ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH

HL Deb 07 November 1961 vol 235 cc216-344

2.45 p.m.

Debate resumed (according to Order) on the Motion moved on Tuesday last by Lord Melchett—namely, That an humble Address be presented to Her Majesty as followeth:

"Most Gracious Sovereign—We, Your Majesty's most dutiful and loyal subjects, the Lords Spiritual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament."

LORD LATHAM rose to move, as an Amendment to the Motion, to add at the end of the proposed Address: but humbly regret the failure of Her Majesty's Government to take any effective steps to remedy the grave state of the economy of the nation". The noble Lord said: My Lords, with the leave of the House I rise to move the Amendment standing in the name of my noble Leader. As is customary in your Lordships' House, the Amendment has been drawn in moderate terms, but I cannot promise that my remarks will not be more forceful and, indeed, abrasive where such is warranted, for as regards our financial and economic condition the gracious Speech is an affront to both Parliament and the nation. There is nothing in the Speech to show that the Government realise the grave sickness which besets and is rapidly enveloping the economy of this country. Nor are there any real, efficacious or positive measures proposed to restore the dynamic health of our economy.

There are, let me admit, a few inconsequential, hackneyed references to the stability of sterling, to the balance of payments and to the stability of prices—all, of course, new problems: I had almost said recent discoveries. But as regards the reference to the maintenance of the stability of prices, the claim that the Tory Governments have done this is really a bogus claim—in the terms used at the time by the late Jimmy Thomas in another place "it is 'umbug", leaving the aspirate for use another time. For during the ten inglorious years of Tory Government the pound has gone down in purchasing power from 20s. to 14s. 6d. There's stability for you!—almost as stable as the Chancellor's "off-the-cuff" statements at Party conferences.

The only positive measure specified in the gracious Speech is to raise the limits of the provision of the Export Credits Guarantee Department. The mountain has been in labour, with what a derisory and miserable result! What a failure of government!—so great a failure that it has gone to their heads. All the world knows that we are rattling into industrial and economic decline. All the world knows that—except, of course, the Chancellor of the Exchequer. In sorry truth we are a sick society as the result of ten years of "setting the people free". The Chancellor of the Exchequer on October 24 blandly said that there is no recession. Well, well! If that be so, what is all the ballyhoo about? Is our economy all fine and dandy? Was it never so good? If so, why the bother? Why the "little Budget"? Why the 10 per cent. increase in indirect taxation? Why the imposition of the wages and salaries pause? Why the increase of the bank rate to 7 per cent.? Why cut down public and social expenditure?

In view of the Chancellor's asseveration, let us briefly review the state of our economy. Unemployment is on the in- crease. It is up by 48,500. The increase is double the normal increase. Vacancies are down by 39,000 as against the seasonal decrease of 13,500. There is no recession! I am sure that the 365,000 who are unemployed will be delighted to know that and maybe they will forgive the Chancellor. What volume of unemployment is it necessary to have before it is a recession—one million? Is that the sanction the Tories need to work a system of "setting the people free?". "Conservative freedom works", we are told; but the unemployed are not allowed to work—and the Chancellor of the Exchequer is "all right, Jack". Is increased production likely to flow from increased unemployment? Is that another nonsense of the Chancellor of the Exchequer? He had really better give up making statements "off the cuff".

Then, my Lords, if we turn to our overseas trade position we find no greater comfort. We had a huge trade deficit in 1960, largely flowing from the illusory prosperity fostered for the General Election of 1959; and we are adding to that deficit. It is true that in August the deficit went down from £82 million to £34 million, but this was not due to an increase of exports; it was due to a decrease of imports resulting from the fact that business people are de-stocking. Sooner or later they will have to restock, and then the deficit will go up and not down. The picture as regards our overseas trade generally is black indeed. World exports are up for the first half of this year by 5 per cent.: ours are up by 3 per cent. West Germany, Italy, Sweden and Switzerland are up 10 per cent.: we are up 3 per cent. The Government are resolved to take us to the bottom of the league in world trade. To our shame, as the cradle of shipbuilding, we are now importers of ships. What an outstanding achievement of Tory rule!

So, my Lords, there is no recession. In proof of that, let me refer to trade generally. Recently, there has been published the disturbing and, indeed, in some respects, frightening figures of the latest survey of trade trends done by the Federation of British Industries. What does this survey show? It shows that, with 51 per cent. of those replying to the inquiry, the present level of output is below capacity; 32 per cent. are down on new orders; 75 per cent. do not feel optimistic as to export prospects; 44 per cent. are authorising less capital expenditure on buildings this twelve months than in the previous twelve months, and 37 per cent. are authorising less on plant. That is a pretty bleak outlook, my Lords. As regards the machine tool industry, the trade association of that industry has said that home market orders in August were down by no less than 14 per cent. The result, of course, is that there will be a delay in modernising our industry. Business men will be apprehensive as to the demand for the products which the more capacious equipment can produce: they will be anxious as to whether new machinery will leave them with an excess capacity under the "Stop-go" freeze, "squeeze" and "pause" policies of the Government.

The Government seem to think that we can build up export trade by paralysing home trade. What is needed, of course, is a proper balance between them, and this calls for planning—real planning. I noticed the other day that the Cotton Reorganisation Scheme, promoted by the Government, and much vaunted in this House and in another place, has proved to be unsuccessful. Lord Rochdale, according to the Financial Times of October 21, said that the scheme had not achieved the results hoped for. That was an understatement according to another person who has acted as chairman of one of the committees under the Scheme and who said that new equipment bought under the Scheme is standing idle in some of the mills. Steel, even before the labour troubles occurred, was down to 77 per cent. of capacity. The export of cars from this country has declined in all the markets of the world in recent years, and there has been a catastrophic drop this year. And still, my Lords, according to the Chancellor, there is no recession.

Redundancy is rampant in the consumer durable trades, and is spreading to the consumer trades—but there is no recession! Everything is spanking—Conservative freedom works. That is why the Government are slashing social expenditure. That is why the Government are virtually tearing up wages and salary awards; treating them, my Lords, as scraps of paper. That is why the Government are denouncing the basis of comparability of wages and salaries as regards those employed in public employment, and why those workers are henceforth to be regarded as second-class workers, getting less wages and less salaries than their counterparts employed in the private sector of industry. They will, in the result, constitute a sort of depressed wages area, which means that there will be an exodus from public employment. Indeed, this movement from public employment has already reached serious dimensions as regards the railways and other forms of transport, and it is now spreading to local government.

So, my Lords, according to the Chancellor of the Exchequer, there is no recession. What ineffable ineptitude to launch, without notice, an attack upon our widespread machinery and procedures of negotiation and arbitration which have been built up over the past forty years, shattering with one body blow the feeling and belief in their equity and their justice, and destroying the sense of reliance upon them which has grown up among the workers! My Lords, we talk at times of the rule of law. What sort of rule of law is it that justifies a Government, as employer, suspending the operation of procedures to which, by signature, honour and long practice, they are bound? What a blunder!—the consequences of which we shall suffer these many years. And all, my Lords, to deal with a recession which we are told does not exist.

My Lords, all these facts and circumstances go to show how sick is our economy after ten years of Tory Government: crisis succeeding crisis, Chancellor succeeding Chancellor, each with his little crisis or his election. And sometimes one resigns. How he must now be chuckling in the silent watches of the night! The bank rate goes up to 7 per cent. True, it was recently reduced to 6, due to the flow into this country of "hot" money becoming almost an embarrassment of debt. The result of this increase is that our foreign exchange, it is estimated, will cost us £30 million more. There is, of course, a growing body of informed opinion which gravely doubts the efficacy of the bank rate as a monetary weapon for influencing or regulating our economy. It is really a vestigial specific appropriate to the day before yesterday, but no longer suitable to modern conditions. The "Old Lady of Threadneedle Street" is still wearing the intellectual bloomers of the "Gay 'Nineties"! It is encouraging to note that the new Governor of the Bank, at the Bankers' Dinner recently, himself expressed doubts as to the suitability of our money rates structure, or words to that effect. And well he might. Let him take courage and exchange the nether garment of the "Old Lady" for something more modern. I will not say a bikini, because that might go too far.

My Lords, faced with this deep-seated and growing malaise in our economy, what do the Government propose to do? As I have said, the gracious Speech is silent as to this. The Government will say, of course, that they have taken steps, and so they have—but mostly wrong stops, as I shall proceed to show. First, there is the restraint upon wages and salaries, coupled with the tearing up of negotiated awards, to which I have already referred. Some of my noble friends on this side will be addressing themselves to this matter in particular. I wish here to make one comment only upon one aspect, and an important aspect too; it is the relation of wages to productivity, and of profits to productivity.

Wages and salaries are always measured against productivity, but profits are never so measured, It is alleged, with gathering frequency, that increases of wages and salaries have exceeded increases of productivity. It is the pat answer of the amateur economists, and sometimes even of the professional economists. No one says that increased profits and dividends have exceeded productivity, or relates the one to the other. Why should not profits be kept in step with productivity, if wages are to be so kept? Moreover, the work-people cannot really determine the measure of productivity. Whether production shall be more or less; whether new methods should be used, new equipment installed; whether the firm should go out for export business, or rest in the comfort of the home market; whether prices should be lowered to increase sales, and therefore increase production: all these matters are not decided by the workpeople, but by the management in the board room. And I am not complaining at that, for management must manage, except that adequate consultation facilities should be available.

But if productivity is too slow in relation to wages cost, then it is the function of management to find out why and to remedy the matter. And the same should go, my Lords, for profit. After all, profits are costs—the cost of the money used in the business. Only when the workpeople and management are in real partnership can this test of productivity be fairly applied to wages, and then it should also apply to profits. At present, under the edict of the Chancellor of the Exchequer, a condition of wages increases is to be applied which the workers themselves cannot determine—namely, the level of productivity.

My Lords, there is another factor, and that is that the measure of productivity can be reduced by Government action, as it has in each of the three crises within recent years. Steps were deliberately taken to slow down production by reducing demand until capacity became under-used or unused. Moreover, the Chancellor has said that many of our industrialists, under cover of high tariffs and like protection—higher, I think, than in any other industrial country—have become sluggish, slack and complacent; that some industrialists have rested upon the ease and comfort of the expanding home market to the detriment of our export trade. According to the Chancellor, what is needed is a sharpening of competition to wake our managerial and directorial people up. That is a pretty unflattering indictment. The workpeople cannot be held responsible for this failure to increase production or to expand the export trade.

Moreover, unwise as their policy of pause may be, assuredly its application is even worse. Large numbers of workers' wages increases are suspended without option, but with dividends it is optional—how optional the following figures will show. Wages are under a diktat, and dividends are under "by your leave". Since the wages pause and .the appeal as to dividends, nearly 800 companies have made dividend announcements, and nearly 100 of those have raised the dividend. They have not kept it as it was or reduced it, but have raised it. According to The Times of November 1, taking the first full three months since the "little Budget", fifty-two companies have restricted payments and seven have promised to do so next time. Optional forsooth! Fifty-two companies out of hundreds of companies which within the period have declared dividends. So it is one thing for wages and salaries, and another thing for dividends.

Mr. Lloyd said at the Brighton Conference that the response to his request for dividend restriction had been considerable. Fifty-two companies have done so, and there are seven promises of "next time", out of 800 companies who have made dividend announcements. If this is "considerable", I should like to know what would be inconsiderable. Really, in the mouth of Mr. Lloyd words would seem to have lost their meaning. Does the Chancellor imagine that this discrimination as between wages and salaries and dividends is likely to be a fertile soil for the growth of the co-operation of the workers and trade unions in Government planning? Is this the kind of planning contemplated: plan the workers, but appeal to the employers?

Then there are the other so-called remedies: reduction of public expenditure, which includes, of course, social service expenditure; bingo halls in preference to houses or schools. And who has been appointed to control Government expenditure, which includes, as I have said, social expenditure? Who, if you please? None other than Mr. Brooke, former Minister of Housing and Local Government. No doubt the Prime Minister said to the Chancellor: "Mr. Brooke is just the boy for this job". He has all the qualifications of a hatchet man. Did he not pass the Rent Acts which have rendered hundreds of families homeless and delivered thousands to the extortion of excessive rents, with eviction as the alternative? The much-vaunted free market in housing, when this Bill was heralded, has meant freedom to walk the streets, children in arms, looking for somewhere to sleep.

According to a statement made in another place yesterday, before the Rent Acts commenced operation the London County Council had 1,200 homeless families on their hands. Now they have 3,000, and the number is increasing. It cannot be doubted that this increase is largely due to the operation of the Rent Act, which was to provide a free market in housing. Did not Mr. Brooke stop the housing subsidy for general housing, and thus shut down the provision of housing for thousands of young couples and others desperately in need of it. Did he not repeal the provisions of the Town and Country Planning Act, 1947, which would have given to the nation the increase in the value of land which arises from public and social expenditure and development? Did he not throw the principles of Uthwatt out of the window and betray those who gave their lives for freedom, notwithstanding that the Tory Party was committed to the principles of Uthwatt and joined, as part of the Coalition, in issuing the White Paper entitled Land User?

He was the man who "sold the people down the river". And this is the main cause of the high land costs, assisted, as I have indicated, by the decontrol of houses. The homeless, roaming the streets of London and other big towns and cities, are tragic witnesses to the achievements of Mr. Brooke, now Chief Secretary of the Treasury, formerly Minister of Housing and Local Government. Who better fitted for this shabby job of cutting down social expenditure? Having made people homeless, who is better able to make them jobless? Because that is what will be the result of the reduction of Government expenditure. Workers will become redundant—which means workers will become unemployed.

Circulars issued by Mr. Brooke, when he was Minister of Housing and Local Government, and by the Minister of Education are dismaying proof of the intention to cut wherever they possibly can housing, education and other social service expenditure. One can reflect upon the incident of the Kingsmoor Marshalling Yard, where, because there had been increased production and the work was in advance of schedule, it was proposed to stop it. Could anything have been more inept than that? What an encouragement to increase production, to say to the workers, "If you do increase production and get in front of schedule, you will lose your jobs!" That was the situation as regards that marshalling yard a few weeks ago. It is true that, under pressure of public opinion, certain modifications of the previous decisions were made. But what a crazy business!

In his speech of the 2nd of this month, my noble friend Lord Silkin referred to the absence from the gracious Speech of any reference to housing. That is so. It is a tragic omission because it is a tragic problem, more tragic than anyone here can realise, more tragic than anyone who has not suffered the absence of a home or place of shelter can understand or appreciate. But if there is no mention of it in the gracious Speech, it is not that the Government are neglecting housing. By no means—they never do when it comes to cutting down.

On August 10, very soon after the announcement about the "little Budget", the Minister, who was then Mr. Brooke, issued a circular which enjoined upon the local authorities that the total number of houses put into contract by local authorities during 1962 should be reduced below recent levels. Recent levels are pretty low, owing to financial considerations and otherwise. But what does this mean? At the present time local authorities are engaged in practically no housing activities, except in regard to clearing slums, providing for the elderly and for overspill in certain cases. So, if the level of expenditure is to be reduced, it means that the level of slum clearance will be reduced; it means that the level of providing for the elderly will be reduced. In short, it means that the marginal activity which is now financially permissible to local authorities will be reduced below the present level. And the circular issued by the Minister of Education is to the like effect.

In the course of the debate, the noble Lord, Lord Strathclyde, referred, a little testily, if I may say so, to the figures of the cost of sites given by my noble friend. The noble Lord went on to say that the cost of a site per dwelling was no more, or was less, than the cost of the linoleum for covering the ground floor. It is just as well that we should get the cost of land in the proper perspective. Accordingly, I have obtained some figures. They are, not perhaps unnaturally, limited to London. May I recall en passant the statement in the Press recently that the Islington Metropolitan Borough Council contemplated building 28 flats in Upper Holloway until they learned from the district valuer that the price of the land was about £100,000 an acre, and accordingly they had to drop that scheme, however desirable and necessary it otherwise was.

To show the effect of the Rent Act, as well as the effect of the emasculation of the Town and Country Planning Act, 1947, on the values of land, let me give these figures of the average prices per acre paid by the London County Council in the three years from 1951 to 1953, which was before those events, and from 1958 to 1960, which was after these events. The average per acre before was £12,900; after it was £26,100. In the three years, 1951 to 1953, the London County Council had to buy land amounting to 9 acres at a price between £30,000 and £50,000 an acre. In the years 1958 to 1960, they had to pay those figures for 73 acres. In the first three years, they bought two acres at a cost of between £50,000 and £100,000 an acre, and in the years 1958 to 1960 they had to pay between £50,000 and £100,000 per acre for 28 acres. Who will question the crippling burden which the policy of the Government has produced as regards land and as regards rents and housing?

This difficulty is not confined to London. It is proportionately as onerous and as desperate in the provinces. Land has changed hands in Luton and elsewhere at fantastic figures in relation to its value some few years ago.

Accordingly, my Lords, in conclusion, I should like to repeat that there is nothing in the gracious Speech which measures up to this malady of the economic system and condition in this country. There is an abundance of soporific words, such as the vigorous promotion of exports". So the Government increase the limit on export credit guarantees, which is mere "chicken feed." Indeed, the Minister has told us in the past that credit requirements were not a material factor in our loss of exports. What the Chancellor has said is that behind tariff walls some business men have been laggards and sluggards, and the outside business world has commented to the like effect.

Then the Government are to seek the co-operation of both sides of industry in the better co-ordination of the national effort.… This is what the Government call planning. But the Government do not believe in planning: they believe in "setting the people free." They tore up the planned co-ordination and integration of transport; they have refused to co-ordinate the national resources with national needs; they have enthroned the doctrine of "Set the people free!" and left the economy at the mercy of what the Prime Minister described, if I may say so, in his more enlightened days, as "the ethics of the casino."

My Lords, the economy of modern society must be planned and regulated; it cannot work satisfactorily otherwise. But it must be real planning. It must not be notional planning; not artificial planning as a pretence such as the present Government have given us, to be scrapped and jettisoned at any time to win an Election. The Governments of the last ten years have produced a state of affairs which can only be called a Bingo Society". That, my Lords, is the crowning achievement of ten years of Tory rule. It is high time it was ended, before it buries our national estate and patrimony under the debris of its own misdemeanours. I beg to move.

Moved, as an Amendment to the Motion, to add at the end of the proposed Address: "but humbly regret the failure of Her Majesty's Government to take any effective steps to remedy the grave state of the economy of the nation".—(Lord Latham.)

3.23 p.m.

LORD LUCAS OF CHILWORTH

My Lords, if politics and economics did not get inextricably mixed up I doubt whether there is one of your Lordships in the House this afternoon who would not go into the Division Lobby later on in support of this Amendment: because, if I may be permitted to say so, I thought the noble Lord who has just sat down, as the leader of the Opposition in this debate, made a telling speech. With respect, I did not agree with a lot of but there is no doubt that he uttered some very harsh but firm truths. If we look back upon the Government's economic policy over the last ten years, there is little of which they can be proud.

Where have we arrived? After ten years of Conservative Party rule we have arrived at a state where the only economic policy the Government have devolved is increasing taxation and the manufacture of unemployment—now called by the rather more respectable name of the "creation of surplus capacity". I remember, when your Lordships used to be in what is now Her Majesty's Robing Room, the noble Lord, Lord Balfour of Burleigh, who was such a pillar in the economic debates of the House, using an expression which affrighted me. He said: "Of course, what we want in this country is a little, tiny, wee hit of unemployment." I remember those words so well; they have stuck in my mind ever since. This is the doctrine to-day: going back to the 'thirties and creating a surplus capacity to see if you cannot bring wages down by creating conditions where, instead of having two jobs for one man, the curse of over-full employment, you can now swing it the other way and have two men for one job. That is the state to which we have sunk.

If your Lordships look at the record over these last ten years, you will see the mistakes and miscalculations that have been made. The Chancellor of the Exchequer got into hot water through admitting that he might have had responsibility for some miscalculation. I commend him. Why should not a Chancellor of the Exchequer enjoy the refreshment of telling the truth now and again? I see nothing wrong in that. I thought it was commendable. What amused me, rather cynically, and slightly nauseatingly, was the posturings of the Treasury to try to prove that the Chancellor never said it, and that if he did he did not mean it. The ordinary people of this country have a far higher degree of intelligence than the Treasury ever give them credit for. They are well aware of the miscalculations that have been made, and of the fact that in the last ten years Government expenditure to cover up many of these miscalculations has increased by 90 per cent., to over £7,000 million, and that the cost of living has gone up by 85 per cent. Those are facts that cannot be controverted. Whether or not the gentleman whom the noble Lord, Lord Latham, called the "hatchet man" (shades of another gentleman with an axe!) will go about it the right way, I do not know. He has my good wishes, but my grave fears with regard to his failure.

Attentively as I listened to the noble Lord, Lord Latham—and I assure him that I did—and while I commend him upon his speech, it did not stir in me the slightest confidence that the Party on whose behalf he was speaking could do any better. All they would do, I fear, is to go about it in a different way. And I have the unhappy feeling that they would arrive at precisely the same end. I think that that accurately represents the dilemma of the ordinary citizen of this country. The ordinary citizen is punch-drunk with slogans and policies: slogans such as, "We shall double the standard of living in 25 years". And when half of that time has gone by we are now told that the real trouble is that our standard of living is too high. We are told to work harder and harder, and earn more money; and then taxation is increased to take it out of our pockets so that we cannot have the benefit of it. Indeed, one slogan I have heard given out—whether it will beguile or "begull" the public I do not know—is that in a reasonable length of time the average remuneration of the artisan worker will be £1,000 a year. When it gets to that stage, I think that £1,000 a year may well be worth about £250.

So, my Lords, this is the difficulty. The difficulty in which we find ourselves is that people in my position say, "A plague on both your houses!" We must find something to instil confidence into the people, because even the best friends of the present Government have lost confidence that their economic policy is going to pay. I say this to the noble Lord, Lord Mills, who is to reply to some part of this debate—the "rough stuff", I expect, will come later. What we must do is to prevent this country and the workers in this country—by "workers" I do not mean the lower grades of worker, but all the workers of this country—from losing faith and confidence in themselves. We are having a very difficult time, and the only thing I have noticed that the Government have done to rectify the present unbalance of our economy is to increase the bank rate, an action which is criticised upon all sides and has brought "hot" money into this country to an embarrassing extent.

The Government have had to bring the bank rate down, principally, I think, at the dictates of America; and they know very well that they will not stop "hot" money coming into this country while our rate of interest is the highest of any country in Europe. It must come down another 2 per cent. to stop the "hot" money coming in. What is going to happen then? In an article in the Observe, of a week ago, headed: The borrower's road to bankruptcy the Economic Editor of that paper wrote: Would you borrow money from someone who may ask for it back at very short notice in order to repay another creditor who is willing to wait for several years? And would the transaction appeal to you any more if you had to pay through the nose for the money you borrowed, while the creditor whom you rushed to repay was charging scarcely more than a nominal rate of interest? You might well believe that somebody who ran his affairs in this way deserved to be nearly bankrupt. Incredible though it may seem, this is exactly how the Treasury has been behaving this month. Huge sums of 'hot money' have been attracted to this country from abroad by our absurdly high Bank Rate; and it has just been announced that we are going to repay prematurely £100 million of the money we borrowed from the International Monetary Fund in the July crisis. The main purpose of this move is to mollify the Americans, who do not like to see British reserves rising at the expense of a rather shaky dollar. But has no one noticed that we are repaying a debt that we were not required to pay for another three to five years and are once again filling our reserves with 'hot money' which can leave this country within a matter of weeks? A few more such transactions and there will be little but 'hot money' in our reserves. The only other prong in the Government's attack upon this unbalance is a wages pause, which is already getting a bit moth-eaten and will go, I should imagine, by all the signs and portents, about next April. In fact, one Minister of the Crown has just made a weighty pronouncement that we can expect to see its end before July next.

When bank rate is down to 4 per cent., as I think must happen, and when the wage pause is over, what happens then? Will the noble Lord, Lord Mills, tell me? Does the "rat race" start all over again? If the Government are afraid that unless they have a high bank rate spending will start by increased borrowing, what is going to happen then? Are we going to have another cycle of inflation and then another pause of some kind? With all the good will in the world, I cannot imagine—and I say this with great respect—that the modern Treasury have a clue as to how to rectify the economy of this country. Yet our economic difficulties and our policy are easy to state—they can be stated in one sentence. The greatest problem of this country, and the only answer to our economic difficulties, is to sell more of our goods abroad. Berlin is not a problem. We have no problem except that one thing: we shall have to increase these exports or starve.

How are we going to do this? Let us address ourselves to that problem. We are told authoritatively that we must increase them by 10 per cent.—a high figure, your Lordships will say, but I have heard a higher one quoted. Our invisibles have gone, and in this modern world I cannot see that they will come back again to any great extent. Yet they were our prop and our bolster in the inter-war years. What is the basic truth as regards our lack of exports? We have exhortations that our salesmanship abroad is bad—and maybe there is something in that—and that credit is not prolific enough; and there may also be some truth in that. But the fundamental basis is that our costs and prices are too high. Do not let us lose sight of that fact. Government spokesmen who parade around the country exhorting people to do better are just trailing red herrings.

Let us examine for one moment the Government policy as regards the cost to British industry and price. During the winter months, from September to Christmas, it has been a habit of mine all my life in industry to spend what is commonly known as "the knife and fork season" in going to dinners—dinners that are usually graced by Cabinet Ministers. Their utterances are illuminating. They all add up to what the Government call "policy". I was at a dinner the other night when the Minister of Transport told his audience—it was an audience of shipbuilders and shipowners —quite frankly that he would do nothing to stop the British shipowners from getting ships built abroad if they could get them built more cheaply. I found nothing wrong in that statement. But a day or two before the Board of Trade had denied the British steel industry the importation of cheap coal which would have allowed the steel industry to bring its costs and its prices down. In a simple way, I thought, "Where is the policy there?"

