ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH

HL Deb 08 November 1960 vol 226 cc310-96

2.42 p.m.

Debate resumed (according to Order) on the Amendment to the Motion 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"—

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."

LORD SILKIN

My Lords, we had a full and interesting debate yesterday on the Amendment standing in the name of my noble Leader, and moved by the noble Lord, Lord Pethick-Lawrence, in a most admirable and remarkable speech. It would seem that to-day there is little left for me or other speakers to say which has not already been said. Fortunately, new life has been given to this debate by the fact that we are to have the privilege of hearing a maiden speech from the noble Viscount, Lord Amory, to which we all look forward. He will be somewhat handicapped if he is going to speak in the tradition of this House and be non-controversial, but I have no doubt that, with the skill which he was taught in another place, he will manage somehow to say exactly what he wants to say.

I have, I must confess, few additional facts to add to what was stated yesterday by my noble friends. But I was turning over in my mind the general conception of a debate of this kind, and I realised that such a debate would not have been possible in this House or in another place, say, 50 years ago. At that time Parliament and the Government were in no sense even remotely concerned with the economic position of the country. They were beginning to be attacked by Oppositions for not dealing with unemployment and for the size of unemployment, but these were very small beginnings, and it is a very long road from those beginnings to the position to-day, when Governments accept full responsibility for the economic position of the country.

My former noble friend, Lord Ogmore—politically; I hope he is still my personal friend—yesterday got into some trouble for quoting a remark which had certainly been made at some time, not necessarily at the Election. I am not going to attempt to quote—I do not want to incur the wrath of the noble Viscount, Lord Hailsham—but certainly many speeches were made by many leaders of the Government, at the time of the Election, and before and since, indicating that it is the Government that is entitled to credit for the prosperity which the people of this country are enjoying. And both the noble Lord, Lord Mills, and the noble Earl, Lord Dundee, in the course of their speeches yesterday, implied the same thing. They both suggested that the large amount of employment and the high standard of living that our people are enjoying to-day are due entirely to the actions of the Government.

Accepting that, accepting that Governments have a very large part to play in the economic position of the country, does it not follow that they also have a great responsibility, if not complete responsibility, when things are not going so well? Is it not, on the Government's own theory, their responsibility, if they find it necessary to take drastic and sudden action to deal with, say, inflation or an excess of imports or unemployment? Are they not to blame for not having taken this action, or the action that was necessary, at an earlier stage rather than having to put on the brakes, as the noble Earl said yesterday, suddenly? I suppose we have all had experience of dangerous drivers, and the most dangerous driver of all is the person who boasts of his great skill by jamming on the brakes and taking other sudden action in getting himself out of a situation where he runs the risk of losing his life. The skilful driver never gets into those predicaments, and I suggest to the Government that if they find themselves in the position of having to take sudden action, as they have done, it is because of the predicament in which they have placed this country by not taking early or suitable action.

We on this side put forward what we hoped was a constructive and detailed case of our criticism of the Government, and we had in reply two speeches—they were serious speeches, I must admit—from the noble Lord. Lord Mills, and the noble Earl, Lord Dundee. But I am bound to say, having heard them and having considered them again, that they did not seriously attempt to deal with the case that was made. I should like just to recapitulate the headings under which our view of the Government's failure has been put. These represent broadly the various criteria for judging the economic position of the country.

The first was the balance of payments, and my noble friend Lord Pethick-Lawrence explained that the balance of payments was in a very precarious position. Indeed, the noble Lord, Lord Hawke, from the other side, presented figures which were, I am sure, most disturbing to every noble Lord who heard them: they showed that for some two years past we have not actually been paying our way; that the balance of payments was definitely going against us. There was the question of exports, particularly exports to the United States and Canada, which in the last few months have declined, in the case of the United States by 27 per cent. and of Canada by 20 per cent. Figures were given showing that our share of world trade is declining.

My noble friend Lord Latham gave a good many figures to establish this fact. He also gave figures showing that production was falling, and likewise that the amount of investment that was taking place was not as much as it had been.

There was a considerable decline in the amount of investment. So far as I could gather, the main reply that was made was that conditions were satisfactory; that, as the noble Earl, Lord Dundee, said, more people were employed to-day than there ever were and the standard of life was higher, and everything in the garden was lovely. If the criteria that I have put forward can be accepted as reasonable and fair criteria for judging the position of the economy of the country —and I submit that they are, and there are no other tests by which you can judge it—then I say that we are living on a knife's edge and that the position is most precarious.

In spite of the glowing accounts of our prosperity, the Government must have come to the conclusion that something was wrong because they did take action, and we must presume that they must have foreseen the consequence of their action and intended it. I should like to ask the Government whether they really foresaw that the result of the action that they took would be what it actually has been. Did they foresee, for instance, that by raising the hank rate, by introducing credit restriction and by restricting hire purchase, we should be suffering from all these things that I have enumerated? If they did foresee it, did they intend it? And if they did intend it, why? In what way do these reductions in the position of our economy benefit us? Moreover, if they really intended to take action which would be for the benefit of the country, is it not at least doubtful whether the means they adopted are right or effective for the purpose they had in mind?

The raising of the bank rate has been criticised, both in the debate yesterday and on other occasions, not merely as a blunt instrument capable of injuring both the righteous and the unrighteous alike, but, even more, damaging the righteous, because there is no effective curb on the speculator. The person who really suffers is the person who has to go into the market in the normal way and raise money for the purpose of his business. The speculator is always in a position to pay a high rate of interest, and usually will not find it difficult to get the means that he requires.

It was pointed out in the course of the debate—I need not enlarge on these points—that a high rate of interest creates certain difficulties for the economy. It creates uncertainty for business men, and it creates difficulty in planning. It raises costs materially and thereby affects our ability to compete in the export market. It attracts "hot" money which, while it may be of temporary help, can be eventually most embarrassing when it is called in; and it creates competition between one country and another for the attraction of this money by maintaining an unduly high bank rate. It affects the national finances. It will cost the taxpayer some £40 million to £45 million more in interest this year on the National Debt. It affects borrowings by local authorities and other public bodies, and is thereby responsible for increases in the rates and charges by those bodies.

I see that the noble Lord, Lord Hawke, is not here. He was rather under the impression that local authority borrowings could be short while interest was high, and that they could then borrow at lower rates. The fact is that local authorities are compelled by the condition of the market to borrow over long periods, as is instanced by the recent cases of the London County Council and the Surrey County Council, who have both gone to the market and had to raise substantial sums at 6 per cent. interest over a period of twenty years. A high bank rate also involves higher rents and interest charges on mortgages. In consequence, it is something which we should resort to only in the most extreme circumstances. I wonder whether these circumstances have really arisen, and whether, even so, a high bank rate is the answer to the difficulties which confronted the Government.

In this context I should like to read a paragraph from the Report of the Radcliffe Committee. I do not know whether the noble Lord, Lord Radcliffe, is in favour in this House. As Chairman of this Committee, he has been treated with rather scant courtesy by the Government and with inadequate appreciation of the time and effort which he gave in producing what I regard as a most valuable Report. This is what he said—I quote from paragraph 472: We are driven to the conclusion that the more conventional instruments have failed to keep the system in smooth balance, but that every now and again the mounting pressure of demand has in one way or another (generally via the exchange situation) driven the Government to take action, and that the quick results then required have been mainly concentrated on the hire purchase front and on investment in the public sector which could be cut by administrative decision. The light engineering industries have been frustrated in their planning, and the public corporations have had almost equally disheartening experience. That these two should be the 'residuary legatees' for real resources when sharp adjustments were called for is not a comforting thought. It is far removed from the smooth and widespread adjustment sometimes claimed as the virtue of monetary action; this is no gentle hand on the steering wheel"— I draw the noble Earl's attention particularly to this because he was so pleased with the idea that we can put on the brake and then put on the accelerator— that keeps a well-driven car in its right place on the road. That is a pretty strong condemnation of the policy of resorting to monetary control as has been done by the present Government, and I do not think it needs anything stronger from me.

Now I want to turn to one or two points which were made in the course of the debate yesterday and which, in my view, have not been answered. The first is the point made by my noble friend Lord Lucas of Chilworth, that in order to have a successful export trade we need a good home trade. I am sure that, as an economic doctrine, that cannot be denied, and I do not think I need argue it; but the policy of Her Majesty's Government has been to restrict the home trade by restricting credit in hire purchase, and so on. How, then, do they expect that we can increase exports when, through their very action, we are having to increase the price of goods through being unable to spread the overheads sufficiently far, thus increasing our inability to compete abroad? I should be grateful if one of the noble Lords who are to reply would deal with this point of the home trade. Undoubtedly there is a contradiction between restricting the home trade and endeavouring to increase the export trade.

The other thing I should like to ascertain is this. On the statements that have been made from the Government side we are not, in fact, reducing consumption. While the intention of these various actions of the Government was to reduce home consumption, they are not, in fact, doing so: the only result is to direct consumption along certain channels. The purchasing power of the public remains, and if a man cannot buy a car, a washing machine, or whatever you will, on the hire-purchase system, he will spend his money in some other direction; and there is no assurance that he will spend his money in a direction that will not Involve even more imports than the manufacture of the articles he might have obtained on hire purchase. Indeed, if he chooses to spend his money on luxurious foods or wines or other items of that kind, practically all of which are imported, that might well tend to cause our balance of payments position to deteriorate rather than to improve. So I should like to have explained to me, by one or other of the noble Lords opposite, what is the advantage in restricting production and sales in one field and diverting expenditure into another channel entirely?

Then I want to say a few words about the Cunard position. A good deal has been said on that matter, but having listened to the noble Lord, Lord Mills, and read his speech, I still fail to see what is the case for making an advance to the Cunard Company, and for making them a present of £3¼million. This is not a time when we are flourishing and have money to spare. Indeed, we have so little to spare that we have asked the British Transport Commission to cut down their investment programme this year by £20 million. It seems to me an odd kind of priority to take a portion of that sum in order to hand it over to the Cunard Company. I should like to have a clearer account of what is the case for making this payment, and particularly for giving a grant to the Cunard Company.

If it is believed, as I think the noble Lord, Lord Mills said, that at the end of ten years that company will be in a position to repay, why make a present? If they will be able to repay, will they not be able to repay the £3¼million? And why are the Government giving this grant without getting any return? Why is there any objection to their having some share in the equity, or having some representation on the board? I do not think we have had this transaction fully explained to us. After all, this is public money. This is our money which is being given and lent, and we are entitled to have the fullest possible explanation. If there is anything in the Report of the Committee of the noble Viscount, Lord Chandos, which would throw light on this, why is not that Report put before the House? I do not know whether or not it will be published one day, but. I feel that the time for publishing that Report is to-day, at the time when we are being asked to make the grant: and I should be glad of a more specific answer on this question of the advance to the Cunard Company.

The noble Lord, Lord Ogmore, raised the question of tenders from abroad. I think there is a lot to be said for inviting tenders from abroad if we are prepared to accept the lowest tender. But I imagine that one of the reasons for giving this assistance to the Cunard Company is that the shipbuilding industry is in a bad way and that we want to provide work for one of the shipbuilding yards in this country. If that is the argument, then, of course, it would be quite wrong to invite tenders from abroad, knowing in advance that we shall not accept one. I feel that the American position whereby they accept tenders from abroad and then, on grounds of national policy, are not prepared to accept them is not one that we ought to emulate.

LORD OGMORE

My Lords, my point is that either our shipbuilding industry is efficient or it is not. If it is efficient then the Government should produce the report of the Department of Scientific and Industrial Research. If it is not efficient, then this is a subsidy—another subsidy—to the shipbuliding industry the extent of which we do not know and have no means of knowing. That is the point.

LORD SILKIN

My Lords, it may well be that this is a subsidy to the shipbuilding industry, but the fact remains that in my view—and I believe in the view of most people—this advance is being made in order to Whelp the shipbuilding industry; and if that industry is not efficient and cannot compete with overseas firms, then obviously we are to that extent making a grant to the shipbuilding industry as well. It may be a perfectly proper thing to do. It may be that we ought to subsidise all indus- tries which are either inefficient or unable to compete in the world market. That is a new state of affairs, but it is something which we ought perhaps to consider. The fact that we are making this advance to the Cunard Company will encourage this thought, because they are not the only large concern that could do with a bit of assistance; and to the extent that we make the advance to the Cunard Company it will be difficult to resist making advances to other concerns in similar circumstances.

I should have liked to say a few words about the position of the British Transport Commission, but time will not permit. I am certainly not going to lay myself open to the implied criticism of the noble Lord, Lord Balfour of Inchrye, by taking up too much time from this Bench; and I am sure we should all like to hear the views of other speakers. I will content myself with saying that I feel we are paying too little attention to the effect of traffic strangulation which is taking place in this country. Everybody is taking far too much time, either in moving goods or in getting about. The loss to the country in the increased time taken through traffic strangulation must be enormous and I do not think it has ever been carefully worked out. I believe that one of the ways in which we can drastically increase the efficiency of this country is by doing something really serious and really quick on the traffic position—and not merely the position of transport but the carriage of goods. But this is a subject which I feel is worthy of a full day's debate, and I do not want to carry it further to-day.

I think, my Lords, in conclusion, that so far we have had no adequate answer to the charges that have been made regarding the policies of Her Majesty's Government, that they are not conducive to an ordered and expanding economy. I think we have established that, far from their being conducive to these matters, the economy, largely as a result of the action of the Government, is neither ordered nor expanding. Accordingly, unless the noble Lords who are going to speak for the Government can give us much stronger grounds for refuting the case we have made, we propose to divide the House at the end of the debate.

3.11 p.m.

THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (EARL WALDEGRAVE)

My Lords, I think I shall be following a good and well-established precedent if I intervene from this Bench for a few moments to elaborate briefly the reference in the gracious Speech to agriculture. Many of your Lordships are experts on agriculture, and we in this House always try to give this great industry—and it still is our greatest single industry, with its gross output of over £1,400 million a year—its proper place of honour in our deliberations.

Several of your Lordships have already referred in this debate to agriculture, and doubtless others will do so later on this afternoon. But before I turn to the points which have already been made I should like to say a word about the floods, for the noble Viscount who leads the Opposition has specifically asked me to do so, and I believe that all your Lordships would wish me to do so. Flooding this autumn has been most serious and widespread for more than a month, and some areas have been flooded more than once. More than 30 counties have been affected, and the floods have been serious in the South-West and in Yorkshire, Lincolnshire, Leicestershire, Norfolk, Suffolk and North Essex, and recently in Hampshire, the Isle of Wight and Kent and Sussex.

A NOBLE LORD

And Somerset.

EARL WALDEGRAVE

Somerset I included in the South-West. Conditions this year have been quite exceptional. In some parts of the South-West, for instance, the rainfall in October has been about four times the normal rainfall for this time of the year, and it has fallen upon ground that is already saturated. In Exeter, for example, there were 13 inches of rain in the month of October.

In recent years much good work has been done by the river boards. If this had not been so the floods would have been very much more serious. And it so happens that, as a result of preparations and consultations over a long period, and not, of course, as a result of last month's floods, a further Land Drainage Bill has now been laid before Parliament. It will give the river boards greater resources; it will enable local authorities to do works with grant assistance to prevent urban flooding. It would not, of course, be realistic to think that provision can ever be made against every eventuality everywhere. Absolute and total flood prevention is not a practical proposition.

The aspect of the floods which is most tragic is, of course, the distress and danger and financial loss suffered by people whose homes have been flooded. I myself had the opportunity of seeing some of the worst damage and distress in one of the worst flooded areas of the South-West recently; and I can assure your Lordships that the Government are anxious that everything possible should be done in alleviation. I would say that, as one would only expect, the cheerfulness and courage of those who have suffered is beyond all praise.

It is not easy in a few words to summarise the reports reaching Ministers on progress in relief and rehabilitation. The different areas are at different stages, but all have tackled the problem vigorously. And the various services, civil and military, voluntary and official, have all played their full parts. Not for some time will it be possible to say what the cost will prove to be, but the statement of Government financial support which was made to your Lordships on Wednesday last has given a necessary reassurance to all concerned, and it has been well received locally and by the local authorities. Over and above ordinary grants which are payable, local authorities will be able to make applications for assistance towards any extraordinary burdens. They need not make their claim until all their liabilities are known; and, of course, this will take some time. The voluntary funds which are relieving private distress may, therefore, the sooner be in need of reinforcement, and it is manifest that the calls upon them will be greater than the funds so far collected. I hope, therefore, that subscriptions to these funds will continue to flow in. They are seriously needed. But those administering the funds are wisely limiting their immediate grants to distress needs, leaving full claims to be settled later; so that here, too, no call for Exchequer assistance has yet been made. The Government's statetment has in fact given the necessary financial backing to enable this work to be done without delay.

One thing we must all be profoundly thankful for is that, so far, there has been so little actual loss of life. To turn for a moment to agricultural damage—

LORD STONHAM

My Lords, before the noble Earl leaves that aspect, can he make this point clear? He made it perfectly clear that the local authorities can, in due course, apply for Exchequer grants for damage to local authority services. Is he in fact saying that the Government will at some future date make grants to these voluntary funds for the relief of distress, private distress, or will that again be done through the local authorities?

