Lords Sitting of 27 July 1961

Preamble
The House met at a quarter before three of the clock, The LORD CHANCELLOR On the Woolsack.
Prayers—Read by the Lord Bishop of Chichester

LORD COUTANCHE
Sir Alexander Moncrieff Coutanche, Knight, having been created Baron coutanohe, of Saint Brelade, in the Island of Jersey—Was (in the usual manner) introduced.
The Marquess of Zetland—Sat first in Parliament after the death of his father.

EXPORTS TO CHINA AND SOVIET BLOC
3.2 p.m.
VISCOUNT ELIBANK: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether, in view of the fact that this country is now short of some £200 million of exports to pay for all that it spends abroad, they will make it plain that they can no longer accept any embargoes on exports to China and the Soviet bloc except on munitions and items of direct military significance, thus removing restrictions which, directly and indirectly, gravely hamper our exports to these markets.]
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR FOREIGN AFFAIRS (THE MARQUESS OF LANSDOWNE): My Lords, as I informed the noble Viscount in my reply to his Question on April 25, United Kingdom exports to the Sino-Soviet bloc are only marginally affected by the small number of industrial items and materials on the Embargo List. The number of embargoed items is kept to the minimum consistent with our security, and, in consultation with our Allies, is under constant review in the
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light of current technological developments. Our trade with the Sino-Soviet bloc has been expanding steadily in recent years, and we hope this trend will continue. The 1960 figures show an increase of 25 per cent. over 1958. As I have told the noble Viscount, the principal limiting factor on our exports to the Sino-Soviet bloc is the amount of sterling available to them.
VISCOUNT ELIBANK: My Lords, I beg to thank the noble Marquess for his Answer. How can he say that the embargo has no limiting effect on the export trade, seeing that in the House of Commons on May 30 Mr. F. J. Erroll gave a table which showed that the spectacular increase in our exports to China from 1957 onwards from £10 to £32 million in 1960, was almost entirely in ferrous and non-ferrous metal products, special-purpose machine tools, and tractors, all of which were previously embargoed? May I ask this further question'? How long in the matter of the Chinese embargo are we to be tied to the overriding influence of America, which does no export trade with China at all but which, notoriously, is determined to put a brake on our export trade with that country?
THE MARQUESS OF LANSDOWNE: My Lords, I do not suppose that the noble Viscount did it deliberately, but he did not in fact repeat the words used. I said that our exports were "only marginally affected" I did not say that they were not affected at all. As to what the noble Viscount repeated of what my right honourable friend said in another place, it is perfectly true that the list of embargoed items is steadily decreasing. But as to whether we are in any way tied to American policy, of course, that is perfectly untrue. The members who subscribe to COCOM are the members of N.A.T.O., minus Iceland and plus Japan. These members together agree what items should and should not be on the embargo list; and the items which are on the embargo list are the items which it is the considered view of the members could endanger the security of the countries concerned.
VISCOUNT ELIBANK: My Lords, but even so, that reinforces my argument that it is for Great Britain to go all out to put an end to this embargo. With regard to America, the noble Marquess

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said it was perfectly untrue. But it is just common knowledge that America has an overriding influence in this matter.
THE MARQUESS OF LANSDOWNE: My Lords, the noble Viscount is very persistent. I think that I must remind him of this—he knows it just as well as I do, because he has studied the question—that in fact the limiting factor is shortage of sterling, and really there is nothing more to say on this matter.
BARONESS SUMMERSKILL: My Lords, in view of the noble Marquess's assurance on this matter, are we to understand that this very long list in the Journal of the Board of Trade for May is now quite out of date and that it has been substantially reduced? Can the noble Marquess tell us what things have been taken out of that list?
THE MARQUESS OF LANSDOWNE: My Lords, I cannot anticipate for the noble Baroness what will be taken out of the list, but I think I said on a previous occasion that items are taken out, and also added, according to technological developments. The list at the moment stands at 118 items. In the middle of August it will be published, but I cannot tell the noble Lady exactly what figure it will stand at then. I hope that is fairly clear.
VISCOUNT ELIBANK: My Lords, is the noble Marquess aware that the shortage of sterling is a wonderful slogan, but it is not the governing factor in the situation?

DRIFT-NETTING OF SALMON
VISCOUNT ELIBANK: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they are now in a position to announce measures, legislative or otherwise, to put an end to drift-netting for salmon off the Tweed and other parts of the Scottish coast.]
THE MINISTER OF STATE, SCOTTISH OFFICE (LORD CRAIGTON): My Lords, I can assure the noble Viscount
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that the Government's consideration of this matter is proceeding with all possible speed and that an announcement will be made very soon.
VISCOUNT ELIBANK: My Lords, can the noble Lord say what is holding up these negotiations? Is it that England is lagging behind Scotland in the matter? Another question I should like to ask is whether the noble Lord realises that, unless steps are taken to bring about the cessation of drift-netting for salmon, British salmon could become extinct within the course of a few decades? May I ask him this specific question? Would not regulations to control the marketing of salmon, involving a declaration of the source of supply, go a long way towards removing the incentive to fish for salmon outside the present legal limits? That is a definite suggestion.
LORD CRAIGTON: My Lords, I can assure the noble Viscount that in this, as in all important matters, our two countries are as one: there is no difference of opinion between Scotland and England. As regards the question of salmon being extinct in a few decades, that, of course, is a very important matter, though I doubt whether I would go so far as the noble Viscount. As regards the noble Viscount's third question, I think that he would be wise to await the announcement.
LORD FERRIER: My Lords, with all due respect to my noble friend Lord Craigton, "very soon" seems far too indefinite. Is it possible for him to give us something more specific?
LORD CRAIGTON: My Lords, I hope before the end of next week.

BARLEY PRICES
LORD WISE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government if, in view of the arrangements made for the importation of Russian and other barley, they are prepared to take steps to ensure that the price to be paid by purchasers of home-grown barley of this year's harvest will not be lower than the minimum for imported barley of similar feeding quality.]
THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (EARL WALDEGRAVE): My Lords, the action which the Government has recently taken on dumped or subsidised imports has already brought about a significant improvement in the market for home-grown barley. There is every reason to hope that the price of homegrown barley delivered to port mills will keep broadly in line with that of imported barley of similar quality, provided growers do not overload the market with supplies. This season, growers have an incentive to spread their sales more evenly throughout the year under the statutory arrangements which your Lordships approved on 26th June last.
LORD WISE: My Lords, while thanking the noble Earl for ibis reply, I am afraid that I must disagree with the suggestion that the price of barley has risen to any considerable extent. Is the noble Earl not aware that the price of feeding barley 'at the present moment is at least £2 a ton less than the price of imported barley of the same quality? If that is so, is it not a case of,exercising some sort of control over the prices of English barley so that the farmers should not suffer and the taxpayer should not suffer by having to pay high subsidies by reason of the low price of barley at the present time?
EARL WALDEGRAVE: My Lords I am not sure that I mule agree with the noble Lord about the price. My information is that at Mark Line on Monday, July 24, homegrown feed barley was being gold for £19 to £19 15s. per ton delivered to port This price is at least 30s. per ton higher than it was a month ago and 50s. more than seven weeks ago. When we are considering the prices of imported barley we must remember that they are generally quoted as at port c.i.f., and there is a 10 per cent. duty on top of that price. If, for instance. barley is quoted at £18 per ton c.i.f. at port, after a 10 per cent. duty £1 16s. has to be added to that.
LORD STONHAM: M Lords, can the noble Earl say whether, if prices of home-grown barley fall appreciably below the price of the Russian imports, the Government will take steps?—because it is unanswerable
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that if British barley prices fall too low, the taxpayer's subsidy will go up and the Chancellor will then say that the cost of farm support is too high.
EARL WALDEGRAVE: My Lords, any Government control over the market price for home-grown barley would require a major change in the Government's tree market policy and the system of agricultural support by deficiency payments which is associated with that policy.
VISCOUNT ALEXANDER or HILLSBOROUGH: My Lords, would not the noble Earl, from his knowledge of the matter and knowing 'the difficulty that farmers have had this last sowing season, when they have poured more barley in than they would have done if they had had a suitable winter growing season, agree 'that there ought 'to be some measure for keeping out foreign barley until what you have at home—and this will help your balance of payments—is properly absorbed in the British market?
EARL WALDEGRAVE: My Lords, 1 think we have really gone a long way in this. I would remind the noble Viscount of what my right honourable friend the President of the Board of Trade has done. He announced in another place on July 7 that he had been discussing this question of imports of barley with the suppliers, the exporting countries, and as a result of their assurances he was not going to impose at the present moment anti-dumping duties, but he had assurances that no new contracts would be made at a landed price of less than £20 a ton. That surely meets the position.
VISCOUNT ALEXANDER OF HILLS-BOROUGH: My Lords, I should have thought: that, if you were really watching your balance of payments and recognised what a powerful factor British agricultural products now are in the;balance of payments, if you had more available here, you could keep a lot of the other out.
LORD WISE: My Lords, may I point out to the noble Earl, in view of what he said about the present price of barley, that he was quoting Mincing Lane prices. But the farmer gets the price on the country market, which is sometimes very much less than the Mincing Lane price; and it is at present.
EARL WALDEGRAVE: My Lords, as the noble Lord will know, the Working Party on Feeding Barley on which the merchants, compounders and growers are represented, issue each Friday an indicated ex-farm value for home-grown feeding barley of fair average quality and 16 per cent. moisture content, and the present ex-farm price is 18s. 3d. per cwt. or £18 5s. 0d. per ton. If you compare that with your port price you will find that, allowing for delivery costs, it comes to very much the same thing, £19 or more per ton.

BUSINESS OF THE HOUSE
EARL ST. ALDWYN: My Lords, I should like to inform your Lordships that, in view of the number of speakers to-day, dinners will be available, but it would be a great help if your Lordships could warn in as early as possible.
GREAT OUSE WATER ER BILL
Read 3a, with the Amendments, and passed, and returned to the Commons.
BRITISH TRANSPORT COMMISSION (No. 2) ORDER CONFIRMATION BILL
Read 3a (according to Order), and passed.

THE ECONOMIC SITUATION
3.16 p.m.
THE LORD PRESIDENT OF THE COUNCIL AND MINISTER FOR SCIENCE (VISCOUNT HAILSHAM)THE LORD PRESIDENT OF THE COUNCIL AND MINISTER FOR SCIENCE (VISCOUNT HAILSHAM) moved to resolve, That this House endorses the policy of Her Majesty's Government as outlined by the Chancellor of the Exchequer on 25th July for the purposes of upholding the strength of sterling. improving the balance of payments, and maintaining a sound basis for the continuing prosperity of the nation. The noble and learned Viscount said: My Lords, I rise to move the Motion standing in my name on the Order Paper. I do so with a great sense of responsibility and a considerable feeling of personal inadequacy to cover a matter of so great a moment. But I have never moved a Motion as to which I felt a greater confidence that the thing I am trying to do is something which it is our duty to perform.
It is only a few days since we held our debate upon the Finance Bill, and the arguments then used on both sides of the Chamber will be familiar in our memories. The statement made by my right honourable friend the Chancellor of the Exchequer is fresh in our minds and your Lordships will not expect me to rehearse it. Moreover, I feel certain that your Lordships would not wish the debate we are holding in our House to be simply a replica of the proceedings in another place. It may be that we have a distinctive and, in some ways, as important a task to perform, because it is, I think, all too easy in matters of this complexity to lose one's way in the thicket of facts and figures, to travel for hours in the rather dismal fog of Party and political recrimination, or to tread the well-known treadmill of economic argument.
But I am convinced that the thing which needs most to be said to-day is not something dark and mysterious, bidden in the recesses of a professorial mind, but something simpler—something that everybody knows to be true and everybody knows needs to be said. To me, at least, the issue is not economic; to me the issue is moral and political. It is not primarily a question of the pocket; it is primarily a question of the heart and head.
I begin with the moral imperative imposed upon us by the international situation. It was only last week that we held our debate on foreign affairs. We heard my noble friend describe the situation in which we were living as one of international anarchy—terrible words to be used by a responsible Minister of the Crown; and all the more terrible because they were generally acknowledged to be true. I have the conviction that we live and move in the context of tremendous events, in a critical phase in our history which will make demands upon the wisdom, the courage and the compassion of us all.
Do we wish that this country should have something to say in the events of the coming weeks and months? Can we leave foreign affairs simply to the foreigner? It is my conviction—I know it is the conviction of the House—that in this coming period of uncertainty and difficulty the voice of Britain should be distinctly and clearly heard—calm, wise, grave, moderate and moderating. Do

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we wish, or do we not, that this should be the case? For if we wish the end, we must also wish the means whereby the end can be obtained. I think that more than a little of the authority with which this country's voice will be heard will depend upon the mood, the resolution, with which the House, with which Parliament, with which the country, face the present proposals of Her Majesty's Government. If it were some great thing that the people were asked to do for their country, I think the volunteers would flock forward in their thousands. Men have died, they have fought, they have travelled the deserts, the seas and the air, to play the part of heroes. What is now asked is only a little thing, small in comparison.
We all know what hat; happened. We all know what requires to be done. We know—and the facts are beyond gainsaying—that over a period of years our national economy has grown annually by 2 per cent.; and the amount we have taken out of it in money incomes by 6 per cent. And the figures for the last few months show a rate of annual growth of 3 per cent. and 8 per cent. respectively. We all know that the demands of money incomes have been in excess of what the economy will bear, and have been at the expense, therefore, of one n o ther. We know that this cannot go on. Is this too great a thing for Britain to put right quickly? Is it too much to ask of a people that endured the years of war?
My Lords, in one set of circumstances it is not only too great a thing; it is impossible. If each ma n looks at his neighbours' burden and says, "This man's burden is lighter than my own. I will do nothing until it s shown to my satisfaction that his burden is made as heavy as mine", it is impossible. We shall wait, and we shall be devoured. A man never tries to be fairer than when he is dealing with his own family. But when one's child raises the cry, "It is not fair", one knows instinctively that, however unworthily, one must remind him of an old and more excellent doctrine than the exact equality of burdens. There has been a time in our history when to be in danger is to be in a position of honour; when the logic of events, strange whims of chance, or even the mistakes of one's superiors or comrades, have placed one in a position of
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added burden that has been considered a privilege to be eagerly embraced. And until, in the ordinary conduct of our economic affairs, we can recognise that this alone is the way upon which a modern society can endure, we shall find that it is too much to ask that people will bear what they need to bear in order to put an end to the situation in which we are now placed.
But, my Lords, it is not a great thing which is being asked of us. To talk of austerity is a misuse of language. In a country which enjoys a national income of £22,000 million a year, better distributed than it has ever been in the course of our history, to ask for a certain degree of personal restraint is not a high request to place before a great people. To talk of tightening our belts when we all know that the trouble is that we have let them out a couple of notches a year, and that that is the cause of our misfortune, is to be guilty of complete deception. The trouble is that we could put this thing right in six weeks if we wanted to, and if we were determined.
What picture do we want to present to the world by September or October of this year? A people angry, distracted, squabbling over matters of the pocket? A people driven to borrow on short-term and not prepared to put its house in order? My Lords, I refuse to believe that this, is the true spirit of the British people. Yet I think it would be absolutely wrong if we were to-day to join in the general orgy of self-depreciation and self-reproach by which this controversy has been marked. We have not devalued our moral standards in any part of this country. If we have a balance-of payments problem, as we have, it is of the order of £350 million a year. If you add the money which we are paying across the exchanges to keep our troops in different parts of the world, including Germany, to the money which we are paying across the exchanges to help those countries which are called underdeveloped, you get a deficit of about £350 million a year. If we cared to renegue upon our responsibilities or our moral obligations, we could enjoy all our "I'm all right Jackery" without the smallest degree of balance-of-payments problem, so long as the world lasted and did not fall about our ears.
I sometimes think that people are a little too ready to take Britain for granted. We have since the war deliberately set upon a course of action which in some ways makes our economic life more difficult. We have introduced and maintained a generous system of social security; we have pursued, even at risk, the persistent policy of full employment. Many of our problems would be easier if we did not care to carry these burdens. Is it too much to ask that we should set national efficiency as the third of our great national objectives?
My Lords, I refuse to believe that Britain is standing in the second place of the world's economy. I spent, as many of your Lordships may have done, some hours of recent weeks looking at the Soviet Exhibition. I do not wish to depreciate or to underestimate the achievements over 40 years of the Soviet Union. I sent the scientists from all the Councils for which I am responsible to look at what they have been doing, but the universal judgment is that we are not behind except in fields very closely connected with defence, which we have deliberately chosen not to enter. Our scientists and technologists are equal to the European, even to the American. But of course science and technology are not a substitute for good management, good labour relations or hard work; an honest facing of the facts of life.
I refuse to believe that Britain is not a good investment. No one has ever got rich by selling Britain short. I look about the world—Europe, America, South America, Asia and Africa—and there is no place where your money is going to be as safe. There is no country which is fundamentally more socially homogeneous, more technically capable, and ultimately more sure to possess an honoured part in the economy of the world.
My Lords, there is one more intimate thing that I hope your Lordships will allow me to say, and I know that the noble Lords opposite, although they will not agree with it, will bear with me. It has been said that the present situation is inconsistent with the prospectus, as it is called, whereby the present Government secured power at the last Election. I have never before spoken of it, but the fact is that I, as much as 'any other man after the Prime Minister, was
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responsible for fighting the last Election. It is not for me to say to what extent, if at all, I influenced the result, but I Should only like to tell the House this.
The whole campaign as I envisaged it, as I tried to carry it out in the speeches in the country and by any other means in my power, was built around this doctrine. It would have been easier, perhaps, to say to people, perhaps particularly in my own Party, that we promised great reductions in Government expenditure, immense prosperity, easy going and higher wages. What I did say was this. I said that this country needs investment; it needs schools; it needs roads; it needs hospitals; it needs an education service equal to the demands of the present age; and every penny of the capital we can put away to those purposes will be money well spent. But I added that we should need every penny that we can put away to carry out even the modest programme which we then promised; and I added that my one worry 'was lest we should have engaged in that respect to do too much.
My Lords, When I criticised the Party opposite, as we all at Election times criticise our opponents, it was not on the grounds that they did not want the same objectives: it was precisely because the programme which they had put forward, in addition to claiming to provide these things, which all are agreed are necessary, engaged also to purchase with public resources vast assets of existing industries and of houses, and to make vast personal payments by way of welfare services, adding Iv to a total expenditure which I was quite certain this country could not carry. And if anybody wants 'my candid opinion as to why we won, or why we won by the extent we did, I would tell him frankly that it was nothing I said, but that at a certain point the leaders of the Party opposite felt it possible to say that all they engaged to do would be done with a reduction of taxation and without any other cost to the economy.
Now, my Lords, we differ about these things, and I mention this fact not to resurrect old controversies but because I feel that if people say we won on a false prospectus my honour as a servant of the public in involved. Looking back, searching my conscience, there is not a word, I think, of what I said then that

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I would not say again. And if we are to work together, as I hope we may without offence to one another, noble Lords opposite will recognise that we must work together in the knowledge that both sides are sincere.
My Lords, the present situation demands three things. It demands a plan to contain our present inflationary tendencies—that is, a shore-term plan. It demands a plan to control Government expenditure within the size permitted by the growth in our economy. And it demands a much longer-term plan for the expansion of national efficiency, on the lines I tried to indicate some days ago in the Finance Bill debate. I use the words "national efficiency", rather than "national productivity", for one reason. We have to remember, of course, that the whole of what we can gain by way of a raised standard of living comes from the product of industry. But efficiency in administration, efficiency in the public service, efficiency in other services, is no less part of the campaign we must wage than the direct production of goods for the purposes of export, and those who contribute to it play as important a part in the national life as those who increase the national economy by their direct efforts.
Of those three plans each is a vital part. As I tried to indicate the other day, it will not be enough to contain our present tendency to inflation this time unless we make up our minds not to go back to the recurrent series of crises which have plagued a series of Governments since the war. But, equally, if we do not contain our present tendency to inflation it will be impossible to carry out the longer-term plan.
The third part of the plan, the need to contain Government expenditure itself, is a necessary part of the other two. We cannot carry the conviction we need to carry, when we say that in the private sector money incomes must not expand more rapidly than the national growth will permit, unless we contain public expenditure, too, within that limit. Nor can we contain present tendencies towards inflation unless we begin to put in that plan at once.
Here may I say something about the teachers? It was one of the happiest experiences of my life—though it was only for a very few months to he Minister of Education. I think I can say
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that my relations with the teaching profession were happy. I came to respect them, and I more than once enjoyed their hospitality and kindness. There was one thing I learned about them: their passionate desire that their vocation in life should be thought of as one of the great professions. Of course one wants to see such men and women adequately rewarded. It so happens that they, in common with very many other professional and industrial organisations, have a pay claim, the cost of which to the country out of public resources would be £100 million a year. And the cost of the tentative award would have amounted to £60 million a year. What would have become of our appeal in respect of money incomes if this had been allowed to go by without comment or without abridgement? How could people say that we were in earnest?
I would only say this, and I would wish to say no more; and I say it, I hope, without any desire to say anything in bad taste. I think I know the spirit of gratitude and generosity of the people of this country. If the teaching profession thought it right at this juncture in our history to say, "It is reasonable that some part of our claim should be moderated, as our contribution, as our part of the burden", they would win, I am absolutely certain, a position for their profession in the life of the country, a moral ascendancy, and a right of gratitude on the part of their fellow countrymen, which would stand them in good stead for maybe a generation to come. The opportunity is there, and I hope and believe that they will take it.
The important part of these proposals, from my point of view, is necessarily the long-term plan. I know, of course, that in a statement of the kind that my right honourable friend made in another place two days ago it is inevitably the short-term measures which get the headlines, the credit restrictions, the 10 per cent. regulator, the bank rate; and it is proper, of course, that these things should be hammered out in argument in another place. But I am afraid that the longer-term implications are by the like token disregarded. I should like to say a word about those, too, because they are there; they are not left out, and they are not less important, just because they occupy a less prominent place on the front pages of the newspapers.
It is not simply that various investment and depreciation allowances remain in the taxation structure; it is not simply that the investment programmes of the nationalised industries have not been attacked; it is not simply that in dealing with public expenditure a solid attempt is being made to preserve public investment to an extent not before attempted in crises of this kind. It is that the whole conception of the thing rests upon an appeal to 'the country, to industry—and to both sides of it—not merely in money incomes (those are crucial, and Ito those I will return) but in the setting of targets, a 3 per cent. annual increase for the gross national product, and a 6 per cent annual increase for exports, rendered absolutely necessary and of first-class importance by the loss of our invisible trade.
Those are the things, I hope upon which this House and the country, after the immediate debate is over, can fully co-operate and will concentrate. I cannot believe that either side of industry will venture to disregard the appeal to co-operate in these times.
VISCOUNT ALEXANDER OF HILLS-BOROUGH: My Lords, may I ask a question? I want to be quite clear, and what the noble Viscount is saying now is very important. Do I understand that the target that he thinks not impossible is this; to aim at 3 per cent. expansion in production as a whole and to expand exports out of that by 6 per cent.?
VISCOUNT HAILSHAM: I think those were the figures given by my right honourable friend, and that is what I intended to convey. The other thing that I wish to emphasise is that these things cannot be done by Government alone; they cannot be done by one side of industry alone. They demand the support of public opinion at every stage, and they will take place only after the careful discussion between the two sides of industry and the Government which my right honourable friend has in mind. May I just say this in passing, lest there should be any mistake about it? It has sometimes been said that our desire to contain public expenditure is an example of what has been called the classic bias of persons of my political complexion against it. May I assure the House that this is not so. It is simply the urgent
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necessity Ito contain all forms of expenditure within the rate of growth of the national product.
I turn now to the more immediate proposals: the rise in the bank rate, the credit restrictions, and the 10 per cent. regulator. I should like, if I may, to deal with just one general criticism which has been made of them and it has been made, I think, in all quarters and by persons of all political complexions. They have asked: are they not inflationary in themselves? The bank rate puts up perhaps rents, certainly rates of borrowing by local authorities and by private persons; the 10 per cent, impost (it is said) will add to the cost of a whole range of commodities, including fuel; credit restriction will make it more difficult to keep things going, perhaps, in exports—are not these things in their nature inflationary?
My Lords, I see the force of that argument, but may I just say this in answer to it? If we argue on those lines about short-term remedies, we accept defeat. If we once assume that what has happened is that too much money has been getting into the economy; if we concede, as it must be conceded, that the short-term remedy must be to take some part of it out; and if we concede that every time we increase the cost of anything or make things more difficult to buy we shall be greeted with a demand for more wages which must be met: then we had better not set about this business at all. It is because we refuse to concede that last proposition that we have confidence that the short-term part of the package will work. But in the end, everything depends upon the appeal with regard to money incomes. I say "money incomes" because I include profits and dividends with wages and salaries.
I do not want, at this stage of what I am afraid has been a longish speech, to engage noble Lords opposite in controversy on matters which have been debated before; but I should like, if I may, to say a word to them about tax-free profits and profits generally, not by way of substitution but by way of addition to what I said the other day. In a sense, we do not want to stop the man who exports, the man who improves efficiency, from earning profits, subject to his bearing the proper proportion of taxation. But, of course, one recognises

