THE ECONOMIC SITUATION

HL Deb 27 July 1961 vol 233 cc1150-201

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". 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- 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 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 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 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.

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 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 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 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 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 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 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.

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- 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 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 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.

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, 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 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. 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, 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 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 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.

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 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.

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 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, 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 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 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 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 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 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 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, 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. 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, 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 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!". 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 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 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 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 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- 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.

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 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.

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 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. 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 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.