EARL WALDEGRAVE

My Lords, I cannot answer that question. That is a question that is being seriously considered. Your Lordships will remember, as I said in the statement that I made before, that the scope of existing funds —for instance, the Lynmouth disaster fund—may well be expanded. But the question of any sort of national fund is a matter on which my right honourable friend, the Minister of Housing and Local Government, and other Ministers, have not, as I understand, come to a conclusion. That is still being considered.

Perhaps I may turn to agricultural damage from these floods. This has not been so serious as the damage in urban areas. There has been little loss of livestock. And it is perhaps even more difficult as yet to assess the agricultural losses. If the present fine weather holds it should be possible to some extent to catch up with the work that has been seriously delayed, particularly the lifting of root crops. We have had the present kind of weather now for a few days, and tremendous efforts are being made by farmers and workers everywhere. But in some districts there will be, I fear, shortages of hay and winter fodder, as in these flooded areas cattle have had to be put on full winter rations much earlier than usual.

VISCOUNT ALEXANDER OF HILLS-BOROUGH

My Lords, is not perhaps the most difficult thing to calculate the effect on next year's harvest, because farmers have not been able to get on to their land and effect their sowing, and because what has in fact been sown is in danger of decaying?

EARL WALDEGRAVE

Of course, I do not dissent from that at all. A great deal of the winter wheat is not in. It is going in now, in some cases where it is possible, late, and we shall have to wait until later for a full assessment.

I will now turn briefly to the points raised on agriculture in this debate so far. The first was by the noble Lord, Lord Brocket, and I think that I need hardly add anything to the reply which was given to him by my noble and learned friend who sits on the Woolsack. But I must say that when I listened to the speech of the noble Lord, Lord Wise, my first reaction was one of astonishment. He painted a grossly exaggerated picture. He implied that agriculture was on the verge of "collapse". That was his word. He spoke of bankruptcies, and he painted a general picture which, if it were true, would be alarming indeed. May I suggest that he takes seriously to heart a remark which was made yesterday by the noble Lord, Lord Pethick-Lawrence, sitting on his own Front Bench. The noble Lord, Lord Pethick-Lawrence, said [OFFICIAL REPORT, Vol. 226 (No. 4), col. 222]: 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. My Lords, what are the facts? Human memory is short, and some people tend to forget, and many others are scarcely old enough to remember (although that perhaps does not apply to the noble Lord, Lord Wise), the enormous difference between pre-war agriculture and the position we have reached to-day. Before the war, only one-third of our food was produced at home. Now, with a good many more people, and with eating standards on the whole a good deal higher, the proportion has risen to almost one-half. If we look only at the foods which it is climatically possible to produce at home—the temperate foodstuffs, as they are rather charmingly called—we find that their proportion has risen to almost two-thirds, instead of the one-half that it was in 1939. Then in some of the basic essentials we have become practically self-sufficient. Last year, agricultural output, across the board, reached the highest level yet recorded; and farming income was well over £300 million by whatever method you make the calculation, which is a substantial income. This year we are expecting much the same results, or perhaps even better: rather higher output, on the whole, of livestock products, and at least the same output of farm crops, although, as the noble Viscount has pointed out, we cannot yet judge the full effect of the floods and of the recent appalling weather that we have had.

But, even so, we can reasonably expect that the splendid achievements of previous years will, on balance, be maintained. When we consider that it is a bare six years since we were able to lift all controls, with the essential help of a vastly expanded home agriculture; that not so long before that meat was rationed to 1s. a week, and eggs to a couple a week; and that offal had become not merely a term of esteem but a prized rarity—when we remember all this, the transformation is quite remarkable. These achievements have been won by a prodigious and sustained effort on the part of the farming community, with a very great measure of Government assistance and encouragement.

VISCOUNT ALEXANDER OF HILLS-BOROUGH

May I say that I think most of the figures so far quoted by the Parliamentary Secretary are the figures that have been amassed by the farmers' unions and quoted by Mr. Woolley in his case against the Government of showing insufficient respect for the position of the farmer in a balanced economy, and as not paying sufficient regard to the farmer's income as compared with other sections of the community?

EARL WALDEGRAVE

Perhaps the noble Viscount would make his speech later, and will allow me to make mine now. I dissent from that interpretation of the position, and I would say that these achievements have been won, not only by these great efforts by the farming community, but because they have been backed by Government assistance and encouragement—solid financial help in meeting both capital and running costs. And not only have the Government given financial backing; we must not forget the extremely valuable contributions made by the Government's advisory services, which, as farmers readily acknowledge, have done much to stimulate the impressive technical advance which has been achieved. It has, in fact, been a combined operation between farmers and the Government.

The noble Lord, Lord Wise, when he referred to the meetings which are taking place between the farmers' unions and the Agricultural Departments, put a gloss on those meetings which I do not think is justified. It is the same gloss which the noble Viscount, in his interjection, has just sought to put on the position. The noble Lord, Lord Wise, said that they conveyed that there was something drastically wrong with the industry, and that this was the reason for the meetings. Now my noble and learned friend the Lord Chancellor, in his speech last Thursday, referred to these talks, and I echo his hope—indeed, I am sure—that they will have proved most valuable in removing misunderstandings and in indicating directions in which, without any dramatic changes in our established and proved system of agricultural support, agriculture can continue its forward progress. This is the true basis of these talks: not that there is anything drastically wrong with the industry or with the policy, or that they represent any radical, new development.

My Lords, I cannot stress that fact too strongly. Over a number of years, there has been the closest consultation between the farmers' unions, as the producers' representatives, and the Government. It is part of our tradition in the agricultural set-up. We are working, to a common objective which is enshrined in the Agriculture Acts and the long-term assurances—the common objective to fill the nation's larder with as much good food as can best be produced at home, and at the lowest prices consistent with a fair reward. It is significant, and should not be forgotten, that in the agreed communiqué issued after the meeting between Mr. Woolley and the Prime Minister in Downing Street last year they both agreed that our system was probably the best system—and they did not use the word "probably"—for our country and our conditions. Let me assure your Lordships that this new Hyde Park Corner improvement is not devised solely to improve communications between Agriculture House and Whitehall Place. Of course, it will certainly help, but that particular traffic pattern is constant and even already.

I would not deny that in certain quarters there has been some uneasiness; a disquieting feeling that now that farmers have done, in the broad, that which was required of them, they are regarded as unprofitable servants; and that the Government are finished with agricultural expansion and are anxious to sacrifice home agriculture altogether to our overseas trading interests, especially in Europe. My Lords, nothing could be further from the truth. Total consumption of food will undoubtedly continue to rise, for two main reasons: the natural growth of the population, and the ever-increasing standards of living under this Government. The problem is to keep production and consumption in step.

The noble Lord, Lord Wise, was right when he reminded your Lordships that the Government are pledged "to maintain a stable, efficient and prosperous agriculture." My Lords, we may indeed be a nation of shopkeepers, but agriculture has an essential supporting role and one which neither we nor any other industrialised country can for one moment afford to neglect, still less ignore. Agriculture directly supports about one million people in this country. It provides a large home market for manufacturing industries, and supplies about half of what one might term the raw materials for the 2 million other people who are engaged in food processing and food distribution. All the industrial countries give, and very rightly give, powerful support to their home agriculture, and it is unthinkable that we should not continue to do the same. And that is the policy to which the Government have always been, and will remain, firmly pledged

I hope that the noble Lord, Lord Wise, will forgive me if I do not follow him into the detailed arguments about the price-support system which we have adopted in this country. We have had thee discussions before. He and I never seem to get any further with them, so I will confine my remarks to saying this. I emphatically rebut the charge that the guarantees and subsidies are diverted into the pockets of the wicked middlemen, and that the farmers do not benefit from them.

I listened in vain during Lord Wise's speech for any constructive suggestions. If he really thinks the position is as bad as he painted it, one would suppose that he or his Party would have some alternative policy. But I have carefully read every word inHansardthis morning, and at the end of all his Cassandra-like utterances, he holds out the following alternative to the well-tried policy which the Government have followed over the years. This is what he says [OFFICIAL REPORT, Vol. 226 (No. 4), col. 285]: We on this side of the House"— that is, his side of the House— invite the farming industry to proceed by way of an ordered and expanding economy. So far, so good, Then he goes on: 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. The noble Lord, Lord Wise, said—and this was the basis of his attack on Government policy for agriculture—that the resolutions and intentions of the Government were "thin and meaningless", and that the words in the gracious Speech were platitudes. I must ask your Lordships whether "planning our daily engagements of hand and brain" is not a rather better example of thin and meaningless words. I doubt whether they would give as much comfort to the farming community or to the country at large as the words in the gracious Speech. And I would remind your Lordships of the words in the gracious Speech, and they are these: At home My Ministers are resolved to maintain a stable, efficient and prosperous agriculture. My Lords, there is no reason at all for our farmers to be afraid of the future.

VISCOUNT ALEXANDER OF HILLS-BOROUGH

May I ask, does not the Parliamentary Secretary really realise when he is criticising my noble friend's statement, that our quarrel with him on this matter is this: that, like all other parts of the economic activity of the Government, they vary and tend to shut down departments of agriculture or push them back on their course—I mean bacon, pigs, eggs, and the like. We can give any number of examples. It is no good running away with a general sort of reply of that kind.

EARL WALDEGRAVE

I am much obliged to the noble Viscount. I maintain that if any changes in the structure and support of the farming industry prove necessary, they will be gradual ones; and I confidently expect that the industry, with the continued support of Her Majesty's Government, will prove sufficiently adaptable and efficient to take them in its stride.

3.36 p.m.

LORD CITRINE

My Lords, I rise to support the Amendment which was moved in such clear terms by the noble Lord, Lord Pethick-Lawrence. That Amendment regrets— That the policies of Your Majesty's Government are not conducive to an ordered and expanding economy. The word "ordered", I think, typifies the difference of approach between the Opposition and the members of Her Majesty's Government, the word being used in the sense of a planned and methodical approach. I think it is commonly understood that the Labour Opposition believes in planning, and believes that the life of the country, industrially and commercially, is so complex that it cannot just be left to the empirical and arbitrary means which the Government from time to time apply. We approach this problem in, perhaps, a deeper recognition of the phase into which our country is moving.

In at least two debates in this House I have said, claiming no special knowledge, that it seemed to me that we were moving into a world where competition would be very much more intense in the future than it has been in the past. I said that we were moving into a world of competing economies, and that, however disguised it may be, and however we may attempt to get round the difficulties by so-called agreements, like G.A.T.T., which we all know are full of loopholes and from time to time are subverted by some of the signatories, the Government recognise that competition in the world's markets is increasing. But it is rather a belated recognition, and, so far as my recollection goes, it is only in the last two or three years that any kind of emphasis has been placed upon that by the Government of the day.

There may be a reference to the need for our equipping ourselves as a country to meet such competition, but I do not think it would be doing injustice to the Government to say that very little of a practical character had been done to further our competitive efficiency. It appears to us on these Benches that the Government really believe in the free play of what they call economic forces, though among the economists there are many who substitute for that euphemism the free play of the capitalist system. where the profit-seeking motive is the driving force and national interests are very low down in the list, not because of any mal-intention on the part of those directing industry, but because, in the nature of things, the only justification for economic activity and investment by individuals is the amount of profit that is likely to accrue to them. No amount of playing with words will disguise that major difference in the approach to this question between those on these Benches and noble Lords sitting opposite.

I dearly wish that private enterprise, which on other occasions I have said is sometimes not very enterprising, could be subjected to the same kind of scrutiny as the publicly owned industries are. Then we should see a great deal of the inefficiencies which can be concealed under the present system in the operation of those industries. But, of course, planning presupposes some kind of control, and control is anathema to the Government and their supporters. I would go so far as to recognise that controls are usually looked upon with disfavour by the citizens of this country, and probably by the citizens of other countries where they have some form of free Government. But the fact, if one looks at it historically, is that day after day Governments are required, in one direction or another, to impose more and more controls in order that the economy of the country can proceed, and it is simply a waiting until the emphasis has become so clear to everybody that characterises the Government's reluctance in the use of controls.

I think that this is the really big issue involved in the gracious Speech itself. In one passage it says: My Government will seek to maintain a sound economy 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. Somehow, the Government hope to do all that—a most laudable and desirable objective—while not at the same time imposing controls over the economy. Let us just remember that there are some countries in the world which believe in a completely planned economy and go much farther in that direction than anyone who sits on these Benches. They form a very large part of the world. Soviet Russia and. China are building up their economies entirely on a basis of planning, with the power to see that the plans are carried out.

Last night, I listened to a television extract of a speech in which Mr. Khrushchev was proclaiming that the triumph of Communism throughout the world was inevitable. He may have been somewhat over-optimistic in that respect—and from some of the aspects of what passes by the name of Communism, I devoutly hope that he is. But so far as the economic system goes, I question whether anybody can stand up in your Lordships' House and assert that an unplanned system, a system in which private enterprise, so-called, had flee play, would have resulted in the rapid development of the industrial and commercial life of Soviet Russia which has happened since the Revolution. I should like to hear the theme developed by someone that would bring conviction to me on that point.

There is no question at all—and there is no use blinking our eyes to it—that Soviet Russia, the oldest of the States in the revolutionary sense, has achieved remarkable things in the years that have gone over the last three or four decades, until to-day it is commonly recognised that Russia has the power largely to disrupt the economy of other countries. Although the standard of fife in Soviet Russia has consistently been low, there is considerable evidence that that is changing for the better, as I myself witnessed when I was there with an electrical delegation in 1956. I remember one of the principal officials concerned with the economic life of 'the country saying to me, when I was in Russia on that occasion, "What do you think is Russia's biggest problem?" I thought for a moment and then I said, "Well, I think that over the next twenty years you will have solved the problem of poverty. I think that it is quite conceivable that you will rival the West, and certainly you will surpass many of the countries of the West. But there is one problem you have to surmount and that is, to reconcile your system of economy with the freedom of the individual. You cannot suppress that indefinitely." And that, of course, is the problem. If we on these Benches believed that, side by side with a planned system of economy, it would be necessary to impose dictatorship on the country and stifle the freedom of the people, we should never advocate it., but we are quite convinced that, with 'the resilience of mind of the British and their long tradition, we can combine both principles without going to extremes in either.

I wonder whether we recognise that our economic system has not really been tested since the war. The Government, quite properly from a Party political point of view, take credit for a rising standard of life and for full employment, and I, for one, am very glad that it has been possible in the post-war period to attain and maintain those objectives But they have been operating in an unusual set of conditions. Throughout this period there has been an insistent and growing demand at home for all kinds of commodities and services and a world hungry for those goods and services. But as I said a little earlier, we are passing out of that phase, and it will be a serious test to the flexibility of our system and the enterprise of our people whether they can find a way to succeed in maintaining those two very commendable achievements.

I do not like to use language which appears to be that of a scaremonger. All my trade union life I tried to emphasise this to the trade union members I was was trying to guide. What I say is not being said by way of trying to paint a harrowing picture of the country. All of us on these Benches are as British as noble Lords on the opposite Benches and want to maintain the prestige of our country so far as it is possible to do so, but the greatest country in the world where "free enterprise" is operating (and I use "free enterprise" always with quotation marks), the United States of America, according to what I heard listening again to the television, has some 5 milllion unemployed at the present time. Although we in this country have nothing like a proportionate number of people out of work, it shows that even with a highly developed system such as operates in the United States you can slip into a position where, because of a trade recession or something of the kind, you have millions of people out of work. I have said before that the remembrance on the part of many people in this country that at one time we had 3 million men and women out of work, colours the thinking of trade unionists in regard to this post-war period and the general attitude of mind which they bring to bear upon its problems.

I hope we shall avoid circumstances ever arising where we once again count our unemployed in millions. But there are bad patches of unemployment within the broad figures of 1.5 per cent. given in this House yesterday. It is not much comfort to the man out of work in Glasgow or in Northern Ireland, or even in places like the ordnance factories at Nottingham and elsewhere, to know that the average level of employment is high. Averages conceal a whole lot of sins and omissions. It is like the fellow who fell into a pond shouting at the top of his voice: "Help, help! I'm drowning". A passer-by said, "You can't drown in that pond; the average depth is only three feet", and the fellow said, "But I am in the six-foot end." That applies to many of these people. Due to the immobility of labour—and the shortage of housing as one of the causes of this—we can, in a period of full employment, have many people out of work

I saw headlines both in the week-endSunday Timesand theObserversomething like this: "Give us less wages". I looked with astonishment and then read the articles, which were to the effect that the workers in the ordnance factory at Nottingham were pleading for a still further cut in their working week which would enable more of their people to be retained rather than become redundant. I cannot see how this objective of full employment and prosperity can be achieved in any permanent sense—and I stress those words—without a much greater measure of planning of our economy and the use of some physical control.