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that, in an economy with a tendency to inflation, paper values of assets will tend to rise unhealthily. The honest man who bought a house in 1946 on the fringes of London, to live in with his family, will find that that house is, at least on paper and if he cares to sell it, worth a good deal more than he paid for it. In a sense, that is a measure of the rise in prosperity of the country. In a sense, it is an unhealthy feature of an inflationary economy. In either case he has done nothing wrong, and indeed he has made no money—he has a paper profit on an asset he wishes to retain. Surely the only way to deal with that is to attack the malady and not the symptom —to attack inflation and not its consequences, so as to ensure a generally healthy level in the value of assets throughout the country.
But, of course, there are people who indulge in speculation just as there are people who indulge in horse-racing. I should like to say a word about the taxation of their gains. It is legitimate for noble Lords opposite to ask what is being done about that. Any source of money which can be taxed efficiently and without injustice is a legitimate source of inquiry when we are asking for sources of taxation to raise money for public purposes. There are people who go quickly in and come quickly out of a speculation, who cash in on the rise in paper values and turn it into money. Incidentally, they may do it by selling short as easily as by buying in advance. There is no reason why they should not be taxed, and my right honourable friend has promised that the resources of the Treasury will be devotee. to finding a way of doing it.
There is another point which I think it is vital to make. My father, who was, I think, one of the best lax lawyers of his day, maintained that people who carry on a business in the buying and selling of assets which other people treat as capital assets ought to have their profits taxed as much as people who carry on business in the sale of tobacco and cigarettes. It is purely confusing, so he said, to treat their working capital and their stock as different from the stock of any other business, simply because most people treat similar articles as capital and not as working capital. Their profits are profits, and he always maintained that, even under the existing
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tax law, they ought to be brought in. I was glad to hear my right honourable friend say the other day that he will try to find one way or another of ensuring that that will be so.
My Lords, I want to end on this note. The ultimate choice of this country is to combine on the definition of national efficiency, in the sense in which I have tried to explain it, or suffer the penalties of national frustration. I realise that in what I have said there is an element of what has come to be called, sometimes with scorn, "government by exhortation". But I maintain that exhortation is a necessary part of the machinery of modern government. It is resorted to by the free countries. It is resorted to—not less, but rather more—by countries which are not free. Exhortation is part of the business of leadership.
I notice on the Back Benches of this Chamber the noble and gallant Field-Marshal who led our armies at Alamein. He was backed by the terror of the battlefield, the power of court-martial, and all the forces and tradition of military discipline. One of the things which made him a great commander was that he realised that, with all these things, he would still not be able to achieve his military purpose without exhortation of the private soldier. What is needed in this country is the knowledge that each private soldier in the battle for national efficiency is carrying out a worthwhile national plan in his own part. What is needed is the belief that it is a privilege to serve in such an army and to bear burdens in such an army.
To end, what this country needs is a knowledge of the one economic truth which no man can forget except at his peril—so simple that a child can remember it, so true that a lifetime of experience cannot better it: it is the economic and moral truth that "Man does not live by bread alone." My Lords, without the recognition of that truth the people perish. I beg to move.
Moved to resolve, That this House endorses the policy of Her Majesty's Government as outlined by the Chancellor of the Exchequer on 25th July for the purposes of upholding the strength of sterling, improving the balance of payments, and maintaining a sound basis for the continuing prosperity of the nation.—(Viscount Hailsham.)
4.0 p.m.
LORD PETHICK-LAWRENCE LORD PETHICK-LAWRENCE moved, as an Amendment to the Resolution, to leave out all the words after "House", and insert:
"Considers that the proposals outlined by the Chancellor of the Exchequer on 25th July, dealing with the economic situation of this country, besides being unfair, disclose no constructive policy and are not calculated to secure the wholehearted co-operation of the nation."
The noble Lord said: My Lords, all of us listened with great interest to the speech of the noble Viscount, who has covered a very considerable ground and who has merited our attention in so doing. I should like to make it perfectly clear at the outset that I do not resent his introducing the moral aspect of this question, because I think that in the last resort the moral aspect is of great importance in considering the prospective value of one's duty to one's country, one's duty to oneself. In so far as the noble Viscount has stressed that aspect I certainly shall not take exception to what he has said.
But against that, I feel that in order to support this Motion he has to relate that moral aspect to the facts of the situation. Personally, I do not think that that part of his speech was in any sense proved. I do not consider he related the moral efforts he desired us to make with the facts of the statement which he has supported by his Motion. On the other hand, I do not think he has laid any claim that his Party has sustained the moral truth which he has ventured to put forward. The view in my Party as to what the attitude of his Party has been would be an entirely different one. Before I sit down, therefore, I propose to move an Amendment to his Motion, to leave out all the words after "this House" and insert the words that are on the Order Paper, which I expect most of your Lordships have read.
What I should like to do is this. I should like to put three questions. The first question is this: has there been, and is there still, in any sense a crisis? I should answer that question by "Yes" and "No". I would say "Yes" in the sense that there is a situation in this country which is of very serious import, and unless that situation is removed we
1104
are in a very bad way indeed. If the question were asked whether that crisis has arisen in the last few weeks or few months, I should answer, "No". I consider that such a crisis as there is has been going on for a very long time. I would say it owed its origin to the false attitude which has been put before the people of this country; and I would say, further, that we have been lulled to rest in this country by certain quite incorrect assumptions.
One of the things that have happened in the course of the last few years in this country is that we have profited on paper, and to some extent in reality, by the enormous change in the value in the terms of trade. We have succeeded in cashing in on entirely changed terms of trade between ourselves and the countries producing raw materials, with the result that, without knowing what has been happening, we have succeeded over the last few years in enriching ourselves and in meeting the balance of trade by means which were perfectly legitimate, no doubt, but which misled us into imagining that we had a permanently advancing situation. We had not. We had a situation which depended upon our gradually taking over the profits of some of these countries producing raw materials.
In the second place, we have deluded ourselves into thinking that a high bank rate enables us to have a profit which we can spend. Everybody who really thought about it carefully knew perfectly well that it was not an expendable profit because it consisted of "hot" money. "Hot" money came here because of the high bank rate, and if the bank rate was not further raised or if it fell we were going to suffer from the losses of money we had had the benefit of for a time. So for two reasons we were deluded into a state of selfsatisfaction—one owing to the change in the terms of trade and the other owing to the position of "hot" money—and into a belief that we were in a much better position than we were.
The crisis, or whatever you like to call it, that has now burst upon us is a sudden realisation of the true facts of the case. I have been preaching from these Benches, time and time again—and the noble Viscount is quite aware of it—that the situation was a very serious one and needed to be attended to carefully.

1105
The Government have waved it off on the grounds that we were going along quite satisfactorily and could afford to make all sorts of reductions in taxation. And now we have come to face the true facts. That is so far as the crisis is concerned.
The second question I want to ask is: what is there about these proposals which is really going to solve our difficulties and get us out of our difficulties? I was rather interested in the speech of the noble Viscount. He swept aside all of what he called the short-term remedies and said that the really important things were the long-term remedies. They have been so obscured by short-term remedies that up to the present time I am not very clear what precisely they are. I realise that the Chancellor of the Exchequer has not yielded to some of the things to which he might have yielded. Ore was to reduce the investment allowance. Then, again, one of his regulators way a proposal, as your Lordships know, to have a poll tax on all the labour in industry; and that has been so universally condemned, in-chiding condemnation by Members of his own Back Benches here, that he has very wisely got rid of it.
What is left? I am not very clear from the noble Viscount's speech precisely what is left. According to him, there is a great deal of real advantage to be obtained. But, on the short look at what has been done, it is a question of the old doctrine over again. I know very well that in America at the present time many people are taking what they call tranquillisers. We have been given tranquillisers for a long time past in this country and we have been put off from giving attention to the great gravity of the situation by its being pointed out that things were going fairly well. It seems to me that to a large extent these new proposals of the Chancellor of the Exchequer are—I will not say a lot of tranquillisers, but there is the same kind of (lope that we have been put off with all the time.
Take the question of: nigh bank rate. I do riot want to drag in high bank rate on every occasion, but the fact is that the Chancellor of the Exchequer said, and the noble Viscount admitted it, that to a certain extent the nigh bank rate has and inflationary effect. It tends to send up the value of prices; and, there-
1106
fore, so far from improving the immediate situation, making things better and making us more competitive, it is going to do the exact reverse. Putting up the bank rate, restricting credit and putting up prices here is all going to make us (at this time, at any rate) less competitive. Therefore, when I relate the noble Viscount's moral arguments, about which I am not complaining at all, to the facts which are in the Chancellor's speech, I find that they are at variance with one another. I understand the noble Viscount's point of view, but his arguments are to a large extent at variance with the facts as they are brought home to us.
As far as I can see, therefore, so far from making us more competitive and enabling us to get into the world and to expand, the proposals of the Chancellor are to a large extent of exactly the reverse character. They are going to make it harder for us to compete. By restricting credit and restricting enterprise, they are going to make us more stagnant than we were. I have preached in this House, time and again, that our progress, and productivity if you like, or the enterprise of this country, is far below that of practically all the advanced countries of the world, and I cannot see anything in the new scheme brought forward by the Chancellor of the Exchequer that is going to help. On the contrary, it is going to make us less competitive; it is going to increase our stagnation; it is going to do all the things which seem to me to be likely to frustrate British enterprise and stop us getting on with the job.
Let me take another thing. I have argued, and some of my colleagues in another place have argued, that we are lagging behind in the matter of planning. I see no forward step by the Chancellor of the Exchequer to set the economy in greater motion by planning. I see none of that. On the contrary, I see the same old dope, the same old quack: medicines put forward as those that have been in the offing all this time, and which, in my opinion, have not succeeded in their purpose.
That brings me to my last point, and it is one at which Members opposite will not be surprised. I think we are today in the position of having to face this business for a long time. We have

1107
got to stiffen the backs of the people of this country. We must make them realise that if they want to be a great nation they must be worthy of being a great nation. They must be prepared to make sacrifices, and they must pull themselves together and work harder. But you cannot do that all on one side. If you are going to do that, you must make an appeal to people all round.
Now the noble Viscount cannot get away from the fact that in the Budget as a whole an enormous reduction of taxation was made in respect of the earned-income surtax payers, and that has remained in the minds of the working people of this country as a very unfair division of release from taxation. The Chancellor of the Exchequer will not be able to make an effective appeal to the working people of this country so long as that remains the principal feature of the Budget that was introduced last April. The Government cannot expect to have a united people behind them while they limp under that cloud of unfair discrimination by way of relief to one certain class of the population and handicap on the other. I cannot see how the Government can get out of that. Nor can I see how the Chancellor of the Exchequer's proposals can be accepted in this country so long as they suffer from that lamentation.
I therefore shave no alternative but to move the Amendment which stands in my name on the Paper: first, because there is no relation between the moral precepts which the noble Viscount has put forward and the concrete proposals which the Chancellor of the Exchequer has laid down; and, secondly, because there is no relation between the principles of equality as shown by the taxation of different classes of people and the principles Which come to light from studying the Chancellor of the Exchequer's proposals both in the Budget and since. I beg to move.
Amendment moved—
Leave out all the words after ("House"), and insert—
("Considers that the proposals outlined by the Chancellor of the Exchequer on 25th July, dealing with the economic situation of this country, besides being unfair, disclose no constructive policy and are not calculated to secure the wholehearted co-operation of the nation.") —(Lord Pethick-Lawrence.)
4.18 p.m.
LORD REA: My Lords, we have got to the position where, although we are officially discussing the Amendment, we are in fact, of course, discussing the substantive Motion together with the Amendment. Your Lordships may know that in another place the Liberal Party put down a second Amendment to the Government's Motion which, in terms, was very similar to that of the official Opposition. My friends and I on these Benches have thought it unsuitable to weary your Lordships with any second Amendment from our Benches. Therefore, I think I may say that we are generally in support of the Amendment proposed by the Labour Party through the noble Lord, Lord Pethick-Lawrence. I do not think our own Amendment would have differed very much from it, though possibly in one slight verbal context. I see there is the rather archaic phrase that the proposals
"are not calculated to secure the wholehearted co-operation of the nation."
I should have thought that they were certainly calculated to secure the cooperation of the nation, but in my opinion the calculation was a bad one and they will not in fact do so.
My first reaction to the Chancellor's statement, and I think the reaction of my colleagues here, was one of surprise at the inadequacy and lack of attack in the statement which he made. In this House we have had a most interesting speech from the noble and learned Viscount the Leader of the House appealing to our moral and idealistic side. I must say that I found myself in almost complete agreement with him in everything he said. Oddly enough, I also found myself in agreement with the noble Lord, Lord Pethick-Lawrence, who really did not differ very much from the noble Viscount in principle. Where I feel that. I must to some extent criticise the Government side is that we have been told by Ministers and in the Press, and we have gathered from our own observations, that things are in a bad way—a very bad way. Statements of Ministers lately have indicated to us that something very drastic was going to be done, and that we were in a parlous state. This mountain brought forth a mouse, and it seems to me that this mouse was a Treasury-minded mouse, rather than a comprehensive mouse.

1109
I think the public were: keyed-up over the last week or ten days for something much more stringent from the Chancellor of the Exchequer. Most of us found his statement completely unfundamental and with no dynamic approach; there was nothing that one could find very inspiring about it. And worst still—though I do not attack it too severely—it had no positive aim. It was all a question of restriction, of restrictive practices, and of cutting them down. After all this cry of "Wolf, wolf!" from the Government, I feel that the public's confidence has been considerably sapped by what has in fact eventuated. I would suggest that there are two con elusions: either that the Government overrated the seriousness of the position—and after listening to the noble Lord, Lord Pethick-Lawrence, I think that unlikely—or, secondly, that although recognising the seriousness of the situation, they have not dealt with it in a really adequate way.
The Government talk of plans. The right honourable gentleman, the Chancellor of the Exchequer, specifically says that he is not afraid of the word plans"; but we on: his side of the 1-louse are—on the part of the Government—very much afraid of the word "plans". Surely, we elect a Government—we do not personally, but Governments are elected—on policy and manifesto—which is based on a general plan to go ahead. We are sometimes a little alarmed when we hear of three-year plans, five-year plans, plans which have not originally come into the programme of the Party concerned and which are very difficult to see through to the end, as the noble Lord. Lord Pethick-Lawrence, said.
As a very small instance of that, we found, only a few days. perhaps a week or so, ago, the Postmaster General's heart was bleeding for us because we were spending too much as telephone users, and instead of having to spend:3s. 6d. to speak from London to Newcastle, he made us tie great gift of enabling us to speak from John o' Groats to Land's End for two pence. It would be a very short conversation, but there it was; it was to help the telephone users; we needed assistance. Then, only this week, the Postmaster General came along again and said that he was very sorry, he could no: make ends meet,
1110
and the telephone users would have to pay more for rental, and there are now these increased charges in other ways. That is only a small example of the come-and-go, push-and-pull, policy which I think really underlines the fact that there is very much this wrong planning.
In the present matter which we are discussing it seems to me essential that we should not regard imports in general overall as "necessary evils". 'They are not an evil. Surely, they are only a complement to exports. If you have two children, one ailing, either by being puny or too tall and scraggy, and the other healthy, you do not suppress the ailing one because you do not like its looks. The trouble is, as the noble Lord has said, inflation itself; more money wanted all round without more production. I, for one, do not blame the trade unions alone for the raising of wage levels which has gone on all through; I would blame also the employers, who raise the prices of their products, with no related increase in quantity or quality, just to be in a position to give higher wages for the same production. It seems to me a wrong thinking on both sides of the fence in this matter. The Government surely could control the price of essentials.
But, instead of that, what are they doing? First, they are really keeping down wages in the categories 'which are in their control, leaving other wage bargaining as a sort of free-for-all. As the noble Lord, Lord Pethick-Lawrence, says, it is invidious how one part of the community is impinged upon by these suggestions and the other part is left alone. Secondly, the Government propose to balance the Budget by indiscriminate taxes—I think I can only call them indiscriminate—on production, regardless really of the poverty and hardship caused in the lowest income groups. I think it is the people with very small incomes who are going to be hit hardest by the present proposals.
My Lords, there are a number of speakers, and I do not propose to keep your Lordships, but I think it is my duty to suggest what I think might be done. Of course, the basic problem is always money, so if we had more money to encourage the export market and home production, it could be used in very many ways. I am reverting here to

1111
a very old hobby horse: that if only we would abandon the independent nuclear deterrent, we could have so many millions of pounds with which we could really do something, for the state of the British market. I think we can do that without loss of security, because our contribution in this nuclear matter is negligible. But I will not go into the details of that question. Also, there would be no loss of prestige, because if we could tackle our internal economy we could regain the lost leadership which we used to have in Europe and the world. I feel sincerely that in no short time we should easily have that power in this world of ours. Command in this world will lie really more with the economic than with the military power, as it always has in the past. By the saving of that great amount of money, we could encourage sound trade and build up good commerce, as far as the usual channels allow, and we could balance the opportunities, which are in such imbalance, between the underpaid and the overpaid. Also—and this has only been touched on, but doubtless will be touched on again—we could remunerate more adequately the teachers of this country, who I think all would agree are underpaid in such a great community.
Having mentioned that we shall need priority in the economic field as well as in the military field, I think we might all see that in the next generation we are going to need men with a great deal of expertise—what I think the noble Viscount called "scientists and technologists of the best quality". We shall not obtain scientists and technologists, or even humanitarians, of the best quality unless we provide teachers to teach them. I do not say for one moment that our present teaching staff are anything other than excellent and are producing excellent results, but unless we can keep up their living standards by giving them a comparable standard to that of other people who are going into science and other fields where reward is high, we are going to suffer very much when the next generation comes along.
Then I do think that we should abandon, in the moral and idealistic way (as the noble Viscount put it), the principle of punitive concentration of passing
1112
evils, trying to restrict by punishment, rather than looking wider, picking out what is good and encouraging it, fostering productivity and incentive—particularly incentive—by generosity and encouragement. I think the Government's watchword might be much more "Give, give, and give" to the good things, rather than taking away, restricting and disciplining those things which appear to them to be of less value. Therefore, I think our political approach as a country, and indeed as a Government, does need more spirituality; that is, a constructive and not a destructive policy in general.
My third point is that we should aim urgently to free all sorts of movement in the world, and that is not taken account of at all in the present statement of the Chancellor of the Exchequer. In fact the brake seems to be put on there more than ever. It is surely more urgent than ever that goods should circulate much more freely. Tariffs, trade barriers, protection—we have had those for thirty years, and during those thirty years members of all political Parties have said that they must be lowered and lowered, and then finally abolished. Yet we are still hanging back in this sort of work which I think needs urgently to be done.
Secondly, we should have a much freer movement of people. Mutual knowledge can be obtained only by mixing together various people of different countries. There should be an interchange. There should be an interchange of goodwill, an interchange of friendship, and particularly an interchange of young folk, so that they can see what their contemporaries in other countries are doing and where they are heading. We should mix much more freely. I would press the Government to take such steps as trying to get the institution of passports completely abandoned. Travel allowances are quite unnecessary these days, and all forms of difficulty and restriction everywhere for those who would like to mix with their follow-men of different nationalities should be done away with.
Thirdly, the Government should give much more attention to the dissemination of knowledge to other countries. In principle, that is agreed by the members of all Parties, but we live in a world where we still think that the British are

1113
a good people and the rest of the world knows it. I would subscribe perhaps to the first half of that, but not to the second. I think that cur information channels are quite inadequate. We should encourage the B.B.C. overseas broadcasts. We should got our message of goodwill, not only for goodwill but in order to sell our goods abroad, not only to Russia and China, 10 Portugal and Africa, but also to our friends in Europe and elsewhere.
I would say no more except that I think that this statement which we are considering is a bureaucratic and myopic Budget worthy perhaps more of a parish council than of a great Government such as we have, representing, not if I may say so, just timid Tory terrors but also, at least in theory, the lusty and dogged spirit of our whole nation, who, as your Lordships remember, rallied to a man to Churchill in the darkest desperate days and who I think to-day would rally to a Government of any political colour which offered them sufficient leadership and sufficient imagination in our present troubles.
4.32 p.m.
LORD BRAND: My Lords, I do not intend to discuss in detail the Chancellor of the Exchequer's proposals. I am going to deal, so far as I can. in a short time, with the question of inflation, from which we are suffering now and from which we have been suffering since the end of the last war, and which we should get rid of as soon as we possibly can. I support the Chancellor's proposals, in so far as he is trying to diminish the excess demand that exists in this country at this moment.
Inflation is derived from two sources —excess demand and the constant rise of wages and incomes. Clearly, we are now living beyond our means. Mr. Selwyn Lloyd gave figures for the year 1960–61 showing that wages and salaries had increased by £1,000 million in that year and that other personal incomes had increased by £450 million. On the other hand, national production had increased by only £650 million. Therefore, last year, on wages and it comes, we went to the bad to the tune of £800 million. That is certainly inflation. Evidently we are in a period of excess demand, which. as I say, is one of the causes of inflation.
We have been traveling on the road we are travelling now since the period of
1114
Sir Stafford Cripps. I do not know whether your Lordships saw a little chart that appeared in The Times a few days ago, showing the value of the pound over the years from 1938 to 1961. I have a copy of it here, and as your Lordships see, the value goes steadily down, practically without cease, whether under a Labour Government or under a Conservative Government, and now there has just begun a steeper fall, because we are so far exceeding our means.
Our weakness is well exemplified by some figures in a document recently sent to me, produced by the Action Committee of the United States of Europe (Common Market), of which Mr. Monnet is chairman. He has been a great friend of mine for many years and he sent me these figures, which I think I should quote. They represent the reserves and short-term liabilities at the end of December, 1960, of the United States of America, the European Community and the United Kingdom. The figures, which are expressed in dollars, are as follows. The U.S.A. has nearly 18,000 million dollars of reserves and nearly 19,000 million dollars of liabilities. The European Community has 15,500 million dollars of reserves and 2,000 million dollars of liabilities. The United Kingdom has 3,200 million dollars of reserves—one-fifth of what the European Community has—and nearly 11,000 million dollars of liabilities—more than five times the liabilities of the European Community. So we see the position into which this country has gradually fallen over the years in relation to the United States and to the European Community.
In 1950, the official gold and foreign currency reserves of the countries now in the European Community were 3,100 million dollars, and they are now 15,500 million dollars. At the end of 1950, ours were 3,700 million dollars as against what we have now, 3,200 million dollars. So we are in a state of extreme weakness compared to the European Community and of great weakness, too, in my opinion, compared to the United States. The chart in The Times shows us the inflation from which we are suffering, and at the moment the Government are trying to restore strength of the pound to a certain extent by cutting down too great demand. Our difficult position was not so apparent until the last year or two because, as all your

