Lords Sitting of 30 July 1962

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of St. Albans

MOTOR-CYCLISTS: PROTECTION OF EYES
2.35 p.m.
THE EARL OF NORTHESK: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they will consider introducing legislation to make it compulsory for the riders of motor-cycles, mopeds and scooters which are not equipped with a windscreen, to protect their eyes with goggles, or a visor rigidly attached to a crash helmet.]
THE PARLIAMENTARY SECRETARY, MINISTRY OF TRANSPORT (LORD CHESHAM): My Lords, it appears that the number of accidents caused because riders of motor-cycles, mopeds and scooters do not wear goggles or visors is not significant, and my right honourable friend would not, therefore, feel justified in making the wearing of goggles or visors compulsory. Most riders already wear goggles for long
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journeys or when travelling at speed. But there are circumstances, as, for example, in heavy traffic in wet weather, when it may be safer for them not to do so.
THE EARL OF NORTHESK: My Lords, may I thank my noble friend for his very understandable Answer, and ask him to ask his right honourable friend whether he would consider the possibility of using publicity, as was done very successfully for the wearing of "crash hats", to show the public the advisability of these riders wearing goggles or a visor at all times?
LORD CHESHAM: My Lords, I would certainly agree that it was desirable to wear goggles whenever possible, and I shall be pleased to convey my noble friend's words to my right honourable friend. I was very glad to see recently that this particular point was covered in the motor-cycling Press.

TOBACCO ADVERTISING
2.37 p.m.
LORD AMULREE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether it is true that there has been a considerable increase in tobacco advertising since the debate on the Report of the Royal College of Physicians on Smoking and Health.]
THE LORD PRESIDENT OF THE COUNCIL AND MINISTER FOR SCIENCE (VISCOUNT HAILSHAM): My Lords, I am not aware of any evidence of a recent increase in tobacco advertising. Indeed, I understand that tobacco companies are no longer advertising on television before about 9 p.m.
LORD AMULREE: My Lords, I should like to thank the noble Viscount for his reply, because it helps, when I have seen a figure indicating that advertising has trebled or quadrupled, and I take it we may assume that that is not the case.
VISCOUNT HAILSHAM: My Lords, I have no evidence that would justify that sort of statement; nor is it the impression I get from seeing the amount of advertising that is going on. The impression I get, purely subjectively, from examining it is that there has been a certain switch from cigarettes to cigars and pipes and also to various types of filters, whose advertisement, I suppose would come under the general expression of "tobacco advertising".

BUSINESS OF THE HOUSE
EARL ST. ALDWYN: My Lords, I should like to inform the House that my noble friend Lord Dundee will be making a statement on the Common Market after the conclusion of the speech of the noble Lord, Lord Grantchester.
CITY OF LONDON (VARIOUS POWERS) BILL
Read 3a, with the Amendment, and passed, and returned to the Commons.
REGENT REFINING COMPANY BILL
Read 3a, with the Amendments, and passed, and returned to the Commons.
LONDON COUNTY COUNCIL (GENERAL POWERS) BILL
Read 3a, with the Amendments, and passed, and returned to the Commons.
RIVER DART NAVIGATION BILL
Read 3a, with the Amendments, and passed, and returned to the Commons.

FINANCE BILL
2.42 p.m.
Order of the Day for the Second Reading read.
VISCOUNT HAILSHAM: My Lords, in rising, as I do, to move the Second Reading of the Finance Bill, I would say that I have been in some perplexity as to what it would be that the House would most like me to deal with. Of course, the actual finance structure of the Budget is wholly in order, and I suppose, if I cared to be pedantic, I could confine myself to that; but I have imagined that the House would wish to range somewhat wider on the present occasion. Partly, it is true, we discussed the Budget proposals, which are substantially intact, in April, and they have, of course, been very fully discussed, as it is their prerogative to do, by another place; and what I feel is probably, at any rate in this year, more required is some more general appraisal of the situation.
It would be, I think, unrealistic not to say that, from the point of view of the debates of this House, this debate comes at an opportune moment. We have a new Chancellor of the Exchequer. Parliament, I think, is entitled to discuss, and I am sure noble Lords will wish to discuss, how far we have, or need to have, a new economic policy. This, at any rate, will be a theme of some of my remarks, delivered with the maximum candour that my position in the Government allows. I do not pretend to be in a position to give a complete answer to the question; indeed, I look to the House to give me a little guidance on the matter. But there is so much to be said, some of it general and some of it particular, that I am afraid only of too much rather than of too little matter to deliver.
I will begin, if I may, with four general reflections. About two weeks ago I began a debate on broadcasting policy with a plea that we should abandon mythologies and doctrinaire positions and try to work out, in frankness and candour, a practical policy based on technical and economic realities and practical politics which would achieve the highest common factor of public agreement. I was on that occasion immensely gratified by the generous response which the House gave to that

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plea. I now return to it, but in the broader and more general field. I would have said that this is a juncture which needs integrity and resolution, common sense and mental clarity rather than orthodoxy, dogma or ideology.
I myself am not so naive as to expect that anything which touches the pockets of our fellow citizens should not evoke passionate interest and eager controversy. My plea, therefore, is not for an absence of discussion, and certainly not for universal agreement. It is rather that in discussion we abandon mythology, forswear the intellectual hypocrisy which is bidding fair in some cases to make honest political discussion impossible, and concentrate on the real themes, and differ, if we must, about the genuine options. I cannot resist the impression that public opinion is getting fed up with Party war cries, sterile abuse, sour criticism, interested special pleas, obsolete and unrealistic theories of politics and economics, and is absolutely hungry for leadership on both sides, common sense, originality and clarity of thought.
The first thing I wish to say is that there is nothing radically wrong at the moment with our society. But we are all in such a "tizzy" about whether something is not about to go wrong—and we may, of course, be right in this—that we are in danger of working ourselves up into a kind of collective neurosis, and I feel strongly that we must snap out of it if, as the Americans say, we want to go places. The next thing, as my right honourable friend the Chancellor of the Exchequer pointed out last Thursday, is to get out of our minds that it is only the Government who are on trial at the present, or that our difficulties would be solved by a mere change of Administration. What is on trial, I believe, is nothing less than our nation, our Parliament, our Opposition, our belief in freedom, our experiment—for we must remember that it is only an experiment in democracy—above all, our religion, our philosophy, our civilisation: everything that goes to make up our way of life.
The third thing I would say is that it is important to get rid of this hypocritical attack which is so popular nowadays on things and people who have been successful: the fatuous and disingenuous
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sneers at the so-called candy-floss civilisation, and the so-called affluent society, on the one hand, and, on the other hand, the Establishment, which is in the main, only a name for those serious-minded people who happen to think that public service of one sort or another is worth more than sex, drink or money. Let those who do not seek material satisfactions for themselves cast the first stone at the first. Let those who think that material satisfactions are all there is to life combine to condemn the second. At least if that is to happen we shall not have to face the hypocritical conspiracy of the cynical and the unco' guid which forms the core of beatnik philosophy at present.
The fourth thing I should like to say is that, although luck, good or bad (whatever that may mean) enters vastly into almost every human enterprise, the more chancy the field of activity may be—and politics, economics and international relations are among the most chancy—the more important it is to reduce the element of chance in them by conscious and methodical forethought, consistent action, and realistic appraisal of the facts of the case. If this is planning, then I am, and have always been, a planner. But, so far as I know, every other rational being of every other persuasion is one as well. The man or the nation trying to guide policies and attitude by obsolete beliefs about man and society, or simply emotional responses to people and events, may talk big about their political philosophy and may even achieve by luck a measure of adventitious success, but in the end they reduce the whole field of human endeavour to the status of a lottery.
We cannot afford any false ideas to stand between us and the magnitude of the task which confronts us. What is obvious to me, and ought, I believe, to be obvious to everybody, is that we are in the middle of a period of violent and revolutionary change which we are seeking by every means in our power to confine to evolutionary means, and which will affect every field in our lives, spiritual, social, political, and moral, as well as fiscal and economic; and that what is at stake is nothing less than the adjustment of a society in my youth aristocratic, imperial, and based on nineteenth century technology and a concentration of effective power in this

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island to the needs of a twentieth century in which all these assumptions and preconceptions seem to have been swallowed up in the whirlwind of our time.
There are, it seems to me, three great issues before the world, of which one is specifically economic, and the other two are political and social. But, as is always (the case, the three issues—and the three strands—are inextricably intertwined with one another. First, there is the fact—for I regard it as a fact—that the political and social institutions of the world, both the Communist world and the free-enterprise world, are no longer matching either the requirements of the human race or the actual technical facts of life. This is true both of the internal relations between the State and society and of the external relations between States. Secondly, there is the moral crisis. This is engendered by the fact that the West has the right moral ideas and does not live up to them, which renders it liable to the charge of hypocrisy, and the East rejects the right moral ideas altogether but finds rapidly that it cannot live without them, which is rapidly bringing it to a state close to schizophrenia. But the third and specifically economic point is the inability of the West to generate sufficient economic power—capital, if you will—to support the volume of activity which can alone enable it to win the cold war.
It is, of course, with the third that we are primarily concerned to-day. But it is important to recognise that the problem is international and can only be solved internationally. Moreover, its importance is to be seen in relation to the other issues. Our Finance Bill is only a small part of the national end of an international crisis which covers the whole field of human experience. The point I wish to make is that growth—whatever that may mean, and I shall try to examine it—is international; and whatever the need for expansion may be, we shall not be able to achieve it in a world in which any of the major countries, the United States, Canada, or any major country in Europe, is not working in the same economic team for the same economic objectives.
Therefore, my Lords, in this kaleidoscopic world of revolutionary change there are two minimum essentials. The first is to recognise that there are truths
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which do not change with changing circumstances—namely, moral and social realities which are not altered by shifts in technology or in the balance of power. Secondly, I think we require an absolute national determination that our own distinctive national society should thrive and prosper in the altered conditions of the twentieth century. But in order to conserve these essentials it is necessary to be radical and flexible in much else. In particular, it is necessary to realise that the relationships between the State and the individual, between the State and the trading organisation, between the State and the voluntary association—and above all between sovereign States themselves— have been and need to be radically recast. Most of the rather crude and almost certainly pre-scientific mental conceptions which served our ancestors have to be constantly examined and reexamined if we are to pursue realistic courses in the changing currents of a revolutionary world. This places immense strains both upon the flexibility of mind and upon the consistency of purpose of our public men.
At this stage I hope that I may not inappropriately pay a tribute to Mr. Selwyn Lloyd, for almost six years my colleague and still, I believe, my friend. Our work did not always bring us closely together except in the Cabinet. He was always much busier with matters far more pressing than I; and, let us frankly say, he was more important and bore a far heavier load. All his colleagues had come to recognise and to admire a character quite different from that portrayed, sometimes cruelly, in the Press and in the popular cartoons. He was sensitive, warm and affectionate, able, loyal, brave, patriotic and sincere. I should like to express my admiration for him as a man and as a colleague.
I do not think that anyone fully realises the extent of the debt which the public owes to the Prime Minister and to Mr. Selwyn Lloyd for their action in July last year, or for the injustice which was done to them during the unpopularity of the first phase of the pay pause, which, whatever its defects, was the first really constructive effort by a British Government since the war to end the series of balance-of-payments crises which began, after all, in 1931. We were faced with

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a serious threat to confidence which was only not fully understood because it was faced in time and faced successfully. The fact that the public has never fully appreciated what was done then is one of the best measures of the success of the policy which was then undertaken. Our recent repayment to the International Monetary Fund, published the other day, proves that some, at least, of Mr. Lloyd's policies have already borne fruit.
My Lords, the policies really had three sides: the first, the measures affecting credit. These were largely temporary in their operation, and have to a great extent been reversed as the pressure was taken off the pound and put on the Canadian and U.S. dollar. No one likes dear money, but experience has shown it to be an effective medicine in a crisis. Like all other measures affecting credit, these were unpopular at the time, but I do not believe it can now be seriously contended that they were not necessary and that they did mot succeed. The second group of measures were fiscal, measures of increased taxation, the so-called "regulator", and so on. These measures were much more controversial. They were challenged, notably in the Economist newspaper. On the other hand, they had, and have, weighty supporters. The issue here was whether it was necessary or beneficial, in order to combat inflation and improve exports, to reduce the pressure on home demand. It is a very important issue, but it has the great demerit of being very highly technical and one which I am ill qualified to judge.
What is certain is that it is an issue Still with us, because obviously the level of taxation imposed by the April Budget assumed a continuing need to restrain home demand. No doubt the House will desire to explore this question in various directions. In the meantime, however, I must point out that the fact that the restriction of demand was right last July does not necessarily make it dither right or wrong this April, and the fact that it was right this April does not necessarily make it either right now or wrong now, if only because since April various new forecasts have been made about the future levels of prosperity in America and elsewhere which can alter the very
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sensitive indicators of what needs to be done.
Having answered at this Box for the Treasury for a number of years, I am bound to say that all economic forecasts seem to me to have in them am element of crystal gazing, even when they are not based on extrapolation, which I should have thought was by far the most scientifically doubtful of all statistical experiments. At all events, the international economic field is obviously extremely fluid at the moment. Government policy must depend on informed forecasts, and these change from time to time and at best are valid for months rather than for years. In the meantime, however, I know that my right honourable friend intends no immediate reversal of policy. I am quite certain that both he and his predecessor believe that in this matter it is better to err, if at all, on the side of caution. Experience has certainly taught me that it is easier to start an inflation than to stop one.
But the third and by far the most important part of the July measures was the so-called pay pause. It was, as I have endeavoured to show, the first time that any British Government had had the courage to attempt to stifle inflation at what was increasingly agreed to be its point of genesis—the growth of unit costs as the result of inflationary wage settlements. In its origin, and in its first phase, which lasted until April 1 of this year, the pay pause was avowedly a temporary measure. It was therefore crude, and in various respects it was unequal in its effects. But in large measure it succeeded. Anyone, I think, who has studied impartially the general run of wage settlements after July, 1961, must be struck by the fact that they were much lower than they would have been but for the pause. But the pay pause was not an incomes policy; nor was it, nor could it be claimed to be, a substitute for an incomes policy. It was at best a precursor to an incomes policy and it was always clear, I should have thought, that what was wanted was an incomes policy and not a pay pause.
I do not want to be drawn into a detailed discussion of individual settlements, but without doing this, surely two things have become plain. I think I can say so now because I said so as early as February of this year. It is neither just,

