, "Let us get this thing in proportion. There were only five, and 50,000 British troops were engaged on this exercise in Western Germany". The thought went through my mind, "What is that costing me as a taxpayer?" I understand the Prime Minister to say that he hopes this year that the Defense Estimate will be contained within £1,600 million, but doubts are being cast as to whether that will be so. What are we going to do? The Public Accounts Committee and Select Committees on Expenditure are all admirable bodies and do admirable work, but they spend their time locking stable doors after horses have bolted. I think that is one of the things upon which the Government are very vulnerable. There does not seem to be any sound policy in Government expenditure, and they have not yet been able to reduce it.
I now turn to perhaps one of the saddest stories of Government mishandling of the economic wealth of this country. Is not the present state of the British Transport Commission a tragic and alarming story? It is now disclosed that to date the total loss on British Railways alone is £541 million. The vast bulk of that has been lost since 1953 by this Government. They cannot say that they did not know, because from this side of the House we have pointed out time and time again where their policy was wrong. With monotonous regularity for these last ten years I have pointed out that the estimates given by the British Transport Commission, endorsed by the Government, were hopeless. I have used the expression that they came out of cloud-cuckoo land. But no! the Government did nothing about it. And on and on it went, deficit after deficit.
After the passing of the 1953 Act, when the Government, to use the expression of a former Minister of Transport "kicked the guts" out of the railways, what did the Government do? Nothing And on and on the deficit went, until they concocted some wonderful scheme of accountancy by opening a Special Account whereby the Commission had to pay interest on the money borrowed to pay the debt on the interest of the

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money borrowed before. Only one man, the noble Viscount, Lord Amory, who is sitting on the Back Benches opposite, said that he would have no more of this nonsense. He took the deficit and put it, to the extent of £100 million, above the line in the Budget of two years ago. The Minister of Transport in another place said the other day that he calculated that in this year alone he would have to put in a figure of £115 million as the deficit on the working of British Railways. The Government did not do anything about it.
There is worse than that. The facts are here. One has only to read the White Papers. The Government in the preamble to the White Paper on the Reappraisal agreed with the estimates which were given, and that this next corning, year was a year when the British Transport Commission were going to pass out of deficit into the stream of surplus. Instead of that, another £500 million of the, taxpayer's money is involved. I have never weakened in my criticism of the British Transport Commission, but what is the responsibility of the Ministry of Transport in this matter? The Minister of Transport said the other day—and I should like just to quote to your Lordships a few words [OFFICIAL REPORT, Commons, Vol. 627 (No. 159), col. 2364]:
"After all, I act as the Commission's banker for most of its investment. I am responsible to this House and to the country for the advances made, and I am responsible through my Vote for its deficit."
What have the Ministry of Transport been doing since 1953—twiddling their thumbs? Where does their responsibility lie? Where does the Government responsibility lie, to allow this thing to go on for year after year? The Government cannot say that they have not been warned. I do not know whether the noble Lord would like me to read out some of the fatuous statements that have been oat into the mouths of Ministers by the Ministry of Transport in the briefs that they have prepared as apologias for all this. Everything was going to be fine. There was only one thing wrong—that was with the spokesmen from this side of the House.
Of course, the real trouble is that the Government have never had a transport policy. The 1947 Act, with all its defects
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—I have always been prepared to admit that it had some—twas a policy. The 1953 Act was a pure shambles, and it has cost this country £541 million. If one takes the Modernization Plan, what was the evidence given before the Select Committee? It was a hotch-patch—that was the expression used. It was never one real, co-ordinated plan. What has happened? The money has been spent at the rate of £160 million a year, but we as a country have never had anything like that value out of it.
It was admitted by the Permanent Secretary of the Ministry of Transport before the Select Committee that they had never done anything in regard to looking at the economic consequences or made any economic survey of the proposals made. I indict the Ministry of Transport for their carelessness. No wonder the Chancellor of the Exchequer cannot afford to reduce taxation! But I always saw one hope, and I mentioned it in a speech I made twelve months ago. I suggested that the noble Lord should make a personal investigation—that he was the man to do it. Perhaps we are fortunate that, at long last, the Government have taken my advice. He has made it. It has resulted in one thing: that the Minister now says that the Government are, at long last, going to have a policy for transport; and he has set up a study group. I want to ask the noble Lord whether he will give us the names of the members of that study group, because at last they are going to tackle the problem of what part the railways can play in the transport system of this country.
They are going to do one other thing—namely, work out the excess of profit prospects of transport. My word! Sixty-four years ago a gentleman walked in front of a motor car with a red flag—I know the date so well because it coincided with the date that I arrived in this world. We have had all that time to study the impact of the internal combustion engine on the transport of this country, and at last the present Government, after losing £500 million of the taxpayers' money, are going to sort out a transport policy. And we are going to have a White Paper from the Government telling us what their proposals are. I suppose we are going to have it hacked by the proposals of the Stedeford Committee. I do not know why

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the Government will not publish the recommendations of the Stedeford Committee. Perhaps they will do so in the White Paper.
LORD STONHAM: Perhaps they do not like them.
LORD LUCAS OF CHILWORTH: Perhaps they do not. At any rate, shall be far more interested in the proposals of the Stedeford Committee which the Government are not going to accept than I shall be in the proposals which they do accept. I want to ask the noble Lord one thing in terms. There is so much rumor and loose talk. Every other section of the British Transport Commission is a profitable concern. The road haulage section is a profitable concern, as are the hotels and everything else. I want to ask the noble Lord whether, in the proposals which the Government intend to present to Parliament, it is intended that there shall be hived off or sold, or whatever expression he likes to use, any of the present activities of the British Transport Commission—because I am prepared to still any criticism that I may make until we see what those proposals are. I have confidence in the noble Lord, if he gets his way; but of course he may not, because I do not suppose that the present Government are any more united on what to do with their transport problem than they are upon what to do with a lot of their other problems. But I know that if the noble Lord has anything to do with it, it will have behind it the elementary sound business and commercial principles.
What are we going to do in the meantime? The Minister speaks of an emergency. We are to have a White Paper, perhaps before Christmas, and we have to study that. We are, perhaps, to have legislation halfway through next year. But what is to happen in the meantime? When the house is on fire one does not call the family together and have a meeting to decide whether to write a letter or send a postcard or to telephone the fire brigade. What is the position of the British Transport Commission to-day? Are they caretakers? Are they under notice? What about the 39 part-time members spread all over the regions? Who are they? They are all men with interests outside the British Transport Commission. Are they to be kept on
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trust? Perhaps the noble Lord will be able to tell me the answers to some of these things.
There is one more point I want to touch upon, because this brings me to what I said in my opening remarks about the specters of unemployment. The noble Lord, Lord Ogmore, asked whether the shipping industry of this country wanted public assistance. They do, and they will not do without it. The position in the shipbuilding industry of this country is serious. We are to-day the largest net importer of ships in the world. I am glad that the noble and learned Viscount is now on the Woolsack, because I said something similar to this twelve months ago, also in the debate on the Address. The noble and learned Viscount rather questioned it on that occasion, so this time I have come armed with the official figures. I take my figures from Lloyd's Register of Shipping—they are the figures of merchant shipbuilding for the third quarter of 1960. The tonnage under construction in this country for owners registered abroad is 252,637. The tonnage under construction abroad for registration in this country is 537,610; so we are importing twice the tonnage that we are exporting.
I am not going to enter into any discussion on the report to which the noble and learned Viscount the Leader of the House has referred. I am not going to enter into any discussion as to whether the shipbuilding industry is efficient or inefficient; but I am going to tell the Government quite plainly that they cannot sit down and do nothing until we have unemployment on the Tyne, the Tees, the Clyde and all the other areas of shipbuilding activity in this country. They cannot do that; and they cannot get over it, when it does come, by handing out subsidies. What is wanted in the shipbuilding industry of this country to-day is some kind of rationalization like that which has been brought into the aircraft industry; and that can be done only with Government assistance. But that Government assistance must be on a proper basis and the tax-payers' interests must be properly safeguarded.
There has to be a partnership between the Government and the shipbuilding industry of this country. If there is not, then the shipbuilding industry of this country is going to be a bigger problem

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to the Government than they dream of at the present moment. Because there is only one thing that can save this Government, and that is to stop the growth of unemployment in some of our depressed areas. That is why I am not quite so critical of the action of Her Majesty's Government over the replacement for the "Queen Mary". But I should like to ask the noble Lord just one or two questions—and here I may repeat something said by the noble Lord, Lord Ogmore.
The amount of the taxpayers' money involved is to be £3¼ million and, so far as I can trace, there have been only two reasons advanced for doing this. One is prestige; the other is the ability of a ship of this kind to earn dollars. The second reason does not impress me a hit. If I wanted to earn dollars I could think of a better way of spending £3¼ million of the taxpayers' money. But let us take prestige. What prestige? I would suggest that the British Flag and British prestige need boosting in other parts of the world far more than in North America. What about South America, where the shipping industry of this country is up against a gigantic problem of flag discrimination? There is not a country in South America—Argentine, Brazil, Ecuador, Columbia, Peru, Chile or any of the others—where there is not flag discrimination. Is there any other part of this world where it is more necessary to keep British shipping in use than in South America? And what are we going to do? We cannot give subsidies to one shipping company without giving them to others who can put up just as good a case—and better.
One of the biggest shipping companies whose prestige stands just as high as that of Cunard have just built three ships costing them. I believe, about £18 million. They had to go on the market for somewhere in the region of half that amount, or a bit more, and pay from 6 to 7½ per cent. I do not know whether that company asked for a subsidy, but if we have money available, to subsidise shipbuilding I would suggest that it could be used in another equally useful way. And how are we to resist the arguments that are put forward? Then, as the noble Lord, Lord Ogmore, asked, what about the replacement of the "Queen Elizabeth"?
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There is another question I should like to ask the noble Lord. Has he satisfied himself that the replacement of other ships in the Cunard fleet is not going to suffer through the building of this new ship? I expect he will be quite prepared to answer across the Floor of the House the other question I asked him: whether he will tell us what was the result of the economic survey which the Chandos Committee had the advantage of having before them but which your Lordships have not. I can quite understand why he cannot produce the Chandos Committee's Report; but at least, he could tell us—and I hope he will—what were the principles Which guided it. My Lords, although I had other questions to raise, they have been put by the noble Lords who have already spoken. I hope that I have said enough at least on the transport position to justify the Amendment on the Order Paper, and I hope that the noble Lord will give me some answer to the questions I have asked.
4.31 p.m.
THE PAYMASTER GENERAL (LORD MILLS): My Lords, I listened with great interest and. I hope, respect to what the noble Lord, Lord Pethick-Lawrence, had to say on this subject and in support of his Party's Amendment. But I found it a very gloomy speech. I am sure that it was a sincere speech, but he was, I feel, so anxious to support the Amendment that he went rather far in his allegations. He talked about bank rate and the price of Government securities as if they were something new, as if we had not experienced these fluctuations at the time we suffered under a Socialist Government. He said that our economy was going downhill. I can find no evidence of that. It is true that there has been a pause. He mentioned at the same time that there was an expansion to which we are entitled. I suggest that we are entitled to only the expansion we work for and deserve.
I should like to refer to the statement in the gracious Speech:
"My Government will seek to maintain a sound economy",
because that is the fundamental determination underlying the monetary and fiscal measures which have been followed. I say that the success which has followed the Government's efforts is there for all

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to see quite plainly. In 1957 we had to battle against inflation. The Government then turned their attention, in the middle of 1958, to stimulating the economy by relaxing the restrictions on credit and hire purchase and by expanding the public sector investment, and this was followed by the substantial Budget concessions in 1959.
The result was a rapid expansion in output. The Index of Industrial Production rose at about the rate of 12 per cent. per annum. Unemployment, which in October, 1958, was 514,000—that was 2·3 per cent.—was by October this year down to 328,000 or 1·5 per cent. During the whole period of expansion, while unemployment fell by about 200,000, about 300,000 additional workers were found jobs and about 100,000 were released from the Armed Forces to civil employment. And, as your Lordships are aware, this period of expansion has been accompanied by practical stability of prices for a period of 2½ years. It surely can be said that unemployment has been kept within limits which would have been thought absolutely impossible to achieve by pre-war standards. Investment as a whole has risen substantially in almost every year since 1952 and is now at record levels.
But the increase in employment and the expansion in output was such that it absorbed much of the unused capacity which was available. It became apparent early this year that the growing demands at home resulting from increased prosperity were likely to affect our balance of payments position. The gap between our exports and imports was widening, so the Government decided that it was necessary to moderate the pace of expansion. The measures taken were the two increases in bank rate in January and June and the two calls on the clearing banks for special deposits made in April and June, some adjustment of taxation in the Budget, and the reintroduction of a degree of control over hire purchase transactions in April.
The objectives were to prevent a strain on sterling, of which signs were appearing, and to avoid a return to rising prices which would surely follow an undue pressure on our resources. But, equally, it was desired to slow down the rise in imports for domestic consumption, because the whole basis of our
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economic life depends on carrying out sufficient exports to pay for our imports. In pursuing measures calculated to limit expansion or the rate of expansion—although these measures are sound and directed against the build-up of dangers to our economy—the Government can expect, and are prepared for, certain criticisms. There is the criticism from those who are directly affected by such moves. There is the view that because expansion does not proceed at the same rate something must be wrong; whereas it is the intention to keep the general atmosphere right, so that expansion can build up in the most favorable direction and can proceed at the right pace within our resources.
I referred to the success which had already followed the Government's efforts to achieve a sound economy. In carrying through their measures to this end the Government have had regard to the other measures mentioned in the gracious Speech:
"…and to ensure a well-balanced growth of production in conditions of high and stable employment. Their aim will be to preserve stability of the general level of prices and to further the expansion of overseas trade and strengthen the balance of payments".
The Government have always to have regard to several lines of economic policy. We want to make full use of our resources, which means a high level of employment and a high level of investment, in order to encourage growth. But, at the same time, we must recognize that a satisfactory balance of payments is essential both for full employment and for growth, since if we could not pay for our imports the economy would eventually run down. We must also recognize that a stable price level is desirable both on economic and on social grounds. Finally, we as Conservatives believe in a free society, and not one in which every detail of economic life is centrally regulated.
The Government have to make the best compromise they can between these various objectives, since from a short-term point of view there may well be contradictions between them. For example, when expansion goes too far, there is an excess of demand and shortage of labor, and these things tend to cause difficulties, both with the balance of payments and with prices. We are