1115
Lordships know, the dollar was weak, and therefore a great deal of foreign money was sent here because for the time being the pound looked as strong as, perhaps even stronger than, the dollar. Now that the dollar has recovered to some extent, all this money is being taken away from us and we are having to make large borrowings from the International Monetary Fund for the purpose of strengthening the pound. But, of course those borrowings will have to be repaid. I am not quite sure for how long we have them—I think it is about two years—but they will have to be repaid shortly, and we must put our conditions right in that time.
My opinion is that our fundamental problem is inflation, and that is what we must do everything in our power to stop. We are increasing inflation at this moment, because our prices have gone up, due to excess demand here, and our sterling remains unaltered. Therefore it pays the foreigner to import here, because he gets higher prices and he converts those higher prices into sterling at, say, the same price that it was a year ago. On the other hand, we cannot export, because our prices are high here and our sterling remains high. If we devalued sterling, then the foreigner would find it more difficult to import here and we should find it easier to export. But I hope that we shall not contemplate devaluing at this moment and that we shall get out of our troubles.
Mr. Gaitskell, a few days ago, in what seemed to me to be otherwise a good speech, did not deal at all with the causes—that is, inflation—except to put the blame on the inefficiency and lack of enterprise of British industry. I think there is a more general cause, though I am all in favour of Mr. Gaitskell's idea of having a planning staff for industry, such as was set up in France after the war and did wonders for French industry. I consider that the fundamental cause of our troubles arises not from inefficiency so much as from inflation, and that inflation and rising prices come in the main from two causes. They come either from the cause which I have already mentioned, excessive demand—and that the Chancellor of the Exchequer is trying to cure—or from the constantly rising incomes, and particularly wages.
1116
The question is: how are these rising prices brought about? If any of your Lordships wants any light on this subject I would refer him to a large book recently published by the Organisation for European Economic Co-operation, whose Council about two years ago requested a group of independent experts from different countries to study this problem and report on their findings. The Report has now been published. It is a big Report of nearly 500 pages of small print, but most of these pages are taken up with accounts in detail of the conditions in the various European countries and in the United States. Any of your Lordships who care to read the book will find, in the first 75 pages, most of what you require for a good knowledge on this subject of rising prices. Each of the six economists came from a different country, and they were all eminent in their profession. Our representative was Professor Richard Kahn, of King's College, Cambridge, a very good economist, who is an executor of Lord Keynes' estate and not one who could be called at all a Right Wing economist.
With your Lordships' permission, and if I am in order, I should like to read a few paragraphs which appear in the conclusions of these eminent economists. The causes of rising prices which the group found significant were
"(a) Special or temporary causes such as bad harvests;
(b) Excess demand for goods and labour"—
which is what we are suffering from—
"(c) Excessive negotiated wage increases as an independent force;
(d)Monopolistic pricing."
From what they say later, the writers plainly thought that (b) and (c)—that is,"Excess demand for goods and labour, "and" excessively negotiated wage increases "—were the main causes of rising prices. Excess demand they took to be the volume of aggregate monetary demand which cannot be met at existing prices without exerting undue pressure on productive resources, partly from excessive Government expenditure—which we are suffering from here—partly from a consumption boom financed by banks, hire purchase companies and so on. Excess demands, as I say, exist in this country at this moment.
The writers of the book think that wage increases can be considered an independent cause or factor of price

1117
increases only when they are determined by negotiations between organised labour and groups, and employers; and that, of course, is what happens here. They point out that wage increases are accustomed to be generalised over a country, and that a money/wage illusion —and this I should like to emphasise—. is likely to be established leading to demands over and over again, though the gain in real incomes is inevitably equally upset by higher prices. They acid
"In our view this factor has been of particular importance in the U.S. and U.K."
Later on the Report says:
"All Members of the Group are agreed that excessive wage increases secured through negotiation have been a significant factor in the upward movement of prices."
Then they add:
"In the view of the majority of the Group the essential element to be stressed first of all is that the stabilisation authorities"—
that is, the Government—
"must have a wages policy for dealing with the problem of wages just as they must have monetary and fiscal policies for dealing with the problem of demand."
Most countries, they say, have not yet faced this fact squarely. They go on:
"We are fully aware that to do so requires a decision at the highest political level and a political understanding of the need for it."
They point out that
"In France the Government announced its wages policy in connection with the stabilisation programme initiated at the end of 1958…It is evident that the policy was deliberate and thought out, and that it was consistent with and an integral part of stabilisation aims."
That is what we want here. They repeat that,
"On the other hand, there is nothing significant that excessive wage increases have to offer because they are immediately followed by rising prices."
When the Report conies to their discussion in relation to the different European countries they end up as follows:
"On the strength of its record to date "—
in the United Kingdom, this is—
"the system of wage determination in the United Kingdom must be judged to have failed to respond satisfactorily to he new problems posed by full employment. It would be wrong. how ever,"—
and I hope this is true—
"to overlook the much greater awareness of the deficiencies of this system which has grown up on all sides in the last few years. Beginning
1118
in 1956, the Government has carried out a campaign to educate public opinion, the unions, and the employers, about the basic relations between wages, productivity, and prices, and there is evidence that this has led to some change in attitudes, but with the inadequate nature of the institutional arrangements in a number of industries, the weakness of the central bodes on both sides"—
that is, the trade unions, the T.U.C., the Government and industry—
"and the lack of any clearly defined norm for arbitrators to have as a guide when making awards, there can be no assurance that wage increases will in future be kept in line with the. growth potential of the economy "
I think your Lordships will agree that this is a fair description—even too favourable perhaps—of our circumstances.
The devil about inflation is that it feeds on itself. Supposing inflation is due to higher wages—too high for the country concerned—then prices rise, and then some industries and some speculators make large, sometimes very large, profits, the former out of increasing sales, the latter out of a capacity to foresee what vast fortunes can be made by clever speculators in an inflationary period. These profits are, of course, advertised in the newspapers, but no one advertises the plight of a far larger number of people who are made poorer and poorer by inflation because they do not know how to defend themselves against rising prices. It is the big profiteers and the receivers of big dividends who prosper out of the rise in prices, which infuriates labour in to demanding still hither wages which, if granted, increase prices again and provide still higher profits for certain sections; and so on ad infinitum. This process will go on until some Government is strong enough —as in Germany at the time when the Rentenmark was instituted by Dr. Schacht and the recent stabilisation in France—to bring the merry-go-round to an end. Our inflation has not gone anywhere near those of Germany and France, but it will increase as the rounds of wage rises increase and as prices continue to rise.
In such circumstances, the whole market, for a time at least, booms. Why should home industry bother too much about exports when there is a roaring bull market at home? Moreover, the same circumstances, so long as our exchange remains unaltered, offer a fine market for importers from abroad. It used Ito be France who could not manage

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its own affairs, and which went from bad to worse over the years. We thought that France could never put herself right. Now it is this country, and there seems no end to it. Perhaps we might get Mr. Rueff and Mr. Baumgartner (who put the exchange right in France) over here to teach us how we could do it.
My Lords, lour serious danger, as pointed out in the O.E.E.C. Report, is that our institutions are too weak. The T.U.C. does not control the unions, and it appears to the public that the unions often do not control themselves but are under the influence of the organised shop stewards who initiate many strikes. It cannot be right for a democracy that our destiny and our fate, financial and economic, should be determined, not by the Government and Parliament, but by shop stewards; that it should be they who determine whether we can or cannot control inflation, and whether, therefore, we are to go bankrupt or not. There must, however, be many leaders of trade unions, and also many leaders of industry, who wish to co-operate, who recognise the evils of the present situation, and who would be glad to set our country on an even keel again. This must be also what every Government and every Chancellor want. That this aim should be achieved is vital to our future.
4.56 p.m.
LORD BOOTHBY: My Lords. I must confess at the outset of my remarks that, unlike the Lord President, I do not feel any sense of personal inadequacy; I just feel a sense of personal despondency, because this has happened all too often before. This is the sixth balance of payments crisis since the war; and I remember that six times I have now gone down to the House of Commons after a tremendous Press campaign warning us against the dreadful things that awaited us and all the sufferings and sacrifices we should have to take and make; and then nothing much has happened at the end of it. We just get the same old rise in bank rate—that is about what it comes to—and we leave the House of Commons feeling a little sad at having been braced to make sacrifices and then not being called upon to do much. It does not hit the individual in the same way as it huts industry. Then everything gets better; the "hot" money comes back; and then it happens all over again.
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These proposals have, of course, little relevance to the basic long-term economic problems confronting this country. They are designed simply to get us through yet another balance of payments crisis—as I said, the sixth that has happened since the war. The method is the old one and, I think, the bad one, of attracting "hot" money to this country to see us round the corner. Many years ago Keynes wrote:
"Unless the aggregate of the new investments which individuals are free to make overseas is kept within the amount which our favourable trade balance is capable of looking after, we lose control over the domestic rate of interest."
This is precisely what has happened; hence the rise in the bank rate. I think we probably had to do it. But we had to do it only because once again we have lost control—because the balance of payments has gone wrong. I think it would have been better if the Government had taken far more strenuous steps to keep the balance of payments right, which they have never done. I think this policy will succeed in the short run: but at a very high cost, particularly from the long-term point of view.
Let us take a brief glance at three of the main proposals of the Chancellor. First of all, the 7 per cent. bank rate, which is generally regarded as a crisis rate, in conjunction with the 3 per cent. special deposits. This is the clumsiest economic weapon of all, because it hits the lot; and, on the whole and on balance, it hits the small man rather than the big man throughout industry. It will cause a diminution of productive investment in industry—it must do—and, therefore, deter economic growth at a moment when we desperately need it. It will also increase costs and rents, and decrease productivity.
What does it all really amount to? By raising the bank rate and the special deposits to the fantastic height they now are, you knock the whole national economy about, in the desperate hope that a reduction of imports will somehow or other, come about as a byproduct. I just do not believe that this is the way of doing it. This is using a sledge-hammer instead of a scalpel knife. In so doing you impose heavier burdens, not only upon the Exchequer, and on the taxpayer who has to pay higher rates of interest, but also upon

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local authorities throughout the country. There is not much hope for the export trade here. As I said in another place as long ago as February, 1953, trying to increase exports by repressing industrial development at home is a policy of desperation.
The second major proposal is a surcharge of 10 per cent. on Customs and Excise duties. While it varies, of course, on different items, the effect is to put up the cost-of-living index by 12 per cent. Nobody is going to tell me that this is going to make it easier to hold wages during the "pause" which is so strongly advocated by Her Majesty's Government. I say no more about that, but I must add one final word about the teachers, to whom the Lord President of the Council referred. I am the first to admit that they were foolish not to accept the Burnham award and have dom., with it. They would be in a better position to-day; in fact they would be "home". But to single out teachers of all people in this country to-day for special attention, and to say that you are not even going to implement the original award, and at the same moment give an £18 million subsidy to build a "Queen" liner for the Cunard Line, at a moment when the whole Atlantic passenger ship traffic is declining, does not seem to me to make any kind of sense at all.
My Lords, I have just come back from the other side of the Iron Curtain, and I can tell you that they are taking education very seriously; mote so than anything else. Everybody knows, some of your Lordships better than myself, of the tragic shortage of mathematical teachers, in particular, which, if it is allowed to continue, will have a disastrous effect upon technical training throughout this country. What a moment to single out teachers to make special sacrifices, when every other country in the world is plunging ahead in the fiord of educations I really do think that, from a psychological point of view alone, it is a disastrous mistake; and I beg the Government at least to put this one right, because I can see no end to the trouble. I do not think the teachers will go on strike; but I know they are disheartened, and the Government is making them more disheartened; and they are the last class in the whole community who should be made to feel disheartened at this moment.
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I am absolutely certain that the Lord President's appeal—fervent, eloquent, and made with great sincerity—for what he called a "certain degree of personal restraint" is very necessary; but I am going to ask him quite frankly, and somewhat brutally, what the Government have done to encourage this. They removed practically all discipline from the economic field from the moment when they started indulging in what used to be known—perhaps the Lord President has forgotten it—as "the dash for freedom"—Mr. Butler's "dash for freedom". I never supported it, I always thought it was a mistake. In fact what they did was to take all discipline away from the economic field; and in so doing deride the memory of Sir Stafford Cripps, who, when all is said and done, exercised a greater moral authority in time of peace over the people of this country than any Chancellor of the Exchequer since Gladstone. I think we ought not to forget it; it is true, and he was right.
Enough of this; let us just have a look at the record during the last ten years. First the Government removed all building licences. I am on the record here. I opposed it from the start. They then abandoned all effective control over the export of capital from this country. They made no attempt whatsoever to plan our industrial development in co-operation with leaders of industry and the trade unions. They set up no planning machinery of any sort or kind. Nor did they make any attempt. to stop the speculative boom in land which has now got completely out of hand, in fact out of control. Finally, they have completely failed to curb increases of national expenditure which we can no longer afford and which can only lead in themselves to inflation.
The result, my Lords, has been, and we had better face it, an orgy of completely reckless personal speculation—for example, in property shares and television shares—which has no parallel in the history of this country since the South Sea Bubble. In these cases one field for speculation was allowed to continue by the Government, and the other was actively created by the Government; and the Lord President comes down to this House and appeals for "a certain degree of personal

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restraint"!It will not do. I know the stand he took himself about television. I am only taking it as an example; but all this has been going on now for too long, and not the slightest attempt has been made to deal with it or curb it in any way.
There are one or two questions I should like to ask the noble Earl who is going to reply. How much capital does he think has gone out of this country during the last five or six years by way of the escape hatches of Kuwait, Bermuda, and Nassau? How much of the Overseas Trading Corporation surpluses abroad have not returned to this country in any shape or form? How much money has been wasted—and, I emphasise the word "wasted" because I am not a supporter of unilateral disarmament—on armaments over the past ten years, which we really cannot possibly afford? How much capital and labour has been employed, and is still being employed, on the construction of quite unnecessary buildings in this country—anyone can see it going on right the way from John o'Groats to Land's End—while slums continue? Lastly, do Her Majesty's Government really think that we can afford, at this juncture, to rebuild New York and Chicago; because that is what I gather Mr. Clore and Mr. Cotton are setting out to do? I am sure it is very desirable, but I should have thought that the United States themselves could have looked after that one.
My Lords, of course I blame the Treasury more than the Chancellor of the Exchequer. I blame the Treasury because for over 40 years it has been the most disastrous institution this country has ever had. In fact I often wonder how we have survived it. It is a miracle. Except in the two world wars, when Keynes was there, they have never had a new idea, still less a good one. And I am old enough to remember the 1920's, when Sir Winston Churchill said, without any great conviction:
"It is the orthodox Treasury dogma, steadfastly held. that whatever might be the political or social advantages, very little additional employment can, in fact, and as a general rule, be created by State borrowing and State expenditure."
We have since learnt the answer to that one; but if the Treasury could seriously hold it as "dogma", what cannot they
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believe? They can believe anything. They still boast that the only man who ever made them do what they did not want to do was Lloyd George; and that was before the First World War, when he had to hire an external Civil Service to get through the measures he wanted, 'because the opposition within the Treasury was so implacable. It is my chief regret, in a life full of regrets, that I was never given the opportunity of being Chancellor of the Exchequer. It would not have lasted long, but it would certainly have been fun while it did.
The noble Viscount, the Leader of the House, said that one of the advantages of this place is that there are some things one can say here that one cannot in another place, where there are, after all, votes to be considered. For example, one thing I should like to say is that this country is still riddled with restrictive practices, and they are not confined to one side of industry; both sides are equally to blame. The ship-building industry, my Lords, is dying at the 'present time; and this is due to the people inside the ship-building industry, and well they know it. They will not take any steps to put the situation right; and that is not the only industry to which this applies.
I often smile when I read some of the very pompous leading articles in our newspapers saying what a terrible thing restrictive practices are. They say how important it is that we should free the economy of them and shoulder our responsibilities. I often feel inclined—except that one has to keep in with the Press, so long as one is in public life—to 'write a letter saying, "Have a rook at your own office and see what the employment situation is, and see how many redundant people you are employing". Here is the reason for the recent closing dawn of newspapers; it is because the printing industry in this country is an absolute scandal, and none of the newspaper proprietors has the guts 10 stand up and say, "Enough of this nonsense!We have had enough", just as the shipbuilders should have said, "Enough of this!" long, long ago.
On this aspect I want to say one other thing—and it is splendid, and I feel relieved, that I do not have to ask for votes any more when I say it: I wonder

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how many jobs in this country to-day are being done by three men when one man would do. I should think the number is absolutely staggering. For that I.do not blame the trade unions entirely; I think the employers are also very much to blame, because it has all been too easy for them This is,something that ought to be said by somebody, somewhere—and I do not see why it should not just as well be said by Lord Boothby in the House of Lords as by anybody else—because we all know it is true. We have to face up to this problem, because it is not a comparable problem with our chief competitors in the world.
If I may, I should now like briefly to put forward a few proposals of my own, because purely negative criticism is an arid job, and rather pointless. I agree with what the noble Lord, Lord PethickLawrence, said. The noble Viscount the Lord President of the Council has the personal authority to make the moral appeal he made; but on the record of the Government, the facts as we know them and these particular proposals, I do not think the Government have any right to make any moral appeal of this kind. They have not shown the way by asking for, or imposing, any discipline upon industry.
If you ask me what I would do, I would say first that wages have to be related to productivity. One of our chief troubles is that we have not related wages to productivity. They have risen by 6 per cent. against a rise in productivity of less than 2 per cent. over the last two or three years. That is no good. But how can you get an agreed wages policy unless you have a plan, and bring into that plan the trade unions themselves—in fact both sides of industry? We want, as my friend Lionel Fraser said in an admirable letter to The Times the other day, Five-year Plan for Progress; because, as he truly said, there is no alternative to a coherent, long-term economic policy.
Going back to the recent trip I took in Eastern Europe, although they have failed in agriculture because neither the peasant system nor forcible collectivisation will do, they are making tremendous strides on the industrial front. Their productivity, and their gross annual national product, far exceeds ours in all of these countries. And why? Mainly because it is extremely well planned.
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But it is important not only for Communist and Socialist countries. As the noble Lord, Lord Brand said, they are doing it in France and doing it extremely well. M. Monnet started it; M. Massé is carrying it on. The results are achieved by influence rather than by coercion; and they are startling.
France has a planned economy not far short of, and in some respects better planned than, that of the countries east of the Iron Curtain. The whole staff of the planning organisation in France does not amount to more than 40 people, but they do very well. They have got 3,000 of the really important and influential industrialists together, and persuaded them to follow an agreed course. This is what we have to do. And I beg my noble friend to ask the Chancellor of the Exchequer to consider sending a small mission of inquiry over to Paris to see how they do it. And they may as well go on to Bonn, because Erhard is doing it, too. Both the economies of West Germany and France are infinitely better planned than ours—that is inevitable, because ours is not planned at all.
We shall then have to come to grips with the problem of international reserves. With our present reserves and liabilities we cannot carry on with sterling as the second major international currency of the world. I have, on this, at least, an unblemished record, because I did oppose the Bretton Woods Agreement. I opposed it on three grounds. First of all, because it put the onus of restoring equilibrium in international balances of payment on the debtor countries and not on the creditor countries, which it did; secondly, because it failed to provide adequate liquid reserves for the dollar and sterling, which is true; and thirdly, because it fixed exchanges at rates which were arbitrarily chosen, in a world of flux. I am one of those who doubt whether any democracy with a completely free economy can ever maintain, indefinitely, a fixed exchange. I am not sure it can be done, because it means that economic pressures which might otherwise be corrected by variations in the rate have to be met by infinitely more difficult methods, and sometimes impossible methods, such as a substantial all-round reduction in wages, which are almost impossible in a free-economy democracy.