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nor indeed actually possible, that an incomes policy can be effected by holding back wage increases from public employees to which in some sense they become entitled as the result of settlements freely arrived at in the private sector of industry.
I myself am not unduly squeamish about inequalities over a short period of time, but, apart from any other consideration, recruiting difficulties in various fields would in the end act at least as powerfully as trade union pressure or popular opinion to bring this to an end. I think from this it becomes apparent that it is the private and not the public sector which is the key factor. Once you have accepted this, you must also honestly face the issue as to how you can effectively police an incomes policy in the private sector, except either by deflation, which involves the acceptance or deliberate creation of a certain degree of unemployment on some scale, or by direction, which inevitably involves you in a series of measures—very different from the kind of free society which, I believe, is what we all sincerely desire.
Speaking for myself, I have considered every possible expedient short of coercion, only to reject, in turn, each one. If I had to choose between deflation and a run on the pound I would, I think, quite certainly choose deflation, even at the cost of unemployment. But, in a sense, deflation is a declaration of misere; and if all countries deflate, one has to ask oneself seriously what is to become of the expansion and growth of which we are never tired of talking, and what is to become of the free enterprise system viewed as a whole. Even if only we in this country deflate, it is clear enough to me, and I think to most people, that for the time being we shall have thrown growth out of the window.
My Lords, this leads me, of course, straight to the speech of my right honourable friend the Prime Minister last Thursday. It is, I believe, growingly recognised that we must have, and it is essential that we have, an incomes policy. It is essential, for the reasons that I have indicated, that that policy should bite primarily in the private sphere, since it is in that sphere that our unit cost inflation has had its genesis. It is essential that it should not supersede
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the process of free collective bargaining or arbitration, but that the process of free collective bargaining should not be allowed absolutely to defeat the aims of an incomes policy. We have proved that we cannot rely on mere exhortation; nor are we ready—or, I must say, am I prepared—to move over into a system of legal coercion. The instrument which we have devised as a next step, a Commission on Incomes, is designed to escape the horns of this dilemma. It will not override free bargaining. But if free bargains are arrived at which disregard the public interest, the parties to that bargain can, of course, under this proposal find themselves in for the open-air cure.
The level of prices and profits and dividends, the competence of business management, the degree to which technology is contemporary in the industry concerned, the existence of restrictive practices, the marketing methods, the apprenticeship schemes, the educational background, the export record, the general level of productivity must surely come under the cold scrutiny of impartial appraisal and public report with a view to some action. All these things will need to be looked at. This is no instrument designed against trade unions; it is an instrument designed simply to let the public know what is going on. My own conviction is that when the public do know what is going on, they will demand efficiency as the price of higher wages and better management as the condition of higher prices. The only people who I think will oppose this instrument when it comes down to practice will be those who prefer to keep the public in the dark about what is going on.
LORD SHACKLETON: Before the noble and learned Viscount leaves that point, do I understand him to say that this new Commission will also concern itself with prices?
VISCOUNT HAILSHAM: That is a very fair question, and I will try to answer it immediately. There are two cases to be considered. The first is when a matter is referred to the Commission in the way suggested before an agreement is arrived at; the second is an ex post facto inquiry, after a settlement has been arrived at which the Commission cannot override. I would

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think that in both cases some inquiry into prices and profit margins is quite in order; and in the second case it is absolutely imperative. One of the things of which we must be most careful, I think, in considering an incomes policy, or in considering an instrument of this nature, is to prevent increases of cost being unfairly passed on straight away to the consumer. My Lords, the object of this is, as I say, to let the public know what is going on, and I should have thought that, within the limits of what I have been saying, both prices and the other matters I have enumerated and which are, not necessarily solely concerned with wage levels would be very much matters which it would be in order to inquire into.
LORD SHACKLETON: May I ask how many people are going to serve on this Commission to undertake this task?
VISCOUNT HAILSHAM: At the moment, I am not in a position to answer that question. I would ask the noble Lord, while discussions are proceeding, not to press me too far about the actual size of the Commission. What we hope, obviously, is that inquiries would take a very short time—or what, in comparison with other types of Commission, would be thought a very short time, and that will mean that the Commission must be adequately manned.
VISCOUNT ALEXANDER OF HILLSBOROUGH: Is the Commission to be anything like representative of the proper people?
VISCOUNT HAILSHAM: I hope it will be representative of every proper person. Of course that will depend, too, on the proper people.
My Lords, to return to my general theme, my experience of the difficulty and determination of inaugurating an incomes policy has led me to two distinct conclusions, and I should like to put those to your Lordships. The first is a matter of presentation; the second is an issue of policy. We have made the mistake—and I think it has been a mistake—of seeking to advocate an incomes policy too much in vacuo, too much in isolation, without seeking to define it, and to place it in the context of other political, social and economic
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objectives: consumer protection, for instance; the status and well-being of the wage-earner, and other wider though less immediately relevant objects of policy, like housing, hospitals, education, business efficiency, roads, and so on. It is this, I would have said, much more than dividends and profits which, by and large, can be said to follow wages—which need to be seen in context and accepted. In economic matters the heart is quite as important as the head. People will put up with a lot if they are convinced that their rulers' heart is in the right place. They will not be so easy if a limited and negative appeal is all that is put before them.
The issue of policy is closely related to the issue of presentation, but it is economic rather than social and political. For whereas the presentation must be related to social objectives, the economic policy must be related to genuine economic reality. It is an issue which I have presented again and again in speeches in this House: the issue of national competitive efficiency. My Lords, the basic point I would make here is that we are not, as is so often wrongly said, suffering from stagnation; and therefore we shall not, as is so often, and I think so foolishly, claimed, cure our malaise by a mere demand for growth. What we are suffering from is rigidity and (I feel bound to utter the word) a degree of inefficiency. We are trying to operate a network of essentially nineteenth century customs and technologies in the twentieth century. The only true growth is surely either a technical innovation which enables us to do something which was not done at all before, or to do it with less labour than was used before, or else an improvement in business management or operational efficiency—which has the same effect. A mere increase in production, which is all that appears in the statistical figures for growth, may be only a misleading ideal. It may, indeed, lead only to the production of surplus articles which nobody wants, or to the production of surplus articles which are deleterious rather than beneficial; as I would personally regard a multiplication of the production of cigarettes or some brands of literature. A mere increase in capacity may be only a prescription for idle machines. An increase in wages without a corresponding increase in

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efficiency is not good trade unionism; it is simply blacklegging the community.
What we surely have to do is to break down rigidity, abolish restrictive practices, close down, if need be, objects which were engineered in 1855, and designed for the horse-and-buggy era, change methods of management and, by all means, tug and pull and squeeze and press Britain into the twentieth century. This may mean in some places, as people apprehend, some redundancy, which we should handle, of course, with generosity and compassion; but it need not mean, I should have thought, unemployment, if the growth industries take up what the technology of the horse-and-buggy age releases. My Lords, it needs to be done, I believe, over the whole field of our national life, over industry, public and private, and I believe it will take years to complete. If N.E.D.C. succeeds, as I hope and pray it will, it will surely be the best monument to Mr. Selwyn Lloyd's Chancellorship that he or we could possibly desire.
But it is, of course, certain, if this theme be accepted, that it will lead to a close, prolonged and, at times, painful examination of most of the aspects of our economic life. There are people who talk as if the Party to which I have the honour to belong had achieved its purpose and had nothing more to do. There are also those who talk as if, when a Party has been in power for eleven years, it is not entitled to have any more new ideas. My Lords, you are faced with a dilemma: either the idea is old, in which case it does not interest, or it is new, in which case it is said that we should have brought it in before. I regard this dilemma as false. When a Party has been in power for eleven years it is just as much entitled to new ideas, and even new faces, as in the first year of office. Ideas develop, and moods and situations change. We must develop, too, and I think we need a more aggressive virile attitude to our economic problems.
Our watchword in this must be competitive national efficiency. Inefficiency of management, restrictive practices, ought to be dirty words. Our rather ancient system of house construction could, I think, be radically improved. Our traditional and inadequate systems of apprenticeship ought to be brought
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into line with economic and educational reality. Our railways, engineered admirably in the nineteenth century, and built by navvies in the 1850's, have still to be adapted fully to the age of the road and the motor car; and so have our canals, some of them dating from the 1790's. Our roads, when not the product of the rolling English drunkard, have been created all too often by Roman engineers. My noble friend Lord Rochdale is inquiring into our docks which seem, at any rate at first Slight, to be technological museums and, like all backward industries, to suffer from labour trouble. My Lords, old and obsolescent craft industries need to be given a new scientific base. We need to have a long hard look at our inadequate system of training for business management. Our reluctance to adopt modem methods of machining in the engineering industry, or our slowness in the application of scientific ideas—for instance, we might say, in shipping operation and shipbuilding—our retention in too many places of (batch rather than continuous methods of processing; all these things have to be considered. Our comparative neglect of social studies needs to be reviewed. But, my Lords, this is much more than the work of the Government. It is the task for an awakened people renewing its strength for a more virile approach.
My Lords, I draw attention to these things not by way of criticism of the past eleven years. It is impossible to manufacture either tragedy or failure out of the Conservative Party's record. I am proud of the Government's record; particularly proud, as my right honourable friend pointed out the other day, in the fields of education, housing and other social services. It is simply a recognition, as I believe, of the immense distance which we have still to travel. It will take us not ten years but a generation or two to traverse it. All the more reason why we should travel continuously, and without delay; for I believe that we are on a road which will last us until the middle of the next century. What I am suggesting is painful. Those who are willing to walk this path with us will go, to some extent, as missionaries among the heathen preaching the Gospel. I cannot say that our gospel, like that of the missionaries, will at first be popular. Indeed, some of us may end in the pot. But I am not concerned

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principally with popularity. What I am preaching is, I believe, the facts of life, and one way or another I believe that they are bound to win in the end.
My Lords, I should like to leave this sphere for the time being, to have a look at the closely related spheres of fiscal policy and Government expenditure. Since we came out of our own balance-of-payments difficulties, the Canadian and American Governments have mm into theirs. This is profoundly disturbing, since both have a direct, and might have a sinister, bearing upon our own economic situation. The Canadian Government have sought, as they legitimately might, to remedy their own evils by fiercely protective measures, some of which bite seriously and sharply on our own industries—the wool industry, for instance. They have already been pursuing considerably discriminatory measures against our shipping. I do not complain of this, though I wish that those who genuinely believe in the economic future of the Commonwealth would be a litle quicker to see the dangers to Commonwealth trade in the economic nationalism of other members, and a little slower to select as a whipping boy a United Kingdom Government striving, without much help, to save European civilisation and the West by pursuing a trade policy which is for the benefit not only of the Commonwealth but of the whole interdependent complex known as the Free World.
The American dangers are more serious, because they are on a larger scale. All experience goes to show that American recessions harm our export trade in advance, and to a larger measure even than local American industry. One wonders, too, about the repercussions on Europe. What is certain, to my mind, is that if each nation does what is economically right for itself in this economic situation, each may succeed in doing what is collectively disastrous for all. I would think that the time has come when the Governments of the West should cease to talk about interdependence and start to act on it, and when the Commonwealth, Europe and America should begin to look on themselves as partners rather than as rivals.
The last individual subject I wish to handle is Government expenditure, and here I would appeal to the public to try to face the facts of life a little
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more realistically, and to stop acting schizophrenically about a subject which does not admit of schizophrenia. During the past year, as no one knows better than your Lordships, I have had to face in your Lordships' House a number of difficult issues, and my colleagues have had to face an even greater number of difficult issues in another place.
We have been blamed because we have not given greater or wider subsidies to white fish, shellfish, or protection to shale oil, to farmers, to cotton and to boat-building; because we close uneconomic coal pits, lines and railway stations. We are constantly being pressed to pay out more money in wages and salaries—directly out of the Exchequer—to various very highly praiseworthy occupations; and over the weekend, also to the victims of criminal violence. We receive savage demands for more schools, hospitals, roads, housing, laboratories, colleges, and industrial research. We are sneered at because it is said we give so little for aid outside this country, or else, as the other day, because we cannot compensate some of our people elsewhere, who are suffering from the economic nationalism of others. One daily newspaper demands a space satellite. Another plausible and powerful group presses for a National Sports Council. Others demand the expenditure of one, two or three hundred millions on the retirement pension.
My Lords, most of these cases and demands have much to commend them. Some of them, I confess, I actively support myself, both inside and outside the Government. I do not doubt that many of them will be pronounced by history as fully justified. But when all this is coupled by a demand from the public for lower taxes and lower prices, coupled with violent abuse of the Government for not granting it all, I can only describe the total result as national hypocrisy on a gigantic scale. The fact of the matter is that by super-human efforts we reduced the total burden of rates and taxes and contributions from about 40 per cant. of the gross national product to a little above 30 per cent. I have not the exact figures with me, but I do not think that, for this purpose, exact figures matter. But now they are rising, and threatening to rise still further.