As is commonly recognised, we have to keep the balance between home consumption, capital investment and an expanding measure of exports. With regard to the control of consumption, I think we have all funked it in some way or other in not telling the people of this country in plain language that we must cut down personal consumption. It has been wrapped in all sorts of language, and up to yesterday I had not heard—at least, I cannot recollect it—any Minister of the Crown saying anything of a sufficiently direct character in this respect. The President of the Board of Trade, according toHansardof November 2, said that everybody must accept that we should consume a smaller share than we do at present of what we produce. What a simple home truth! But it is one that somehow we try to shrug off, and few of us personally set any example to others in trying to carry it into practice. How do we deal with that kind of problem? We deal with it by the general system of taxation. We have hire purchase restrictions—a juggling business, now and again relaxing the restrictions and at other times putting them on, and getting a sort of, I will not say false, but meretricious prosperity, plunging the community further and further into debt by mortgaging their future earnings. That is what hire purchase means. I know, of course, that used in moderation that system can help to raise the standard of life; but at the same time I think that a doubling of the hire purchase debt, as happened in a matter of a few months in this country when the restrictions were removed two years ago, shows the dangers.

Others have spoken about the credit squeeze and the bank rate. It is a most unscientific method of operation: leaving the bankers and others to decide—which of course they never do decide—what are the essential activities that ought to be carried on and what are those where credit should be withheld. There is no doubt that the credit squeeze reduces production. How can it be otherwise? If all types of enterprises find it more difficult to raise capital and the means of carrying on their business, it follows that business, although it may not contract absolutely, must be restrained. This certainly does not help the expanding economy which the Government seek to achieve. What I do not like about it is that it is so largely indiscriminate. It hits our exporting capacity; it penalises and reduces both private and public investment—and that last statement, to my mind, shows the complete contradictoriness of the policy.

The investment programmes of all the nationalised industries are approved by the Government as something essential in the interests of the community; and then the Government, through the credit squeeze, make it not only more difficult but well-nigh impossible to carry out the expanded work that the board set themselves, and see that they pay a much higher price to the bankers where they have had temporary borrowing to carry on this work. It creates, as a noble Lord who is a banker told us in the Finance debate and which of course all those of us who have been in touch with the problem knew, uncertainty and hinders forward planning both by individual firms and by public undertakings.

I think he would be a bold man who said that at the present time the measure of capital investment in this country is adequate. Capital investment, as everybody knows, simply means the equipping of the industries of the country to create a greater standard of efficiency, which in turn affects their competitive position. Last year the nationalised industries invested some £760 million—that was all done, of course, with Government approval—whereas private manufacturing invested something like £820 million. Investing in capital goods necessarily means that a smaller proportion can go to home consumption. I have no figures on this point to support what I say, but it remains my conviction that this country is devoting a smaller proportion of its annual income to capital investment than many of our competitors are doing. If any reply is made on this point, I should like some indication as to whether what I have said is accurate or not.

We all know very well that this position cannot be redressed except by further saving, and this again means reducing personal consumption. I pay my tribute to the President of the Board of Trade, Mr. Maudling, for his statement in another place, when he said that we simply could not go on taking the same proportion of our national product as consumers. I think it wanted courage to say that, and I wish it was said much more frequently and by a great many more people.

I think it would be accepted that capital investment is essential to an expanding economy. When I say "capital investment" I mean an increasing capital investment, and not a stationary one. But when we look at the position of the railways, what do we find? We find that the Modernisation Plan which was approved in October, 1956, was reappraised in July, 1959. Why was it reappraised? In the document itself the reasons are clearly given. They are in order to speed up the process so that advantage could be taken, in increased revenues and greater efficiency, of the measures which had been planned in 1956.

But what has happened since then? So far as I can see, instead of encouraging that process of rapid speeding up of the measures to create greater efficiency, what is actually happening is that capital investment in railways is being cut hack. Instead of being able to spend £168 million, as they did last year, they are to be cut back to £140 million. This £140 million is approximately the same amount that was spent in the year 1958 before the Plan could really get into operation, and before orders had to be paid for. In other words, just as the measures are getting into their stride, along come the Government and say, "Sorry, but you cannot go on with these things. We know how important it is to the life of the nation that we should have an efficient railway system, but, as a Government, we are sorry to say that we cannot give you the money to achieve this."

The effect is that the Modernisation Plan of the railways is being slowed down. The reason is the losses that are being incurred in successive years (in circumstances we all understand pretty well) by the railways and the Transport Commission. In another place the Minister of Transport said that these losses were equivalent to 4d. in the pound on the income tax. When one remembers that the whole Plan was estimated to cost £1,600 million, just as much as we spend in one single year on armaments—or on defence, if that is a better phrase—then I think we get it into somewhat clearer perspective.

I should like to refer to main line electrification. As far back as 1931, Lord Weir presided over a committee composed, among others, of railway managers—that was when the private companies were operating—and they showed the advantages that would accrue from main line electrification. I had the pleasure of discussing these measures with Lord Weir at the time. Therefore, when main line electrification was put forward as one of the principal features of the railway Modernisation Plan in 1956 and affirmed by the Government then, and affirmed again by them in 1959, one would have expected that after the fullest review as to the efficiency and economics involved in that Plan it would have been carried out. Now we are told there is going to be a review of main line electrification. I am perhaps putting it too strongly, because I am speaking from recollection. I think the word "possibly" or something like that was connected with it, but I do remember that the Minister said he was going to refer this matter to a study committee, and I am sure the word "review" was used in the statement.

I find it very difficult to understand the method of operation in these matters. Twice a plan has been reaffirmed by the Government of the day, after the most careful examination by the Transport Commission, before it was presented as being sound economically and promoting the efficiency of the railways. Now, apparently, the whole thing is to be reviewed. I figured as chairman of one of the nationalised industries for some years, and I say this with emphasis: only those who are employed in the industries understand the sense of frustration and discouragement that can result when they are told that plans which have been matured over a period cannot be proceeded with for financial reasons.

There is one other aspect of this matter. What about the effect upon British manufacturing industry of postponing or reviewing these things? By far the greater proportion of the work of re-equipping the railways is being done by private manufacturers—reputable firms who have pushed on with the work as rapidly as they can, and who have produced some encouraging results.

Now what is going to happen? It has been stated that contracts will not be cancelled or anything like that, but no further new contracts will be placed. Anybody who has had any connection with business on a large scale knows very well that contracts have to be placed sometimes years in advance before the actual orders materialise in the shape of finished goods, services or work. I personally think it may be very serious for British manufacturing industries if that process, which was entered into in 1956 and reaffirmed in 1959, is interrupted in this way.

I know there is a bland assumption that if home activity is diminished, somehow energy is concentrated upon the export field. I should like to see the mathematics of that worked out at some time, because I do not believe it is happening on any substantial scale. My opinion is confirmed by manufacturers who themselves are anxious to engage in that field. I hesitate to speculate what the moral effect of this curtailment and these hesitations and doubts, even as described in the papers, will be on the average railwayman. After all these years, after Select Committees and goodness knows what, who have bored into the work of the Commission, after the structure has been altered by Parliament, we are told in the gracious Speech that the Government will submit to you proposals for reforming the structure and functions of the British Transport Commission. When I was a trade union official, I supported the principle of the public corporation very strongly, for this basic reason. The conception of nationalisation up to that time had been operation through a Government Department, and I did not believe that, outside the narrow sphere of the Post Office and one or two services like that, industry could flourish under a Government Department subject to Treasury control. I thought that a larger measure of freedom was desirable; and the Government of the day who nationalised these industries subscribed to that conception. A measure of commercial freedom, commercial judgment and treating their business as large private corporations would have done, was the basic principle.

Now what is happening? The Minister of Transport is to require the Trans- port Commission to submit to him all schemes over £250,000. Well, in a large reorganisation scheme involving £1,600 million there will be many instances of that kind, and we all know perfectly well what will happen. There will be meticulous examination of these schemes by people who have no practical responsibility for carrying them out, and in Government Departments and archives there will be minutes of all kinds, all of which will delay conclusions being made and decisions being reached which would be reached quickly in the case of private companies in a comparable setting. I think all this strikes at the root of the competence of the Commission, indeed at the viability of the public corporations.

All these corporations have men who have been appointed by the Government of the day; let us remember that. They have been appointed for their expert knowledge of this subject or that subject as the case may be. Many of them are men of outstanding business ability —I could mention half a dozen off hand—men who have risen to the top of their own businesses and shown their efficiency and qualifications in that way. These experienced businessmen, harassed by all sorts of inquiries, are now to subject their judgment to a Government Department. I make no reference to be Minister or anything of that kind; I am dealing only with the setting in which the work of experienced people will be reviewed. If there is one thing calculated to stifle initiative, which we are told is one of those qualities which large-scale organisation tends itself to fritter away, it is the bringing of Civil Service mentality into the field of industry.

I have many times testified to the competence of the Civil Service in the range of subjects in which they engage. I do not individually challenge a single person in that sphere. But their activity is usually either in preventing their Minister from making a fool of himself or alternatively doing something to stop somebody else from doing something. The sphere in which they function is a broadly negative one. And while I hope am not going to be construed as making an attack upon them (noble Lords may laugh, but remember what I have said; said I regard them as competent in their particular sphere) that sphere is assuredly not that of the business world.

I deplore this development. I deplore it because I believe it represents an encroaching feature of the attitude of Parliament and the Government of the day to the public corporations. I was glad yesterday to hear the pronouncement of the noble Lord, Lord Mills, in connection with the Transport Commission, when he assured the House that no question was being raised of hiving off any of the services or activities of the Commission. Lord Mills is a business man. I met him in his sphere when I was Chairman of the Central Electricity Authority, and I would ask him to use his influence and his power to try to preserve the independence and the freedom of action of the public corporations w thin the broad setting of their constitutions.

The last thing I want to say concerns the preservation of the stability of the general price level, which is, of course, one of the aims in the gracious Speech. There is an implication in this that the principal way of doing it is to keep incomes within control. And there is no doubt whatever that the principal agency for doing that is regarded by governmental people as being the trade unions by way of restraining applications for advances in wages. Always the thing that has befogged this has been the psychological aspects, because the average trade unionist wants to see some outstanding examples whereby private individuals in receipt of dividends, for example, operators on Stock Exchanges and others are not constantly furnishing him with an example of a rising standard of income in their own particular level. I know very well the difference between capital appreciation and income, although one can fade into the other, as we very well know. But the Stock Exchanges of recent months have become almost a ramp, and while I have not the competence to examine closely into their activities, nor the desire to, I am perfectly sure the effect on the minds of trade unionists and working people generally is not a good one and not one to make them inclined to restrain their applications for advances; in wages.

A question we should all ask ourselves is: are we now entering into another inflationary round? Are we at this moment not facing prospective applications for advances in wages in quite a number of industries. In so far as these advances are kept within the advances in production, there is no inflation. But one cannot always be sure of that. I should like to see some measure of voluntary restraint on the part of trade unions in this matter, because I do not believe the spectacle of chasing prices by advancing wages is any good in the long run to anybody. I should like to see longer-term agreements between the trade unions and the various employers' associations whereby over a period, we will say, of three or five years as the case might be, we should revert to the principles of pre-war days. These agreements would have to have some provision for automatic adjustment to rising costs of living. But it is something to aim at and something which will be found more and more in the negotiations between the parties.

Yesterday the noble Lord, Lord Ogmore, made a number or suggestions in respect of the work of the trade unions. He referred to restrictive practices, membership of trade unions, and supervision of the unions by the Registrar. I do not propose to traverse any of those questions, but if the noble Lord would care to put down a Motion I think it would furnish us with a very interesting theme of discussion.

I am delighted to see that the Trades Union Congress is collaborating in the newly formed European Export Council. I made a suggestion broadly to that effect in the House, when, apparently by an inadvertency, they had been omitted from the consultations which the Prime Minister then entered into. They are also, so far as I know, apart from their independent inquiry, embarking upon some investigation under Government auspices, in consultation with the employers, to review unofficial strikes. I think that shows, to all who have read the Report and the debate at the Trades Union Congress in September, their readiness to face up to their responsibility.

I would say, finally, in this rather exaggerated conception of individuality to which we cling so tightly, that we must try to balance it a bit by an increasing measure of co-operation. We are seeking in the export markets to raise the level of our exports and so improve the standard of life of our people. I believe that measures like co-operative marketing and better organisation, not merely of a national character but of a local character, and in particular industries, are essential to a solution of this problem. They involve a measure of co-operation amongst people who are fiercely competitive in the normal way. Unless we recognise that that kind of competition is of minor interest measured by the interest of the community as a whole, we shall fail to achieve our objective in the export field.

4.20 p.m.

VISCOUNT AMORY

My Lords, I wish to crave your Lordships' indulgence on the occasion of my addressing this House for the first time. I had, in fact, not intended to inflict a speech on your Lordships so soon as this. I thought it would be more fitting that I should profit by sitting for a space in respectful silence, listening to and absorbing the collective wisdom of your Lordships' discussions. But one reason why, nevertheless, I have sought to speak this afternoon is, I confess, that recently I received from my noble friend Lord St. Aldwyn a long list of subjects for debate, with an invitation to mark all those on which I felt qualified to offer your Lordships advice. When I looked through this list I was shocked to find that, even after fifteen years' service in another place, there were astonishingly few subjects on which I felt fit to offer your Lordships my advice. Then I remembered the shrewd observation, "If only those who were qualified spoke, the world would be filled with a profound silence".

Another reason for my seeking to speak this afternoon is that I own, after listening to the debate yesterday, that from time to time I felt mildly stimulated to make one or two observations on one or two matters with which I have been rather closely concerned during the past two and a half years. Even so, I intend to follow the instruction that I remember one used sometimes to find at the top of an examination paper—" Do not attempt more than three questions." I know that I must not be contentious or controversial on this occasion, and, indeed, I think it will be not difficult not to be so, because, if I may respectfully say so, the views from which I wish to dissent were put yesterday with great courtesy and moderation.

I should like to say what a delight it was to me, as a newcomer to your Lordships' House, to hear from the noble Lord, Lord Pethick-Lawrence, one of those vigorous and lucid expositions of his views to which I know your Lordships are well accustomed. As a friend and admirer of the noble Lord, I know I can say that without any risk of his concluding that I agree with all or most of the views that he expressed. As my work employed me at a rather central point in the field we are discussing, it may be that some of your Lordships feel that the right place for me this afternoon would be in the dog-house, or the dock, or at least the witness box. I want to say, only that, so far from feeling any remorse or regrets at my past actions, I shall be well content to occupy at any rate either of the last two of those locations.

The reason and the justification for the Government's economic policies were fully and, I thought, if I may respectfully say so, most thoroughly explained by my noble friends Lord Mills and Lord Dundee in their excellent speeches, and I find myself in complete agreement with what they said. Therefore I will venture to supplement what they said on only one or two points. The main objects of fiscal and monetary policies are to keep the economy in balance anti prevent its going either too fast or too slow. It sounds obvious and trite to say that, but I think we need to remind ourselves of it because sometimes people are apt to complain at painful effects when the necessary measures are effective in achieving just that object. I think it is fair to say that there is at present a wide measure of agreement between the economists that these measures, fiscal and monetary, are more fitted to free a competitive economy than a mass of elaborate and detailed physical controls. I say "a mass" deliberately, because I think experience of the past shows that in that field, if you start with one or two it leads you further, on and on, until eventually you do have a mass. I think controls of that kind tend to lead to rigidity, whereas, above all, flexibility is what we need in the competitive conditions of the modern world.

Some, I know, while agreeing as to the choice of these instruments, in practice complain if they are used in more than one direction. Stimulation is fine, but restriction is anathema. I know that many people feel that any measure of temporary restriction is not really a policy. I always like the story of the man who went to his doctor about his health, and the doctor said, "You are receiving too many stimulants. I advise you to halve your consumption of whisky and port"; and the indignant patient said, "I did not come here to get that sort of advice; I want a positive remedy".

We are told that confidence among business men to plan ahead is impossible when changes are made from time to time in, shall we say, the bank rate or in the volume of credit. I have sometimes found that when complaining of this frustration what business men are really objecting to is the effective use of any restrictive controls. After all, the whole object of economic controls is, and must be I think, to cause some people to modify their plans and intentions, and the justification for doing that is, of course, the lone-term benefits to be obtained from overall stability and full employment which make that price worth paying.

I think we ought sometimes to remember that it is only since the war that Governments have accepted a serious degree of responsibility for keeping the economy in balance. Both the Labour Government between 1945 and 1951 and the Conservative Government since then have been experimenting, as it were, in a new field in rapidly changing world conditions. The central problem, as I see it, is to keep the economy operating at a high level of activity and at full employment, without danger to price stability or the balance of payments, and, of course, operating under conditions where the Government do not directly control the two main elements in our costs—wages and profits. En the present state of our economic knowledge I believe that that task does entail fairly frequent manipulations of a limited number of instruments of control.

Having said that, I should like to go on to say that I should be disappointed if I did not think that during the course of the next decade, in the light of our experience, we shall succeed in devising, either more delicate instruments, and quicker-acting ones, or perhaps learn to use our existing ones, in the light of further experience as time goes on, more gently while still obtaining the necessary effects. But we have been deliberately, and with the approval of the nation, seeking to operate our national economy at a very high level indeed—with a much higher level of employment than economists have generally thought would be practicable: and that of course means inevitably that we have a small margin of safety.

In such circumstances, much more frequent use of instruments of control is necessary than if we were working the economy less flat out. But businessmen, I am sure, should conclude, and will I think conclude, when they think this over, that any frustrations that come to them from the use of existing monetary controls are infinitely less harassing than would result from the booms and slumps of pre-war days in an entirely uncontrolled economy. I should like to say, in answer to the noble Lord, Lord Citrine, whose speech I found so very interesting, that we are not really against all planning. We believe in appropriate planning in the strategic field. What we are keen on is that every necessary control should be the minimum required to do the job and should not be carried too far down into the tactical field. I listened with great interest to what the noble Lord said about the danger of carrying Civil Service and bureaucratic methods too far into industry, but I feel that I must not follow that up to-day or I might be in danger of entering into a dangerously controversial field.