1127
I think we should say to the International Monetary Fund before they meet this September, "Look here, there are the Bernstein proposals; they would help a great deal, but unless we can get more adequate liquid reserves, and unless we can avoid this agonising biennial balance-of-payments crisis, for which a 7 per cent. bank rate seems to be the only remedy, we shall have to let the pound not be devalued, but just go". I am not at all in favour of devaluing ever again to a fixed level, because that guess might be no better than the last one. A floating pound worked pretty well between 1931 and 1937, supported as it was by a powerful Exchange Equalisation Fund. I think that if we told them that we would let it find its own level again, if adequate liquid reserves are not provided, they might do something. I doubt whether we can maintain the pound, with our present wholly inadequate reserves, at this narrow fixed rate.
Thirdly, I would restore building licences. I would not do it on a big scale, but I would do it on a sufficient scale to stop the wasteful and extravagant building which is going on. We have had enough of that. Fourthly, I would reimpose some effective control over foreign investments, using a better method than that used in the past, which would not be difficult. Fifthly, and finally, I say that, since the quantitative control of investment is the core of any planning scheme, I would set up an organisation comparable to that which exists in France to direct investment into channels which, from the national point of view, are the most productive and most important, and away from wasteful channels. It can easily be done by some discrimination in the granting of investment allowances; and does not require any elaborate machinery. I would do it in consultation and collaboration with the industrialists and the trade unions. I know that I shall be accused of advocating physical controls, planning and socialism. I do not care what I am told, and I do not care what you call it. It may be physical controls, planning and socialism. But there is one thing that is amore important than any of these things, and that is sense.
Before I sit down, perhaps I may be allowed to detain your Lordships for a
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moment or two with a quotation from a very trenchant paragraph by a friend of mine, the outspoken, fearless and independent financial correspondent of the Spectator, Nicholas Davenport. because he succeeded last week in putting into one paragraph what I have been trying to say, and saying much less well, in the last twenty minutes. He wrote:
"If anyone should repent, it is the Government itself. It should confess that it has been pursuing idiotic economic policies, refusing to plan and direct the two sides of industry. refusing to apply a building control and so allowing the building and contracting industry to over-reach itself and force up wages, relying on higher rates of interest and credit restrictions to do the impossible act of balancing the economy, encouraging the wrong domestic investment by indiscriminate investment allowances, refusing to control our overseas investment and allowing foreign exchange we have earned to stay abroad instead of coming home, trying to protect sterling with 'hot money', that is, short-term foreign loans, expecting to boost exports by knocking the home trade in consumer durables, raising the price level at home by higher indirect taxes and dearer money and then complaining of the uncompetitive prices of British exports! This catalogue of ghastly mistakes is enough to make the nation rise up in anger and tell the Prime Minister that they have never had it so bad—in Government administration."
That is powerful stuff, but I think that if you read it in Hansard to-morrow you will agree there is more than an element of truth in it.
I am old enough to remember the day when Keynes described Snowden's proposals in the economic crisis of 1931 as "replete with folly and injustice". I am tempted to apply the same words to the present proposals of the Chancellor of the Exchequer, but I have too high a personal regard for him; and I certainly do not want him to share the fate of his predecessor, who also raised the bank rate to 7 per cent. and, so soon afterwards, became a "little local difficulty". I should not like the present Chancellor ever to become "a little local difficulty", especially if it came so near to an Election that he could not even be recalled as Minister of Works. I do not want to see him go; but I think he really must do a bit better than this.
The only reason that I can think of for what he has now done—I have searched my mind for the last 24 hours—is that, somehow or other, it is a prelude to our entry into the Common Market. I cannot see any other point

1129
in this exercise at all. We shall be dealing with this situation next week, so I will content myself with saying to-night that, in all the circumstances, and holding the views that I do, I do not think it would be possible for me to go into the Lobby in support of the Government to-night.
5.23 p.m.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I rise to support the vote of no confidence in the Government, and I think I can express some confidence that the noble Lord who has just spoken so energetically in support of our points of view will not merely not go into the Government Lobby but will surely join us in our protest when it comes to the vote.
We have already had an interesting debate; but I should like to say to the noble Viscount, Lord Hailsham, that I was disappointed with his speech in opening, not because I did not admire the language of it, because I did, or the presentation of his great and moral appeal, but because it did so little to show us what were the, Government's detailed proposals to deal with the present financial difficulties, and how far they were going to proceed on the basis of a short-term policy and to look for a long-term solution in order, as the noble Lord, Lord Boothby, said, to try to stop.a repetition of these steadily recurring crises in our economic and financial life.
I am sorry that the noble Lord, Lord Brand, has left the Chamber. As usual, he made a thoughtful and financially informed speech. But, somehow or another, speeches of that kind always seem to bring in somewhere the kind of statement which is less likely to obtain working-class response to the kind of appeal that the noble Viscount made. It sets up the difficulties of the shop steward, the large element of wages in rising costs and the inflationary tendencies. It always stresses things like that. Of course, the fact is that we, as a nation, have had the most extraordinary experiences in our lifetime. I do not suppose any nation which has occupied the pre-eminent position of ourselves over a number of decades ever had to face such a succession of crises as the First Great War and the Second Great War, to find in the end that, after
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fighting these two great and long campaigns, with huge human as well as monetary sacrifices, we had to try to readjust our own economic position and standards to meet the situation.
While I thoroughly agree with the facts stated by the noble Lord, Lord Boothby, about the planning efficiency of France and West Germany, Belgium and Italy, I must say that there is a marked contrast between the manner in which the Governments and the peoples of those countries are meeting their war costs compared with the manner in which we are meeting ours. In the whole of our economic problems, both after the first war and the last one, we as a nation have faced up to financial situations in a manner which I think is much to be admired, and we have now to go on in the future facing together difficulties which the others have discarded. I think we have to remember that.
Nevertheless, the noble Viscount must remember that in connection with any great calls to national unity for our self-defence and for the maintenance of our liberty, the working class of this country has taken its equal share at least with every part of the community. Nor is there any case in my memory in which the general electorate of the country have not taken their full share of responsibility whenever the country has been in great danger. The question is, of course, as to upon what basis you approach them and in respect of what sort of crisis.
When we look at the build-up of the campaign in the Press, to pre-Ministerial-statement speeches of what was going to happen over this economic crisis, then surely the whole of the nation was looking for the production of something quite out of comparison with the steps taken in the last three or four crises. Many of them say to-day, when you ask them what they think of the statement of the Chancellor of the Exchequer, that they regard it, in the circumstances, after that pre-statement campaign, as an anti-climax; that in the proposals which are made there is nothing really which is likely to be constructive or something upon which to build as a long-term policy so that industry can deal with the one thing essential in order to get our proper recovery. I asked particularly, because I wanted

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to be quite clear that I had not misread it in the newspapers or misheard it from the noble Viscount, Lord Hailsham, when he spoke about the recovery including a 3 per cent. increase in expanded production and that that was to cover an increase at the same time of 6 per cent. in our exports. I gather that my hearing of it was quite correct.
Let us look at that. The real problem is not the denying of this, that or the other within our community. The real problem which has been facing this country ever since this Government came in is that we have been falling back and back among all the other great industrial producing countries, especially in our rate of expansion of production. I do not need to bother the House with them, but I have all the details here; they speak for themselves. There is hardly a single producing country in the world which has not kept far ahead of us in our rate of expanded production, year by year. We have seen the speeches which have been made over and over again by my right honourable friend in another place, Mr. Harold Wilson, upon the sort of football league table, of which usually we were at the bottom or bottom but one. These are published every six months, and they show how we have been falling behind.
Of course, there is nothing yet in the proposals submitted by the Chancellor of the Exchequer of a really concrete character to show that the Government have in mind major plans that would make a real attempt at getting an expanded production overall and make quite sure that in that will be included a proper provision for the production of the goods which are most readily acceptable in the export market, upon which we still must depend if we are to be able to pay for the balance of our food and raw materials that we cannot produce in our own country.
It seems to me, therefore, that we have made a little step forward when it is mentioned in your Lordships' House (I think it was the noble Lord, Lord Rea, who said it) that the Chancellor of the Exchequer said that he was not afraid of the word "planning". I do not know whether the noble Lord, Lord Boothby, had taken note of that short phrase in the Chancellor of the Exchequer's
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speech. The Chancellor of the Exchequer is not afraid of it.
LORD MIDDLETON: He dare not do it.
VISCOUNT ALEXANDER OF HILLSBOROUGH: That is the whole point. I was going to say that he does not dare do it upon the kind of wholly national basis which we on this side of the House have always considered is necessary if you are to get a plan properly working.
Look at the position of the Labour Government from 1945 to 1951, with all its faults—and we all have faults in Government; no one can set up on the part of a Government and say, "We are perfect". We know that. If you look at the state of bankruptcy, with the failure to continue Lease-Lend in this country in 1945, and at the kind of conditions we were up against, you will see there is nothing like it in all our history. The national planning brought such an increased and expanded production that it put us on the map and enabled us to partake in what, I will quite agree, was a different type of foreign market from that of to-day. After the war there was a buying market, and if it had not been for the opportunities there were at that time out there, rather than a situation which is now turning things right the other way round, I do not quite know what we should have done. But it was an enormous advantage. We could not have done it if we had not planned nationally and controlled the direction of goods, commodities and raw materials, and had action to make sure how to reach our objectives. You could not find any other way to do it. The record will stand and I defy any economist to be able to disprove that that was the fact.
What we need now is a plan which will enable us to go steadily forward the other way. Remember, the Government have an enormous responsibility for the manner in which they have essayed to lead the people since 1945. In 1950, when we were meeting increasing difficulties because of the outbreak of troubles in Korea and finally the Korean war, what was the attitude of the Conservative Party? The attitude was, "Never mind about these great difficulties. Never mind about the cost on top of all your other troubles. Set the people

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free!". It was not a patriotic appeal for all the people to stay together. It was, "Set the people free!". My leader was quite right in another place when he made the rejoinder to the Prime Minister's comment the other night, "We did not devalue the pound", Mr. Gaitskell said [OFFICIAL REPORT, Commons, Vol. 644 (No. 150) col. 1082]:
"The right hon. Gentleman devalued something as else—he devalued our moral standards".
You have had ever since a pressure upon the Government, upon industry, upon finance itself, with the people having been promised that they must have it. Nothing must be in the way of the utmost pressure of salesmanship in the home market. So when the noble Lord, Lard Brand, talks about excessive demand, it is no use his thinking that that is simply because of some lapse of moral stature upon the part of the ordinary citizens of this country. It exists because of the policy which was brought in in 1951, and emphasised and stressed in 1953, against the views of men like the noble Lord, Lord Boothby, or the noble Viscount who has been making an appeal this afternoon. You had your Independent Television service set up, with all the racket which has been exposed in the Press about the manner in which it was done. There was pressure salesmanship to advertise, bringing in such enormous revenues that some men have made a 1,000 per cent. profit on what they originally put in. The pressure for sales means that every house, in certain classes of areas, must go on with the old game of "Keeping up with the Joneses". If somebody next door is listening to I.T.V. programmes and wants this spin dryer or this refrigerator or this television set, then we must have it too! All the pressure is on spending on the home market. an things which are not really, in every case, vitally necessary, although they may be great comforts and give a great sense of satisfaction in the heart and mind of the person concerned because he is not worse off than his next-door neighbour.
This responsibility lies with the policy of the Government. Although I very much admire the language of the moral appeal of the noble Viscount this afternoon, and I appreciate its sincerity. I have to point out that here we are in the same place that we were in in 1951, when the Government came in and said
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that things were much worse than they had expected. Yet they said, "Set the people free!" You have to-day, nearly ten years after, a fall in the European reserves of gold and other securities to a lower point than existed in October, 1951. This is the case that the Government have to answer. I have seen 'nothing yet, either in the statement of the Chancellor of the Exchequer or in the statements made so far in this House, that can satisfy me that what I am saying to your Lordships to-day is not a true statement of the facts of the situation.
Let us see what is going on at the present time. We have been suffering, apparently, from the great increase in imports. Of course, if we were getting a great increase in imports because there were going back the exports to pay for them it would be a very good thing—part of a general expanding economy. But, as I understand the figures, in 1960 imports increased by £500 million. I have not time to go into all the details, but when we look at some of the details they shock us. Let us take steel, one of the great bones of contention among the Parties because it was nationalised. This House of Lords gave warning when it was nationalised that they would denationalise it at the 'earliest possible moment. So they had to do it.
Let us look at steel in the year 1959–60—look at the import figures and you will find it confirmed. You will find that in 1959 you imported 40 million tons of steel; in 1960 100 million tons. I ought to qualify the word "steel"; it is iron and steel; I have taken the two together. There was an increase from 40 million to over 100 million tons. I was reading a trade comment the other day and I saw that it was improving a little in the early part of this year. The real reason why all that extra steel was coming in in 1960 was that the steel industry had failed to keep up with the requirements of that part of our basic industry for stuff being turned either out or in; and failed also to meet the demand even of our home users of it; and so they had to buy foreign steel and iron. Is that because it was nationalised for a year or two? Not on your life! There is one firm down in Wales, Richard Thomas & Baldwins, which is still under national ownership. That is the successful one. It had a plan behind

1135
it—a real plan. I use the case of steel only as an illustration.
On the question of planning, and the way you use your fuels, I take the case of electricity. We have had one or two debates on this matter before with the noble Lord, Lord Mills. Look at the extent to which the Government have launched expenditure after expenditure upon the building of nuclear power stations in this country as compared with the type of station which could have been built using our own, natural raw material of coal; and how, in other cases, they have given a preference to oil fuel, importing it, instead of the natural coal of this country. I am quite sure it must be sound sense to have, may be, a pilot scheme, or even two schemes, for demonstration of electricity production by nuclear power. It might even be worth while having a "check off" against coal with one or two oil-fired plants. But here we have our own, natural raw materials being left and neglected, while we produce electricity at a higher charge to the customers at large throughout the country. It is not good sense. And all the time we have had the feeling that perhaps the name of "nationalised" industry is really a dirty word to many people, just as it was said the other day, in the other place, that "planning" is often regarded as a dirty word.
VISCOUNT HAILSHAM: My Lords, I should like to assure the noble Viscount that that is not so. The nuclear power stations, of course, are based on nationalised industry no less than the conventional power stations.
VISCOUNT ALEXANDER OF HILLSBOROUGH: I know. I am talking now only about the question of national planning at any time in relation to your overall plan. I say that if you had had a proper plan for using the raw material resources of your own, and had balanced that with your experiments in the proper way, you would not have spent anything like the money you have spent in those two fields to-day
But let us look at that part of the Chancellor's proposals which deals with defence. Take his statement during the early part of this week about defence. What a story that is! He says, "We are going to try to save money upon our overseas commitments". Some of
1136
the overseas commitments that used to be there are not there at all now. Practically the whole of our Naval station at Malta has gone. We have handed it over to a civilian dockyard company, which we hope will be successful in meeting the labour needs of the Maltese population. In many places we no longer have the commitments that we had.
But in general, in relation to the opening part of the noble Viscount's speech, when he appealed to us on the basis of the dangerous international situation, and bearing in mind the statement from the Foreign Office yesterday (these are my words, not his; I do not want to fasten on him anything he did not say) that there must be agreement with President Kennedy about our attitude to the general international situation, and also bearing in mind the examination which has been going on between Mr. Watkinson, the American Secretary of State, and General Norstad, as to what further call-up there will be, when I look at the state of our defences compared to January, 1950, when I handed over the office, I find the situation amazing.
What are the Government spending on defence? The fact is that we shall not have half the manpower forces in the defence of this country, whether abroad or at home, that we had in 1950—not one half; and we shall be paying £1,625 'million for them this financial year. I admire any proposal that may be made by the Chancellor of the Exchequer to get proper issues raised with reference to the cost of the maintenance of the troops we hold in Germany. That is a very good thing to do. But when you make a strong appeal to us, on a national and patriotic basis, about saving money here and there, and about our forces overseas, my reply is: have a look at the facts. They are extraordinary, and they have been getting worse and worse ever since the White Paper of 1957.
My Lords, those are the facts. If we take other proposals in the Chancellor's statement, what do we find? The noble Lord, Lord Boothby, has put the situation correctly. They will raise the cost of living at once by 1½ per cent.; and one cannot expect that the people engaged in industry, or the middle-class professions, Ito have that increased cost

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of living put upon them and not to want to be able Ito live properly. If they are Ito make a sacrifice, then surely they ought to be able to expect other people, in spheres different from theirs, higher up the scale of receipts, to make equally big sacrifices. It is not to be wondered at, I think, that the first reactions of some of the people on the industrial side in our Party were of concern.
I ask the noble Viscount to take note of what was decided yesterday by the trade unions, and their reaction to the proposals in general. They said they will be glad to consult with the Government and to co-operate, provided that what they are asked to do is to be on a fair basis. This afternoon the noble Viscount seemed to think that that was not quite good enough. I am going to read his words very carefully again tomorrow, to make sure. I do not want to do him an injustice on this point, but it looked as if he was adopting a rather high moral attitude to the workman Who says, "I ought not to be charged another 1½ per cent. on my cost of living if you are going to relieve surtax payers to the extent, among the highest incomes, of up to £3,000 a year benefit. I ought not to be expected to do that. But if you appeal to us"—this is what the trade unions are really saying— "to help and co-operate in anything that is required to be done nationally to restore our proper and sound position, we are with you if you will treat us as fairly as you treat your friends." That is not unreasonable.
VISCOUNT HAILSHAM: I am sorry to interrupt the noble Viscount, but I do not want there to be any misunderstanding about this. I was very careful indeed not to criticise anything that was said by the trade unions, or on their behalf. Indeed, I was rather encouraged, than otherwise, by the response they made to the Chancellor's appeal, and I hope I did not give the contrary impression. The only thing I did say was that if we are going to get on together in the future, as I hope we may, the offers of co-operation ought on both sides to be unconditional, and that we should try, if possible, not to make it a condition of our help to one another that somebody else's burden should be increased. It may well be a demand in the course of
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discussion, but to make help conditional makes it less easy to accept.
VISCOUNT ALEXANDER OF HILLSBOROUGH: I am just checking up a quick pencil note which I made, and I am glad the noble Viscount makes it unnecessary for me to quote. But your Lordships see now the impression left upon my mind. I am glad to have the further explanation, but certainly there is a feeling on this side, and among my colleagues in the other place, that this emergency Budget—and that is what this really is—is unfair.
After all, this is not the beginning of the matter. A very large burden was put upon the ordinary people, who are now in industry and commerce, in the new charges for the Health and similar services—very heavy charges. Putting that on top of what they are now asked to suffer, it comes a bit hard to the ordinary workman when he now finds he is not going to get a packet of cigarettes, which even after the war he could buy for 2s., for less than 4s. 6d. These are big differences.
I see the noble and gallant Viscount, Lord Montgomery of Alamein, over there. I was wondering what would have been said, when he was leading that great and line Army in North Africa, if cigarettes had been anything like this price to the troops. That was a great part of the happiness and the unity of those fine men who served us in all the fields of war, that we struggled and struggled and struggled to keep them as well supplied as we possibly could. But the workman also likes that today, and I think he is entitled to it.
If this is a question of whether or not we are getting the proper amount of production for what is being paid, that is another matter. I think we should be quite frank: the overall figures seem to show that the production does not go up at the same rate as incomes go up. Is that entirely the fault of the worker? I do not think so. I would not say that there are not faults in the worker. You will never get a working force of 11 or 12 million and find that every one of those 11 or 12 million is pulling the same amount of weight on the rope. There is a very vast difference, too, in the quality of management, and a very vast difference in the actual industrial

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relationships in the different organisations.
I was very sorry to see that a late Member of our House, Lord McGowan, passed away a few days ago. It is 40 years ago since I first began to understand and to learn what it means to organise good industrial relations between a great organisation and the workpeople of the trade unions. If we reached anything like that standard universally throughout industry, I believe we should get better management and we should get a much better result from the general contribution the workers themselves would make.
I am satisfied that the Government have not yet made up their mind to deal with this situation effectively. The bank rate has been dealt with by my noble friend and by other speakers. The other taxes that are supposed to be put on will make very little difference. We want a long-term policy, as well as immediate steps to secure our gold reserves position. But on the showing made in the Chancellor's statement, and after that the appeal by the noble Viscount, which did not have in it very much more detail, I am bound to say that we must adhere to our decision to move a vote of no confidence.
5.55 p.m.
VISCOUNT RIDLEY: My Lords. I share with others a disappointment that the present proposals of the Government deal only with the temporary difficulty which we are in, and not with the long-term problem which I think is clearly recognised to be with us. I do not want to repeat again what has been said about the short-term corrections in the form of higher bank rates and control of credit, except to say that I think in the circumstances it may be necessary to use those. But one should never forget the appallingly difficult situation it creates when there are these continual chances in matters of that sort throughout the life of the country, and also the fact that those controls both slow up investment in capital goods and make them more ex pensive.
What I find difficult to understand is the other main proposal, which is the increase in purchase tax. I understand that to be intended to reduce purchasing power throughout the country. It implies
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that there is now excess demand almost everywhere. I am not absolutely sure whether that is a right diagnosis. I think it is self-evident that in the building and civil engineering trade there is far too much work going on. But it is by no means apparent that in every other industry there is the demand to keep factories and plant working hard. One sees figures showing the small number of unemployed and the larger number of vacancies, implying that there is a shortage of labour. That, of course, is not a uniform pattern throughout the country. At the same time one hears it said, and figures are published to show, that the output of the country is not rising as fast as it should. Does that necessarily mean that employers are holding on to labour which they cannot properly use? It always seems to me very doubtful that any firm would do that for any length of time or to any extent, beyond keeping men on for a decent interval so as not to put them out of work more quickly than they can help. It is not a cheap exercise; it is an expensive one.
I cannot help thinking that the very large increase in industrial capacity which has been made in this country by the building of new factories and new plants must have some effect on these figures, and that the shortage of labour must be related to the fact that there are more factories. So I wonder whether there is any need to reduce the purchasing power in the way that has been spoken of; and even, if that is necessary, I should doubt whether this purchase tax method is the right one. It is only reasonable to expect that men will want their wages put up so as not to reduce their standard of living and purchasing power, and I think that those demands will be difficult, if not impossible, to resist.
One would have thought that some more general method might be chosen—even, possibly, the not-too-good method of hire-purchase controls, which fall unevenly on special industries but more or less evenly on everybody throughout the community. Possibly there might even have been an extra Budget, with some alterations in tax to last for the next six months. I feel that the method which has been chosen can do nothing but add to, expenditure and add to costs through rising wages and in other ways.

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I can see nothing in these proposals that will help to get the balance of payments back into the right proportions for years ahead. This, I think, is the really disappointing thing. The only positive thing which the Chancellor has said, I think, is that he will control Government expenditure abroad; and there I think it is a matter of keeping it down to its present level rather than of reducing it. That means, among other things, if not reducing at least not increasing the aid which we are able to give to under-developed countries; and I think we are all in agreement that wd wish to see ourselves doing as much of that as we can. It may be that Government expenditure abroad will comedown a little, but I believe that the scale of that operation will never be enough to meet the difference that we have to meet in our trading exports and imports.
What I should hope to see would be some serious and rather detailed attempt by the Government in various ways to find the means of helping industry to reduce costs. I believe that that is the main problem now before us. I do not think it is universally true that reducing demand at home will necessarily mean that all firms in all kinds of industries will, as a result, have more to export abroad. I believe that it applies to some, but by no means to all, and certainly not to those who find that their costs will not allow them to compete abroad.
For that reason, I should have thought that the great objective of everybody in this country, led by the Government, would be to find ways and means of bringing down manufacturing costs. By this, I do not mean only bringing down costs and leaving the manufacturer with more money in his pocket; I mean bringing down prices as the result of reducing the costs. So much has happened in the last year or so, as a result of Government action of one sort and another, leading to increases in costs, that one begins to think that this is a point which has not been appreciated in Government circles. For many years high indirect taxes have pushed up costs; and they have pushed up wages and therefore costs again.
These periods of high bank rate have been expensive for the building of new plant, and in other ways. This increased bank rate has been made necessary by
1142
periodic crises. Recently (although this is a small point) we have had derating of industry abolished. It is now necessary to pay rates, which again increases costs. Then the Olean Air Act, also very necessary, and very good and desirable, means more capital expenditure, and more running expenditure with no return. We have had higher coal prices, and it is felt by many in industry that the recent readjustment of prices was done in such a way as to load them with more than their share of the proper cost of coal. We have had a fluctuating policy on hire purchase and other matters, which has made planning difficult for many firms. There have also been increases in pensions contributions. They are in themselves desirable, and I mention this matter only as one of the many things which, one after the other, have been adding to the original primary cost of manufacture. On top of all that, we had in the Budget an oil tax, which hits many of our basic and important industries very hard; and now, in this "little Budget", there is another 10 per cent. addition. This shows the sort of thing that happens without any specific policy. I do not believe that at any time these measures were intended to add to manufacturing costs. But they have done so.
I believe that it is time for a reassessment of matters of that sort. There is no doubt Whatever in my mind that, if prices could come down, we should find our conditions of living at home very much easier. It is possible that we could have a reassessment of the methods of taxing industry, and the methods of carrying these Charges. Would it not be much better to make it as cheap as possible to' manufacture whatever it is that you want to sell abroad by removing these various impositions, or by removing their incidence? Then the manufacturers or businesses, having succeeded in selling abroad or at home, would have no grounds of complaint if they were asked to pay taxes from the resultant profit. I believe that, if this were done, in the end more money would be available from which taxes could be paid.
Some people say they would like to see a special differential form of income tax, so that exporters could be given some encouragement that way. I do

1143
not believe that it is practical to do that, or that it would be fair. Because it might well be that a firm supplying a semi-manufactured product to another manufacturer, who then exported it, would make a saving in his costs but would not get the benefit of the specially adjusted system of export tax which he would in fact deserve.
We have a proposal for a five-year plan for investment policy, and I very much hope that the Government will pursue that policy on the lines the French and Germans are doing in the way described by the noble Lord, Lord Boothby. That planning system does, however, function mainly as a form of investment planning, by deciding what forms of industrial capacity are required in the future; and it cannot, I think, do very much specifically to affect our exporting position and our capacity to be able to compete with importers.
I should like to see the Government confer with all organisations in industry to find ways and means, first, of reducing the real original cost of manufacturing, which I think must be distinguished and specified. It is cost that matters. At the present time, there are some products one knows of which it would be possible to export to the Continent with hardly any profit if this marginal small percentage of saving could be made. One would like to see the Government confer about that and think about this sort of problem, and also think about some new method of taxation on industry, perhaps weighted to encourage employers to employ fewer people in relation to units produced. In that way, efficient firms would be favoured, in much the same way as the investment allowances now encourage firms to instal new plant; and by producing a system which would be a definite inducement to firms to produce more cheaply, they would become more efficient and better able to compete.
I think one must now support the Government in their general policy of trying to introduce temporary expedients. I would do so, except that I doubt either the need for or the rightness of increasing purchase tax at this time. I regret very much that we have heard of no plans to help make a permanent change in the trend of our balance of payments;
1144
but I believe it is by no means too late. I hope that, as the months go by, the Government will get down to the problem of seeing in what practical ways they can make it easier for firms to compete in export markets, and also to compete at home with importers. Whether or not we go into the Common Market, we have the problem of competing both as exporters and against importers here, and I think conditions must be such that we have a chance as a country of holding our own. One thing I would say is that industry in this country has made an enormous contribution by increasing the rate of exports since the war compared with what they were before the war. The increase has been very large indeed. What remains to be done in relation to that amount is relatively small, though it is no less important for that. I would urge the Government to spend some time in looking at this side of the problem.
6.10 p.m.
VISCOUNT BRUCE OF MELBOURNE: My Lords, it is with the greatest reluctance that I am claiming your Lordships' attention for a few minutes this afternoon. The reason for my reluctance is that I am going to say practically nothing that I have not said before. It seems to me that I have spent years now in declaring my apprehension that unless some Government could succeed in enlisting the general support of all sections of the people, apparently we were going to continue with this cycle of economic crisis every few months. However, long experience has taught me that if, by the Grace of God, you happen to be right, repetition in the end will ensure that something will be done about the matter with which you are concerned. Hence my speaking again to-day.
We are discussing to-day the speech of the Chancellor of the Exchequer on Tuesday last in another place. After that speech, my feeling was one of very great disappointment, and I think that that was shared fairly generally. I believe that we were all hoping for something dynamic, forceful and imaginative, that would stir the country and lead to a great effort to get us out of our present position and out of this recurring cycle of economic crises. I am afraid that the Chancellor's statement hardly measures up to our expectations.