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My Lords, I do not in the least mind this, if it is what the public really wants. But what I must assert, surely, and protest, is that it is intolerable that we should be blamed at one and the same time for niggardliness in public expenditure and for the actual burden of taxation; for the failure to raise incomes still further and for the rise in prices which inevitably follows at intervals of never more than six months after incomes have been raised—unless, of course, this takes place in the atmosphere of improved national competitive efficiency which I have been pleading with your Lordships to recognise as a first priority. I must say, in all candour, and with the best will in the world, that if we gave in to the kind of expenditure publicly advocated by responsible spokesmen for the Parties opposite—both of them: by the Liberal and Labour Parties—it would not be very many months before we had committed ourselves to practically unproductive expenditure of two or three thousand million pounds a year—so rapidly do these figures tot up.
My Lords, I hope that I have not spoken with too much heat in this matter, but I have tried to do three things which, I think, have not been fully attempted in this debate before. I have sought to relate our economic policies to the general, social and political revolution in the midst of which we live. I have sought to give a forward glance at the totality of these policies as I see them, and to present them, not as a radical departure from the policies pursued over the last eleven years, or as a confession of failure, but as a legitimate development and continuation of them which will keep us all busy for many years to come. Moreover, although I have not minced my words on occasion, I have made a plea for a new examination of Parliamentary doctrines and established attitudes which will, I believe, if it is accepted, have a revitalising influence on our national and economic life. My Lords, I beg to move.
Moved, That the Bill be now read 2a.—(Viscount Hailsham.)
3.23 p.m.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, you live and learn: and I think that at last the noble
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and learned Viscount seems to have been learning as well as living. At any rate, he has treated us to quite a wonderful piece of oratory, obviously very carefully prepared. Except for the last few words, I felt on many occasions during his speech that the best thing I could do was to invite him to come over here. He seemed to have quite good ideas about some matters, but they can all be found in Socialist writings over the last 75 years. There is nothing new in them. When he comes to talk about what is intellectual hypocrisy, what is social hypocrisy and the like, I myself find it a little hypocritical to seek to divert the present trend in the country against the Government, after eleven years, by saying continually that it is all the fault of other people, and not of the Government, that we are faced with the difficulties and the economic position that now face us.
The whole lead-in of the Government represented opposite in 1950 and 1951, in two combined Elections, was to set up the very difficulties that the noble and learned Viscount now presents to us. When the noble and learned Viscount talks about putting sound things, sound statements, in place of the hypocritical, he at last finds himself forced into a cul-de-sac where he has to turn round and say, "Of course, we must not forget the presentation". Presentation! Why, you have been in power for eleven years largely on the presentation of, "Set the people free!"—free from all the things you are now putting up—and, the second time, on the presentation of, "You never had it so good". Then, at the end of eleven years, we have the economic position with which we are faced to-day. Really, I do not quite know whether the noble and learned Viscount has done this as a special essay upon his own, as a special piece of studied oratory for the purpose of getting hold of the leadership of, at least, the Bow Group—it may be that—or whether he thinks that there are going to be such economic, political and industrial changes (he seems to be feeling that very much in his heart) that he might in the end have to cave in and come this way, accepting the whole gospel and not only bits of it which will never work unless they are put together. I think that perhaps he had better think that one out for himself, while I get on with what I

21
had in mind and deal with the actual economic position.
The economic position of the country to-day is certainly very serious, and nobody who has listened to the noble and learned Viscount could put it at anything less than that. But when in the earlier part of his speech he made references to the Budget, the Finance Bill and the various attempts that had been made to deal with the problem, especially by taxation, I really could not understand what value he placed upon the Budget, the Finance Bill or the taxation proposals. What were the two main taxes? First, there was the capital gains tax. Anybody in the City concerned with anything of the sort, with similar experience in other countries, can tell you that that can be avoided as easily as clockwork. It is no real check at all. Then, what was the main tax regarding what he referred to as checking the consumption of the people? The sweets tax, and those taxes allied to it—the lollipop tax. Really, I thought that was a very poor effort, both upon the part of the Government at the time and upon the part of the noble and learned Viscount this afternoon. To our minds it does not bring any relief at all to the present economic position, and that is serious.
If we look at the facts and study them a little we find it is true to say that, during the whole period of government by the Conservative Party, our production in the country has increased overall by, say, one-third, which is an average of about 3 per cent. per annum. It is true that in this country we, under a Labour Government, made a much more rapid and successful recovery from war damage than any of the other countries in Europe, which have since been going ahead so fast. That is quite true, and it is in fairness both to our own Government of that time and to the present Government to take that into account. But I must say this. If we take any of the intervening years—1951, 1953, 1955 or 1956—up to 1960 or 1961, we find that the other countries have been going ahead more quickly than we have all the time in actual production.
Of course, you could say at once in answer to that, "Ah! There are certain devils in the piece". And who is the
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devil largely chosen by a Conservative capitalist? It is Mr. Worker. He is demanding too much in wages, they say, or he is not pulling his weight when he is at work, or he is not working as long hours as do the workers in the competitive countries. Of course, that dog will not run at all now, because there are, although they are still not yet, I think, quite as satisfactory as they ought to be, international statistics, and you need only to read the statistics of bodies like the O.E.C.D. to see that none of those charges is true. They are not true. If you look at, for example, the wage rates which have been measured in hourly rates by O.E.C.D., you will find that we have certainly made some increases. Belgium is very, very low: but, apart from that, the increases in nearly all the other main countries in Europe have been much higher than ours. I know it may be said that it depends to some extent again upon the point from which you start measuring with precision in the particular countries; but to say that our trouble is due to excessive wage demands by the people in industry in this country is simply not true, when one compares them to the known records from other countries in Europe. It is simply not true.
When one comes to look at the actual cost of living which affects this matter so much, what are the facts? The fact is, of course, that since 1951 the actual cost-of-living index has gone up by 40 per cent.; and having regard to the way in which wages have risen in relation to that, there is nothing abnormal about it. I grant this to the noble and learned Viscount: he said that it was natural that if expenditure went on rising all the time and costs went up wages would rise. He said, "Of course they will". But they have not risen to anything like the kind of threat which has been suggested by those who criticise Labour in this country. If you take the reasons for cost-of-living changes which become dynamic of wage increase approaches, who is more responsible than the Conservative Government? It is not merely what your food costs you, although that as a vital factor in your cost of living; but when you come to deal with the modern circumstances of industry, then you have also to find other costs. You have to find the people housing. The noble and learned Viscount mentioned it. He did

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not tell us anything about the results of cancelling the Rent Restrictions Act. Have a look over the years and analyse it, for ten or twelve years, and see how the costs have gone up to the working man, not merely if he is paying a higher rent, but also if he is one of those who wish to be, as all Conservatives as well as many of us want to be, owners of their own homes.
One can go out to-day, since the canceling of the Rent Restrictions Act, which has altered the whole basis of housing economic prices, and one can see builders building new houses. At the end of a road in Enfield, a very good residential road which I looked at the other day, there were three tiny houses built in one block. They had a couple of bedrooms and one sitting room—there was baldly anything in them at all; and not one of that terrace of semi-detached houses can be purchased for less than £4,500. If you look at the changes in the cost of leaseholds, you find the increases are simply fantastic, and the major part of it has stemmed from the creation of avarice in the people who gained by the abolition of the Rent Restrictions Act. That all goes into the costs of the couples who say, "We must have more wages. We cannot live like this".
Let us take rates. The local authorities' rates are dependent upon more factors than one. A great deal depends upon what is demanded by a local democracy and what is permissible upon any national policy in connection therewith. But there is also another thing, and that is the question of finance. How terribly this Government have mismanaged the finance in relation to local authorities! If the fact were really known, some authorities are still now so short that they are being driven to borrow for short periods abroad. The Treasury themselves are very concerned about that and what is happening; but it was the Government who closed up the ordinary public flow of money to local authorities; and the best values they can get at present are about 6 to 6½ per cent. on local notes or from any ordinary investor investing for a certain period. It all goes on the rates. It all goes on the extra claim for wages. Your financial policy in regard to the financing of local authorities has been fantastic in
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its stupidity. Neville Chamberlain was at least a good municipal man if he was not a tremendously successful Prime Minister, and when he set up the Birmingham Municipal Bank he said, "If this is Socialism, then I am a Socialist". What we need is a drastic reconstruction of the management of the peoples' credit for the provision of their actual needs, and then you would get far less disturbance in the industrial world than you get now.
Let me say this also: we hear all about every strike that happens, and I am bound to say that the strikes that have happened in the last few years were often confined to a limited number of industries which we know are important. Nobody wants them to happen, if he has got any sense, and we will do all that we possibly can to prevent them. But if you take the general picture of the country, with the 23 million people employed, and you take either the actual days lost or the hours lost over the whole year by stoppages of that kind, what do you find? They do not amount to more than two or three hours per worker employed. Yet it is used by some people in industry as a fundamental and major argument. Although I can understand it in one or two particular industries, I really am shocked at so much credence being placed on the statements which are made.
The fact is, of course, that in this country trade unionism is a very sensible organisation, and, as it is gathered in the Trades Union Congress, has not only had men who matter, men of integrity, men of industrial knowledge, but men who want to see the best thing possible done for their large membership and for the country as a whole. You will get in every organisation of such a wide character some who will not be of the best; but then neither are all the things for which the Government have been responsible always of the best.
So I add one more factor to the present situation. Listening to that very long but very wordy speech of the noble and learned Viscount—I am not complaining about that; it was probably a very good essay indeed, and I am going to read it with very great pleasure—I was thinking of what the pressures had been, and I could not help thinking this: that when prices rise in food, when

25
prices rise in home provision in general, what do you get? On analysis, we find that a lot is due to advertisement and pressure groups. This Government were responsible for introducing commercial television—although I have to hand it to the noble Viscount the Leader of the House that he was against it at the time—and commercial television is a fantastic repetition of advertisements. The noble Viscount spoke about too much pressure on the home market, but his Government have been as much responsible as anybody for exerting undue pressure on the home market. That is something that they will have to look at carefully before they finally decide what they are going to do with the Pilkington Report.
The general charge I would make against the Government is this. Without the proper controls this country could not possibly have made the recovery we made from 1945 to 1951 compared with other countries. Nor is the noble Viscount able to come to the House now with any general message without indicating that the people, industry and finance, have to be controlled in future. I am not quite sure whether all the noble Lords who support him from behind realise the extent to which the noble Viscount is to-day preaching that gospel and preaching it very forcibly. During the whole time of my membership of your Lordships' House I have argued from this Box that, without the right kind of controls to divert raw materials, labour and finance into the right channels at the right times, we shall not get the proportionate advance in exports to enable us to meet our balance-of-payments problem. We have argued that again and again, and noble Lords can turn up the speeches to confirm it. And that is what the noble and learned Viscount has had in effect to advocate.
VISCOUNT HAILSHAM: My Lords, I never said a word about control. I did not use the word and did not intend to use it. I think that when the noble Viscount looks through what I have said, when he comes to read my speech in the OFFICIAL REPORT, he will see that that is something I simply did not advocate. I say this not because I want to contradict the noble Viscount, but to put the Record right as to what I do advocate.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, the noble Viscount may be speaking, as he says, entirely for himself, and I like the courage of that. He must not find himself in a completely independent place, if he is going to stay in the Government. Disraeli settled that when he said "What is an Independent? An Independent is one upon whom no dependence can be placed". No Government will put up with too much independence among its members. But if we analyse what the noble and learned Viscount said this afternoon we shall find that he was advocating—what shall I say?—planning of a kind, and controls, voluntary or under compulsion. He was putting a picture which he knows in his heart we cannot reach without effective economic and financial controls, as we have always advocated.
I do not want to talk for long this afternoon. I am going to scrap a lot of the material I have here—there is any amount of it. The noble Viscount may be satisfied that, if nothing else has happened, his speech, quite original, skilfully deployed in language, has been the greatest divertissement to the debate that we were likely to have. Perhaps that was one of the objects of his speech. Let me say this to the noble Viscount. The T.U.C. have rejected the pay pause. The work of the Council which is to be set up will depend a great deal upon how far the Government are willing to meet the needs of the working population of this country by the right methods. If noble Lords read the speech made a week, or two ago by my noble friend Lord Crook on the objects of the National Productivity Year they will find a few mild warnings. If the Government want to get the working people with them, they will have to approach them much more in the spirit and with the skill with which Clem Attlee and Ernest Bevin faced the bankruptcy of this country in 1945, after the greatest slaughter and expenditure in our history. We gained support and co-operation which the Government have not yet been able to capture but which they might be able to get if they face the situation properly. I hope the noble and learned Viscount will have another "go", after we have had a chance of reading his speech. But there will be no cure of the situation until we have such

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controls as will put the right things in the right place at the right time for the needs of the country.
3.47 p.m.
LORD GRANTCHESTER: My Lords, I should like to congratulate the noble and learned Viscount, the Leader of the House on the picture he has set before us for the future. Most of us admire his speeches. If he can get over to the country in simple terms what he has been trying to say to us, he will have performed a great service.
It has been in the field of public relations that the Government have perhaps scored their greatest failure. They have been unbelievably dull in an age which is full of excitement and interest. This is not to say that I shall have no other criticisms to make of Government policy to date. It seems strange to be considering a Finance Bill detached, as it were, from its author. We are accustomed to men being more praised dead than when alive, but I am not sure that some of the praise showered upon the former Chancellor of the Exchequer is calculated to enhance his reputation. So I will content myself with saying that the opportunity given to him for rest and contemplation in the wilderness is not perhaps the worst trick of fate which could befall him. While giving the former Chancellor full credit for some notable success, I am afraid that I cannot congratulate him, as I did one of his predecessors who resigned, as a stout and firm opponent of increasing Government expenditure. I will quote some figures to substantiate this fact during the remarks I am making.
The danger of inflation, never far removed, was rearing its ugly head. Too often and for too long the sting has been taken out of inflation for those groups who secured frequent wage increases and for some other lucky or privileged people. A revolt was growing up; a revolt from the thrifty; a revolt among the women perhaps more than among the men; the women who try to build the only tangible material security in this unpredictable world, a nest egg of savings. These people started registering protest votes, perhaps without any more positive purpose but with a sound instinct that they must protest against a danger threatening to overwhelm them
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by sweeping away all their carefully made plans for the future; for the education of their children as they thought best, and many another cherished hope. Here at last, surely, was a heaven-sent opportunity for any Chancellor of the Exchequer. He should have mobilised every man and woman with a balance at the bank or at the Post Office; every man and woman with a deposit with a building society or with an insurance policy; and shown himself determined, with their help, to grapple with inflation, with debased money, debased standards and collective dishonesty. I hope the new Chancellor of the Exchequer will make this his first task.
My Lords, the necessary measures which any Government must take to do this are by now well known. They are, I need not remind your Lordships, first, to stop printing money in increasing quantity. The phrase, "licence to print money" has been bandied about recently. Only the Government can print money, and they should not be given a licence to make it cheap by increasing the quantity. Second: if inflation is to be fought the Government must cut their expenditure, which they would have to do if they could not manufacture the money to pay for extra expenditure. The third necessity is to cut tariffs; those protective duties which enable "unnatural" profits to be made by suppressing competition and keeping prices artificially high. My Lords, we must ask the Minister to give us some specific assurance on these matters on behalf of Her Majesty's Government and to convince us that, as a first priority, war will be declared against further inflation.
In this connection, whatever theorists may argue as an abstract proposition, over the centuries no acceptable substitute has been found for gold as a standard or store of value. Am I right in assuming that no progress has been made in international discussions on the unsatisfactory gold exchange standard? If not, should not the proportion of gold held for the sterling area reserve be increased? It is significant that France has, I believe, recently added to her gold reserves by selling other securities; and in France her citizens hold their own reserves of gold.