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always trying to support as much expansion as we can without hurting the other objectives, but it is no good not recognizing that compromise is necessary.
When we were combating inflation in 1957, it was generally understood, and frequently referred to, that we were taking out of the pot more than we were putting into it. I believe we profited from that illustration. We kept our demands for better rewards within the country's earning power: but again we seem in some danger of forgetting our past experiences. Profits, dividends and wage demands are mounting up, and the national position seems in some danger of being overlooked. It surely is the Government's duty to see that demands on the pot bear some relation to what the country is achieving in the way of adding to the contents of it.
LORD STONHAM: My Lords, if the noble Lord would allow me to interrupt him, may I ask whether it is not also the Government's duty—and he has neglected to tell the House this—not to create inflation, which they did in 1955 and again in 1958? We should not need the measures he has described if those conditions had not been created by the Government.
LORD MILLS: It is always the Government's duly to combat inflationary tendencies. It seems to me that you cannot rightly find fault with the Government in respect of our current situation. But the Government need your support, too, in dealing with inflationary tendencies. Inflation results in general hardships, but most of all it falls on those least able to hear it; and it can be resisted only by co-operation among us all.
Now the noble Lord, Lord Pethick-Lawrence, has said that the Government seems to be willing to support private enterprise in a way which they are not prepared to deal with publicly-owned concerns. In support of that, he instanced the Cunard Company and the measures I announced last Thursday. I will come back to the question of the Cunard Company in a moment, but I should like to answer a specific question which he put to me. That was: were the Government under an obligation to deal with a sister ship in a similar way? It is quite true, as he pointed out, that at the moment one has to think of cross-Atlantic pas-
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senger trade by these ships on the basis of two ships, but the "Queen Elizabeth" still has some years to go, and much will depend upon the situation in which the industry of the country finds itself at that time. I therefore cannot give the noble Lord a precise answer to his question, except to say that the Government have entered into no commitments to conic to any further assistance of the Cunard Company, or of any other shipping company, in this respect.
The noble Lord then referred to the question of the Common Market and said that much danger had been done to our trading prospects by the present situation—and I should also like to refer here to what the noble Lord, Lord Ogmore, had to say in regard to this matter. He instanced a case of four Ministers and said that they were speaking with different voices. That is not the fact. It may have been that the Ministers in question were talking on a particular aspect of the problem, and were dealing with that aspect; but all Ministers are united in desiring to advance our trade and our association with the rest of Europe, and for the rest of Europe to advance it with us, too, provided two things: that we do not disrupt our relations and our trade with the Commonwealth by destroying their free entry, and that we do not put ourselves into a position in which we cannot carry out our pledges and provide support to our own agricultural industry. That is the objective common to us all, and I think that if the noble Lord will be kind enough to look again at what was said, he will find that there is no real difference, the explanation being that the Ministers were dealing with particular aspects.
Now I will deal with a question raised by the noble Lords, Lord Pethick-Lawrence and Lord Ogmore, as well as by the noble Lord, Lord Lucas of Chilworth—that of the new Cunarder. The noble Lord, Lord Ogmore, suggested on Thursday that it would be a good thing to invite a foreign yard to tender. It would stimulate the British tenders, he said; and he expressed surprise that his friend—or is it ex-friend?—the noble Viscount the Leader of the Opposition and I seemed to be somewhat united in not favoring that proposal.
The new shin to replace the "Queen Mary" is, I suggest, of great significance

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to the nation as a whole. It will be a striking example of British engineering and technical skill, and I think public opinion would find unacceptable the idea that its construction should take place abroad. I think we can claim that the United Kingdom is pre-eminent in the building of large passenger ships, and inviting tenders from the six largest of our shipyards will show a competitive tendering of a high order which I doubt could be equaled by Continental yards on equal terms.
LORD OGMORE: May I ask the noble Lord, if that is so, what is the objection to throwing out the tender to foreign yards?
LORD MILLS: I will gladly answer that point. I have said that I do not think it would be favorably regarded by the public as a whole, but we cannot rule out either the possibility that other countries might use special inducements to their builders in order that they might get this job. It is not a risk that I should like to advise should be taken.
Reference was also made by the noble Lord, Lord Ogmore, to the Department of Scientific and Industrial Research examination, and he raised the question of the publication of its report. That matter comes under the æais of my noble Leader, and I am sure he would be doing something he should not do if he promised publication while the report is being discussed between the industry and the D.S.I.R. I have no doubt, however, that in due course the noble and learned Viscount will be prepared to say something more about it.
VISCOUNT ALEXANDER OF HILLS-BOROUGH: If the noble Lord is dealing with the question of the new steamship and the use of a ship like the "Queen Mary", is not the real position this: that the loan and the special grant is to be made to the shipping company, and the shipping company will therefore have to use that loan and grant to build the ship. The Government, as I understand it, are faced at the same time with a growing decline in the British shipbuilding program, so would it not be quite nonsensical for us to give this loan to a shipping company to enable them to build a ship, and then to say,"You must go outside the country, if necessary, on cost"—there by involving the
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country in greater expenditure in order to meet the position of the shipbuilding industry? Would it not also be folly to say this—a folly matched by the American example, where, whenever the American Government thought their employment was going to be in danger, they went through almost a farce of asking for outside tenders, at the same time carefully safeguarding their employment position at home?
LORD MILLS: My Lords, I will not disagree with anything the noble Viscount who has just taken his seat has to say on this matter, but I have not quite finished with this subject. There was the question whether the Chandos Report could be published, and whether we could get some information about the economic survey that was made. I have thought about that request, and discussed it with my right honorable friend the Minister of Transport, as I undertook to do last Thursday. There was a clear assurance given to Lord Chandos that the Committee's Report would not be published. The reason for that was that he could assure all those who gave evidence before the Committee that their remarks would not be published, and thus he was able to get a clearer exposition of the facts than might have been the case if publication was made. However, I can say this. The Committee commissioned surveys by the Economist Intelligence Unit and Research Services, Limited, on the various aspects of future transatlantic passenger traffic. I think it would be quite misleading if only part of the evidence were published on which the Chandos Committee based their conclusions and which the Government considered in reaching their decisions.
My Lords, What were the reasons for proposing the construction of this ship, and why did the Government decide to subsidise it to the extent of some £3¼ million? The reasons were these. There is something in prestige, but that is not the whole story. So far as any calculation can be made ahead, it was felt that ten years was as far as anybody would look in advising about this matter, in view of the changes in the transport field. It is true that air transport is going up at a greater rate—a much greater rate—than sea transport. But sea transport is going up, too. In other

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words, more and more people are traveling. So far as the next ten years are concerned, one is confident that the business will be all right.
There are some Who think—and I am one of them—that this business ought to prove a profitable venture throughout its life. But the fact remains that ten years is as far as anyone is prepared to look ahead. Therefore the Government felt that, as it was desirable to have this ship, they were not doing bad business and, moreover, at the end of ten years their security position would still be good. Foreign exchange enters into the matter, of course, but what I suggest is much more important is that people wishing to cross the Atlantic quickly by ship should use a British ship and not a ship supplied by someone else.
The noble Lord, Lord Ogmore, also asked if it would not be better to have two ships of half the size. The whole technical and economic evidence was against any such solution. A ship half the size would not give the saving which the noble Lord expects, because such a ship would not be used for transatlantic purposes, whereas the liner which is contemplated will be. The noble Lord also asked: What sort of economy does the country want? and entered into a long argument with my noble friend the Leader of the House.
LORD PETHICK-LAWRENCE: My Lords, would the noble Lord allow me to interrupt him? I think that there are Rules of Order in both Houses of Parliament which lay down that a Government speaker is not entitled to quote from a document which is not before the House, and if he does quote from it the Government are liable to be called upon to produce the document. I do not say that the noble Lord has gone all that way, bat he seems to me to be getting near it. If he goes much further in using arguments from a document we are not allowed to see, he may find himself being called to order; and I venture to suggest that he is getting very near that point.
LORD MILLS: My Lords, I am much obliged to the noble Lord. I was trying to be as frank as I possibly could and to give the House as much information as possibly could, having explained why I did not think it was possible to produce the document in its entirety; but I am obliged to the noble Lord.
LORD PETHICK-LAWRENCE: My Lords, the noble Lord is perfectly entitled to say that he thinks it is this, that or the other, but the moment he begins to quote in support of his statement a document we are not allowed to see I think he is getting beyond the point of Order.
LORD MILLS: My Lords, I can only repeat that I am obliged to the noble Lord. I was referring to another matter when the noble Lord was so kind as to interrupt me—namely, to the fact that the noble Lord, Lord Ogmore, had posed the question: What sort of economy does the country want? He did not pursue that except to talk about the statement, "You never had it so good".
LORD OGMORE: My Lords, may I say that the actual question I put was: What sort of economy do the Government think the country needs?
LORD MILLS: My Lords, I think I can answer that by saying that they would always like everybody to be able to say, "You never had it so good".
The noble Lord also referred to stagnation in industry. I suggest that there is no stagnation in industry. There may be places where there is a temporary setback, but in industry as a whole there is no stagnation. There is a high level of production and of sale. The noble Lord said there should be proper consultation on redundancy. I am sure that he would expect me to agree with that. I think that the country is much more aware of the need for consultation on redundancy. Then the noble Lord said that the Government should reorganize their attempt to carry out our export trade. But the Government do not carry out the export trade. They do their best to create an atmosphere in which export trade should flourish. While it is true that many Ministers have been going round pointing out the importance of export trade to this country and the need for export trade, this is not because we are doing so badly with export trade but because we should like to do much better. After all, the export trade has doubled since before the war and has gone up considerably in the last two or three years. It is true that, in the first three-quarters of this year, it was a little down, but it is now tending upwards again, and it

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may be that exhortation is having some effect, much as some people dislike exhortation.
LORD SHEPHERD: My Lords, may I ask the noble Lord how the Government have created the climate for export trade? Would he not agree that the bank rate, in causing a restriction in imports, equally causes a restriction in exports, in the sense that much of the manufacture for exports has to be done on credit and the bank rate falls equally on the export side of industry as on the home side?
LORD MILLS: My Lords, the Government never have this question of export trade out of their minds. In the consideration of every move, the question arises whether it is going to hinder export trade. The fact that any move is felt in the export trade is a very potent factor. Conversely, I have never heard a discussion on economic matters in which it has not been asked, "Is this going to help our export trade?" The Government are continually trying to create the right atmosphere for export trade, as well as pointing out the necessity for export trade to this country, which has no raw material save coal and has to import so much of its food.
LORD SHEPHERD: My Lords, I am afraid that the noble Lord must take it from exporters that we do not share his view.
LORD MILLS: My Lords, I do not know whether the noble Lord is speaking for the export industry or for a particular firm, but it does not matter very much. I can assure him that the desire to foster the export trade is never far from our minds.
Running through the speech of the noble Lord, Lord Ogmore, and even through the speech of the noble Lord, Lord Lucas of Chilworth, was the suggestion that the Government are failing to do this, that and the other in trade, as if the Government themselves were the traders. That is far from the truth. Every Government has to look to the industries of this country, large and small, and to the merchants of the country to foster its trade. All the Government can do, as I have said, is to support them in their efforts where it is possible. It may be that some people think that the Government should be doing the
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trade; but that is not our philosophy. Our philosophy is to aid the traders of this country to do what is required.
LORD LUCAS OF CHILWORTH: If I conveyed to the noble Lord that I wanted the Government to trade, that is far from the fact; I do not. What I want the Government to do all the time is to have in their minds the paramount thought that they not only must help industry to export but must hinder it as little as possible.
LORD MILLS: I am glad the noble Lord has made that statement, because it is just the way we think on these Benches, too. The noble Lord started his remarks by saying two things: first, that taxation is too high; and secondly, that there is a complete lack of incentives. I could not agree more. Taxation is too high; but the Conservatives are the people who have got down taxation and who aim to get it down, in spite of the growth of public expenditure. So the noble Lord certainly gets an echo from me when he says that taxation is too high and that there is a lack of incentives.
LORD LUCAS OF CHILWORTH: I hesitate to interrupt again, because the noble Lord is always so courteous and kind. Technically, if he is talking about the rate of Taxation per head, he is right; but he will no doubt agree with me that from 1951 to the end of 1958 the gross amount of taxation increased by £2,000 million.
LORD MILLS: If we are going to talk in this kind of way, I would ask the noble Lord to have a look at the gross national product and see where the percentage of taxation stands there.
The noble Lord made one remark which rather surprised me. He said that the Government had induced the motor industry to expand. That is not correct. The motor industry, which is one of our great forward-looking industries, has itself made proposals to expand, and the Government have been glad to have the opportunity of supporting that desire on the part of the industry. It wanted originally to expand in places where there was no labor to spare, and where I have no doubt it would have got the labor, but only at the expense of other industries and other people. What the Government did was to persuade the industry