Then in the "little Budget" we had the amazing thing happen that the hydrocarbon oil duty was put up 2d., which has had the gravest effect upon those industries, the steel industry, the engineering industry and the chemical industry, which collectively embrace two-thirds of the total volume of our exports. I suppose if I asked the Chancellor why he did this he would say: "Well, I wanted the money to put up taxation receipts; and, after all, the coal industry could do with a bit of a boost "—because that is the only reason it was done. But then, immediately afterwards, we bring in natural gas, which is not going to reduce our costs; and now I hear we are going to shut down a large number of coalfields in Scotland. And all this, my Lords, on top of trying to push £18 million down the throat of the Cunard Company and losing £800 million that is now going to be written off by the process of a Bill that is going to be introduced into another place, the loss through imprudent and incompetent Government administration. This adds up to a policy which is to help the British producer get his costs right down underneath that of his competitor!

Now, my Lords, if we take the other side, I quite agree with the noble Lord, Lord Latham, that we have not got out of our system in industry in this country those terribly restrictive days in between the two wars—when a producer always wanted high prices on low output, when he wanted to make a lot out of a little, instead of a little out of a lot; and on the other side of industry the slogan was "Don't work too hard because you may work yourself out of a job". Restrictive practices got right into the being of British industry, and they have not yet got out. That is the trouble, and I say this deliberately, to see if I can court again the remark of the noble Lord, Lord Mills, because when I was speaking in a previous debate in your Lordships' House and I said something to the effect that one of the troubles is that managing directors of British industry become fossilised, he thought I was being very harsh; but, of course, I know that to talk of old age in your Lordships' House is heresy.

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

No, just tactless.

LORD LUCAS OF CHILWORTH

It is about time somebody was tactless and that this was said, because it is true. You cannot expect to project British industry into the competition ruling at the present time when it is directed by men who were nurtured in these restrictive eras before the war.

I am very glad to see that after he has had the shock of the shelving of the replacement for the "Queen Mary" the chairman of the Cunard Company has had what I think they call a "shakeout" and a streamlining of his board. But their troubles go right through the whole of the British shipping industry, and one of the troubles is that it is antiquated. And not only is it antiquated, but it is stopping the bright brains from underneath from coming up to the top. Look at one of our greatest motor-car businesses, a concern that has risen through the brains of one man, Sir Leonard Lord, who has now decided at the age of 65 that it is time he stopped down to make way for younger men. In the shipping industry it is nearer 80 years of age; and that is one of the things we have got to cure.

Then I read in the papers of chairmen of companies whining and groaning about the diminution of margins. But is not that of the essence of private enterprise, together with competition and fiercely competitive market? Do they think they are going to maintain, in the time that is coming ahead, the margins they had in a 100 per cent. seller's market? If they want to learn something of the diminution of margins, let them wait until they get into the Common Market; then they will have something to learn, and they had better start their apprenticeship now. I was brought up in industry and taught always to make a little out of a lot. In other words, there is only one way: that is, to bring your prices down and to put your volume up. That is the thing we have to learn in the times that are coming ahead.

Now in a last word or two I should like to say that I believe your Lordships know—and I hope the noble Viscount the Leader of the House will take note of this, because I say it with sincerity—that one of the main obstacles in his generation and mine to the real and continued expansion of the high standard of living in this country is that our taxation system is archaic. That is one of the reasons; and it can be summed up, in perhaps what the noble Viscount will think is an over-generalisation, by: tax spending, yes; tax earnings, never. That, of course, one cannot quite do to-day, but what we must do is keep on thinking of what incentive we can give everybody to produce more. If any of your Lordships know a better incentive, an incentive to increase a man's prosperity and his mode and way of life, I should like to hear about it. We have to do that with exports. Do not tell me that we are the only country in this world who cannot find a method of giving the exporter an inducement, an incentive. We must do it. We cannot go on as we are, because all the time the Government have been maturing their policy it has not increased our exports one cent. Is that success or failure? And if you fail you have to try something else.

My Lords, I was talking just now about restrictive practices. Let me pay tribute to the Government for the courage they had in bringing in the Restrictive Trade Practices Act. That has done an enormous amount but, as I pointed out to the noble and learned Viscount who sits on the Woolsack—and he will remember our battle at arms when I was speaking from that Dispatch Box—you nullified considerably the good you did then by leaving in the individual price maintenance provisions. To-day, in spite of the magnificent work of the Restrictive Trade Practices Court, there are restrictive practices going on in industry in this country that are startling and alarming. And, my Lords, if you want to start with greater competitive freedom, start at home before you start abroad. To-day we have restrictive-minded producers, and two or three big ones in one industry can ruin the efforts of all.

I come finally to the Common Market, and I am not going to say much about it because I am not sure that the noble Lord, Lord Latham, did not bring this into his speech. I am convinced that the only hope this country has for economic salvation is to get into that Common Market as soon as it possibly can. To me, it is not a real world when people talk about a Commonwealth free trade market. If the Commonwealth will give us a free market into their countries I will start thinking about it. But I will not even start until they have done that—and I know that that is impossible. I would say this to the United Kingdom Government: please realise at long last that, after all the things you have done for all the countries in this world, black or white, right from the war and before the war, there comes a time when you should do something for the benefit of the United Kingdom citizen.

LORD AMWELL

My Lords, before the noble Lord sits down, may I add a point? I shall not take more than a moment. In all these debates upon the "export or perish" theme it is remarkable that the possibilities of British agriculture on scientific lines are never considered. Has the noble Lord considered the fact that an increase of 20 per cent., or 23 per cent., in agricultural production in this country would practically wipe out the whole of our adverse balance of payments? And has he considered the debate that took place at the last convention of the British Association for the Advancement of Science, in which it was shown that it was quite possible to increase, by direct and scientific methods, agricultural production in this country by 50 per cent.?

LORD LUCAS OF CHILWORTH

My Lords, I must confess that I have not. I study many things that scientists and economists say, but I come to the end of it all and I do not believe half of it.

3.54 p.m.

LORD MORRISON OF LAMBETH

My Lords, I rise to support the Amendment which has been so ably moved by my noble friend Lord Latham in a speech which, for clarity, penetration and understanding, I thought was very excellent indeed. I have listened to the noble Lord who has just sat down. I must say that when he rose I was a little apprehensive as to what he might say, in view of the fact that he has changed his geographical position in this House, but I am happy to say that, as a whole, it was a speech which suited us very well. He had a little dig at my noble friend Lord Latham; but what is the good of sitting on the Cross Benches if one does not have a tap at both sides of the House in the process of making one's speech? But, as a whole, his was an able speech indicting Government policy, and I think it was useful in general from our point of view. So, although the noble Lord has shifted his geographical position, he has not gone very far wrong and there is still hope for him as the days and weeks and months go on.

My Lords, we are debating the economic situation of the country, and I would emphasise once again that we are debating it after ten solid years of Conservative government. This is a Government which cannot say, "Well, give us a chance. We have only just come in after the Socialists were in power." They have had ten years since the Socialists were in power and, with respect, I think in view of the particular difficulties we had to meet, inevitably, following a great world war, we made a better job of handling the national economy than this Government have done. The Government have had ten years in which to ensure that the economic situation was good, and they have not done it. Crisis has followed upon crisis; difficulties have followed upon difficulties, and there is still no coherent Government national economic policy. And, what is worse, there is still no coherence of general view on the problem among the British people in the national interest. I wish there were.

When we read the gracious Speech of Her Majesty on the economic aspects, we find that really it makes no contribution either to the situation or to the intentions of Her Majesty's Government in economic affairs. It says: My Ministers will continue to direct their policies towards maintaining the stability of sterling. But it does not say how. It says: They will seek to strengthen the balance of payments by the measures already announced, including especially the vigorous promotion of exports But it does not say how. It says: My Ministers will continue to seek the co-operation of both sides of industry", and it still does not say how. Then it says: They will seek to keep public expenditure within limits justified by the national resources. Continuing efforts wilt be made to secure a better relaionship between increases in incomes and in national productivity. It is an excellent sentiment, but there is no indication as to how they are going to do it.

We have followed the debates in another place; we have followed the speeches of Ministers in the country at those dinners to which the noble Lord, Lord Lucas of Chilworth, has just referred. I have been to many of them in my time, but not to more than was necessary in the public interest. They can be very bad, time-wasting affairs, especially for hard-worked Ministers. But I have read the speeches made there; and still there is no clarity, no indication of how they are going to handle the problems and of what ought to be done, not even a clear indication to the public at large in all sections of society as to what their contribution to the easing of the national economic situation can be.

This, I say, is a failure of leadership; it is a failure of government. Because what are the Government paid for?—and in the aggregate they are paid quite a lot of money, especially now that they have started double-banking Ministers. If we do not look out, the House of Commons will have a majority of Ministers in it, which would be very bad constitutionally. They cost a lot of money. I am not saying that they are over-paid, but they are much better paid than when I was a Minister of the Crown. That is just too bad; it was my bad luck. But they are paid in order to examine and to seek to solve the national problems, and to give guidance and leadership to the country as a whole as to how the private individual in all classes and all sections can make a contribution to their solution; and the Ministers are not doing it. They are just not doing it. Ministers are not earning their keep. They ought to have their pay cut or stopped until they can do their job. Or, if they do not know how to do their job, they ought to resign—for which there is a lot to be said. Let us hope that the country would be sensible enough to return a better Government of another colour.

My Lords, the basic fact is that the only way the nation can live, the only way in which government can be successfully carried on, is on the basis of production. Economic production carries everything: it carries wages and salaries; it carries dividends; it carries the costs of government, including defence. All of it depends upon production. And economic production, when we consider it in relation to defence, is part of the military defence of the country and the free world, because if we are hard up, if we go broke, then we cannot afford to maintain adequate institutions of defence. That is why the Communists often promote disputes injurious to the economy of the country: they want our country to be economically weak just as they want the Communist countries to be economically strong. Therefore, the aggregate of production, the amount of production, is a vital consideration in all these matters, whether it be personal incomes of any sort, social services, education, the cost of government or defence. It is production which is at the basis of it all and without which we cannot get on.

But it is not only the amount of production which is important; it is also the cost of production. If our costs are unduly high, through bad organisation or bad management or whatever other reason, if that be so, then our prices are going to be higher, and that has two effects. One, it is damaging to us in the export trade, which is absolutely vital to us because of the balance of payments—and I agree with the noble Lord who has just sat down. One is worried about the invisibles; they used to be a material part of the balance of payments and they have much diminished. Therefore, the cost of production matters in relation to the export trade, and the Government ought to be actively interested in the cost of production. But it is also vitally important in relation to the cost of living, and the cost of living has all sorts of repercussions. The cost of living is high; it is much higher than it was years ago. None of us is proud of the fact that the pound to-day is worth only about one- third of what it was before the war. I am not making pleasure out of it; I hope I never will make happiness and pleasure out of the economic difficulties or sufferings of my country. I do not. I do not like this cost of living going up. It leaves everybody uncertain as to where they are. It leaves incentives to try to take more out of the economy than one puts into it.

Of course, the cost of living did go up, partly by the action of malice aforethought by the Conservative Government when they came in, when they slashed and cut the food subsidies. That was an arguable and controversial thing, but they did it deliberately; they stopped the collective importation of Commonwealth produce, and they knew that these things would increase the cost of living and increase prices. They knew it. They did it with malice aforethought. The inevitable consequence of that was that the trade unions put in applications for better wages, and the managing directors and the higher executives in industry put in applications for higher salaries, and they got them. Then the Government complained that the unions were inflating the economy; but the Government incited, almost compelled, the unions to put in applications for wage increases because the Government had deliberately increased the cost of living.

I am in favour of everybody, of whatever class or section of the community, making what contribution they can to the economic wellbeing of the nation. I want the employers to do it, the managements to do it; and I am a trade unionist and I want the trade unionists to do it, too. And, believe me, there is no fundamental lack of willingness on the part of the Trades Union Congress to play their part in these matters, as I am sure will be confirmed by my noble friend Lord Citrine. But they must be given a chance to do it; they must be given a fair opportunity to do it. Some years ago I sat for a few years on the Economic Committee of the Trades Union Congress as a co-opted member, and it was one of the happiest experiences of my life. I never met in politics a body of men who were so concerned about the wellbeing of the country, especially the wellbeing of the working people of the country, naturally—that is what they are for. But I heard them argue, and they never became abusive with each other, which can happen in politics even within the same Party. We have heard it on both sides of politics. They could argue, and they would talk and argue reasonably, rationally, until they had talked themselves into agreement. And, after several of these meetings, I thought, "My goodness! If this lot were the Cabinet of the United Kingdom the United Kingdom would not be badly served." They really were jolly good, and those men had the interests of the country at heart. So the good will is there; the willingness is there.

Nor have the Trades Union Congress taken the line that they would not co-operate with the Government because they were a Government of the wrong colour. Indeed, directly the Conservative Government were formed the T.U.C. issued a statement saying they would be willing to co-operate with that Government despite the fact that it was of another colour, provided the Government were co-operative with them. That was a pretty courageous thing to do soon after the defeat of the Labour Party at a General Election. But the Government have been sticky; the Government have been doctrinaire, dogmatic. The Government have been stick-in-the-mud; they have held to their dogmas. It is only within recent months that the Government have begun to use the word "planning", and even now that they have begun to use the word we do not know what they mean by it, and I do not think they know what they mean by it.

That brings me to another point. The Chancellor of the Exchequer has said that they are willing to set up a national planning authority with a sub-stratum of officers or other people doing the hard work under the National Planning Council, or whatever it is called. That is not a bad set-up. I would only say that in this body not only should there be civil servants but there should be some good and competent and broadminded economists from the universities and otherwise, and there should be some able trade unionist officers interested in economic affairs, who are to be found; I have heard them talk and argue in the Economic Committee.

But what the Chancellor of the showing a willingness to co-operate. But Exchequer has not told us in any detail, so far as I know, is what the function of this body is to be, whether they are to be decisive or whether they can be over-ruled by the Government; and I am not dogmatising about that, because, after all, we have parliamentary Government. We do not know what its functions are; we do not know what its terms of reference are going to be, so far as I can recall. Well, my Lords, this is really terrible. It is difficult for the trade union leaders to pronounce upon their willingness or unwillingness to join any body which is so vaguely described, and you cannot blame them for being cautious and going back and wanting to think again. Therefore, I say that the Government must be willing to concede that the Government have a right and a duty in a broad way to plan, to inspire and to lead in the use and application of the economic resources of the country. They must not preach only to the trade unions the undesirability of wage increases—I follow their argument—but they must preach to the employers and, if necessary, compel the employers to be moderate in their dividends.

We read frequently in our newspapers that some body has declared this year a bigger dividend than they did last year; that some have declared a dividend of 20 per cent., 25 per cent. or even more. How is this going to affect the psychology and the mind of the average trade union workman? Do not forget that the average trade union workman in a large proportion of cases has a wife. Wives are influential people. They read the newspapers, too! This kind of thing is an incitement to the unions not to be as reasonable as even I would wish them to be in these matters.

But if we have a situation where the Government are really guiding the national economy right the way through —I do not call it bureaucratic regulation, mere regulation for the sake of regulation or control for the sake of control, which I would not wish; but control where it is necessary in the public interests, planning where it is desirable in the public interest, ensuring that there are going to be fair do's in personal incomes between the various classes of society—then we shall, I think, rightly get a response from the trade unions, an answer from the trade unions, showing a willingness to co-operate. But this is a two-way traffic. It cannot be a traffic that goes one way alone; it is a two-way traffic. The test of all these policies and the test of every section of the community is, really, what is good for the nation, the willingness to serve the national wellbeing that I want to operate among every class of the community.

We are to have a reply quite soon from the noble Lord, Lord Mills. I hope that he will not skate thinly and artistically over the surface, but that he will come to grips with the points that have been raised by my noble friend Lord Latham, by Lord Lucas of Chilworth, and by myself. After all, the noble Lord, Lord Mills, worked under me in war time as an officer in the Ministry of Supply. I put him in charge of machine tools, I think, which was a difficult element in war production. We were short of them. What did he have to do? It is true that there was a war on. But there is a war on now for the economic survival of our country. He had to plan the use of machine tools. He had to inspire and stimulate greater production of machine tools and even to import steel now and again in order to get them. But it was planning, it was organisation, which the noble Lord did well and competently—under my inspiration and guidance. But he did it well. He and I will never forget that we were in years past master and servant together—and, thank God, I was the master.

My Lords, I beg of the noble Lord, Lord Mills, to remember those days and to keep them in his heart and mind whilst he is replying, and not to be afraid of this idea of planning within legitimate limits, of controlling within legitimate limits. Let him give us rather more information than we have, unhappily, yet had from Her Majesty's Government, so that the whole country may know what is the problem and what are the Government's ideas for the solution of the undoubtedly serious economic problems with which our beloved country is faced.

4.15 p.m.

LORD GRANTCHESTER

My Lords, for those who are free from responsibility in Government the role of critic is easy, and noble Lords opposite know that I try to remember this. But there are times when a protest must be made. I agree largely with what the noble Lord, Lord Morrison of Lambeth, has said. Although with the noble Lord, Lord Lucas of Chilworth, I do not feel that the Amendment before the House is happily worded, and although I do not agree with some of the remedies which noble Lords on the Labour Benches are suggesting, I think the strongest protest is justified in the face of the pious platitudes which are contained in this statement of Government policy. These platitudes are calculated, if not designed, to lull a people, already suffering from frustration, into apathy and inertia. So on general grounds we shall register our protest from these Benches by supporting the Amendment.

In my view, this document strikes a completely wrong note. What is the impression it creates?—"Leave everything to your high-minded Government and all will be well. Your average wage, as the Prime Minister said recently, may to-day be £15 a week, but soon it will be £20". As we know, with such pronouncements, the qualifications put in by the speaker are usually forgotten by those who repeat them. In the gracious Speech there is no appeal to the individual citizen, no indication that only with his co-operation can any Government achieve very much. It is enough to make us feel that we should go out and sit down, make a nuisance of ourselves, demonstrate that we, as individuals, matter and should be taken into account.

Is there not much to be done? Why, then, not a call to work, to special effort to overcome some of our troubles?—for instance, the shortage of homes, particularly for those who have several children, a matter to which the noble Lords, Lord Silkin and Lord Latham, have referred in moving terms. Could we not come to believe, as the Germans are taught, that work makes life happy? Why not a decision to renounce voluntarily for a period, at any rate in the building trade, all restrictive practices and provide a little interest-free money, by subscription, in an effort to remove some of the sufferings caused by the existing shortage?

In spite of the wickedness of the world—when I say "wickedness", I mean the unkindness, man to man, and the envy, a lot of which is stirred up, perhaps without deliberately meaning to do so, by making comparisons between one man and another; nor must we forget that the professional classes, who are least heard, have suffered more in their standard of living since 1939 than have the wage-earners in industry—in spite of the meanness and the cruelty of man to man, without reason, there is much which is exciting and of absorbing interest to-day all around us. Cannot the Government tell us something which might generate a little enthusiasm that could be infectious, that could raise in us a little curiosity, or make us feel that we have a stake in the country and a part in what is going on? Some of the noble Lords from the Labour Benches, though not the noble Lord who has just sat down, were even more depressing than Her Majesty's Government in the gracious Speech.

Look, my Lords, at what we are told in this statement of policy: "East and West", "My Government are trying", et cetera, et cetera—the old story. Is it not time that we grew up and used words that mean something? Could anything be more uninspiring than "the West" as a description of what we value in life? In days gone by, the West was Christendom, and that meant something. And cannot we pluck some hope, even, from the East? Is there not an awakening, in some countries from sloth, in some countries from sleep or meditation? Is there not the flicker, and often more than a flicker, of light burning in some of the worst areas, in spite of persecution, that should put some of us to shame?

My Lords, could not the prospect of helping to build a comprehensive European Community be made a little exciting? What progress, may I ask, is being made in our schools with the teaching of a second language? How many are leaving our secondary schools with a working, conversational knowledge of Italian, of French, or of German, which is necessary if we are to play a part in the Common Market? I should like to congratulate the Lord Privy Seal on the success that he has had in his approach to the Community. In a very difficult atmosphere he seems to have convinced the doubters among the Six of our sincerity and good intentions. I hope he will be allowed to continue the negotiations without too much interference from the new "set-up" in the Cabinet Committee.

But surely what is exciting in this matter of the Common Market is the political implications—something which I think should be particularly interesting for the young to think about. Yet the political implications of the Common Market are being kept in the background, and the Government are keeping us quite in the dark on this matter. In the Preamble to the Treaty of Rome, the six signatory Powers state very clearly their determination to establish the basis of an ever-closer union between the peoples of Europe. The union envisaged and the community to be created goes far beyond an economic adjustment, a commercial agreement. Professor Hallstein, the head of the Commission of the European Economic Community, wrote in June last: The political union of the six Member States is under active discussion. And again: Economic integration must be seen as part of a wider process. It has not been conceived or put into practice as an aim in itself. Here, surely, is something of great interest. The form union should take would make a very exciting study by the people of this country, and is something Which should be brought out into the open.

My Lords, the gracious Speech refers to the Government's efforts to secure better co-ordination of the national effort with a view to promoting faster economic growth… If we had been told a little more about this and about the Government's plans, as the noble Lord, Lord Morrison of Lambeth, has said, we might find this very interesting. In the view of the Labour Opposition, this paragraph heralds the conversion of the Government to their idea of "a planned economy". The remarkable upsurge in the French economy during the past four years is due, so they say, to planning. I think we need a little more information before that sort of statement is accepted. In general terms, I would agree that planning for oneself and for a business for which one is responsible is good; this is but sound sense: but planning for other people is usually bad.

Now the French method, as I understand it, is to allow the principal industries to work out their own plans, and then to get them together so that a number of individual plans may be looked at together. Any plan can, if necessary, be modified by those who have prepared it in the light of what others are planning to do and in the light of the wider information that becomes available in a general discussion. For instance, in this discussion it is possible to encourage some industries to seek a larger investment, and others to switch their plant to new, anticipated, demand. Finally, these individual plans are put together and called "the Plan". This sort of co-operation is useful and sensible. It enables a Government that sits in to lend a hand in certain developments where such assistance is considered by all to be generally beneficial or, at least, acceptable to all the industries represented. Done thus openly, the charge of discrimination, such as was made against some of the assistance offered to British industries by Her Majesty's Government, is avoided.

But what is most important in the French Plan, as I understand it, is that it is a co-operative build-up by those who have to implement it. It is certainly not "dirigism" or "unpredictable intervention" which, at all costs, these who believe in a free economy want to avoid. Such a preconcerted development plan appeals to a logical nation like the French, who, because they are, above all, individualists, would not allow any plan to be imposed upon them. But, when all this is said, the credit for the French recovery during the past four years is not due to the Plan, but rather to the existence of the basic conditions in which the plan can work. For example, there was the introduction of the new franc, a reduction in subsidies, and the policy of liberalisation of trade, which have established general confidence in the French economy.

The gracious Speech also mentions public expenditure, which is to be curtailed within limits justified by the national resources"— whatever that means in pounds, shillings and pence. It seems to me extremely flexible in the way it may be interpreted. What has happened, may I ask, to the Committee set up by the Chancellor of the Exchequer to oversee and curtail Government expenditure? Reference is also made to maintaining the stability of sterling. In the past three or four months we have had to borrow no less than £850 million from the Bank of International Settlements and the International Monetary Fund, of which, I think, some £750 million is still outstanding, to maintain the position of sterling. Why keep the public ignorant of such facts and expect intelligent co-operation from our people? Why is there not a little more done to explain the seriousness of the country's position, when the Government know we are in a jam?

Bearing on this question of stability and sterling, I think there is a growing awareness of the danger inherent in the gold-exchange standard. It has since the war provided a sense of security which, with the weakness of the dollar, is now seen to be resting on an insecure foundation. I think the reason for the United States Treasury taking up a Swiss loan a few week ago was to get additional support for the dollar. This is very significant when you remember that the reserves of so many countries are held in dollars. What the resultant effect of a devaluation of the dollar would be is almost beyond thinking about.

The noble Lords, Lord Latham and Lord Lucas of Chilworth, referred to the menace of "hot" money. I wonder how much the flow of "hot" money is assisted by the misuse of aid which is given to some of the less industrialised countries. It would be interesting to know the sources of supply from which some of this "hot" money originates. There is fairly widespread agreement that there should be a return to some form of gold standard, but possibly not much agreement as to the basis on which it should be done. As Monsieur Rueff has suggested, this matter needs urgent consideration. Perhaps an internationally recognised standard could be worked out by O.E.C.D., and put into operation among members of O.E.C.D., who should be prepared to submit to the necessary discipline of a common standard.

In concluding, I want to go back to the theme on which I started: what is it that is sapping the energy and initiative of so many of our people? I believe it is—as it always was—the great concentrations of power that take the "go" out of people, until the people are driven to fight back. There have always been "dragons" to kill. A crusade against dragons can be both inspiring and exciting. And what are the dragons of to-day? I think they are the ruthless taxation machine; the tyranny of some too-powerful trade union organisations, which, if not always in evidence, is there in the background; it is the pressure exercised upon the individual by powerful bodies, such as the National Farmers' Union and some multiple trading businesses in fields on which, owing to restrictions, the individual trader has not got a fair chance to compete and to survive in competition. I am sure that if the Government would watch a little more closely and take action against any abuse of power, from wherever it comes, whether exercised by their Ministries or by other organisations, we should remove much of the frustration which is holding this country back. Let Her Majesty's Government concentrate on creating the conditions in which each individual can—and, because he feels something in himself, is willing to—apply his energy, his enterprise and initiative to meet the growing demand of consumers, particularly those with low standards of living, in the knowledge that by so doing he is performing a valuable service to his neighbours.