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Then, my Lords, I hope the new Chancellor of the Exchequer will undertake a review of the whole structure of taxation and use the opportunity to remove some misunderstandings in the mind of the public—for example, one which I find very prevalent: that their National Insurance contributions pay for the Health Service. Perhaps he might find a more appropriate label for National Insurance contributions which would not be misleading.
A review is very urgently necessary of the whole structure of taxation, for the additional reason, surely, that if we do not enter the European Community it will be necessary to diminish the burdens we carry and to give our people the chance to go out into the world to build more trade in the face of intensified competition. I will say no more on this matter, for perhaps it comes within the orbit of the debate we shall have in this House on Wednesday.
My Lords, turning to the Finance Bill itself from the wider considerations associated with it, I would suggest that there are matters of substance and drafting which might with profit be debated in your Lordships' House because, in their complexity, they seem to me to go beyond the taxation rights reserved to another place. I will comment only on three provisions of the Bill: Clauses 10 and 14; Clauses 16 and 24; and Chapter II generally, which imposes the so-called "speculative gains tax". The clauses I have mentioned, 10 and 14, and 16 and 24, seem to me to cut right across the professed principles of the Conservative Party, and, I may say, also of the Liberal Party; the first, in imposing retrospective taxation, and, the second, in taking power further to breach confidential relationships. In spite of what the noble and learned Lord, the Lord Chancellor, said in another place, that charge, I think, still stands. The confidential relationship between, for instance, accountant and client, should be respected as much as that between solicitor and client. Perhaps we might hear a little more on this matter.
I shall be told no doubt that the sins in this Bill are "but little ones". My Lords, sins are not little because they affect only a few people or even only people whose actions we dislike. Sins of any kind against principles we hold
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break down respect for honourable government. Although non British nationals are not subjected to the same inquisition as British nationals, in these days of exchange of information between Government Departments in different countries these little acts of unwisdom have a wider effect than is often supposed in downgrading London as a financial centre, Where formerly principle was rated higher than the avoidance of loss by a sacrifice of principle.
So far as the speculative gains tax, so called, is concerned, the Chairman of the Stock Exchange has spoken of its ill-effects in exaggerating fluctuations in market prices. I am very glad he is to speak to us this afternoon, so I will limit my comment to another point. If the tax is good, why should the individual investor, or, if you will, the individual speculator, be penalised and the institutional investor or speculator be exempted? The scale of operations of the institutions as distinct from the number of transactions is far larger than the scale on which private investors can operate. Surely if a market is to be a free market and not a "rigged" market it must reflect the result of the greatest possible number of individual choices. That is the sine qua non of any market that is claimed to be a free market. The fact is that this tax is a thoroughly badly conceived tax, particularly in the manner of its calculation. I suppose it is a case of political opportunism which, so far as I can judge from the critical remarks of the opposition Parties, has already miscarried.
I want to recall some figures, if I may, to substantiate the charge I made earlier in my speech about ever-increasing public expenditure. Central and local government expenditure in the year 1950 was some £4,500 million; in the year 1960 it was £8,400 million, and this figure was £1,000 million up on the figure for 1958. As the noble and learned Viscount the Leader of the House admitted, it is still increasing, and I do not agree the percentages he indicated of expenditure to the gross national product. Since 1950 the fiduciary issue has been increased by some £1,000 million; this is the extent to which the Government have exercised their licence to print money. In the ten years between 1950 and 1960 the value

31
of the currency has depreciated by one-third. I am quite aware that there are economists who will tell me that these figures are not correlated; still, in the absence of any evidence that the velocity of circulation of money has decreased (which is most unlikely), or that the national debt has been otherwise reduced (which I think clearly is not the case) I should be most surprised if depreciation did not follow almost automatically from the greater use of the printing press.
Unfortunately, the other place seems to have abrogated or neglected its duty as the "watch-dog" of the public purse. It is not a popular rôle, and spending other people's money is such fun and generosity at the expense of others so pleasant. I will give but one example of the lack of check on spending. The cost of maintaining the North Atlantic Treaty Organisation is a very heavy burden on its members. The accounts are said to be audited. Not long ago at a meeting of the Defence Committee of Western European Union I asked whether the auditors had made any complaints about wasteful expenditure. Upon inquiry, the interesting revelation was made that the auditors confined their scrutiny to checking that the total expenditure was apportioned among the member Governments in the agreed percentages! While mentioning defence, it would appear from such figures as I have that British expenditure on defence is nearly double that of the German Federal Republic; but I may not have the latest figures.
It is, of course, right and proper that the pennies should be watched, for the saving of pennies will take care of the much needed pounds. But as we con template the vast levy upon our people's earnings and savings to be legalised by this Bill, we may well ask some deeper questions. In the recent debate on broadcasting the noble and learned Viscount, the Leader of the House, whose speeches, as I have said, I so often admire, said that when the moral standards of the people might be affected it was impossible for the Government to stand aside unconcerned, or words to that effect. Well, I wonder whether looking at the whole picture we can feel assured. Of course I am speaking of government as government. Her
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Majesty's Government may be better than the average, but for the purpose of my argument that is not the point. In our lifetime have we not seen Governments guilty of acts which only the most debased or demented individual would contemplate? The collective conscience, if there is such a thing, is not very sensitive; for that for which all are responsible none is responsible. When individuals surrender too much of their responsibility to the man or men, even of their choice, the moral rot sets in. If I may paraphrase the words of a prophet of old when the people clamoured for someone to take over their responsibilities, he warned them:
"This will be the manner of man that shall rule over you. He will take your sons and your daughters and appoint them to make his instruments of war. He will take a tenth of all you have and you shall cry out."
Now, my Lords, it is nearly four-tenths of all that we have. Never has so great a concentration of power been placed in any hands. This enables Government to operate in every field of human activity. Unfortunately, in the hands of Government the search for truth becomes a search for power. Today the plea is for more and more production or expansion because, it is said, with more production, more money, more wages can be paid. This in turn should swell the gross national product and by maintaining the rate of the percentage of the gross national product which the Government take Government can still further increase their power.
But what happens as production becomes over-production? Already the cry is for the Government to give the economy an injection to boost it. For a change, why do the Government not turn and have the courage to say to the people, "We are not miracle workers. With your money we can make weapons ever more fearful, or, if you prefer, may-be we can find drugs that will do the job of destruction painlessly. We can appoint teachers for your children, but because we employ them you often suspect them. We can appoint doctors and nurses who will prescribe medicines and treatment for you, but because we employ them you do not fully trust them". The truth is that man was not made to live without responsibility, and if he tries the end will be disaster. Why not go to the country and say, "Why not

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try keeping a little more of your money and have the fun of doing a little more for yourself? You will find you do many things much better and more quickly, and you will be happier (because the Government are not always pushing you about". My Lords, is that too much to expect from Government?

COMMON MARKET NEGOTIATIONS
4.12 p.m.
THE MINISTER OF STATE FOR FOREIGN AFFAIRS (THE EARL OF DUNDEE): My Lords, with the permission of the House I should like to repeat a statement being made in another place by the Lord Privy Seal on the progress of the Brussels negotiations.
"A meeting of Ministers took place in Brussels from July 24 to 28. At the first session on July 24 they resumed discussion of problems arising for British domestic agriculture. They considered the extent to which the Community's arrangements for two commodities—pigmeat and eggs—give producers an assurance of an adequate return. Problems which would arise for these commodities during the transitional stage were also considered. The Working Party on pigmeat was instructed to continue its work on the basis of the ministerial discussion. They will resume their discussion on both these products at a later meeting.
"Ministers also had an initial discussion on the transitional arrangements for horticulture.
"The major part of the meeting—from July 25 to 28—was devoted to the problem of imports of foodstuffs, mainly cereals, meat and dairy products and sugar, from the Commonwealth. As I have already told the House, all seven Governments have agreed, in the context of an enlarged Community, to take an early initiative to secure long-term agreements on a broad international basis for the principal agricultural products. At the same time the members of the Community have accepted the importance of reaching an understanding on the purposes of such agreements and on the points to be covered in them. We also considered together the question
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of price and production policy in an enlarged Community, which would have a major influence on the volume of imports.
"They discussed the position which would anise if these wide international agreements did not prove practicable. The Six Governments have stated their readiness to conclude agreements, with the same purposes, on a common basis with those countries who wish to do so, in particular the Commonwealth countries. The consideration of arrangements for the transitional period continued.
"As the House knows, the problems which arise in this sector of foodstuffs are the most difficult in the negotiations. They are complicated by the fact that the Community's price policies are still in the course of development. We must seek to strike a balance between the interests of farmers in an enlarged Community, including our own, and the interests of traditional exporters, in particular the Commonwealth. In so doing we must recognise that patterns of trade cannot and will not remain static, but that the arrangements reached must promise to work out fairly and must not damage the essential interests of all concerned.
"In the intensive discussions that have taken place during the past week we have made some progress in each of the sectors I have just mentioned. They did not however reach agreement, and the discussions will be continued at a further Ministerial meeting this week, beginning on Wednesday, August 1."
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I am much obliged to the noble Earl for repeating this statement which has been produced in another place. But it tells us so little that we have the same complaint all the time. I was most interested to read the replies by Mr. Soames, the Minister of Agriculture, to oral Questions in another place on the 25th, when he said, I think three or four times, that we made a statement at the beginning but we are not declaring any policy while negotiations are going on—no policy at all. It seems to me that the country is being led up the garden, and we are not being advised properly as we go along

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so that the country is in a state of mind to come to a decision. I regret it very much.
LORD REA: My Lords, I should like, on the other hand, to welcome what the noble Earl has said. I think the noble Viscount who leads the Opposition knows that, unfortunately, we do not see eye to eye with him on this matter, and we should like to wish the Lord Privy Seal well. Towards the end the statement says that patterns of trade cannot and will not remain static. Bearing that in mind, I hope that the Lord Privy Seal will not have too much pressure brought upon him by one section of the community which may see some disadvantages in the immediate future, when those of us who support the Common Market think those circumstances will come out in the end to everybody's advantage.
LORD SILKIN: My Lords, towards the end of the statement the noble Earl told us that the parties have not reached agreement. That statement has apparently been anticipated in the week-end Press and we are told that there is a grave danger of the whole of the negotiations breaking down. I should be most grateful if the noble Earl could give us some assurance as to whether or not that is likely to happen. Evidently, this disagreement has been known ever since last Saturday, and the inference which most of the Press have drawn from that is that negotiations are likely to break down towards the end of the week.
LORD BALFOUR OF INCHRYE: My Lords, your Lordships are going to have a two-day debate on this subject, but may I ask one supplementary question, because it appears as if the issue of priority for the Commonwealth or priority for Europe is one which will have to be decided positively. My question is: Can the Minister give an assurance that our negotiators will not in any way depart from, or whittle down, the pledges which have been given as to what must constitute unacceptable terms for this country? Can we have an assurance that there will be no alteration in the general pledges which have already been given in that particular direction?
THE EARL OF DUNDEE: My Lords, I am sure your Lordships will realise that I am anxious not to say anything which might add to the difficulties of my right honourable friend the Lord Privy Seal when these negotiations are resumed on Wednesday. The noble Lord, Lord Silkin, has referred to prognostications in the Press that the negotiations are likely to break down. I have perhaps an advantage (or it may be a disadvantage) compared with him, in that, having been in the Scottish Highlands for the last week-end, I have not seen these prognostications in the Press.
LORD SILKIN: I can give the newspapers quite categorically—the Sunday Times, the Observer and, this morning, the Daily Express.
THE EARL OF DUNDEE: My Lords, I prefer to stick to what has actually been done by the Lord Privy Seal than to speculate, or join in newspaper speculation. The Lord Privy Seal and his colleagues spent most of their time last week on the most important question of finding a solution in respect of temporary agricultural products from Commonwealth countries which will, on the one hand, safeguard, both in the immediate future and in the long term, the essential interests of those countries; and, on the other, meet with the requirements of the European Community that the solution should be compatible with the principles of the common agricultural policy of the community.
In reply to my noble friend Lord Balfour of Inchrye, the Government abide by their undertaking which was given nearly a year ago, on August 3, 1961, in another place, that no agreement will be entered into until it has been approved by Parliament after full consultation with other Commonwealth countries.
LORD OGMORE: My Lords, I should like to express my appreciation of the skill and the patience of the Lord Privy Seal and the expert staff who are advising him in Brussels. They deserve all our gratitude. May I ask the noble Earl this question? Is he aware that New Zealand is making a tremendous sales drive at the moment to find a new market for her products in South-East Asia, and will it not be a very good thing for the people of South-East Asia