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to take its expansion plans into areas of high and persistent unemployment. The fact that it has done this has already shown its effect by reducing unemployment in those places. I do not think the motor industry is downhearted; it wants to go on with its plans, in spite of the temporary setback, much of which has come from the reduction in the North American market.
The noble Lord suggested that the hire purchase period should be extended from two to three years, and he also referred to the question of purchase tax. Can we just look at this industry for a moment or two? Car production has more than doubled in the last ten years, and exports have risen by nearly 50 per cent. Cars account for about 5 per cent. of industrial production, and in 1959 the export of motor vehicles of every kind accounted for about 15 per cent. of our exports. I suppose that altogether the number of people dependent on the motor industry is not far short of one million.
LORD LUCAS OF CHILWORTH: More.
LORD MILLS: It is true that the third quarter of 1960 shows a sharp fall from the high levels achieved in the first half of the year; but, even so, the weekly average in the third quarter is still higher than in the corresponding quarter a year ago. As I have said, there has been a fall of exports to North America. Redundancy is quite small, firms generally keeping hold of their labor, which is another manifestation of their belief in the ultimate expansion of their plans.
I now come to the question of purchase tax. Purchase tax is essentially a revenue instrument. It is not applied to motor cars or to any other commodity for the purpose of restricting demand. If one looks at the figures (I hope that I am not out of order in quoting from something here, too) one sees that the existence of purchase tax has not prevented a substantial growth in the industry in recent years. In other words, there is no reason to believe that purchase tax has kept down output.
LORD LUCAS OF CHILWORTH: I am not going to deny one word of what the noble Lord says, but the trouble is that our increase in productivity has not matched that of our competitors. While
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admittedly our exports have increased, they have not increased at the same rate as that of our competitors; and our share of the world market has gone down and has been going down for these last three years.
LORD MILLS: I think the noble Lord can find the reasons if he looks for them.
LORD LUCAS OF CHILWORTH: I have tried to find them and to quote them.
LORD MILLS: I will tell him one or two of them. In the first place, certain countries are doing export business where they did not do it before. There are certain people who export goods in the way they did not export them before. We and America are two of the old exporting countries, and if you compare ourselves with America you will find that we have done better than they have in exports. We have, in my view, done very creditably—and when I say "we", I mean the industrial firms in this country and all who engage in export business. There has been a large and consistent increase in exports. It might not have been too surprising if we had not done as well as we have, but we must do even better, because our obligations have grown. People want to import things. They want to enjoy things which other countries can give them, and we have certain moral obligations, if not actual obligations, to those countries with whom we have been associated, and some with whom we have not been associated, who have the need. If we have the ability to earn, then we ought to supply their needs.
Hire purchase restrictions have mainly affected the used-car business. Only about one-fifth of new car sales are made by hire purchase transactions. The present arrangements appear to be about right, and a selective relaxation in favor of cars would make it impossible to maintain the remaining restrictions, because the agitation would grow, "If cars, why not something else?" think we have a fairly good level now, and it should be something which is capable of being worked. I do not agree with people who say there should be no hire purchase—and there are some people who say that. It is a fact of life and a way of life, and it is so

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difficult to save that many people would find it difficult to set up house without the advantage of hire purchase. But I think it is right that we should not let it run out of hand.
The noble Lord, Lord Lucas of Chilworth, made the statement that no modern Government has ever proved capable of reducing its expenditure.
LORD LUCAS OF CHILWORTH: I said, "controlling expenditure".
LORD MILLS: Controlling its expenditure. I do not know that I would agree with him there. I would agree with him if he said reducing it, and this is why. You and I demand so much, think we are entitled to so much, and in a growing economy that movement cannot stop. The thing we have to do, and the thing we are striving to do, is to build up our production and productivity so that we can afford these things. But that does not mean that Chancellors of the Exchequer, with whom I have been fortunate to be associated, are not always striving to reduce their expenditure.
The noble Lord, Lord Lucas of Chilworth, then referred to the British Transport Commission. It is quite true that very large sums of money have been lost by British Railways. I referred earlier to the note which has crept into the debate that the Government were doing the trading, and the noble Lord also said that the Government were losing these heavy sums of money. Be that as it may, we are debating the gracious Speech and the Amendment to the Address. The gracious Speech refers to the Government's proposals for reforming the structure and functions of the British Transport Commission. I need hardly remind your Lordships that the present consideration of the British Transport Commission as a whole started with a statement by my right honorable friend the Prime Minister in another place on March 10, 1960. In it, he expressed concern at the state of the Commission and its finances, and particularly drew attention to the problems of the railways. He outlined the main features of the Government's policy for the future. The industry must be of a size and pattern suited to modern conditions and prospects, and the railway system must
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be remodeled to meet current needs. The public must be prepared to accept changes even if they mean some sacrifice of convenience. The British Transport Commission must accept a radical reorganisation of its structure, including decentralisation of management, so that individual undertakings, including the railway regions, should be made self-accounting and responsible for the management of their own affairs.
The Prime Minister then announced that a special group had been sot up to advise on the application of these principles to Government undertakings. Accordingly, the group was set up early in April to advise the Minister of Transport and the Commission. Its composition and terms of reference were announced by the Minister of Transport in a statement on April 6. At the beginning of October, the Special Advisory Group completed its task, which included taking written and oral evidence from a wide variety of interests, among them, of course, the British Transport Commission, the trade unions and industry generally. They made a number of recommendations dealing with finance, statutory restrictions, modernisation and reorganisation. In the debate on October 26 in another place, my right honourable friend the Minister of Transport announced that the Special Advisory Group had completed their work, and mentioned the broad subjects covered in their recommendations. He said that the recommendations were being considered and that the Government's proposals would be placed before the House as soon as possible in the form of a comprehensive White Paper.
The noble Lord, Lord Lucas of Chilworth, asked me whether there was any proposal to hive off or to sell any part of the undertakings. I can tell him this: it has been no part of the Government's recent consideration of the affairs of the British Transport Commission, or in their discussions with the Special Advisory Group, to consider the hiving-off of any of their assets and their return to private ownership and control. The Government have been concerned only with the consideration of measures designed to improve the service, efficiency and economy of the organisation and the elements comprising the British Transport Commission.
LORD LUCAS OF CHILWORTH: I am very grateful to the noble Lord for making that statement. It will allay rumour, perhaps wishful thinking, and, I think, will prevent a lot of harm being done to the proposals which I hope will be very carefully considered in the coming White Paper.
LORD MILLS: I am obliged to the noble Lord for having raised the question and thus enabling me to reply.
The noble Lord talked a great deal about the money that had been lost—and rightly so, because it is a matter on which I am sure we are all concerned. But do not let us overlook the fact that many of the moves necessary to counteract that loss are very long-term moves, and that the expenditure of money in, for example, modernising the railways, for a time creates charges and expenditures and adds to the deficit, rather than to the revenues.. We must not overlook that fact. But I should like to say a word on the revenue deficit, for the purpose of the Record, as well as for the information of your Lordships. The Commission's deficit on revenue account amounted in 1959 to £74 million. This resulted from a deficit of £84 million on British Railways, offset by a surplus of £10 million on other activities—London Transport, British Road Services, provincial omnibuses, docks, shipping services and so on. The noble Lord said in his statement that all the other sections were profitable. But of course that is not true with regard to inland waterways.
This is not the full story, because under the statutory arrangements, originally designed to tide the Commission over the difficult early years of modernisation to which I referred, certain interest on borrowings is not charged to the revenue at once: it is held in suspense to be charged to revenue later. This interest, which all arises on the railways, amounted in 1959 to £26 million; and when one adds that to the railway deficit of £84 million still in the accounts, as one must to get a realistic picture, the total real deficit is seen to be £110 million, which is about a quarter of the gross takings. That is a very heavy and disturbing proportion.
As part of the special temporary arrangements referred to which were embodied in the Transport (Railway Finances) Act, 1957, the railway deficits
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for the years 1956 to 1959 have been met by loans from the Exchequer on the basis that the Commission will eventually make profits from which they would pay interest on loans and repay the principal. This year a change was made. In the words of the Chancellor of the Exchequer in his Budget speech last April [OFFICIAL REPORT, Commons, Vol. 621, col. 49]:
"It has become apparent that the prospects of the railways and the Commission are not now such as to justify the continued financing; of the deficit by repayable advances."
Explaining that for the purpose of his Budget calculations the requisite sums for 1960 were being transferred from below the line to above the line, the Chancellor of the Exchequer added that the effect of this is that the amount of deficit will have to be met from the revenue, a sharp reminder of the harsh realities of a disturbing situation. Here, clearly, is the heart of the problem of the Commission's finances and the reasons which led to the appointment of the Special Advisory Group announced by the Prime Minister on March 10 last. The measures which are being worked out in the light of the group's recommendations have as their prime object the relief of this burden on the taxpayer and the creation of an efficient railway system which, by enterprise and economy, can stand on its own feet.
I regret that with regard to the publication of the Stedeford Report I have to say "No". Really, what matters is what are the Government's proposals. Because it is the Government's proposals which the Government will try to get through Parliament, to the extent that is necessary to get them through Parliament. The Government will advise Parliament fully on those measures which do not require legislation.
LORD LUCAS OF CHILWORTH: Could the Minister give the House some idea as to when the White Paper will be available?
LORD MILLS: It is expected to be available before the House adjourns for Christmas.
LORD LUCAS OF CHILWORTH: Thank you.
LORD MILLS: I have dealt as fully as I can with the questions I have been asked, and I have tried to explain the

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situation to your Lordships. I was a little worried by something the noble Lord, Lord Ogmore, said. He said that I had considered that your Lordships' House was too dull to understand the Reports and figures. I am sure he did not mean anything by that remark. He knows perfectly well that your Lordships would understand anything put in front of you. What he really meant was that I was too dull to understand the necessity of doing that. I have tried to be as full and frank as possible on these problems, but if I have erred in any way I am sorry.
5.40 p.m.
LORD BALFOUR OF INCHRYE: My Lords, it is now twenty to six and we have enjoyed a most interesting debate, but I would point out to your Lordships that as far as the Private Members on both sides of the House are concerned I am the first to have the honour of addressing your Lordships, and I think, in the interests of debate, if I may be allowed to say so with great respect to the Government, the debate on the Address should be the occasion on which Private Members have an opportunity of stating their case as well as those upon the Front Bench, whom we are delighted to hear, let us say, fully. However, the late hour cannot prevent me from dealing, with one general point which was raised by the noble Lord, Lord Rea, last Wednesday, when he made a statement of a kind which I think is said too often and too widely, and one with which I profoundly disagree. I will remind your Lordships of his words [OFFICIAL REPORT, Vol. 226 (No. 2), col. 51]:
"I have the feeling that they are somehow hiding from the people the unpleasant fact that we, as a country, are no longer supreme or in the first rank as a power in Europe or in the world."
We in this country do not travel second-class as a world power to-day. I would say that, both economically and morally. Britain is still a great power in the world.
LORD REA: My Lords, if the noble Lord will forgive me, may I say that he quoted my words perfectly accurately, but he will remember that I was speaking in the context of military power; and I went on to say in the next sentence that we do not
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"have to take a second-rate place, because we have a tremendous opportunity of leading in other ways."
By those "other ways" I meant exactly the way he has just mentioned.
LORD BALFOUR OF INCHRYE: If by the second sentence the noble Lord meant that he was cancelling out the first, of course I willingly accept it, but I think the first was the governing sentence. I should like to point out that economically this country is great still. We are the sterling area bankers; we are a great trading nation; we are one of the leaders in the development of nuclear power; we are one of the great leaders in the technical development of new aircraft engines—indeed, the Rolls-Royce jet engine is installed in a large and an increasing number of the modern airliners of the world. These are great advances. As the centre of the Commonwealth—which is, after all, the single greatest force for the free way of life in the world, because it is more spread throughout the world than the concentrated United States—morally we are in a position of supreme importance, as indeed is evidenced by the attention which is given to our representatives at the United Nations.
Having made that small refutation of Lord Rea's speech, I come to the gracious Speech from the Throne and to the Amendment to the Address, which I cannot support, for two reasons. The first is that I think Lord Mills deployed very well, if he will allow me to say so, the knife edge upon which our economy rests at all times, and the skilful way in which the Government have managed to keep us on the right side of the knife edge and to maintain the balance just right in circumstances difficult in a world of dis-balance. The second reason is that, frankly, I should be rather horrified if there were an alternative Government to the present one.
The noble Lord, Lord Pethick-Lawrence, in his interesting speech, used these words:
"No one would put his hand on his heart and say he is satisfied with the economy at the present time."
But I do not believe that anybody would put his hand on his head and say that he had confidence in the alternatives