One word, if I may, about the level of interest rates. I thought that one or two noble Lords spoke yesterday rather as if it were a law of nature that there should be low-interest rates, and that it was a kind of sacrilege to interfere with that law. Whether or not we are destined to live much or most of our time in the years ahead under some degree of credit squeeze I do not know. It is as difficult to define the limits of a squeeze in the economic field as, I understand, it is in the field of amorous proceedings. One thing I am sure we do well to remember is that, looking ahead as far as we can, it can be said that the demand for capital is likely to be enormously greater than the supply; and in such circumstances the price of capital, year in year out, one would expect, might be relatively high rather than relatively low; otherwise, I believe, we are apt to bring in a factor which may distort the economy rather dangerously.

There is one thing which I believe we should remember: that savings, either voluntary or compulsory, are the source of all capital, and a high level of savings, preferably—and much preferably in my opinion—voluntary savings, is essential to our national future. Other things being equal, high-interest rates are more likely to stimulate savings than low-interest rates. I will leave that matter there. On hire-purchase controls I will say only this: they are, of course, quick-acting and effective in their field, as one of a battery of instruments; but they have the disadvantage that they make their impact on a relatively narrow section of industry—upon only certain industries. To that extent, they are discriminating and not so fair as more general controls; and perhaps for that reason that is an instrument which, in the light of experience as time goes on, should be adjusted and changed infrequently rather than frequently. It is a club which, I feel, one should take out of one's bag only very seldom, if I may put it in that way.

One benefit—and a benefit which I think is a benefit of the first order—which we have enjoyed for two and a half years is a stable cost of living. I noticed that noble Lords opposite yesterday in their speeches—no doubt through lack of time—did not dwell very much on that point. As my noble friend Lord Mills said, price stability, so far as it lies under our own control to ensure it, is essential both to our competitiveness in trade and for reasons of social justice. The trouble is that it is one of those things which, once one has them, one is rather apt to take for granted. I am sure that the contrary is the real fact: that it is something difficult to maintain combined with our other objectives, and something worth paying a very high price for and worth, If necessary, sacrifices in other directions; because it can be so easily lost, and once lost it is so hard to regain.

On the present situation, I agree that our main anxieties must be centred on our export performance; and on the other point mentioned by the noble Lord, Lord Citrine, agree there is a risk that further increases in wages—and in profits, if may say so—may well outstrip our likely further increases in production, bearing in mind that our manpower is now very fully employed. The noble Lord, Lord Lucas of Chilworth, told us yesterday that a good export performance must be based on a 'buoyant home market and that the best way to prevent inflation was to encourage maximum production. That was what I understood the noble Lord to say. If I may respectfully say so, I think there is much truth in both those, maxims, but I do not think either can be accepted without important reservations. An efficient export performance must be based on a firm and, I believe, expanding home market, but not such a rapidly expanding one that it is either soft or easy. I believe that the situation we have been experiencing during the past year has carried some dangers of both those factors being present.

Looking back I recall the forecast made to me by some businessmen in 1958: that the export performance on their part, if the current restrictions could be removed, would show astonishing results. Their unit costs did no doubt come down, but I am afraid that in a number of cases their sales in the home market expanded so enormously that there was not sufficient room for their export figures even to be held. Looking back, I cannot help feeling that in some ways during the time of those temporary restrictions in 1957 and 1958 I detected more signs of really keen export effort than I have detected since.

One word about stagnation. My noble friend Lord Mills implied that he thought it was a misuse of the word to call the present situation one of stagnation. To get matters in perspective we must remember that to-day the economy is operating at pretty full stretch. Production and employment are running at record levels, with average unemployment down at the present time to 1.7 per cent. Public and private investment are running at all-time record levels, as my noble friend Lord Dundee pointed out, I believe; and total savings are probably the same.

Though it is good that production should be running at a record level, I think there is an inclination in some quarters to judge the strength and soundness of our economy solely in terms of the Index of Industrial Production. Important though that is, to start with people's consumption demands to-day are increasing more strongly in the field of services than in the field of physical production. But I think that if we seek to-day a further immediate sharp rise in production we shall experience once again what we have experienced in the past: the danger of achieving most certainly an increase in the price level to the detriment of our balance of payments. And looking back to when the Labour Government were in power in 1949 and 1950, and the Conservative Government in 1955 and 1.956, I would say that the efforts made then to maximise production, absolutely flat out, resulted first and foremost in a further rise in prices.

The lesson seems to be that that top band of production, just under the ceiling, is one that may or may not be a bonus. It may be a bonus or it may be a very dangerous field to enter into. What I am sure, we must aim at—and I know your Lordships will agree—is to get our economy expanding over the years at a pace steady enough not to strain our resources of manpower or our reserves, and to remember that if we seek immediate further big gains in production now we 'are doing so against a background of a very fully employed manpower. And the starting point is a very important one in this respect. It is like the Irishman who was asked the way to. Roscommon, and he said, "If it was to Roscommon I would be going, it would not be from here I would be starting." Here we must, in considering what more we can do, remember the progress we have achieved and the position we are at to-day.

My Lords, I am not going to detain you this afternoon on the sordid subject of taxation, except to say this: that I greatly admired the eloquence and passion with which the noble Lord, Lord Lucas of Chilworth, reminded us, very effectively, if I may say so., of the disincentive effects of high taxation on individuals. I entirely agree. Unquestionably, as my noble friend Lord Mills said, the level of taxation to-day, particularly of direct taxation, is disagreeably high.

Personally I think that further reduction in direct taxation is so desirable that our aim should be to achieve it, even, if necessary—and I hope it will not be so—at the expense of raising indirect taxation.

But something very significant has been achieved in this direction over the past nine years. It has been often said that if the rates current in 1951 were still current to-day we should all be paying something like £1,300 million extra in taxation; and I like to think that it fell to my lot to propose a reduction in those rates over three years which have amounted to something over £400 million. But I think that to put it in the most relevant way is to put it as a percentage of the national income; and there the figure taken in 1950–51 by the Central Government amounted to 30.6 per cent. of the national income, whereas the amount I proposed to lay my hands on this year, if I could, amounted to 26.6 per cent. That was, anyhow, a substantial move in the right direction.

I should have liked to say a word about agriculture, commenting on the speech of the noble Lord, Lord Wise. Like my noble friend Lord Waldegrave, if I may respectfully say so, because I know the noble Lord's great knowledge of this subject, I think he chose rather depressing colours from his palette to paint the picture of the present agricultural situation. Does the noble Lord really feel that the current statistics of production, of aggregate income or of agricultural land values quite bear out the rather gloomy picture he painted? If agriculture really is in such a parlous state it seems rather strange that there is such a very long queue of people anxious to enter it and to secure farms and to share this tragic misfortune

Finally, my Lords, I want, before I sit down, to try my hand, in a few sentences, at what I consider the essentials of the sort of economy we want, though I cannot equal the ingenious and succinct definition of my noble friend Lord Mills. These I believe to be the aims we ought to keep in front of us. First, to keep our currency, sterling, strong and respected. That is the basis of our trade and our livelihood. Secondly, to keep the cost of living and our costs of production stable, for the reasons I have given. Thirdly, to encourage a high and, I hope, still higher level (it has been rising very agreeably over recent years) of productive investment—and I mean productive "in the widest sense. Then, fourthly, but only fourthly, to encourage further growth in our living standards and an expansion of our economy generally at a pace consistent with our success in achieving the first three of those aims. These, then, my Lords, are the priorities that I think right, and they are, I am confident, those by which the Government will continue to be motivated.

My Lords, do not let us be daunted by the new and formidable challenges that face us as a nation in this rapidly changing world. That sort of challenge has been the very lifeblood of our nation throughout our long history. And if each one of us as an individual, whatever his job, resolves to play his part with energy, and not to let our internal differences run too deep or become too hitter, and always to put the welfare of the nation first, then I am confident that we shall continue to give a good account of ourselves whatever challenges lie ahead. I apologise once more for addressing your Lordships with rather greater precipitancy than I had intended and, indeed, it may be, with rather greater impetuosity than it would be fitting for me to do.

4.48 p.m.

LORD STONHAM

My Lords, I regard it as a signal distinction and a very great personal pleasure to have the opportunity of congratulating the noble Viscount, Lord Amory, on his maiden speech in your Lordships' House. I find it difficult to resist, and only convention prevents me from addressing him as "my noble friend", because we entered another place at the same time, in the same year, and we were representatives in another place of the immediately neighbouring constituencies, Tiverton and Taunton. I have, indeed, although disagreeing with him on many things, always entertained the greatest respect and admiration and friendship for him. My regard is such that, although he may have deserted Tiverton in the political sense, I am going there on Monday to do my best to ensure that Labour at least gets second place; and I shall again, therefore, renew acquaintance with the noble Viscount on the political platform.

I feel also, my Lords, that we are extremely fortunate to have with us one who, as it were, has been at the centre of the financial web of our country at a time of very considerable difficulties; one, indeed, who assumed the high office of Chancellor of the Exchequer at a time of political difficulty for his own Party, when he used his considerable yachting skill to steady the financial and national boat and, as some would say, saved his Party from acute political difficulty. In particular, we welcome him, not only for his very great knowledge and attainment, but for the fact that he is perhaps the most modest of all politicians. When the noble Lord first took his seat here he characteristically sat on the rearmost Bench of all. This afternoon he has progressed somewhat by stages. He went to the next rearmost Bench, and I thought that that was because it was cushioned. Now he has come to the one immediately behind the Front Bench, and I am sure that that is so that he can overlook the noble Viscount the Leader of the House, to make sure that he is getting the right kind of Treasury briefs.

I welcome the noble Lord also because he has a particularly warm humanity which he does not wear on his sleeve; and, as your Lordships have noticed this afternoon, he has a bright and pungent wit which can convulse his audience without ever hurting his victim —a very great attribute. But as listened to the noble Viscount, Lord Amory, this afternoon, I felt that it was not so much a case of not speaking without knowledge, or that if we spoke only when we had knowledge there would be a vast and empty silence in the world: I thought it was much more important to remember what the late Artemus Ward said: It isn't what you don't know that causes the trouble, but what you do know and ain't so. There seemed to me a great deal of that in the speech made by the noble Viscount, Lord Amory, and particularly in many of the speeches we have heard from those Benches during this two-day debate.

The noble Viscount, Lord Amory, very rightly paid tribute to my noble friend Lord Pethick-Lawrence for his outstanding speech, and expressed some disagreement with parts of it without particularising them. That has been a notable feature of the speeches made by noble Lords opposite, and none more so, I feel, than that of the noble Earl, Lord Waldegrave, when he was commenting on the speech of my noble friend Lord Wise. I felt that my noble friend Lord Pethick-Lawrence made not merely a notable speech but one which was completely factual and altogether unanswerable. Indeed, it has not been answered. The noble Lord, Lord Mills, described it, I think, as gloomy and exaggerated. It was a good job he did not stay to hear the speech of his noble friend Lord Hawke, because he would have regarded that as terrifying. That was supported by actual figures quoted from official reports which at one stage indicated that we are presently suffering from an actual deficit of exports compared with imports, counting in invisibles, amounting to approximately £88 million a month—which, my Lords, is £4 million per working day.

LORD HAWKE

My Lords, if the noble Lord would allow me, may I take this opportunity of correcting a figure? The figures of the balance of trade were taken from two different sources and were compiled on a slightly different basis. Therefore there falls to be subtracted from the deficit a shipping credit, or added on the other side a shipping debit, which would make a difference of something of the order of £30 million a month. But I still stand by the figure which I gave, which was that 1960, as compared with 1958, will probably show a deterioration of the order of £450 million to £500 million; in other words, from a plus of £350 million to something like a minus of £150 million.

LORD STONHAM

I am most grateful to the noble Lord. He will remember that I interrupted him yesterday and asked him for confirmation of those figures, because they were indeed very much worse than I personally had in mind. That is why I asked him to confirm them, But, as he said—and as, indeed, I was going to quote [OFFICIAL REPORT. Vol. 226 (No. 4), col. 274]: 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". My Lords, despite the speech which the noble Viscount, Lord Amory, has just delivered, and which we very much enjoyed and appreciated; despite all the artificial sunshine of Mr. Macmillan's smile; and despite all the false prosperity slogans of high-pressure publicity agents, nothing can disguise the fact that we are in a dangerous economic situation, as the noble Lord, Lord Hawke, very rightly said. No amount of talking about a high level of production, of full or over-full employment, can disguise the fact that, relatively, we are doing very much worse than most other nations. Our productivity is falling. And it is no use replying to the point made by my noble friend, Lord Lucas of Chilworth, that we should have higher production, by saying that we are full now. We know that all the time, in all the industrial nations of the world, productivity is advancing, except in this country; and here it is falling.

Of course, since the war we have had a tremendous advance in productivity per man, and that is our increased wealth. That is the whole basis of the hopes which the present Home Secretary has given us, that in 25 years our standards of living will be doubled. So please do not let us start from the premise of complacency, that we are doing well now. The noble Lord, Lord Mills, reproved my noble friend Lord Pethick-Lawrence, and said that there may be a pause. Objection was taken to the term "stagnation". What else is it but stagnation if you are not making any upward move, and if, in fact, in productivity you are making a downward move? There is one other thing which we cannot get over. At the very best estimate, we had on current account a surplus of only £35 million on our international trade in the first six months of the year (and that is the best half of the year), and that compares with the Government's figure, which they insist on, of a £450 million surplus which they say is necessary if we are going to finance our capital commitments. No one can dispute that our rate of capital investment as a percentage of national income is the lowest among all the industrial countries of the world. Nor can anyone dispute that, since 1951, the growth of our industrial output has been the lowest in Europe. If we are going to get down to facts, let us compare like with like. Let those challenges be answered from the Government Benches when the noble and learned Viscount comes to reply. They are unhappy facts, and they are entirely due to Conservative policy. I do not think it can be disputed that, unless the Government's policy is radically changed, our people's living standards will soon be, not necessarily lowered, but lower than those of people of other countries in Europe who formerly were very much below us. That is the kind of criterion we have to look at.

My Lords, the Government's economic policy always reminds me of the story of the discovery of roast sucking pig. Your Lordships all remember the story.

THE LORD PRESIDENT OF THE COUNCIL AND MINISTER FOR SCIENCE (VISCOUNT HAILSHAM)

The story is in theEssays of Elia, which was published over 100 years ago.

LORD STONHAM

That does not make it any the less attractive. In fact, if it is of any interest to the noble and learned Viscount, I must have read it at least 45 years ago, but it has stuck in my mind. Perhaps I may refresh his mind of the principle of the story—

VISCOUNT HAILSHAM

I remember it very well.

LORD STONHAM

The poor farmer suffered the misfortune of having, his pigsty burned down soon after the sow had farrowed; and when he mournfully approached the ruins after the fire had died down, he stretched out his hand and touched one of the little bodies and immediately put his burned fingers in his mouth. And, as the story goes, so a new culinary delight was born to the world. The sow farrowed several more times and the pigsty was burned down several more times before the neighbours persuaded him that it was possible to enjoy roast sucking pig without burning down the house.

VISCOUNT HAILSHAM

I hate to cap the learned Lord's story, but in the interests of literary accuracy I must insist that it was the house, not the pigsty, each time.

LORD STONHAM

I said the house because, again in the interests of accuracy, the house and the pigsty were one and the same dwelling. So the noble and learned Viscount is putting a little too fine a point on it. But the lesson of the story is one that the Government have yet to learn.

If I may summarise what has been said by a number of noble Lords, the cycle goes like this. The Government release spending power for an Election-winning boom. Home consumption naturally rises and the amount of exports suffers relatively. Imports increase and therefore we have balance-of-payments problems, so imports have to be reduced. The Government are not satisfied with one or two little pigs. They refuse to reimpose restriction's on the less essential imports, such as foreign motor cars, refrigerators, washing machines and items like that—restrictions, incidentally, which they foolishly lifted not so very long ago in lifted "never had it so good" period. I refer to it as a "period", as it undoubtedly was, so as not to say who in particular invented it or who fostered it, although I think we all know. Instead of that kind of selective control, the Government imposed a 6 per cent. bank rate.

My Lords, what does the price become of what would, after tall, have been only a marginal reduction of imports? The price becomes a £40 million increase in the cost of the interest charges on the National Debt. That means increased costs of all local authority and social services, higher rates, higher mortgage charges for house-owners, which all adds up to higher living costs and, consequently, increased wage demands and reduced exports;. The latter, of course, destroys the value of any cuts in imports which may have been achieved by the policy of burning down the house.

I think the worst effect of it is that, instead of a steady rate of planned expansion, with the proper measure of the right sort of capital investment, which the noble Viscount, Lord Amory, claimed the Government were providing, we do in fact get a cycle. It consists, roughly, of one year's spending spree and three years more or less of frustration and financial restriction. That is why, in my view, we are at the bottom of the investment and production tables of the industrial countries of the world; and I believe that we shall go on sinking relatively lower until we have a change of Government or until the Conservative Party cease to regard planning and controls as dirty words that is, of course, if there are still any dirty words left in the language after the trial last week.