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to get some of the products that Europe has in plenty?
THE EARL OF SWINTON: My Lords, may I ask a question, or perhaps put a point? We have all been looking forward to the debate that will take place on Wednesday and Thursday, rather on the assumption that the Government would be able to give the House a great deal of positive information on which noble Lords would be able to express an opinion, without the House being invited to give any formal approval to a policy which, obviously, they cannot be asked to approve until the policy is finalised in accordance with the Government's undertaking that any proposed agreement is brought before Parliament. But at the moment the whole negotiations are, as it were, upon a knife edge. If you are dead against the Common Market, you would want to encourage everything to break down; if you think we have to go into the Common Market at any price, then you can always make that kind of speech. But if the middle-of-the-road opinion is taken up (as I feel is the position of the vast majority of the people, of all Parties, who are extremely anxious to get an agreement, if such an agreement is possible consistent with our central policy and our undertakings), might it not be better that the debate which is to take place should, in present circumstances, when it seems it can hardly serve any useful purpose, be curtailed as much as possible until we are in a position to have a great deal more positive information upon which we can usefully express an opinion, without prejudice?
VISCOUNT HAILSHAM: My Lords, I have great sympathy with what the noble Earl, Lord Swinton, has just said, but this must ultimately rest with the House. I do not know what the right answer is. As I say, I have a great deal of sympathy with the noble Earl's point of view, and I will explore through the usual channels exactly what we can do about it. I will say, quite frankly, that hitherto I have always taken the view that this is an unavoidable debate, although there are dangers to which the noble Earl has drawn attention, which I am sure individual noble Lords will be anxious to minimise. But if there is a general view to the contrary, I shall be very receptive to any suggestions made.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I think I ought to point out that the Opposition, which I have the honour to lead, has been very co-operative in delaying and delaying this debate on the Common Market. There has been no full debate on the Common Market in this House such as there has been in the other place. Finally, we agreed to the two last days of this Session so that we could discuss it properly. It is no fault of ours that we have not had the debate we ought to have had, and that fact must be taken into consideration. The noble Earl, Lord Swinton, is quite entitled to make the point he made, and I am not complaining about it; but there are other people to be considered, the people in the Commonwealth. I think they ought to know something about what we feel, whichever way we are thinking—whether we are in the middle-of-the-road position, as the noble Earl said; whether we are in the position of thinking that we should enter the Common Market at any price, or whether we are seeking to stand upon the pledges given to the Commonwealth. They are entitled to know this, and I think we are entitled to put that position to the public and to the Commonwealth at large in this House, as has been arranged.
VISCOUNT HAILSHAM: My Lords, I hope I did not give the impression that I was in any way criticising the Opposition, or any other section of the House, when I replied to my noble friend. I was simply saying that I sympathised with the point of view he was putting forward, but that the matter is one for the House; because the Government could not curtail debate nor would they desire to do so. At the same time, the considerations which my noble friend put forward are considerations which would naturally occur to the Opposition, as well as to the Government. Indeed, I would think that even those who were opposed to entering into the Common Market would be very anxious that, whatever else could be said about their attitude while negotiations are in progress, it should not be said against them hereafter that what they had said had prejudiced the negotiations, until they had reached a stage at which they could usefully be discussed.

FINANCE BILL
4.26 p.m.
Debate resumed.
LORD ALDINGTON: My Lords, may I begin by asking for the indulgence which your Lordships customarily extend to those who are addressing the House for the first time? I shall do my best not to overstrain the tolerance and understanding which is customarily accorded to maiden speeches, but this will not be as easy to-day as it is sometimes, because there is, unhappily, an important area of sharp controversy about financial and economic policy. If I cannot wholly avoid that area, I will do my best not to be aggressively controversial, though I must say that the two noble Lords who last spoke have tempted me greatly—a temptation which I hope I shall resist.
Before I come to the main subject of my speech, I should like to say that, like my noble friend Lord Ward of Witley, I am making my second maiden speech in this Chamber from the same geographical place. If I may say so, I feel the distinction of making my second maiden speech opposite to the noble Earl, Lord Attlee, who was kind enough to listen to me on the first occasion; and I think the noble Viscount, Lord Alexander of Hillsborough, who leads for the Opposition, had to undergo that ordeal as well. That speech was about demobilisation policy. I thought it was almost impossible to be controversial about demobilisation policy, but I had underestimated the imagination and nimble-footedness of my then Leader, Mr. Winston Churchill, who, as noble Lords opposite will remember, made that day a different speech from that which we expected of him, so I found myself in controversy with my Leader. I do not think this will happen to-day.
My Lords, I propose to concentrate my remarks on this theme of faster growth of Britain's wealth. Of course I realise the danger of this expression "growth", for what we want is true growth. Quality in this context, as my noble friend the Leader of the House said to us, is every bit as important as quantity. Nevertheless, quite unblushingly I admit to being in favour of a faster rate of growth in our economy than we have achieved in recent years. In my view, that should be a major aim of Government policy, as I
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am glad to know it is. In the years of which my noble and learned Leader spoke we have expanded our output and our wealth, and we have, in addition, done many other things which many other countries have not done. We have had full employment; we have had a tremendous expansion in our social services; and we have consistently over the years invested in, lent and, indeed, made outright grants to, Commonwealth countries and underdeveloped countries elsewhere. But we have not—and we should face this, I think—expanded our wealth as fast as some people have desired, and many now desire, particularly the younger generation; and we have not expanded our wealth as fast as some other countries in quite different circumstances have been able to do.
I am not concerned this afternoon, my Lords, with the past, the reasons for which are well known to your Lord-ships. It is my simple belief that we now have a very good chance of getting a faster rate of growth without inflation. I say a very good chance, and not a certainty, for it is surely dangerous to be arrogant about economic affairs. I should like to tell the House, quite briefly, why I think there is this very good chance; and perhaps in doing so I may make one or two suggestions about how the chance may be made even better.
First, our economic base is now sound. By that I mean the pound is strong, prices are getting steady, and there is no excessive strain on the nation's resources; indeed, there is some sign of the reverse. Our reserves are much stronger than they were, and I would say much stronger than they look, for it seems to me these days—and I speak as someone trained in banking—that we should take more account of what I might call the overdraft facilities we are able to negotiate with the International Monetary Fund. Our trade gap is much better than it has been, and far better than it looks in what are, I think, the very misleading figures that have been issued for many years by the Board of Trade, which I think I am right in saying quote the imports c.i.f. and the exports f.o.b. We thus get a quite false picture of the real balance of payments in our trade, at a time when it might be important to get a true balance. But I mean more than this when I talk about

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a sound base, for there have been built into that sound base some factors of real continuing strength. Industry, largely because of the increasing competition with which it has been faced, both at home and overseas, has itself become increasingly competitive; and not only, I think, increasingly competitive but increasingly flexible. The general acceptance of the necessity for an incomes policy is also, in my belief, a factor of continuing strength. I shall refer to both of these points in a moment.
My second reason for optimism is related to the increasing competitiveness of British industry. There is, I think, a greater awareness throughout the country of the importance of efficiency, and I believe an increasing awareness in Government circles of the part they can play in encouraging it. The competitiveness in private industry has not, of course, come about without some help and influence from the Government. The Restrictive Trade Practices Act, the removal of excess demand at home, the reduction of tariffs—all these have helped, and I would guess that there is much more that can be done and will be done. There always will be more to do. It is my belief, too, that the National Economic Development Council will also help efficiency in industry as a whole. I have seen, working in industry myself, the value of the Iron and Steel Board and its activities to the more thorough thinking by managements in the iron and steel industry. I am sure that the proper use of the material produced by "Neddy", as we have learned to call it, will help management generally in the same way.
Another step to greater efficiency which I welcome is the measures that have been taken recently to sharpen up the efficiency of nationalised industries. We cannot expect our national economy to be fully efficient if our basic industries—coal, transport and power—are not themselves fully efficient and fully efficient in economic terms. Having served in another place for four years, as the Chairman of the Select Committee on Nationalised Industries, I am aware both of the tremendous difficulties involved in running these industries and of the real achievement made under the direction of very able men, some of
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whom are now in your Lordships' House, and one of whom I see sitting opposite me.
I should like to add my humble welcome to a step taken within the Government and announced in the newspapers to-day; I refer to the important changes in the organisation of the Treasury, and the appointments that have been made. I think these changes will greatly help efficiency generally. I cannot help feeling that the two Joint Permanent Secretaries of the Treasury, who are about to end such distinguished careers, must themselves have had a very large part to play in these proposals that look to be so apt for the present problems, and so well designed for the future. There are, of course, many other ways in which the Government can encourage efficiency. Their education programme is an obvious one; the tax system is another. Talking about taxes, I hope that, as the months go by, those taxes which quite manifestly add to the costs of industry—for example, the increase in the oil duty—will be re-examined.
My third reason for confidence is that we have the resources necessary for growth. There has been a tremendous increase in industrial capacity in recent years. It can be argued—indeed, I think it will be argued; and rightly—that we shall need a still higher rate of investment in the future. For change, about which the noble Viscount the Leader of the House spoke, inevitably requires a great deal of capital to pay for it. Certainly we have been increasing the proportion of our resources going to industrial investment in recent years, but we know that in America, for example, the workers in industry have far more capital equipment behind them than they do here. If we are to have increased investment, we must first have increased savings. The absolute essential, if we are to have the increase in savings, is that the pound itself should be sound. Those who have doubts about the general health of Britain's economy should, I believe, pay more attention to the enormous increase in personal savings which we have seen in this country, particularly in the past six years. It is here on this point, as well as on other points, that we can see how false it is to try to argue that it is possible to have growth without stable prices and a stable pound.

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For some years now I have argued that there is one source of savings in industry which has not been fully tapped, and that is what I might call the small saver, particularly the wage earner. In 1959, with a group of colleagues, I helped to produce a report entitled Every Man a Capitalist. I still consider that the Government can do more to encourage further savings by wage earners, and the investment of those savings in industry, whether on a unit trust principle or in some other way. That would increase the savings available for industry and might, as a result, reduce the amount of surplus for which the Chancellor at present feels bound to budget; and it would at the same time link more of our countrymen more closely with the prosperity of great industrial firms. There is, I think, one resource of which we have been constantly short since the war, and that is skilled manpower. I was therefore very glad to read what the Prime Minister had to say on July 26 about the training of young people and of adults.
My fourth reason for confidence is the wide acceptance of the idea of an incomes policy. There is nothing new, I think, about the idea that incomes in the nation as a whole should not rise faster than real output in the nation as a whole. There was nothing absolutely new in the idea of the pay pause, although I think it is fair to say that the determination with which it was pushed through was new. The immediately new idea is the Incomes Commission, which has already been christened "Nick". I do not know, my Lords, whether it is wise or not that a Commission of this importance should have a "Nickname". But I welcome the setting up of this Commission and all that my noble Leader has said about it. In my belief, the National Incomes Commission is designed to make the nation richer, and not poorer. It is not a weapon against any body of our people: it is an imaginative, new instrument designed to tackle the most intractable problems in a modern, closely-knit society. Too long, perhaps, we have hoped to escape from that problem.
I have two more points that I should like to make, I hope without overstraining your Lordships' patience. My next
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reason for confidence is the overseas trade position. The rate at which we can expand our exports does, of course, govern the rate at which our economy can grow. Exports are increasing, have been increasing for the past several months, and, I hope, will go on increasing for several months more. Whether they will continue to do so afterwards depends partly on our continued competitiveness, about which I have great hopes, and partly on world trade conditions—for, as we have been reminded this afternoon, growth is indeed international.
So we come to the importance of the right Western international policies, and particularly to the importance of the right policies about world liquidity. I was very glad to read what the Prime Minister said on Thursday last about the importance of finding the right method of financing increased world trade. None of us in your Lordships' House who is connected with industry would deny that there is around us in industry and in financial circles a feeling of some uncertainty about the future. It would be stupid to think that the policy of Her Majesty's Government, or of any Government, is alone responsible for all the feeling of uncertainty which exists outside this country as well as inside it. Part of that feeling of uncertainty is due, no doubt, to the protracted—and necessarily protracted—negotiations for entry into the Common Market; part to world trade conditions and to events in the United States; and part, too, I think, to the fall-off in orders, particularly in the heavier side of our industry—and, connected with this, the undoubted fact that at the present the return on investment in our heavy capital goods industries is not high.
There is both a short-term problem for us at home and a long-term problem, too. The short-term problem is when to remove some of the remaining squeeze weapons and additional taxes imposed to create a down-turn in activities at home. The long-term problem, which, I think, is just as important, is to make it more certain that the highest rewards in industry can be earned from those activities which expand the nation's productive wealth and are responsible for increased exports, rather than from the very important yet rather more subsidiary activities.

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My last reason for optimism relates to the question: has the British nation the will to grow, and with it the willingness to accept the consequences of faster growth? I think there are signs that our nation has this will and this willingness. The nation as a whole wishes to be on terms with other countries in improving our own standard of life and in helping other nations to improve theirs. I believe that there is a greater willingness to try to understand the real facts of economic life. The Press, television and so on, have all helped in this, and I believe that my right honourable friends in another place and my noble Leader here should take advantage of this in the way in which they publish to our people the basic facts about our changing economic circumstances. There is a Treasury Bulletin for Industry which many of us in industry read carefully. I think there should be a Treasury Bulletin for the nation.
My Lords, I believe that it is a mistake, and dangerous, to foster false conflicts in arguments about economic affairs. It is my belief that stability of the pound and of prices, and of our economy at home, is not in conflict with the faster rate of growth that I and many others want. My Lords, four-and-a-half years ago I was speaking in another place in an economic debate, and I made the same point. A well-known satirist who wrote then in a weekly paper described me as a "mugwump", with my "mug" on one side of the fence and my "wump" on the other. I do not think that that satirist had recently looked at his dictionary. A "mugwump" is defined in my dictionary, first, as a great man or boss. That was most inappropriate. In my Concise Oxford Dictionary, it is defined as "a person affecting superiority to party politics". On this occasion, my Lords, I have done my best not to affect superiority to Party politics, but simply to be fair.
4.48 p.m.
LORD LUCAS OF CHILWORTH: My Lords, it falls to my pleasant lot to offer to the noble Lord, Lord Aldington, who has just sat down, and who, if he will not mind my saying so, is known to most of us affectionately as "Toby Low", congratulations upon an outstanding maiden speech. It was not controversial so far as I was concerned—principally,
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perhaps, because I agreed with most of what he said. It gives me pleasure to congratulate him and to welcome him here because, as he so rightly says, he comes from a background of banking and industry. I myself come from a background of banking and industry, but my experience of banking was on the other side of the counter to his. But it is a pleasure, and a very rare pleasure—all too rare a pleasure for your Lordships' House to-day—to listen to an informed speech by a banker and an industrialist. There was a time when, on the debate on the Finance Bill, the speakers were all bankers and industrialists; there were very few politicians and very few economists. That was the day when we heard sound sense talked in your Lordships' House upon these great issues. I should like to voice a minor protest about our bankers and our industrialists being elevated to the peerage and then absenting themselves from this House: secure, I suppose, in honours for past services, but never thinking that they have a duty to the country in the future. So I am so sincere when I say to the noble Lord that we all hope, I am sure, that we shall hear him many times in the future—highly controversial, I hope, as I know he can be, but always well-informed, as he has been this afternoon.
I intend to follow the noble Lord upon this question of growth, because I think that is the one thing that confronts us to-day. In many of these discussions, and taking into consideration international factors, we lose sight of the fact that we are, for our size, the greatest industrialised country in the world. It is by industry we live, and at the present time our industries are in sore distress. I must be frank. While I share the admiration of the noble Viscount the Leader of the House for the former Chancellor of the Exchequer, I never agreed with his policy, and I think he was largely to blame for the impasse in which we find ourselves to-day. When I say, "He was to blame", I mean he was to blame in not standing up to the real culprits; and, my Lords, I will be equally frank with you and tell you who in my view they are, or were: the Treasury. It is the dead hand of the Treasury, who from first to last, ever since I have taken any interest in industry, finance or economics, have