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advocated by the Party opposite, which have been tried in practice and found wanting, and are still advocated by them in theory. For those two reasons, I certainly could not accept or support the Amendment. Nevertheless, I regret that in the Amendment there was no specific mention of Commonwealth trade, and that when speaking of Western Europe there was an ambiguity in the words of the gracious Speech from the Throne which it is unusual to find in any such (local-I-lent, which is, as we know, prepared for Her Majesty by Her Ministers.
I will read the sentence which has a bearing, upon Commonwealth trade. It is this:
"At the same time they wilt work towards the political and economic unity of Western Europe, on a basis satisfactory to all the Governments concerned."
I emphasise the words "a basis satisfactory to, all the Governments concerned." Does the phrase" all the Governments concerned" refer to the Governments of Western Europe, or does it refer in the wider context to all the Governments concerned, which would of course include the Commonwealth Governments? I trust I have made the point clear to the Minister so that we can have a clarification of that ambiguity. I believe it is of vital importance that there should be a clarification which will give an interpretation in the wider sense of the two that I have submitted to your Lordships.
Until the clear declaration of Lord Mills to-day there has been a good deal of confusion on this matter of where we stand in relation to Western Europe and the Commonwealth. There have been oft-repeated promises that our trade position with the Commonwealth will not be affected by any Western European movement in which we may join. But some of the declarations of the Commonwealth Finance Ministers following the recent Finance Ministers' Conference seem to me to run rather counter to the assurances we used to have, that the Commonwealth countries were in full support of any and every step that Her Majesty's Government might take to consider joining in a closer integration with Europe. Mr. Donald Fleming, the Canadian Minister of Finance, at the end of the Conference, said:
"If there is going to be any tampering with the advantages now enjoyed by Canadian exports in the United Kingdom market we would
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have to re-examine the terms of access of British goods to the Canadian market."
Mr. Nordmeyer, the Minister of Finance for New Zealand, said:
"We do not like the Six we were unenthusiastic about the Seven; we have an almost superstitious abhorrence about the Thirteen."
The Minister, Lord Mills, to-day made a clear declaration, as I understood, that the Commonwealth position would not be prejudiced, either in its preferential character or as regards the principle of free entry of Commonwealth produce based upon the Ottawa Agreement; nor would British agriculture be adversely affected. Those are important declarations which clear up the ambiguities which were exposed by the noble Lord, Lord Ogmore, in the course of his speech. Indeed, your Lordships will be delighted to hear that my few remarks will be considerably shortened because of the assurances given to-day by Lord Mills. We do not want double-talking or double-thinking, although I am afraid that in the gracious Speech from the Throne we have something which might be called double-writing. I believe it is vital that there will be this wide interpretation of carrying the Commonwealth Governments with us, because no less than 41 per cent. of our trade is still with the Commonwealth, although I regret to say that it is declining.
I believe that the pressure on this country, from new members, particularly of the Commonwealth, to take greater steps than in the past to remedy the disparities in the standards of life between ourselves and the more backward parts of the Commonwealth, is going to be increased, as the world is really now so small. In the old days poverty and disparities in the standards of life did not stare us in the face, and were accepted in a way that cannot be tolerated when any part of the Commonwealth is perhaps within twelve hours of the centre. As Mr. Wendell Wilkie said, we are indeed one world, and we are one Commonwealth. It is because of that that I believe that this pressure is going to be an increasing pressure in the years to come.
But investment in the Commonwealth, and indeed outside the Commonwealth, must. I submit, carry with it opportunities for the recipients to be able to carry the burden of the inflow of capital into their countries. It is no good pouring money into a country unless it is for an economic objective which is going

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to give a return. It may not be an immediate one, but it must eventually give a return. I believe that to enable these countries to give that return, some assured markets for their exports are necessary, because for many years yet several of these new countries are going to have mono-economies, or something very nearly approaching mono-economies; at any rate, they are going to have economies which depend primarily on production of one product, like rubber or tin.
Although undoubtedly industrialisation may go on, the economies of these countries are going to depend for many years to come on the successful export of a particular primary product, and if that he the case I believe it is as much our duty to the Commonwealth to provide markets which will absorb those products as it is our duty to invest in those countries. In the long run, I do not think it is any good to invest unless we assure those countries of some security of market so that they are to some degree insulated from the quick fluctuations of world markets and have some security for their main products.
As the political ties weaken, the future Commonwealth partnership must essentially depend more and more on economic ties, and the partnership must be seen by those new countries to be a worthwhile partnership to keep them, as it were, with us. It is true that the Government have promised what I would term "no sell-out" on the present preferential position. but my plea is that this is not enough; that we ought to have an economic policy that allows us to give some Commonwealth priority beyond the standstill position at present enjoyed
Yet to talk of a Commonwealth policy I believe puts the Government on the horns of a dilemma. On the one side, they sincerely believe that a policy of international multilateralism and nondiscriminatory trade is the best way to achieve a satisfactory balance of payments position which, in turn, would afford us the resources from which we can invest overseas. They sincerely believe in what I call the multilateral non-discriminatory basis which gives us a sound financial position, while on the other hand that very policy precludes us from taking any steps on special oppor-
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tunities for what I would call "privileged" operations with these new territories. On the one hand, we have the policy which says we must not give discrimination because we should not be able to sustain a satisfactory financial position. On the other hand, by that very policy, we are stopping ourselves from being able `to give any extension of the preferential system.
I believe there are many ways of extending opportunities to the Commonwealth, such as bulk purchase, long-term contracts, guaranteed markets and tariff preferences, and I would not be doctrinaire about holding out any of them as applicable. But all of them require some modification of the present rules of the General Agreement on Tariffs and Trade and particularly the "no now preference" rule. I believe that for the sake of the Commonwealth we should offer to these new countries with what I would call mono- or near mono-economies same kind of preferential benefits without thought of mutuality for ourselves. The mutuality for ourselves would come later.
We have to find a middle course, somewhere between the Protectionism of Ottawa and pure Free Trade liberalism, neither of which are applicable in their entirety to-day, enabling us to fulfil our Commonwealth duty to these new countries with these single, or near-single, economies. That is my plea to-night to Her Majesty's Government. While not supporting the condemnatory Amendment, I would ask for a greater sense of realisation, a greater sense of urgency and for determined action to foster what is, I believe, our economic and social duty to our fellow members, present and future, of the British Commonwealth.
5.55 p.m.
LORD BARNBY: My Lords, like my noble friend, Lord Balfour of Inchrye, who has just sat down, I am not speaking in support of the Amendment, but we are all grateful to the Opposition for having put down this Amendment which affords more of us the opportunity of taking part in this debate on the gracious Speech from the Throne. For myself, I wish to refer to-day to export trade. It is true that that has already been dealt with at considerable length by my noble friend Lord Mills, but there is an angle to it which I particularly want to bring up.

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Like many Others, I was at that large gathering of industrialists addressed not long ago by the right honourable gentleman the Prime Minister, which he called together to give an exhortation for exports. It was an admirable presentation, as was to be expected, but it fell short of conviction because he offered no intentions of providing incentives. Human nature being what it is there is little doubt that such exhortation will not bring spectacular results. In this matter there are two factors: the cost factor and the human factor. Under the first heading let us take the survey or exploitation of possibilities in North America. That is very costly, and boards of companies must give careful consideration before embarking on expenditure of their shareholders' money on such an adventure.
Then there is the angle of personnel, the need to have the right talent and the time taken away from putting over the home business which, after all, should make the major contribution to profits. Then there is often the unreasonable attitude shown by the Inland Revenue authorities, harassing individual travellers with oppressive interrogations and forfeits, and the Treasury making difficult the provision of adequate expenses. The Prime Minister at that time placed great emphasis on the need for small firms to embark on the export business. I was rather concerned about that. There is, of course, the question of what "small" connotes. There is a difference between the textile trades and the metal-consuming trades. Certainly any small textile firm can export a cloth of imaginative design involving themselves in very little expense; but when somebody is going to embark on the export of lawn mowers, or something of that kind, a lot of expensive presentation is required, and so I doubt the wisdom of exhorting these small industries to do this, which often means squandering money. My Lords, if I may be pardoned for making a personal confession, I have been travelling abroad making sales from this country for over 40 years. I have seen a good deal of the game while travelling in several continents. It is not only the difficulty of presenting the picture as a salesman that is involved: I have also had a goodly experience while managing businesses in overseas countries in noting the type of personnel
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and method of presentation by salesmen from this country who try to sell products.
But to return to incentives. There are many possible varieties, and it is necessary only to study the practices followed by foreign countries which compete with us to recognise what can be done. It is usually argued by the Government that if we apply incentives such will bring reprisals. Let them bring reprisals. Let us answer reprisals with further retaliation. After all, the British market is a valuable market, and let us exploit our strength. For that reason I strongly urge incentives as the method by which increasing exports can be obtained.
I turn for a moment to G.A.T.T., the General Agreements on Tariffs and Trade, already referred to by my noble friend Lord Balfour of Inchrye, who has effectively covered the ground. This country respects Treaties; other countries continually disregard them, and frequently get away with it Therein lies the difference. About this possible Customs realignment in Europe, to which my noble friend Lord Balfour of Inchrye referred, I myself feel that surely many of these proposals are, in effect, tariff discrimination, selected preferences or barter trade. They are all infringements of G.A.T.T. For that reason I am among those who strongly support the plea that we should get free from the shackles of G.A.T.T. And, incidentally, when we emerge from this morass of complexity and kaleidoscopic changes, which bewilder all of us, I am among those who want to trust the undertakings of Ministers that our commitments with regard to Commonwealth preferences will be respected. I believe that it is better to underpin the solidarity of the Commonwealth by Customs aid, because the world needs a strong Commonwealth.
The noble Lord, Lord Ogmore, went to considerable length to explain the apparent differences of thinking of members of the Cabinet. We can only hope that the great assembly in this City at the present time of eminent financiers and members of Governments from the outer Seven will listen to the speech of the Prime Minister with the feeling that there is no longer any confusion. I refer for a moment to the Common Market. Such is understood to suggest freedom of movement, of

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merchandise, of capital, and of people. I have always wondered how that gets by without resistance from organised labour. We have seen what seems to be unreasonable resistance by the mining unions to the importation of Continental labour. There are other unions too—bricklayers and goodness knows what others who also oppose.
I turn to depreciation allowances. The energetic modernisation or replacement of existing equipment can be greatly assisted by the adding of depreciation allowances; and the existing allowances on depreciable assets cannot fail to be inadequate. They are based on the historical cost of such assets during a period of rising prices. There are various methods of improvement. Of course, these have been continually suggested by the Federation of British Industries, and it is to be hoped that their plea will produce in the future more action by the Government. On investment allowances, these have been more generous, but surely these should wholly take the place of initial allowances, in order to provide a sufficient stimulus both to replacement and to new investment.
I want to decry the disparagement which we often read of British official trade representation abroad. My own experience has been that these officers are bringing devoted and intelligent experience to their work. We have a fine body who often suffer frustrations and insufficient allowances, but who, in spite of that, give a great service to British industry. The Export Credits Guarantee organisation render great service to industry. But I feel by this agency methods of greater assistance lie to the hand of the Government. I have recently had some exchanges of correspondence with my noble friend Lord Dundee, who replies in this House for the Board of Trade, and I am grateful to him for assurance that there is going to be a further consideration of liberality in certain directions. But I would say to him that I hope that the terms of the "Contracts policy" may, without additional cost, be to a greater degree extended to "Shipments policies". This very week in the Economist there is an outstanding article on the question of export insurance. This shows that Germany offers greater facilities than does this country.
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I just want to refer to the imports from low-wage Asiatic countries. Tariffs alone are inadequate for these, anyhow to preserve industries regarded as expendable, and I want to take this opportunity of quoting a recent statement by the Vice-President of the United States:
"Our diplomatic resources should be used unreservedly to remove remaining 'road blocks' to increasing our exports abroad, to create wider opportunities among other nations for imports from low-wage countries, and to encourage the development of fair labour standards in exporting countries in the interest of fair competition in international trade."
I can only hope that it is not contemplated that the United Kingdom should be among the "donkeys" at the receiving end in this particular case.
LORD SHEPHERD: My Lords, would the noble Lord permit me to say this? When he referred to the poorer countries does he include the Commonwealth countries, as the appeal was made by the noble Lord, Lord Balfour of Inchrye—Hong Kong in particular?
LORD BARNBY: My Lords, I said in any industries which might be considered expendable. I trust that no industries are being considered expendable, although there is some concern about the textile industries particularly.
LORD SHEPHERD: My Lords, the noble Lord will recognise that in the case of the cotton industry the Government lent their aid to bring about a restriction—a voluntary restriction it was called—on Hong Kong imports into this country, only to find that the shortage of grey cotton in this country was so large that Lancashire went to Spain and had to import large quantities of grey cotton from Spain, which commodity Hong Kong could well have supplied, and which would have given employment to hundreds of thousands of refugees in Hong Kong.
LORD BARNBY: I find myself sometimes in disagreement with my noble friend. In this particular matter, I am afraid I am one of those who are critics of Government policy, so I will not go on further about that. But, my Lords, diplomacy must always be the dominant protection of commerce, and I should not like to sit down without paying a tribute to the outstanding speech we