4.38 p.m.

THE MINISTER WITHOUT PORTFOLIO (LORD MILLS)

My Lords, just a week ago we had the pleasure of listening to the noble Lord, Lord Melchett, and the noble Lord, Lord Amherst of Hackney, who respectively moved and seconded the humble Address in reply to the gracious Speech from the Throne. To-day we have heard the noble Lord, Lord Latham, introducing the Amendment which appeared on the Order Paper in the name of the Leader of the Opposition, the noble Viscount, Lord Alexander of Hillsborough. When the noble Viscount addressed your Lordships on Wednesday last, he expressed the good will and the best wishes of this House to Her Royal Highness, Princess Margaret, and talked about the many services which she has rendered to the State. I am sure you would wish that our congratulations go out to Princess Margaret on the happy occasion of the birth of her son.

SEVERAL NOBLE LORDS

Hear, hear!

LORD MILLS

My Lords, I feel sorry for the noble Lord in his task of moving this Amendment. He had a very difficult job in trying to build up a picture of what he described as the "Bingo State". He used every illustration he could, whether it was typical or not typical—I will not say whether it was true or not true—without any regard at all to exaggeration. For example, he said that the orders taken by the machine tool industry in August had shown a reduction. What does he expect in August? Is it not the common experience of us all in all trades that we suffer a diminution in August? Most people are away in August.

LORD LATHAM

A reduction as compared with the previous August.

LORD MILLS

The noble Lord did not say that, and therefore people can draw the same conclusion as I did, that he was using an exaggeration to illustrate his point.

I was very sorry to hear his criticism of my right honourable friend Mr. Henry Brooke. I think that it was undeserved. Mr. Brooke is most sincere. He has carried out an increasing housing programme, in my view, with great skill. He has laid upon the authorities as the noble Lord said—but he said it to criticise Mr. Brooke—the task of dealing with slums and overspill. At the same time, he has reserved for them a considerable amount of housing. In total, housing continues to show progress. My noble friend Lord Lucas of Chilworth sent his good wishes to Mr. Brooke. I was grateful for that. But he criticised the Chancellor of the Exchequer. He said that the Chancellor should enjoy telling the truth now and again. I have never known the Chancellor of the Exchequer guilty of misleading anyone or of departing from the truth.

LORD LUCAS of CHILWORTH

My Lords, I am sorry if the noble Lord took that as what I said. What I said was in adulation, "Why should not the Chancellor enjoy the refreshment of speaking the truth now and again?"

LORD MILLS

My Lords, I can only suggest that the noble Lord should read the OFFICIAL REPORT when it is available to-morrow. The noble Lord, Lord Morrison of Lambeth, attacked all Ministers. I suppose we can put up with that. The noble Lord, Lord Grantchester, did not attack any Minister. He attacked the whole Conservative Party. And he warned us beforehand that he was going to vote for the Amendment.

The noble Lord, Lord Latham, in dealing with the Amendment, covered a wide field. "Is there no recession?" was the theme of his speech.

VISCOUNT ALEXANDER OF HILLSBOROUGH

A very good one.

LORD MILLS

It may have been a very good one, but there is no recession in the sense the noble Lord was trying to convey to the House. In other words, as I will endeavour to show the House, the Chancellor's moves are beginning to work. They are intended to work, and we should have been disappointed if they had not. They are not throwing men out of employment, as was alleged. They are having some effect where they are intended to have effect and making room for exports.

The noble Lord, Lord Lucas of Chilworth, said: "A plague on both your houses", but he did not suggest anything in place of both our houses. I did not gather whether the noble Lord was going to form another Party or whether, as someone said the other day, he was going to leave the people to choose between a Government which might not be popular—no Government is ever popular—or Socialism, which they dislike. The noble Lord said certain things which appealed to me. He said that the real problem is to sell more goods abroad. And I could not agree more. He talked about restrictive practices, which to some extent were preventing our doing that. He also said something about the British shipping industry which I should like to take up. He said that it was full of antiquated thinking. Well, there may be people in the shipping industry who are antiquated, and people who are antiquated in their thinking, but there are certain firms in the shipping industry of which the country can be proud—

LORD LUCAS OF CHILWORTH

Agreed.

LORD MILLS

—and I should not like it to go out that the shipping industry is effete and unable to compete, because it is not true. Among the shipbuilders are some very good firms indeed.

The noble Lord, Lord Lucas of Chilworth, and the noble Lord, Lord Grantchester, referred to the Common Market. I was glad to hear that both of them support our intention to see whether we can gain entry into the Common Market on acceptable terms. The negotiations start to-morrow. The Government are going into them in a positive spirit and with the intention, if we gain entry into the Common Market, of making it a success.

I was interested in the speech of the noble Lord, Lord Morrison of Lambeth. He made a speech which I thought was very helpful. I have always found the noble Lord helpful. As he said, I served under him during the war. We had some battles in which he stood behind me, and I am very appreciative.

LORD MORRISON of LAMBETH

My Lords, may I thank the noble Lord for that reference and say that I forgot to mention that I had another subordinate in the Ministry of Supply, one of the Parliamentary Secretaries, named Harold Macmillan, who has become Prime Minister and First Lord of the Treasury? I must say that "my boys" have done well for themselves.

LORD MILLS

My Lords, I do not deserve to be classed with the Prime Minister, and I am sure the noble Lord did not intend that. His speech this afternoon was what I should have expected from him. Of course, he had to attack us as Ministers; but he said that government can be carried on only on the basis of the production achieved, in terms both of its amount and of its cost. He said that the cost element in our production is vital to our exports and to our cost of living. I think that that is perfectly true. Then the noble Lord gave us a picture of how we should all put our heads together to improve the economy. That, of course, is just what the Government are seeking to do.

When I come to the terms of the Amendment: but humbly regret the failure of Her Majesty's Government to take any effective steps to remedy the grave state of the economy of the nation I would suggest that its general wording seeks to prejudge adversely the effect of the steps which have been taken by Her Majesty's Government. These were designed to prevent certain developments in our economy which were bringing about an inflationary situation that could wipe out the undoubted benefits the nation has experienced under the present Government. I would remind your Lordships that there has been a great improvement in the standard of living in the past ten years; an increase in real earnings of about one-third, quite apart from the expansion and improvement of the social services. If we are to continue these benefits there must be a more co-ordinated and effective attack upon those matters which are obstacles to a continuous growth. I do not think any of your Lordships would object to that.

There are fundamentally two problems which were giving rise to anxiety and were weakening confidence in our ability and our resolve to overcome them. The first was the pressure from home demand upon our resources, and the second was the pressure from earnings of all kinds—wages, salaries and profits—and I agree with the noble Lord about profits which have been rising to an extent out of proportion to our increase in national production. As a consequence, last summer our economic situation had become unsatisfactory, both as regards the external accounts and as regards the domestic economy. The measures taken by the Chancellor of the Exchequer in July last were in part intended to cope with the immediate strains at home and on sterling, and in part directed to a more fundamental improvement of the health and competitiveness of United Kingdom economy.

The balance-of-payments situation had been deteriorating. In 1960 there was, as your Lordships know, a large deficit, though its impact was not felt at the time because of the large inflow of short-term funds. Although the balance of imports and exports improved considerably in the first half of this year, the underlying position remained unsatisfactory and made necessary the remedial measures introduced by the Chancellor of the Exchequer. The result was an immediate and striking effect on confidence abroad in sterling from the announcement of the July measures and the large drawing from the International Monetary Fund which took place early in August. The sterling exchange rate improved immediately, and has remained strong.

Funds began to return to London, and after allowing for the International Monetary Fund drawing and repayment of debt under the Basle arrangements, there was an appreciable increase in the reserves in both August and September. The capital outflow of the preceding months was reversed and £100 million of the International Monetary Fund drawing has been repaid. It has been possible, as your Lordships know, to reduce the bank rate from 7 per cent. to 6½ per cent., and then to 6 per cent. I would emphasise at this point that last week's decision to make a small reduction in the bank rate does not indicate any relaxation of the credit restriction, which it is still necessary to maintain.

The measures taken to reduce the pressure of home demand have also had some effect. Obviously we cannot expect to see such immediate changes in domestic demand as we have seen in the foreign exchange markets. The total of advances by the London clearing banks, after a continuous rise, fell by £220 million in August and September, and have been declining through October. There are indications, too, that the rise in consumer expenditure was checked in the third quarter. But all this, my Lords, really does no more than provide us with a breathing space in which to tackle the underlying imbalance of our overseas trade. Indeed, with the loss in the last two or three years of most of the net earnings from invisibles, to which reference has been made, and on which we used to be able to rely, we must develop a substantial surplus of exports over imports to carry the load of overseas commitments for investment and aid and defence.

The development of world trade in the period ahead looks like providing a good opportunity for our exporters to sell more. The noble Lord, Lord Grantchester, asked that something should be done to wake up the enthusiasm of the people to export. That is what we have been trying to do all along, because, as the noble Lord, Lord Lucas of Chilworth, said, it is the key to the problem. At any rate, in world markets it looks as though the demand will be there, and we must shape the economy at home so that this opportunity is not missed. This means that we have to make sure that the goods we are offering for export are competitive and that home demand is not excessive. To this end we have to prevent inflation and the consequent rise in costs, so that exporters can carry on their business on a stable basis. At the same time, we have to keep room in the economy for the needed expansion of exports and we must not be swamped by continuous expansion in home demand.

My right honourable friend the Chancellor of the Exchequer, as I said earlier, has already seen a fall in bank advances, and the rise in consumer expenditure has been checked in the third quarter of this year. He has received the co-operation of the banks, building societies and insurance companies in restraining advances for private house building and projects other than those relating to exports and to productive industry. These steps have been taken to curb inflation and to ensure that sufficient resources are available for export.

On the side of costs, it has been evident for a long time that personal incomes of all kinds have been greater than the growth in national production could bear. Consequently there should be, and I believe that there has been, an acceptance that a pause in the continuous increase in wages, salaries and profits is needed. In spite of what the noble Lord, Lord Latham, said, the last figures confirm that there has been a check to company profits this year. Plainly, the pause is not the whole solution; it is a pause, but it gives time.

VISCOUNT ALEXANDER OF HILLSBOROUGH

My Lords, may I ask a question on this matter of profits, because we want to get the facts right? As I understood it, the actual profits so far in the calendar year declared by companies show a considerable increase on last year. It is true that a great number have announced that they will not increase their dividends this year, but in fact there has been no halt at all in increasing the resources and the ultimate distribution may be of more capital to shareholders. Am I putting my fact right?

LORD MILLS

My Lords, I think the noble Viscount is mistaken. In any case, I will write to him with the actual figures upon which the statement I have just made is based.

I was saying that plainly the pause is not the whole solution. It is a pause, but it gives time—time in which we hope the Government, employers and employees will be able to determine ways of getting a better and more sensible balance between increases in money incomes and in national output. Failure to do this would mean economic trouble in the future. We should be putting a chronic drag on the faster rise in production and real wealth which we all want to secure. The pause will, of course, have been of little avail if, with its ending, there is a reversion to previous practices which have in large measure contributed to the present difficulties. My right honourable friend the Chancellor of the Exchequer is in consultation with those concerned with industry about possible new machinery to assist in securing a faster, sustainable growth in the economy. He is also giving consideration to the problem of securing a more sensible long-term relationship between increases in income of all sorts and increases in national productivity. One thing is clear. Excessive increases in wages, salaries and profits—that is, increases greater than the increase in national productivity—have resulted, and would again result, in a slower rate of growth in real incomes all round than would otherwise be possible.

The Government's aim is to establish new procedures of economic planning—and I use that word "planning". It has been asked this afternoon: what are the terms of reference? I think the terms of reference are a matter to be discussed and agreed between the parties concerned. As I say, the Government's aim is to establish new procedures of economic planning so as to clarify what are the essential conditions for realising our potential economic growth. The potential is there. I do not agree with the noble Lord, Lord Grantchester, that people are in a frame of mind in which they cannot use their energy and their will to improve affairs. These new procedures would involve closer co-ordination of the various processes of consultation and forecasting, and an improved flow of ideas and information between the Government and industry and between one industry and another.

Noble Lords will be aware that these discussions have taken place. Last August, the Chancellor of the Exchequer held meetings with representatives of the main employers' federations and with the Trades Union Congress, or their representatives. On September 23 he sent them a letter outlining certain proposals, and he has since had further meetings to discuss the proposals. The employers' organisations have already expressed support for them, and my right honourable friend is very hopeful that in due course the Trades Union Congress will do the same; because the Government believe that consultation on the lines under discussion can make an important contribution to the solving of our long-term economic problems. There are attitudes and customs in industry to-day, and in commerce, working against national efficiency, and there exist out-of-date restrictive practices which are obstacles to economic growth. Greater understanding stemming from the closer co-ordination of the needs and resources of our economy should help us in tackling these problems.

But, my Lords, the fulfilment of our economic objectives depends on the cooperation of all engaged in industry, and the Government are anxious to see that the consultation takes place at every stage of the process. The noble Lord, Lord Latham, said, or indicated, that we were in a recession but were saying that there was no recession. I must repeat that the July measures were not so severe as to produce a recession, as some people, not the Government, feared at the time they might. The Government are confident that they will not do so. We expect investment will be higher next year, even if there is a pause in manufacturing investment after the great upsurge of the last two years. Public investment is still rising, and we know from the White Paper published last week that we expect it to be about £85 million higher in 1962–63 than in the current financial year, measured at the same level of prices in the two years. Nor is there any reason to expect a decline in economic activity as a whole. In these circumstances, my Lords, I suggest that the Opposition Amendment cannot be supported by the facts. Your Lordships are well aware that, well as exporters have done, further expansion is necessary if our standards are to grow, and the measures which the Government have initiated are based on this need. The Government, I submit, are entitled to ask for the co-operation of all who can contribute to the task they have undertaken.

5.12 p.m.

LORD CITRINE

My Lords, I rise to support the Amendment, and I do so not in any representative capacity but as one who is proud to have been a member of a trade union for 50 years. It is from that point of view in the main that I wish to participate in this debate.

All of us are well acquainted with the fact that our country is faced with a serious economic situation. Production is too sluggish; imports have been difficult to reduce; exports are meeting with severe competition:, the balance-of-payments situation is causing a great deal of anxiety, and inflation is becoming more intractable. We have been operating our economy for a considerable time past by a series of stops and starts, and I think that that kind of operation is deprecated by everyone who is related in some way or other to the conduct of modern business. Clearly, what we are dealing with is a recurrent problem and not something that can be resolved by expedients such as manipulation of the bank rate, credit squeeze, purchase tax and other temporary measures. These do afford, and have afforded, apparent temporary alleviation; but it is only temporary. The need for adequate planning of the national economy has been plainly apparent for many years past. Those who sit upon these Benches and the Party they represent have always realised that our life is too complex in the economic sphere without some greater measure of order represented by planning.

I was very happy to be reminded, by an article which appeared in the Daily Telegraph only a week or so ago, of the interest of the Prime Minister, Mr. Macmillan, in this same subject. I had forgotten the book that he had written in 1938 proposing the establishment of a National Economic Council and outlining broadly the terms and functions of such a Council. Even at that time the necessity for planing was in the air; and if I had forgotten that book and the proposals that Mr. Macmillan had made, it would seem that the members of his Party have either forgotten it also or have never, in fact, taken any notice of it. It cannot be said that there have been in the Conservative Party many supporters of planning.

I gave some indication of this in an earlier debate and I do not wish to repeat it, but at long last it is now being perceived that the economy cannot be operated effectively without some such measure of planning.

When we talk about our national economy we are talking about a very complicated subject. Millions of human beings, in our own country and in other countries, are engaged in producing goods and exchanging services and commodities of all kinds—myriads of them; and I think we too often think of the economy in abstract terms and forget that what we are really talking about is the relationship of human beings to other human beings in this complex system of production, distribution and exchange. Of course it is imperative to have a maximum of co-operation if that kind of system is to operate efficiently, and I was very glad to hear the noble Lord, Lord Mills, stress that point in the final words of his speech. The gracious Speech says: My Ministers will continue to seek the co-operation of both sides of industry in the better co-ordination of the national effort with a view to promoting faster economic growth, while maintaining stability in prices and a high and stable level of employment. That is a most laudable aim; but I cannot escape the query as to how the Government have gone about achieving this aim.

The Chancellor of the Exchequer made a statement in another place on July 25, and he announced, not a matter for consideration, not a matter for the consultation to which the noble Lord, Lord Mills, alluded a moment ago and which he said the Government were anxious should take place at all stages, but a declaration of policy—policy firmly made by the Government—which, I venture to suggest, was a bombshell to the trade unions of this country. He announced a wages pause, and referred, as the noble Lord, Lord Mills, has done, to this giving an opportunity for a review of our long-term policy. While on that point, I may say that he is much more optimistic than I am as to the speed with which a long-term policy can be worked out—but let that pass. He laid down the principle that increases in wages and salaries, and incomes generally, must follow and be related to increased production.

My Lords, if ever there was a vital question to trade unionism as a whole, it was this one. The Chancellor must have known that trade unions have been traditionally opposed either to wages restraint or anything in the nature of a pause. Even during two world wars they have always declined to exercise what was considered by the Government of the day to be wages restraint. That does not mean that they have not exercised restraint, but it does mean that they have not subscribed to it in agreement with the Government. Now this policy of a wage pause was laid down without consultation of any kind with the Trades Union Congress or its constituents. No warning was given, and I know from my own trade union experience when I was Secretary of the Trades Union Congress the means that are available to Governments to impart information on impending developments in Government policy without doing it in any official way. Yet nothing of that kind, so far as I know, took place in this case.

I say, as one of considerable experience in the industrial sphere, that the action of the Chancellor was precipitate and provocative, and we are entitled to know the reasons why he acted as he did. The Chancellor told his hearers in another place that he had based his action upon a report published by the Organisation for European Economic Co-operation which was issued in May, 1961, and then went on to say [OFFICIAL REPORT, Commons, Vol. 646 (No. 167) col. 621]: After studying the reasons for rising prices in 20 or so O.E.E.C. countries, it came to the conclusion that in six of them, among them the United Kingdom and the United States of America, excessive wage increases constituted both an important and independent inflationary force. My submission to the House is that in these circumstances it was necessary for the Government to act. Well, my Lords, I thought that was a most remarkable discovery. The Chancellor of the Exchequer may not have heard of the exhortations of his predecessors. He perhaps had never heard of Mr. Thorneycroft and his doctrine when he was Chancellor of the Exchequer, that we were paying ourselves, I think it was, £900 million more than was measured by the actual amount of increased production. He may not have heard even of Mr. Gaitskell, who, in the later part of his Chancellorship, was issuing a rather similar warning to the country. And then the noble Viscount, Lord Amory, and others, have always hammered away at this point. So the Chancellor of the Exchequer is not on good ground when he gives the impression that something new had arisen, some new information had come along which prompted the Government to take immediate action.

May I stress this point: that while it is true that that ascertainment of fact by the Committee of O.E.E.C. is correctly represented by the Chancellor, he did not go on to say what he should have said, that there was no agreement among the authors of the report as to what should be done to remedy that situation. There was not a word about that. That was left for others to detect in the Press report or by those who were favoured to get access to the report itself.

LORD BRAND

My Lords, may I ask the noble Lord whether it was not the case that out of seven members two were of a different opinion and five agreed among themselves?

LORD CITRINE

I thought it was four and three, but I may be wrong about that.

LORD BRAND

It may have been four to two, but it included Mr. Richard Kahn, who is a well-known economist in this country and well known to be a Left Wing economist. He is a successor of Lord Keynes and is a very well known Cambridge professor.

LORD CITRINE

I think it would have been a help to everybody if the Chancellor of the Exchequer had said that in Parliament and showed, in fact, that there was not unanimity in regard to the remedies which might be applied. Moreover, I would point out that in the report, the part which I have quoted already, it is said that this situation existed in six separate countries, and I am quite unaware of any one of those countries having taken the drastic measure of instituting a wages pause to try to correct the situation.

LORD BRAND

My Lords, in the Netherlands they have had some system like that for many years.

LORD CITRINE

I do not suggest for one minute that all the other countries have sat down and done nothing. I am merely saying they have taken no such drastic measure as a wages pause; that is the point I am making. This report was published in May. The Chancellor of the Exchequer's statement was made on July 25. There was ample time for him to have consulted the Trades Union Congress, the Federation of British Industries, the British Employers' Confederation, or anybody he wished, but he did not do it. As a matter of fact, he went further and said that the time for appealing for wage restraint had gone by, had passed. I thought that a most serious statement, and I really am puzzled to know where the Chancellor of the Exchequer went for his advice. Did he go to the Ministry of Labour, for instance? They could have told him what the reaction would be in the trade union movement; they would know it would be violently opposed. And yet the Chancellor of the Exchequer made his announcement.

He did not even, so far as I am aware, tell the Trades Union Congress of his conclusion and his decision to operate the policy even after his statement in Parliament. Instead, the Chancellor went on to impose—and I stress that word "impose"—a wages pause in the Civil Service and in that section of the economy where he has a measure of direct control. He expressed the hope that nationalised industry would follow suit and he has also stated that he hoped that private industry would follow. This strikes me as a very curious way of going about trying to secure the co-operation which is mentioned in the gracious Speech.

What has been the result of the Chancellor of the Exchequer's statement? First of all, the most bitter opposition at the Trades Union Con- gress in September. I attended that Congress, as I have done successively for many years past, as an observer, and I cannot transport into this assembly here the atmosphere that was prevailing in that Congress and the anger that was raised. The speeches of every delegate who took part in the debate, including the spokesmen of the General Council, were in the same vein: "We will resist and we will fight this measure of dictation." I have seldom seen such unanimity in the Trades Union Congress. We know that since that time there have been threats of strikes in some of our vital industries, and goodness knows how far this movement will go. The Chancellor himself has struck a blow at the confidence of the average workman in the system of arbitration and conciliation that I feel confident he cannot possibly realise.

It is not understood that there is a natural reluctance because of the trade union traditions in this country to go to arbitration at all. They have resisted it for years. Australia and other countries have systems of compulsory arbitration, and others get over the difficulty by a different system, as in Sweden and Holland. But in this country it is the devil's own job for a trade union officer to persuade his members that the right thing is to take the case to some form of arbitration. You may think that I am using extreme language but I recall a leading article in the Guardian on September 7: Mr. Selwyn Lloyd can scarcely have imagined that the British economy will be strengthened by promoting the most serious industrial disturbance since 1926". That was the year of the National Strike. Yet unless he and Mr. Macmillan think again industry is in for a bitter autumn. Then, concluding their article (there is some argument in between) they say: Mr. Lloyd is destroying institutions that may sometimes work badly, but which at least do work, and he is offering nothing in their place. That is to invite anarchy, and the settlement of all wage disputes by private wars. I want to make my own position clear. I am not attacking the policy of wage restraint. I have long supported that policy and have advocated it in public and in private, because I believe that it is necessary not only in the interests of the nation as a whole, but in the interests of trade unionists themselves. But always the base of that belief is that there should be equitable and similar treatment in broad character in regard to the incomes of other sections of the community. Experience shows that that is not easy to achieve; nor is it quite so easy to work out an equitable policy as to how wages shall be related to production. The Chancellor of the Exchequer himself (whether subsequent to his speech or not, I do not know) is now finding some of the difficulties and he has announced these in Parliament. He says [OFFICIAL REPORT, Commons, Vol. 646 (No. 167), col. 630] that there is no great difficulty, perhaps, in arriving at a view on the likely rate in the growth of national productivity, but there are many practical problems to be worked out in regard to personal incomes. How would it be possible' under such an assessment to secure proper relatives among wage and salary earners, and how would it be possible to secure the most effective deployment of our manpower? How do we reconcile the interests of those whose productivity can be measured and those who work in industry where productivity and increases in it cannot be measured? How do we reconcile the interests of those who work in industries where there is great scope for increasing productivity, for example, because of new investment, with those who work in industries where, in the nature of things, productivity increases extremely slowly? Most important of all, how does one secure that answers in principle are translated into action in the practical world? I wish to goodness that the Chancellor had thought about that before he made his announcement. He would have found that this is no short-term policy.

This is not something that can be done overnight or in a few short months. It means embarking upon a long and difficult road, and of course one which I and most of us hope will be traversed and will bring about some satisfactory and equitable conclusion. I want to make this point as plain as I can. There are real difficulties in regard to this knotty problem. The noble Lord, Lord Mills, knows them as well as I do. You cannot impose upon workpeople measures of this kind. Even where the Chancellor of the Exchequer has direct power he has created resentment and, for the first time, we have seen a measure of disturbance in the Civil Service and among teachers and others without, I think, parallel in the whole history of those institutions.

The people with whom agreement has to be come eventually in these matters are the people who have been antagonised and have been driven into a resentful and non-co-operative attitude. The Chancellor of the Exchequer thinks that he can impose a wages pause. He has done that in the Civil Service and, as I have said, he hopes it will happen in nationalised industries. He has said that he hopes employers in private industry will do the same. What same? Speaking in the debate in another place on October 23 he said [OFFICIAL REPORT, Commons, Vol. 646 (No. 167), col. 628]: Then the accusation was made that I have discriminated against the public sector and done nothing about the private sector. That is not true. In fact, part of the indictment made by the right honourable Member"— I think that is Mr. Wilson— was that I hoped what I had done in the public sector would spread to the private sector. He is absolutely right: that is exactly what I hope will happen. Just think of those words for a moment. Those words will be read in trade union branches by officials. They will be circulated in documents in all sorts of places among 8½ million trade unionists. But an interpretation will be placed upon those words which is perhaps quite different from what the Chancellor himself intended. He says: what I had done in the public sector". What has he done in the public sector, except to impose a wage pause? Is this a standing invitation to private employers to impose a wage pause, too? I really cannot see that any interpretation will be put upon it by the average trade unionist other than the one I have just quoted.