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always had a restrictionist outlook. I have said this in your Lordships' House: whenever they have wanted to do anything they have always gone to see what the children were doing and tell them not to—"You cannot do this; you must not do that"; and if there is one thing this country desires to-day and out of which only can we live, it is an expansionist policy.
Since this Motion was put on the Order Paper there have been changes, and radical Changes, in the Treasury—of course, nothing to do with the Government changes, we are hastened to be assured. All I can say is that it was a very fortuitous coincidence, and I wish them well. But I suggest to the noble Viscount that there are one or two lessons we have to learn. We have to learn them, the Government have to learn them, and the Treasury have to learn them, because while the noble Viscount put a great deal of responsibility upon the people of the country, the Government are collectively responsible for the unhappy state of industry to-day. I am not making a Party political speech. Industry has a lack of confidence in the Government, and, to use a popular expression, they are punch drunk.
My Lords, let us go back twelve months to last July. While Cabinet Ministers were stumping this country exhorting industry to work harder, to become more competitive, to decrease their costs and increase their efficiency, what did they do? The Chancellor of the Exchequer put a tax of twopence a gallon on oil, after the Minister of Power had assured the oil industry that the Government would do nothing of the kind. That put up the production costs of the steel industry and the chemical industry alone by £38 million. The noble Loud, Lord Aldington, knows that, and what it added to transport costs and to the cost of living. There was the 10 per cent. regulator that could be pushed in and pulled out at the Chancellor's whim. That was after something in the region of another £30 million was advanced to the motor industry alone to go into various areas of this country and expand, and expand for the purpose of mopping up pockets of unemployment. And as soon as they had laid their plans,
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what happened? The purchase tax on their goods was increased by 10 per cent., which prevented them from getting rid of their output.
Now, my Lords, what are we to make of that? That has been the restrictionist attitude that we have had to contend with—the Paish doctrine, that what we wanted as an economic policy in this country was the creation of excess capacity. All right, my Lords, we have got it; and what are we going to do about it? We were saying that always the slogan went forward that there was too much money chasing too few goods. Now we have too much capacity chasing too few orders. We are told we must increase production. We cannot increase production until we have increased demand that will provide the orders to be fulfilled. I am sorry, my Lords; this is rather elementary; it is fourteen-year-old schoolboy economics; but it has not dawned upon the Treasury that once you start cutting down home consumption you succeed only in putting your export costs up; and that is the trouble to-day. Our exports in volume are going on very nicely, but we are losing money on them; and the home market, which has always had to find the profits to subsidise the export market, is stagnating. Because it is stagnating nobody will invest his money, and you get that vicious circle all the way round, because we have been tied to a policy of damped down demand.
There is no such thing in an economy such as this country's as excess demand; there is only shortage of production. It is by the natural ambition of people to acquire more goods and have a higher standard of living that the demand is created which production can fulfil. No, my Lords; there was no excess of real demand. Where the excess came in was a fictitious excess of incomes and the really scandalous behaviour of sections of the banking world who threw over all sense and reason and started a hire purchase system in this country which eventually succeeded in losing them the best part of about £25 million.
LORD LINDGREN: It serves them right!
LORD LUCAS OF CHILWORTH: It
serves them right, I quite agree. It is not only the avaricious worker who is at fault in demanding higher wages. It

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paid, in an era of supply being short of demand, for an auction sale to go on in this country between the employers, to pay high wages. I can only hope that NIC is going to look after that. I do not see how it is going to happen, because there is no sanction; but do not forgot that to-day the unemployment figures which are published by the Ministry of Labour are entirely fictitious. They reflect no true estimate of the employment of labour, because if you added to the totally unemployed registered at the Labour Exchange the under-employment and the concealed unemployment in factories it would come to an alarming extent. But I agree with the noble Lord and the noble Viscount that world growth is what we have to aim at.
My Lords, I do not want to touch upon the international situation, because I do not understand it completely, and I do not think there are many people in the world who do. The noble Viscount who leads the House said something to the effect: If we all deflate, what of growth? One of the evils of this world is that every country wants to deflate, to keep the value of its currency up, irrespective of the fact that it might beggar the internal economy to do it. Every country wants cream at the front door, and it does not matter whether the larder is bare. It is not a case of keeping up with the Joneses, but of an international keeping up with the Kennedys. How long that is going to last, I do not know; and I do not think the President of the United States knows, either.
There is one other criticism I should like to make. This is really the only point at which I mention the Finance Bill. Of all the stupid things for a Chancellor of the Exchequer and a Government to do, the bringing in of the capital gains tax in the manner they did was the most stupid. I mention this only in passing, in order to make a point, because the noble Lord, Lord Ritchie of Dundee, the Chairman of the Stock Exchange, is going to follow me. This tax was brought in allegedly as a piece of social justice. As it lost the fixed income long-term investor millions of pounds, I cannot quite see where the social justice comes in. If it was intendded to buy over the trade union movement, it was the silliest thing to do, because
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the trade union movement is far too hard-headed to be bought over to serve on a national economic council by a gesture such as that. "Never buy your opponents; always encourage your friends", is a good motto for a position of this kind.
I would ask the noble Earl who is going to reply one question. The Prime Minister, in his speech in another place, made a passing reference to restrictive practices. Molony has come out with a Report, which I shall only mention because I expect that it will be debated in your Lordships' House in the near future and which says that the safeguard of the shopper is competition. Yet the Government appear still to be burking the issue of resale price maintenance. Why? Is it vote catching? Is it to pander to the small shopkeeper? Because I could argue that resale price maintenance is the last remaining thing on the shopper's list to be done away with.
May I suggest to the noble Earl what the Government will have to do? This is a crucial point. We cannot afford to delay for a sufficient period to save the face of the Government. It is useless for the Prime Minister to sack the Chancellor of the Exchequer and in the next breath say that, of course, his policy will go marching on. We must stimulate demand in this country. We must get back the confidence of industry. Without industry we cannot survive for very long. We must give up this "Pull and push, Stop and go," economic policy. We cannot slow down a huge machine like British industry to the depths it is in to-day and think that it is going to start up again overnight to be the same as it was four or five years ago. We cannot afford the time. I hope that the Government will take notice of this. As the noble Lord, Lord Grantchester, said, they have lost the confidence of industry and of the electorate, and that confidence is going to take a lot of getting back. I hope they will do so, because industry cannot go on at the tempo at which it is now moving. An expansionist policy is the only policy by which this country can survive. As a chart in The Times showed the other day, the purchasing power of the pound has gone lower and lower, because we have followed a restrictive policy instead of an expansionist one.
5.7 p.m.
LORD RITCHIE OF DUNDEE: My Lords, in the first place, I hope that I may be allowed to associate myself with what the noble Lord, Lord Lucas of Chilworth, has said in congratulating the noble Lord, Lord Aldington, and to express the hope that we shall have the pleasure of hearing him in your Lordships' House on a number of occasions. I propose to keep the House for no more than a few moments on one particular point. I thought it was only right that there should be stated exactly whore it-he Stock Exchange stands with regard to the tax on short-term gains, the cause of our deep anxiety and how it could largely be remedied. Probably our views are fairly widely known, but I think that it is right that they should be placed on (record in your Lordships' House in the course of this important debate this afternoon. Therefore, if I may, I should like to state briefly the history of the matter.
Your Lordships will recall clearly that it was almost exactly a year ago that the then Chancellor of the Exchequer announced, among other things, that he proposed to introduce in due course a short-term gains tax. At that time I am sure he indicated that he had in mind that such gains would be treated as income. There is no doubt that the moment this was said, there was a great deal of anxiety in the City, in the business world and in the Stock Exchange in particular. Our anxiety in the Stock Exchange was chiefly based on the question of what form the tax would take. We come to the latter part of last year. Early in December, we in the Stock Exchange prepared a memorandum. Some of my colleagues and I called upon the Chancellor of the Exchequer and met him and some of his colleagues. We placed our argument before him. The burden of our argument was an urgent plea that the tax should be imposed in such a form as to do the least possible damage to the marketability of securities dm this country. We explained that the least damaging form of tax would be a flat percentage rate of tax. We assumed that it would not be at a penal rate. And we explained that the most damaging effect would be caused by bringing the gains into the scale of income tax and surtax.
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We felt that we were justified in saying this and in considering ourselves as exports in some respect. At least, we had some expert knowledge of the probable effect of the tax—we, who deal day in, day out, year in, year out, in stocks and shares. We really do know what we are talking about.
I have said that we recommended a percentage rate of tax at a non-penal rate. What is the effect of the present proposals? The effect is this: that a, man who pays no income tax or a negligible rate of income tax because his income is small pays no tax ox a negligible rate of tax on what might be a quite substantial capital gain; whereas a man with a high rate of tax pays at a rate of close on 90 per cent. I am fully aware that there are many people in all walks of life who are in favour of a tax on gains of this kind; many arguments can be marshalled in favour of it; but, quite frankly, I can find none in favour of a tax which has the effect of stopping business altogether and which indeed defeats its own object because it produces little or no revenue. Because that is the effect, my Lords. The man who perhaps earns a large income, who perhaps has capital in industry, will not pay large slices of tax on his large capital gains. He will not pay any tax at all because he simply will not deal. No one is going to be so foolish as to take a risk with the prospect of keeping 10 per cent. if he is right. That is the result of this proposed tax. As I have said, little or no revenue will come in, business will not have been done, and the market, which needs the business in order to keep turnover going to keep the market free, will have been deprived of it.
May I, for one moment, just turn to one other aspect of this subject. It seems to many of us in the City, and certainly in the Stock Exchange, that the moment of time chosen to introduce the tax in this form could not possibly be worse. It comes at a time when we in the Stock Exchange in particular are striving to restore to its full vigour the international aspect of our market. We have the prospect of the Common Market; we are engaged from time to time in conferences with the other Stock Exchanges in Europe and elsewhere, and we feel, my Lords, that this is something which, if brought in, is

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going to do most serious damage to our efforts. May I say, in passing, that I am fully aware of the fact that residents abroad are not liable to this tax? There, again, I have the feeling that quite a number of people are going to discover that they have a lot of extremely useful aunts and other relatives in places like the Republic of Ireland and elsewhere. I am fully aware that this tax is not payable by residents overseas. But that is not the point. The point is that the market in which we are trying to get people from overseas to come and deal may well become an unreal and emasculated market.
I think I have said before that the City of London did not reach its pre-eminence in the past through taxation and restriction; quite the reverse. The merchants and bankers came to London from Europe because of its freedom. May I just say this in closing, and I say it with great sincerity and with the greatest emphasis I can command? I am not making a piece of special pleading for the Stock Exchange—that is to say, for those of us who get our living by dealing in stocks and shares; I am not making a piece of special pleading for stockholders; but I am making a most urgent and sincere plea to Her Majesty's Government to reconsider at this eleventh hour and to alter the method of imposing this tax so that the invaluable machine of the stock market can work smoothly once again.
The noble Lord, Lord Aldington, said just now that change requires a great deal of capital. Where is it coming from? Let there be no misunderstanding: this is not an affair which is just the concern of some business people, of "someone in the City"; it is a matter which will have the most deep effect on industry in its essential raising of capital for development. It is a matter which will affect the national economy, and, in varying degrees, directly or indirectly, every man or woman in this country. My Lords, put the tax on a reasonable percentage basis. Honour would be satisfied, revenue would be obtained and the free market in securities in this country, which is of enormous importance to us all, would be restored.
5.16 p.m.
LORD STONHAM: My Lords, I would join with others who have spoken in
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congratulating the noble Lord, Lord Aldington, on his second maiden speech in this Chamber, delivered, as have so many recent speeches, from almost the same place as an earlier maiden speech seventeen years before. The excellence of the noble Lord's speech did not, of course, surprise any of his former colleagues, and I look forward to hearing from him again on many occasions. I was particularly pleased by his reference to the position of the nationalised basic industries, to which I myself should like to refer a little later on in my speech. We are, indeed, all indebted to him for his work on the Select Committee on the Nationalised Industries with whose conclusions I find myself in almost complete agreement. Indeed, I could support almost all the noble Lord's reasons for optimism in the speech he has delivered were it not for the fact, made so clear by the noble Lord, Lord Ritchie of Dundee, that in almost any situation the Government tackle, when attempting to do the right thing they almost always seem to do it in the wrong way. Therefore, the only optimism that I could share with the noble Lord, Lord Aldington, is with the grounds for it; but it will be realised only when we have another Government.
The noble and learned Viscount, Lord Hailsham, delivered a speech which was, I feel, compounded part of basic truth and part of heart-felt appeal. I hope that his speech will be read, understood and appreciated throughout the country, but I hope he will forgive me for saying that I felt all the time that the address at which it should be most fervently and continually delivered was Admiralty House; and that he might well have been speaking to the Cabinet. At least, I hope he was; particularly when he called for integrity, resolution, common sense and clarity; and particularly when he said that we must "snap out of it if we want to go places." If anyone in this country needs to be told forcibly and continually to "snap out of it if we want to go places" it is the members of Her Majesty's Government. Because, whatever the noble and learned Viscount said that we can agree with, about the kind of situation he would like to see—and which most of us on these Benches would like to see—the situation from which we start, a situation largely created by Her Majesty's