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heard in the earlier part of this debate from the noble Earl who was until recently our own Leader, and who is now the Foreign Secretary—an impressive presentation in a resolute manner of our mission in the world, and of the robust intentions to carry it out.
6.13 p.m.
LORD HAWKE: My Lords, I should like to associate myself with my noble friend Lord Balfour of Inchrye in some of the propositions he put forward, for I have long believed that, for political and economic reasons, it is vital that we should be able to guarantee markets for some of the commodities produced, particularly by the emerging countries—and when I. say "we", I mean that it would be preferable that we ourselves should do a large share, but we may need help from others, too. I am not frightened of the name earned by long-term contracts. Why long-term contracts got a bad name in this country was because there was too much "Government" muddled up in them. The Treasury tried to beat down the producers to such a degree that the producers ceased to produce, and we therefore nearly starved. That is how long-term contracts got a bad name.
There is great anxiety in many quarters about the balance of trade of this country at the moment. The figures are not comforting. On visible account, in 1958 we ran an average monthly unfavourable balance of £36 million; in 1959, it averaged £44 million; in the first quarter of 1960 it averaged £55 million, in the second quarter of 1960 £69 million, and in the third quarter £90 million. The negative balance has been remorselessly creeping up. But, of course, one has to throw in and examine the invisibles, too. The figures for invisibles have been published only up to the end of June, but if you add together the figures for the last complete twelve months—that is, from July, 1959 to June, 1960—of both visibles and invisibles and compare them with those for 1958 (which, incidentally, was a good year), you will find that our current account balance deteriorated by no less than £287 million, from a plus of £345 million to a plus of £58 million. Of these, £181 million were visibles and £106 million invisibles.
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The major items of deterioration in the visibles—that is, actual trade—were £83 million deterioration in the dollar area and £148 million deterioration in the rest of the sterling area. Of the invisibles, there was a large item in South America, oil, of £129 million, and travel in Europe amounted to £40 million. So that these four categories more than accounted for the total deterioration. But at the moment the position is undoubtedly considerably worse. On visible account, we are running at nearly £100 million a month deficit, which must far outweigh the figure for invisibles, which were running at an average of only about £12 million a month in the last period for which we have the figures. In fact, if we were to compare the year 1960 with 1958, we might well find our position deteriorating by as much as £450 million to £500 million.
LORD STONHAM: My Lords, may I interrupt the noble Lord? I am not sure whether I have got his figures right. He is saying that we are at present running at about £100 million per month deficit on visibles, and he estimated the earnings on invisibles at about £12 million a month, which would leave a net deficit of £88 million a month. Is that right? Because I understood that in the first half of the year the actual surplus was £35 million. Are we now losing £88 million a month?
LORD HAWKE: On invisibles, the last published figures, the January/June provisional figures, show that the total—that is not monthly, but the total—was £62 million.
What have apparently hit us chiefly are: too many imports from the dollar area, too few exports to the sterling area and a catastrophic blow in connection with oil in South America—which, from inquiries, I have tracked clown to be, I believe, a "once and for all" blow, in that the present Government of Venezuela, when they came into power, found that the late President was no longer in the country and that a large sum of money which they had expected and hoped to find in the Treasury was not there. They therefore sought to replenish this by a very heavy retrospective tax on the oil companies, and I am informed, on good authority, that this

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particular item, which s a very large sum of money, represents that figure.
The other item is the ever-increasing and excessive travel in Europe. The extra dollar imports and the travel in Europe are, of course, the logical results of greater freedom, but unless we can improve our exports we shall have to back-pedal on that sort of thing. Her Majesty's Government have rightly launched a great drive, exhorting manufacturers to export more, but it is right that we should examine how far the situation is our own fault and how far we are caught up in the action of others. The world situation at the moment does not seem to be particularly favourable for British exports.
The purchasing power in overseas markets has been affected in several ways. First of all, commodity prices, if anything, tend to be a little lower than they were a year ago. There has been a general drive against inflation throughout the world, and as overseas buyers particularly tend to spend the top slice of their income on British goods, that naturally acts discriminately against British goods. The production of raw materials has more or less caught up with manufacturing capacity, and has certainly overreached purchasing power in the world, so that the incentive to invest in more oil production and more mining production is somewhat less; and both these fields, of course, are very good fields for British exports.
Germany has been running a large surplus on exports which she has not in any way re-lent to the world, nor has she made any attempt to increase her imports, though there are signs that some effort is now being made, particularly in Ghana and in the Argentine. Moreover, confidence in the future is impaired, or has been impaired, by the United States Election, as well as by events in the Congo and the general white fear of black domination in Africa. The result is that there has been a diminution in the ability to buy and in the confidence to buy, with the result that there has been less buying. Moreover, there are larger sources of supply to fill the lesser demand, sources created by the world boom in productive investment over the last few years. Some of these sources, too, are backed
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by cheap Oriental costs, and some sources are willing to meet overseas customers' credit needs more than we can. Altogether, the general atmosphere for British exports is pretty grim at the moment.
A lot of this atmosphere is not of our creating, but if we are to overcome it, we want to make quite sure that all our methods are of the best, whether we are hunting new trade or whether we are looking after what we have already got. In the days when I was engaged in world trade, I was much struck by the system that some of the Continental firms used to employ for the export markets. They would form a cartel of manufacturers of similar goods, a cartel large enough to be able to employ a first-class overseas representative. They would appoint their agents in the various markets, firms of substance, but the king-pin of the organisation was the German, Czech (or whatever he was) sales representative who travelled round in his area doing the hard work while the agent provided him with a base, introductions, and so on.
That was most effective, but it was effective because it was possible for firms making the same things to come together. The noble Lord, Lord Barnby, was talking about the difficulty of exporting lawn mowers. I agree. But supposing all the lawn-mower manufacturers in this country formed a lawn mowers' export cartel, they could afford to employ a first-class salesman in every big market in the world.
LORD BARNBY: Restrictive trade practices!
LORD HAWKE: I agree. But I do not entirely agree with my Party on restrictive trade practices.
The only difficulty, which the Continentals were able to overcome somehow or other, was how to apportion the orders when they got home. They did it all right, but I admit that it must have proved difficult, particularly when some of the orders were taken at a loss, as undoubtedly they were. But I am perfectly sure that that is a far better method than banding together a miscellaneous bunch of manufacturers whose sole object in coming together is to see that no one of them competes with any other. They can then produce only a salesman who cannot possibly be an

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expert in all of the goods he has to sell. I hope that the President of the Board of Trade will try to knock this idea into some of our British manufacturers.
Whenever manufacturing capacity exceeds purchasing power, we are going to run up against the question of credit. I do not believe that we can rely on other countries not to get round any agreements on credit that we choose to make. In any case, however wide the facilities the City of London can offer, according to The Times Supplement on the City of London published quite recently, the City does not appear to be able to offer credit to overseas buyers, as contrasted with British sellers. I believe that we shall have to commit some of our foreign exchange reserves to the setting up of a British Export-Import Bank to enable loans to be made to overseas buyers to buy British goods. No doubt loans would have to be partially undertaken by indigenous banks, or even by the Government of the country concerned, to see that the risk was properly spread. But the Americans do it, and I am sure that we shall have to do it.
I hope our measures succeed. I welcome this great exhibition in Moscow, and I hope there will be a good display of goods, even of those goods in which there is very small chance of our doing any trade. Millions will come and see the exhibition, and it will be one chance of showing behind the Iron Curtain what exists on this side of the Iron Curtain. If we do not succeed in our measures to increase our exports, we shall undoubtedly have to cut down imports and other expenditure abroad, as others have done—Australia, for instance. I know that sterling launched into the world always comes home to roost, but it may come home as hot money from the Continent or in the buying of shares in 13ritish industry. Personally, I do not regard it as good business for Britain if a holiday on the Costa Brava is paid for by selling I.C.I. shares to a German national. That is living on the nation's capital, and that is what we have been doing this last year.
In my view, those who believe in freer and freer trade, without any question, should remember that there have been very considerable changes in society since the days of Cobden and Bright, Gladstone—and even, for that matter, Marx.
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We had a new deal in this country, and a great deal of the purchasing power is now in the hands of the masses and is no longer confined solely to the middle and richer classes. That means that when we exchange greater freedom of markets with other countries, we are offering them a very great privilege and in nearly every case a privilege greater than we can receive in return. After paying for food and shelter and the essential overheads of life in this country, our people have a higher purchasing power than anybody in the world except, perhaps, the Americans. Moreover, we have a very strong leaning towards American gadgetry and Continental artistry. To take an instance, the Italians seem to be able to make ladies' shoes much better than we do but they cannot make woollen cloth so well as we can. If we throw open our market to Italian shoes, there are millions of our people who can afford to buy those shoes. But if they throw open their market to our woollen cloth, far fewer Italians have money to buy it. For centuries the Northerners have always searched for the sun, so we are inveterate holiday makers in the South; but the Southerners do not reciprocate.
I should like to say one word about our old friend, monetary policy. Nobody can ever suggest that I have not backed Her Majesty's Government 100 per cent. on the use of bank rate. That was so long as I believed that bank rate was the decisive weapon, the heavy cudgel. But is it any longer so? Has its place not been taken by special deposits and by the fact that money-lenders have found that people are willing to pay far higher rates than bank rate for personal loans and hire-purchase contracts? I believe that special deposits and hire purchase controls are the weapons of control today in the home market. Bank rate may have some effect, but it is not nearly so effective as it was. Bank rate is, however, highly effective in attracting foreign money to this country. Keeping bank rate above that of our neighbours means that hot money flows in here and our reserves bound up, masking the true position on current credit account. Moreover, Her Majesty's Government give the Opposition a stick to beat them with the whole time, because the Opposition insist on bemusing the public by mixing up short-term and long-term rates

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and pretending that bank rate has a decisive effect on rents, which obviously it cannot possibly have.
I would say a final word about the motor industry, which tends to expand and contract violently with the season. I hope that we shall manage to find the means of keeping a steadier rate of employment in this industry. Last season, we had cheap credit at the peak of the seasonal buying. The result was that we had a wild boom, and credit controls had to be imposed more or less as the seasonal buying spent itself, so we got something of a depression. Why could we not try for loose credit in the off-season and tightened credit in the buying season? Indeed, why cannot manufacturers have winter and summer prices for cars, as the Coal Board has for coal? At present, the vagaries of the motor industry make the situation for other employers of labour in the Midlands most difficult. I hope that the Government will try to pursue this matter with the trade, to see whether something cannot be done, otherwise they will be forced to relax hire-purchase restrictions just at the moment when next he seasonal buying comes on the market.
6.34 p.m.
LORD WISE: My Lords, only short references to agriculture have been made so far in this debate, so in entering the field on behalf of the farming community, I am raising the expectation that to-morrow we may learn something more of the Government's intentions regarding the industry. Sometimes it is entertaining to refer to arguments or events of the past, and in discussing the present and future position of agriculture, it may be well to look back upon references to agriculture in the gracious Speeches of recent years. For my purpose, I need take only those of the last three years. I am not troubling about previous years, but I expect that the references to agriculture in those years would be in the same strain.
In 1957, we were told that:
"My Ministers will continue to give support to agriculture and fishing".
In 1958:
"A healthy and thriving agriculture will remain among the principal objectives of My Government".
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In 1959:
"The wellbeing of all those whose living depends upon the land will remain one of the first cares of My Government".
And in 1960, we have these words in the gracious Speech:
"At home My Ministers are resolved to maintain a stable, efficient and prosperous agriculture".
These statements of policy might have been written by the same pen. This year, just fourteen words, and not two lines of the gracious Speech, are devoted to agriculture. I think that we might have been entitled to something better and more illuminating. Those are the platitudes we are becoming accustomed to, and I wonder whether next year we shall be treated to "the same medicine as before."
The resolutions and intentions of the Government are thin and meaningless, and I hope that the farming community will soon wake up to the fact that it cannot live on words and phrases, even though they come from the high authority of Her Majesty's Government. Those whose living depends upon the land—and I use words which appear in one of the references I have made—are entitled, whether they are farmer or worker, to fair rewards for their services to the nation. They are not getting these, and for that reason alone, apart from any other, I feel justified in calling the Government to book. A prosperous and expanding agriculture could play a supreme part in reviving our declining economy and also in reducing our rising import liabilities. If agriculture collapses and the purchasing power of its people continues to diminish—it has already started on a downward trek—then other industries will not survive in the ensuing distress. That is a hard but true fact.
The services which farmers and their workers render to the nation are unequalled in any other walk of life. In this I must particularly praise those who are active in their work on the land in all weathers. That statement cannot be contradicted. If anyone considers that I am wrong., let him go now and do a week's work on heavy land, pulling, knocking, topping and loading sugar beet under the conditions which have prevailed during the last few days. I have seen the men doing this in the rain, and I was very thankful that my way of life has taken me along easier and more