It cannot help but embitter relations. I cannot say how much I personally deeply regret the way this situation has been handled, especially at a time when there is a chance of doing, something practical to solve some of the basic economic problems of our country. I am here referring to the proposal to establish a National Economic Development Council which was referred to by my noble friend Lord Morrison of Lambeth and by Lord Mills. Let me say at once that I welcome this; I welcome it without reservation. I think it would be a really constructive effort to get to grips with our problems. It is long overdue, but better late than never.

My noble friend Lord Morrison of Lambeth said something in regard to the powers of this Council. Such information as has come to me is most reassuring on that point. It is probable that the terms of reference will be as wide as possible, that little if anything will be excluded. It is highly probable that the representation of the Government on the Council will be at a small but high level. It is also probable that there will be appointed a sufficient number of representative trade unionists and employers who have experience of the subject and can give the benefit of that experience. I think there is some doubt in regard to what are called independent members—that is to say, members who are appointed by neither the employers' organisations nor the trade unions. My own view would be that such people could be of value on the Council, but I am not sure that there would be unity of view on the side of the trade unions on that. They may think that such people, economists and others, could play their parts most effectively at (shall I call it?) the staff or executive level, and not as members of the Council.

On the question of staff, if this Council is going to be manned exclusively by the Civil Service it cannot succeed. It must incorporate a number of people with direct experience in industry on both the employers' side and the trade union side. My noble friend Lord Morrison of Lambeth mentioned that earlier. Above all, it must have a director who has complete independence and great powers of initiative, because I am quite sure that, without drive from the executive body, it will be almost impossible to keep the Council from languishing into a talking shop. I am sorry to say to the noble Lord, Lord Mills, that that is what happened with the National Production Advisory Council on Industry, a body started with the best of intentions, which has been a mine of information to myself and others who served on it for so many years. But bit by bit the decisiveness of action was whittled away—not by intention or anything of that kind, but it just happened. I hope that that will not occur on this particular occasion.

Let me say to trade unionists, if I can, through this House—because it is quite possible that what I say may be represented to trade unionists—that I sincerely hope that the resentment that trade unionists feel at the wages pause will not blind them to the value of such a Council.

As I have said, the work of that Council could be not only in the interests of the nation but in the fundamental interests of trade unionists themselves. To my mind, the essential question is: what will happen to any recommendations that are passed by the Council? The employer bodies are autonomous. Both the Federation of British Industries and the British Employers' Confederation are autonomous bodies. They are confederations, in sonic cases, of federations, and their measure of direct power in extremely limited. The position is similar on the side of the Trades Union Congress. So it is or immense importance that the people who represent those bodies are of the highest possible calibre; men who will carry the confidence of their constituents. It may be difficult to achieve that, but I am sure that that will be the shortest way and the best way of achieving this result.

I must say to my noble friend Lord Morrison of Lambeth that I cannot possibly see a Council of this kind being endowed with executive powers. No Government would pass over to such a body the power to deal executively with such a wide range of subjects as must come before this Council. We had the same problem with electricity. The unions there claimed to come on our advisory council with executive responsibility. We had to say, "No, we cannot do it. It is not constitutionally possible". But what we did was to appoint on to that council the chairmen of the various boards or their deputy chairmen and every member of the Central Authority at that period, with the result that, when a recommendation was made, we were pretty sure that those men, who had subscribed to that recommendation, would do their best to see that it was carried out by the bodies with which they were associated. Now, that may not be possible in similar form with this Council, but I think it would be desirable for the Government to aim as near to that analogy as possible.

This Council will throw up problems not only to the Government: it is going to throw bigger problems to the trade unions and also to the employer organisations. I think it is going to be a great test for all concerned, in their personal character and firmness, in their decisiveness of mind and in their readiness to do unpopular things in the confidence that what they are trying to do is the best that can be done by human beings in the interests of our country and its people.

5.43 p.m.

LORD BROCKET

My Lords, although we have no direct power over finance, I feel that it is a great credit to our House that we have in it representatives of all sides of industry and all sides of politics, and that we can listen to a speech such as that which we have just heard from the noble Lord, Lord Citrine. I feel that speeches of the kind made by the noble Lord must be helpful to the Government in their negotiations at the present moment over wages and productivity. I think that everyone in this House, on whichever side he sits, realises that the prosperity of this country must be based on production, and I feel that speeches from noble Lords on the Opposition side which are as reasonable as some of those we have listened to this afternoon are very helpful indeed to the Government in the formulation of their views on how production can be kept going satisfactorily and, also, on how exports can be increased.

Although I sit on this side, I should like to say that I agree wholeheartedly with the noble Lord, Lord Citrine, that the handling of the wages position during the last three months has been very far from satisfactory. On July 17, when our late, lamented friend and colleague, Lord Pethick-Lawrence, made one of his excellent speeches on the Finance Bill, I made a few remarks on the subject of the extra 10 per cent. which might be put on Customs, Excise and everything else. Unfortunately, since then the Chancellor of the Exchequer has seen fit to put on this extra 10 per cent. Although I am personally a non-practising barrister, and the Chancellor is an eminent Queen's Counsel, if I were going to negotiate wages with the trade unions I would not increase the cost of living before negotiation. I would not have put on this extra 10 per cent. It is quite easily shown that it may not be so very great an increase, as it is 10 per cent. of the purchase tax of the customs, of the excise, and so on, on all these various articles; but to go to members of trade unions when the price of tea has gone up, when the price of beer has gone up, when the price of fuel has gone up and when the price of everything has gone up, and then to ask for a wage pause seems to me a most foolish way to negotiate; and it is not a way in which I should expect a Government, in these very serious times, to negotiate.

But, my Lords, to go back a little further, in 1960 the cost of living went up by only 2 points, to take the nearest round figure—from 110 to 112. This year the cost of living has gone up, to take the nearest round figure, by 4 points. I only wish that Her Majesty's Government had taken this matter in hand during 1960, instead of 1961, because there is no doubt that the export trade of this country is far from satisfactory. If purchase tax on cars is put up, how can the motor industry sell enough cars in the home market to keep its costs down so that it can export as cheaply as possible to the foreign markets? Those of us who spend our lives, apart from the times when we are here, in industry realise that one must have a satisfactory and profitable home market in order to export satisfactorily. Take motor cars, for instance. It looks as if the last Motor Show has done well, particularly in certain makes of cars. But there is no doubt that the Midlands of this country—Birmingham, Coventry, and so on—are founded upon the prosperity of the motor industry, and there are very sad thoughts in many parts of the Midlands at present on the future outlook for the motor industry. Then, just at that time, one finds that another 10 per cent. is put on to the purchase tax on cars. It seems to me, my Lords, quite extraordinary that really responsible Government should do such a thing.

May I take some other points? In the Victorian era (and I am not saying this in any way against the Victorian era, which was in many ways an era of great prosperity), there were various theories on economics. One theory was that inflation was caused by too much money chasing too few goods. That theory may have been all right in that era, but there was at that time the possibility of unemployment. I am not speaking now as an employer: I am speaking as somebody who has studied these things. If there is the prospect of unemployment, the Government might say, "We will mop up purchasing power", as the noble Earl, Lord Dundee, said in our debate on July 17. He said that if these two regulators were put on it would mop up, in a full year, £400 million worth of purchasing power. If there is the prospect of unemployment and you mop up purchasing power, it means that the unfortunate wage-earner can spend less on the various necessities and luxuries of life. But if you have over-full employment—and I am thankful to say that we have had that during the last few years—the question of mopping up purchasing power does not arise. It adds to the cost of living, and the wage-earners, through their legitimate negotiators, the trade unions, will say, "As the cost of living has gone up, we want more wages". That does not mop up purchasing power: it adds to inflation.

I should like to emphasise, as strongly as I can (it is not the first time I have said this, and your Lordships may weary through repetition), that if the Government keep on increasing taxation, increasing purchase tax, and adding in various ways to the cost of living, they do not mop up purchasing power but simply encourage further wage rises. At the moment our country cannot afford large wage rises. I am sure that representatives such as Lord Citrine, who had such a very distinguished career, both with the Trades Union Congress and with the Electricity Board, as Chairman, would agree with me that wage rises, when the country is prosperous and paying its way among other countries of the world, are all right; but at a time like this, when we have been certainly outrun by such countries as Italy, Germany and so on in the export market, we cannot expect large wage rises unless those wage rises are tied to the cost of production.

For these reasons, I am sorry that this obsolete theory of too much money chasing too few goods seems still to be at liberty in the minds of some members of the Government. As I have said before, although we in this House have no power over finance I hope that some of our words, particularly from those of us who are in industry, will find their way into the minds of some of the members of Her Majesty's Government, and that they will take a little notice of what we say. Because we are all, on both sides of the House, absolutely all-out for Britain, whatever our political views may be.

Now, my Lords, there are one or two other small factors. I should like to welcome the reduction of the bank rate from 7 per cent. to 6 per cent. I feel that, although I could not vote for the Opposition Amendment, which says that they: regret the failure of Her Majesty's Government to take any effective steps to remedy the grave state of the economy of the nation. I think they have taken some effective steps, and I could not vote for the Opposition's reference to the absence of "any effective steps".

To take the bank rate, I am not, like the noble Lord, Lord Brand, sitting in front of me, an expert on international finance, and it may well be that the bank rate had to be put up to 7 per cent. I should not like to express an opinion on that. But I would say that if a company which wishes to export goods has to borrow money at 7½ per cent. or 8 per cent. to improve its factory, it becomes very expensive, although the company is trying to improve its factory in order to export goods more cheaply. I am told that in Belgium exporting companies can borrow money more cheaply to improve their factories, and that is perhaps one reason why, in fact, they have a more satisfactory record of exports than we have.

Or, again, take the question of local authorities, which I mentioned before. If they have to borrow money at 7 or 8 per cent. the rents of their council houses are higher. It means that the occupants of the council houses want more wages to pay the rents—inflation again. I do not want to labour this point, but I do hope that at some time in the future Her Majesty's Government, and particularly the Treasury, will realise that high taxation and high bank rate are themselves inflationary and not deflationary.

My Lords, I do not intend to take much longer this afternoon, because I might repeat myself. But I would reiterate my hope that Her Majesty's Government will realise, as I am sure is the case, that all Members of this House, coming from both sides of industry, and from both sides of politics, only wish prosperity to the country, and that any advice they may give comes from the heart. I hope that Lord Amory, who has now gone to Canada, will have his wish, and that the future Council on Productivity and Wages will be a great success and will help our country to go forward, particularly if we have European Free Trade. If we have European Free Trade, there is no doubt that we shall have to compete with some of the other countries with their lower costs and, if I may say so, in some instances with harder work. Therefore, I do hope that any advice which the Chancellor of the Exchequer and the Treasury may receive from industry, will be regarded seriously, and that the Chancellor will realise that anything we say is meant not in any unkind way but to help our country to be more prosperous, and to enable the reasonable wages which we all desire to see to be paid.

5.54 p.m.

LORD STONHAM

My Lords, apart from the contribution of the noble Lord, Lord Mills, all the speeches so far in the debate, from all parts of the House, have been severely critical, or even condemnatory, of the Government's economic record, and I think that the speech of the noble Lord, Lord Bracket, is no exception to that. Indeed, I would draw the attention of my noble Leader to the fact that if only we had worded the Amendment "failure to take adequate steps" we might have had the pleasure of Lord Bracket's company with us in the Lobby. It just shows how much there is in a word.

LORD LINDGREN

That is wishful thinking.

LORD STONHAM

Not at all. My experience tells me that we might have had that distinguished company with us, and it shows how important it is to word the Amendments exactly.

My Lords, I think the feature of this debate has been the insistence of almost every speaker, whilst welcoming the fact that at long last the Government have taken unto themselves a cleaned-up version of what was at one time a dirty word, "planning", that the Government are handicapping themselves almost be- yond repair by the fact that they have made it virtually impossible for the trade unions to co-operate to the extent we should all like.

My noble friend Lord Citrine spoke from 40 or more years' experience as a trade unionist, and as a negotiator on behalf of the trade unions at the highest possible level. The noble Lord, Lord Brocket, spoke as an employer. I speak in this matter as an employer, but one who for 30 years has had—at not a very high level—and still has, direct experience of negotiations with employees about wages. I am also a member of a trade union, and even now I go to St. James's Square and sit on a joint industrial council. I would say at once that no one who had the slightest and most elementary experience of industry and negotiation could possibly have handled this matter as badly as it has been handled. It is quite incredible that so many mistakes should have been made. I think that the noble Lord, Lord Mills (who I regret is not in his place at the moment), really agrees with that, because he made no attempt whatever to answer the case that has been put forward so far.

The noble Lord did, indeed, express his sorrow, I think it was, for the position in which my noble friend Lord Latham found himself in building up his case against the Government. I did not notice that my noble friend was in any difficulties at all, and I thought his case was unanswerable. Indeed, as I have said, I think that the noble Lord, Lord Mills, shared that view, because he did not attempt to answer it. He expressed some regret that my noble friend had referred to Mr. Henry Brooke in slightly unfavourable terms, but we do not in any way doubt Mr. Henry Brooke's sincerity. There are people who say that Satan is sincere. What we object to is the results of that sincerity, the results which my noble friend clearly pointed out—thousands more homeless people; hundreds of thousands of people paying double or treble the rents they were paying—all as a direct result of the Government's policy.

Lord Mills himself said, as a point in the Government's favour, that the discount houses and banks are restricting their loans to young people who want loans for houses. That is a result of the Government's policy. Have all these hundreds of thousands of people who cannot get homes, or find it impossible to pay for the homes they require, to be grateful to the Government for these things? As the noble Lord, Lord Brocket, made so clear, there is this policy of adding all the time to the cost of living through dear money: 2 per cent. on bank rate, on interest rates, on the public works loans rate—and 2 per cent. on that means 24s. per week on a council house. How on earth is it possible, when the Government keep on doing things like this, to expect a wage freeze? My noble friend Lord Morrison of Lambeth said that these trade unionists have wives. They read the papers, and spend the housekeeping money. Many of them actually pay the rent out of the housekeeping money, and they know these things.

Anyone who has had any experience at all of negotiation knows that the guilt for this present situation lies entirely with the Government. Indeed, we on these Bench, including myself, two or three years ago told the Government, or foretold to the Government, exactly what would happen as the result of the policies they were pursuing. And that was not very difficult; it was merely adding two and two together and making it four. After all, twice in four years we have had a credit squeeze and a 7 per cent. bank rate, and this time, although it has solved the largely self-inflicted, short-term monetary crisis, it has done nothing towards making the economy more efficient, or towards removing the underlying cause of our balance-of-payments problem.

That is why the Government have been compelled to take a leaf out of the Labour Party's book and say that they realise the situation cannot be solved without economic planning. But unfortunately, now that the Tory horse has at last been persuaded to jump this hurdle, the Chancellor of the Exchequer has tied its front feet. Because whatever form of planning is put forward, it can be successful only if it is given the full co-operation and backing of the trade unions. But how can they he expected to co-operate, with prices rising, their members subjected to a wage freeze, and no absolute restriction or limit of any kind of profits and divi- dends? The men say: "We were entitled to get a 2s. a week rise. The machinery gave it to us. It is an agreement which has gone on for years. We are not getting our miserable 2s. a week rise". This is the men's point of view, and it is an understandable one. What is the action of the Government with regard to profits and dividends? They exhort. There is no kind of compulsion on them. We all had high hopes when the Chancellor of the Exchequer promised a Bill to deal with speculative profits on shares and property deals; but that matter is not mentioned in the Queen's Speech. That is something we should have liked to see in the gracious Speech, but it is not there. Indeed, it seems that the Chancellor of the Exchequer and the Government are determined to make it utterly impossible for a joint effort by management and workers.

These wage agreements which have existed for decades have been dishonoured. The pledge to introduce a Bill to improve the safety, health and welfare conditions in shops and offices has been dishonoured. The Government have even refused to implement the Bill we passed last year of a similar, but more limited, kind. At a time when it is common ground that we are desperately short of scientists and technicians, it has been decided to close the scientific and technical register. When we need all the skill that we can muster, the Government are going to close the training centres for school-leavers and unemployed, and to reduce the training facilities for the physically handicapped. I think that last decision, to reduce the training facilities for the physically handicapped, is not only senseless but really quite inhuman, because it means that many unfortunate people who can be trained to make a useful contribution will now find that their lives are a burden not only to themselves but to the State.

This list of follies is indeed unending. All the major wage claims are being turned down. As my noble friend Lord Citrine mentioned, a strike is threatened in the electrical -power industry. Wage trouble looms on the railways and in engineering. If the Government adhere to their wage freeze policy with no restrictions elsewhere, they are positively asking for a head-on clash with virtually the whole of organised labour; there cannot be any doubt about that at all.

The British people as a whole, as well as the British working man, are reasonable and sensible people, and if they can see the need for sacrifice they will make it—we have known that before. But no man in his senses can expect sacrifice and restraint from wage-earners unless equal demands are made on the rest of the community. Every trade union leader can see the value of cooperating with Government and employers in working out and implementing a long-term programme of capital development in the hope of ensuring a steady, planned expansion, but only if there is built into the agreement the guarantee that his members will share fully in the increased wealth which they create. But such a plan cannot even begin—and, with all respect to my noble friend Lord Citrine, I would say the first joint meeting cannot even take place—until the Government abandon their present policy of dishonouring the machinery of negotiation. Therefore, the first step is for the Government to restore confidence in the processes of conciliation and arbitration.

For 42 years the industrial court has been an honoured body whose decisions have been honoured by employers and workers alike. If you are in an industry and are discussing wages and conditions with representatives of the workers, you may first of all discuss it with the joint industrial council. You are on friendly terms with them, but you come to a disagreement and say: "Very well, we will voluntarily go to the industrial court." There you both put your case before an impartial body and a decision is made. It may go in favour of the men; it may go in favour of the employers; it may be halfway between the two. But whichever way the decision goes, both sides honour it; and when the Government destroy that machinery they are dishonouring both sides. It is not only the men who are complaining about this, it is the employers as well; and I am one of them who would complain if an award which was arranged in that way was set aside.

The second essential step is for the Government to halt rises in living costs, in so far as they can, by dealing with profits and speculators, and, as quickly as they can, by lowering interest rates. Unless these positive steps are taken there can be no co-operation and any plan will be stillborn. Instead there will be commercial and industrial anarchy and economic disaster. Unless these steps are taken, my Lords, the Prime Minister will prove what I have long suspected—that the Government are suffering from "ballistic thrombosis".

Your Lordships probably all know the story of the City gentleman who devoted so much of his life to the pursuit of wealth that he had neglected the social graces. He tried to correct that by hiring a grass moor and buying a very expensive gun, but unhappily he failed to hit a bird. Of course, he did not blame himself. He went back to the gunsmith and blamed him, because the gun did not aim true. The gunsmith, besides being very good at his job, was a man of tact, and asked him whether he could take it away for examination. He came back in due course and said that he was very sorry, there was a fault with the gun; it was suffering from an obscure and rather technical fault. "Oh", said the man, "and what is that?" "Ballistic thrombosis", the gunsmith replied. Then the man said: "Tell me, what is that in plain English?" "I'm sorry, sir," said the gunsmith, "it means that there's a clot behind the trigger." That is exactly the difficulty in which the Government will find themselves, unless they repent before it is too late. If they do take steps to prove that they have seen the error of their ways, I am sure that the unions will co-operate.

But one top-level planning committee, however eminent, will not be enough. I think that my noble friend Lord Citrine had this in mind. Even with the full co-operation of the unions, with everybody pulling one way, as I should like to see, I do not think we are really going to do any good with one, and only one, top-level committee, association or conference. The work is done when the people in industry, knowing this industry and its needs, what it can do and the help it needs to do better, get round the table and discuss things together. What we shall need is not only a top-level conference but also a planning commission for every major industry, so that each one can work out its needs and so give us an overall picture.

Exhortation is no good any more. We are getting sick of it. We are beginning to think—some of us thought it a long time ago—that we know more about this than the Government, and that the best service the Government can do for us is to leave us alone. If we are going to have these plans built up for every industry, agreed to by employers and workers, by men who trust each other and will work together for the common good, it is imperative that there should be an assurance that those plans will not be disturbed by sudden changes of policy. We just cannot have "Stop and Go" any more. What is really necessary is for the Government to recreate goad will and trust, to restate their faith in the virtues of arbitration and conciliation, to realise their mistakes, to get to work with a national planning committee, trying to secure the co-operation of the trade unions at top level—and they will secure it, if only they will retrace the wrong steps they have taken—and then break it up into separate commissions for each industry. Then we shall really begin "to go places".

It is not all black now. Last year, the electrical industry exported £300 million worth of goods, 10 per cent. of our imports, and that was 10 per cent. up on the previous year. But they could do very much better, if there were a sane and settled policy on the purchasing programmes of the nationalised industries, on hire purchase restrictions, on exports incentives and the like. Therefore, I urge the Government to give industry an opportunity to work out these plans and to promise continued support when they are worked out. With such support, I am sure that employers and workers alike can be trusted to prove once more that British is still the best and that, if we pull together in a team, we shall advance along the road to national solvency and increased prosperity.

6.15 p.m.

VISCOUNT MASSEREENE AND FERRARD

My Lords, the noble Lord who has just sat down has said that our present economic ills are the fault of the Government. I do not agree with him. We have to go back much further, to the 1930's. I think this is a case of the pot calling the kettle black. The truth is that our economic policy for a very long time has been immoral. Having had as our chief aim a vast programme of State welfare, for years we have been living beyond our means. Our per capita production has always fallen behind our expenditure. We cannot go on like that. Since the late 1930's, when our exports failed to cover the cost of our imports, we have been liquidating our foreign assets to square our adverse balance of trade. We have seen how great assets, like Trinidad Oil and Argentine Railways, which were built up in the past by our ancestors and—let me remind noble Lords opposite—by private enterprise, have been sold off to maintain a standard of living which we have not earned. The barrel is now scraped pretty clean, but that is not the fault of the Government; it is the fault of Party politics. We have to give the voters to some extent what they want. If we have democracy, that is how it goes.

I agree with the noble Lord, Lord Lucas of Chilworth, who scoffed at the rising bank rate. I think it is rather an outworn method of controlling the economy, because the bank rate can control only about two-fifths of actual spending capacity, owing to the vast Government expenditure, and therefore it cannot act as a real brake on expenditure. We want a bold, comprehensive plan and I am sure that the Government are attempting to work one out, but it requires a great deal of work. Personally, I have never understood why we cannot have a selective bank rate. By all means let us have a high bank rate for "wine, women and song"; but cannot we have a low bank rate for exports and for industry generally? We can have a high bank rate for unnecessary imports. But to have a high rate for shipbuilding and industries like that is crazy. But I am not an economist.

The Premier told us that in ten years' time it would be possible to have a basic wage of £20 a week, £1,000 a year. I agree with the noble Lord, Lord Lucas of Chilworth, that it would be far more attractive if he could tell us that in ten years' time our present wages are going to buy us twice as much. But I understand that that would be rather a rash thing to say. Suggesting that wages must increase is really what I can only call a glass-bottomed dish policy. If you give a dog a bone in a glass-bottomed dish he thinks he has two bones. People are rather fooled by this perpetual increase in wages, and think they are really bettering themselves.

It is essential to try to preserve the value of money. I have often wondered whether a nation like ours, whose economy is tied to world markets (after all, we have had to take as our motto "Export or Die") can have a Socialist State—and by using the word "Socialist" I do not mean to be political; I am referring to the complete Welfare State. I rather doubt it. If we were entirely self-supporting, it might perhaps work. I quite understand that to ask the Government to put welfare on proved need would be asking too much of any democratic Government; but in our precarious position it is what is required. You can have your bankers and financiers juggling with the figures, putting up and bringing down the Bank Rate, and borrowing from the International Monetary Fund, but the basic fact is that we are spending more than we earn and have been doing so for a very long time. I suppose that we shall go on having recurring crises until, like the Gadarene swine, we rush to our doom. But we have a spark of hope on the horizon, thank Heaven! in the Common Market which is now looming up and will probably arrive in time to avert the complete collapse of our standard of living.

What I am frightened of is how the people of this country, having had rather a soft time in some ways, are going to stand up to the competition of a free economy in Europe. I would say that the Welfare State has had rather an injurious effect on the standards of duty and responsibility in this country. If we are to compete effectively in Europe we want to overhaul our whole industrial machine and try to get the people in this country to have a different attitude to life. At the moment we have the attitude that you can get something for nothing. Well, of course, you cannot. You can fool yourself into thinking that you can, but in the end the day of reckoning always comes and it can be highly unpleasant.

I am pleased to hear that the Government are going to set up this National Council for Planning. I think that one of the most important things in our economy is to plan to use our capital for the best results possible. We must also, as I have often said before, root out restrictive practices and unofficial strikes. I am wondering whether this National Council for Planning will have wide enough powers to set up a capital investment committee really to use our capital in industry for the best purpose. I am quite certain that capital is not always used for the best purpose; and if one thinks of the railways, the Government, I am afraid, have been one of the worst offenders in that respect.

Our chief revenue to-day really comes from indirect taxes on consumption, and these taxes weigh most heavily on the poorer members of the community. You are going to have the Welfare State, but you cannot raise direct taxation any more. It seems a sort of Alice in Wonderland. I suppose it keeps the voters happy, but I think they must be a little bemused. The question is: what are we to do? What are the Government going to do? I should hate to be in their shoes. We are pledged to the Welfare State, apparently, irrespective of the national economy. And if the Opposition came to power (Heaven forbid!) the day of reckoning would come far, far quicker. It is all very well for the Opposition to accuse the Government of this and that, but if they were in power the balloon would very soon go up.