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Government over the last eleven years, is a very different one. Because of that it makes us view his hopes with a particularly jaundiced eye.
It seems to me that to-day the economic situation is dominated by two political questions. The first is: who is Prime Minister? If course the present position surely is similar to the Ramsey Macdonald-Baldwin situation in the early 1930's, when we had two Prime Ministers, one with the title and the other with the power. The second political question is, will the Prime Minister, or Prime Ministers, do what the noble and learned Viscount wants—serve Britain? Or will they try to buy votes. And I think that is still anybody's guess. Because no one could pretend that the re-issue of a few modest ideas which the Conservative Party first produced in 1947 will add a pound's worth to our production or exports. Even the Daily Telegraph called the proposed new policy a "half-groomed cat."
It is scarcely credible, despite the protestations we have heard, that Mr. Selwyn Lloyd would have been sacked if the Government did not intend to pursue to some extent an inflationary policy. Yet consider this extract from the speech of a Conservative M.P. which was made as recently as last March:
"Keep on with the Pay Pause. Keep down home demand with a tough Budget. In 1959, we threw away the advantages gained from tough policies. The Government will have a lot to answer for if we make the same mistake in 1962."
That was said by Mr. du Cann who has just been made Economic Secretary to the Treasury. Apparently he has been promoted for advocating the very policy which Mr. Lloyd was sacked for pursuing. No wonder The Times City page the other day carried a headline "Confusion worse confounded"! And it is small wonder that among industrialists, as has been made clear by almost every speaker in the debate, there is to-day less confidence in our economic future than for many years.
As for the workers, their living standards have been actually reduced in the last twelve months. The cost of living has gone up 6 per cent. and their earnings, their paper earnings, by only 2½ per cent. Unemployment, about which the noble Lord, Lord Lucas of
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Chilworth, said the figures were unreal, stands at over 400,000, and if you add the numbers of those who will soon be leaving school the total may well reach half a million. The recent slackness in bank lending is another sure sign that industry is not so keen to borrow capital for investment purposes. The question of confidence has been mentioned several times, and I do not think it was ever more clearly shown than in The Times account of Mr. Maudling's meeting with the National Production Advisory Council on Industry. According to The Times, the meeting resolved itself into a demonstration of little or no faith by industrialists in the immediate future under present Government policies. And The Times added:
"This is the most certain indication yet of the true state of industry and Mr. Maudling cannot have failed to have been impressed by the note of despondency he heard."
Another newspaper reported on the very rough handling which the Members of the N.E.D.C. have given Government Ministers, particularly on the kind of soporifics that were put before the Council, in particular, one paper submitted by the Treasury on "General Obstacles to Economic Growth". The Government are the biggest obstacle to economic growth, because they have persistently pursued policies which have handicapped and stultified industry. But in his speech last Thursday in another place, Mr. Macmillan said nothing at all which had any bearing on increased production or exports; and he gave no sign that he is aware that, under his leadership, our export record has been the worst in Europe. All we get is the frequently repeated platitude that wages must not rise faster than production. But for two years the Government have deliberately held production down. Why talk of incomes rising with production if, through sheer incompetence, you dare not allow production to rise?
This stagnation is not the fault of British industry. For seven years they have suffered the frustrations of stop and go, of artificial stimulation followed by arbitrary restrictions. How can they have confidence in an Administration which, by insisting that the way to cut costs is to reduce production, flouts basic economic principles? How can they believe in a Government which can never make a complete plan and cuts even a partial one before it is fairly started? I

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should like to give what I regard as an important example of the way that Government policy, or lack of it, hamstrings industry. For that I would draw your Lordships' attention to the acute problems arising in the great electrical manufacturing industry, which occupies a key position in the national economy.
The Report of the British Electrical and Allied Manufacturers' Association indicates that last year they sold £1,700 million worth of products and exported more than £300 million worth. The industry is our third largest exporter and stands third among the world's exporters of electrical equipment. As the supplier of more than one third of our entire home capital equipment, its prosperity and efficiency will in some considerable measure determine the country's future prosperity and economic growth. Developments in electronics and the progressive requirements of the electricity supply industry make necessary major investment in plant and research.
Over the last ten years this has involved capital expenditure of £380 million, plus a research and development programme which is now running at £70 million a year. That is an indication of the size of the effort which is being made by the industry to maintain progressive efficiency. Indeed, the leading firms can and do compete successfully anywhere in the world. But unfortunately their earnings expressed as a percentage of capital employed are declining catastrophically. In seven years they have dropped by 50 per cent. and are now at such a low level that they cannot finance major modernisation and research and expansion out of earnings and cannot look for capital on the market because the likely level of interest is too low to attract investors. We have in fact arrived at the position where, unless there is an improvement, further major developments which are vital to the nation's economy cannot take place.
This problem, of course, confronts other basic industries, and it has arisen because the Government have encouraged less essential industries which, because their earnings are higher, can get all the capital they need. The publicly owned electricity supply industry is charged with the duty of providing a substantial part of its capital needs out of surpluses. Parliament has been
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given details of the total net surplus which must be earned in the next five years, and it is recognised that prices charged for electricity must be adequate to ensure this. Indeed, tariff increases have been forecast. Electrical manufacturers in the private sector are not, and of course should not be, able to solve their problems in this way. But the Government must provide the framework within which efficient firms can earn sufficient surpluses to finance badly needed capital developments and to attract further investment capital.
The first essential in this framework is stability. It is significant that electrical machinery is among the first industries selected by the N.E.D.C. for national planning and their recommendations may be looked for by the end of the year.
However, it is worse than useless to approve a plan and then subject it to the process of stop and go. These key industries which depend on technological progress must know something about expected home demand for at least five years ahead and they must be able to plan their programmes accordingly. There must be reasonable assurance that once the plan is approved it will be allowed to proceed without major change, because long-term investment will not increase while the future is a Government contrived lottery. For the last ten years manufacturers of domestic electrical appliances have been the whipping boys for the Government's economic errors. Sudden arbitrary changes in purchase tax and hire purchase conditions have wrecked their basic home markets and thus endangered exports. The recent reduction in hire purchase deposits has been an encouragement, and it has given them a chance to heal their wounds and build up again. But they need assurance that the present levels of deposit will be maintained. I say deliberately "maintained", not "reduced", not "increased", because an unforgivable pre-election free-for-all would do as much damage as the heavier restrictions which would inevitably follow it. British industries of course cannot expect immunity from changes in world trade, but they have a right to expect a stable Government policy within which they can play their full part at home and abroad.

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The second essential in the industrial framework is abandonment by the Government of a dear money policy as almost the only escape weapon in balance-of-payments difficulties. A 7 per cent. bank rate is a desperate and expensive form of surgery, which would be quite unnecessary if we kept British industry in a healthy condition through proper planning. Moreover, just because they cannot afford high interest rates it hurts most the major technological and basic industries on which our whole future depends. The need for stability and access to capital at reasonable cost are common to all major industries, but there are special problems which will become particularly acute if we enter the Common Market. One of these is the manufacture of generating plant and transmission equipment for the electricity supply authority, whose need in 1966, four years hence, will be double the present level. The demand will not only be greater but different, because most of the orders will then be for generators not of 60 but of 500 megawatts. For these the Government agency, the Central Electricity Generating Board, will be the sole customer, and thus they, and not the manufacturers, will have the entire decision about the demand.
The whole of this anticipated demand can be met by the four British firms who alone have the plant and the technical resources to produce generators of this size. Their total manufacturing capacity will be adequate for these anticipated requirements. But in any one year only perhaps three out of the four would get an order for a major power station. In a five-year programme they will get two orders each. So far, so good. We have the plant and presumably it will be employed. But suppose, when we join the Common Market, the Continental giants come in. If, for example, A.E.G. or Siemens get an order for a major British power station, then the whole pattern of demand in this industry will be disrupted; and, of course, outside Europe there are few potential overseas purchasers for stations of this size.
The point is that if our home market is to be open, then the countries of the Six must also be truly open—not just open on paper. I think we should ask for proof of this before believing that
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it will be so. Indeed it was recently made clear by the countries of the Six that even within the Common Market now, the time is not yet ripe for the abandonment of the "policy of preferring the national supplies of major items of plant". Our supply industry is nationalised; the Continental ones, apart from France, are not. Will it be our policy to put our contracts out to European tender and will the Six really do the same, or will this be just another one of these international agreements where only Britain keeps to the rules and the others smilingly evade them?
It is said that nothing concentrates a man's thoughts so much as the knowledge that he is to be hanged. British industry, I am certain, is ready and able to accept the challenge of the Common Market. But some British industries who fear that they are about to be hanged want to be sure that they are going to have a fair chance to fight for their lives. We must not go into Europe with handicaps of our own making. One handicap under which we suffer in competing with Continental manufacturers is the banning of certain co-operative agreements which are banned under the Restrictive Trade Practices Act. Of course the Act is necessary and beneficial, and everybody supports it; but I think there is urgent need for looking again at the somewhat narrow definitions in Section 21 of what can be regarded as the public interest.
Recently we had to pass a Bill to legalise certain wholly desirable arrangements among home timber growers; and in industry there are many similar cases of arrangements which, in the broad sense of the term, are in the public interest but are at present barred by the Act. It was apparently drafted so as to make the question of public interest justiciable. But this has been so in other matters for many years and the Monopolies Commission have always been able to make up their mind on this point. So I think that here is something that can be looked at again, if necessary by means of a suitable amendment or, in the case of agreements which the Government themselves are convinced are proved to be necessary in the public interest, that they should support the industries concerned in convincing the court that they are in the public interest.

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I submit that if the Government really believe in, as does the noble and learned Viscount, Lord Hailsham, and if they are really concerned for, our country's future, they will rely not on vote-catching gimmicks but on British industry. They will restore shaken confidence by announcing a firm determination to advance production by 4 per cent., or, if it is possible, even by 5 per cent. a year, on lines which are being worked out and which I hope before long will be recommended by N.E.D.C.; and that they will give a pledge that if the pressure of world economic events brings currency difficulties they will not stop the plan in a panic and impose a dear money policy again, but that they will go the other way, our way, the only sensible way, by limiting imports of those things we can best do without.
I trust, too, that they will ascertain the particular difficulties of different industries and do their best to remove them. Above all—this should really be put first—if you are going to harness the complete thought and activity and goodwill of the whole country behind the effort, then when, according to circumstances, rewards are available or sacrifices required, the Government will see to it that they are fairly shared by the Whole community. I think it was implicit in Lord Hailsham's speech that in many ways these are exciting times. Exciting times demand bold and exciting policies. If the Government cannot provide them, they should give place to those who will.
5.40 p.m.
LORD BARNBY: My Lords, we have had an enjoyable analysis from the noble Lord, Lord Stonham. May some of his points be an inspiration to the new Chancellor of the Exchequer! The noble Lord properly criticised aspects of Government policy. That is our privilege in this House. I was surprised, however, that in his overall condemnation of the Government for impeding industry during the last eighteen months, he did not seize on the criticism which some of us advanced from this side of the House, that it might well be that they have been misled into thinking that shutting down on the home demand might increase the export demand, because in fact that is one of the problems which is clearly debatable.
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One or two decades ago it was customary Finance Bill as not worth while intervening upon, since this House has no power of revision on a Money Bill. But to-day things are changing. A long list of speakers has shown that we intend to retain the privilege of this House to express its views on financial policy, indicating at this moment assent for or dissent from what has come out of the wisdom of another place in the Finance Bill. We have heard an exposition from our noble Leader, a speech which was full of the lucidity and fluency to which we have become habituated. I myself enjoyed very much the analysis of the climate of thought in the country which he saw fit to make, and the sentences which he used appealed to me very much. He said that we need integrity and common sense rather than doctrinaire orthodoxy; that we may be suffering from rigidity in industry and inefficiency; but that the Government's policies would not be motivated by popularity but by the facts of life. Well, for the rest, his speech covered, in general terms, the main aspects of thought in the Bill. There have been several speeches dealing with the wader financial policy, and at a moment when a new Chancellor of the Exchequer has taken office it is open to all of us to raise such points as we think might have been dealt with differently in the past.
It is my intention, briefly, to refer to a few particular points. The first is in regard to depreciation allowances. It has been urged from many quarters that, supplementary to initial and investment allowances, there should be more generous statutory depreciation allowances. This has already been recognised in North America and in Canada, and generous concessions have been given to particular industries, in particular to the textile industry. It is obvious that this will stimulate managements to make replacements. This is justified by the higher speed of mechanical invention, which brings about inevitable obsolescence of machinery much more rapidly than the statutory calculations on which our taxation system is based. This, of course, will increase competitiveness, and, in turn, will reduce the number of bodies employed in any particular task.