I also feel, quite apart from that, that there is the Government's relentless hostility towards public ownership—publicly-owned undertakings, to which Lord Citrine and others of my noble friends have referred. There is a contrast between their hostility to publicly-owned undertakings and their tenderness towards anything privately owned. I honestly regard that as the second major cause of our present difficulties. Because, after all, the nationalised industries, apart from agriculture, are the main basic industries and services which have such a great effect on the costs, efficiency and prosperity of other industries.

Let us, for example (I do not think this point has been taken yet) contrast the Government's attitude to the coal industry and their attitude to the steel industry. Coal was, and to a large extent still is, our industrial lifeblood. We embarked on a full-scale expansion and modernisation programme for which the Coal Board have had to pay full and ever-increasing rates of interest. Not so the steel companies. Colvilles, a private undertaking, is allowed to borrow £60 million at special rates. Llanelly and Staveley Steel Companies have been sold to private companies at well below their intrinsic value, at a loss of millions of pounds of public money. Again, when supplies of coal were short the Coal Board were never allowed to charge world prices to enable them to build up reserves. Instead, they were compelled to pay the enormous losses involved in the import of foreign coal—a quite unjustifiable burden. Meanwhile, the steel companies were free to fix their own prices, and anyone who wants to import steel has to pay the full price for it. And after all that rigging, as it were, of the conditions of those two industries, the Conservatives have the effrontery to describe coal as an inefficient failure and to laud steel as an outstanding success! Then, to rub it in still further, the Government damage the market for coal by encouraging the unrestricted import of other countries' surplus fuel oil.

My Lords, I think it is a tragedy that a body of patriotic men can, for these, as I regard them, stupidly doctrinaire reasons, destroy or damage one of our greatest industries. And the worst of the tragedy is that, in the process, they take the heart out of some of the finest men in the country—the miners. Five or six hundred of them are leaving the coalfields every week to go to better-paid, easier and more assured jobs. For a year or so now we have been talking of coal surpluses. If that drain on manpower continues, it will not be long before there will be a shortage of coal. And all because of the Government's policy.

A great deal has been said about the railways. I do not want to go over the same ground again, but I should like to add one or two points which have not yet been made, with particular reference to the statements about losses and inefficiencies. I will remind your Lordships that for 30 years the railways were starved of investment capital. They were overworked and badly knocked about during the war, and suffered losses amounting to £68 million in 1947, the last year before vesting day—the last year of private enterprise. That figure of £68 million compares with the figure, which is indeed alarming, referred to by the noble Lord, Lord Mills, yesterday, of £74 million last year. I know that he said that by a different calculation it would come to £110 million. Nevertheless—and I am sure he will agree with this—the £110 million, at its full figure, including so many of the costs arising from the increased capital investment, is a relatively lower figure than the figure of £68 million in 1947.

Despite the condition of the railways in 1947, it is a fact that in 1950, 1951, and again in 1953, they earned their interest and central charges and produced a small surplus. That all arose out of the conditions created by the 1947 Act. But in 1953 we had the Act of the Conservative Government, to which my noble friend Lord Latham referred yesterday as tearing asunder the co-ordinated road and rail transport system. What has been the result of that?—because that is exactly what it did. The result has been accumulated losses of £540 million, for which the general public, the newspapers, and noble Lords opposite blame British Railways, when in fact the blame should reside where it belongs—namely, with the Conservative Government.

Then, five years ago, the Government approved the Transport Commission's bold and imaginative modernisation plans. But since then, as my noble friend Lord Citrine made so clear, it has been a continuous process of start and stop. It is always the railways and the public undertakings who suffer as whipping-boys for Government errors in financial policy. They have never been told their capital allocation for more than twelve months ahead, and it is virtually impossible to implement such a big programme on that basis. They have been plagued with Committee after Committee, and we learned yesterday that we were not to hear the findings of the latest Committee, headed by Sir Ivan Stedeford. One wonders whether that Committee did not come up with the answers the Minister wanted. Now another Committee has been appointed, again a secret Committee. Again we shall only be told what the Government wish to tell us.

I think, and I hope your Lordships will agree with me, that the worst feature of the present position with regard to the railways is the open and undisguised hostility of the Ministers directly concerned with them. At the Conservative Party Conference the Minister of Transport, Mr. Marples, is reported to have announced, in the manner of a man expecting cheers, that for the first time in the history of this country the railways are taking less than 50 per cent. of the total traffic. He went on to declare that, if big things like coal and minerals were moved on the railways, it would not ease congestion in the cities. It is impossible to reduce the chaotic overcrowding of our roads unless we carry more big things on the railways. But Mr. Marples went on to quote, from his own business experience, that when you send things on the railways bits are liable to drop off. That is positively inciting people not to send goods by British Railways.

His Parliamentary Secretary, Mr. Hay, adopted a similar line. He said that the £160 million cost of the London—Manchester electrification scheme was eight times the cost of M.1. As was pointed out in an excellent letter in The Times the other day, the line to be electrified is ten times longer than M.1, and the £160 million includes no less than £94 million for rolling stock and traffic control. It would be more true if I were to say that, mile for mile, the build- ing of M.1 cost ten times as much as British Railways electrification. But we ought not to say nonsensical and stupid things of this kind. What matters is that we need more M.1s and also the electrification, improvement and modernisation of British Railways. It should not be a case of railways competing with roads for capital. They both need a great deal more capital. When Ministers so disgracefully misrepresent the industries for whose wellbeing they are responsible it is not surprising that the men who work: in them become utterly disheartened and leave their jobs, as they are doing.

British Railways is down now to a little more than 500,000 men, which is no: enough to do an efficient job. Many small stations—and here I speak from my own business experience—deliver passenger parcels only once a week, and sometimes parcels arrive ten days after they left the senders. A big London depôt near the City has no replacements of cartage men, and if one falls sick, his collections are not made. There are no: enough men to handle the transfer of goods at the junctions, so goods consignments take anything up to ten days to reach their destinations. Only this morning I learned that at Kidderminster they are not taking any more consignments because they are so congested. All this has an effect on the export trade and on general trade, and it is happening all over the country. These delays are not due to strikes, hut to the fact that there are not enough men to handle goods; and that is due to the reasons I have already given. For all these, and many more, shortcomings the public blame British Railways, though the real culprits are the Government of the day.

My Lords, there is this further disheartening news. Yesterday the noble Earl, Lord Dundee, said that in 1960 there would be a 20 per cent. increase in capital expenditure over last year. Yet British Railways have been told that they are going to suffer a £20 million cut. So it is not only a case of not knowing twelve months in advance—and the noble Lord, Lord Mills, knows just what that means in the context of the nationalised railways and ordering locomotives—but also of a £20 million cut. And almost in the same breath we are told that the Cunard Company is to get an £18 million loan, including a £3 ¼million subsidy.

It would almost seem, though I do not say it is the case, that the modernisation of the railways, which we all own and use, is to be held back for the benefit of the Cunard shareholders.

The Select Committee had many good things to say for British Railways, and recommended that modernisation should proceed on a five-year basis and not a twelve-month basis. Surely this is the first essential step towards an efficient transport system, both road and rail. Our railways are being starved of capital to satisfy this doctrinaire hatred of nationalisation. Our roads system is the worst in Europe. We need continuous, sustained and heavy investment in both, and neglect of such long-term investment for the sake of quick returns elsewhere is equal to eating the seed corn. We cannot have efficient industry without efficient transport, and we cannot have competitive end-product industries without sound and prosperous basic industries, with satisfied workers in them. If we are to resume our rightful place in the economic world, the Government must bolster up our international credit with high and expanding production and not with high-interest rates. They must restore the confidence of the workers and management by announcing a programme of bold and planned expansion, of more public investment, not less. Give the people heart and they will respond, as they have always done. If, through that programme, the total of imports becomes too high, let the Government reduce selectively—cut out the frills and keep the essentials. And let the Government give us a promise that never again will they burn down the whole house for the sake of a little roast pig.

5.18 p.m.

LORD GIFFORD

My Lords, unfortunately I could not follow the noble Viscount, Lord Amory, but I should like to add my tribute to that of the noble Lord, Lord Stonham, for the wonderful maiden speech we have just been privileged to hear. I hope that if the noble Viscount searches the Order Paper more diligently he will find many other subjects on which he is qualified to speak.

I do not propose to keep your Lordships long this afternoon, but I should like to express my deep regret that there is nothing in the gracious Speech about measures to spread the holiday season.

I ventured to address your Lordships on this subject about a year ago, in particular with regard to the proposal for shifting Bank Holiday from the first to the last Monday in August. I am sure that such a measure would do much to avoid the appalling congestion on the roads and at holiday resorts which now occurs. Some months ago, the Board of Trade held an inquiry but nothing has emerged from it, in spite of the fact that many views have been expressed in favour of such a change. The British Travel and Holidays Association have come out very strongly in support of the proposal, as have many other bodies, such as air lines, hoteliers, and transport operators. Indeed, in a competition organised by theEvening Standardafter my Motion 75 per cent. of those who entered for the competition were in favour of this change of Bank Holiday.

The noble Earl, Lord Dundee, in replying to my Motion last November, said that the Government contemplated ascertaining public opinion on the matter. But there again, nothing seems to have been done. Of course, the shifting of Bank Holiday is only one of many measures which could be taken to spread the holiday season, but I lay particular emphasis upon it because it is the easiest to alter, in that it does not in any way interfere with, for instance, the school holidays.

I am also disappointed that nothing further has so far been done about the extension of Summer Time. I understood that an announcement was going to be made about that, and I hope that in 1961 we shall see Summer Time continue until the latter part of October. I hope that the noble Viscount the Leader of the House will be able to say something in his reply about the points which I have raised, because I feel that they are of great importance to the country as a whole, and to all those connected with travel and the holiday industry. I would remind him that this industry is one of the greatest earners of dollars and of other foreign currency that this country possesses. Therefore I make no apology for raising these matters once again in your Lordships' House.

5.22 p.m.

LORD SHEPHERD

My Lords, evidence of hearsay is always dangerous ground, particularly with the noble Vis- count, Lord Hailsham, sitting opposite, but I understand that there is quite a difference in speaking in another place and in your Lordships' House. Yet in a matter of a few days the noble Viscount, Lord Amory, has quickly adjusted himself to this House and has delivered a speech which we all thoroughly enjoyed. I should like to be associated with those noble Lords who have spoken a tribute. I hope that he will enjoy his stay in this House and not regret his transfer to our company. The noble Viscount said that he agreed in full with the speeches made by the Ministers yesterday. I frankly think that he would find difficulty in disagreeing. I was most disappointed in the speeches that were made. We are living in dangerous times, and neither of those speeches, I thought, reflected the urgency that is facing this country. The noble Lord, Lord Mills, when speaking of the growth of production said [OFFICIAL REPORT. Vol. 226 (No. 4) col. 246]: I suggest that we are entitled to only the expansion we work for and deserve. I do not believe that is correct. I should like to put it to the House in this way: by what standards are we to judge our economy and the Government record? I think we must get this very much in our minds. If this country stood in isolation, with no commitments to the Commonwealth and to our Allies if we were concerned only in having a Welfare State and full employment, perhaps the economic position that faces this country would be regarded as reasonable. But, my Lords, that is not the case. We are a world Power, with all its responsibilities.

Naturally our great aim is to achieve peace: a peace not of living in a cold war, but a peace when all the seeds of conflict have been eradicated. The noble Earl the Foreign Secretary knows as well as any other Member of the House of the seeds of future conflict that exist in Africa and Asia to-day—seeds brought about by squalor and misery. I should have thought that the challenge of our time is whether we shall be able to build up our economy quickly enough and efficiently enough to withstand the psychological and economic warfare that this country and our Allies of the West are going to face. That warfare will be as ruthless and as savage as any hot war in the past. Are we of this country and of the West prepared and geared to-clay to meet that challenge?

The facts that are known in this House and in Government circles must surely show that the West economically is not yet ready to face that challenge. We know that even within our own Commonwealth what we have been able to do has been insufficient to meet the requirements to develop those countries. These are facts. We know that the gap that divides us and these unfortunate people grows wider and wider. It is a vacuum into which the Soviet forces will move. If we wish to stand, we must be ready to meet that challenge. Therefore I would put to the House the question whether our economy could not be developed with that of our Western Allies. I believe that the pattern of to-day is not conducive to meeting and will not meet that challenge. I want to hear from the Government and from those Ministers who are responsible for economic affairs that they are going to direct the economy of this country to stand side by side with the foreign affairs statement made by The noble Earl, Lord Home, last week. This is vital.

As I have said, I do not believe our economy as it is to-day has the ability to deal with the Challenge. We have at present a stagnant production. We need an increased production, because only with increased production can we have a dynamic economic policy. But the point that worries me is this. We heard from the noble Earl, Lord Dundee, and the noble Lord, Lord Mills, yesterday that we are already scraping the bucket of labour; that there is not much left of availability of labour. Therefore, if we are using all this labour and yet our production remains stagnant, something obviously has gone wrong.

We know that there is a shortage of capital, but we know also that a large quantity of capital has been put into our economy in the last ten years. Therefore we must ask the question—and I put this in no Party sense—whether our investment has been going in the right channels where it has the greatest effect to stimulate our production and our economy. I am one of those who feel that far too much of our capital has gone into What one would call the soft industries, into the services—by that I mean the servicing side of industry, the store trades, hire purchase—and that inadequate investment has gone to heavy production.

Getting back again to labour—because labour is a priceless asset to this country —I think far too much of our labour has gone into service and is not at the factory bench where it should be. I do not advocate that the Government should use conscription, but it is up to the Government and industry to provide attractive conditions by way of labour and working conditions so that the people of this country will go into the factories and move away from the service side. This can be done, and it must be done. The Government may well say, "This is not our duty." In the opinion of my friends on this side of the House the Government are entrusted with the welfare of the country. It is in their hands, and has been placed there by a free people. If we need increased production, if we need movements of capital and of labour, it is the Government's responsibility in the interests of the country to see that this is done.

Now I turn to another side of our problem, the balance of payments. I do not think the difficulty there is due entirely to high imports. It is largely due to the fact that we have forgotten that this country lives on its exports, and that the wealth of this country was made on exports. There are some who ask the Government to give incentives. I do not go so far as that. I want them to create a climate in which industry and commerce will go back to its traditional trade. Exporting is something you do not go in and out of like the Stock Exchange; exporting is a long-term task. It is something which is full of frustration and difficulty. It carries high financial risk and, unfortunately, a lower margin of profit as compared with the home market. If the noble Lord, Lord Mills, wants to know why we are not exporting to-day, the answer is relatively simple: that business will always go where there is a profit against its capital cost. We know of the risks and the returns on the export markets, and we have in this country a market where there is fat profit to be made and with little financial risk.

There are some who have asked for incentives. I would put one thing to the noble Lord, Lord Mills, which I believe the Government could do, possibly short-term. I believe that, through-the Export Credits Guarantee scheme, they could take a greater share of the risk involved in exports, because risk is not only a doubt as to the ability of the client to pay. We are faced more and more to-day with the sudden imposition of import licences, with contracts that have been made but which could not be shipped through no fault of the buyer, the manufacturer or the financier. This burden is heavy, and I would say that with regard to the Export Credits Guarantee scheme the premium rate is rather high. Realising the importance of exports, I think the Government and the country could well take a bigger share of the risk. That would be far more preferable than giving inducements by income tax rebates or any other devices.

I sincerely ask the noble Lord, Lord Mills, whether he would consider this. May I give him an example? At the very moment when in Africa we should be standing by and stimulating our trade with that continent, because of the uncertainties the business communities and others are coming out. London houses are saying, "Africa is no longer a risk. We are not prepared to do business in that market." As a businessman, I agree with them that the risk, for the return, is very great. But from a national point of view that is wrong and might well be fatal. I ask the noble Lord whether he would look into this point. I say that with great sincerity, not because it would not make any difference to me—it would, in business—but because I think I am a representative of a large number of small people with no great resources behind them who are trying to export. The Government should give considerable aid to them and I think it would reflect very much on the country's position.

I would end by turning to the real, critical point we have to-day, and that is the use of public money in industry. I do not object to the use of public money in industry. I believe myself that it is the pattern of the future. I believe that if we are to meet the challenges that face us as an industrial power, we shall need more and more public money in the private sector. It will be a form of marriage between State and private enterprise, hoping to take the fruits of both. But there is a considerable difference between putting public money into an industry on loan, at probably preferential rates and without any control, and the industry raising it on the market. We on this side of the House believe that if State money goes into industry the State should receive some form of equity. The money should go in on the same basis as other people's money, and should enjoy the same control and the same protection.

Noble Lords opposite believe that participation by the State in industry is an attack on liberty. I think that that is utter nonsense. The State owns parts. It owns the sanitary systems, the Atomic Energy Authority, the water boards and the electricity industry. Would you say that those are an attack on liberty? If public money should be in those industries, why should it not be intermingled in partnership with the ordinary commercial companies? The public money should stand on the same basis, in my judgment, as private money, to share the responsibility, the control and the risk. I believe that this will be the pattern of the future.