We have heard from several noble Lords the same old thing about increasing our exports, and so on. But how are we to do this? The trend of world trade is rather working against us. Our own Commonwealth are now manufacturing a good many of the goods they require. We always hear much about management, executive and all that, but basically it is the restrictive practices and unofficial strikes—the tea-breaks and all that nonsense—that destroy our productive power. I agree that some trade union officials are very loyal people and they are worried about the position. But for some time we have asked them to try to do something about unofficial strikes and, so far as I know, nothing has been done. An unofficial strike is a fraud; it is a complete travesty of justice, and absolutely against the law. But nothing is done about such strikes. Why is this so? Is it not possible for the Government, together with the Opposition and the trade union officials, to have a Royal Commission of inquiry into the working of the unions regarding unofficial strikes?

A short time ago we had all these revelations concerning the E.T.U., which I think shocked the public. It is all highly unpleasant. Can we not really try to do something about this?—because I think it is useless taking any other measures to increase exports if we cannot stamp out unofficial strikes and restrictive practices. I agree with the noble Lord, Lord Citrine, that it is unfortunate, if it is the case, that the Government have not taken the unions into their confidence over the wage pause. Personally, I should like to see in every Government, irrespective of their colour, a member of the T.U.C. as a member of the Government, because I think it is high time that the T.U.C. rose above Party politics. They are such a power in the land and of such importance that we must have complete co-operation and complete confidence between the unions and the Government of the day. That is extremely important.

I know very little about trade unions, and I should not be talking about them at all. Have the trade unions any sort of information service which explains to their people the great damage they do to their own cause, their own livelihood and the purchasing power of their own wages by these strikes? After all, the average British working man is a decent person, if only we can explain these things to him. I try in my small way to explain the position to the few with whom I come in contact, and they seem to understand. I have seen these T.V. interviews of strikers. I hardly ever look at T.V., but I have seen them. It is obvious that they do not have a clue what they are striking about; they are completely at sea. I think it is important that we should try to explain to the people that they are completely destroying themselves.

I have probably spoken far too long, but I hope that the Government in future will really try to co-operate. Perhaps they do, but we have just heard from the noble Lord, Lord Citrine, that they do not. You must have this co-operation. If we do not, it is absolutely hopeless. I will end by quoting a saying from Benjamin Franklin: Experience keeps a dear school, but fools will learn in no other. I only hope that we are not the fools.

6.35 p.m.

LORD LINDGREN

My Lords, the last time I spoke in this House on a major debate, I am afraid I rather shocked some noble Lords by using the more robust form of debate that I was more accustomed to in another place. The noble Viscount who has just sat down could hardly have been more provocative, even if he had set out to be so. When he started, he was really trying to draw me away from a good resolution I had made to keep more strictly to the Rules generally observed in this House. I do not believe he really wanted to be provocative. I noticed him sitting in the House, and he has sat through most of the debate—which is very creditable to him. But it has not made much impression on him.

The noble Lord, Lord Mills, commended my noble friend Lord Morrison of Lambeth on the fact that he opened his remarks by saying that the vital matter was production. What seems to have upset the noble Viscount is the Welfare State: we cannot afford the Welfare State, and all our ills are due to the Welfare State. There is no such thing as "something for nothing" in this world. All wealth that is produced is produced by the application of man's muscle and brain to the raw materials of the earth, and if there is anybody who lives without working then he is living only on the backs of those who are working. Of course, those who are working and producing have to provide the necessary sustenance for those members of the community who are rendering a service but who are not producing. The science of government is to facilitate production, to decide what proportion of the wealth that is produced is required back in the form of taxation to meet the cost of the Army, Navy, Air Force, Colonial Office, housing, education and all the social services. It is the worker in production who pays for the social service.

The noble Viscount said that we are spending more than we earn. Who is spending more than he earns? Not the engineer in the engineering factory; not the miner producing coal. It is the land speculator, whom this Tory Government encourages. In Hertfordshire, where I come from, the County Council have had to spend hundreds of thousands of pounds in the last three years in increased cost of land for social services. That has gone to land speculators, who have rendered no service whatever to the community. It has had to be paid for in their rates by the men working in the factories, the workshops and on the land in Hertfordshire.

VISCOUNT MASSEREENE AND FERRARD

My Lords, a famous economist—I cannot remember who it was—worked out that in one of our greatest shipyards the productive work done by the men was only sixteen hours a week, and the rest of the time was unproductive, in tea breaks and union meetings. I am all against speculators. I have never speculated in land in my life, and I am all for having a capital gains tax on land speculators for a certain time. I also agree that if you have a wage pause you should have dividend limitation. But you have to remember that if you have dividend limitation the Government cannot have so much tax. It works both ways.

LORD LINDGREN

My Lords, I am not quite sure whether I am provoking the noble Viscount or he is provoking me. If it is a fact that there is any workshop in which there is only sixteen hours' productive work out of the normal working week, whether it is 44 or 40 hours, it is not the workman who is only working sixteen hours, but those who are responsible for the supervision and organisation of the factory floors. That is where the problem comes.

If I may leave the noble Viscount now, I will deal further with some of his problems in regard to unofficial strikes as I go along. The noble Lord, Lord Mills, in his speech said he was sorry for the noble Lord, Lord Latham, in the case that he had to make out against the Government. Well, we can turn the tables and say that we have been sorry for the noble Lord, Lord Mills, because, quiet frankly, not one question that had been put to him by my noble friends Lord Latham or Lord Morrison of Lambeth was answered. If I might briefly sum up Lord Mills's speech it was that in this present crisis the action that the Government have taken was in fact to get a breathing space. Well, really, ten years of Tory government, and they either have not got their breath or have so lost it that they want a breathing space to get it back again!

He implied that the noble Lord, Lord Latham, had rather stretched the facts, and he referred to machine tools. When he was corrected on that he immediately moved away, but never came to the question of housing, which is a vital factor in the economic position and in production. Practically no local authority in this country is at the present time producing houses for general need. It is a fact, and I challenge the noble Viscount who leads the House to refute it when he comes to reply. As was stated by my noble friend Lord Latham, the only house building that is going on at the present time—local authority house building—is a little slum clearance; certain housing for old persons in which there is still a subsidy; in the new towns, built not by local authorities but by the development corporations; and a little in towns which are expanded towns and which is really being carried out by the London County Council or such councils as the Manchester Corporation, or in regard to which local authorities are arranging for overspill with local authorities in the neighbourhood around them. May we ask where the 300,000 houses that the Tories talked about are? We had an election fought on it at one time. The Tories disrupted the whole economic structure of the country in order to produce those 300,000 houses; they cut school building programmes and the rest; but to-day fewer than 100.000 houses—for slum clearance, old persons, expanded towns and development corporations—are being built.

LORD HAWKE

My Lords, has the noble Lord got his figures from the Housing Return? Because my impression is that very nearly 300,000 are being built every year, though I agree the vast majority are for sale.

LORD LINDGREN

It is true there were 300,000 houses built two years ago. Last year there were not 300,000 houses built, and the 100,000 houses I am referring to are of local authorities.

Now we come, as the noble Lord referred, to private development. But the Tory Party talked about "a property-owning democracy", and there are now fewer houses being built by speculative builders for private ownership—owner-occupied houses—than at any time in the last three to four years. They are not building them because they cannot sell them. The speculative builder cannot sell privately-developed houses because newly-married persons who want to buy houses cannot, in fact, get a loan. The noble Lord seems to doubt it. Building societies to-day will not end anyone more than 75 per cent. of the purchase price. Where is the ordinary man or woman going to get the other 25 per cent.? Previously Tory Governments were intending to, and did, facilitate the provision of Government money to building societies in order that they could lend up to 90 per cent. They are not doing it. What is more, if a manual worker applies to a building society to-day for a loan he cannot get one if his house is going to cost £2,000 to £2,500, unless he is earning more than £20 a week. So now the "property-owning democracy" has gone as well as local authority building.

The noble Viscount referred to television. I know Ministers have not much time to look at television, but very likely other noble Lords looked at television last night. Are the Tory Government proud of the spectacle of housing in London as shown on "Panorama" last night? Will the noble Viscount tell us when he comes to reply tonight what will be done for the hundreds of respectable families in houses of over £40 rateable value who are being evicted just before Christmas and have nowhere to go, and with the London County Council unable to help them? That is the position in regard to housing which the noble Lord, Lord Mills, did not develop; nor did he deal with the charges that were made by my noble friend Lord Latham in regard to them.

I want to emphasise as much as I can much of the speech which was made by my noble friend Lord Citrine regarding the references in the most gracious Speech to co-operation between both sides of industry, because, as I said just now in answer to the noble Viscount who spoke before me, production is what matters, and unless we can get an effective and efficient production this country is sunk.

VISCOUNT MASSEREENE AND FERRARD

My Lords, might I ask the noble Lord whether he agrees that the objective of production is to produce wealth, or to produce jobs? Because that is very important.

LORD LINDGREN

Production is wealth. After all, I do not want to go into my elementary economics, but it is the shaping by labour of the raw materials of the earth that is producing wealth.

VISCOUNT MASSEREENE AND FERRARD

Have we not rather fallen into, as one noble Lord suggested we now have, two men doing one job?

LORD LINDGREN

Two men are not doing the same job, but they might be doing half each. As regards co-operation within industry, which is necessary if we are to get production going, the Government have struck a very serious blow to it, and that blow is in the undermining of trade union confidence; and without trade union confidence production will go by the board. The Chancellor of the Exchequer has undermined the whole faith of the trade union movement—when I speak about the trade union movement I am referring to the ordinary trade unionist and not the trade union leader; the trade unionist who pays his contribution, goes to his branch meeting and expects a return from his trade union in the improvement of his wages and conditions of employment—because so far as the trade union movement is concerned in this country it has prided itself (I believe industry as well as the trade union movement) in the fact that there has been free bargaining between employer and the employed, collectively, without the interference of Governments, with the Government coming in only when asked, when negotiations between the two sides break down. What I really cannot understand with this Government is that in their activities they hit hardest those who are least able to bear the blow from their action. Where does the enforcement of the wage pause hit hardest? It hits in the public sector of industry; the Civil Service, local government, the nationalised industries. The industries which are covered by the wages pause are all the industries which over the generations have been recognised as being those that have always lagged behind general industry in their rates of pay.

Transport is a very important factor in production and London is the centre of trade and commerce. But the action of the Government is taking away from some of these vital industries even the workers they had. Because of the fact that public service industries have for many years had a lower wage basis, and a lower salary basis, than manufacturing industries there has been a tendency for there to be drift from these public sectors into manufacturing industry. That is why London Transport, the railways and others have a very poor recruitment basis, and have great difficulty in retaining within their employ those whom they do recruit. One of the problems of British Railways and London Transport is not the desire of the officers to provide an efficient transport service, but their inability to secure the labour force necessary in order to provide that service. They cannot get that labour force because of poor rates of pay, or lower rates of pay than obtain in industry generally; and here again, the Government, by the pay pause, are hitting at that particular sector and pushing it even lower than it was below the manufacturing sector.

Equally, as I mentioned just now, the Government are damaging confidence. Over the last 10 years the trade union movement, and industry generally, has moved away, with a great measure of success, from that old and shocking guerrilla warfare which we used to have, with each trying to pick the time which was most advantageous to itself and most damaging to the other to attack. The trade union would wait until they knew the employer was anxious to secure an order at a certain time with a group of customers and then put in their wage demand, with the alternative that if it was not met they would withdraw their labour, knowing full well that they were more likely to meet success because the employer did not want to break his contract so far as his order was concerned. Equally, the employer would wait till he was slack, and so did not mind whether there was less labour, to make demands for wage reductions, knowing full well that the worker would consider half-a-loaf better than none and would accept wage reductions rather than unemployment. Such guerrilla warfare got us nowhere. Over the last 40 years we have developed negotiating machinery, and that machinery has, in the main, worked exceptionally well, both sides of industry, collectively, employers and employed, stating their case, arguing their case, coming to an agreement and implementing the agreement. We talk a good deal about strikes: they get the headlines. But generally industry has worked exceptionally well, and so have the various negotiating machines.

One of the problems of the trade union movement, however, has been that negotiating machinery is of necessity a slow machinery. Blame for the slowness does not lie on any one side. There have to be stages: application by one side or the other; arrangements for meeting; negotiations, one side putting its case, the other side answering it; deferment for further consideration. This all takes time, and of course there are always some folk in industry who are impatient. With the ordinary worker, who does not understand the difficulties of arranging dates—and sometimes the trade unions officers, as well as the employers, cannot find suitable dates—there is a tendency to kick over the traces.

I should be the last not to admit that full employment has brought its problems. The great problem, perhaps, is lack of discipline. None of us, certainly none of us in this House, would want to go back to the days in which there was a fear of pay day because of the possibility of being handed one's cards and of unemployment. That is a discipline no one wants to see return. But in a period of full employment one of the problems the trade union has to face is how to maintain discipline in the light of the employee's ability to find other farms of employment, to withdraw his labour and injure the employer who has no other source of labour.

Within the factories, within offices, drawing offices and all the rest, there have always been a number who try to make it difficult for the trade union movement to maintain that discipline. They have suggested, "We have got power now; we can wield the big stick, because in fact we can withdraw our labour and hurt the employer". What are the Government doing now? They are really encouraging the fellow-traveller and the Communist, because whereas the trade union before has been able to say, and say with success, "We have agreed to this machinery. We are going through the stages of that machinery, and when we come to the end of it, if we cannot secure agreement, then is the time to talk about withdrawing labour", the fellow-traveller and Communist is now able to say on the shop floor, "The Government have broken the rules. We have gone all through the stages of the machinery. We have got the award and now the Government refuse to implement it". What a weapon to hand to the agitator on the floor!

The noble Viscount—I can understand him—thinks that men should not withdraw their labour. I agree. But not every fellow who is on the shop floor has studied economics. He does not understand all the ramifications of industry. All he is concerned about is that when he goes home on Friday night with his wages his wife complains that this, that and the other has gone up; that when he gets his rate demand his rates have gone up; or, if he is paying his rates with his rent, that his rent has gone up. He just cannot make ends meet on what he has got coming in. The wife presses him for more money for housekeeping. He has got to cut down on his cigarettes and beer, and then the Chancellor puts up the price of cigarettes and beer. So the poor fellow is immediately susceptible to people who say, "The Government are not only creating difficulties for you, putting up prices and the rest, but when you keep to the rules and go through the machinery they break them and will not let you have the increase".

As I think my noble friend Lord Citrine mentioned, this Government—and this is a shocking thing—said that to a group of workers who had secured 2s. a week more. That is the increase they were awarded after going through the whole of the machinery—2s. a week! A packet of 10 cigarettes—and the Government stop it! Yet in the Budget in April the Chancellor of the Exchequet had given £80 million to surtax payers. True, they have not got it yet, because it comes in next year. But if the Communist on the shop floor says to the worker, "The Government stop your 2s. but there is £80 million for the surtax payer", can you wonder that the worker gets a little out of hand and is more susceptible than he otherwise would be to suggestions that he should withdraw his labour? And the fault is not with the trade union movement. The fault lies with the Government, who have broken faith in so far as the trade union movement is concerned.

I turn to an industry which I have much at heart. It gave me a living; the workers in the industry made it possible for me to enter political life, and when I was turned out by the electors at the last General Election the railways gave me a living again, until I joined our Lordships. So I have every reason to be grateful to the railway industry of this country. But the railways, as one of the industries in the public sector, are always well behind general manufacturing industry in rates of pay.

LORD STRATHCLYDE

My Lords, I wonder whether I might interrupt the noble Lord for just a moment? I do not want him to be misrepresented. I understood him to say earlier—he is returning to the same theme now—that the rate of wages in the public sector was lower than that in manufacturing industry. So far as I understand it, that is not accurate. What is accurate is that what the worker brings home at the end of the week in manufacturing industries is much larger than what the man in public service can possibly bring home.

LORD LINDGREN

That is not so. Let me explain this to the noble Lord. This is one of the problems of full employment. So far as the public sector was concerned it always had the virtue of regularity, whereas in pre-war days, before full employment, those in general industry were in and out of employment. Security was always paid for. The railway carpenter or joiner, the engine fitter, the wheelwright or anybody else, was always paid 10s. a week below the district rate. So far as the Post Office line men and others were concerned they were always paid 10s. below the district rate. But so far as the worker was concerned, particularly when he came to the age of 40 or 45, when he could not "tear about" as he could when a youngster on piecework wages, it was a better proposition to get 10s. a week less each week for 52 weeks than to get the district rate for 20 weeks and then to be out of work for 30 weeks of the year. So far as the building industry is concerned, in those days the employees always had to face sixteen weeks out of work owing to frost and wet weather.

The wage rates have always been based on applications on the existing wage rate. The public sector has never gone up with general industry, except that within the railways following the 1957 negotiations we did have the Guillebaud Report, which had as its object—the Civil Service, to its credit, has been doing this through its Civil Service Research Department—the bringing of wages and salaries levels within the railways up to a mean rate within the manufacturing sector or other similar sectors in general industry. We had Guillebaud.

I was one of those who took part on behalf of my trade union in the negotiations with the British Transport Commission and the Government which followed the Guillebaud Report. It was understood at that time that the Guillebaud Report was the basis which should be carried on right the way through, and that, instead of doing what we did in the old days, making applications through the recognised machinery, the basis of comparability with general industry would be maintained throughout. There was the appointment of a new Chairman of the British Transport Commission. He was to be paid a salary of £24,000 on the basis of comparability, not with the job that he was taking over but with the job that he had left.

Just to prove that I was not alone in thinking that the Government as well as the British Transport Commission meant to continue with comparability as recommended in the Guillebaud Report, may I refer to a statement by the Minister of Transport in another place, when he was questioned by one of the honourable Members for Cardiff on the appointment of Dr. Beeching to the British Transport Commission. The question arose from the suggestion that the Minister had said that the salary of £24,000 was being paid on the basis of comparability, and the honourable Member for one of the Cardiff divisions asked: Does this apply all the way through and down to the engine driver? The reply of the Minister of Transport was: Yes, it does, because it follows the Guillebaud principle by which railwaymen were given wages comparable with outside industry. If railwaymen get that principle accorded to them, why should honourable Members opposite deny it to the managerial side? Here we have the Minister of Transport on the appointment of the new Chairman of the British Transport Commission bringing to his aid the Guillebaud Report—comparability of the job with general industry. Then the Chancellor of the Exchequer, one of his fellow Ministers in the Government, says to the British Transport Commission, in spite of Guillebaud, in spite of the fact that we give the Chairman of the Transport Commission £24,000 a year, "You must not implement a recommendation of the Guillebaud Report."

Again we have difficulties within the railway industry. Sometimes a fellow who can stop a job by getting off the engine, or in other ways, is tempted to do it if he cannot get his own way. What a glorious opportunity for those who wish to undermine discipline in the trade union movement to say, "The Government can give your Chairman £24,000 a year on the basis of comparability, but so far as you are concerned they stop the negotiations that will enable you to get it even though you were promised it under the Guillebaud Report"!

I opened this part of my speech by saying that unless we can get harmony in industry, both sides working together—I think the noble Lord, Lord Mills, used the phrase "putting our heads together"—we shall get nowhere. We have gone a long way in industry on joint consultation. The best place to get the ordinary fellow on the shop floor to understand what is happening and why it is happening, is in joint consultation. When the ordinary workers, not trade union leaders, come up from the floor to meet departmental managers they discuss and argue what is happening and how things are to be done on the job. That is where you can improve the effectiveness and efficiency of production. But, by their action, the Government are endangering joint consultation. There has always been a section of workers—the same section who always try to create trouble within industry—who have objected to joint consultation, who have always opposed joint consultation in the trade union branches. Now the Chancellor has given added facility to the fellow who is trying to cause trouble and stop joint consultation. It is one of the easiest things to do. If the agitator cannot get a fellow to stop the job he can say to him, "Come out of joint consultation".

This is happening because of resentment of the fact that the Government have broken trade union agreements. Within the Government service it is happening. In the Post Office joint consultation is being withdrawn because of failure to implement awards. In my own industry, the railways, it is more difficult because the managerial side of local departmental committees and the rest are made up of employees as well. Where the managerial staff is disgruntled as well as the fellow on the shop floor, how can you expect harmony in discussions? The Government have in mind (I am not going to argue it now, because there will be other opportunities to do so) the reorganisation of the railways. They have given Dr. Beeching the job of doing that, and I believe they are going to bring in legislation to facilitate it. Dr. Beeching will not be able to carry out a reorganisation of the railways unless, through the whole of the joint consultative machinery, both sides are prepared to work to implement it. You have both sides represented in the joint consultative machinery except at the very top level; and where you have the managerial side representing the employer, and the various trade unions representing workers on the line, both disgruntled, then you will not get very far.

Apart from the noble Viscount who spoke before me and, of course, the noble Lord, Lord Mills, who intervened on behalf of the Government, every Member of this House who has spoken this afternoon has condemned the Government for their action in regard to the pay pause. I ask the Government to think twice, and to be as honest as the Chancellor of the Exchequer was in making his Leicester speech. If they have made a mistake, well, let them correct it. Now is the chance. Withdraw the pay pause. Let the trade unions and the employers in the private and the public sectors have their discussions and come to free and open decision arising from those discussions, and let the Government go back to their ordinary function of coming in only when there is a dispute.

7.12 p.m.

LORD ROCHESTER

My Lords, there are two reasons why I should like to speak for just a few minutes this evening: first, I work in industry in an occupation which gives me the best possible opportunity to observe the effects of the Government's economic policy on employers, on the one hand, and on trade unions, on the other; secondly, I. owe allegiance to no political Party, and in the controversial subject we are debating now I therefore have no political axe to grind. As one who is closely involved in industrial relations today, I am frankly appalled at the prospect before us. As I see it, on the one hand the Government have said that, in the public sector of industry at least, there shall be no increases in wages or salaries. Incidentally, there must be many firms whose current trading position is such that they need no advice from the Government to make them unwilling to grant those increases. On the other hand, the trade unions claim that the effect of the Government's policy has been to reduce the standard of living of their members, and that this is something which cannot be tolerated. I shall not perhaps be accused of exaggeration in saying that there seems to me to be a grave danger of widespread industrial strikes in the country within the next few months.

Nevertheless, I think that most patriotic, thinking people feel that the time has come to stop the process whereby wages and salaries are increased unless they are matched by corresponding improvements in productivity. But what many of these people also feel is that the sacrifices that the Government have called on the nation to bear are not being spread equally over all sections of the community. They hear that restraint has been called for in the distribution of dividends in the form only of a request, whereas, at least in the public sector of industry, there appears to have been a directive that wages should not be increased. They know, too, of concessions to surtax payers—promised, it is true, before there was a change in the weather, but not again referred to now that the storm is at its height. A much more reverend and distinguished Member of your Lordships' House than I is reported recently to have said: The trouble with politicians is that they are incapable of saying they are sorry". I would add that the rigidity of our Party system appears to be such that, too often, they dare not even recognise the other person's point of view. I have observed that this is less true of your Lordships' House than of another place, but it certainly does not help in trying to find common ground on which to solve our immediate problem.

It may seem paradoxical, but I believe that the divisions between us at the present time are not primarily those of economic or political doctrine. Indeed, at long last, to judge from what the noble Lord, Lord Mills, was telling us, there seems every reason to hope that the Government will gain the co-operation of both trade unions and employers in at least trying to plan a way out of our long-term difficulties. In my view, the qualities that are needed to solve our immediate problem are not intellectual at all. They are qualities of character: courage and, above all, leadership. I wonder if it is too much to ask the Government, in view of the magnitude of the dangers that are now confronting the State both from within and without, to practise a little more of this joint consultation which, as the noble Lord, Lord Lindgren, was just saying, we have in industry. That is something of the past; but I would express the hope that the advice which has been proferred to the Government from both sides of the House this afternoon should be taken in future, and that they should try to put the people a little more in the picture, to take them into their confidence, and to tell them a little more of what it is they have in mind.

At the same time, one wonders whether it might be possible for the Government to make some really imaginative gesture, designed to gain much more widespread support for their policies in the nation as a whole. Is it possible, for example, to say that the surtax concessions which were announced last spring will be postponed for a period of twelve months or so? This idea is not original to me. I first heard of it when it was mentioned by, I think, a Conservative Member of another place. Or would it be possible to accede, at least in principle, to the suggestion that the noble Lord, Lord Melchett, had the courage to canvass when he moved the humble Address last week—namely, that some form of restraint should be placed on dividends and other forms of profit realised in business? The point has been made again by the noble Lord, Lord Morrison of Lambeth, this afternoon, and I understood that the noble Lord, Lord Mills, in his interim reply to the debate, said that that view had his support.

But what I think some of us are looking for is a commitment on the part of the Government which is a good deal more definite than that. There will, no doubt, be difficulties involved in drafting the necessary legislation, but these difficulties did not stop the Government when they took the brave step recently of deciding to tax short-term capital gains; and, in my view, they should not stop them now. My Lords, in face of the danger from outside, we need at this moment, more than ever, economic stability at home, but as a democracy it is only in unity that we shall achieve it. If the Government are to get that unity, as I am sure they desire to do, it will be by giving a lead which all can follow. Once that lead has been given it will be for the Opposition and trade unions to show equal character, courage and leadership in persuading wage-earners to follow it. But I have enough faith in the British working man to feel that if he is then told clearly what is required of him and why, he will not let his country down.

7.21 p.m.