1145
The statement indicates that the Chancellor is going to employ taxation and financial measures to meet the present situation. With that, I am not going to quarrel, on the basis that he had to do something on the short term and do it immediately. But we have all to recognise that what he is doing is simply something that may get us temporarily out of the crisis we are facing—something very temporary at that—whereas what we had hoped for was something much more constrictive and long term. To me there appears to be nothing in the Chancellor's statement that is going to make a contribution towards the vital needs of increasing production and reducing costs, in order to increase our competitive power, save what I think is called a "standstill" in wages. With regard to that, I am convinced that it will do the very opposite. It inevitably means an increase in prices. Can anyone believe that, in isolation, the wage-earner is going to sit down under that? It seems to be absolutely stupid even to imagine that that can happen, and I am quite convinced that we have to go much further and deeper into the problem.
I feel that the situation is much better expressed in a statement made by Sir James Turner (as he then was: he is now the noble Lord, Lord Netherthorpe, and a Member of your Lordships' House), when he was President of the National Farmers' Union. I have quoted this before, but it seems to me fundamental and I should like to quote it again:
"In my view the problem of inflation will never be solved, and this national economic disease will never be cured, unless and until someone tells the patient its real seriousness and what is certain to happen to him if a major operation is not performed, and performed skilfully and quickly.
It is my deep and sincere conviction that the truth, however unpalatable, needs to be laid bare to the people of the country. The war-time catch-phrase, 'Britain can take it', remains true to-day—but only if her people are told what they must take, and why."
That is another way of saying that the circumstances we are up against necessitate that the people should be told how serious they are and that their cooperation should be enlisted in a national effort to try to overcome our difficulties.
The first point is: Can we make the people understand? I am told that it is quite hopeless. I venture to suggest
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that it is nothing of the sort. The facts are relatively simple. Our national economy is exactly the same as every individual's economy. The individual can enjoy the things he can afford by what he earns and what he saves. The nation is exactly the same. Our earnings are what we get from our exports, visible and invisible, including insurance, shipping and similar things; and our savings are the returns we get from our capital invested abroad. These things are simple. I believe that the people could be made to see them and to understand.
Who is going to tell them? Obviously, it must be the Government and the leaders of industry on both sides, employers and trade union leaders. And the method of telling them must be to employ every conceivable aid—Press, radio and television. What we must tell them is that we really are in a desperate situation, and that, unless we can get out of it, their employment, their wages, their standard of living and their social services will inevitably go. I am convinced that those are the facts, and that we can put them into simple language. I agree that perhaps this is a little wearisome to your Lordships, because these facts are so simple to us, but even when I am listening to debates in your Lordships' House, the statement of the case begins to get so complicated that I begin to wonder where I am arid where I am going. Yet I think that it can be put so simply that people will understand.
The first point is that exports of manufactured goods are of vital necessity. The world market for manufactured goods is increasing, but so are the number of competitors we have up against us; and the hard facts are that in face of this competition, our proportion of the world market for manufactures is steadily decreasing. It fell without interruption from 1951 to 1961. Since 1953—that is, over the last seven years—it has fallen by 20 per cent. But, since 1953, Germany's share of the world market for manufactures has risen by about 42 per cent., Japan's share has risen by over 80 per cent., and France's share by some 8 per cent. All these countries were faced with exactly the same problems that we have, of maintaining their competitive power. But they have managed to do it primarily because their productivity has increased sufficiently to enable

1147
them to compete at a competitive price. Since 1953 Britain's export prices have risen by 10 per cent.; those of the United States by 7½ per cent., of West Germany by only 1 per cent., while Japanese and French export prices have actually fallen by over 5 per cent.
Those figures are very serious. They show clearly that our costs and prices have been rising faster than those of our competitors; that our productivity has been improving more slowly, and that the pattern of distribution of world trade has changed entirely. Surely those facts are so simple that they can be made clear to the people of this country and the people can be made to understand how serious is the position. That seriousness is brought out when you think of our balance of payments. Every householder can understand what is meant by the balance of payments: it is simply getting enough to pay for what you want. It is as simple as that.
As your Lordships well know, the balance of payments on current account of the United Kingdom was last year in deficit to the tune of £340 million, despite a slight move of the terms of trade in our favour. The actual overall deficit was, as stated by the Chancellor, almost £550 million, when you take into account the £200 million of our long-term investments abroad. Your Lordships will remember that the experts from the Treasury told the Radcliffe Committee that it was considered necessary as long ago as 1953 that we should have a surplus on current account of about £350 million—roughly the same as our deficit last year. Looking at last year's figures in perspective, therefore, we need to increase our current surplus by some £700 million in order to meet all our commitments, including building up our convertible currency reserves. I venture to say that even that is not so complicated that the public could not understand it and realise how serious the position is.
A further point is that, even if the people were convinced of the seriousness of the position, we should still have to get their acceptance of it; and they will have to put up with some very unpleasant things, having regard to the luxury we have lived in over the last few years. I have such faith in the British people
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that I am convinced that, if the situation were brought home to them, they would accept it, and would make an effort and self-discipline themselves. But they have to be convinced. And if we are to get their co-operation there is one vital necessity. Even if the people are convinced, it is imperative that in any remedial action not only must justice be done, but it must be apparent that it is being done.
In the Chancellor's statement great emphasis is laid on what I think is described as the "standstill" in wages, but it contains only a vague threat to capital. I say that it is absolutely essential, when you are dealing so definitely with wages, to deal with the position of capital. I do not propose to go into detail about what I would suggest should be done, if only for the reason that if I make any such suggestion it will become the subject of controversy and my fundamental point will disappear in it. And my fundamental point is that the people must be made to understand. That is the greatest task to which we have to set our hands.
There is one point, however, that I want to make on capital, and it is this. I protest at the idea, which to my mind is far too prevalent in this country, that there is something sacrosanct about capital. The United States and other countries have tackled the problem, and I do not accept the view that we are not capable of dealing with it. We have the brains, and we should do it. The point I am making is that there must be equal treatment as between wages and capital or we shall never get what I say is vital. I suggest that we should adopt the suggestion contained in the admirable letter of Mr. Lionel Fraser to The Times on June 27 last; namely, that the Government should formulate a coherent long-term economic policy. And the essential thing in that long-term policy is that it—and these are his words:
"will only succeed if it is understood and supported by the man in the street."
From the Chancellor's observations it would appear that his mind is running in the same direction. If it is, why does he not bring the plan down now? It is urgent beyond words. The Government have had many years to consult their experts and these various bodies,

1149
Surely by now they have in mind what their own financial and economic policy is. My plea is: for Heaven's sake! bring it down, and bring it down quickly, because the situation is pretty desperate.
House adjourned during pleasure.
House resumed.

ROYAL COMMISSION
6.30 p.m.
The following Bills received the Royal Assent:

Rating and Valuation,

Companies (Floating Charges) (Scotland),

Mock Auctions,

Land Drainage,

Covent Garden Market,

Rivers (Prevention of Pollution),

Police Federation,

Army and Air Force,

North Atlantic Shipping,

Human Tissue,

Crown Estate,

Credit-Sale Agreements (Scotland),

Trusts (Scotland),

Crofters (Scotland),

Eyemouth Harbour Order Confirmation,

Pier and Harbour Order (Exmouth) Confirmation,

Teesside Railless Traction Board (Additional Route) Order Confirmation,

British Transport Commission (No. 2) Order Confirmation,

British Transport Commission,

Middlesex County Council,

Shakespeare Birthplace, &c., Trust.

House adjourned during pleasure.
House resumed.

THE ECONOMIC SITUATION
6.46 p.m.
Debate resumed.
LORD PEDDIE: My Lords, we have had a long and interesting debate and I do not propose to detain the House too long. I recognise that the Opposition has a responsibility to challenge the Government on issues of moment, and that has been done from this side of the House most effectively. But I am certain that I speak for all on this side of the House when I say that the challenge on this particular issue is not made in any spirit or feeling of elation, for we are discussing matters and circumstances that affect the life and standards of our people. However, there are certain things that should be said, and have been said, in spite of the noble Viscount's appeal—and probably justifiable appeal—that in our consideration we should give emphasis to the moral issues rather than the purely economic. There are many economic aspects that demand the attention not only of this House but of the entire nation.
This is not a sudden crisis that appears with unexpected violence upon the nation; it comes as the inevitable climax to a long period of economic erosion, arising very largely out of the Government's unwillingness over the years to meet the facts of the situation. I recognise that the Government were possibly rendering a signal service in ma king the nation vividly aware of the circumstances of this crisis at this particular moment, and I believe that when the people a short time ago became aware of crisis conditions they were expectant rather than apprehensive, and they braced themselves for action. But instead of the clarion call which we all expected, we got a pathetic bleat; and that, one can only assume, was due either to a paucity of ideas or a cynical reluctance to face the facts of the situation.
The noble Lord, Lord Rea, offered a quotation when he said:
"The mountain was in labour and it brought forth a mouse".
I think the exact translation from Horace would be even more apt and more accurately fits the situation. It is, I believe:
"The mountains will be in labour; the birth will be a single laughable little mouse".

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That, to my mind, indicates the true circumstances of the situation as presented by Mr. Selwyn Lloyd. One remarkable characteristic of the whole circumstances surrounding the recent declaration of the Government is the fact that even the Press, which is normally on the side of the Government, joins in the universal condemnation of these proposals. My noble Leader has already indicated, as have other Members of your Lordships' House, that crisis conditions justify additional burdens upon the community. But it is appalling that to-day we have the same stale, unoriginal proposals, and, in addition, we have the most unfair spread of those proposals upon the community.
I believe that the Government can be condemned on two grounds: first, that they have allowed this situation to develop; and secondly, that they have rejected the outstanding opportunity to rally the nation to do all the things that the noble and learned Viscount called upon the nation to do. I recognise that no Government, no matter what its political complexion, carries a magic wand to create prosperity, but it can set an example; that was all that was expected of this Government. There is no legislation and no declaration which can translate poverty into terms of prosperity. We find little has been done by the Government in their present proposals—except possibly the penny on the pint of beer and the twopence more which the lady has to pay for her lipstick; I do not know what sort of contribution that will make.
The basic problem that confronts this country is, as has already been mentioned frequently in this debate, its capacity to produce. Our capacity to produce has a bearing on the problems of inflation mentioned so frequently to-day. It does not require economists to tell us that our prosperity depends upon the skill of our people and the efficiency of the tools that they employ. Therefore, the basic measurement of a country's efficiency can possibly be found in the proportion of the annual revue that is invested in new equipment. The Government can have some influence upon that; through the process of policy it can influence that particular trend. What do we find? Over the years, although the Govern-
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ment have been aware of the situation, between 1950 and 1958 this country invested about 14 per cent. of its national income in new equipment, a long way behind almost all of the progressive industrial nations.
That sluggish investment betrays itself in our industrial production. Between 1951 and 1960 our industrial production increased by 32 per cent. But look at the figures which are registered by other nations: France 76 per cent., West Germany 112 per cent., Italy 107 per cent. And the same picture is reflected in our export record. It can be said, in all sincerity, without any exaggeration, that after ten years of Tory Government, in comparison with other major industrial countries we are less well equipped to earn a good living in the world to-day than we were when the war ended. That is a statement of fact and it is no use blaming the workers and the trade unions or even the shop stewards. They do not make the decisions on investment policy and exports.
I know I could join with others in this House who would express condemnation of restrictive practices. They exist; they are to be deplored. But in the examination of restrictive practices it would be as well to examine the conditions out of which those restrictive practices are often born—frequently out of a justifiable suspicion that possibly the standards of those workers may be affected if those practices are not maintained. It is born out of a long experience, a hard, grim experience. I think the Government, by their own example, and the employers, can do much to allay the suspicion out of which these restrictive practices in so many cases were created. When we think of the relationship of workers and the trade unions to production, I refer your Lordships to a recent statement made by The Times, which said that Britain's failure to improve exports is due more to the apathy of management than to the shortcomings of workers. That is not my statement; it is a statement of The Times.
I would ask your Lordships to turn to another aspect of this question, and that is the human aspect. We have indicated our position relative to economic affairs, but I would say that we are no better off to-day in human terms. The human equivalent of a high level of

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industrial equipment is an expanding level of education. What do we spend on education? Three per cent. of our national income is spent on education, about the same proportion that was spent in 1938. Over the past 23 years we have seen a fantastic development in science and technology and new skills. A vast new body of knowledge has been made available to the community to-day; it is at the disposal of our nation. We can strengthen and develop the nation if we make use of it; but we can do so only by developing and stimulating our educational resources. Instead of that, we are jogging along at the same rate as we did a quarter of a century ago—indeed worse, because, as the noble Lord, Lord Boothby, pointed out, our attitude towards the teaching profession to-day is such that a further set-back will be given to our educational development. So much for the question of education in relation to this problem.
I turn now to the matter of profits and dividends, which have already been discussed. It is common knowledge that profits and dividends have risen far more rapidly than wages. But that is not all. For years now the public have been regaled with almost obscene stories of millions of pounds made in stock deals and in property and land speculation. And when an appeal is made for cooperation, what do we find? Recently there was a Budget which gave £83 million to surtax payers. I know justification for that was put forward in terms of offering higher remuneration to those in management and science who were deserving of greater salary awards, in view of our need for their services to-day. That may be something of an argument. But how does it justify that within that £83 million, £19 million was relief on unearned income? Where is the justification for that? A few months before, wage earners were subjected to a disguised tax of £65 million through increased health charges.
All this tends to illustrate the inevitable consequences of the policy of eat, drink and be merry, for to-morrow comes the next crisis, and the next and the next. The ordinary people of our nation have made no special study of the effects of capital investment, productivity and the like, but they do sense that there is
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something really rotten in the state of affairs to-day. I ask your Lordships what are they expected to do in this pattern of living set for them by the Government and the people who run industry and finance? When they read of easy money and speculation, when they are told that the glorified purpose of life seems to be that of making money, are they expected automatically to accept the suggestion of a cut in wages so that the speculative bubble can be blown even bigger? We have heard on many occasions the Conservatives accusing the Socialists of being doctrinaire. I am going to say as kindly as I can that I believe that the most bigoted and doctrinaire, people who have ever ruled Britain in this century are those who have been in power since 1951. Why? Because they have stuck blindly to that doctrinaire obstinacy of an idea that nations can prosper on the basis of the unrestricted, uncontrolled decisions of anonymous and socially irresponsible financiers.
The Government did away with physical controls. They destroyed the methods of regulating the economy except by the crude device of the bank rate and certain savage increases in taxation. The so-called purists have made the malady a deal worse. We have heard the challenge that the Tory Administration over the years has shattered all sense of national purpose and protection and has put a premium on individual and group selfishness. Surely the Government cannot be so inept as to have no policy at all. Rat I wonder whether they have a policy. Would they be inclined to indicate what it is? I am tempted to ask that because of a statement made in the Guardian, I think only yesterday. I pose this as a question. This is what was said:
"Could it he that, after all, Mr. Selwyn Lloyd intends to create a recession as the only way of containing the excessive wage demands which his policy will probably provoke?"
That is what the Guardian says. That is what creates suspicion in my mind.
Only serious planning can deal with the situation to-day. The bank rate increase and the credit squeeze could never reach the seat of the trouble. It would have been possible at least for the Chancellor to attack imports by imposing physical controls upon certain

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classes of luxury goods. During 1960 food imports into this country increased hardly at all, but finished manufactured goods increased by 38 per cent., a total of £150 million, much of it pure luxury goods. In my opinion, the Chancellor has over the past few days lost a great opportunity of making a new approach in an economic policy. Instead, his proposals are largely inflationary. His financial measures may protect sterling in the short run, but it will not be a lasting cure for the nation's ailments. To attack "hot" money, the bank rate goes up. How much longer are we to be dependent upon a bunch of faceless Continental financiers and, in the interim, impose serious additional burdens upon industry and added charges upon the community, all of which are reflected in a higher cost of living which must inevitably reflect itself in demands for higher wages?
The noble Viscount opposite made a most impassioned and eloquent appeal on the moral plane. It was almost an appeal for patriotism. I want to assure the Government and noble Lords opposite that there is as much patriotism on this side of the House as there is on the other. There is the same desperate desire to see that this nation indeed grows in strength and in stature. We have the resources, we have the men, we have the ability. We demand the leadership; we demand, instead of exhortation for co-operation, a demonstration of the only way we can go forward—on the basis of reasonable equality, without calling upon one section of the community for all the sacrifices. Let us go forward recognising that the only way that we can safely achieve progress is on a community basis, and not on a sense of complete class consciousness.
7.6 p.m.
LORD MOLSON: My Lords, we have reached another of the biennial balance of payments crises to which we have become accustomed ever since the war. I think it is necessary, first, to consider what the immediate cause of this present crisis is; then I should like to give my explanation of what is the long, predetermining cause of these constant crises, and in that way to join with those who are pressing upon the Government the need for a long-term policy.
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A number of noble Lords have criticised the Government because of changes in the bank rate and of policy. If we are going to seek to maintain a policy of high and stable employment without an excessive increase in prices, it is obviously necessary to alter the bank rate and in other ways to make the necessary modifications. Indeed, it is like a car being driven along the road: on some occasions it is desirable to use the accelerator and on other occasions the brake. What has gone wrong with the driving of this motor car is that the accelerator has been put down too hard and too late, and then the brake has been applied too savagely shortly afterwards.
I think that the actual cause of the present balance-of-payments crisis is the measures that were taken in 1958–59 and early 1960 by the Government, perhaps because of their excessive concern over a comparatively small rise in unemployment. I do not agree with the noble Lord, Lord Boothby, who says that what has happened is entirely due to taking off of controls by the Government. What in fact happened was that, with the best of intentions, the Government adopted all sorts of measures in order to put more purchasing power into the economy. I thought it was ill-advised at the time. I felt sure that it would result in a great over-burden of the building industry. Of course, that is what has happened. Roads and bridges are being built at a tremendous rate. The building industry has a programme of prisons, hospitals, barracks and housing, in addition to schools.
Then there was the Local Employment Act, 1960, which is now beginning to take effect, just at a time when there is over-full employment in this country. In the first twelve months of its operation £19 million was promised to industry; in the next twelve months it was £30 million. I hope that now steps will be taken to close down this inflationary activity, for it really cannot be said that at the present time there is any need for more purchasing power to be infused into the economy. To me that appears to be the short-term cause of the trouble.
But ever since the war we have been faced with inflation, the chronic disease from which we are suffering at the present time. The Times has drawn attention to

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the not steady, but continuous, decline in the purchasing value of the pound ever since the war. I believe that this is largely due to the fact that ever since the war wages have tended to increase in excess of the increase in production. Despite the fact that what I say may incur the censure of noble Lords opposite, I intend to say that I think the general system of wage settlements in this country is calculated to deal with the old situation of unemployment and low prices, and not with the modern problem of high employment and rising prices. The whole wage-fixing system is calculated to deal with a state of affairs which I am glad to think is now one of the past.
Take the case of wage boards. They were introduced by a Liberal Government before the First World War in order to deal with the appalling problem of setting wages in particular industries. Wage boards have now been carried on and applied in many industries where it cannot possibly be said that wages are low. I remember discussing with the late Ernest Bevin his catering wages legislation during the last war when a number of members of my Party were very hostile to the Bill which he introduced. He said at the time that he had no intention of using it for hoisting up wages but because he foresaw that after the war there was likely to be a period of unemployment and wages might fall, and he wanted to put in a floor to prevent them from being depressed. It was with that in mind that my friends and I gave him support at that time, despite the contrary view taken by a number of members of the Conservative Party. But although the catering wages legislation has been modified, and despite the fact that there is full employment in the catering industry and wages are high, we still have a wages board in that industry which really is based upon the legislation of, I think, 1911, which was intended to deal with an entirely different problem.
Then take the way that arbitration, which has been agreed to in so many industries, is now operating. It has become an escalator of wages. Unions now ask for double what they really expect to get; the matter is referred to arbitration; and it has become the accepted principle that some increase must be conceded every year. It is usually in the spring, but if the increase
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does not take place in the spring, then it usually takes place in the autumn. Wages are not raised merely as a result of an increase in the cost of living. At the time when my noble friend Lord Amory was Chancellor of the Exchequer, when the cost of living remained constant, there still was an increase in wages, largely brought about by the machinery of industrial negotiation and arbitration, which resulted during that time in a great increase in real wages and an increase in nominal wages Which was not balanced by a corresponding increase in production.
My Lords, I invite consideration of the anomalous position of the Minister of Labour at the present time. The doctrine of the Ministry of Labour is that they are under an obligation to hold the balance evenly between the two contesting sides. In a large measure the Minister of Labour in matters of industrial disputes regards himself as in a position analogous to the Attorney-General in the administration of justice. Although he is a member of the Government, he considers that he has a special obligation to take an independent line and to hold what he deems to be the balance evenly and to be impartial. In fact, we have this strange state of affairs: that when the Chancellor of the Exchequer is trying to adopt a particular economic line as regards the country as a whole, one of his Cabinet colleagues has a divided allegiance. One, in the speeches that he makes in the country, may express agreement with the policy of the Chancellor of the Exchequer; but when it comes to the actual administration of the conciliation machinery of his Department, he is precluded from bringing any pressure to bear in order to give effect to the Chancellor of the Exchequer's policy which may be to have stable wages.
I believe the solution to this problem would really he to take the conciliation machinery, the work of the Industrial Commissioner, away from the Department of Labour and put it under the Lord Chancellor. In that way one would have the feeling that there was an impartial body administered by the head of the Judicature who would be able to adopt the same attitude in dealing with that kind of matter as he would in any other kind of tribunal. But the Minister