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congenial paths. I could also suggest to noble Lords, as a cure for complacency, other methods of employing their spare time on the land. I have seen the sugar beet on its way to the factory, and here the farmer suffers, as in a few days the factory's statement of weights and condition will come back to him showing a heavy dirt tare and lower sugar content. It cannot be otherwise under present conditions.
To make matters worse, 2s, 6d. per ton was knocked off the price he might otherwise receive by the action of the Government at the last February Review, simply, we were told, because the contract acreage might be oversubscribed—a penalty for over-production. It will be interesting to know who has benefited and into whose pockets that 2s. 6d. a ton has gone. Perhaps the noble Earl the Parliamentary Secretary will be able to toll us tomorrow. On the basis of an estimated tonnage of 5 million tons of sugar beet passing through the factories this season the loss to the farmers on this item alone by the reduction of 2s. 6d. a ton will be no less than £600,000. The Government tell them: "Your wellbeing will remain one of our first cares". Or the farmers may hear that worn-out exhortation that they can make good the reduction by greater efficiency. It cannot be made good under existing conditions and under the present prices necessitated by the sugar content that £600,000 cannot be made up. To be quite fair, I know that in previous gracious Speeches other matters have been referred to and have since been brought into operation. I expect the noble Earl will enlarge upon these and seek some praise for the Government; and he is entitled to do that. However, financial palliatives, in the form of loans or grants which cannot be obtained or enjoyed by all in the industry, are quite incapable of stemming the general decline.
Perhaps by accident, the Government this year have made reference to the three roots upon which alone a flourishing agriculture can grow: efficiency, stability and prosperity. The noble Earl may disagree with my interpretation of what these really mean in the agricultural industry. The Government said that they will maintain these things, and we are entitled to ask: at what level? That is a most material point. They cannot main-
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tain something which the industry has not got. It is clear, I think, that farming practices and operations are more efficient at the present time than ever before. All concerned have gained in knowledge, and scientific, mechanical and technical skills have been readily acquired and used to the advantage of the industry. These can be maintained.
But the essence of stability in agriculture lies in assured markets and guaranteed prices. The first of these has now become a figure of speech; it is an unreality and a delusion. It cannot be otherwise when harvested cereal crops cannot be absorbed into the markets and when combined barley cannot be sold, as the merchants cannot buy except at low prices. In many instances prices do not cover production costs, and it is now often the case that lower prices are offered by merchants in the knowledge that the farmer will receive a subsidy from the Government. This is an evil practice and may give the merchants two profits, one at each end of the transaction.
It has come to my knowledge that the following statement was made a few days ago, and it is a complete echo of what I have said many times in this House. I must apologise for a somewhat long quotation, but it bears materially on the points that I am trying to make. This is the quotation:
"I am not at all satisfied with the way in which some of the subsidies at present being administered to agriculture are working. For instance, I feel that a lot of the subsidies on barley and wheat, in particular, are going into the wrong hands. The middle men, or the brewers in the case of barley, as well as the feedingstuffs merchants, are, I think, tending to talk down the price of corn, and particularly of barley, in the knowledge that the farmer will obtain a deficiency payment which will make up to him the difference between the realisation price and the guaranteed price. Much of the subsidy, therefore, does not go to the farmer, who should be getting it, but goes into the hands of the brewers and of the compound feedingstuffs manufacturers.
"The time is fast approaching when we must look at some of our deficiency payments schemes again to see whether we cannot devise a system which will put a minimum price on these crops, which will have the effect of raising the price which the farmer is paid and reducing the difference between the price which he receives and the guaranteed price for those crops."
I could not have said it better myself.
THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (EARL WALDEGRAVE): Would the noble Lord tell us from whom he is quoting?
LORD WISE: It is Mr. Prior, the Conservative Member for Lowestoft, who is a farmer, speaking on November 1 in the debate on the Address—it appears in Hansard for that day, at column 127. Now the noble Earl has chapter and verse. In this quotation deficiency payment schemes are mentioned. The very words and the uncertainty of the amounts payable do not suggest an industry abounding in stability and security. Farmers do not want deficiency payments and subsidies if schemes can be devised—and this is quite possible—whereby they can receive fair, remunerative prices for their products. Under present conditions without subsidies farming would become a distressed industry; it would soon collapse. Even with subsidies, I doubt whether it is solvent at the moment. It is degrading to any industry to be told that it cannot pay its way without Government aid. Such a state of affairs vindicates our view that the fetish of free enterprise is a failure. It has brought no financial gain or stability to agriculture. The farmers are told in our February Reviews what their incomes would have been under normal weather conditions, but not what they are according to the value of the pound in comparison with previous years. The first is wishful thinking, but the second can be calculated accurately.
What I have said about cereals can also be related to livestock prices. Up and down they go. Farmers who cannot sell their cereals cannot find the money to buy store stock for wintering. The demand therefore decreases, and prices fall; and graziers and others who purchased stores in the spring may lose money in the autumn. Fatstock prices fluctuate also according to the size of the weekly purses or demands of housewives. Guaranteed payments for stock by the Government are thus increased on falling markets and a greater burden has to be borne by the taxpayer. This all seems an irrational system to attach to a great industry. But the Government are convinced that this can be termed "stability". And so it goes on, to the
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detriment of those who get their living on the land.
Now I want to say a word or two about prosperity. The noble Lord, Lord Brocket, told your Lordships on Thursday last that farmers are becoming depressed and that the catch-phrase about "having it so good" is worn out. I can tell your Lordships that East Anglian farmers, large and small, fear an agricultural depression and are always talking about it. Perhaps the Parliamentary Secretary, in order that we may know what is happening in other parts of the country, will tell us what the small farmers in the South-West area are thinking and talking about.
It is obvious that the writing is on the wall, and can it be wondered that this is so? One side of the account shows decreasing incomes, and the other rising costs in everything a farmer is called upon to buy or pay for in running his farm. These costs are not stable, are not subject to any Government control or restriction of price, but just mount up with frequent changes of the upward movement. Repairs, replacements, spares, feedingstuffs, transport and all tradesmen's and contractor's bills show increases. It is ironic that the farmers' incomes are lower, yet the profits and dividends of those who supply him rise. Some of these reach astronomical heights. One well-known firm—and I know the noble Earl saw it in the Press—which has close connections with the farming industry, announced with wide publicity last week that its profits had risen, I believe, by £1 million. I have already in past speeches told your Lordships about high milling and other profits.
In farming, however, money is running short; profits become lower, and the red figures in bank statements grow larger and larger with increasing charges. Costs rise by high percentages. I know of a 10 per cent. increase in certain feeding-stuffs within two or three months. Standards of life naturally become lower. Bankruptcies still persist. Workers leave the land in their thousands annually, and those who remain have to wait a further two months for a rise in wages already agreed upon, because the farmers cannot afford to pay until the additional millions of pounds involved can be included in the consultations which will take place in February. Is this a sign of prosperity? Cottages on farms are becoming vacant,

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and many of our smaller villages show no signs of development or social advancement. How can the Government be satisfied with such agricultural tragedies?
On Thursday, the noble and learned Viscount who sits on the Woolsack referred to the meeting between the Prime Minister and the President of the National Farmers' Union. He may differ with me as to the outcome of that meeting. However, the reason for that meeting endorses my case. It was obvious that farmers were doubtful as to the substance or the so-called stability and prosperity, and wanted an assurance as to the future of their industry. The leaders of industry do not seek a meeting with the Prime Minister unless there is something drastically wrong with the industry in which they work.
My Lords, I hope that the conclusions arrived at at that meeting so far as agriculture is concerned will stand the test of time. "Stability" and "prosperity" are both idle words, so far as agriculture is concerned. We do not want to stand still or suffer from lack of a genuine prosperity. We on this side of the House invite the farming industry to proceed by way of an ordered and expanding economy. This involves planning our movements, our activities, our daily engagements of hand and brain, our markets, our financial obligations and, last but not least, increasing our production. Only by this expansion and order can we have any hope of overcoming the days of anxiety and disappointments which seem to loom ahead. Farmers and workers are entitled to reap fair arid unsubsidised rewards for their labours, and I am sure are hoping for an ordered and expanding economy.
6.55 p.m.
LORD WOLVERTON: My Lords, if the noble Lord, Lord Wise, will excuse me for not following him into the realms of farming, I wish for one moment to get back to home affairs. Reference is made in the gracious Speech to the Transport Commission and the proposals for reforming the structure and functions of the Commission. I welcome (hat statement, because I think it is one of the most important things in Her Majesty's Speech. The noble Lord, Lord Mills, told the House this afternoon that the Transport Commission made a loss of £110 million in 1959. As
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the gross receipts of the railways last year were £457 million, the loss represents a quarter of their gross receipts. In 1953, when the Act was going through quite a number of us on these Back Benches begged Her Majesty's Government to see whether it was possible, when they set up the area boards, to have area accountancy and to give each area board a capital structure, so that they knew what their capital structure was and also their profit and loss. I well remember my noble friend Lord Swinton, in answering, saying that they had given most careful consideration to the proposals which we put forward, but that it would mean setting up the cumbersome system of the old clearing house, and that it would not be possible. In a statement in April, the Prime Minister—this was quoted by the noble Lord, Lord Mills, to-day—said that earnest consideration must be given by the Stedeford Committee to the possibility of setting up area accountancy.
If I may quote, as I think I am entitled to, a Minister's speech in another place made on October 26, 1960 [OFFICIAL REPORT, Commons, Vol. 627 (No. 159), col. 2484], I would point out that the Under-Secretary, in winding up the debate, said:
"May I say a word about regional accounting? I know it is anathema to many in the railway industry, but I urge those who had experience of the old railway clearing house system before the war to remember that accountancy and accounting have undergone a complete revolution since those days. To-day electronics and computers make simple the task which previously had to be carried out by a building full of clerks…"
That is all I want to say on that point. I think it is vital, and I hope that the White Paper will say something about it. At the moment we do not know at all.
I have studied some of these figures over the week-end. There has been a lot of talk about whether the London-Midland-Scottish Railway electrification should go on, because now the estimates are something in the neighbourhood of £160 million. I think myself that, a section of it having been completed from Crewe to Manchester and Liverpool, it would be tragic if it could not be finished in the next seven, eight or ten years. To have to change engines from diesel to electric traction halfway means that you cannot have non-stop through trains. In

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the Modernisation Plan of 1955, which the Transport Commission gave to Parliament, they said—I am quoting page 18—that the structural alterations to do with the London Midland Region would cost about £40 million, and the locomotives £35 million, making a total of £75 million. Then there was an asterisk against locomotives, and it was said that multiple unit vehicles, electric and main diesel, were taken into account under passenger carriages. They have allowed £285 million in the scheme for passenger carriages.
Delving through this most interesting Report of the Select Committee on the Modernisation of British Railways, one finds that it is said that this scheme, which was going to cost in 1955 £75 million, does not include signalling, which is a vital point. The signalling in the Plan of 1955 for the whole of the modernsiation of the railways was to cost about £210 million. On top of that I read another paragraph saying that of the £160 million it was going to cost, £40 million would have to be spent, even without electrification, on renewal of ordinary plant. It is a very large sum of money. We have no idea at all on what basis income could be earned on that particular line. The Minister has asked the Commission to stop further contracts until we get the Stedeford Report or the Government White Paper. Unless some form of regional accountancy can be done, I cannot see how the Ministry of Transport are to know at all whether a particular line is going to pay or not. In the Report of the Select Committee, it is stated that during their examination of the chief civil servant of the Ministry of Transport he said:
"We find one of the most difficult things in the Ministry is to discover where the money is actually being lost in the Commission, and it is very difficult to get an answer to that."
If the Ministry cannot find out where it is actually lost, how are we to be able to find out? I hope earnestly—and I do not expect an answer to-night—that the Minister will seriously consider, when they bring the Report out, having some form of regional accountancy.
7 4 p.m.
LORD LATHAM: My Lords, we are reaching the end of the discussion of a vital subject this afternoon. It could, I
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think, be fairly said that we are dealing with the economic state of the nation. The subject was introduced by my noble friend Lord Pethick-Lawrence, in a most informed and penetrating speech, a speech which was also powerful, and the more powerful because of its moderation. The questions which he propounded concerning the economic state of the country were not in any real measure answered by the noble Lord, Lord Mills, notwithstanding a rather long speech. He said that in his opinion Lord Pethick-Lawrence had taken a gloomy view. Well, that may be so. Certainly there is no reason why any of us should be other than concerned, and gloomy if you please, as to the situation which confronts the nation. When figures which I shall give are considered—figures as regards exports, production, investment, share of the world's trade and similar figures dealing with similar subjects—it will be difficult even for the noble Lord, Lord Mills, to be other than concerned as to the situation. The noble Lord, Lord Hawke, said that as regards exports in his view the figures were pretty grim, and that undoubtedly is the case.
My noble friend Lord Lucas of Chilworth indicted the Government for wasteful expenditure and then criticised the Government forcefully, as is his custom, in regard to the transport policy which has been and is being followed by the Government concerning the financial and the operational activities of the British Transport Commission. The real trouble, of course, with transport is that since this Government have been in office from 1951 they could not leave transport alone. They have been continuously, and usually wrongfully, interfering with the operations of the British Transport Commission—and that notwithstanding the fact that When the 1947 Act was going through as a Bill, both in the other place and in your Lordships' House, the representatives of the Government, who were then in Opposition, were very concerned that steps should be taken to see that the Government did not interfere in the operation of transport. At that time, certain Amendments were put—and I believe two of them were accepted—designed to prevent the Government of the day, of whatever Party it might be, interfering in the operations

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of the Transport Commission. Immediately the present Government came into office in 1951, however, they started to interfere; and on this Q can speak with some knowledge, because at that time I was the Chairman of the London Transport Executive.
In 1952 the Railway Rates Tribunal authorised certain increases of fares, both on the railways and buses of the London Transport Executive and upon certain lines owned and operated by the British Rail ways Executive. We put these alterations of fares, mainly increases, into operation. There were certain proposals which we also put into operation for the reduction of certain fares. Unhappily for the finance of the Commission, there was pending an election for the London County Council. Accordingly, in breach of every understanding reached when the Bill was being considered by both Houses, and, notwithstanding that the fares had been approved by the Tribunal and by the Consultative Users Committee to whom the matter had been submitted at the instance of the Government, the increase of fares which had been put into operation was revoked on the order of the Government.
That action cost the Commission, principally the London Transport Executive, nearly £2 million a year. And where the fares had been reduced, they were left. Ever since then, with a succession of Ministers, two of whom I met and had a good deal of negotiations with, there has been a steady policy of tearing apart the integrated system of transport by road and by rail for which the 1947 Act provided and which, if the undertaking had been left to do its job, would have been a success and would have been profitable. The one thing the Government did not want was that the big nationalised railway transport undertaking should be successful. I witnessed some of this interference. There was the sinister Act of 1953 which handed over the profitable element of the road service to private enterprise, and dismantled the coordinated machine for public transport.
What this country needs, my Lords, is not a system of transport that provides a series of facilities, but one which provides a national service of transport, which is something entirely different. That cannot be achieved, is not being
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achieved, and will not be achieved, unless we have a co-ordinated system which includes with railway transport also road transport. That is a point of view which was accepted before the last war by several independent Commissions or Committees which inquired into the question of transport in this country.
The noble Lord, Lord Mills, was asked by my noble friend Lord Lucas of Chilworth, whether he agreed that the deficit on the Special Account of the Transport Commission would amount at the end of this year to no less than £541 million. I hope that the noble Earl, Lord Dundee, who is to reply to the debate, will be able to say whether that figure is a correct one or not. The noble Lord, Lord Mills, found some difficulty, I gather, in answering the question, or, rather, in agreeing to the proposal made that the Report of the Chandos Committee should be published. Sooner or later, of course, the substance of the Chandos Report will be made public. Sooner or later, the matter of this expenditure will go before the Public Accounts Committee, if it does not go before a Select Committee earlier; and at the Public Accounts Committee full information can be demanded and, as I understand it, must be given. It seems to me to be an indefensible attitude for the Government to take up: that the nation can know after the thing is done, after the nation is committed and some of the money provided, what the Committee reported, but it cannot know beforehand. That seems to me to be a state of topsyturvydom and it is to be hoped that the representations by the noble Lord, Lord Mills, to his colleagues may result in this information being made available.
My noble friend Lord Pethick-Lawrence mentioned the bank rate, and again expressed his objection arid opposition to the use of the bank rate as an instrument for monetary control. I share the same view. It is indiscriminate in operation. It does not prevent the antisocial or the non-social expenditure of money; but it can, and does, prevent the expenditure of money on social and desirable objects, especially in the field of local government. For instance, the Metropolitan Water Board engage in a good deal of capital expenditure which is unavoidable, and upon their estimated