LORD SHEPHERD

My Lords, I would first apologise to the noble Lord, Lord Mills, because I was not in my place when he made his speech. Unfortunately, I was in a committee connected with the Kitchen. We are now at the end of ten years of Conservative Government and I wonder how historians will rate those ten years. I think, charitably, they will say that it was ten years of wasted, missed opportunities. As I see it, the world emerged from war, most countries prostrate with their exertions, and there was a golden opportunity for this country to organise its economy with some degree of a chance of overtaking some of the more powerful industrial countries. For a few years, perhaps because we were more advantageously placed, we made tremendous strides, but in the recent years many countries in Europe have now overtaken us or are in the course of overtaking us.

My Lords, why is that? There are some who say it is purely a question of labour costs; there are others who say that investment has not been rightly placed. I think the reason is possibly something of both, because if we look at the figures since 1913, we find that over the years the productivity of this country is less than that of many of the countries in Europe and the United States, and yet our investment rates are considerably higher compared with those countries. Therefore, I often ask myself whether the investment that we are now making is being channelled in the right directions. Is this valuable item, this investment, going into the manufacturing industries which will provide us with our overseas income, or is far too much going into services and luxury industries in this country? I believe that happens to be the case.

The Government may say that this really is not their responsibility. I think it is their responsibility. It is their responsibility on one point only, and that is the question of defence. At the present moment, there are many of us who are gravely worried about our overseas commitments and our ability to meet those commitments, and yet we are spending £1,600 million a year. I think that in the foreseeable future we shall have to continue that burden. We may well have to increase that burden. How, my Lords, is this to be paid for? The Government are to provide this defence; therefore, they have to find the means.

Over the years the balance of payments has been causing concern, because we are an industrial Power taking in raw material and producing manufactured goods; and since, I think, 50 per cent. of the food that we eat has to be imported, we have to ship overseas and earn more currency each year. My Lords, the figures are very poor. The noble Lord, Lord Mills, said that the Opposition had no evidence to produce to support their Amendment. May I remind him of the balance of payments position last year? The then current balance for the United Kingdom with all territories was a deficit of £339 million. It had changed since 1958 when it was £320 million, and since 1959 when it was £90 million. The trend was there. The Government, surely, must have known not only the way the trade, the imports and the exports, was going; they must have had a shrewd idea where the invisible balances were going, because we have depended over the years on the income from invisible assets and invisible earnings to balance our economy, and these invisibles continue to decrease very rapidly.

I think it is when we look at the balance of the United Kingdom with Europe or the non-sterling area that we see the disastrous trend. We had a deficit in 1960 of £670 million. That cannot last, that cannot continue; and yet during the period January-June, which I think provides the latest figure, the then current deficit between United Kingdom and the non-sterling area was £229 million. But I think that when one considers the stability of the pound sterling, which the Government are pledged to protect, one must take into account the trade of the Commonwealth with the non-sterling area, and there in 1960 there was another deficit of £579 million.

There are some noble Lords who say that this is not entirely the fault of the exporters; that it is because the Commonwealth are changing their trade. The Commonwealth trade rose between 1958 and 1960 by £550 million. Western Europe contributed £143 million and North America £334 million; and if the noble Lord, Lord Mills, wants evidence of our case, what was the expansion of British trade to the Commonwealth?—£19 million. Now it cannot simply be said that our prices were wrong and that our deliveries were wrong, because during that period we were able to raise our exports to Europe by something in the region of £301 million.

We have heard much about the Commonwealth, how close our ties are with the Commonwealth, particularly our friends in Australia. I was horrified to read the other day that, while some years ago this country provided 49 per cent. of their imports, last year it was only 31 per cent. Why is this? Are the Government to blame, or is it just something that is unfortunate? In my view, we look to the Government to guide us and to provide us with the direction in which the country should go. The Government are not a board of directors. They are the representatives of the people. If the Government fail to give the country the direction it needs, they are failing in their responsibility to their supporters.

My Lords, how far have we to go before we can say that we have turned the tide? A considerable effort will be needed, but it is not an effort that is beyond the ability of other countries in Europe. From January to June this year, Western Germany raised its exports by l2.5 per cent., as opposed to our rise of 1 per cent. If we could increase our exports by 12½ per cent., we should have a credit balance of £129 million. If we increased our productivity by one-half of 1 per cent., the earnings would be sufficient to pay the entire military expenditure of the country without any increase in taxation. And yet 2½ per cent. is the rate of growth of Germany. How is it that Germany can do it, yet Britain fails? Is it that we are decadent, ignorant and idle? Or is it that we have lost a sense of purpose and direction? I believe that we have; and the responsibility for that, in my view, rests directly upon the shoulders of the Government, for it is they who have created in ten years a society in which the rich and the strong may take it and the poorer sections must suffer.

We have heard a great deal about justice to civil servants who are being asked to accept a pay pause. I fully recognise, as I am sure do my noble friends on this side of the House, that wage costs in industry are becoming very high. It is not the fault of the worker, because wage costs depend upon productivity, the amount that is put out in the factory. Output also depends upon sales and on the man who goes out to sell. From my experience I feel that there are far too many companies in this country that are quite prepared to restrict production in order to maintain a profit margin. They are not prepared to buy the raw material for manufacture which is speculative because in the export market the margin is low. I have heard of this in a number of cases.

My Lords, we have got to make a very great effort. We have to get a real new spirit in industry. Management must—I will not say make its peace with the workers, but give the workers a real understanding, not only of the position of the industry but of the company in which they are employed. From the Government, we want them to show to the workers that there will be justice. If there is to be a wage pause, it cannot be just a few months after surtax payers have been given £80 million.

On that matter, I would make one point to the Government. It may be that they had a case to give incentives to what might be called the middle-class executive, the man in the £2,000 to £3,000 a year group. If my memory serves me correctly, the men who will enjoy the relief from surtax are not the £2,000 to £3,000 a year group, but the £5,000 to £6,000 a year group. Of those men who will enjoy relief from surtax, how many belong to the "top hat" insurance schemes in which their companies have voted them an increased salary, which they do not take and on which, therefore, they do not have to pay tax, but which they receive at the end of their service, a salary which is accumulating over the period meanwhile? I suspect that many, if not all, of those in that surtax group were in the "top hat" schemes.

My Lords, time is short. I beg the Government to realise that it is not only their own good name that is at stake. I beg them to realise that it is not only the standards of our people that are at stake, but that it is perhaps Europe, the part we play in defence and the part we play in the Commonwealth, that is at stake. Unless we can gear ourselves up and make ourselves dynamically strong, we shall become a second-class nation.

7.38 p.m.

LORD FERRIER

My Lords, it is relatively easy to criticise, as noble Lords opposite have done, and I have great sympathy with most of what the noble Lord, Lord Lucas of Chilworth, said. All parts of the House agree, however, or appear to agree, that we must export to live, and that we must export to earn the means to take our proper part in the world and pay for our defence expenditure. Is not the simple fact that the system of arbitration meant an almost automatic steady rise in wages, from which arose the spiral with its demand for higher wages, higher salaries and higher profits? This had to be stopped. My belief is that world competition is doing its share in controlling profits. The fact is that, by and large, profits on the year are down; and in most companies in which there has been a rise, the rate of rise has been stopped. Economic factors are imposing their own restraint upon profits. However, with here and there a stumble, the steps which the Government are taking lead, I believe, in the right direction.

Such stumbling as I see seems to me to arise from three factors: either not stepping firmly enough; perhaps missing a step, or, thirdly, taking a false step arising from glancing aside from the true Tory track. Where, in my belief, the Government are not stepping firmly enough is in failing to provide the incentive for which so many noble Lords have appealed, and to which the noble Lord, Lord Lucas of Chilworth, so emphatically pointed, the incentive towards leadership and towards enterprise in exports by means of taxation relief. In other words, I do not agree with the noble Lord, Lord Rochester, or with the noble Lord, Lord Shepherd, opposite, that the surtax relief should be paused. Indeed, if it were to be left at its present level, that would be a pause, because, in my view, originally it did not go far enough.

LORD SHEPHERD

Humph!

LORD FERRIER

The noble Lord says "Humph !", but the fact is, as the noble Lord, Lord Shepherd, was saying, many of the executive class in industry are not receiving enough, after their incomes have been taxed, to provide the incentive by which we should seek to encourage enterprise.

LORD SHEPHERD

My Lords, would the noble Lord agree that if a man is in the "top hat" scheme, that should also be taken into account?

LORD FERRIER

If the man was in the "top hat" scheme?

LORD SHEPHERD

Is in the "top hat" insurance scheme, of which I am sure the noble Lord is aware.

LORD FERRIER

My Lords, of course I am aware of it, but I do not see the point. I am talking of the young executive who has possibly not begun to think of the "top hat" scheme.

But I must confess to some disappointment that the Government have missed a step in the absence of any reference in the gracious Speech to decimal coinage. This was a disappointment, I feel, to many besides myself. However, I see that my noble friend Lord Fraser of Lansdale has a Question down for November 14, so perhaps we may get a statement fairly soon. My own view in this matter—and it is a subject which affects the economic position—is that no time should be lost. The change, after all, is inevitable, and the longer it is deferred the greater will be the cost. The ultimate savings will be enormous; we cannot get away from that. Further, I believe it is important that it should be introduced, but in such a way that it is kept quite distinct from the forthcoming negotiations regarding the Common Market. Because we do not want controversy which is not intrinsic to the basic problem to cloud the issue. I support what the noble Lord, Lord Brocket, had to say, and I am particularly glad that he ranged so far from the fairly narrow path which we have been following in this debate and from which I also propose to range a little. But I would express my entire agreement with what he said: that, after all, all of us wish for prosperity for this country, and we are all striving toward that end.

I will now turn to the suggestion of a capital gains tax, to which some noble Lords have referred. A draft measure, of course, is not available, though it is promised. But I implore the Government to reconsider the whole matter. If some touchstone is required in regard to negotiations over the wage pause, I have another suggestion to make. I speak with some experience in this matter, though, of course, experience in another country, because a firm in which I was a partner became involved in a capital gains tax assessment on a transaction which took place in 1948. My Lords, it is not settled yet. The years rolled by; partners have died and been replaced by executors; the cost to the Government concerned, as well as to the assessees, has been heavy. I cite this only to illustrate that a capital gains tax, no matter how carefully drafted, is very hard to administer. Further, by virtue of the cost of its administration and of the complications which may arise from it, the revenue from it falls far short of what it appears to be at first sight.

My Lords, a capital gains tax can trap the innocent. What about trustees? What about executors, and similar persons who may be faced with forced sales of an urgent nature? It adds to the inhibitions which taxation already imposes upon the simplest business transaction. It can prove to be a tax on inflation, though, of course, the one-year period—if that is the period which is contemplated—may avoid much of the inflation angle. That period is twice the period which the United States of America fix. Cannot more powers, existing powers under the Finance Act, be used to tax income of an unusual nature? I was talking the other day with a friend in the North who was strongly of this opinion. He is an experienced man, and he believes that powers exist which could be used more powerfully under the Finance Act. Then, how are losses to be offset against gains? It is a very complex and a most provocative matter. I am no speculator—indeed, I do not approve of speculation, though, of course, it is only human to have a sneaking respect for those who do it successfully. As I say, that would only be human.

Now we come to one of the problems of any stock exchange—namely, the stag. One must remember that the stag appears only in a period of inflation. Stagging is no sin, but it is most undesirable, especiall when large gains are made which are untaxed. These stags must be stopped and brought to book. But surely, besides the political counter, it is revenue which is sought; and trusting that this is so I have the following constructive suggestion to make as an alternative Ito a capital gains tax. This is a proposal which is simple to legislate for, it is easy to administer, and it is consequentially, in my belief, potentially more remunerative than a capital gains tax. It is this: to remove the 2 per cent. stamp duty on transfers, and to substitute therefor a 2 per cent. tax on all contracts. This comparatively simple—I repeat, comparatively simple—measure would bring down the stags, or most of them. It would take a levy on the full measure of dealings. It may be objectionable to the Stock Exchange, but it is not so objectionable as a capital gains tax. It would, in my view, not inhibit real investment, as I believe a capital gains tax would. One can speak only from intelligent anticipation of the terms the Government may have in mind, but if our information is right, then the proposed measure for taxing capital gains would, I to use a slang phrase, inevitably "gum up" the market.

The noble Viscount who is to reply may say that the suggestion has been considered and rejected; but, if it has not, I urge the Government to give it close study, bearing in mind the complexity of a capital gains tax and the staffing and the administration of its operation, and bearing in mind also the fact that, rightly or wrongly, a capital gains tax may be regarded by some as oppressive, certainly on occasions, with consequent litigation, disputes, suits, prosecutions, and the like. These all cost money in terms of time; it is a great loss to the nation's productivity, a loss which already arises from the hours and hours of time which would otherwise be spent in productive work which people, not only businessmen, have to give to-day to the avoidance of tax. After all, no director, no trustee, no administrator, no property owner, no salary or wage-earner, is worth his salt if he does not keep a wary eye on his tax position. And, talking of wasted hours, how many millions of man and woman hours are spent weekly in playing the pools? Would it not be equitable to have a rising scale of taxation chargeable to winners of big dividends on the pools—or am I allowing a measure of "sour grapes" to creep into my thoughts?

I would emphasise that I am not saying that large gains on quick transactions should go untaxed. But I am urging a more practical method of taxing such gains than that which we believe is proposed. I would say that a capital gains tax in the form visualised is objectionable. And once a system of this sort is established we may never get rid of it, on the ground of political sentiment, no matter how impracticable the use of it may prove to be.

Turning to another subject, despite what the noble Lord, Lord Shepherd, said and other noble Lords have hinted, I believe that management as a whole in this country is fully alert to the dangers which surround them and industry. Our management is, by and large, efficient; but, as I said earlier in my speech, we must remember that the income of the middle-level manager, the well-paid representative overseas and the like, after tax, is not sufficient, certainly in my view, to provide the necessary incentive for the real enterprise which the country needs in order to gain the way that the country demands in the export market. I propose to vote against this Amendment, for. I believe that it is only when people are doing something that they make mistakes, and if the Government have made mistakes, at least they are doing something; and most mistakes can be rectified.

7.52 p.m.

LORD WALSTON

My Lords, I hope that it will not be long before the Government take in what the noble Lord, Lord Ferrier, has just said about rectifying their mistakes. They have had ten years for that rectification to take place. I think that all of us have little criticism of the short-term methods which the Government have adopted to meet this latest crisis in our financial and economic affairs—namely, the raising of the bank rate. Unfortunately, it was an essential thing to do. Things having got to that pass, and with the country entering upon the period of abnormal strain upon sterling, with many heavy imports to be paid for, there was nothing to do except to attract into this country more short-term money. That could be done only by raising interest rates, so that the foreign depositor found that he could grow somewhat richer by sending his money into England instead of sending it to Frankfurt, Basle or New York. That has worked. We have got the money into this country—in fact, we have got rather too much money into this country at this stage by those means.

We must remember that the use of such means is a highly expensive method, not only in general terms but also in terms of foreign exchange, because we have to pay out a far higher percentage in interest rates to foreigners who deposit their money than we do with the lower bank rate. That is perfectly simple common sense. It is not something which we can enjoy doing and which we can allow to happen for any length of time. That is why, on these reasons alone, disregarding everything else for the moment, the Government are perfectly right to respond to the needs of this immediate crisis of foreign exchange by introducing a lower bank rate and trying to force out same of this foreign money into other places. Unfortunately, doing this gives the impression to people in this country that the crisis is now over and that there is no need for any of these further actions. I hope that when the noble and learned Viscount the Leader of the House replies to this debate he will tell us a little more about the Government's further ideas about this crisis. How long do they think it is going on?

The feeling is getting around, partly because of the lowering of the bank rate and partly because of certain statements that have been made about wage increases in the spring, that by April 1, or some such time, we shall be out of the wood and able to return to normal. I hope that that is so, but I very much doubt it. I think it would be disastrous if the country, particularly those who have put in wage claims, took it for granted that, when the sun returns and the cowslips bloom again clear skies will follow and the wage pause will evaporate. I hope that on this occasion we shall be told definitely whether the Government confidently expect that this will be so or whether they do not.

The noble Lord, Lord Mills, patted himself and his colleagues on the back for the great increase in the standard of living that has taken place in the past ten years. Surely in ten years any reasonable country would expect to have some increase in the standard of living, and we should have thought it only natural that it had taken place. But what is disturbing to some of us is that some of this increase has been brought about by mortgaging the future. We have been buying our prosperity on hire-purchase. And on that we have to keep up the weekly or annual payments. Sometimes, when times get hard, that becomes difficult. Because we have pledged so much of our future to this increased prosperity, we are now finding that the birds are coming home to roost, and it is not so comfortable.

What is more important than this immediate short-term problem, which has been to a certain extent overcome—though we do not know if it will recur in nine months' or twelve months' time—is what are the Government's longterm plans for avoiding these constantly recurring crises which come back once every two or three years. I think that all noble Lords who have spoken to-day have agreed that the answer to this must be increased production and exports. That is self-evident. That is what has been said in the gracious Speech; and, with that, of course, none of us has any quarrel. But, as my noble friend Lord Latham said, it is not enough simply to say that this is what we want. How is it going to be achieved?

Let me remind your Lordships, as other noble Lords have done, that the Government have had ten years in which to solve this problem. Are they coming out now with some new "secret weapon" which they will not disclose to us? Have they some newly found solution to this problem, or are we to be given once again the old recipes? So far, in the gracious Speech and in other pronouncements we have had no indication of what the answer is. So far, the only suggestions seems to be that we should have a wages pause.

It is perfectly true that wages are a big factor in our production costs if we are to compete abroad. We must not allow our production costs to rise, and, therefore, to some extent it is sound and reasonable to say that wages must be kept stable. But wages are not the only factor in the general cost of living. It is the cost of living, in effect, which determines wages. There are many other factors. House rents are a significant factor, particularly for lower-paid workers. Rents takes up 20, 25 or even 30 per cent. of their weekly earnings, 30 per cent. of their weekly wages. And what are the Government doing about housing? They believe to a large extent in the law of supply and demand, from which it follows that, if they are to re- duce the cost of housing, there must be more houses. Conversely, if the number of houses does not increase sufficiently to meet the demand, prices must rise. That is precisely what has happened, particularly since most forms of restriction have now been removed. At the same time, a large factor in the cost of housing is the cost of land. There is no need for me to remind your Lordships of what is happening to the cost of land, and how it is due to the deliberate and thought-out plans of the Government.

I think the point must be made clear that we cannot solve our economic problems in this country simply by saying: "Let us keep wages level and everything else will follow from that". We want to keep wages level and do not want to let them spiral right up thereby pushing up the price of everything. But if we are to do it sensibly we must at the same time look at other factors which cause inflationary pressures.

I was very much impressed by all that my noble friend Lord Citrine said in his speech. He spoke of the present lack of confidence in the Government's policy among trade unionists and among workers, and also of the essential need that there should be confidence if any successful policy is to be worked out in this country to-day. He went so far as to say—and it was a courageous thing for him to say—that in his view wage restraint was a good thing. That is something which we should take note of and and welcome. My noble friend then went on to make a few remarks about a national wages policy. I know that there are difficulties here, and it is not a simple matter by any means. I do not know how many of your Lordships read a letter in The Times a few days ago written by Professor Kahn of Cambridge, already referred to by the noble Lord, Lord Brand, in which he suggested that perhaps the Chancellor of the Exchequer had not entirely understood the full implications of a national wages policy. It seemed to me to be quite clearly expressed and I hope that it was read by the Chancellor and by other members of the Government.

My noble friend Lord Citrine went on to talk of the National Economic Development Council or the Economic Planning Board, which has been mentioned also by my noble friend Lord Morrison of Lambeth. There has been a lot of talk about this, but none of us, I think, is very clear as to just what is hoped to be achieved by it. One thing of which I am quite certain is that, however desirable such a council may be, it cannot in any sense undertake the responsibilities which must ultimately lie with the Government and specifically with the Chancellor of the Exchequer. It cannot be an executive body. It can be an advisory body and, if it is of sufficient standing, a body whose advice will be listened to and frequently acted upon. But it would be a complete abandonment of all that we understand by democracy if the Chancellor of the Exchequer were to abrogate his own responsibilities and put them on to a National Planning Council. He must remain the Minister responsible, and the Government must remain the responsible body for the economic policy of the Government.

But I believe that the Economic Planning Council (or whatever name it may be given), if it is properly constituted and has the confidence of the vast majority of the people in the country who will be affected by its decisions, can do an invaluable job, particularly in the matter of a national wages policy, not only in deciding on the total amount of wage increase which is permissible in the interests of the country, but also in advising on the rough allocation as between industries and groups on the basis of need, and on recruitment value to the community, or whatever criteria may be set up, and in advising the Government as to the best means of implementing this national wages policy.

But there is no point in having a national wages policy which affects only the weekly wage earner while allowing salaries and dividends to go completely free, because wages are not by any means the only factor in our total cost of production, and certainly it would be grossly unfair to have Government action which was regulating and restricting the one while allowing the others to pursue any rises, inflationary or otherwise, that they might see fit to obtain. Therefore, at the same time as it brings in anything suggestive of a national wages policy it must be made very clear indeed that the whole economy is to be subjected to the same form of planning and the same form of control.

I am not suggesting for a moment that one should have another council to decide the level of salaries of company directors or the level of dividends that companies can pay out; that is manifestly impossible. But we have the simple fiscal weapon of taxation, and in order to gain the confidence and the acceptance of this policy by the unions and the weekly wage earner it should be made quite clear that this weapon will be used relentlessly in order to keep salaries and dividends in line with the wages which are recommended by the National Planning Council.

On this subject I think it is worth reminding your Lordships of what has happened in the last ten years, during which we have had a Conservative Government, in the matter of wages, salaries and dividends. We have been talking, and many people have been writing, as if wages were the only thing that had got out of hand and were the cause of this inflationary pressure, high costs and our inability to export. But if your Lordships refer to this document of the Central Statistical Office on National Economy and Expenditure for 1961, where the figures from 1950 to 1960 are given, you will see that wages as defined by the Central Statistical Office rose during those ten years by some 87 per cent., whereas salaries rose by 117 per cent. In parenthesis, I might say that farmers' incomes rose by only a meagre 38 per cent. during that same period. To come to dividend payments during that same ten years, they rose by 142 per cent.

So your Lordships will see that the greatest rise that has taken place on a percentage basis has not been that of the weekly wage earners but that of the receivers of dividends; that the second greatest rise has been for the recipients of salaries; and the lowest rise, apart from the farmers, has been that of the weekly wage earners. We have now come to the stage where salaries, instead of being about 50 per cent. of the cost of wages, as they were in 1950, are 60 per cent. of that cost. So, if we attempt (as I hope we shall) to plan and regulate our wages, it is important that we should not ignore salaries or dividends in the whole question of the distribution of the economic resources of the country.

While I am on this question of dividends and company profits, perhaps may save the noble Lord, Lord Mills, the trouble of writing a letter to my noble Leader in answer to the question that my noble Leader put to him. As your Lordships will remember, my noble Leader asked the noble Lord, Lord Mills, if it was true that company profits had been declining during the past twelve months. If you refresh your memories with the Economist of July 15, you will find that the figures for the second quarter of this year are there given. It is there written that the gross trading profits of the 892 companies analysed in the second quarter of the year rose by 6¾ per cent. So during the second quarter of the year company profits were still rising, and in fact rose by 6¾ per cent. over those of the previous period. If you turn to the Economist of October 14 dealing with the third quarter of the year, you will see that the combined trading profits of the companies referred to have risen by £29 million, a rise of 7¼ per cent. So, in fact, in spite of wage restraint, in spite of all the exhortations of the Government—not that Government exhortations can have any effect on companies' profits—it is quite clear that companies' profits are still rising. Perhaps they are not rising as fast as they have done, but so long as they are rising it is extremely difficult to enforce anything like an effective wage pause.

In parenthesis, it seems to me a rather peculiar state of affairs that a Government spokesman should appear to be almost anxious to say that company profits have not risen in any period of time. It surely is to the credit of the Government, and to the benefit of the country, that company profits should continue to rise. But so long as they do continue to rise, it is very hard to maintain that wages should not rise also.

LORD MELCHETT

My Lords, may I say, before the noble Lord leaves that point of company profits, that there seems to be some confusion on this point this afternoon. My right honourable friend the Chancellor of the Exchequer on October 23 in another place, during the debate on wages and salaries, gave the Treasury figures on this point. Speaking of the first half of this year, he said [OFFICIAL REPORT, Commons, Vol. 646 (No. 167), col. 627]: Gross trading profits of companies—that is, profits before providing for depreciation—were £1,695 million in the first half of 1961 compared with £1,833 million in the first half of 1960. That shows a fall of about 7 per cent. I think the noble Lord was quoting the figures of a certain number of specific companies selected by the Economist, but I believe the overall figures have in fact shown this 7 per cent. fall during the first half of this year.

VISCOUNT ALEXANDER OF HILLSBOROUGH

My Lords, if I could intervene in this little discussion, perhaps I could give the best figures I have. These are from the Financial Times of October 16. It says that the analysis of profits of 2,136 companies published by the Financial Times records a grand total of £2,603,777,000, compared with £2,399,868,000, for the nine months to the end of September. Although there may have to be some adjustments outside that very large number of companies which are the principal ones reported in the Financial Times, I must say this seems to prove the case my noble friend Lord Latham was putting.

LORD WALSTON

My Lords, possibly I have not saved the noble Lord, Lord Mills, his letter after all. Perhaps it will have to be a rather longer letter, and possibly there should be a letter from the Chancellor of the Exchequer to the Economist or from the Economist to the Chancellor to settle this point. All I can say is that I hope that company profits have not fallen, because I think it would be a disastrous indictment of the Government's economic policy if in fact that were true. It seems to me to be rather an Alice in Wonderland world where noble Lords on the Government side are trying to make out the company profits are lower, and where the Opposition is trying to make out that the economic state of the country is more prosperous than it really is.