In conclusion, may I go back to the words with which I started my speech? I believe this with the greatest possible sincerity. In history this country is at the cross-roads. We have withstood attacks from all quarters. By our ingenuity and our faith we have won through. But we are going to face a greater threat, not of a hot war but of trade, economics and psychology. We must be ready to face that threat. In that, I hope the Government will lead us.

5.40 p.m.

VISCOUNT ALEXANDER OF HILLS- BOROUGH

My Lords, we are now coming to the closing stages of this important debate, and it is. I think, fitting that on such an occasion we should, at least annually, if not more often, be able to hear each other's point of view upon such vital issues as the economic position of the country and matters arising, therefrom. May I say, in the first place, how grateful I am to my colleagues on this side who have supported the Amendment which stands in my name on the Paper. I am especially grateful, as always, to my noble friend Lord Pethick-Lawrence and for the specially pertinent speech by my noble friend Lord Lucas of Chilworth on matters connected with transport. I noticed that he has earned a sort of congratulatory message from the other side of the House, thinking that at least the taxation portion of his speech might have been made to a successful and applauding Conservative meeting. Nevertheless, there was sufficient in that speech critical of Government policy to satisfy me. I do not think any Party is without members who will always resent levels of taxation, although they may even, on some sides of the House, resent the impact of taxation more than the total amount that has to be secured.

The other speech on which I should like to comment is that of my noble friend Lord Wise, who dealt with agriculture. He comes from quite a remarkable agricultural district, and he has constant, almost daily, contact with leaders of thought in that very important agricultural district. He quoted at some length, I think especially for the benefit of the Parliamentary Secretary to the Ministry of Agriculture, the opinion of the Conservative Member for Lowestoft as to what the true position is. It seemed to me that the Parliamentary Secretary had not felt constrained to deal with the details, not of all that my noble friend said but what his Conservative Party Member said in another place, and that seems to me to be a very great pity. I will come a little later to say a word or two about agriculture in general.

Yesterday we were also favoured with two speeches from the Government Benches: they came from two of the most charming personalities on the Government Bench. There was the noble Lord, Lord Mills, who is an old friend, specially from war-time days when we were concerned with industry and similar matters; and he always has a charming personality. But when he lectures us upon our views upon matters like national controls and economics and the like, I always feel that he lets only just enough information come out, as he was in the habit of doing as chairman of company meetings; he thinks that we should be given only that amount of information which is in accordance with practice; that shareholders should be told only just enough of what is good for them and apparently just enough to keep up their confidence in the market.

The general trend of the debate on this important Amendment seems to, me also to have been fairly well stage-managed. Of course, the noble Viscount who is to reply presently has become very experienced in political stage management in the more recent years of his career, including the chairmanship of the Conservative Party. I felt, as I looked at the list of names down on this Amendment, where we have done our best, as a limited Opposition, to put up a proper front, that the number of Conservative Members who took part surely must have been a little stage-managed.

I do not know how close a supporter of modern association football the noble Viscount may be, but I could not help thinking, as I looked at the programme of speakers, that there was a sort of what is called "playing down". Mr. Puskas, of Real Madrid, and formerly of Hungary, and some other experts of modern Continental soccer, have earned the reputation that when they have got the ball and are in the lead, then they are certainly not going to part with it, even if it means running to and fro and then passing about without saying or doing very much. It seems to me there has been a sort of "playing-down" arrangement, just like that sort of tug of the coat when I interrupted—I am sorry I interrupted—the Parliamentary Secretary, which obviously resulted in the fact that I received no reply to the interjection—a very nice bit of by-play and "playing-down". That may be all right in Parliamentary controversy and stage-management, but it does not dispose of the real troubles that we are seeking to bring to the knowledge of your Lordships, those of you who have not already got it, with regard to the economic situation.

I am bound to say that we have had, in places, some rather extraordinary interjections. I feel that we have not yet been satisfied about the point of. Order, for example, that was raised by my noble friend Lord Pethick-Lawrence when he was dealing with Lord Mills's exposition of the situation in relation to the Chandos Report. I hope that the noble Viscount the Leader of the House., who is to reply presently, will, because of his position as Leader of the House, take some note of that and see whether we are right in our submission that, wherever documents of that kind are likely to be quoted direct, or where very strong inference can be taken from the speeches of Ministers upon them, that greatly strengthens the case for having the document itself laid. I know that the rule itself is pretty well known, but I hope that when the noble Viscount comes to reply he will perhaps put the position plainly.

VISCOUNT HAILSHAM

I must tell the noble Viscount this. Quite frankly I had not realised that he wanted a direct answer from me. If he will put a Question down on it, I certainly will consider it. But, equally certainly, I should not be in a position, in my speech in reply to a contentious Amendment to the Address in reply to the gracious Speech, to give my opinion on what, if it is intended as a point of Order, would be an important precedent. I think he should not press me on that point, having regard to the different function I am performing in my reply to a contentious Amendment.

VISCOUNT ALEXANDER of HILLSBOROUGH

We will leave it at that. We shall be meeting in a day or two in what is called the "usual channels", and perhaps we can pursue it on that occasion. It is essential that we should have a proper understanding between Government and Opposition Benches as to what is the proper basic conduct in such instances, and I hope that will all be satisfactorily cleared up.

We also had a little controversy (I want to get rid of these points at the start) as between the Government Bench and the noble Lord, Lord Ogmore, with regard to whether the slogan "You never had it so good" was or was not officially used by the other side in the Election. But I think it is important to remember the complete frankness of the noble Viscount, who said that the words were used in a speech of the Prime Minister twelve months before the Election. That is perfectly true. Of course one has to remember that became a sort of inspiration of many other people, and it was even beyond the control, I think, of the Chairman of the Conservative Party organisation at the time to restrain their many followers in the propaganda field from using the essence of the Prime Minister's statement. Nor was it by any means confined to the actual words. I have here a little book, which no doubt the noble Viscount has already read, in which it says, for example: Life is better with the Conservatives. Don't let Labour ruin it. In regard to the point that was made in debate, that there is a great amount of complacency in the Government about these matters, it is a pity we did not get quite the note in the Government statements that was in the speech of the noble Viscount, Lord Amory. I am sorry to see he is not in his place at the moment. He really understood what was the danger point in the maintenance of the present high level of the economy of the State. That is a danger note. No Party can really tolerate a state of complacency when dangers arise to the economy.

That is all I need say on that. Certainly, I think the noble Viscount, Lord Hailsham, proved his point that the Prime Minister did not use the phrase during the Election. That is quite right. But there is one little sidelight on it that arose at a much later date. I was most interested to see in theDaily Expressof October 31 of this year—not so many days ago—that they say that the Tory candidates in the seven Parliamentary by-elections have been given these orders: (1) Play down the theme, "You never had it so good"—all right; (2) Play up the sterner themes of duty and self-reliance (always a good line, says theDaily Express, when times are getting hard). I shall have a word to say presently about the remarkable and courageous speech of the Foreign Secretary the other day, because of a certain aspect of the case with which he dealt and which is not out of place in the connection in which I am speaking.

Then there is the order: Go soft on Labour disunity; let it speak for itself. I take note of these things, you know. But some of us have had long political lives. We have seen other disunities. I look at the noble Earl, Lord Winterton—an old and valued Parliamentary friend of many years' standing. When I was a lad I can remember the League of Young Liberals, and that the noble Earl had entered, or was just about to enter, Parliament. I remember all the controversy he brought with him—it was tremendous—following the great split between the Retaliationists and the Protectionists of 1904 to 1906, and the enormous victory which the Liberals secured as the result.

EARL WINTERTON

My Lords, as the noble Viscount has referred to me, perhaps he will take comfort from the fact—I do not know what my noble friends will think at my saying this—that the Liberal Party was more divided than it had been for generations, but they won an enormous victory.

VISCOUNT ALEXANDER OF HILLS-BOROUGH

I hope that the noble Earl is asking his colleagues not to be complacent in these matters. I think he is wise it giving that advice. I have lived through other splits. I have seen the Liberal Party split from top to bottom, so far without any major recovery.

LORD REA

So far.

VISCOUNT ALEXANDER OF HILLS-BOROUGH

Forty-two years. I have seen other splits, later than that. I saw the split in a time of great national economic difficulty in 1931, when there was a Labour Government without a majority in office. That was said to be the death knell of Labour. Was it? There never was such an example of a revivified and united Labour Party than that in 1945, and you are still taking, to your advantage and for the general good of the economy of the State, the physical controls that the Labour Government put into operation in 1945 to 1950. Every decent financier and manufacturer knows that to be true. That is the real case. We shall recover all right—do not worry about that. Because of the points that were so admirably made by my noble friend Lord Citrine to-day, as to what is inevitable in the end, it will be proved that, provided we can find a system of collective controls with proper and reasonable freedom to the individual citizen, there is no question about the speed and efficiency with which there can be an expansion in the economy of a State which is united on one objective: the organised and objective way of dealing with industry.

Now I turn to the views that we hold about the general position of the State. I see that the noble Viscount, Lord Amory, has returned. It would be less than courteous of me if I did not say a special word from this Opposition Bench about his speech to-day. It was an exceedingly happy and well-thought-out contribution, as we should expect from one with his great business, as well as Ministerial, experience. Perhaps he will forgive me for saying that I have always been particularly interested in him since he went into politics, somewhat later in life than some; and as I married a Tiverton girl in Tiverton, and as I spoke in the last General Election in Tiverton, I take a particular interest in Tiverton still. It is a town which has been largely dependent upon two things: the central industry of the town and on its dealings with the surrounding agricultural industry.

I am going to tell a little story, because I was thinking about the noble Viscount's remarks about controls. When I was First Lord of the Admiralty 1929 to 1931, one Sunday morning there was a knock at the door of my wife's mother's house in Tiverton where I was staying. Outside the door and waiting to see me was a gentleman—it was the noble Viscount, Lord Amory. I expect he has forgotten. Such was his great anxiety to see me that even on the Lord's Day he came because I was likely to be there. We had a nice little talk—most pleasant and quite in order. His object was to elicit my sympathy for the expansion of duties to safeguard the main industry of Tiverton.

When I think of some of the ideas that are present in the minds of some members of the Government, in contradistinction to some other members of the Government, as to the increasing value of free trade—I am not saying freer exchange of goods, but free trade—then I find it good to remember that our Chancellor of the Exchequer of yesteryear was able to come and have a friendly talk with a Labour Cabinet Minister in 1930 in case we should make the mistake of not giving some protection by way of having an effective home market to assist the export trade. No doubt he will remember that that was the basis of the conversation, and I am glad to say it has been most effective owing to his industry.

VISCOUNT AMORY

My Lords, I am most grateful for the remarks of the noble Viscount, and I really must consider following his example one day in selecting, if possible, a Tiverton girl.

VISCOUNT ALEXANDER OF HILLS-BOROUGH

My Lords, that is exceedingly kind, and I would say, in return, that I cannot for the life of me understand how it is that a gentleman of such good manners, so essential to a successful marriage, has not yet seen fit to indulge in that institution. These preliminaries now having been got over, may I turn to some of the main points I want to make this afternoon?

I want to say, first of all, that our position to-day is gravely affected by two main things—though there are others, of course. The first is the balance-of-payments danger; the second is the amount of the economy and the taxation necessary for our present defence programme. On that I come to what I have said was the most courageous speech of the noble Earl the Foreign Secretary. I thought that he spoke completely realistically about the dangers of the future. It was perhaps a confirmation of what Sir Anthony Eden said quite recently: that the present position was very confused indeed—I suppose he thought even more confused than in 1956—and that we were perhaps in greater danger to-day than we have ever been at any other time.

What is the situation in regard to the speech of the noble Earl the Foreign Secretary? It is that, apart from relying upon other parts of the collective Alliance of N.A.T.O. and what they can do for us, we have never been in such a weak position in relation to impending dangers, and at such a high cost, as we are to-day. We are spending in this current year £1,625 million upon our defence, and we cannot show, on paper at any rate, more than about one-third of the defence available to this country when I left the Ministry of Defence in 1950. One-third! —and the whole position to-day is even more directly affected by the revelation in the LondonTimesthat there is at this very moment a struggle going on apparently between the Treasury and the War Office, over the extent to which it is necessary to cut down the personnel in B.A.O.R.

Figures have been mentioned but I do not propose to go into them. But certainly the volume of collective defence we can put into the field, on the sea or into the air to-day, compared with the price we are paying, is—well, there is only one word: it is fantastic in its weakness. And I sympathise with the noble Earl the Foreign Secretary, and with any Foreign Secretary, of any Party, who has to write urgent notes of decision without any lead in his pencil. And that is the fact. Let us look at the reason for this position of defence and cost. I say that it is because the country was misled in an early Election—in 1951, which was preceded by a softer Government than the previous one—on the idea that what was required was to free the economy, but especially to "Set the people free". The noble Earl the Foreign Secretary appeals to us to-day on the basis that he hopes the people of Britain will have sufficient stamina to accept the (I think) implied hardships that must arise in meeting the dangers of the position. There is the rub. I believe he is right. I hope that we shall have the stamina, but I hope also that we shall recognise how the position has come about.

The fact is, of course, that with that freeing of the economy, and the constant rise in the cost of living afterwards, without proper controls to set off our balance of payments, costs of production have increased to such an extent that it has been quite impossible for the Service Departments to meet the planned programme agreed between the Allies in 1950 and 1951. They have not been able to do it. It is true that at one point Her Majesty's Government have broken away from maintaining larger conventional forces and indulged in very heavy experimental expenditure, relying far too much —in fact completely—upon the ultimate deterrent. But the general position is that the Government have not fulfilled even what they themselves would have desired to do: the cost was so great that the plan could not be carried out. The real quarrel going on, so far as the Treasury and the War Office are concerned, is whether or not we can afford to keep the present basis of land forces in Germany—and this at a time when we are under pressure of continuous threats from the leader of the Communists in Moscow.

That gives a lead to what is the true danger in the situation, and brings me next to one of the points that was dealt with by my noble friend Lord Wise yesterday with regard to agriculture. Agriculture was rightly praised by the noble Earl, Lord Waldegrave this afternoon for its services to the State. I think he was quite correct in his appreciation of the situation agriculture holds in the country. But the fact is that while, when danger arises, agriculture is looked to as the salvation of the situation, when the danger recedes (this has usually been the case in the past, certainly up to 1945), the services of agriculture are forgotten. The history of the country for the last century proves that. But since 1945 the position has changed. A Labour Act of Parliament set the standard for a permanent recognition of the economic importance of the agriculturist which was his due, and, secondly, acceptance of the fact that the agriculturist is absolutely essential to the balancing of the economy. So far from money spent by the State on agriculture having been wasted, on the contrary the very figures quoted by the noble Earl the Parliamentary Secretary this afternoon proved that, had it not been for the actual increase in the agricultural contribution from production in the last fifteen years, our balance-of-payments position would have been entirely in ribbons. That is the fact. Yet what is the treatment of agriculture at the moment?

I believe that the noble Viscount, Lord Hailsham, called the Conservative Election appeal the "Manifesto". That said that the Party would adhere to the 1957 Act. But is the 1957 Act in adherence to the promise to maintain the 1947 Act? It is not. And the practice has been very different since. The Manifesto of the Conservative Party was very careful to say that they would limit themselves not to go below the basis of the 1957 Act in the lifetime of this Parliament—not exactly the happiest way of giving encouragement to agriculture and expanding investment in the agricultural industry. But there it is, and it speaks for itself. I say to your Lordships that in the danger of an impending conflict, if there is going to be a conflict—and I pray to God there will not be—we should never let down our agricultural industry in any sense whatsoever.

In the second place, if the Government are contemplating the kind of thing mentioned yesterday in the Supplement to theFinancial Timesabout entering into the Common Market, they should at the same time consider very carefully the other matter. Our ability as a nation depends not only upon British agriculture but it will depend here, and in all those nations in support of the North Atlantic Treaty Organisation, on wholehearted and wide support from our Dominions and from the rest of the British Commonwealth. I beg that on these matters Her Majesty's Government will take due note of the anxiety felt by many people in my Party (I will not say all my Party) on this matter.

Then I come to look at the matter in a little more detail. What steps, really, in support of this balancing position in the national economy of agriculture are the Government taking to prevent very large losses of agricultural land to the industry? If Mr. Woolley's estimate is correct, by 1970 the industry will have lost, with the losses that have already taken place since the war, agricultural land equal to the extent of three counties. We are likely to be losing in the next ten years, at any rate, between 30,000 and 40,000 acres per annum. That is a very serious thing. If we are going continuously to meet the retrogression in our export market and to pay for the raw materials and food which we still import, we shall need to keep every acre possible to ensure that agriculture contributes its proper balancing factor to the economy of the community. I beg the Government to look at that very carefully.

I am grateful to Mr. R A. Butler from the point of view of the agriculturist for the publicity he has given to this aspect of the subject in the country. It is a pity that in this matter the Government seem to be widely divided; and it does not matter what sort of explanation was given yesterday, I cannot reconcile the two speeches, the speech of Mr. R. A. Butler and the speech of the Colonial Secretary, on this subject. We will leave it to the wonderful experience of the noble Viscount who is to reply to tell us exactly what the situation is.