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capital expenditure of £3 million a year—and expenditure on water undertakings has always been exempt from any restrictions upon capital expenditure—a 1 per cent. increase in the rate of interest involves an additional expenditure of £21,580 per annum for 30 years.
LORD HAWKE: May I interrupt the noble Lord, by asking him over what period they expect to borrow that money? Are they going to borrow for 30 years, or is this day-to-day money? The noble Lord knows that the bank rate affects only day-to-day money.
LORD LATHAM: My Lords, the bank rate does not affect only short-term moneys. The London County Council has just borrowed at 6 per cent., I think at 99, for, I believe, very nearly 20 years.
LORD HAWKE: But does the noble Lord really think that the supply of long-term money would increase if the bank rate were lower?
LORD LATHAM: I was seeking to show how indiscriminate the operation of the bank rate is as regards controlling expenditure. The "wide boys" can always get round the question of the bank rate; but honest people, performing a public service and providing social capital which is urgently needed, cannot. The London County Council spends something in the region of £27 million a year, and an increase of 1 per cent. means an increase in expenditure of £221,000 per year for 40 years. If we take housing and reduce it to the increased cost per room—and there the financing is on the basis of 60 years—it is £9 per room per annum; and as regards the cost per school place for 30 years, it is£2 5s. 0d. per place for the primary and £3 12s. 0d. for the secondary. That shows how unfair and ineffective is the use of the bank rate as a means of controlling expenditure.
The noble Lord, Lord Mills, offered no hope and no comfort whatsoever. There is nothing in the gracious Speech which shows that Her Majesty's Government have a policy for dealing with a situation which really has become alarming. The use of a number of controls and restrictions has proved to be quite ineffective because they are isolated and are not part of a long-term plan designed to increase the economic health
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of the nation. We are behind almost every economy anywhere. If we take investment, upon which all our expansion depends and on which the maintenance of even our present unsatisfactory state depends (as does, of course, our efficiency and competitive power) we find that our investment has been smaller than that of any other country within the European Economic Community, and has been smaller than that of most other countries. Public investment this year, for instance, is down by £40 million; and public investment is the keystone of our economy. In 1959, 40 per cent. of all new plant and machinery and more than 50 per cent. of all building was for public authorities, and the nationalised industries in 1959 accounted for 40 per cent. of all investment; and this is largely spent through private enterprise which it fertilises and fructifies. That is the situation as regards investment, which is the basis of all economic development and progress.
When we come to production, we find there has been no rise in output this year since the Spring. In short, for six months in the field of production there has been stagnation, which is due mainly to a drop in investment in the manufacturing industries after 1957. In this matter of production we are not keeping up with other nations. Since 1951 our record is the worst in Europe, and we are still falling back. In 1953 the Index of Production—that is, the share in the world's exports—was, as regards, the United Kingdom, 21·2 per cent., and as regards Germany, 13·3 per cent. At the end of 1959 Germany's figure had gone up to 19·9 per cent., and we had fallen behind to 16·7 per cent. And that is not because the German worker worked longer hours than the British worker. Quite the contrary is the case; he works less hours. According to an article in The Times of December 31, 1959, the German workman works on an average only 41·5 hours per week. That compares with 45·1 in France, 45·3 in Britain and 50·2 in Japan: The article says:
"These averages were arrived at by including summer holidays and sick leave, an average of 15 and 19 days respectively in West Germany."
LORD HAWKE: My Lords, may I ask the noble Lord whether they also include tea breaks and knocking off to wash hands?
LORD LATHAM: My Lords, if I may say so, that is a little unworthy when we are discussing an important matter of this kind. The noble Lord might equally ask me whether they are allowed to stop to blow their noses.
LORD HAWKE: My Lords, it is a perfectly relevant question, because I believe that in German factories they do not have those breaks.
LORD LATHAM: My Lords, I have quoted these figures because it has so frequently been said that the difference between Germany and this country was because the German worker worked longer. That is not the case and these figures prove it not to be the case. The article goes on to say:
"Order books are full but overtime pay cannot keep West Germans at the bench after five. The trade unions regard a short working week as an objective more important than higher wages. On Saturday daddy belongs to me is one of the trade unions slogans."
Then we come to the question of exports. There the situation is very serious indeed. It affects the balance of payments, which in turn affects the bank rate, which fixes interest rates and the cost of money. For the first six months of this year the decline has been very grave and disturbing, and I cannot understand why Her Majesty's Government and the noble Lord, Lord Mills, representing the Government in this House, should be so complacent about the situation. For instance, in the first eight months of 1960 Western Germany increased its trade with France by 64·1 per cent. and we by 12·4 per cent. Western Germany increased her exports to Holland by 21·6 per cent., and the United Kingdom by 6·1 per cent. Even when we get to the Commonwealth, we find that Western Germany increased her exports to Australia by 32·3 per cent. while the United Kingdom increased hers by 19 per cent. To Pakistan Western Germany increased her exports by 37·6 per cent. while the United Kingdom's increase was only 20·1 per cent. Are not there grounds for being gloomy in the presence of this sombre picture of our economy?
Our complaint is that, faced with this situation, there is no long-term policy, but only a sort of hand-to-mouth series of devices and expedients in fits and
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starts. Controls are on; controls are off. The bank rate is down; the bank rate is up. The brake is on at one time, and the accelerator is on at another: the credit squeeze; expenditure encouraged, banking facilities enlarged, controls on hire purchase taken off. A boom, convenient of course from an electoral point of view, is engineered; and then, without any notice whatsoever, the Government impose restrictions, raise the bank rate, first to 5 per cent. and then to 6 per cent., without regard to what is in the pipeline, as it were, and to what stocks are being held, and pass the burden of facing the balance of payments situation mostly upon selected trades which come within the restrictions of hire purchase and the like.
Moreover, of course, these restrictions and these controls work most unfairly. Capacity has been increased under the stimulus of the boom, and when the increased capacity is available it cannot be used because the demand is not there; the demand has been cut off by these suddenly imposed restrictions. Whereas, if controls are to be effective they must be part of a pattern which is planned and which takes into account, appraises and assesses, the requirements of industry as a whole, including export industry.
The Tory Party is always, it seems to me, hesitant about expansion. I sometimes think they are afraid of expansion. They are scared, even with free enterprise, under conditions of full employment. I sometimes think that the mentality of the nineteenth century, the arid inhumanity of the economics of that time, are still dominant in the minds of the Tory Party. They do not know what to do without the sanction of unemployment. They do not know what to do with an expanding economy based upon full employment and the Welfare State. If full employment and the Welfare State are to be preserved, my Lords, there must be expansion, otherwise there is no such thing as full employment, and the Welfare State will, as it were, dismantle itself. Let us face the fact that it is no good tinkering with controls: on to-day and off to-morrow. What is needed from the Government is a plan, an economic plan, based upon full employment, based upon the Welfare State, based upon doing what we can by way of investment in the under-nourished

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and under-developed countries, and doing what we can to maintain and to raise the standard of living of this country. In that way the Government could regulate the course of events much more successfully than they are doing at the present time.
There is, of course, an enormous increase in purchasing power which has stimulated an increase in the manufacturing industries, stimulated an increase of capacity. Forty per cent. of the people of this country are now employed in what are known as the service industries, not in manufacture but in service and distribution, and a very large proportion of the investment at the present time is investment in the service industries. That, of course, merely reflects the operation and the movement of the increased purchasing power which is in the hands of the people of this country as a result of full employment. This Amendment has been put down in order to enable the Government to say what is their policy, not on snippets of controls and the like, but their global policy, of regulating, as we must regulate, the economy of this country in order that we may avoid booms and slumps, recessions and the like.
7.37 p.m.
THE EARL OF DUNDEE: My Lords, it is always a great delight to me to listen to the noble Lord, Lord Latham, on this or indeed, on any other subject. Some of the things which he has said this evening had a familiar ring about them, and I have no doubt that he will notice the same in the few remarks which I shall now try to address to your Lordships. But, if I may say so, I think I have been equally interested by everything which has been said by all your Lordships both from the Front and from the Back Benches. I thought it was very sporting of my noble friend Lord Balfour of Inchrye to make so mild a protest as he did against the fact that the first three hours of our debate were occupied by four successive speeches from the Front Benches, averaging 45 minutes each—
LORD HAWKE: Forty-seven and a half minutes.
THE EARL OF DUNDEE:—which were, perhaps, more conducive to an ordered and expanding economy than to an ordered and expanding debate.
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My noble friend put to me a most intriguing terminological conundrum arising out of the gracious Speech about the word "concerned". My Lords, I can only say that I have looked at it and it seems to me that grammatically, in that particular context, the word "concerned" applies only to the Governments of Western Europe. But, my Lords, the Governments of Western Europe include the Government of the United Kingdom, which has declared that it does not intend to abandon our obligations towards the Commonwealth; and in pursuing, as we shall pursue, our endeavours to find some solution of the question of European trade, it will always be a condition that the solution must be acceptable to the Governments of the British Commonwealth as well as to those of Western Europe.
My Lords, I am perhaps even more grateful to those of your Lordships who have attacked the Government than to those who have supported, partly because I always like to hear what we are doing wrong. It is usually a great help. And it is also a particular help in this sense: that it is often very difficult to get the people of this country to appreciate any difficulties and dangers which may be inherent in our present economic situation when they are experiencing an unprecedented prosperity. Your Lordships may have noticed the employment figures issued by the Ministry of Labour last Thursday. We have now reached a record figure for all time—23,809,000 in civil employment. At the same time, wages have risen. Real wages rose in value last year by 3 per cent., and there have been further rises this year. We have therefore now got in this country more people earning more money and enjoying greater wealth than has ever been the case in Great Britain before.
It is the continual duty of the Government, aided by your Lordships on all sides of the House, to try to persuade the people that this prosperity must not be undermined, either by inflation, or by importing so many things from abroad which are not essential to our economy that we cannot afford to buy the imports which are essential to it. When we discussed this subject on the debate on the Address last year, there were then two

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matters about which everybody was principally concerned. One was the local employment question, the maldistribution of employment, which had, of course, been even heavier at the beginning of the year. The other was the comparatively small amount of capital investment in relation to our gross national product. Those were the matters, I think, which gave us most concern a year ago.
The first one, the local employment question, is, of course, a long-term question. It has been with us a long time. We have been fighting maldistribution of employment, more or less, ever since 1934, and it must still be a few years yet before we can hope for a complete and final victory. But during the last twelve months we have made very substantial progress towards our goal. The new factories which have been approved so far are estimated to provide employment for 90,000 people, of whom 50,000 are in England, 10,000 in Wales and 30,000 in Scotland. It looks as if two areas, Merseyside and South Wales, will very soon cease to be in need of help under the Local Employment Act. Ulster, of course, is the place where the problem is most acute, where there is the highest percentage of unemployment; and Scotland is the place where it is on the largest scale.
In Scotland, both under the Local Employment Act and by other means, we are endeavouring to build up a better distribution of industry. We now have the B.M.C. Works at Bathgate, the construction of which began some months ago, and the even greater project of the Rootes Group at Linwood is now approved, to our great satisfaction. It is of equal satisfaction, as my noble friend Lord Mills pointed out, that, in spite of the temporary recession in the motor trade, the trade is confident of the future, and is proceeding with these new schemes for expansion.
Parallel with that, one has the strip mill now being set up in Lanarkshire, the graving dock and a large number of important industries which have been introduced during the last twelve months. I am not going to talk about the particular figures of employment which they are expected to provide, because they are all part of a long-term policy, the object of which is to provide a far greater diversification of industry.
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Many of them will draw ancillary industries to them. The object of that policy, which we shall steadily try to pursue, is to take Scotland out of the category of development areas, so that eventually people who live in Scotland will have as much chance of full employment as those who live in any other part of the United Kingdom.
LORD LATHAM: Will the noble Earl forgive my interrupting him? Would he admit that most of these new subsidiary industries are industries engaged in the consumer durables affected by these controls and hire-purchase restrictions which are suddenly imposed?
THE EARL OF DUNDEE: My Lords, I do not care what branch of industry they are in, provided that they give employment and provided they tend to lead to a better distribution of industry, light as well as heavy.
The other matter, capital investment, is a short-term problem, because over the years the rate of capital investment has been increasing. But last year, at the end of 1959, it seemed to be disproportionately low, and your Lordships will remember that that was one reason why the Government authorised in that year very large increases in the public sector of investment, which is for this year limited to £1,730 million. That figure is nearly £200 million higher than the figure in 1958, but one reason why that was done was because the prospects of investment in the private sector of the manufacturing industry at the end of last year did not seem very good. We were very doubtful about them. It was not until the beginning of this year that an investment boom in the private sector began.
At first, the estimate was made, on the basis of Board of Trade inquiries, that there would be an increase of 14 per cent. in the private sector over the previous year and your Lordships will remember that my noble friend who is now Lord Amory (whose retirement we regret, though it is of some compensation to us that he has become a Member of our House, and who I understand is making his maiden speech to-morrow) said, when he introduced the credit restrictions last April, and again in June, that one of the chief anxieties was that these credit restrictions would nip in the