Be that as it may, let us come back to what is really the most important fact in this matter. Here may I remind your Lordships of the words of our old friend Lord Pethick-Lawrence in the last debate on this subject in July. He emphasised the need for justice and "fair do's". If we are going to achieve anything like a planned society, a planned economy and a planned output, and use our national resources (and we are delighted to learn now that noble Lords opposite are coming round to believe that some form of planning is necessary in order to achieve this), we can do so only by making quite certain that the antagonism between the two different sides of industry is once and for all abolished, and that people realise, whether they are on the factory floor, in the managing director's office, sitting in banks or wherever they may be, that they are working for the same ends and to the same purpose. The great tragedy of these last six months is that the action of the present Government has made any hope of that fact getting home far more remote than it was before.

I do not want to labour this point, but let me repeat just once more that you cannot say to the weekly wage earner, "You are to have a wage pause" or to the school-teacher or the civil servant, "You must not have any more money", and at the same time—and I will not repeat them—take all these other actions that the Government have taken which in effect make those who are above that income level still richer. You are not getting that feeling of justice; you are not getting that confidence, as my noble friend Lord Citrine said earlier on. And we must get that confidence and that feeling of co-operation. The longer we wait, the harder it is to achieve it. But it can still be achieved, even by this present Government. I would suggest that the three things they must do rapidly and in a clear-cut manner, with no "ifs" and "buts", if they are to obtain this result, are: first, see that land speculation is curbed—inflated land prices must not be allowed to continue; secondly, in whatever form it is introduced, even if it is not economically or fiscally sound, but for psychological reasons if for no other, introduce a capital gains tax so that people do not get rich in one form which is denied to many other people; and thirdly, postpone the surtax reliefs announced in the last Budget until the wage pause is lifted.

I believe that, if those three things are done, the Government will at last have the support of the whole country in this effort of getting the country's economy once again on its feet. There will be no more recriminations about the ten wasted years; there will be no more saying, "You never bad it so good", and the rest of it. We shall at last believe, even on this side, that there are in charge of the destinies of this country a Government who are prepared to work for justice and who believe in "fair do's". When we have that, we shall then get the economy of the country going ahead; but until we have that, we shall never do it.

LORD FERRIER

My Lords, before the noble Lord sits down, may I make three points arising out of his speech? One is with regard to gross profits. Surely they are bound to increase as investment increases. The noble Lord referred to dividends and surtax. It is true, of course, that dividends are taxed in the hands of the receiver as unearned income, and I think I am right in saying that at the time the surtax relief was granted the profits tax was increased.

8.20 p.m.

LORD BRAND

My Lords, I should like to make a very few remarks, as the noble Lord, Lord Citrine, and I had a certain discussion for a few minutes this afternoon. He referred to an O.E.E.C. book called The Problem of Rising Prices. published some months ago. It is 500 pages long, deals with all the European countries and is the final judgment of four out of six professors to whom I referred, and I should like to read a short piece. I quote: We are fully aware that the idea of a wages policy runs counter to the traditional view of how collective bargaining should be conducted and of the role of the government in wage determination. In some countries it may take some time before public opinion can be brought to see the need for such a policy. In our opinion, however, the traditional view no longer conforms to present day realities, hence a deliberate policy towards wages offers the best, perhaps the only, means of securing an appropriate behaviour of wages where wage-push is a serious threat to the attainment of other basic objectives. I am not, I think, being a schoolmaster in referring your Lordships also to an admirable article in a magazine that I have something to do with, The Round Table. You will find the article in the last number, a quite admirable article, with which I had nothing to do, on this question of wages and inflation.

My Lords, our great danger is more and more inflation. Nobody can deny that prices are now rising rapidly. Certainly I know it. I have had a little to do with building in the country recently, and the prices stagger one, when one sees them. I cannot believe that the building industry is not very fully occupied, even if fewer houses are being built. Anyhow, prices are rising rapidly. Why are we suffering from this inflation? It is a combination, I think, of full employment and the almost yearly rise in wages, the rise being disproportionate to production. This custom, I think, did not prevail before the Welfare State came into being. Now, as prices rise, naturally the worker assumes that he ought to get more wages; and next year, as prices have risen more, he will assume that he ought to get more wages still. And so it goes on, year after year. I have seen a lot of inflation in certain other countries, in Germany and in France, and the results are apt finally to be disastrous. Ask the German workman how he liked the two inflations that he has had to go through since the First World War and you will learn the answer.

But it is not only that inflation is growing more and more, but that we are not now anywhere near paying our way. Last year, I think one of your Lordships stated that we were short on our balance of payments by £345 million. We are supposed to be the great lender to the rest of the world, and I think that a great many of the Party of noble Lords opposite consider it our duty to lend to African countries, to Cyprus and to all the countries in the British Commonwealth. But we have nothing to lend them. We are short of money. We have to borrow from other people. We have just had to borrow £500 million from the International Monetary Fund; and therefore we, who are so great a debtor, cannot possibly assume the role of the lender of capital to the rest of the world. How we are paying now for the United Nations' dealings in the Congo I am not sure.

It is because our consumption is greater than our production that our situation grows worse; and for that reason inflation will increase. I fully understand the difficulty of explaining to the ordinary man what the balance of payments means. If you were to ask a million of the ordinary workmen it is likely that you would find very few who knew. What the ordinary man does know is that prices have risen, and he wants more money; and as prices rise next year he will want more money again. Mistakes may have been made by the Government in their strategy, but I think they can be remedied. Of course dividends and salaries are involved in such a scheme, but I believe that people overlook the fact that sometimes profits decrease, and that the owner of shares cannot say he wants more money because his company has done badly. He has to stand the loss. In that way dividends are quite different from salaries and wages. Moreover, it is inflation itself which produces the big profits and the big profiteers. No doubt dividends and profits have gone up. We are in a period of inflation, and in a period of inflation, they go up and up; but ultimately, of course, the whole structure crashes.

However, I gather from this debate that a great deal of unanimity exists on both sides of the House, and I should like to say that I personally agree with almost every word uttered by the noble Lords, Lord Morrison of Lambeth and Lord Citrine.

8.28 p.m.

VISCOUNT ALEXANDER OF HILLSBOROUGH

My Lords, we have come now almost to what we call in sport the penultimate round of the debate, and the noble Viscount will be winding it up in its final stage. I think we have had a very good debate to-day and I want to say at the outset how much I am indebted to my noble friends who have addressed the House from our point of view and who, I think, have been quite fair and just and have put the case, as we see it, adequately before the House. The speech of the noble Lord, Lord Mills—I do not see him here; is he coming in?

VISCOUNT HAILSHAM

I hope so.

VISCOUNT ALEXANDER OF HILLSBOROUGH

Perhaps I will leave it for a moment and turn to one or two other points.

What I took a special note of, in the course of the earlier speeches, was the fastening by the noble Lord, Lord Morrison of Lambeth, on the point of the lack of leadership in this Parliament and in previous Parliaments which have also had a Conservative Government. I think that that is brought out perhaps even better when you find the kind of contrast that was pictured in the Sunday Express on Sunday by one who is certainly not a Labour supporter and I think, on the whole, probably belongs to as long a Conservative tradition as anybody, Lord Hinchingbrooke. I noted this comment particularly: The present Conservative Government is the weakest from which Britain has suffered since the collapse of Mr. Balfour in 1905. There is no spirit of determination to be found on any front except that of massive bribery of the electorate. I think I can say to my noble friend Lord Morrison of Lambeth that he must have a complete supporter, in the person of Viscount Hinchingbrooke, for his charge of lack of leadership.

I come to the end of that sentence of that noble Lord in the other place. The "massive bribery of the electorate" used always to be the charge of Toryism against Socialism; that was always the case. But a large part of the economic troubles of the Government to-day stem directly from the massive bribery of the electorate by the Conservative Party, who were so anxious to get back into power and were also anxious at every subsequent Election to go on sticking to office like limpets, as was once said in the other place. How did they do it? First of all, in their appeal to the country in 1950 and in 1951 they took no notice of all the economic troubles which the noble Lord, Lord Brand, put to the House to-night, in spite of the fact that we had a £30,000 million debt and that we happen to be, I suppose, the only major partner in the war which really goes on paying its international debts, compared to some of the others who are now boosted as wonderful, marvellous, but who never sought to meet the debts we have met and who comprise the European Economic Community.

And what happened? What happened was this: they offered the people what they called freedom from the effective controls that were already on the community, which was burdened not only with keeping the promises of all the Parties of the establishment of the Welfare State but also burdened with the two factors, first of the extension of the military programme in support of the North Atlantic Treaty Organisation and secondly of intervention, in the middle of all that, in the war in Korea. You could not possibly justify coming in, taking off controls and introducing economic behaviour in the nation which was on the basis of a "free for all". There lies the responsibility of the Government.

And in each subsequent election that they have held what have they done? They have, first of all, brought in a Budget which distributed tremendous largesse to the electorate, and when they were returned each time they came back to meet a new financial crisis. On each occasion the main policy that they have adopted in dealing with it was not to restore more direct taxation on those who have unearned or very high earned incomes, but, on the contrary, to raise money again by indirect taxation, raising the cost of living of the common people and therefore being responsible for the demand for increased wages, thus raising the costs of production all the time, and perhaps thereby (it may be true or it may not be true, if it is measured very minutely) this has meant there has been a wage income out of proportion to the volume of production. If there is anybody responsible for that in the last ten years, there they sit on the Benches opposite, and it is entirely due to their economic policy that those conditions obtain to-day. There is no doubt whatsoever about it.

If one looks at what are almost the adventures of the Chancellor of the Exchequer, Mr. Selwyn Lloyd, one wonders exactly how it has come about and where he is going. I am not going to join in the earlier remarks about whether or not he made a statement that he at least had a share in the blame himself. That is quite fair. I do not think he said anything very much out of place in that particular speech that has been quoted, and I do not want to dwell upon it. But what we do know is that he has shaken to the roots the ordinary trade unionists in the country in the procedure which has been adopted with regard to the proposed wage pause on the one hand and the lack of consultation in regard to this new proposal for setting up an economic planning board.

As regards the wage pause, it was stated in detail in the other place nearly three weeks ago what a disgraceful situation that presents. I know it can be argued that any reigning Government responsible for the general position of its nation ought to have the final say upon the general economic policy. But when it comes to challenging the actual results of the tribunals set up after years and years of organisation, both for public servants and, through industrial wages councils and the like, for ordinary industry, and then to come forward with proposals of this kind for a wage pause and to say, "We set the example at once by interfering in the independent tribunal award for teachers; we interfere by suspending the award with regard to public servants, such as servants of the Admiralty and certain classes of civil servants, and we expect the rest of industry in the country to follow," that is not the kind of thing that the most progressive minds in the Conservative Party ever thought they would have to agree to—not by any means.

I am going back to a quotation from Mr. Butler when he was Minister of Education and talking to people concerned on the other side of these arbitration meetings, arrangements and regulations. I just take one short extract, but if any noble Lord wants to read the rest of it he will find it at Columns 611–2 of Volume 646 (No. 167) of the House of Commons Hansard of October 23, where he is quoted as saying: You would be making an even greater mistake than the Government if you were to regard it as any part of the general duties of a Government to regulate the conditions and rewards of those who serve in any non-State regulated branch of our national life. I, personally, should very much regret it, and it would go right against the grain of some of my most fundamental ideas. No wonder that many on the Labour Benches in the other place said, "We want 'Rab'". There is no need for any further explanation when you see the different view of this divided Cabinet at the present time on these fundamental matters relating to the social consequences of economic policy of this kind.

Take, for example, the repetition this afternoon—I still do not see the noble Lords, Lords Mills, here, and I do not like to refer to him when he is not here, but I will. How has this crisis we are going through now arisen? In 1959 we had "never had it so good". If there is anything at all in what the Chancellor of the Exchequer has now put before us, if the steps now proposed by the Government were the right ones, they ought to have been proposed in the middle of 1960, after proper consultation. Now it is expected that the Trades Union Congress is just, as it were, to come to heel to follow these dishonest and, from the point of view of the law as it stood, illegal measures against the awards of independent bodies set up under well-known legal practice. If you take the question beyond the wage points which the noble Lord, Lord Brand, has mentioned, you then come to the comparison (which would have been better put by him, if I may say so) that is now so often used, I must confess, by Ministers as well as others, not on the basis of wages but upon personal incomes all round. I am quite sure that the noble Lord, Lord Brand, will not mind looking at it from that point of view.

I want to support my last point by saying that of course they ought to have introduced their measures in 1960 if necessary, because it is quite clear from the Return that whereas wages went up by 8 per cent. in the particular twelve months, personal incomes from other sources went up by 13 per cent. in the same period. What proposals were made by the Government to deal with that? They gave a promise that in another twelve months £83 million would be made available for the relief of the surtax payer. What sort of opening gambit do you make with the Trades Union Congress in such circumstances? I shall wait to hear the answer, because although the noble Viscount, Lord Hailsham, and we often quarrel on politics, when it comes down to dealing with moral and human values over and over again I have found that he is much nearer to us than he is to other people.

To take the point that was made by the noble Lord, Lord Mills, I especially want to refer to his speaking of there being two problems: first, the pressure of the home demand on resources; and, second, the pressure from earnings of all kinds. Who is responsible for the pressure of earnings of all kinds? I think I have proved my case on that. I would go through with anybody, and debate stage by stage, all the ten years of political history of complete Tory majority and prove my case. I would not fear any tribunal.

The other point put as a problem by the noble Lord, Lord Mills, was pressure of the home demand on our resources. Who is responsible for that? I remember the speeches reported in the different shades of the Press at the 1950 Election, as well as at the following Election of 1951, about the iniquitous Socialist controls. Set the people free! They spoke of "this dreadful rationing for the people five years after a war." There was no regard there for how you were ultimately going to deal with the immediate needs of the Welfare State to which you had all agreed, and at the same time meet not only the proper amortisation of the debt with which much progress has never been made, but also the interest we had to pay on our own internal national debt, and meet the debts that we had to pay for obtaining what we needed to carry on in a bankrupt State in 1945. "So," said the Tories, "take off the controls. Set the people free!"

When the Tories were returned in 1951 they said, "Things are even worse than we expected. The situation is getting worse." What did they do? At the Election they had promised to bring freedom, to abolish rationing, to give the people more of this and more of the other—everything that they wanted. Within three years there were groups of them, some of them Parliamentarians in both Houses, supporting that well propagated proposition for an independent television channel which was to be financed by the advertisers. So since then you have had nothing but constant pressure salesmanship. Unfortunately, they knew the human mind better than I did, because they seem to get away with the most kindergarten type of advertisements. What is the result of that? You talk about incomes going up. I wonder whether we can analyse the financial position of all those who were in that pressure for I.T.V. programmes which the noble Viscount, to his honour, opposed on principle during the whole passage of the Bill through this House; he foretold some of the things that were likely to happen.

I ask your Lordships to draw a comparison. The noble Lord, Lord Mills, was quite right to-day to stand up for the shipbuilding and shipping industry. I find it convenient to say that because I want to make a comparison. The shipyards of the Clyde, the Tyne, the Tees and of Belfast do not make as much profit as does commercial T.V., the pressure salesman group which is making the particular problem that the noble Lord, Lord Mills, put to us: too much pressure by the home market upon our resources. The shipping industry does not make so much profit as does commercial T.V. Commercial T.V. is a new type of enterprise upon which the Government have conferred great rights. The total profit of ten of Britain's commercial T.V. companies is £26,400,000. It is a figure impressive by any standards. It is startling when it is the easy money made by the T.V. tycoons from a monopoly of exploitation which the Government have bestowed upon them. It can be compared with the £22 million earned by the big firms in the shipbuilding industry. But that industry provides employment for 220,000 men and sustenance for their families. You have something to answer for! We are perfectly entitled to put down our Amendment to-day, and to say that you have no economic policy which is likely to get us out of our troubles.

With regard to the actual outlook for trade at the present time, my noble friend Lord Latham, in his excellent speech to-day, made some reference to a comparison. I just want to point to some of the figures, because these are the results of an inquiry by the Federation of British Industries. I understand that noble Lords opposite will always be prepared to raise their hats to the integrity and success of their records. Here is the present position compared with four months ago, as compiled by the Federation of British Industries. Referring to order books, it says that those that are up numbered 28 in June; in October the number was only 17. Those that were the same were 37 in June, and in October the number was 36. Those order books that were down were 23 in June, and in October, 35. There were twelve not available. That is a pretty bleak picture.

The noble Lord, Lord Mills, said this afternoon that the effects of the Chancellor's action were already bringing great results. As I said then to one of my colleagues on the Front Bench here, of course, we never expected anything else with regard to the position of sterling as a result of a 7 per cent. bank rate, although I do not remember (I may be wrong) any similar circumstances in which the Government had also to go outside to borrow £700 million to do it. Because "hot" money will always come like that. It can be just as dangerous for this country when it chooses to leave; and it can choose, because it is independent. It is short money; it is international; it can leave when it likes. The, Government have succeeded in getting some stability for the time being. I think that is what the noble Lord, Lord Mills, had in mind when he said, "It gives us a breathing space." I said to my colleagues here, "Just listen; there is not a thing in this argument that deals with the balance of payments"—and that is what finally affects you—"not a thing". Was there anything in the noble Lord's mind by which he could show that the measures proposed by the Chancellor of the Exchequer were going to be efficacious in dealing with the problem of balance of payments? I could find nothing at all there. So I say again that I can find nothing in the Government's policy.

There is another point that the noble Lord, Lord Mills, made. He said, "Export goods must be competitive". How? I do not think he told us. How does he want them made competitive? I have here a whole list of notes that have come partly from the Report of the Board of Trade. I do not want to trouble your Lordships with them tonight—it is too late—but I could show you many ways in which the efficiency of industry could be very greatly improved by those who control the management of industry. Or is it really what lay behind the remark of the noble Lord, Lord Brand, when he referred to unemployment? What is the real objective of the Government in pressing to go into the Common Market? It is in the hope that this will bring the only way of deflating the economies of Europe in such a way that they will secure control of the economic and the political lives of the ordinary people of the country. In the case of this country, it is really because the Government can find no other hole to go to at the moment, after ten years of Tory financial failure. They think there is in that direction a means of rescuing the position.

That certainly seemed to be the opinion of the gentleman whom I quoted last week, speaking on behalf of General de Gaulle's French Pan-European Union committee. Look them up: I will not repeat his words. He said, "You had your chance to go in early, and you are going in now only because you have a sick economy." There were merits in going in back at that time; perhaps there are less merits in going in at the present time. I look at the representatives of the Tory Government, and when I recall such a remark as was made this afternoon, to the effect that somebody on the other side was sorry for my noble friend Lord Latham, speaking from this side, all I can say is that I am very sorry for the Government. They are in a dreadful mess, and they have not yet got the sense to see it or to get out in time.

8.55 p.m.

VISCOUNT HAILSHAM

My Lords, at this somewhat advanced hour the House is, of course, torn between a desire to bring matters to a conclusion and the equal and opposite desire to see that the speaker for the Government does not scamp his work. The speaker for the Government is equally torn between a tendency to prolixity and a tendency to superficiality; and I have no doubt that noble Lords opposite will hope that I shall succeed in achieving both objectives.

My Lords, we have had three days of debate upon the Queen's Speech, and now the noble Viscount's Amendment is to be voted upon, humbly regretting the failure of Her Majesty's Government to take any effective steps to remedy the grave state of the economy of the nation. My Lords, the Amendment is vaguely worded, and I do not think that this was at all an accident. It was hoped thereby, I think, to draw into the same Lobby those who criticise the Government's economic policy for equal and opposite reasons. It was hoped to bring in, for instance, the noble Lord, Lord Grantchester, who, in his speech, discovered a number of dragons that he wished to kill in the shape of trade union tyranny and collectivism; the noble Lord, Lord Lucas of Chilworth, who objected to the high rates of taxation to which we are all subjected: and the noble Lords opposite who, in the main, have reiterated their belief in democratic socialism, involving high taxation, very close co-operation with the trade unions, and controls. I have a good deal of sympathy with all these speakers, but of one thing I am absolutely certain: that they cannot all be right. I myself find something rather comforting in the situation of a Government faced with critics whose criticisms are mutually destructive and who have failed, as I shall endeavour to show, to put forward any really intellectually-satisfying and consistent alternative to the policy which we are endeavouring to pursue.

When the noble Lord, Lord Silkin, spoke the other day he confessed, when he introduced the debate on home affairs, to what he described as "a sense of unreality" in doing so in the context of an international situation like the present. I should myself be doing rather less than justice to my own convictions if I did not go a great deal further, and say that, in the context of the present international situation, I find the whole atmosphere of Party political controversy somewhat artificial, and even uncongenial. To that extent, at any rate, I agree with the noble Lord who spoke from the Cross-Benches, Lord Rochester, when he said something early in his speech, I think, to the same effect.

We cannot conduct the affairs of this country in an atmosphere of frayed tempers or jagged nerves. It may be that a few weeks ago, in the atmosphere of the two Party Conferences, the political commentators hazarded the guess that the coming Session was going to be one of increased Party political tension. I should suspect that in the last few weeks the atmosphere has changed, and that the atmosphere of public opinion has changed; and I hope that they are wrong. I would venture to predict, my Lords, that if either Party—and either Party could do it—attempted to raise the political temperature at this time, the attempt would quite certainly recoil upon their own head. So far as I am concerned, though I shall try to say a number of things with which I am sure noble Lords opposite will strongly disagree, I hope, none the less, that I may manage to say them without giving any kind of offence.

My Lords, we are to-day dealing with the economic situation, but the economic situation must be fitted into this general context, and I would, with respect, like to test some of the criticisms which have been made of us against the remarks made and the policies which have been advocated, either during to-day's debate or on the rest of the gracious Speech.

When the noble Viscount who leads the Opposition spoke first in the debate, I remember he reproached us with neglecting our national defences. His case was that, when his colleagues had left office in 1951, they had handed over a defence force of, I suppose, about three-quarters of a million, amply armed, so he thought, with adequate weapons; and he went on to say how much smaller the defence forces are now than they were then. I am not qualified to assess the value of the defence forces then—it was a matter of controversy inside the then Labour Government—but, so far as I am concerned, I should like to say that the noble Viscount's policy on defence at that time reflected nothing but credit upon the patriotism and courage of the Labour Government of the day.

I would say only two things in answer to him: the first is that if we had continued to maintain forces of that size and shape for the following ten years we might as well have tried to defend this country with the weapons of Waterloo. The science and art of defence, if that is what we are to call it, has probably changed more in the last ten years than at any other time. If we were saddled to-day, in a period of continuing tension all over the world, with the huge unwieldy forces which we had then, I should think we should be less, and not more, able to play an effective part in the international situation. But of one fact there is absolutely no doubt, my Lords, and that is that in so far as our economic situation is in question, and in so far as our economic strength is part of our national strength in the international world to-day, then, of course, we should have been very much weaker and our economic situation would have been much more serious than it is to-day.

I heard the noble Lord, Lord Morrison of Lambeth, make a forthright and interesting speech earlier in the debate to-day. He reproached us with having cut off the food subsidies—running, as far as I remember, at something like £400 million a year, and rising, when we took the matter in hand. I know that this was a matter of controversy between the Parties at the time, but I venture to say to the House this evening that it is in a sense paradoxical, for the Party that wanted us to keep the food subsidies on at that time, to reproach us on our economic difficulties of to-day.

VISOUNT ALEXANDER OF HILLS-BOROUGH

My Lords, I do not like to interrupt the noble Viscount, because he has been so reasonable in the way he is presenting his case, but of course we should not agree at all from that point of view. For one thing, we hold that if you had kept your direct taxation at a proper level, and if you had kept your subsidies on so that you would not have had to increase industrial wages to the extent that you have, you would have been in a much sounder economic position, and you would still be. Because we had not been unmindful of the atomic menace, and after great difficulty we had decided, against many of our supporters' wishes, to start with the production of a British atomic weapon. We should have been in a much stronger position, because we could have met in our stride the other variations in the strengths required by the North Atlantic Treaty Organisation.

VISCOUNT HAILSHAM

If the noble Viscount will forgive my saying so, that only makes the matter a little more puzzling, because the operative part of that sentence was "if you had kept your direct taxation at a proper level". Now one crucial point in the last Election, which, after all, was only two years ago, was the promise by the Labour Party not to raise the income tax. How can it now be said that the one error which the Conservative Party made was in reducing direct taxation down to the level at which it was at the last Election, when the Labour Party were not going to increase it? My Lords, we really owe it to ourselves, we owe it to the country, and we owe it to the House and to one another, to try to make sense of our economic policies. One thing I am absolutely certain of, and that is that this does not make sense.

We have heard a great deal from noble Lords opposite about housing, and this is a criticism with which I, personally, have a great deal of sympathy. Of the various social evils which remain after the reforms of recent years, I should probably agree that the one which causes the greatest amount of human suffering is the shortage of housing. If it were at all possible in the present economic context to step up the production of houses beyond the figure of about 300,000 at which it is now running, beyond the level referred to by my noble friend, Lord Waldegrave, on Thursday, then I should agree completely with noble Lords opposite that this would be a very highly desirable thing to do, and as the Session progresses no doubt this will be a matter that will engage your Lordships' attention from time to time.

But, my Lords, I must again come back to the Motion and to the facts of economic life. Whatever may be said about this criticism from the social or human point of view, and I am willing to give it its full weight, the building industry is certainly hopelessly overburdened at the present time. Skilled men are not being trained on an adequate scale, the capital programme as a whole is acutely strained, and though I should agree that in the long run good housing is certainly one of the most important social aims and one of the most valuable social investments, immediate increases in our housing programme of the order of that which the noble Lord, Lord Silkin, proposed earlier in this debate, from 300,000 to 400,000 a year, could be achieved only at the cost of accentuating our economic difficulties.