With regard to the statements made, reinforced by the noble Viscount, Lord Amory, about the high level of our economy and standard of living, I wonder whether the noble Viscount, Lord Hailsham, could confirm that they are borne out by the purchasing power of the pound. I am looking at statements made in Written Answers. I meant to put down the dates, but forgot to do so. However, they are both Written Answers in the other place given in the last few days. One statement, in one set of circumstances, says that the purchasing value of the pound has been reduced since October, 1951, from £1 to 16s. 5d.; the other Answer says to 15s. 2d. Which is the correct one? I should say, judging by all the movements that take place between trade unions and employers' federations, arbitrations and the like, that the latter figure, 15s. 2d.; is more likely to be the correct one. But how one can possibly argue about the general success of our monetary policy and see such a decline in the value of the pound in that length of time, I fail to understand.

I know perfectly well that when we were confronting great difficulties between 1945 and 1951, the keen Conservative Members made great play about this very factor, the value of the pound; and, in fact, we had to deal with it once in a very drastic way indeed. And yet when I look back to that time I am confident that Members opposite are entirely wrong if they compare the present position with that of the Labour Government from 1945 to 1951. The Tories have always in history been exceedingly clever at the political game which was called "Stealing the Whigs clothing while they are bathing." And we have had periods of bathing. But what is quite certain is this: there is no honest economist, industrialist or Parliamentarian who can deny that if, in the position of bankruptcy this country was in at 1945, we had adopted your free-economy basis, you would never be able to maintain the high economy you have to-day. In the period from 1945 to 1951 was laid the foundation of whatever prosperity in trade, industry and commerce is being made available to the people to-day. There is not the slightest doubt about it. I would challenge anybody to produce facts which controvert the basic truth of my statement.

I should like to say this also. The present position in industry to-day gives rise to serious consideration with regard to individual injustice. That exports must be stepped up to meet our balance of payments condition, I entirely concur. I have heard almost nothing at all in this debate about the situation of the motor industry. Here is a position which is almost frightening in its possible effect upon our industry and our balance of payments. I know quite well that at the present moment we say we have a very low percentage of unemployed: 1.7. But what is going to be the position if the present decline goes on in the motor industry? I think it is likely to Abe quite serious. And we are being, faced with the fact that you are indulging in what looks to be quite unjustifiable expenditure on behalf of this industry in North-West England and in Scotland, in areas which have been suffering from unemployment. And while these very things are going on, one of the firms concerned at Luton has had to stand off thousands of workers and put thousands more on short time. Surely we must recognise what used to be called "the handwriting on the wall", and take proper steps to deal with the situation so far as we can.

I think that the motor industry, taken as a whole, has every right to say it deserves the thanks of the nation for the contribution it has made to our economy in the last fifteen years. It has been a very big contribution. I think that still they have some things to learn before they can be certain of both capturing and maintaining a foreign market. One thing especially always is important to the motor industry, and that is that everywhere where it sells it should maintain 100 per cent. perfect service for the particular products it sells. When I can say that I bought a new car a few weeks ago and was on holiday with it and that in a city like Bristol (with nearly 450.000 of its own population, and with certainly 500,000 or 600,000 people within a radius of a few miles) it took me 48 hours to get a simple electrical switch as a spare to replace one which had become faulty in a new car, it looks to me as if that industry, and perhaps other industries as well, want to make quite sure, when they are dealing with the export market, that they have a service of their product which is completely adequate.

I will turn, if I may, to the steel industry. My Lords, a great deal of credit is claimed on behalf of the Government's action in relation to the steel industry; and no one can deny the importance of the contribution that steel makes to our economy. But may I say this? I am astonished that the Government should persist in their policy of getting rid of steel undertakings at a dead loss to the citizenship. How does that arise? Let me turn for a moment or two to some evidence, and look at the facts about the steel industry. The latest example I have here is with regard to the Staveley Iron and Chemical Company, Limited. Now, my Lords, the State paid compensation to that organisation of no less than £8,200,000 when it passed into public ownership in 1951. Since that date, it has made a regular profit; the highest in one year, 1957, being £1,822,000, and I think the lowest (I have not the complete figures) being last year, when it was over £650,000. How is this institution disposed of? It is disposed of to another steel organisation for a price which is £2,200,000 lower than the amount the State paid in compensation when taking it over. How do the Government come to do, or to allow, a thing like that? And who gets the "bunce"? This is not the only case. We have had to turn to this sort of thing again and again before. I think we are entitled to ask, with regard to the future of the economy, exactly how this is going to affect future deals of the same kind.

Shall we have a word about Richard Thomas and Baldwins? I am quite sure the noble Lord, Lord Mills, knows a good deal about the negotiations which have gone on from time to time and which, apparently, have been stopped or delayed for the time being. I think we ought to be told, in relation to the economic position of this country, what are the intentions of the Government about Richard Thomas and Baldwins. What is the position there? Let us have a look at the figures. Richard Thomas and Baldwins have made profits since public ownership—and the concern is still in public ownership—of £70 million. We had a certain pledge yesterday about what was not going to be hived-off from publicly owned industry. Is it intended to hive-off from the State this £70 million which has already accrued to it? Are the Government going to hive that off? If so, why? And for what? Where is the public interest being taken into account?

Let us consider what would be taken over. The value of the capital and reserves when acquired was £19 million; the value of the capital and reserves now is £56 million. The value of the fixed assets was £15 million; the value of the fixed assets now is £44 million. I hope that we are not going to get a decision on this such as has been announced in regard to spending £18 million of the State's money on subsidising the Cunard Company—announced before Parliament was consulted. It is bad enough to have £2,200,000 lost to the State over the Staveley Iron and Chemical Company, without being put into a position of still greater loss over this one—and that in spite of all the development under public ownership. I was glad when my noble friend Lord Citrine put up the case which he did this afternoon about the public Corporations: and, of course, we have an excellent case. The combined surplus of the nationalised electricity undertaking up to March, 1959, was £125 million. We never heard much about that during the General Election from the Tory platforms. The gross value of assets on vesting day was £830 million: now it is £2,556 million. Is this an example of the failure of national ownership, or direction of national corporations?

When we ask for physical controls or controlled ownership, it sets up a snigger or a laugh: the comment is. "What madness these people talk!" But, as was so clearly illustrated yesterday by my noble friend Lord Latham, it is the constant interference with the public Corporations that has led to the lack of proper and ordered progress in the transport industry. Take, for example, as was mentioned by my noble friend yesterday, the hiving-off of the best part of British Road Services from the Transport Commission. The fact is that the road transport services which are still publicly owned have shown, since the vesting date in 1951 until now, a total profit of £38 million, in spite of the ruinous entry into the industry, interference and selling of much of their product by the Government. Then we are told (the noble Lord, Lord Mills, said this yesterday) that it is always to be remembered that they are in favour of a free community and economy. And these things can be done to an industry because it is nationalized! These things can be done in the virtuous name of freedom of industry, although it is to the detriment of the State. When one comes to deal with the serious position which arises now in what we think are the dangers impending, then we wish the Government would pay more attention to us.

There is a point that is very often raised, as it was once or twice in interruptions by the noble Lord, Lord Hawke, yesterday, about British labour, that I want to answer. I am not in favour of "wildcat" strikes and sudden stoppages. Nothing is more detrimental to the ultimate success of the workers' own case, apart from the bigger danger to the general economy of the State. But when we come to look at the facts, what do we find? Again I go to theDaily Expressfor my authority on this, not to a Labour paper. This is the issue of September 5, 1960. It says: Some people bitterly attack them over wildcat strikes. They condemn the union leaders for failing to control their members. But what are the facts? Full employment and prosperity certainly give reckless elements a fine opportunity to make trouble. That is always the case. But the paper goes on to say that, in fact, on an average, only half an hour per annum for each worker has been lost by any of these means. Then in another issue of theDaily Express, appeared this statement: The general position is that the number of days lost by work being missed by strikes in the United States is five times the percentage of workers that it is in this country. Five times, my Lords—and the United States is held up to us as a magnificent example, of the best and highest order, of a free, capitalist State. I think that some of the attacks made upon us and upon our organisations are wholly unworthy.

My Lords, I had intended, but I shall not have time, to comment upon the difficulties created in the balance of our economy by the policies pursued, to which my noble friends have referred, on housing and rents. Shall we ever learn the extent to which the action of Government in these matters, in constantly putting up the cost to the individual, is bound to raise the cost of every one of our products? And the effect upon the finances of local authorities and the unfair restrictions on the capital provided for local authority and public investment only adds to that particular difficulty. I hope that that will never be forgotten.

My Lords, may I, finally, say this? I know that I speak vigorously, and I hope that your Lordships do not mind that. I do not mind at all when the noble Viscount the Leader of the House is vigorous in an argument. I think we must always choose our terms with care, whether we are speaking for this side or for that, but I hope your Lordships will forgive me if I do speak vigorously. I feel deeply on these matters, and I beg you, in the present circumstances, to take very grave account of the dangers impending. We think we have shown that the plans of the Government are not sufficient to maintain a sound economy. We think that the constantly cavorting about between this policy and that, now up, now down, now middle way—as I said in the case of agriculture, suddenly clamping down production in this or the other commodity—is not good for the country. Fancy the spectacle to-day of bacon factory after bacon factory in danger of closing down! And they are in danger of being closed down at this moment because of the indecisive policy of the Government in this matter.

If we really want to get a basis for confidence in industry we must have controls, whether they are actual controls on imports or simply control over what shall be the major emphasis with regard to exports. But they must be understood. With this type of control everyone is free to give the very best of his ability for the general good of the State, and we shall have some reasonable chance of getting to a position where, however high our economy has gone, we have a chance, if there is loyal support throughout the State, of maintaining it.

6.33 p.m.

THE LORD PRESIDENT OF THE COUNCIL AND MINISTER FOR SCIENCE (VISCOUNT HAILSHAM)

My Lords, I am sure that I shall have the whole House with me in saying that lustre has been added to this debate by the intervention in our discussions for the first time of my noble friend, Lord Amory.

SEVERAL NOBLE LORDS

Hear, hear!

VISCOUNT HAILSHAM

All his friends in this House have been eagerly awaiting the moment at which we could welcome him in this way. I should like to acknowledge, too, the extremely generous tributes with which he has been welcomed by the Benches opposite. I do not think that, in the circumstances, he could have hoped to be entirely uncontroversial. Indeed, I would say that he would have greatly disappointed both sides of this House if he had not given an absolutely unprovocative but still necessarily controversial defence of the policies which he pursued so recently as Chancellor of the Exchequer. Therefore I feel he caused no offence on the Benches opposite by taking the line he did, although I think he would like me to say that we greatly appreciated the self-restraint which was exhibited. No doubt on other occasions there will be frequent interventions when he expresses his views, but we greatly appreciated the fact that his first speech was not only universally acclaimed, as I think it was, but also treated with the conventional respect that we grant to "maidens", although in his case that is only a comparative term.

I should like to begin what I have to say with an apology for the fact that part of yesterday's debate I had to read up inHansard. As I told the noble Lord, Lord Ogmore, yesterday, I had for some time been under an obligation to attend the by-election meeting at Carshalton, and I had not expected, until a few days ago, that it would be necessary for the House to sit on Monday. It was for that reason that I had selected that day to go there. I went there with great inspiration from the speech of the noble Lord, Lord Ogmore. I spoke for forty-five minutes to his prescription. I never said that they "never had it, so good"—and not a word did the papers report this morning. Before I went, I also noticed the plea—perhaps it was the courteous complaint, rather—of my noble friend, Lord Balfour of Inchrye, who felt that the debate on the Address was perhaps,par excellence, an occasion for Back Benchers, who perhaps had been crowded out of the earlier part of the debate yesterday. He commanded my entire sympathy in this matter.

Of course, once an Amendment is dawn, it is really for the Opposition to dictate the pattern and tempo of the debate. They fired off, as they did, their Front Bench guns in succession at the beginning of it, and almost rendered it necessary that we should employ our heavy howitzer behind me. I am sure the House would have been disappointed in that situation had he not been employed tactically in this way. If my noble friend will pursue this question of the right of Back Benchers and the, desirability of their having time., through channels of which he is aware, I can assure him that, so far as I am concerned, we shall treat his complaint, which I thought most reasonable, extremely friendlily.

LORD BALFOUR OF INCHRYE

My Lords, may I also include within the terms of reference of this matter the length of speeches from the Front Benches, which I think perhaps, when we come to an hour and ten minutes, are a little on the long side?

VISCOUNT HAILSHAM

I know I have erred myself in this respect, and perhaps I shall err again this evening, but it is done out of a conscientious desire to deal with points which are made, and I know my noble friend was interrupted—quite legitimately interrupted—on a number of occasions, which probably led him to expand his remarks. However, I must say that, having listened to him, it seemed only half the time, and I was surprised to see the time he had taken when I readHansardthis morning.

The noble Lord, Lord Pethick-Lawrence, began his speech by referring to me as the "noble and buoyant Viscount". Political leaders are sometimes buoyant and sometimes less buoyant. I can only say that I hope, at 53, I am half—perhaps not more, but half as buoyant as the noble Lord, Lord Pethick-Lawrence, is at 89.

SEVERAL NOBLE LORDS

Hear hear!

VISCOUNT HAILSHAIM

If I achieve this modest ambition, I feel I shall have remained extremely buoyant indeed. The noble Lord invited me to lay my hand on my breast and to say that I was entirely happy about the economic state of the country. Politicians, in the main, are divided into breast beaters and non-breast beaters, and I, by conviction—and I hope by practice—am a non-breast beater. But, none the less, I will tell the noble Lord that on this occasion I will, respond to his invitation. I do not think it is the function of the Government to be satisfied with the economic state of the country for which it is responsible. On the contrary, by the time it gets satisfied about the economic state of the country for which it is responsible, I should think it was about time it began to move—that is to say, if an adequate substitute can be found. Our business is to improve the economic state of the country, and it is about that that I want to speak in this final speech on this side this evening.

Perhaps I might add this, since it forms such a notable feature of the debate yesterday. Speaking for myself, at any rate—and I have now spoken in Treasury debates since the beginning of 1957—I have always been much more impressed with what I think my noble friend Lord Balfour of Inchrye referred to as the knife edge of the British economy than d have with any sense of satisfaction in the high degree of prosperity which has undoubtedly been reached. But I would say that there is no real purpose served either by deprecating or denying that a high degree of prosperity has in fact been reached, or by denying that that prosperity is enjoyed precariously. It is precisely the contrast between the thigh degree of prosperity which has been reached and the precariousness which we all feel, partly due to the international situation, that causes us to have these repeated economic debates.

May I say this to the noble Lord, Lord Ogmore? During the period of my responsibilities, to which he referred, I was very conscious of what the right path should be in projecting the case for the Government during the Election. I can assure him, quite honestly, that certainly I. and I am sure my colleagues, because, of course, we were working in close consultation in the matter, desired from the first, and on the whole tried, and I think successfully tried, to put the position before the country in a spirit of sober moderation about the possibilities and dangers. Although I know that noble Lords opposite will not agree with me when I say this, if I were asked to say in a sentence why it was that we had secured a success which was better than some people had expected, I would answer that it was because, rightly or wrongly, we succeeded in convincing the country that we were more aware of the danger to our economy of excessive buoyancy (if I may borrow Lord Pethick-Lawrence's phrase) than were the Party of the noble Lords opposite, whose economic programme seemed to us, and so we had to say to the country at the time, to be reckless in the extreme.

Why, then, is it that the noble Lord, Lord Ogmore, is quite right—and he is quite right—in saying that a general belief has grown up that the Election was fought and won on the slogan, as it is wrongly alleged, "You never had it so good"? I think I know the reason —because in the nature of things I had to study this extremely carefully. It was because the slogan was taken out of its context, as I have tried to show, by our critics and an attempt was made to turn it into a sneer. But, unhappily for them, the sneer turned back on those who uttered it, because the fact of the matter was that, although we did not make much of the fact, the country never had been so prosperous. When the noble Lord, Lord Pethick-Lawrence, invites me to put my hand on my heart and say that I am satisfied with the economy of the country at the moment, I cannot do so because of the element of precariousness of which I have spoken; but, equally, I can put my hand on my heart and say that I do not think that he has made out a case of censure of the Government in relation to the economy.

My noble friend Lord Amory has done so much of my work this evening that I do not wish to repeat anything he said. But employment never has been so high. Exports, it is true, are threatened at the moment, for reasons which I do not believe that I can attribute to the Government; but, equally, they have just reached an all-time high level. Production may have faltered at the moment, for reasons we can discuss, but it has never been so high. Our currency has never attracted so much credit abroad. Indeed, the embarrassment from which we are now alleged to be suffering is that of "hot" money; too many people wish to send their money here because the pound has never been so good. Wages, too, have never been so high, rising, I am happy to say, faster than prices, and, I am sorry to say, so far as I can see, tending to rise a little faster than production. Prices, too, have been level, as my noble friend reminded us, for more than two and a half years. Like my noble friend, I am surprised that in this great indictment, which never seemed to get off the ground, so little mention was made of level prices.