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bud this promising boom in capital investment in the private sector. He gave as his opinion that it. would not have more than a marginal effect; and when I spoke to your Lordships in the financial debate on July 26 I gave the Board of Trade's estimate which had then gone up to 16 per cent. It now appears that the actual increase in private sector investment over last year is going to be at least 20 per cent. Indeed, it may be as high as 25 per cent; and it is expected that there will be another large increase in 1961. That has created, of course, a very severe load on certain sections of our economy, particularly civil engineering and building.
VISCOUNT ALEXANDER OF HILLSBOROUGH: Could the noble Earl (I thank him for giving way) give us some idea of the basis of calculation of this increase in investment; and does it, in the private sector, include the raising of capital in take-over bids?
THE EARL OF DUNDEE: No, my Lords. It includes works of a capital nature, but it does not include Stock Exchange purchases, or anything of that kind. It is based on inquiries made by the Board of Trade to a large number of representative firms. I have not given your Lordships the estimate for next year, because the estimate for next year is always rather conjectural; but by now, by November, the Board of Trade is able to get a pretty good idea of what the amount of capital investment has actually been. As I told your Lordships, we think there will be at least a 20 per cent. increase in private sector investment over 1959.
My Lords, I think it is worth mentioning these two matters with which we were principally concerned a year ago when we discussed this subject. In both of them, considerable progress has been made. I hope that equal progress may be made in a year's time in those things which are chiefly worrying us now. Our present anxieties are not new. None of them is new. They are all old and they are all familiar. High wages and great prosperity lead to a demand for greater domestic consumption. That is apt to result in excessive imports, which means depletion of our reserves, a less favourable balance of payments than we ought
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to have, and a serious risk of inflation. That position was foreseen by the Government at the beginning of this year when the various measures which we have often discussed—and I will not go over them again—were taken in the hope of preventing inflation and of modifying the adverse trend in the balance of payments.
I should like to emphasise that this unsatisfactory position in regard to our exports is a matter of proportion rather than of absolute decline. There has been a reduction in the volume of our exports in the third quarter of this year compared with the peak reached at the beginning of 1960; but we are still above the level of exports for the corresponding period of last year. As my noble friend Lord Mills said, the decline appears now to be levelling out again. I think we should also take account of the fact that we are now exporting in a period of slightly, and we hope temporarily, diminishing world trade. There has been this year a decline in world trade. We do not yet know whether there will be a temporary recession in the United States of America; some people expect that there will. If there is, I do not think that it will be a severe recession or that it will last for a very long time. But even a mild American recession lasting for only a short time has a very considerable effect on buying and selling all over the world. That has happened with every American recession since the war.
Every time we have discussed the economic situation in your Lordships' House over the last year, I think some of your Lordships have expressed apprehensions that there might soon be some rise in commodity prices which would alter the terms of trade to our disadvantage. I think I have usually replied to that by saying that, if there were such an alteration in the terms of trade, it would, of course, temporarily add to our balance of payments difficulties, but that, on the other hand, in the long run it might be an advantage to us since it would mean that the primary producing countries would have more money with which to buy our exports.
At the moment, the indications are that instead of having a rise in commodity prices it is possible that there may be a further fall in them. And

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should that happen, although on the one hand it will temporarily ease to some extent our balance of payments problems, on the other hand, on a longer view, it may be a disadvantage because it will mean that our purchasers who live in these mainly primary producing countries will have less money with which to buy our exports. Not only that, but they may—in fact, would, in these circumstances—be in even greater need of aid from the highly-developed countries than they are now.
That is of great importance to our economic position here because, as your Lordships know, it is one of the main Objects of our policy to help underdeveloped countries, particularly in the Commonwealth, by grants or loans or investments, on which we do not receive, as a rude, any immediate return. If it were not for the money which we spend every year on foreign aid and foreign investments, we should not have this balance of payments problem. At the present time we should be accumulating a considerable balance and adding to our reserves every year. But all of your Lordships will agree that this is an object of policy which we must maintain; and indeed we must try, if possible, to increase the amount of help which we give abroad, mainly to Commonwealth countries. That is of very great importance indeed to the whole of our balance of payments problem.
LORD OGMORE: My Lords, I am sorry to interrupt, as the noble Earl is making a very interesting speech, with which I find myself much taken in places. But when he talks about underdeveloped countries, is it necessary for us to make large investments in places like Now York and Toronto, such as in building new skyscrapers? Is that the sort of investment we can afford?
THE EARL OF DUNDEE: The noble Lord would have to give me particular examples if he wants an opinion on any of them. Perhaps it may be that some of the investments he has in mind give us a quicker and more immediate return than those which we spend in underdeveloped countries, and therefore before very long it may be of advantage to our balance of payments. I do not know. It was most kind of the noble Lord to say, as he did, that he is interested in
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my speech; but I see, to my regret, that it is lasting a very long time and that I have been up 25 minutes already, so I must try not to keep your Lordships very much longer.
My Lords, the Amendment regrets that our policy "is not conducive to an ordered and expanding economy" think we all want an economy with some order, and I think we all want an economy with as much expansion as we can have without inflation. I think your Lordships will probably agree that if we want to maintain order, sometimes we must have a little less expansion, at least in some sections of the economy. On the other hand, if we want a great deal more expansion, sometimes the best way to do it is by having a little less order. If we had no order at all, there is no doubt that for some time we would have an enormous expansion leading to a roaring inflation, which would ultimately end in disaster. However, if we have too much order we may not have enough expansion, so we have got to try to get the best balance between them.
It seems to me, my Lords, that you cannot have an ordered economy without some element of restriction in it. Even though, on balance, your overall production may increase, any kind of order, whatever method you choose to adopt, must have the effect of restricting something. If you have building controls, as was suggested in another place—it was the only control which I think was suggested by the Opposition leaders, in present circumstances, to deal with the existing economic situation—then that means you stop people from getting a license to do something which they would have done if there was not this control. So that you are restricting the expansion of our economy in one place possibly in order to expand in some other direction which you think is more in the interests of the country.
It seems to be the fashion in your Lordships' debate to-night to quote Front Bench speakers in another place. One Front Bench speaker in a debate on the Address in another place last week, to whom I listened with great delight, said that this country at the present time was dedicated to striped tooth paste, chocolates, soft inside, and fabulous pink soap. I do not know whether that is an accurate description of British industry at the

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present time, but your Lordships may remember the play by George Bernard Shaw in the thirties called The Apple Cart which depicted British society in the 21st century. In this play the Prime Minister and Chancellor of the Exchequer congratulate each other upon the great expansion of industrial production in Great Britain. It has gone up thousands of millions of pounds. When the President of the Board of Trade asks what is the nature of this production, they have to tell him that it consists of nothing but chocolate creams. Whilst your Lordships would not want unduly to restrict the production either of chocolate creams or of anything which gives anybody any pleasure, there is a case for preserving some balance and for making restrictions on the production of chocolate creams so that some other kind of production would go up to give a better balance in the economy. But our critics would then accuse us of creating stagnation, as they always do when we are trying to introduce a little more order into our economy.
I do not think that stagnation is the right word to describe our unprecedented high production which has increased by 15 per cent. in the last two years and which has stuck to this high level for the last two months. It does not seem correct to describe as stagnation a condition of booming industry, full employment and hardly any overcapacity at all. What I would ask your Lordships to consider is what method we want to control and plan our industry, and what alternative method you would suggest which would have the effect of stopping everything we want to stop and encouraging everything we want to encourage. I wish we could find some method of planning and control which was so perfectly and delicately adjusted to the circumstances of industry that it could always be relied upon to have that effect.
The noble Lord, Lard Pethick-Lawrence, complained about the uncertainty of monetary policy, and said that it was very upsetting to business men not to know whether the bank rate would be the same, or whether monetary credit restrictions would be the same, for the next three or four years. But let us suppose that we had some other method of
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Controlling our economy and planning. Should we avoid uncertainties of this kind? One alternative which many economists favour is the fiscal method, for which, in theory, there is a great deal to be said: taking off taxation when economy needs to be stimulated in order to increase the purchasing power, or putting on taxation to a greater extent than actually needed for revenue when the economy is in danger of inflation, when there is excessive consumption, in order to restrain that consumption.
I think that perhaps the only consideration which deters more people from advocating that course of action now is, as the noble Lord, Lord Lucas of Chilworth, pointed out (having remarked that he was going to try to make up for the deficiency of the Opposition and then proceeding to make a speech which I think would have been loudly cheered at any Conservative Conference), the fact that all taxation is far too high. I do not know if we should all go so far as he did, but of course taxation in this country is so high that it does not give much room for manœuvre. We have a higher taxation than probably any other big industrial country in the world, and if we get it down to about the average of other countries, there might be much more to be said for putting a shilling on the income tax one year, simply for the purpose of checking consumption, or for stimulating the economy by taking off a shilling in different circumstances. But would any Chancellor of the Exchequer be justified in saying, in order that business men might be absolutely certain of being able to plan their business without disturbance for the next three years, that the shilling must stay on for the next three years? That would be a very foolish commitment to give. Next year there might be a recession in America, and then one might want to stimulate the economy and possibly the right thing then would be to take two shillings off income tax. Then we should be accused, as we are accused now, of chopping-and-changing, or of not having any consistent policy or plan. It seems to me that to put on a measure of control which is going to be exactly the same for the next three or four years really is stagnation and that any dynamic method of controlling our economy must be continually changed to adjust it to changing circumstances.

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The noble Lord, Lord Latham, devoted a good deal of time to some comparisons, which have often been given, between this country and Germany, Germany having excelled our production by such a spectacular amount. The noble Lord said that long hours in Germany were not the reason for this high rate of production. It would have been more interesting, I think, instead of telling us what was not the reason, if he could have told us what was the reason. There are probably many reasons, but I should like to know a little more about them than I do, and perhaps the noble Lord could have enlightened me. Perhaps he may attribute this to the brilliant economic policy of the German Government but he might not go so far as to denationalize the whole of the public sector of our economy, as the Germans have now clone, including even Volkswagen. I do not want to denationalize all the public sector of our economy in Great Britain, but if the noble Lord took this line, he, with the support of a number of Conservative Backwoodsmen, might be so effective that I might be overwhelmed by sheer weight of numbers.
Whatever we do, whether we have physical controls or fiscal controls, cat monetary controls, which are the Government's main instrument (though not their only one) at present. or whether we have a mixture of all three, we are hound to have to adjust these controls continuously to the changing circumstances of the economy and we are bound always to be open to the accusation by our critics of being inconsistent, of putting the brake on at one moment and accelerating at another, although, in fact, that is what a good driver does all the time. I think that what we really want to do is to get people to understand—and I believe that they are coming to understand more—about our mid-twentieth century economic problems, and get their support in what we are all really agreed should be our aim. I do not think that we ought to blame people, when they are getting higher wages and are more prosperous, because they want to spend more. We ought not to be surprised at the increasing demand for consumption, inflated as it often is by our hire-purchase system, which sometimes is to the advantage of our economy and sometimes to its dis-
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Advantage. It is one of the controls which acts most quickly on the economy.
My noble friend Lord Hawke described it as a physical control, although I think that economists usually classify it as one of the monetary controls. We ought not to be surprised at this desire for greater consumption. We do not want to stop it altogether. We want only to hold it within limits, so that it will not cause a revival of inflation and divert too much of our effort away from exports, so that it will not promote, as excessive home expenditure does promote, an adverse balance of payments.
As for the aids which are given to exports, I believe they are the best provided by any country in the world—by the Board of Trade, the Federation of British Industries and institutions like the Scottish Council, Chambers of Commerce and, of course, our commercial representatives and our Trade Commissioners abroad. I am sure that whatever may happen about the Common Market or about world recessions or world recoveries, there is an enormous field for increased exports, both by small firms and by large, for those who take the trouble to find out what kind of goods are needed and what is going to sell best. But these efforts which we make in helping people and in encouraging them to export more must be balanced by a check on excessive consumption at home. That is, I think, absolutely necessary. The export drive is now taking place in circumstances which are not altogether easy—many of the difficulties have been underlined by your Lordships—and it may be, perhaps, that the difficulties next year will become even greater than seems likely at the present moment. Nevertheless I believe that we shall succeed.
LORD SILKIN: My Lords, I beg to move that this debate be now adjourned.
Moved, That the debate be now adjourned.—(Lord Silkin.)
On Question, Motion agreed to, and debate adjourned accordingly.
House adjourned at twelve minutes past eight o'clock.