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of Labour should be required, like all his other colleagues, to give in his Department, as well as in Parliament, support to the economic policy of the Chancellor of the Exchequer.
A lead in this direction is now being given—this is where I think it can be claimed that the Government are facing the realities of the situation—in that the Minister of Education for the first time is making it plain that it is impossible indefinitely to go on with the old Burnham machinery. There, for a long time, we have been accustomed to the representatives of two parties agreeing among themselves, and the Government, the Chancellor of the Exchequer, who pays so large of proportion of the cost of education, is called upon merely to pay its contribution regardless of what the settlement may be. To those who are criticising the Government for not having faced up to the realities of our present financial difficulty, I would say that here is a most encouraging indication that they are looking forward and realising that some alterations will have to be made.
I come now to the matter of the nationalised industries. I am not one of those, if there are any, who want to see any of the nationalised industries denationalised, but I am quite sure that in many respects none of us, either on that side of the House or on this side, has faced some of the economic consequences that have resulted from the policy of nationalisation. I think I am right in saying that something like 40 per cent. of the people of this country are now employed, directly or indirectly, by the Government, by the local authorities and by the nationalised industries. It seems to me to be quite impossible to allow the old idea of free negotiation between the employers and the employed to apply in the case of the nationalised industries. It seems to me that the sponsoring Minister—the Minister of Transport in the case of transport, the Minister of Fuel and Power in the case of the coal mines, and so on—must have an overriding authority in the matter of financial settlements.
The practice of the different Departments has not been uniform since nationalisation took place. The Minister of Transport has on many occasions, as
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is well known and has been publicly stated, indicated that he would deplore an increase in wages in the transport industries which is disproportionate to an increase in efficiency. In the case of the Ministry of Fuel and Power very much less effort has been made to exercise any such control. In the case of the electricity industry increases of wages and improvements in conditions took place without any regard to the difficulties of the similar but less fortunately placed industry, that which was producing gas. Gas, an older industry without the same natural ever-increasing demand that there was in the case of electricity, found it extremely difficult to compete with the more favourable conditions which the Electricity Board found itself able to agree to.
Once nationalisation has taken place and a monopoly has been created, it is no longer a matter of free negotiation between a private employer and his work-people, when he is obliged to compete with others. It is a case of a monopoly where, if wages are increased and generous pension schemes are provided automatically, the cost can be put on to the consumer. There has been no proper co-ordination of these pension schemes, which are merely one more example of the kind of burden which can result.
In his statement two days ago the Chancellor of the Exchequer indicated that he intends to try to exercise some restraint upon the nationalised industries. He intends that there shall be a standstill policy as regards wages for the present—indeed, for some time to come. The fact that he has declared his intention of doing so is, in my view, a great step forward. It is a recognition on the part of Government of the completely changed economic position which has resulted from the nationalisation of these great industries and services. But, of course, he will find that that does not go far enough. One of the great difficulties of the railways was that at a time when they were running at a loss they were losing labour to private industries—industries where working conditions were very much more agreeable than they were on the railways. In my late constituency, there was very unfair competition between the railways, who were trying to maintain their services, and a large, modern factory, well-heated, with

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something very much like air conditioning, and with all the amenities and attractions that can be provided by a modern, manufacturing industry.
How impossible it is to leave the private sector without any measure of influence upon its wages is again shown by what happens in the use of negotiations between U.S.D.A.W., the trade union representing those who work in shops, and the shopkeepers. There, a reduction in hours or an increase in wages has an immediate effect upon the cost of living, which can be passed on and is passed on. Actually, an increase in the wages of retail workers is likely to have a more immediate and, perhaps, a more serious effect upon the cost of living than an increase taking place in one of the basic industries, like coalmining.
All these things seem to me to indicate that we shall have to move in the direction of a national wages policy. All the machinery that we have at the present time—the Ministry of Labour itself, the whole system of negotiation, the general laissez-faire attitude with regard to wage negotiations, which many noble Lords on both sides of this House would regard as inevitable if we are to maintain a free economy—is leading directly along the path to an ever-increasing cost of living and an ever-declining value in the purchasing power of money.
What is needed is a new attitude on the part of the Government—and, as I have said, I think there are indications of this in the much firmer line which they are apparently taking with regard to those,who are directly or indirectly in their employment—and a changed attitude on the part of the trade unions. Inflation, if it goes on as it has been doing for the last twenty years, must have the most disastrous consequences. It will destroy our exports; it will destroy the desire to save, because the savings will be constantly losing their value; and it will, in itself, in the long run, destroy full employment. It is because I believe that these facts must be faced, and that they are the underlying cause of these ever-recurring balance-of-payments crises, that I think it is desirable that someone in your Lordships' House should express these views.
LORD CROOK: My Lords, I wonder whether the noble Lord, before he
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resumes his seat, would mind if I raised a point. I would not interrupt what I regard as a brilliant contribution to your Lordships' debate, whether I agree with it or not, to ask him, when he referred to the Chief Industrial Commissioner, quite what it was that he had in mind. As I understood it, he suggested that if the post of Chief Industrial Commissioner wore removed from the Ministry of Labour to the Department of the Lord Chancellor, that would free members of the Cabinet to look at industrial conditions in a rather better way than they can at the moment. What I could not understand was how the Lord Chancellor was more free from Cabinet control than the Minister of Labour. If I am under some misapprehension, perhaps the noble Lord would let me know.
LORD MOLSON: My Lords, I am obliged to the noble Lord, Lord Crook, for his question. Our Constitution is full of anomalies, and that the head of the Judicature should also be a member of the Cabinet is one of them. It goes back a long way; but I think it has been generally accepted that successive Lord Chancellors of all Parties have carried out their judicial work and their judicial administration completely free from Party affiliation. I think, therefore, that it would be far better for the Industrial Commissioner to be under the head of the Judicature, rather than to be under the Minister of Labour.
LORD CROOK: I am much obliged to the noble Lord.
7.28 p.m.
EARL ATTLEE: My Lords, I am not going to follow the noble Lord, Lord Molson, in his very bold raising of the question of industrial relations. It seems to me a little one-sided. He obviously wants control of wages. Does he also look for control of profits? How does he imagine that you must have a semi-judicial decision upon whether a wage should be a certain wage or whether the profits of the employer should he at a certain level? Really, the noble Lord must think again about the difference between justiciable and non-justiciable disputes. I do not think he contributes very much of a solution. However, I was not going especially to deal with that.

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I am reminded that it was just sixteen years ago that the Labour Party formed a Government, and that I was Prime Minister. I recall that at that time I received more condolences than congratulations. They said, "You have got an awful 'headache'." I gather that the Government have a "headache" to-day. But our heads were bloody and unbowed. The "headache" which the Government have got to-day is a very ordinary one—it is the headache of the morning after the night before. Because for the last ten years the Government have been engaged in steadily running down the standard of national duty in this country, and to-day we face a crisis with a country that has been debauched by every kind of Government action.
When we came into office we had one great asset. We had a nation that had been making sacrifices; that had been accustomed to seeing the national interest put before private interests, and accustomed to seeing people give service. And, to their honour, although tired, they carried that on for the next six years. We did not have to make many moral appeals for duty. People did it. For one thing, they had learnt the lesson in the war that you must have first things first; and, for another, they had learnt the lesson that you could get those things only by action, not by mere wishful thinking. They also knew that the Government in power were striving for social justice, and they felt that all the sacrifices they were asked to make affected all parts of the community.
Now the present Government have not done that. This present proposal is manifestly unjust. There has been no attempt whatever to hold the scales evenly between different sections of the community: they lean all the time towards the better-off people. But, worse than that, what is the good of their making a moral appeal when for ten years they have been running the country on the doctrine of getting money somehow—it does not matter how—with no emphasis on hard work, except for the workers, of course? There has been every kind of invitation to gamble over and over again. I know that the better section of the Conservative Party were opposed to commercial television. I do not say that commercial television is particularly bad, but it is an extra-
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ordinary thing, for a Government who recurrently ask people to abstain from unnecessary purchasing, to put the advertiser right into everybody's home; and there was not very much scrupulosity in the way that was done.
You have other things: every gamble you can have—premium bonds, betting houses, everything. There has been no attempt anywhere to raise the standard of public morality. On every possible occasion this Government have said, "We will not have a service for the nation, unless of course it does not pay. If we find any paying sector we will take it away from the nation and give it to private exploitation." That example is not lost on other people. We have a system of immense capital gains, of which we read in the paper every day; and there is no attempt to control that. They glorify these immensely rich people. Business deals of all kinds, takeover bids, speculation in building, inflated values—all these thing are the fruit of a Government that have never attempted to put any moral purpose before the public. I know that the Conservative Party sneered at Stafford Cripps. Stafford Cripps had to put on a number of unpleasant things that were absolutely necessary. I recall that people did not like it; that some goods could not be obtained because they were needed for exports. If it was necessary to export then, it is necessary now. The difference between us is that when we were in power we took steps to see that we did get our exports. It was essential to this country.
My late friend Aneurin Bevan once said a very true thing. He said that
"A sense of priorities is half the art of government".
When we look at the activities of this Government we see what their sense of priorities is. I suppose that nothing can illustrate that better than the attitude to education, which is quite characteristic. When the Tory Government came in they left the Minister of Education out of the Cabinet. Naturally. They did not think much of it. Now they have hit the teachers, an incredibly stupid thing to do. We have had many debates in this House in which speakers have stressed the need for having an adequate number of teachers. We have had educationists painting out the danger because our science teachers and

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our mathematicians were being led away by higher rewards from private industry. There was a shortage of teachers, but the Government disregarded that entirely. They do not consider the priorities, and what is of real value to this nation.
The action of any member of the Government seems to me to be very characteristic. When I was young, it was considered an honour to serve in the Government, whatever the colour of that Government. I cannot recall Minister after Minister leaving the Government because he could make more money in the City, or at the Bar. But that is just a reflection of the lower standards of this Government. Everything is done to glorify the people who contribute nothing to the nation—the financial manipulators and the rest. Now we are in this position, and the noble Viscount has been making an appeal to the country. He may do it. He is perhaps one of the few members of the Government who could do it, because I do not think the rest of the Government will be successful. They cannot do it by just preaching: they ought to give an example. But this Government have given no example whatever, no idea of service and sacrifice, which is what this country needs if it is to compete in the world to-day.
I have been much struck in the last two days by the fact that the Government seem to have attained general unity of opinion in one respect, and that is on the total inadequacy and futility of the proposals of the Chancellor of the Exchequer. In the last two days I have been to one or two social functions, and it is surprising to me how many people came up to me to talk and said exactly the same things, whether they were Conservatives or non-political. They all said exactly the name thing, and I am quite sure that if there were a free vote in your Lordships' House there would be very little approval of the Motion which the Government have placed on the Order Paper. People said to me that there is no idea of long-term policy in this; it is just a collection of the old expedients that we have had before. Businessmen say, "How can we do business with this constant use of an expedient, the raising of the bank rate?" We are getting it
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pretty constantly now. Every few months there is a change in the bank rate.
It reminds me very much of the devices of the late Mr. Whittaker Wright. He used to run a number of companies, and he had a certain amount of money. At a critical time, when the shareholders were meeting, he put that money into a particular company and showed it as doing well. Then, when he got over that awkward point, out it would go into another company. He was caught at last. This Government's action, which I understand is for "hot" money, is very much the same. A crisis comes up; "hot" money is carried over by a 7 per cent. bank rate, and the Government boast that they have cured our difficulties and overcome the balance-of-payments problem. Then, very soon, out goes this "hot" money again, and we have another financial crisis.
Really, my Lords, unless we can get something better than we are getting from the present Government, one is rather in despair for the future of this country. We have lost the moral leadership of the world which we had in 1945—yes, and in 1950 and afterwards. We have come down now to a pretty pitiable position when we are doing worse in every way than our late enemies, Germany, Italy and Japan. France, all those who fell in the war, we are told, are doing better than we are. We have to go, cap in hand, to our late enemies for a little bit of assistance—it is a pretty poor record. I should feel inclined to echo the famous words of the late Leo Amery: "You have sat here too long; in God's name, go!"
7.40 p.m.
LORD FERRIER: My Lords, I rise to oppose the Amendment, or to support the Motion—take it as you will. It is not my intention to make reference to the many and various points which have been raised by your Lordships in this long and interesting debate from the angle of economics pure and simple; but in view of the words of the noble Earl who has just spoken, I may make some references to capital gains and to surtax, and for this reason I do not propose to refer to other points which have already been mentioned. Therefore, I trust your Lordships will not regard the texture of my speech to be woven of trivia.

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I share some of the doubts which have been expressed by many noble Lords on both sides of the House at the steps which have been taken by the Chancellor of the Exchequer, but I know enough of affairs to be conscious of how easy it is to criticise when you have not to bear the responsibility. I am one who believes that the complexities, the uncertainties, and the imponderables of the situation at the moment are such that only time can show what will be the outcome. But there is one consideration—namely, the consideration of leadership, that leadership which is so necessary for united effort; and it is on this point that I should like to concentrate my contribution to this debate.
Besides the steps they have taken, cannot the Government do more to create, to promote, and to develop a sense of mission, a sense of unity, which one must confess is, in a measure, lacking? It is clear that we have to produce and to export to live. It is also clear to me that fiscal measures, whatever they may be, cannot alone improve our productivity unless there is a united effort on the part of the whole nation to strive to make our economy work, and to fight for our place in the trade of the world. This point has been nobly made by the Leader of the House in his opening speech on the Motion.
Now, what can we do to this end? I have listened to several debates in your Lordships' House when productivity has been the subject of our deliberations, and there is one factor which I believe has not received sufficient consideration. It is this. Accepting that co-operation in industry is essential, I feel that too little attention and too little credit have been given to direction—direction in our industry, and the importance of it. We have spoken too much of management—labour relations, and labour—management relations—and have perhaps tended to confuse management with direction. There has been talk of directors losing touch with the shop floor, and there have been some scornful references to "the race of professional directors Who play the game of musical chairs from one company to another". Here I quote from the noble Lord, Lord Lucas of Chilworth. I am sorry he is not in his place. I told him I might mention this,
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and I would not have mentioned it had not the noble Earl who has just spoken suggested that there is a certain amount of this sort of thing. This race of professional directors—and it exists—is a very small one in terms of numbers, but, by and large, a very valuable one. I think it is fair to say that nowadays a substantial proportion of company directors win their way to the board room through the normal executive chain, and that in the larger companies in particular the proportion of such directors is very high.
These executive directors have no limited hours of work. Their task is never done. Their job is a 24-hour one, and as I know them, they are dedicated men. They are pledged and are wedded to their work with incomes little above those of their immediate subordinates. The noble Lord, Lord Boothby, implied when he spoke that there were restrictive practices on both sides of industry. I am inclined to doubt that. I have yet to come across them, certainly on the management side, but it has become the fashion to disparage (as has been the case in this House only to-night), almost to deride, the place of management in industry.
Would it not contribute to this joint united effort which is so necessary if something more were done to put this right? It is to my mind wrong that, for instance, the words "working man" should be applied only to labour. We are all working men in industry, or we have no right to be there. And the working man is worthy of his hire. Take this question of surtax, which has been referred to over and over again in this debate. It is not the relief which is unfair. The position until the relief came was unfair. If there is any unfairness, it is that the relief has not gone far enough, and not gone anything like the distance it should have gone to match conditions to-day with the conditions when surtax was first applied. My Lords, I say that the working man is worthy of his hire, and I go wholeheartedly with the approach of the Government to the problem of the capital gains tax. The difficulties of assessing a gain fairly, as distinct from the rise in prices due to inflation, the problems of off-setting losses, and so on, render it much too complex, in my experience, to be reasonably operable in an economy

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liable to inflationary pressure. And surely we have heard enough to-night of the inflationary pressures which are upon us. Speaking for myself, I certainly look forward to the proposals of the Chancellor of the Exchequer forecasting, in some form or other, some effort to produce revenue from successful speculation. I think it is safe to say that all sides of the House would agree, though this is going to be difficult, that it is something that is going to be worth while.
To turn to the question of exports, which have also been mentioned, it brings me again to the problem of leadership, of the general spirit which should go behind our industrial effort. It brings me to the problem of rewarding successful exporters. This has been mentioned, and personally I am satisfied that, no matter how desirable, it is impossible to adjust taxation so as to provide direct rewards by tax relief. The least we can do is to assist in terms of moral support. For too long the public in this country have been tempted to think that selling overseas is all "beer and skittles". I refer not only to the peripatetic salesman—and his is a difficult task, which calls not only for great skill and expertise, which are often overlooked, but also for physical endurance—but also to the British business communities up and down the world. I feel that their contribution to our island's economy deserves more recognition. If we cannot do more to put this right financially—and I recognise that the tardy surtax relief may have gone some little way towards this—can we persuade the Press to give our overseas efforts and our representatives there a bit of a leg up, if they are not too busy with their own internal troubles?
My noble friend Lord Bessborough has asked me to make one point in connection with exports which he would have raised had he been here today, and he wishes me to apologise for his absence. He would have asked: Should not further thought be given, to finding positive ways and means of helping exporters? For example, one very pressing matter is the cost of obtaining finance. Now that the bank rate has been increased British exporters have to pay 4 per cent. more for their credit than do their competitors in Germany.
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This is hardly encouragement. Could not some means be devised by the Government of making finance available at reduced rates for approved export transactions? That would indeed be a positive incentive and a very great help to smaller exporters in particular.
THE EARL OF LONGFORD: My Lords, has the noble Earl studied what Mr. Harold Wilson had to say on that subject yesterday?
Loran FERRIER: My Lords, I am not in a position to say, because my noble friend handed me this as he hurried out in the course of the debate. Speaking for myself, I think there are various angles affecting this, but my noble friend asked me to say these words and I have said them I have no doubt that when he has studied the Record he will take note of what the noble Earl had to say.
In terms of worrying about the available personnel and the shortage of trained men and technicians, we must remember that the casualties of two bitter wars have heavily cut our resources of men as men alone, and that being the case, although we are short of leaders, anyway, we must battle on. My plea is that the steps which the Chancellor of the Exchequer has taken will go some small way in bringing the crisis home to us, but it is only by strenuous effort, by united and self-reliant effort that success can be obtained. I believe that greater recognition of the worthwhile nature of every side of industry would contribute to this end.
In conclusion, may I inquire whether there is any special stimulant which can be provided—exhortation was the word used by the noble Viscount who moved the original Motion—"gimmick", shall we say, such as the reference of the noble Viscount opposite to the noble and gallant Field Marshal who is not here? But would something like his double badge be possible? I know that the noble and learned Viscount, Lord Hail-sham, cannot ring his bell in this context, but might there not be some sort of equivalent if no time is lost in declaring that we are to have a decimal coinage and no time is going to be lost in introducing it? To do so, and to do so soon, I feel might go some way to providing the élan which we need so much for our attack upon the crisis.
7.54 p.m.
VISCOUNT AMORY: My Lords, greatly to my disappointment, I have missed parts of this debate and, to my particular sorrow, the early part of the able and eloquent speech from the noble Viscount the Leader of the House. I do not propose this evening to deploy my views on our general economic problems because I have done that to your Lordships on several occasions recently. I rise only to give unqualified support to the measures now proposed by my right honourable friend the Chancellor of the Exchequer.
These measures have received criticism in some quarters on the ground that, if these measures are necessary now, why were they not taken at the time of the Budget? In my opinion, there is no substance in that line of attack. The Chancellor's Budget this year was strongly disinflationary. He took powers at that time for these new regulators, and since then, the Chancellor has told us, fresh evidence has come to him that the excess demand we are suffering from now is likely to continue and may well become aggravated. Therefore my right honourable friend has used one of his regulators and other measures to increase the disinflationary effect of his Budget. And the measures that he has taken are not in conflict with the Budget, but are entirely in furtherance of his Budget policy.
There has been criticism from one or two noble Lords opposite that these measures are unfair. I must confess that I see no unfairness in them. The excess demand from which we are suffering arises on a very broad front of general spending on the part of almost the whole of the community, and the Chancellor of the Exchequer's measures are designed to have an impact on that same broad front. I yield to no one in my view of the importance of educational expenditure, but I thought that it was a little out of perspective to refer, as did one or two noble Lords, to the "cuts" on the teachers, because the increase that they are going to receive is going to amount, I understand, to £42 million a year, which means that they will receive an increase which goes further, I think considerably further, than any increase in the cost of living that has taken place since their last increase was given. They are, in fact,
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improving their position, and that £42 million is quite a significant allocation from our national resources.
One or two noble Lords have referred to the increase in the bank rate as if it were introduced solely for external reasons in connection with the flow of funds. But I would judge that that is not so, and that the Chancellor has introduced it for internal reasons, too. The use of the bank rate itself is a blunt weapon, as I have always acknowledged, but changes in the bank rate are certainly not without their effect, and recent experience has shown that increases in the bank rate make much less impact, fortunately, on industrial investment than on other forms of borrowing.
The Chancellor implied that he might have to exercise stricter control over new investment overseas. That has been rising rapidly over recent years, and I think we may well have to cut our coat there more according to our cloth and to impose some stricter limits than we have at present on new investment overseas.
The noble Earl, Lord Attlee, made one or two remarks which, if I may say so respectfully, because I have such a high personal regard for the noble Earl, were a little less than fair. He mentioned that the Conservative Party sneered at Sir Stafford Cripps. I think that he would have modified this if he had had more time. I do not think that that is the case. We often found ourselves in strong disagreement with Sir Stafford Cripps's policies, but we had a deep respect for his sincerity, his courage and his character—and I am sure that I am speaking generally for the Party there.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, if I may say so, we had constant sneering at Sir Stafford and his policy, which was labelled and sneered at under the term, "Austerity," whereas it was a real necessity for the economic position of the country.
VISCOUNT AMORY: I said that we often found ourselves in strong disagreement with his policy, but in no sense were we sneering at his sincerity or at his character.
The noble Earl, Lord Attlee, accused this Government of fostering gambling and extravagant living. I would make only one point there. The level of personal savings to-day is running about

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eight times as high as it was in 1951. The third point was that the noble Earl referred to Ministers who had left office to secure higher earnings in industry or commerce. I do not think the noble Earl was "having a go" at me there, but I have an interest to declare, and if I am guilty, in extenuation I can only say that I am coming back to Government service now.
EARL ATTLEE: I was not referring to the noble Viscount, and I know that he has taken up public service.
VISCOUNT AMORY: I would only say that I do not think his is a fair allegation. I agree with the noble Earl: of course it is an honour to be a member of Her Majesty's Administration, and I am certain that all my colleagues who are in Government to-day, if they were not in Government, would be securing a remuneration for their services much higher than they are now receiving.
LORD MORRISON OF LAMBETH: Not all of them.
VISCOUNT AMORY: I should judge that the measures which the Chancellor of the Exchequer has adopted, taken together, will in the short term be effective in halting the inflation which has been creeping back into our economy. What about the longer term? The first problem there is to recognise the nature of our malady. I found myself there in entire agreement with the analysis made both by my noble friend Lord Brand and by my noble friend Lord Molson. We are suffering from excess of internal demand, stemming largely (and this I think is a statement of fact, and not of view) from the fact that over a number of years wages have been rising faster than production. As a result, an excess of demand has come into existence, bringing with it too soft an economy with too little competition. That is the main reason why our export performance has, in its turn, lagged and been less dynamic than we should have liked to see it.
The long-term solution must be to get more competition going. How can that be done? I think there are three lines of attack there. First of all, in the short-term we should hold back strongly any excess demand that there may be in the economy—and my right honourable
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friend the Chancellor of the Exchequer is doing that. Secondly, we should cut any protective tariffs which are unjustifiably high. I am glad to know from several ministerial statements that it is the firm intention of the Government to negotiate—and I underline the word "negotiate"—substantial tariff reductions in the present G.A.T.T. discussions.
Thirdly, I think the remedy is to find a more sensible way of arriving at wage settlements. I am not going to say more about that this evening, because again I made some observations on it the other day. But I am sure my right honourable friend the Chancellor of the Exchequer would agree that we have not yet made any really effective progress in that direction; and until we do, the Chancellor of the Exchequer of the day will be forced to hold back demand far more drastically than he would if we had more sensible arrangements. Once again I find myself largely in agreement there with my noble friend Lord Molson. But, in substance, for our long-term solution we must got rid of our fat and introduce more competition into the economy by every means available. I would say, finally, that I find the Government's measures in the present circumstances realistic and correct. I believe that they will be effective in dealing with our short-term difficulties, and that they are to be commended and supported.
8.4 p.m.
LORD MORRISON OF LAMBETH: My Lords, it is always a pleasure to listen to the noble Viscount, Lord Amory, as we have done to-night. One feels almost relieved that he came to the support of the Government, because the Government have not had many supporters on their own side during this debate, and I am sure the Leader of the House will be grateful to him. The noble Viscount says that the Chancellor of the Exchequer is doing the right thing, and he supports the steps that he has taken. It might perhaps be retorted that these difficulties are not the product of the last five months, and possibly the noble Viscount might have taken those steps when he was Chancellor of the Exchequer, so that the difficulties of the present Chancellor of the Exchequer, if those steps had been effective (which I doubt), would have been so much lessened.