There is not much ground for censure here, or for the Amendment to the Address. By and large, I would recognise that our prescription has succeeded. I know that by the conventions of public life, which are perfectly well understood by all, and they are honourable conventions, I am bound to contend that in no single instance have we ever made a mistake. Your Lordships do not really expect me to lay my hand on my heart and say that, though I am bound by convention to say it; but I would claim, with my hand on my heart, that, by and large, our prescription has succeeded. Equally, I would lay my hand on my heart, though I should not expect to find agreement opposite, and say that by and large theirs has proved to be a failure. Broadly speaking, if I may outline it in much fewer and less decisive words than those of my noble friend Lord Mills yesterday, in the nine years in which the principles in which we believe, rightly or wrongly, have been applied, one danger after another has been overcome, and—I must remind your Lordships—always overcome in the midst of the most gloomy Jeremiads from distinguished speakers of the Labour Party, who always warned us that things were going to be a great deal worse the day after to-morrrow as the result of the policies which we were following.

It is true that, as the noble Viscount the Leader of the Opposition told us, we started from a common point of agreement, in 1945, with measures of physical control which had to be continued after the war. But the difference between the two Parties is that we thought that they were inherently things which ought to be discontinued as soon as possible, while the noble Lords, like the Bourbons, have come here this afternoon having learned nothing and forgotten nothing, and still say that we ought to have some measure of physical controls. That seems to me to be the difference. The first part of our period of responsibility was from 1951 to 1955 when, as a result of releasing controls, in the face of constant dire warnings of things which never came to pass, we succeeded in getting rid of shortage and moved out of the period of scarcity and rationing into a period of abundance and plenty such as had never been equalled up to that time.

There are those who complain that we did not produce an ordered economy, but our answer to that is that the economy of which we still have a lively memory under what was called democratic Socialism, that period of regulation to which the noble Lord, Lord Citrine, harked back with pleasure, was not an ordered economy, but a litter arid mess of regulations under which life became progressively more and more intolerable and in which control and regulation bred the shortage it was designed to remedy. That is what I would say about it. So far from not having produced an expanding economy, between 1951 and 1955 we succeeded in introducing into this country a degree of consumer expenditure about which the worst thing that has been said by the Benches opposite is that it was excessive. In fact, I would say that we did succeed in producing an expanding economy.

During the period 1955 to 1957 came inflation. Again we applied a remedy, in some degree, of which it is impossible to say here that the objective or effect was not an ordered economy. We were fighting inflation and we applied the monetary remedy. It is true, of course, that noble Lords opposite, with the sincerity and eloquence which they always show, told us that this was a dreadful thing to do; that the trouble would never be cured by monetary regimentation and by the control of inflation. Speech after speech was made in which we were warned that this was quite inadequate to meet the situation. But the fact remains that we did, between 1955 and 1957 and the months that followed in the beginning of 1958, achieve an ordered economy by means of the prescription that we laid down. Whether or not that ordered economy could have been achieved by the prescription which noble Lords opposite would have substituted for it—again our old friend physical controls—is something that we shall never know.

But I would say this to the noble Lord, Lord Pethick-Lawrence, who complains of our use of a high bank rate for this purpose for reasons which I thought my noble friend Lord Amory fully explained: that apparently the difference between us is that where you get a threatened inflation, and we raise the hank rate for the purpose of exercising some restriction on the inflation, he would reduce the bank rate to 3 per cent. or 4 per cent. If that is his prescription, I would only say to the noble Lord—

LORD PETHICK-LAWRENCE

My Lords, I cannot agree with that. First of all, I never said that a high bank rate would not cure inflation; I said that it could be cured better by a less expensive and less injurious method. In the second place, I never suggested that we should reduce the bank rate down to 3 per cent. or 4 per cent. What I said was that this high bank rate had serious consequences, one of which was that it raised the cost of building houses; and that had the bank rate been lower—and I took the figure of 3 per cent. only as a contrast—and been kept lower, the rent of houses would have been less.

VISCOUNT HAILSHAM

Of course I would agree that any form of restriction, whether in the form of a credit restriction or an increased bank rate, will have the effect explained by my noble friend Lord Amory—that is to say, it will cause somebody pain; and those who have to impose it will do so only with regret and only in a case of necessity. I accept what the noble Lord, Lord Pethick-Lawrence, has said about what he himself has advocated, hut I am certain that I can produce chapter and verse from the Benches opposite, which is what I said at the time, in justification of every word I have just uttered. But whether that be so or not, what we are discussing is an Amendment, in effect of censure, claiming that we did not achieve in that period an ordered economy. I claim that the facts prove otherwise.

Then at the end of 1958 the world moved into a period of recession. Again noble Lords opposite sang the praises of physical controls, and again our view was that this world recession, which was, after all, the biggest challenge which our free economy had faced since the war—a challenge of unemployment, and it resulted in unemployment in many other countries too—should be met by the Government by means of a relaxation of the controls that we had imposed, which was largely what my noble friend did in the first part of the period of his Chancellorship. Again that worked, because, although we were beset with dire threats of ruin from the Benches opposite, and they told us that we should have unemployment (many of them, with manifest sincerity, and sometimes with deep feeling, reminded us of the days before the war when mass unemployment was the rule and not the exception), the fact is that it was a danger which never came to pass. Again the prescription worked, and because it was the appropriate remedy, again we had the return of an expanding economy. Indeed, I think I am right in saying—and I say it in the presence of my noble friend Lord Amory—that as a result of my noble friend's measures production was raised by about 12 per cent. in twelve months. That was very fast. This was the result of the procedure to cure the world recession.

We are not now dealing with that particular danger. Since the Election we began, according to our programme, wiping out one by one and wherever we could the pockets of local unemployment in the country, since we thought—and, as I have shown, thought rightly—that, at any rate for the time being, the danger of national unemployment had receded. We have, in fact, achieved that object. The latest figures are most encouraging. In the North West, which was at one time, as noble Lords will remember, one of our chief anxieties, it is down to 1.7 per cent.; even in Scotland it is 3.3 per cent.; in the North it is 2.5 per cent.; in Wales it is 2.4 per cent.; and in Northern Ireland, which, I am sorry to say, has always been the worst of all, it is down to 5.9 per cent. This was not a bad achievement in securing an ordered and expanding economy. I do not think noble Lords have given us enough credit for the operation of our two Acts, the Distribution of Industry Act and the other Act, which have produced these results.

But, of course, once there is full employment on the scale we are now enjoying, and the productive capacity that we were not making full use of during our period of recession is taken up and used to the full once again, you will find a certain danger for prices to rise arid for inflationary tendencies to assert themselves. Of course you will also find that there are some grounds for not believing that world trade is expanding as fast at it should; and there are grounds for looking at our export position with renewed anxiety. But that is precisely what we are doing, and it is precisely the policy of the Government to guard against these risks and to seek, if possible, to avert them.

I do not share to the full the sense of gloom of the noble Viscount opposite at the future of the motor industry. I would say that, so far and up to the moment, its difficulty has far more been due to the appearance of the American compact car in the markets of the world than to anything that the Government have done. But I cannot but notice, in examining the industry's future plans, the real underlying confidence with which it is facing the future. All its skilled labour has been retained. That is a mark of its confidence. In the machine tools trade, which is terribly short of skilled engineering labour, they have been unable to recruit any from the motor car industry. That is another mark of the industry's confidence. For my part, I believe and hope that this confidence will be justified. Therefore, I would say that over the period under review, although we have heard some quite extraordinary speeches from the opposite Benches, we have utterly failed to hear a single speech which has justified the wording of the Amendment: but humbly regret that the policies of Your Majesty's Government are not conducive to an ordered and expanding economy. Nor, my Lords, do I think that the matter is helped out by the various alternative criticisms, to which we have been invited to subscribe during the course of this afternoon's debate. It is no occasion for threshing out once more the future of the Cunarder; it is not an occasion for threshing out the Government's attitude towards the steel industry.

LORD OGMORE

The reason why we raised the question of the Cunarder was because the noble Lord, Lord Mills, asked us to do so.

VISCOUNT HAILSHAM

The reason why I am not raising the matter of the Cunarder is that it is not germane to the Amendment and it has been dealt with so fully and well by my noble friend Lord Mills.

We have to consider now where this debate is leading us. It is not the occasion, I should have thought, after the full explanation of my noble friend Lord Waldegrave, in reply to the criticisms of the noble Lord, Lord Wise, to go into great detail about the future of agriculture, or the loss of agricultural land, or the weaknesses, alleged or real, of our defence programme—although I can understand that it is more convenient for the noble Viscount opposite to raise that on an Amendment dealing with our expanding economy than on an Amendment of his own drafting which set forward any positive Labour plan for defence.

What we really have to consider at the present time (and I was hoping that this debate would develop upon those lines) is the extent to which, and the ways in which, our economy could be made to expand. Because underlying the Amendment, which I believe to be misconceived, and the Party politics which are legitimate but, I should have thought, strictly irrelevant, noble Lords opposite, or some of them, have drawn attention to what they allege to be the fact, and to suggest the possibility of an underlying evil. The fact which I have already sought to explain, and to which I do not think too much importance should be attached, is the temporary lag in the rise of production at a given moment. But the underlying question for us all—and here I would say that the terms of the Amendment are irrelevant, and the Party politics are unnecessary—is whether there is in truth and in fact something necessarily rigid in the post-war British economy; and, if so, what are we prepared to do, if anything, to escape that situation.

I cannot at this late hour develop the whole argument upon this part of the case, but I think it is fair to noble Lords who have raised the point—the noble Lord, Lord Pethick-Lawrence, was one; the noble Lord, Lord Latham, was another, and the noble Lord, Lord Stonham was a third—that I should say something about it. The noble Lord, Lord Stonham, invited me to expound in a little greater detail, although at this late hour I shall be as short as I can, some of the comparisons with other countries which are, to my mind, rather too readily made, about the extent of the expansion of the British economy in relation to them. Manifestly, comparisons with Japan and Russia are not very helpful—Russia particularly, because we, at any rate, and, I expect, many noble Lords opposite, have always held that you cannot have that degree of direction unless you are prepared to accept limitations to freedom which no democrat could do.

The more comparable economies are France and Germany; and here, of course, there are startling contrasts. I hope that the House will forgive me, but I have been doing a little homework in the past two or three days in preparation for this debate, and I could not help being extremely arrested by a book which has only just been published under the imprint of Political and Economic Planning, which deals with this very subject. It is a book which I think would repay a good deal of study on both sides of the House. As a matter of fact, it is not entirely favourable to Government policy. On the other hand, there are certain aspects of it which I think all of us would do well to digest, and there are certain aspects of it to which I am going to invite the specific attention of noble Lords opposite.

Let us take, first of all, France, as I should have thought probably the less apt of the two analogies. The first point which needs to be made about the rise in the French economy is the fact that they started from a relatively low level. The position was that their high level was well back—I think at the end of the 'twenties. Looked at in this light, says the book, the progress made after 1953 is not really remarkable, but only a belated attempt to recover from the economic shackles of the past 30 years. It was gained quite deliberately by the French Governments of the day by running down their sterling and dollar reserves in order to achieve the maximum expansion of production. That, says the book, was clearly admitted by M. Ramadier, then the Finance Minister, admitting that be had deliberately used the foreign exchange reserves in order to keep the expansion of output going, hoping for a reversal of unfavourable factors. That may be very good French policy, but the British currency is far more vulnerable to adverse balance-of-payments factors. I doubt whether a single one of your Lordships ever seriously suggested that it was a policy which we could possibly risk, or would now suggest that it was a policy which we could seriously have risked.

The third item in the French development which must not be forgotten is the considerable increase in the hours worked by the trade unions during that period. That may or may not be a wise policy for France. I doubt whether any noble Lord opposite would suggest it as something we should copy here. Yet it was one of the three factors which enabled them to achieve the rise in their production.

The moral to be drawn from the German analogy is entirely different. Here, to begin with, they had a factor which nobody wants here: an influx in the labour force of, I think, something of the order of 4 million refugees; something which helped them enormously, although at first sight it appeared to be a great disadvantage. The refugees were at first looked upon as an economic burden, but they have proved to be a tremendous windfall. Then there is the attitude of organised labour, and I invite the attention of noble Lords opposite to this if they are going to rely upon this analogy. Organised labour, says the hook, at least acquiesced in policies that paid little attention to fair shares, and went all out to create a thriving capitalist economy. Is that what they want us to do? If so, I should be glad to hear it stated unequivocally. Perhaps we could have a decision of the Labour Party Conference to that effect—we should find it very useful.

The book goes on to say, in case they might find difficulty in supporting this argument, that the policy of seeking economic expansion at the expense of social reform certainly made everyone much better off. The fact of the matter is that if one looks at the German economy, whatever other moral we can draw from it—and it may be that we can draw some—the moral is certainly not that free enterprise economics are bad economics. On the contrary, if we have differed from the German economy in any respect, it is because we are still paying a great deal of attention to the opinions of noble Lords opposite, and not to the free enterprise economists in whom the successive German Governments, with the approval of organised labour there, have confided their trust.

The fact, therefore, is, as we see it at this moment, that the Party opposite is in the position of a doctor who has staked his professional reputation on the efficacy of a single remedy which has proved not only inefficacious but even a deadly poison.

Underlying the failure of so-called democratic socialism there are, I think, some important lessons to be learned and some dangers to be guarded against. The events of the last 30 years and more have proved to us that, whether we are in an inflationary situation or in a period of recession, Britain cannot afford an adverse balance of payments. I think that was the lesson of 1931 no less than of 1951. Neither an ordered economy nor an expanding economy are proof against that. Order will not bring stability if the balance of payments is adverse; nor will expansion. But underlying that, again, there remains an evil. It is the possibility that this country at the present age is in fact suffering from something unduly rigid about its economy. Is this true? Are we stiffening in our joints? Are we suffering from a sort of arteriosclerosis? If so, I would say to your Lordships that we would all wish to fight it with all the means at our disposal.

Are we declaring dividends when we ought to be ploughing back profits into investment research and development, or quite simply into reducing prices? Are there still restrictive practices in the unions? How about individual trades—which I will not mention? Is labour sufficiently mobile? Are we always wise, when some industry has to contract, to feel that an irreparable disaster is taking place when men have to change their jobs? Are managements stockpiling labour in unnecessary jobs as they stockpile materials in time of shortage? Are we sufficiently concerned with exports? It may be that it is fatally easy to exploit some temporary advantage in home or overseas markets. But we may be sure that unless we as a nation, industry and Government, keep on the move technologically, commercially, competitively, our sins will find us out; and we may be quite sure, too, that if we blame anybody else than ourselves, even the Government, unless we happen ourselves to be the Government, for everything that goes wrong with us, then we shall never find out what we have to do to put things right.

On Question, Whether the said Amendment shall be agreed to?

Their Lordships divided: Contents, 33; Not-Contents, 72.

CONTENTS
Addison, V.	Darwen, L.	Ogmore, L.
Airedale, L.	Douglas of Barloch, L.	Pakenham, L.
Alexander of Hillsborough, V.	Geddes of Epsom, L.	Pethick-Lawrence, L.
Amulree, L.	Granville-West, L.	Rea, L.
Boyd-Orr, L.	Kershaw, L.	Shepherd, L.
Burden, L. [Teller.]	Latham, L.	Silkin, L.
Carnock, L.	Lawson, L.	Stonham, L.
Chorley, L.	Lucan, E. [Teller.]	Strabolgi, L.
Citrine, L.	Lucas of Chilworth, L.	Uvedale of North End, L.
Colwyn, L.	Morrison of Lambeth, L.	Williams, L.
Dalton, L.	Nathan, L.	Wise, L.
NOT-CONTENTS
Addington, L.	Chesham, L.	Elliot of Harwood, B.
Ailwyn, L.	Coleraine, L.	Fortescue, E.
Allerton, L.	Colville of Culross, V.	Freyberg, L.
Amory, V.	Conesford, L.	Furness, V.
Ampthill, L.	Crathorne, L.	Gifford, L.
Ashton of Hyde, L.	Crookshank, V.	Goschen, V.
Auckland, L.	De L'Isle, V.	Gosford, E.
Balfour of Inchrye, L.	Denham, L.	Hailsham, V. (L. President.)
Bathurst, E.	Devonshire, D.	Harris, L.
Bossom, L.	Digby, L.	Hawke, L.
Bridgeman, V.	Dudley, E.	Home, E.
Carrick, E.	Dundee, E.	Horsbrugh, B.
Carrington, L.	Dynevor, L.	Kilmuir, V. (L. Chancellor.)
Lambert, V.	Newton, L. [Teller.]	Strathclyde, L.
Lothian, M.	Perth, E.	Stuart of Findhorn, V.
MacAndrew, L.	Radnor, E.	Swinton, E.
Margesson, V.	Rathcavan, L.	Teviot, L.
Massereene and Ferrard, V.	Robins, L.	Teynham, L.
Melchett, L.	Rockley, L.	Torrington, V.
Merrivale, L.	St. Aldwyn, E. [Teller.]	Tweedsmuir, L.
Mersey, V.	St. Oswald, L.	Waldetgrave, E.
Mills, L.	Sinclair, L.	Waleran, L.
Milverton, L.	Somers, L.	Winterton, E.
Newall, L.	Spens, L.	Wolverton, L.

Resolved in the negative, and Amendment disagreed to accordingly.

On Question, Motion agreed to,nemine dissentiente: the said Address to be pre- sented to Her Majesty by the Lords with White Staves.

House adjourned at twenty-four minutes past seven o'clock.