Therefore, when the Opposition put down a critical Amendment directly attacking the failure of the Government to take any effective steps to remedy the grave state of the economy of the nation, I am entitled to point out that, in the three or four fields of policy in Which they have made any constructive suggestions, as against long jeremiads of lamentations, what they have suggested would, at any rate in our judgment on this side of the House, not only not improve the situation but be actually calculated to make it worse.

There is one other general observation which I feel bound to make to your Lordships in the light of the debate. Many noble Lords opposite—I think most noble Lords opposite—have referred to the happy fact that we in the Conservative Party are now celebrating ten years of continuous office. The noble Viscount opposite said that the time had come for consideration and judgment of the whole period. My Lords, it is worth saying, if we are to judge the period as a whole, that since 1951 we have twice appealed for the judgment of the electorate and every time in the light of experience we have been returned with an increased majority.

LORD MORRISON OF LAMBETH

"Never had it so good".

VISCOUNT HAILSHAM

And if I were asked—in the light of what the noble Viscount has now said and what he said in his speech about bribing the electorate—to state in a sentence why it was that we achieved a decisive victory in 1959, I would say quite confidently that although, as I pointed out again and again in my election speeches, we were putting forward an extremely ambitious programme which we could achieve only with difficulty, the programme proposed by the Labour Party would have cost anything up to £2,000 million a year more than ours. If the country had taken their advice then, whatever may be the position of the economic situation now, we should certainly have been right over the cliff.

That, my Lords, brings me straight away to the question of the wages pause, against which the noble Lord, Lord Stonham, made an impassioned philippic. I simply am bound to say this. During the five years past that I have been a member of the Government—though I cannot celebrate, like some of my noble friends, a period of ten years continuously in office, as noble Lords remind me when they talk about television debates; but during my five limited years of office—we have had, I suppose, about four debates upon the economic situation every year, and in the great majority of them I think I have played some part. I think one can by now draw one or two broad conclusions from the experience of these debates, and the problems which have been handled in them.

In the first place, whenever we have had signs of inflation, as we have during part, but not all, of the time, we have been threatened at the same time with a balance-of-payments crisis; and so long as we have been free from inflation, as we have during part of the time, we have, on the whole, avoided balance-of-payments deficits. One can, of course, over-simplify this issue, but I think that to some extent one can infer from this that our balance-of-payments difficulties, when they occur, stem, at least in part, from a want of confidence in sterling, engendered by inflationary tendencies. That, my Lords, is the first general conclusion I will draw.

Secondly, when we have been faced with a balance-of-payments crisis, I believe the country has shown quite clearly, and quite rightly, that it would be prepared to slow up even the rate of economic growth of our economy, desirable as that is, rather than sacrifice the stability of our currency. I believe that this is still the situation; and although we all, I think, on both sides of the House, desire economic growth, I believe that no Party, neither that of the noble Lords opposite nor my own, would dare openly to advocate pursuing economic growth at the price of a depreciating pound.

Thirdly, in almost every debate that we have had since 1958 I have been driven to comment upon what I believe to be the fact (which has not so far been contradicted, I think) that, wherever inflation has occurred in recent years, the signs of inflation were due in their origin to the simple fact that personal incomes of all kinds were rising at a rate which was very much greater than the rise in productivity and production, something of the order, I think (although I am not going to trouble the House with figures, as the House hears so many from time to time) of 10 per cent. in the previous few months before the Chancellor of the Exchequer's statement of July 25, as compared with an increase in productivity of about 2½ per cent. Whoever is responsible for that, and however unpalatable it may be, I believe this to be the fact. And if it is the fact, it is no good complaining that the policy of wage pause to which it gives rise is disagreeable unless it can be shown that the policy of wage pause is not a logical inference of policy to be drawn from the fact. And it is no good people—not only noble Lords opposite, but anybody —flexing their muscles and threatening to strike against the policy unless they can present to us a viable alternative. It is no good striking against the facts of life; you do not make the Government look silly by doing so.

LORD STONHAM

My Lords, if the noble Viscount will allow me, I think that no one on this side of the House objects to wage restraint, but we do say that wage restraint must be accompanied in other directions by restraint of profits and dividends; and that the Government themselves contributed to the inflation by the release of some £84 million to the surtax payers.

VISCOUNT HAILSHAM

My Lords, I was well aware, of course, of what the noble Lord's case is, and I think perhaps he does me an injustice in thinking that I was going to avoid meeting it. At any rate, we have made progress. We have now agreed that the policy of wage pause is, in itself, a reasonable proposal. We are quite aware that to impose a wage pause is not a long-term solution, and I think that if we were wholly devoid of long-term plans, this would be a legitimate subject of reproach against us. But, my Lords, in agreeing to the necessity of long-term plans, it is irresponsible to reject the necessity of a short-term remedy; and we wanted a short-term remedy in July. Moreover—and I say this with great humility, in view of the fact that I have been criticised by my own side, as well as by the other—it is a short-term remedy which, on the whole, has worked and has contained the evil with which we were faced on July 25.

I am, of course, quite aware, as the noble Lord, Lord Stonham, has reminded me, that it is important to see whether we can control dividends and profits as much as wages. I think that noble Lords on both sides will do me the credit of saying that I have never attempted to deny this. But it is important—and I must emphasise this—lo control them in the appropriate way; and it is important not to pretend that they can both be controlled in the same way, but to recognise that they must be controlled by devices appropriate to their nature.

I would also say this to the noble Lord who spoke from the Cross-Benches: that economic affairs at the moment are far too serious for us to be preoccupied about the impact on one another's minds of what we do. We have to consider what is right economically in the interests of the country, to trust our powers of persuasion, and to hope that they will be supplemented by the powers of persuasion of others perhaps not of the same political opinions as ourselves (if we convince our hearers logically that our proposals have a logical coherence, and are economically correct), in order to persuade the people of this country that our proposals are correct. If you once start kidding yourselves that by doing what the other side likes, even though you believe it to be wrong, you can give any form of democratic leadership in a free democracy, you are, I think, ultimately betraying the truth that is in you. You are sinning against the light. Therefore, although I absolutely agree with some of the premises of the noble Lords opposite, I beg them to pay some attention to the considerations which I am putting before them. So far as dividends are concerned, the Chancellor of the Exchequer called for a dividend pause at the same time as he called for a wage pause. Both, of course, are unenforceable, except in the limited sphere in which the Government can control dividends or wages by its own action. Over the whole field of private industry wages are free, and dividends are free. So far as the appeal for wage control is concerned, it was met with a flat refusal. In the case of dividend control, this was not the case.

My Lords, since different figures were given by the noble Lord, Lord Latham, I should like to give the House the figures which have come into my possession. I have been told that in the three months following my right honourable friend's statement on July 25, there have been noted, from the Financial Times, dividend declarations by 365 companies. Of this number, 122 were recorded as being higher than the previous year; 243, the same or lower. As a percentage, the number of increased dividends is 33 per cent., or one-third of the whole. In the three months before the Chancellor's statement, the percentage was almost 55, or over half. We believe that this does show a substantial response to the Chancellor's request. I think it must be remembered that, as in the case of wages, the boards of some companies may have felt themselves irretrievably committed to certain levels of dividend payments before the Chancellor made his statement.

Without examining each and every company statement relating to these dividends it would not, of course, be possible to ascertain how many companies among those who were in a position to choose have, in fact, positively responded. All we can say is that the statistics show a substantial drop in the number of companies declaring increased dividends since the statement of July 25, and that justifies our claim that the response has been considerable. I could have wished that the response had equally been considerable in the other appeal which the Chancellor of the Exchequer made.

I ventured to point out on a previous occasion the distinction to be drawn so far as profits are concerned, and I am grateful to my noble friend Lord Brand for pointing out the same distinction a few moments ago. There are capital profits, which my noble friend said are the direct result of inflation. They are perhaps not so much the result of inflation as a symptom of inflation. If we control that kind of profit, there does not seem very much sense in doing so unless we prevent the inflation which gives rise to that kind of profit; and if we do take adequate steps to control that kind of inflation, we control that kind of profit. It is those capital profits of individual firms that have been controlled pretty effectively by the financial squeeze of this summer, as anyone who reads the share index day by day in the papers can verify for himself.

VISCOUNT ALEXANDER OF HILLSBOROUGH

My Lords, would the noble Viscount compare the amount under the "squeeze" with the position over the last two or three years? The index went up from 200 to 360, and it has dropped nothing like that.

VISCOUNT HAILSHAM

My Lords, I do not want to involve myself with the noble Viscount in an elaborate statistical discussion. What I was saying was that the element of capital profits was I created by the fact of inflation; that the proper way in which to control that was to control the inflation; and that that had been done. I do not think that the noble Viscount will claim that I have stated the case at all unfairly.

As regards trade profits, I pointed out on the last occasion we debated this matter that the appropriate weapon with which to control this was taxation. May I say, in parenthesis, that noble Lords opposite have reverted to the question of surtax relaxations which, I must remind the noble Lord, Lord Walston, do not affect the current year at all. He asked us to remove them so soon as the wage pause was lifted.

LORD WALSTON

My Lords, may we then take it, in answer to another question I put, that the wage pause will be finished at the end of the current year?

VISCOUNT HAILSHAM

My Lords, I think it would be extremely incautious to give a positive reply of any kind to that question. I only say that that is the way of doing it. I beg noble Lords opposite, when they come to talk with the representatives of their own Party, to point out that, whatever the merits of this question, what was really done by the Chancellor of the Exchequer this summer was no more than to secure by profits tax a sum of money which was previously borne by surtax payers who, I think by common consent, in the lower ranges of surtax, were having to bear a tax which, having regard to the change in the value of money, they had never been intended to bear. If it were only adequately pointed out that, whatever the merits or demerits of this problem, the surtax relief was financed out of the increase in profits tax, I think that much of the sting would be taken out of the criticisms which have been made.

It is worth repeating what I have had occasion to say before: that profits have not risen in the period under discussion; indeed, they have fallen, both during the period of the wage pause and before it. Although I should be the first to admit in principle that the demand for the control of profits is not an unreasonable one, I think that noble Lords opposite would have been more just had they pointed out that in fact that there had not been any increase in profits to control. Therefore I would say that this is an argument which is not really open to the Opposition in attacking our present measures.

I would add, although there was no specific reference to it in the gracious Speech, that my right honourable friend the Chancellor of the Exchequer intends to restrict speculation in capital profits as distinct from genuine investment. As this is a highly complex matter, I shall probably be excused for dealing with it in detail; but the plans remain and an opportunity of debating them will arise in due course.

This leads me from the wage pause to the question of long-term plans and to one of the underlying assumptions of the Amendment, which blames the Government for failing to take effective steps to remedy the economic situation. I do not want in any way to deny the responsibilities of the Government in this matter, or to give any impression of wavering in our duty; but we cannot accept—because if we did we should be disregarding the truth—the underlying implication that the industrial growth of this country is entirely something which can be created by political activity on the part of the Government alone. This economy is based solidly on industry, commerce and agriculture, which, broadly speaking, are carried on by persons other than the Government, both in management and labour; and without the co-operation of both we can do nothing to achieve the purpose we all have in mind.

That brings me right up against the issue of planning, which has been mentioned in the speeches of several noble Lords, both in this debate and in previous debates, in which the noble Earl, Lord Attlee, has returned again and again to the theme that we in the Government are against planning. Indeed, the noble Lord, Lord Latham, said as much again in his speech this afternoon. I agree with my noble friend Lord Mills that that is not at all how we have ever seen the matter. No Government can be against planning, because all policies involve forecasting the future in one way or another, and those policies can only be described as a plan. But we must realise, if we are to avoid a mere argument about words, that what is in issue is not whether we are to plan but in what sense we are to plan; in particular, whether the right way to plan is a centralised plan on the Socialist pattern, which we learned to recognise in the years when noble Lords opposite were in office.

It is perfectly legitimate for them to look back upon their period of office, which we regarded as disastrous, as a great achievement. What we saw, or thought we saw, in the policy of that Government was the belief that, side by side with the system of wages and prices, with prices controlled but wages not effectively controlled, they could impose a series of physical controls and directions based on a series of decrees operated at the centre as a means of regulating the economy in place of a prices and wages structure. We believe sincerely that an industrial society cannot be run on those lines—at least not in times of peace. We do not think that it can be run at all on these lines without control of wages, which noble Lords opposite never sought. Even with a control of wages, we do not think that it can be run efficiently, because we do not think that it is possible to predict the direction of future demand with sufficient accuracy to make controls either effective or beneficial. After all, the planners are no better than the tipsters who tell one how to make money on shares or on horses. If they really knew accurately what people were going to want, or were going to be offered, they would be financial geniuses and would have a place in industry rather than in administration.

LORD MORRISON OF LAMBETH

My Lords, the noble Viscount said that the Government were not averse to planning as such. He has spent the last three minutes saying that planning is impossible. Will he tell us whether the Government have ideas about planning, and tell us in some detail what they are?

VISCOUNT HAILSHAM

I was going to endeavour to do that, anyhow. I thought that three minutes was rather a short time in which to demolish the noble Lord's colleagues.

LORD MORRISON OF LAMBETH

That is why it was not effective.

Viscount HAILSHAM

I was about to say that this is very different from saying that we do not believe in planning. Indeed, one of the things we complain about is that the conception of planning which I was attempting to criticise gives it a bad name not only among Conservatives but among the public at large. All forms of business management and all forms of political activity depend in some degree on forecasting, to use a neutral word. This is often difficult to do, but it is an essential part of an attempt to control one's own future. We have done it in a variety of different ways, and somewhere about the summer an internal Government exercise was carried out to do it more efficiently than it had ever been done before.

But, as the noble Lord, Lord Morrison of Lambeth, has reminded me, all this is not enough. So long as industry is carried on through free private enterprise and free trade unions, and agriculture is carried on by free farms and not in collectives, and as long as industrialists are free and not State Boards, some form of co-operative planning, not limited to Government and individual businesses, is essential if any form of industrial planning is to be possible at all in certain fields and if the general conception of what is desired to be achieved is carried on in the whole field.

Personally, I agree with the noble Lord, Lord Grantchester, 'although I hope I shall not subsequently be taken to task for accepting his words. I believe that the realisation of this truth contributed to the relative success of the French plan although I think it is fair to add that another factor was their willingness to accept a heavier strain on their currency than we, as the centre of the sterling area, could have done, and also they had available a pool of mobile labour in the shape of about 26 per cent. of their population engaged on agriculture. But, as I see my right honourable friend's plans, which I shall not endeavour to describe in detail tonight, for the reason that my noble friend Lord Mills gave, what we are concerned with is the creation of machinery which will be acceptable to more sides of the question than ourselves, and we are at the moment engaged in trying to make it acceptable.

As I see the intention of my right honourable friend the Chancellor of the Exchequer, it is that he is determined to institute something that will correspond in general character to the French system, as explained by the noble Lord, Lord Grantchester. It will be a difficult thing to do, because we shall be attempting to graft something on to our system which has not existed there before. What I have tried to establish is that the need for it is present, and what we are trying to do is neither a reversion to planning in the sense advocated by noble Lords opposite, nor yet a repetition of laissez-faire. If I may say so in his absence, as I see, the welcome given to it by the noble Lord, Lord Citrine, though somewhat qualified, was, I thought, a step forward of some importance this afternoon.

I cannot sit down without a short reference to the speeches which have been made about the subject of our system of arbitration. Certainly the noble Lord, Lord Stonham, and I think the noble Viscount who leads the Opposition, referred to this. I must say that I venture on this field with a great deal of trepidation, because I am now outside the field of my speciality, although I did practise a little in it at one time in my career at the Bar. It is quite wrong to say that we are trying to overthrow that system. It is something that has been developed over the years, by the most enlightened Governments of more political persuasions than one, and among the most progressive elements in management and among the trade unions. I do not desire, and I am sure my colleagues do not desire, to overthrow negotiating machinery which has been the product of so much devoted labour and insight over such a long period of time.

But here I feel bound to issue one personal word of warning—and I make it personal in case I say something that might cause offence, so that I alone may bear the blame for what I say. Twenty-five years of my life were spent in the practice of negotiating compromises and conducting litigation over a wide field, and this included arbitrations of all sorts, including arbitrations of wages as part of the ordinary negotiating machinery from 1945 onwards. Therefore, what I say is based to some extent on experience both inside and outside the Government. Where a bargain is struck between two parties by way of compromise, it is inevitable that those panties will consider their own interests rather than those of any person not present or being a party to the agreement. When an action is brought in the courts, or when a reference is brought before an arbitrator, the judge or the referee has inevitably to come to his conclusion on the evidence and on the arguments adduced by the parties themselves and not by some party outside the litigation.

Excellent as our system of negotiating may be, I must testify personally that in the five years in which I have been in the Government I have seen case after case where agreements have been made between employers and employees, or awards have been made by arbitrators after hearing arguments between employers and employees, in which the public interest could not possibly have been made a determining factor in any of them, and where nobody was present to argue the case for the public interest, where what determined the matter was not what the public economy would stand, but only what the parties were willing or able to pay. I do not blame the unions, management, or the arbitrator for coming to that conclusion. What we really have to understand is that in a state of full employment and rising demand our negotiating machinery itself, with all its virtues, has built into it a tendency towards inflation which must be corrected if we are to avoid inflation. It was built up over a generation of underemployment, and, excellent as it is as a means of avoiding the industrial strife which accompanies under-employment, it has still built into it the seeds of economic collapse in a period where the underlying tendencies are different. Until we correct this we do not take effective means to remedy the "grave state of the economy."

I should hope that noble Lords opposite would co-operate with us in explaining this. What we have in mind is not to overthrow the system but to develop it. Having said what I have, I would try to allay the suspicion, which is undoubtedly genuine, in the minds of those who have complained of what we have done. This is not yet a complete edifice. We have still to build it up and build into it some correcting or governing mechanism which will protect the public interest.

VISCOUNT ALEXANDER OF HILLSBOROUGH

My Lords, are we to assume, then, that the action of the Government, as governing the public interest, as regards all State servants or State arbitration results, is that they then ask the rest of the community in industry to do the same: that you are really bringing pressure upon the whole community by way of Government action, and you have done that without any consultation with the parties to the arbitration which the noble Viscount has mentioned? Would it not have been better to have the consultation first than to put down this breaking of your word, breaking of your covenant, as an example to the rest of the industrial community, and then make it clear to both sides what was the matter?

VISCOUNT HAILSHAM

My Lords, I think a distinction must be drawn between the short-term remedy which we undertook as part of the wage pause and what I am trying to do now, which is to try to persuade noble Lords opposite to enter into some kind of discussion, public or private, as to how the system can be improved. It must, I think, be plain to noble Lords opposite—I am not accepting at all the charge that we have broken our word, but the noble Viscount will not expect me to pursue that at this hour—that we could not ask industry and the unions to observe a pause in wages unless we had shown that in our own field we were prepared to do what we were asking others to do. Obviously, in regard to our own employees it was more painful for us than to ask it of other people in regard to theirs, but if we were to establish any kind of reputation for being in earnest in the matter I cannot see that my noble friend could have acted differently from the way in which he did. When we are asked whether we should or should not have consulted, of course this is a matter which is open to debate. But my own belief is that on reflection noble Lords will see that this was not possible in the short-term remedy.

LORD LATHAM

My Lords, is it the case that the noble Viscount is giving notice to the trade unions that the Government propose to change the structure of negotiation and arbitration?

VISCOUNT HAILSHAM

I thought I had made it abundantly clear that I was making my own speech on my own responsibility. I deliberately did so in order that if I said anything amiss no one else should be involved in it. None the less, what I am saying—

LORD MORRISON OF LAMBETH

Ministers cannot contract out.

VISCOUNT HAILSHAM

They can, because in the end their own reputation may fall by what they say. I am seeking to reply to a debate. I will give way in a moment, but I think it would be quite wrong of me not to have said this which I profoundly believe, and I hope noble Lords will listen to what I have said. Criticise it afterwards, by all means, but try to see whether perhaps I have not said something which might be in the public interest.

VISCOUNT ALEXANDER OF HILLSBOROUGH

My Lords, of course, I respect entirely the individual position taken up by the noble Viscount, but he cannot separate it from the responsible statement of a Minister and whether it is to be understood in that sense by the trade unions. It is very important that we should get the best possible relations we can on this matter, and I think the noble Viscount had better explain it a little more, because if this is not a sort of notice either to the trade unions or in some cases to the employers, then what is it?

VISCOUNT HAILSHAM

This is no kind of notice. This is a request for people to think about the inherent virtues and limitations of our system, and to give us the benefit of their counsel when they have thought. I hope I have not said anything I should not say, but I thought that I should be doing less than my duty if I did not indicate my own mind on this subject. There is no kind of notice to anybody, and nobody is to take me as negotiating with the trade unions. This is not part of my departmental function. My responsibility is to this House and to noble Lords on both sides of it.

At the end of the day I really must bring my speech to a close (although I do not in the least resent the various interruptions which have quite properly been made), and challenge the whole assumption underlying this Amendment. Clearly our economic affairs demand serious attention or we should not have given them serious attention on so many occasions. Time after time we have had to defend the economic policy of the Government from this Box. But I would deny, and I do deny, that, apart from the international situation, the fundamental state of the British economy is grave after ten years of Conservative Government. I know that fun is made and scorn is poured upon the phrase, "You never had it so good". It is a phrase I have never liked. It is a phrase I have never used, and it is a phrase I have never encouraged.

LORD MORRISON OF LAMBETH

The Prime Minister has.

VISCOUNT HAILSHAM

Not in the context which the noble Lord tries to suppose. I have dealt with that before. I could not help being struck, as this debate developed, by the fundamental contrast between East Germany building a wall of bricks and mortar, compelling her citizens to remain where they are to prevent them from escaping, and ourselves being made, much against our will, to erect a wall, not of bricks and mortar, but of law, to prevent people from one country or another, either from the Commonwealth or aliens, from coming here who wish to come in because life in Britain is so much more desirable than in any other country they know, or so much more desirable than in any other country which they have a chance to enter. This is not a picture of a country in grave economic difficulties; it is not a picture of a sick society. Our difficulties are not so grave that, if we have the wish, we cannot overcome them.

We stand, as I have have said many times before, on a pinnacle of prosperity, poised precariously on a knife-edge. It is true that in this confused international situation our economy oscillates from time to time, but our production has steadily increased and our capital has increased as well. Our technical skill is undiminished; our technology is steadily improving; our currency is held and stabilised, and would, I think, have remained stable but for the immense efforts we have made to provide for the security of the world by the presence of our troops abroad, and for its prosperity by the aid we have given to countries less prosperous than ourselves. I confess that the prospect of a Party dog-fight in the present international context fills me with despair—the same feeling of unreality that animated the noble Lord, Lord Silkin in his speech. But the prospect of Britain after ten years of Government by the Party of

On Question, Motion agreed to, nemine dissentiente: the said Address

which I am a member does not inspire me with a feeling either of shame or of misguided effort.

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

Their Lordships divided: — Contents, 28; Not-Contents, 88.

CONTENTS
Addison, V.	Kilbracken, L.	Shackleton, L.
Airedale, L.	Latham, L.	Shepherd, L. [Teller.]
Alexander of Hillsborough, V.	Lawson, L.	Silkin, L.
Amwell, L.	Lindgren, L.	Stonham, L.
Archibald, L.	Longford, E.	Strabolgi, L.
Attlee, E.	Lucan, E. [Teller.]	Summerskill, B.
Chorley, L.	Morrison of Lambeth, L.	Taylor, L.
Cork and Orrery, E.	Peddie, L.	Walston, L.
Crook, L.	Rea, L.	Williams, L.
Henderson, L.

NOT-CONTENTS
Aberdare, L.	Elliot of Harwood, B.	Milverton, L.
Ailwyn, L.	Ferrier, L.	Molson, L.
Airlie, E.	Foley, L.	Newall, L.
Allerton, L.	Fortescue, E.	Newton, L. [Teller.]
Amherst of Hackney, L.	Fraser of Lonsdale, L.	Perth, E.
Ampthill, L.	Fraser of North Cape, L.	Radnor, E.
Auckland, L.	Goschen, V.	Rathcavan, L.
Bathurst, E.	Gosford, E.	Remnant, L.
Bessborough, E.	Haddington, E.	Robins, L.
Bossom, L.	Hailsham, V. (L. President.)	St. Aldwyn, E. [Teller.]
Boston, L.	Hampton, L.	St. Oswald, L.
Boyd of Merton, V.	Hastings, L.	Salisbury, M.
Bradford, E.	Hawke, L.	Saltoun, L.
Brand, L.	Home, E.	Sandford, L.
Bridgeman, V.	Horsbrugh, B.	Savile, L.
Buckinghamshire, E.	Howe, E.	Sinclair, L.
Carrick, E.	Hylton, L.	Somers, L.
Carrington, L.	Jellicoe, E.	Soulbury, V.
Chesham, L.	Kilmuir, V. (L. Chancellor.)	Spencer, E.
Clitheroe, L.	Lansdowne, M.	Strathclyde, L.
Colville of Culross, V.	Leconfield, L.	Stuart of Findhorn, V.
Conesford, L.	Long, V.	Swinton, E.
Crathorne, L.	MacAndrew, L.	Tenby, V.
Cullen of Ashbourne, L.	McCorquodale of Newton, L.	Teviot, L.
Davidson, V.	Massereene and Ferrard, V.	Waleran, L.
Denham, L.	May, L.	Weir, V.
Devonshire, D.	Melchett, L.	Wellington, D.
Donegall, M.	Merrivale, L.	Wolverton, L.
Dundee, E.	Mills, L.	Yarborough, E.
Dundonald, E.

Resolved in the negative, and Amendment disagreed to accordingly.

to be presented to Her Majesty by the Lords with White Staves.

House adjourned at ten o'clock.