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I do not think the noble Viscount was quite "on the ball" when he was replying to my noble friend Lord Attlee about Sir Stafford Cripps and saying that the Conservative Party did not attack him. Of course they did. "Austerity Cripps!" was a Tory slogan; and they even said that his philosophy was, "Strength through misery". That went all around in those times. I do not complain about it too much; but if they regret that we are attacking the Government and the Chancellor of the Exchequer, they had better look back upon their own attacks on a Chancellor of the Exchequer who, whether one agreed with him or not, had moral courage and tried to see fair play as between the varying elements of the community.
We had a speech of high moral tone from the noble and learned Viscount the Leader of the House, and I make no complaint that it should be of high moral tone; I think that is good. But the difficulty he is in is that the moral plea which he made for all sections of the community to have public spirit in the service of our country, which in itself is very right, is in conflict with the record of the Government and the Conservative Party who have taught the very reverse. They have consistently taught the ordinary citizen, to "Look out for yourself", and, by implication, though not in words, "Never mind the country !", that the prosperity of the country depends upon the individual fighting for his own ends and his own material advantage. Moreover, the Government themselves at Elections have been appealing to materialistic considerations rather than to high moral qualities. Therefore I welcome the moral tone of the speech of the noble and learned Viscount the Leader of the House, and I hope that the Government will live up to the morals he has preached. But it is a little late in the day, in view of the past activities of the Conservative Party and of the Government.
It is certainly the case that the Government have a good many troubles on their hands, and as one who has had experience in Government, with others, I know what a trying time it must be for them. They have these economic troubles; they have the problem of Germany and Berlin vis-à-vis the Russians, and they have some other troubles, as well. I should
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think the life of Ministers is a bit of a strain at this time, and I can understand how they feel.
Let us look at the main high-lights of the statement made by the Chancellor of the Exchequer in another place last week. He says that we need more productive investment; that is to say, investment in productive industry. But the Labour Party have been urging this for years, with very little response on the part of Ministers. We have been urging that there should be more investment in useful and productive ways in industry, and less investment in ways which are not really advantageous to productive undertakings in industry. As I say, we have had little appreciation of our pleas, and little attention has been paid to them. The Government have been inactive in trying to divert investment into technical industries for technical processes for the purpose of increasing production. The Chancellor then went on to say that industry must become more competitive. Well, so far as exports are concerned, our industry is meeting plenty of competition; and, unfortunately, other countries are succeeding in the competitive battle for exports more than the British are, which is a great misfortune because exports are vital to us.
The Chancellor said he was not afraid of the word "planning". But here again the Conservative Party have scorned the word "planning" for years. They tried, with some success, to make a dirty word out of planning when the Labour Government were in power. The fact is not only that the planning we did got us through the transition from war to peace infinitely better than a predominantly Conservative Government got us through the transition from war to peace after the First World War, but that we did a better job in the economic field than the Conservative Party have done during the last ten years. We left them a heritage of a relatively orderly economic situation. We had our troubles and we had our crises. The wonder is that we did not have more, because we had come out of a very great world war, after a great deal of destruction in our own country and in other countries of the world. I say that we came through that period with considerable success, and left the Conservative Party foundations for which they ought to thank us.

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But they have not planned, and for evidence I would quote the useful report of the Plowden Working Group which has recently been published, in which they complain, lightly, but they do complain, that there has not been enough looking ahead in public expenditure. They say at the bottom of page 6:
"We would favour a reconstruction based on four elements"—
I will not quote all of them—
"A. Regular surveys should be made of public expenditure as a whole, over a period of years ahead, and in relation to prospective resources; decisions involving substantial future expenditure should be taken in the light of these surveys."
This Report declares that the Government have done no such thing, and it really is elementary that public expenditure should be planned over a period. Even in the more limited sphere of the London County Council we did it. We planned our financial policy for a period of three years up to the next election—and it can be done, and ought to be done, by the Government.
The Plowden Working Group go on to urge:
"The development and use by Government of long-term surveys of expenditure and resources is the core of our proposals."
That is sound, too. It is sound not only for the Government, but for political Parties when they are making their election programmes and committing themselves to public expenditure.
The Leader of the House said, and seemed proud of it, that the Government were budgeting for a 3 per cent. increase in the gross national product. But they do not say how they are going to secure this 3 per cent. increase. The next question is: is 3 per cent. enough? I am speaking from memory, will if I am wrong I can be corrected, but my recollection is that the Labour Government, coming after the destruction of war, increased production by somewhere round 6 per cent., and I have a feeling that it went even as high as 8 per cent. in one year. But 3 per cent. seems to me an extraordinarily modest figure and is less than is already being achieved by other countries, including countries in. Western Europe. I do not think this 3 per cent. is enough. Of the 3 per cent., they want to secure 6 per cent. for the export industries; but again the Chancellor said nothing about how that
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improvement of exports is to be achieved.
VISCOUNT HAILSHAM: My Lords, I think the noble Lord must get this right, because, it is important that we should understand each other about it. What quoted was the appeal of the Chancellor to both sides of industry to discuss targets, both for the increase in the gross national product and for exports, to be agreed between the two sides of industry. It may or may not be that these are sufficient. When they have been reached they may look further. The noble Lord said that the Chancellor did not say how it was to be achieved. He made it clear that he was asking both sides in industry to do the very thing that had been commended to us from the French economy; that is, to discuss it with him.
LORD MORRISON OF LAMBETH: My Lords, I have no objection to the Chancellor asking both sides of industry to consider how this can be done and to their giving him all the help they can, but it is not good enough for the Government, having got into this abysmal mess, to say, "Now let both sides of industry lift us out of our troubles." That is farming out the responsibility from a Government, which is responsible to Parliament, to both sides of industry. I have no objection to their making the appeal, and no objection to using these channels—it is right that they should. But the Government are cowardly. They have no mind of their own. They are not themselves producing policies or leads to both sides of industry which they can discuss. They merely say, "This is what we should like. Let both sides of industry solve the problem."
Let us consider our share of world industrial production. Take the year 1960, the index figure at 1953 being 100. By 1960, we were at 130, the United States was at 119, and Canada at 130. But Western Germany was not at our 130—it was at 180. France, which is not the easiest of countries to run economically, was not at our 130, but at 173. Italy, which used to be regarded as a rather backward country in economic matters, was at 182, as against our 130. Belgium was at 126, which is a little below us. The Netherlands was at 157, Sweden at 135 and Japan at 261. I am not quoting these figures with any pleasure, because they are depressing,

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and I love my country. I do not like our country to be behind in these economic efforts. I suggest that the Government need to elaborate, to think out, after careful consideration, a positive policy for the promotion of our export trade. Our export trade, next to the amount of production, is vital to the basic economy of our country. If we import, as we must, a good deal of food, raw materials and other things—we are probably importing some things we ought not to import, but we must import some things—inevitably the persons from whom we import expect to be paid for what they send. Therefore, unless our exports, direct, indirect, hidden and obvious, balance the imports, inevitably we shall be in trouble, not only on the balance of payments; it will also be injurious to the standing of sterling in the world.
The Government have not said what they are going to do to help exports forward, apart from this appeal to both sides of industry, which is all right. Is the Board of Trade lively enough, imaginative enough and constructive enough in promoting ideas for the increase of our export trade? Is it possible, by some taxation device, to encourage manufacturers to go for the export trade? Is enough research being done about foreign markets? I am told that when our motor manufacturers—who have done a fairly good job in exports over the years—began exporting to the United States, one of the things they forgot was spare parts and servicing. The Germans did not forget it when they exported. They put spare parts there, and they made the installation of the necessary servicing organisation. I am told that our people did not—they may be better now. But it is insanity to export articles such as motor cars unless the spare parts are available in the country to which the motor cars have gone and unless the servicing is there as well.
Now in all these things we have to take into account both production and the removal of restrictive practices, a policy with which I am in principle agreed. But the Government have to face the fact that behind the minds of the working people there are, unhappily, memories of the bad old days of the thirties, of unemployment; that the quicker you got a job finished the sooner
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you were out of work; which was true. Your Lordships should read a little book called, Ragged-Trousered Philanthropists to know how true it was. I do not want to rub it into the working people; to say "Remember this: don't do too much". I would not do it. But it is extraordinary how memories last from generation to generation about experiences of that sort. You get it in the mining industry, with people living in mining villages and those who go down the black hole into the pit. Society used not to care much about the miner and was pretty indifferent towards his very hard fate, and the remembrance of that passes from generation to generation.
I am mentioning these facts not in order that they shall remember still more, but because there needs to be some degree of understanding of the psychological processes behind the working-class mind when they are awkward. I am not saying that to excuse strikes. I do not like them. In particular, I do not like unofficial strikes, and I think as a whole they are indefensible. Some of the strikes are against the unions; some unofficial strikes are against the country, and, in some Communist minds, for the purpose of injuring the country. I do not like them. If there are going to be strikes they ought to be called by the unions, and some day the unions may have to face up possibly to expelling the minority of people who start these things for improper purposes.
Now it can be argued, and, indeed, I argued it at a Conference of the Labour Party, that if getting an increase in wages—and this has to be proved, mind you, in each case—results in an increase of prices, then it is like a cat chasing its own tail; there is nothing in it, and it is rather foolish. But if prices go up first, as they did, at any rate, earlier on, and wages try to catch them up, then that is a vicious circle the other way round. It is production that is necessary to keep prices at a reasonable level; it is production that is necessary to carry reasonable standards of life for the working people to which they are entitled. Therefore we again get back to production, Which is at the basis of everything. It is the basis not only of the economic well-being of the country in industry, but also of the

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social services, of the Defence service, of the costs of government, both national and local—all have to be carried by production. Therefore production is the vital thing, and I charge the Government with having been incompetent in stimulating production, even positively negligent in the steering of investment towards more production, and of not taking their responsibilities seriously in this vital respect.
Another psychological factor which affects working people is reading in newspapers of high dividends. These things usually appear on page 2 in the City notes, and I repeatedly read of companies which have increased their dividends by substantial amounts—sometimes a total dividend of 50 per cent. even 60 or 70 per cent., but 40 per cent. and 30 per cent. are fairly common. Now this is morally bad; this is what makes the task of the Leader of the House when he appeals for a high, national, public-spirited, moral feeling very difficult. The working man, when he reads these things, feels annoyed. And remember, my Lords, the working man and the working trade unionist usually has a wife, and if he does not get annoyed the chances are that "Mrs. Trade Unionist" will get more annoyed.
LORD FRASER OF NORTHCAPE: My Lords, may I interrupt the noble Lord for a moment? I believe that if we stopped all dividends we might add a Is, a week to wages in general.
LORD MORRISON OF LAMBETH: That is an excellent example of the moral bankruptcy that supporters of the Government show on this matter. The noble Lord quite legitimately says that if you divide all this up it would not make much difference. I am talking about the moral effect not only of high dividends, but of increasing dividends.
A NOBLE LORD: And expense accounts.
LORD MORRISON OF LAMBETH: Expense accounts, and dramatic increases of dividends. They used to say that if we had Socialism and everyone had an equal income—which, incidentally, we did not advocate, but that was thought by some—the total income of everybody would be "x", which was not much more than mast persons were getting, and that we should probably
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mess up the show in the process. These are not conclusive arguments, but I say that this recurrence of high and, in a number of cases, dramatically increasing dividends is bound to breed suspicion among the working class, and not only among the male working class but among their wives as well, because the wife can be an agitator—as every man knows she can, from time to time.
It is not that the case cannot be put. I remember going to a Labour Party Conference, I think it was at Margate round about 1946, or possibly 1947, and making a speech which I thought would have got me thrown through the roof of that Conference, because I imagined that the delegates would be so irritated by it. I argued this very point of wages and prices chasing each other and of the need to get rid of old ideas about production and working hard; I wanted the workers to work hard in private industry and still harder in publicly-owned industry, and not to regard publicly-owned industry as a kind of Utopia. I thought I should get into a terrible row, but, to my surprise, the speech was received with loud cheers and was a great success. But then those delegates, representing trade unions, constituency Labour Parties and others, knew that the Government were giving the working people a fair deal. They knew that we would keep the balance held fairly as between the well-to-do and the working classes. Therefore they said that that was a decent Government, a fair-minded Government, and they would take exhortation from that Government which they would not take from another.
It is not that I should want trade unionists to be hostile to a Conservative Government in an anti-social spirit. Indeed, when we were defeated and the Conservatives came in, one of the first pronouncements made by the Trades Union Congress through, I believe, Sir Vincent Towson, was that they would deal with any Government, irrespective of its Party colour.
The real reason that they have not been able to deal with this Government is that they feel that it is not holding the scales fairly and is not doing its job well and fairly. It is not until you can convince the working people and the trade union movement that the Government is being fair and equitable between the

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various classes of the community that you will get the answer to the moral appeal so eloquently put by the Leader of the House this afternoon; and I recommend that to the Government for consideration.
My Lords, the Chancellor of the Exchequer also said that he was now convinced, for the first time in the life of this Government I think, that certain people who were making profits that evaded taxation were doing wrong, and that he was going to put this matter right; he would tax certain tax-free profits. But when? Next year. He wants the wages standstill now, but when he comes to deal with these tax evasion people, next year—and possibly just before an Election because the Government relate many of their actions to the proximity or otherwise of an Election. This is the sort of thing also that spreads suspicion among the working people of the country and the conviction that they are not getting a fair deal.
The Chancellor also said [OFFICIAL REPORT, Commons, Vol. 645 (No. 155), col. 222]:
"Turning to wages and salaries, of course, increases in real wages and salaries are desirable, but only provided that national productivity increases sufficiently …"
With that fundamentally I do not quarrel, except that I think the Government must do more to promote national productivity. But he went on to say about wages and salaries:
"Where commitments have already been entered into, they should he met."
That brings me to the teachers. We are talking a lot about teachers, but they are not the only people who are going to he concerned in this; there are also other people who are concerned or may be concerned. The Government have a technical case. The Burnham Committee so far as the employers were concerned reached a conclusion in which they offered to the National Union of Teachers an increase in salaries. That was not accepted by the Union; they had a perfect right not to accept it and to ask for more if they wanted to. I think that perhaps they were squeezed by Left-wing elements in the N.U.T. I suspect the demonstrators outside the N.U.T. headquarters that morning to have been promoted a little by the Communist Party. And now, poor
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things, they have not even got what they were offered by the Burnham Committee. That shows how often Left-wing elements finish by coming out of Right-wing doors; it shows how careful you have to be with them.
But the Burnham Committee had offered this increase. The only "get-out" for the Government is that the teachers had not accepted. Looking hack I expect the N.U.T. wishes it had, and that is understandable. But the offer had been made by the Burnham Committee. It may be that the Ministry of Education had not "O.K.'d" it, but it is not often that the Ministry of Education do not "O.K." a Burnham Committee award. Now the Government come along and say, "You are not going to have the Burnham Committee award than was offered, let alone the further increase you want. We are going to cut that." To save what? What is it—£5½ million? Is it worth this moral offence against the great teaching profession for the sake of saving £5½ million? Is it not morally the case that the education authorities on the Burnham Committee were morally committed to the amount that they offered, and all the local authorities represented? And then the Government came along and say, "Because we had not yet 'O.K.'d' it, we are now going to make a cut in that."
The teacher is a delicate animal. I know them very well. They are an impartial lot in politics; as a matter of fact they get some sort of Parliamentary representation through all three political Parties, or they did. They do not shout about it too much; it is probably quite right. But they do. You cannot bring the National Union of Teachers into Party politics, because they think in their profession that they had better be out of it, and I am not going to quarrel with that. I once tried to get the London teachers into the London Labour Party, but it did not come off. We did pretty well at first, but I dropped it on moral grounds. There is much to be said for teachers being outside Party politics, and they are outside. But nobody can deny the public spirit of the teaching profession.
They are in a strong position. They hate the idea of a strike, even if they are striking. I do not like it either, and I wish they would not. They do not

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like it, but they feel that in the circumstances there is nothing else they can do, and there are only little strikes. They are having a little game so that Johnny can go home and come back next day, so it is not all that terrible. They do not like it; they are a decent lot. They feel they have had a raw deal, and in view of the training they have to undergo before becoming teachers I think they have had a raw deal. This is a mean thing on the part of Her Majesty's Government; it is contemptibly mean and fundamentally immoral, and the noble and learned Viscount the Leader of the House should not come here making speeches on morals When he is defending this act of immorality against a great and decent profession in our country. I am sorry to speak with heat about it, but I feel it. I think it is a most foolish thing to have done.
I rather like the Swedish system of settling wages, where all the unions put their demands up to the Swedish T.U.C. and all the employers put up their ideas (I think I am right) to the employers' confederation. The unions' federation might say to such-and-such a union, "We think you are asking for too much and that you are putting your industry in a more favourable position than it ought to be", and they may get it reduced somewhat. The employers may say the same about their offers. Behind it all is the State, with economic knowledge and so on, and they get these annual contracts settled amicably and without strikes. I am doubtful if the T.U.C. or the trade unions here would accept it, but I think there is a lot to be said for that. I do not like this "catch as catch can" in wage negotiations. I would rather see wages settled in the light of the national economy and in the light of what you are going to do about the national economy.
The next proposal of the Chancellor of the Exchequer is to cut national Government and local government expenditure in so far as it is wasteful expenditure or expenditure which we can do without for the time being. With that I do not quarrel, but if it is going to mean an attack upon public services which are necessary for the nation, and upon desirable local government things like housing, slum clearance,
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and schools where schools are bad and out-of-date, and so on, that can become a negative and reactionary thing, as it did in 1931. I remember the Tory London County Council just enjoyed itself as a result of the crisis message sent out by the National Government, and the silly people enjoyed themselves too much. They enjoyed themselves to such an extent that, though a penny rate in the County of London produced a quarter of a million pounds, they saved £12,500 by metaphorically snatching the prizes out of the schoolchildren's hands, poor little things; and that was a good moral issue on which to fight the next Election so far as we were concerned. It was contemptible, but they went thus far, and once you set some of these Tories, including municipal Tories, going you do not know where they are going to stop.
Moreover, the local authorities not only have to meet the pressure of the Government to cut their services, but the bank rate's going up from 5 per cent. to 7 per cent.—there may be a case for it—is going to hit local government and the building societies very hard, because a difference of 2 per cent. in the rate of interest can be a crippling burden on the local government services. So they themselves may have to cut in the hope that the bank rate will be reduced later on. The Chancellor of the Exchequer said, among other things, that the building industry is over-strained; and it is.
Again, as the noble Lord, Lord Boothby said, the Government shiver in horror at the mention of physical controls. They are one of the things you cannot do without. I do not want physical controls for the sake of them. The Labour Government did not. We scattered a good many of them before we had finished because they were no longer necessary. On the other hand, to avoid physical controls merely out of doctrinaire prejudice is silly. There is some building work going on which is not necessary; as a consequence, some building work which is necessary is not going on. That is because of a lack of some physical control in this industry.
Then the Chancellor goes on to speak of increasing purchase tax by one-tenth, together with some other increase in taxes. He says that this will reduce spending by £210 million a year. He does that now.

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In regard to a number of things subject to purchase tax, that does not matter much, because people can do without them. But it means an increase in the cost of living, and if something similar is not going to be done in regard to other classes in the community there is going to be a sense of injustice. It is all very well for him to say "I do not want any wage claims as a result of this." But, human nature being what it is, I have heard even from Conservative lips "Do not expect this, that or the other." Human nature being what it is, if the cost of living goes up, especially by the action of Government, it is going to be difficult to avoid some wage claims coining forward. The Government should watch the cost of living. Then the Government tell us they are going to draw from the International Monetary Fund. If it had been a Labour Government falling back on the International Monetary Fund, what a scream there would have been from the Conservative Party!
These, then, are the rough heads of the Chancellor's programme. Having heard them, will anybody say that these will of themselves increase production? Are these things designed to increase production? Is that the purpose of this budgetary change in Government policy? I may be ignorant; I am not a longhaired economist, and I speak with all modesty; but I cannot see that these steps are going to increase production. It seems to me that this "little Budget" is irrelevant to the question of increased production and to the question of increased exports. Therefore I do not think that the Government are doing their job. We have to keep up production. Production carries everything, and exports must carry imports. We need physical controls, not only for the things I have mentioned, but for a number of other items. In regard to imports, a tariff is not a scientific instrument for the purpose of discouraging imports. The Government know that there are some imports which the country does not need. They could impose a physical control and say, "We are not going to have them. That class of import is stopped for the time being." This could be said of a number of other items over which an adequate physical control could be imposed. I rather think over-building is one.
I will give the House an example,
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again from Sir Stafford Cripps, of the use of a physical control to stimulate exports. Again, it concerns the motor car industry. The home market was flourishing and the manufacturers were concentrating on the home market. Cripps wanted them to do their bit in relation to the export trade. At that time we had physical controls on steel, and he said, "Gentlemen, I will give you so much steel, but you will get that only if you do such-and-such a percentage of the export in motor cars". He got it. That was the use of a physical control which this Government do not like, in the name of "setting the people free"—which really means setting the well-to-do free.
The Government themselves have encouraged inflation. They stimulated commercial road transport for the purpose of damaging the railways, or, at any rate, with the effect of damaging the railways. They duplicated transport facilities, and that is inflationary. When they started up commercial television, as a result of direct pressure from advertising interests in another place—a miserable dozen Members—that meant investment in what was unnecessary; and that was inflation. Advertisements on commercial television are themselves calculated to stimulate the very consumer demand which the Chancellor says he wants to diminish. Who did it? The Government did it. I am not grumbling to the noble and learned Viscount about all this. I came to the House, before I was created a Member, and listened to the debate on that particular Bill. The noble Viscount made a first-class speech against the Bill, and he criticised the Government. I cannot expect him to do that now: that would not be fair. But then he did. And how right he was when he said that these advertisements on television would actually stimulate inflationary forces!
I turn to another present Minister of the Government, the Home Secretary, Mr. Butler. All Home Secretaries, past and present, have a little brotherly feeling because they have been through it. But Mr. Butler is perhaps more responsible than any single Minister for starting inflation. When this Government won their majority in 1951, he slashed food subsidies, although both he and Lord Woolton had denied immediately preceding the Election that they would do any such thing. But he slashed them

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in his very first Budget, and he knew that he was putting up the price of food. This is a matter of "freeing" things—Conservative "freedom", as they call it. But Conservative "anarchy", as it ought to be called, because they believe in anarchy. These are the polite anarchists.
Mr. Butler slashed these food subsidies knowing what he was doing, knowing that it would put up the price of food. And he also stopped our agreements with the Commonwealth countries for the bulk buying of food. When that occurred it was inevitable that the unions should start making wage claims. And here the inflationary spiral which we, as a Labour Government, had largely checked re-started. I am afraid that the present Leader of another place must carry a great responsibility for what has happened. Then land speculation is going on. That also is inflationary. Yet the Minister of Housing and Local Government defends this monstrous speculation in land values which is costing the country a great deal.
I am not happy to make all these criticisms; I am not enjoying it, but I must do my Parliamentary duty. All this is mild compared to what used to be said by the Tories al nut the Labour Government. They did not stop at criticism; they even went so far as deliberate and calculated untruth. But I am getting no pleasure out of it. I believe in the moral factor. I think the only thing that is going to save our country in the end is a decent form of government for the country—even one that demands sacrifices from the country; but the sacrifices asked must be equitable as between the various classes of the community.
The Conservative Party have done much at Elections by saying, "Vote for us and see what you will get out of it!", "You never had it so good!", "Conservative freedom pays!". They appeal not to the moral factor in politics but to the material factor in politics. They have done it and they are more responsible than anybody for the deterioration in the moral values of public and political affairs. I would sooner say, "Vote for us and join with us in pulling the country through its troubles! Be ready to work and be ready to be active!". I would rather say, "Vote for us, and let us all help our country!".
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This materialism in politics is not good. Never at an Election have I said, "Vote for me and see what you get out of it!". The emphasis has been rather the other way. There is too much materialism in politics—and, I admit, not in one Party alone; sometimes it is found in others, too. What we want is "fair do's"—a sense of justice and fairness between the various elements of the community; a sense on the part of working people that they are getting a fair deal. If we get that, then we can work together genuinely for the wellbeing of our country, and can help our country to play that great and worthy part in the world that we all want it to play.
8.51 p.m.
THE MINISTER WITHOUT PORT-FOLIO (THE EARL OF DUNDEE): My Lords, we have had a very long debate to which I have listened with the greatest pleasure for the last six hours. It does not often happen, I should think, that both Houses of Parliament have a debate upon an identical subject on the same day, and it will probably be interesting if we have the time to compare the two different results in tomorrow's Hansards. I thought that my noble friend Lord Boothby perhaps did a slight injustice to the other place when he said that if he had been there still he would have been much too frightened to say what he said about restrictive practices, because it might have lost votes. I do not believe it would have lost him any votes, and I am quite sure he would not have been afraid to say it.
Although this is a debate on a Vote of Censure, I think that, upon the whole, the majority of your Lordships who have been critical of the Government have made constructive and moderate speeches, among which I would include the speech of the noble Lord, Lord Morrison of Lambeth, to which we have just listened. I am sorry he did not enjoy making it, but I certainly enjoyed listening to it. The noble Earl, Lord Attlee, did have a little more fun, and indulged in a little more Party polemics. He told us that we were suffering from a headache which was in the nature of a hangover, whereas his headache when he was Prime Minister was of a far more virtuous kind. My Lords, to my great regret I was not a Member of Parliament when the noble Earl, Lord Attlee, was Prime Minister, and I always have

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great pleasure in listening to anything he says, whatever it may be, but I could not help remembering as he spoke that while he was Prime Minister there were two of these so-called financial crises. In the first, the noble Earl devalued the pound to 2.80 dollars; and, upon the second crisis, after a more rapid spiral of inflation in 1951 than we had ever experienced before or have ever experienced since, with great respect to the noble Lord, Lord Morrison of Lambeth, the noble Earl really did decide that he had sat there long enough and, in God's name, he went.
The noble Lord, Lord Morrison of Lambeth, has also accused us of being too materialistic and of trying to win Elections by saying to people, "Vote for us and see what you get". I did note with interest that neither he nor any other of his noble friends opposite made a reference to the Labour Party's Election appeal in the 1959 Election. Possibly, if the noble Lord, Lord Morrison of Lambeth, had had more to do with drawing up that I document, it might have been slightly different.
My Lords, I should like to confirm what my noble friend Lord Amory has said about Sir Stafford Cripps. I have never been conscious of any atmosphere of sneering against him. When I was a Member of the other place I was very fond of Sir Stafford Cripps, and he was very kind to me whenever I had any kind of occasion To be in contact with him. I wonder whether the Labour Party, which is just as good at controversy as we are, is not sometimes a little more sensitive about that sort of thing. As my noble friend Lord Amory said, you must criticise a man with whose policy you disagree, but it does not seem to me that calling a man by the name of "Austerity is half so derogatory as the things which any of us can hear from our Gallery, from the Labour "Shadow Chancellor", directed against the Government which is now in office. I really do feel it is untrue to suggest that we had anything but respect for the sincerity and character of Sir Stafford Cripps, although we did not always agree with his policies.
The noble Lord, Lord Pethick Lawrence, who moved the Amendment, asked whether there was really a crisis. He said that, if so, it had not arisen in
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the last few weeks, but had been there for a long time—and with that I would most respectfully and cordially agree. Indeed, I ventured to say in our debate last week that I thought that to describe these various attempts to redress our balance of payments or to fortify our reserves by the word "crises" was misleading, because the proper meaning of the word "crisis" is a decisive moment when either the patient gets worse and dies or gets better and recovers; and you cannot have more than one crisis in relation to the same set of conditions. But, as everybody uses the word, it would, of course, be pedantic for me not to use it too.
I think the essential thing is that we should recognise that the problem with which we are dealing is not the sort of problem which occurs overnight and then in the form of a crisis, but is an endemic problem which is going on all the time. The noble Lord also spoke about the terms of trade going in our favour, which they did in the 1950's, and he pointed out that this was a great advantage to us—which, of course, in some ways it was. But I thought that it would be right to remind the noble Lord that it was also a disadvantage to us in other ways. If the price of raw materials falls, as it has done in the last decade, the result is that the people who produce those raw materials cannot buy so many of our exports—and they come, very largely, from our own Colonies and Dominions. At the same time, of course, they need rather more aid than they would do if they had a good price for what they sell in the markets of the world. It also happens that this has an injurious effect upon our invisible exports. That is one of the reasons why they have gone down so much lately—because so many of our investments are in those countries which depend very largely on the export of primary commodities, and when the world prices of these commodities fall we do not earn so much revenue from our investments as we otherwise would.
But, my Lords, the fundamental difficulty of our post-war economy was put very well, I thought, by my noble friend Lord Brand. He said that our difficulty was not inefficiency but inflation; and I think it is very necessary to recognise that. There are, of course, a great many inefficiencies which we do want to

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get rid of, but they are not fundamental, as inflation is. Indeed, many of them are promoted, preserved and exaggerated by the existence of inflation which, as the noble Lord said, deprives a great many people of a motive to try and sell goods abroad because they think they have a nice, easy, comfortable home market. Important though it is to get rid of our various inefficiencies, the most important thing of all is to prevent the continuance or recurrence of inflation, which is itself an aggravating factor in promoting or increasing inefficiency.
My Lords, what we have got to do now is to restrain excess demand; and I think all of your Lordships have agreed with that, although with different amounts of emphasis. The purpose of raising the Bank rate is not to win support, help and aid from Swiss bankers or anyone else; it is to restrain excess demand because, although we all admit that it may have the effect of restraining some activities which are good for our economy, and which we do not want to restrain, it certainly has the effect of making people refrain from undertaking projects which are not essential and which are not necessary, and concentrating rather on those which are necessary.
As your Lordships are aware, the Chancellor has instructed banks, and the banks and insurance companies have agreed, to give priority in their advances to those projects which are necessary for sound productive purposes, particularly for export, and to give low priority or to reduce advances for unnecessary personal consumption. The bank rate, of course, must be considered here together with the special deposits and in the light of the general instructions which the Chancellor has given to the banks about the policy which should govern their advances. That has been one focus of criticism in this debate, the bank rate and the regulator No. 1, which I think we discussed very fully in our debate last week, and whose purpose is not to put up prices but, again, to check excess purchasing power.
Another criticism has been that the Chancellor's proposals are unfair; and the noble Lord, Lord Morrison of Lambeth, said a good deal about that. He did riot, I think, try to make any unfair Party points out of this. I thought he put it in a very reasonable way, the fact that some of the Chancellor's proposals
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might appear to be unfair, more for psychological reasons than for reasons connected with their real economic importance, as when he was interrupted by another noble Lord. I think it is very important, and I entirely agree with the noble Lord, that we must regard dividends in this connection in exactly the same way as we regard wages. It does not matter that dividends are a very small fraction of the amount distributed in wages. Any action we take, whether it is voluntary or not, to restrain excessive purchasing power must apply to dividends equally as to wages, and any kind of consultations which we may hope to take up must also have that in view.
The question has been asked several times, both to-day and last week: if you want a wages policy, ought you not to have a dividend policy to restrain excessive dividends? And I would unhesitatingly reply: Yes, they should be treated on exactly the same basis. I would remind the noble Lord, Lord Morrison of Lambeth, that last year my noble friend Lord Amory increased the profits tax from 10 per cent. to 122 per cent. in his Budget, not because he needed more revenue from a monetary point of view, but as a purely fiscal measure to restrain excessive purchasing power. This year, to restrain companies from increasing their dividends, the present Chancellor has increased it for exactly the same purpose from 122 per cent. to 15 per cent., so it has been increased by half as much again in two years, with the purpose of restraining excessive payments of dividends; that is to say, the profits tax has gone up by 50 per cent.
The action which has been taken is certainly more positive and more direct than any action which could possibly be taken in regard to wages. I entirely agree with what the noble Lord has said about the moral necessity of doing this, but I would equally defend it on purely economic grounds; that it is against the interests of the economy at the present time that dividends should be increased.
I think perhaps the main line of criticism in the debate, from both your Lordships who belong to the Party opposite and others, has been on the subject of planning. It has been said that we do not look far enough ahead in our monetary policy, in our fiscal policy, or in our in-

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dustrial policy. My Lords, many of your Lordships who have spoken are far more experienced in these matters than I am. I think perhaps the noble Lord, Lord Morrison of Lambeth, the noble Viscount, Lord Alexander of Hillsborough, and my noble friend Lord Amory would all agree how very difficult it is to forecast the probable turn of economic events twelve months ahead.
The noble Lord, Lord Morrison of Lambeth, suggested that my noble friend Lord Amory might with advantage have applied the measures, which are now being applied, a year ago, when he was Chancellor. I have not had a chance of discussing that point with my noble friend, but I daresay he might possibly agree that the Treasury last year did not estimate that excess spending power would grow as rapidly as it has done. Indeed, my right honourable friend the present Chancellor said as much in the debate yesterday.
It is very difficult to look ahead, and that is one reason why in this Budget we have introduced the power to use these regulators, as they are called. It is the first time we have enabled the Treasury and the Chancellor of the Exchequer to use an optional fiscal instrument at any time of the year, so that we may get away from the great handicap of having to wait for any changes in fiscal policy which the economic situation may in our opinion, or in the opinion of our economic advisers, require for another twelve months—that is, until the next Budget.
I should like to remind my noble friend Lord Boothby, and others who have been inclined (to think that we have never had any planning policy—and I would say this also to the noble Lord, Lord Morrison of Lambeth—that we have never, so far as I know, been frightened by the word "planning I do not see how you can have any policy at all without having a plan. The question is not whether you have a plan, but whether it is a good plan or a bad plan, and it seems to me that the controversies, which we sometimes engage in about economic matters, between the Party opposite and the Panty to which I belong, are not as to whether there should be a plan or not but whether the plan is good or bad.
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As many of your Lordships have said, we have this five-year plan now for regulating public expenditure, in accordance with what we expect to be the growth in the national productivity. The noble Lord, Lord Morrison of Lambeth, says that our measures would have the effect of cutting public expenditure, but that is not quite the case. We are not reducing it from what it is now; we are merely preventing it from increasing as fast as it would have done if we had not decided to moderate it within those limits. We are not reducing it.
As for roads, I remember that in the debate on the Address some of your Lordships seemed to think that we had no plan for roads; but that was one of the things for which we had a very full plan. We are, indeed, in the second year of a five-year road expansion programme which has been very carefully worked out, both in relation to our financial resources and to the needs of transport and of industry. It is not a five-year plan which ends at the end of five years. Every year a new plan is made adding on another year, so that it is like an unrolling carpet: you always have your plan made five years ahead. This roads plan has not been affected at all by the Chancellor's proposals; he has been careful to say that he is not touching it. Nor is he reducing the plans for the growth and expansion of our education which is, in the view of the Government, one of the higher priorities in long-term planning for our future economy.
As for industrial planning, that, of course, is a difficult and complicated matter. Planning does not necessarily mean the same thing as controls. My noble friend Lord Boothby pointed out that French planning is entirely voluntary and not imposed by the Government or by law. You can have planning which requires controls, and you can have planning which does not. In order to have a sensible plan, it is necessary to proceed on certain assumptions with regard to the probable increase of your production. Those assumptions need not necessarily be what you would like. The noble Lord thought that a 3 per cent. increase annually in our national production was a very unambitious aim. Possibly we may do better than that, but I should have thought it was more sensible to have a moderate estimate which is a little

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higher than the average increase in our production for the last ten years.
I do not want to go into the question of the "league tables" with which Lord Morrison of Lambeth dealt in some detail. It is true that in the last ten years our average increase in productivity per head was about 2 per cent. per annum, compared with about 5 per cent., in the case of Germany. It also happens to be almost exactly the same as the other industrial nations, whose Conditions are perhaps more comparable to ours, the United States and Canada, who I think are one decimal point different. All three of us come at the bottom of the "league table", about equal.
There are, as the noble Lord knows, many reasons for that, Germany, with her pre-war industries destroyed, started from scratch, and has had a continual influx of refugee labour from East Germany. She has also a very large agricultural population which, with agricultural improvements, is migrating very quickly into industry. So she has had a very quickly replenished and growing labour supply. I do not want to go into all the details. It may be that in other ways Germany is superior to us in her industrial organisation; but it is not correct to say that it is planned in the same way as the French economy is.
LORD BOOTHBY: My Lords, if I might interrupt the noble Earl for one moment, there is no doubt at all that their salesmanship, drive and organisation in this field is superior to ours at present.
THE EARL OF DUNDEE: That may be so, my Lords. But in this plan which the Chancellor is envisaging for industrial production and exports, his targets, so to speak, are an increase in productivity of 3 per cent. per annum, combined with an increase of 6 per cent. in exports. I think I should point out to your Lordships that the proportion of our productivity in this country which goes to export may be even more important than the growth of productivity itself. You might conceive of circumstances in which you would have a very large growth in productivity which would not, in the long run, really add to our wealth, because it might not be in essential things and might not enable us to sell what we have to sell abroad if we are to live and if we are going to hold our place as a great nation.
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The noble Lord, Lord Boothby, was very definite—more definite than many of your Lordships often are in these economic debates—about the kind of controls he wanted. He said that he wanted building controls; so also did the noble Lord, Lord Morrison of Lambeth. The noble Lord, Lord Morrison of Lambeth, said that they were anathema to the Conservative party, but that is not correct. I have often told your Lordships that we have no objection in principle to physical controls. The Chancellor said in his statement on Tuesday, after pointing out that demands on the building industry are growing rapidly and that some less essential forms of development should be postponed, which he proposed to do through the medium of credit policy:
"I do not rule out further measures if they appear necessary".
I do not know whether Lord Boothby agrees or not, but it is very difficult to decide which building is really unessential and which building is essential in the national interest. It requires a very big staff to do it, and their judgment is not always infallible. I do not think it necessarily follows that, because building at present is imposing too great a strain on the economy, therefore we must have some form of building control. It might well be better to try to correct the imbalance by fiscal or monetary methods; but we have not ruled out other methods if they should appear to be necessary.
The noble Lord, Lord Morrison of Lambeth, also declared himself more definitely than I have heard many of your Lordships declare yourselves lately about import controls. He thought that we should control or prohibit the import of things not essential. That is a thing we have often considered very carefully indeed, but the reason why we have not done it is because we think that if we did, other countries would retaliate by controlling their imports from us. Under international agreements we are gradually abolishing all these import quotas, but we are the country which would suffer most of all if this process were stopped and if everyone re-started controlling and establishing import quotas with other countries. That is the reason why we have not done so. It is not because we think it is morally wrong, but because in those circumstances it

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seems that it would do more harm than good. I thought the noble Lord, Lord Peddie, was a little out of date when he said that we had made a bonfire of controls. I think that it was Mr. Harold Wilson who used that phrase when he was President of the Board of Trade. It was he who made a bonfire of controls, and as the noble Lord, Lord Morrison of Lambeth, said, none of us likes physical controls for their own sake. It is simply a question of what is most expedient.
As for a positive policy for exports, your Lordships have already had a full debate on that question a month or two ago, and I think your Lordships are conversant with the very high quality of the services offered by the Board of Trade to those people who wish to take advantage of them. We know only too well of the failure of some exporters to do what is necessary to send the right kind of goods abroad and to take the trouble to find out what is needed and to be punctual in their delivery dates. But when the noble Lord talks about taxation devices to help exports, that is again a matter which we have always had under consideration; and again the reason why we have not done it is because other people would immediately retaliate. In our particular position as a country which depends so much upon our trade, we think we should probably suffer more than any other country if everyone began to subsidise their exports indirectly by means of remissions of taxation.
My Lords, with regard to the probable machinery of carrying out a planning policy, your Lordships have complained that our ideas on the subject appear to be vague. I do not want to say anything which might mislead your Lordships. I think it would be better if your Lordships would permit me to quote what my right honourable friend said yesterday on the subject [OFFICIAL REPORT, Commons, Vol. 645 (No. 156), col. 439]:
"I envisage a joint examination of the economic prospects of the country stretching five or more years into the future. It would cover the growth of national production and distribution of our resources between the main uses, consumption, Government expenditure, investment, and so on. Above all, it would try to establish what are the essential conditions for realising potential growth."
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He then went on to mention:
"the supply of labour and capital, secondly, the balance of payments conditions and the development of imports and exports, and, thirdly, the growth of incomes."
He went on:
"I want both sides of industry to share with the Government the task of relating plans to the resources likely to be available. When it is suggested that I have been vague, may I say that I have deliberately not been specific about machinery because, for the Government to lay that down beforehand is not, I think, the best way to get full co-operation."
I think that if your Lordships will reflect on that, you will come to agree with him that it would be undesirable for the Government to specify beforehand the exact form which consultation is to take. It would not be the right way to get the trade unions or the employers to co-operate, which is what we want them to do.
In one rather exaggerated phrase, the noble Lord, Lord Morrison of Lambeth, said that the Government had got into "an abysmal mess". My Lords, we are very far indeed from that. We have full employment; and we have the highest standard of living we have ever had in history. It has increased by more than 30 per cent., measured by real wage values, in the last ten years. The average wage is now about £15 3s., compared with about £7 16s. in 1950. The noble Lord also mentioned investments. Look how the investment figures have gone up in the present year! Personal savings are £1,500 million, compared with £200 million in 1950. Gross fixed investment last year was £4,074 million, compared with £1,733 million in 1950—which, allowing for the difference in money values, represents an increase of 63 per cent. And there has been a comparable increase in manufacturing investment.
We are in a very high state of prosperity, and it is from that state of prosperity that our problems arise, because we have not yet learned how to control our distribution; how not to anticipate our prosperity by spending now what we are going to earn in two or three years' time instead of being content to spend now what we earn now. That is what we have to regulate. It is not a question of starvation, or anything of that kind. It is a question of being able to maintain our political position and influence in the world, which we cannot do if we slip behind too far in

1201
the production and trading race. It is inflation that is the chief danger. That is why, now that the inflationary spiral has begun again, after two and a half years of price stability, it is so vital to our future position in the world that we should fight it now, as we are doing

CONTENTS

Alexander of Hillsborough, V.

Henderson, L.

Peddie, L.

Amwell, L.

Kilbracken, L.

Pethick-Lawrence, L.

Attlee, E.

Listowel, E.

Rea, L.

Boothby, L.

Longford, E.

Stamp, L.

Chorley, L.

Lucan, E. [Teller.]

Stonham, L. [Teller.]

Crook, L.

Monson, L.

Taylor, L.

Fraser of North Cape, L.

Morrison of Lambeth, L.

Terrington, L.

NOT-CONTENTS

Ailwyn, L.

Dundee, E.

Mills, L.

Albemarle, E.

Falmouth, V.

Molson, L.

Amory, V.

Ferrier, L.

Monsell, V.

Ampthill, L.

Fortescue, E.

Newall, L.

Ashton of Hyde, L.

Fraser of Lonsdale, L.

Newton, L. [Teller.]

Bathurst, E.

Geddes, L.

Perth, E.

Birdwood, L.

Goschen, V.

Reading, M.

Bossom, L.

Gosford, E.

Robins, L.

Brand, L.

Hailsham, V. (L. President.)

Rochdale, V.

Carrick, E.

Hastings, L.

St. Aldwyn, E. [Teller.]

Carrington, L.

Hawke, L.

St. Oswald, L.

Chesham, L.

Home, E.

Salisbury, M.

Coleraine, L.

Horsbrugh, B.

Sandys, L.

Colgrain, L.

Howe, E.

Savile, L.

Conesford, L.

Jellicoe, E.

Sinclair, L.

Congleton, L.

Kilmuir, V. (L. Chancellor.)

Soulbury, V.

Craigton, L.

Lansdowne, M.

Spens, L.

Crathorne, L.

MacAndrew, L.

Stuart of Findhorn, V.

Croft, L.

Margesson, V.

Tweedsmuir, L.

Crookshank, V.

Massereene and Ferrard, V.

Waldegrave, E.

Denham, L.

Merrivale, L.

Wolverton, L.

Devonshire, D.