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The matter of purchase tax has been so strongly pressed from many quarters, both inside and outside Parliament, that I think there is no need to say very much more about it now. Basically, to increase purchase tax on essential clothing and to give a reduction on semi-luxuries is the most astonishing political procedure. It cannot be based upon financial reasons, because the actual receipts as budgeted for show a reduction rather than an increase. I would declare my interest in the textile industry, where this policy is resented very much because we believe it is against the interests of the Government in their drive to increase exports. I should like to quote the following resolution passed by the National Association of Textile Trade Unions:
"That this Association deplores the recent increase in purchase tax on clothing. Being opposed in principle to any purchase tax on clothing, it regards the increase as indefensible and likely to have a detrimental effect on the textile industry in present circumstances. Accordingly, it calls upon the Government to abolish the tax."
I hope that that will come tinder the eye of the new Chancellor of the Exchequer.
To turn now to the Restrictive Trade Practices Act, an Act which attracted so much opposition in this House as well as in another place, some of its clauses undoubtedly operate in a detrimental way in many industries. Again I declare my interest in the textile industry. In the wool textile industry, for instance, it has compelled the abandonment of sensible agreements which gave stability to the industry, and this has now brought about confusion. Factually, the circumstances are that for an amount of l½d. a pound of wool manufactured there has been this disruption; it aggregates a maximum of 6d. on a suit of clothes. Can that be declared an exploitation of the consumer when it disrupts an industry?
It leads me to make a point which was mentioned by the noble Lord, Lord Ritchie of Dundee, in regard to capital gains tax. I think we are all grateful that the noble Lord, speaking with the authority he does, has come along to this House to-day and given his views as to what the effect of that tax would be. I refer to it because I believe there is a climate of reasoning in the country
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to-day which tends to condemn the profit motive in industry as a Whole. How is it possible, as Lord Ritchie of Dundee said, for companies who cannot make a reasonable profit to go to the market and get fresh capital with which to give increasing employment? It is a most dangerous philosophy which is gaining strength in the country. There must be a separation of profits, otherwise how are we going to gat replacement of machinery in order to maintain efficiency?
We have heard much to-day about export incentives, and that exhortations and more practical incentives would bring more promising results. It is true, as was said, that if there were blatant examples of subsidy there might be a retaliation. But, surely, there are incentives that could be embarked upon without the risk of a hampering retaliation. I can think of one the other day. There was a loan of 60 million dollars by the United States to Brazil for the import by Brazil of merchandise manufactured in the United States. It was a loan, free of interest, for 40 years. There was also a subsidy of £1 million on a ship built in France. Surely those are export incentives. In yesterday's paper I read:
"Australian exporters have earned well over 1 million in rebates of payroll tax, through the export incentive scheme introduced last year by the Federal Government. Those who substantially increase their export sales are entitled to the rebate."
Exports below cost produce no benefit to the Exchequer. Too often such exports attract an exports credit guarantee, which may well increase the cost of export.
It appears to me that we must abide in patience to see what are the overall economic intentions of the Government in the re-arranged thinking on finance. Supporters of the Government certainly respect the vigour with which they have applied the necessary measures to improve our balance of payments, however great the unpopularity of those measures. But no facts deny that the terms of trade continue in our favour, and therefore are against our customers who in the main are primary producers. The balance of payments appears to be in our favour, thanks to the attraction of overseas funds. Our invisible earnings appear to be shrinking in a way that dismays us. Our costs of production

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continue to rise. Perhaps our thoughts should turn to the increasing costs of some aspects of the Welfare State. One thing, at any rate, seems sure: industry as a whole is materially flagging. The F.B.I. questionnaire proves that. Our order books are running down faster than new business is being booked, and unused capacity is increasing. The consumer is becoming shy of new commitments and even of day-to-day spending. Indeed, this is a setting for inspired imagination by the new Chancellor of the Exchequer.
5.53 p.m.
LORD HAWKE: My Lords, my noble Leader has given us a fine oration, full of the most forward-looking philosophy, which I shall enjoy studying in greater detail. I do wish, though, that he would just have examined for himself the economic consequences of deflation, in an economy financed to such a large extent by the profits of trade and industry. I think he might find this rather alarming when he looks at it more closely. I did not hear the whole speech of the noble Lord, Lord Aldington, but I arrived in time to discover that he was an optimist, and that he thought growth was compatible with the strength of the pound. I was pleased to hear that. In fact, I should have thought that the strength of the pound was not compatible with lack of growth, in the long run.
Finding myself alongside my noble friend Lord Ritchie of Dundee, carries me back nearly fifty years, when I think he was right-back and I was left-back in our school football eleven. We were a very fine pair. Every word he said about the capital gains tax is, in my opinion, entirely true. I have always been one who was willing to have a capital gains tax, in exchange for a complete revision of the surtax rates on the higher incomes; and, moreover, a capita] gains tax at a reasonable rate. In the result, we have a capital gains tax at absurd rates, and we have not got the all round revision of the surtax on the higher incomes. Therefore I look at the situation in much the same light as the noble Lord does himself, and I can confirm from experience in other commodities that the one thing that stops sharp fluctuations in the market is to have a body of speculators who are willing
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to step in at short notice, either selling short or buying long, who even out the fluctuations for the ordinary buyers and sellers.
In our ordinary economic affairs, we are all activated by the same motives. We want the growth, and at the same time we want to banish all the bogies, the exchange crises, unemployment, rising prices and so on. So far nobody has succeeded in attaining this happy state of perfection, and it is just possible that it is unattainable. Nevertheless, we want to go on groping, because we feel that just around the corner the happy state may exist. It is rather like trying to discover which came first, the chicken or the egg, the growth or the monetary expansion.
In our present circumstances, there appear to be roughly two schools of thought, and eminent economists are lined up on each side. One says that if you ensure that the home market is subdued, industrialists will cut prices, their profits will be squeezed, they will be forced to seek markets abroad and so secure our exports and the balance of trade; and, at the same time, the squeeze on the profits will make them fight vigorously against any unreasonable wage and salary demands, so the incomes will be kept down. The other school believes that by reducing the turnover of industry you are adding costs to each item produced, and that, so far from being a stimulus to exports, this is a handicap; that the squeeze on profits will diminish Government revenue and, in the end, enforce increased taxation, and that this will, in its turn, act as a stimulus to wage demands, which will have to be met to an extent that will bear much harder on each unit of production than larger wage demands would bear in a state of full-capacity production.
The position is still further complicated, by the fact that the foreign holders of sterling would like to pick bits out of the economic arguments on each side—in other words, they want to have their cake and eat it. Like all of us, they want the best of both worlds. Moreover, it does not mean that there are not occasions on which each theory can be right. The Treasury advisers appear to have plumped for the first theory in recent times, and we are all well aware

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of the advantages that are claimed for it But it has brought disadvantages, too, and I personally think it is high time to go on the Other tack. Rightly or wrongly, the late Chancellor was identified with the first doctrine, and I greatly welcome the new Chancellor whom I suspect to be more sympathetic to the other doctrine. He is certainly a man who can hold his own in economic arguments with any of his advisers.
He has a colossal task. What should be his first and main preoccupation? As I see it, his first priority is to get the international payments position straight—and I may tell your Lordships that that comment was prepared before I read the Sunday papers. I believe that the late Professor Keynes is on record as saying that in the post-war world we should be unable to allow free capital movements across the exchanges. If he did give that advice (and I am not quite sure), then we have ignored it, and we have not created a system by which his advice can be ignored. We have at the moment a position whereby, if a foreigner removes his capital from a country, thus reducing its foreign debt, or if one of its own nationals invests abroad, thus increasing its assets abroad, then that country faces a so-called balance-of-payments problem, and if these transactions are carried on in sufficient volume then it faces a crisis. Moreover, that crisis can be revolved by the Chancellor of that country putting up the interest rates so far within his country as to attract an equivalent or larger number of foreigners to lend money back.
In the United States, there is a very favourable balance of trade compensated by most generous gifts and loans to other countries. Yet because, at the same time, American nationals are investing freely abroad and some foreign funds are being repatriated from America for investment in more profitable fields, the dollar is suspect. The United States is no poorer for these transactions. It is relieved of foreign debt, and it is piling up assets overseas. That the dollar should be suspect in consequence is an absolutely Gilbertian situation, and shows that our arrangements for moving capital across the exchanges have not kept pace with the increase in the amount of movable capital in the world. The simplest solution,
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which I have advocated to your Lordships before now, is all-round revaluation in terms of gold; but President Kennedy is incapable of persuading the American people that this does not mean a devaluation of the dollar, and that solution is therefore out.
The international bankers have been busy working for the second-best solution of agreements to "take in each other's washing." But this is very much a second-best solution, because the international bankers are a very nervous lot; and as soon as they accumulate rather more of another nation's currency than they really want they start peering over their shoulders at the state of that country's economy, and in the end they are tempted to interfere in its working. We must have a means of settlement which is quite independent of the action of any country's Treasury, and one which is known to be available in sufficient quantity to meet all foreseeable capital movements. Otherwise, we shall have to decide that Lord Keynes was right. The first task of our Chancellor should be to try to work to that end. He can certainly hold his own in any economic company, and I hope that he will be able to bring home to the international banking circles the absurdities of the present situation, and help to devise a better solution.
My Lords, the next most important problem, as I see it, is that of the increasing riches of the industrialised countries and the increasing poverty of the rest. In many cases this may be due to their own fault. Sometimes it is due to sloth, mismanagement, dishonesty and, perhaps, undue fecundity. But commodity prices are low, and if they rise we start to talk about the risks of inflation, and steps are taken which have the effect of combating that rise. To take our own case, at the moment our heavy industries are slack; the backward countries cannot afford to buy what we could produce. The situation produces a great challenge to the second half of this century. Opinion in the world is turning towards the long-term commodity agreements, of which I, for one, have always been a protagonist, but in regard to which I never got much change out of the Treasury in this country.

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Then, to turn nearer home, we cannot allow the continuous drift of our population towards the West Midlands and the South-East of England, bringing soaring land values and the like. Somehow, we have to see that people can live and work happily in Scotland, the North and Wales. Is it not time that another major Government Department was despatched out of London, not to be replaced by an equal number of office workers from another source? Our communications North and South are pretty good: East and West, they are not so good. Is it not time that we had a major twin-track road from Cardigan Bay to the East Coast, along which could be located some new towns to absorb the population of Birmingham and the Midlands? Then, we have to look at methods of re-deploying our declining industries. The length of time of apprenticeship in our country seems to be very extravagant. Is it too revoluntionary an idea to think of a man who may be qualified both as a welder and as a bricklayer? So far, I do not think such a person exists.
Matters of this sort will inevitably present a challenge to the Government for the next ten or twenty years, and it is in this kind of field that Her Majesty's Government must think big. They will not recapture the interest of the youth of this country with a programme based on remedying the fancied grievances of inexperienced shoppers who will not listen to "mum". My final message to the Chancellor is: for Heaven's sake make the Treasury act in time, and not wait until they can prove on paper that their proposed action is right! By the time they have collected the figures to prove their case, the situation has changed entirely. Every economic step in this country has been taken too late. It may be necessary to drive on the brake and on the accelerator, but you must be quite certain that you do not drive downhill on the accelerator and uphill on the brake.
6.8 p.m.
LORD CHAMPION: My Lords, in his unusual and quite remarkable opening speech the noble and learned Viscount the Leader of the House challenged us to abandon mythologies and to abandon doctrinaire proposals. In a very modest and humble way, I
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propose to accept that challenge. May I join with the noble Lord, Lord Stonham, in welcoming the maiden speech of the noble Lord, Lord Aldington? I feel fairly sure that I heard his maiden speech many years ago in this Chamber, but in what is called, for some peculiar reason, "another place". I heard him with great respect—not always with agreement, of course, but certainly with respect; and I am sure that he will always be heard with respect in this House because of the knowledge he brings to bear upon the subject on which he speaks. He said something with which I am in absolute agreement: that our wealth is not growing fast enough. It is our job, I think, to examine how to increase the rate of growth of our wealth.
How can we increase our prosperity? It seems to me that there are three essentials for prosperity and for increasing the rate of growth. The first of these is a very steady expansion of production. I know this is much easier said than done. Indeed, in any sort of economy the difficulties are enormous. Even in Russia, where they have a much stricter control over their economy than we have here, they have not been able to have a perfectly steady rate of growth. They run into difficulties, have had to make adjustments, and so on. But so far as is humanly possible we must try to avoid the yo-yo-like dance to which our economy has been subjected over the past eleven years—inflation and deflation alternating with all their evil consequences; the upward pull of the string of the yo-yo into inflation amazingly coinciding with the approach of a General Election, to be followed by a sharp, downward push into deflation when the Election is over. I regard this as a cynical use of power only to be justified by a political Party which thinks, with Louis XIV, "L'état, c'est moi." "The country, it is us" seems to be the attitude of the Tory Party in this connection.
The sort of expansion of production that we must have is not merely the increase of production which is offset by an increase in labour, although, of course, a decrease in unemployment is always to be welcomed; but what we must have is an increase in productivity. As I understand the figures in the Economic Survey, they show that the

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rise in production in this country over the past two years has been 2 per cent., and the rise in productivity over that same period has been nil. In other words, the greater amount of production has been wholly accounted for by the increase in the amount of labour employed. That is just not good enough. We shall not double our standard of living in 25 years or some lesser period if our production increase does not vastly outstrip the amount of labour employed to secure it.
Now, how can we increase our productivity? I think there must be a central decision as to investment priorities, and if we remain afraid of direction of our resources by physical controls, it will have to be done by large-scale tax incentives of a discriminatory character. If you will not have one, you must have the other. Have we got to work harder? In some ways, yes; but I believe chiefly with our brains. So often in this connection we hear the wail, "If only the British worker would work harder, like the Germans," or somebody else, and so often it seems to me that it comes from men standing with their backsides to the fire and the coffee (or something stronger and more comforting) in their hands. What is really required, I think, is to use our brains in management of men and resources to cut out the wastes in our industry. Restrictive practices by men and management will have to go, for so often in the case of labour they stem from a fear of unemployment, and if persisted in to such an extent as to restrict productivity they may well lead to mass unemployment again. But restrictive practices are not confined only to labour. In management they stem from the feeling: "Why should we bother? We're all right, Jack, as we are". So often that is the attitude adopted by management in this connection, and that, with restrictive practices adopted by the trade unions and men, must somehow go. We must shake management out of their ideas in that connection and persuade trade unions to adopt more up-to-date policies.
In our economy there is too much hidden unemployment caused by firms holding on to skilled workers, and too little thought devoted to the requirements of labour mobility. Labour mobility I regard as an essential in a
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dynamic economy. If we are going to stand still, let them all remain where they are. If we are going to have a rate of growth, new ideas which will give us exports, we must have the way to ensure that men can be transferred from this job to that job, to the new job that is essential. In this connection there must be redundancy agreements that are really satisfactory, and some way of re-training the redundant worker so that he will fit into the new type of job.
The second essential for our prosperity, as I see it, is a fair distribution of the product of our industry. Here we have to decide how to divide the product between employees and the remuneration of capital in such a way that it is not only fair but is demonstrably seen to be fair. Roughly, in the past salaries and wages on the one hand and the payments for the use of capital on the other have been kept in some sort of balance by the economic forces which played upon them. The power of the trade unions and men to demand higher and ever higher wages was limited by the pressure of large numbers of unemployed and by the profitability of the industry in which the men were employed. The man standing at the gate seeking a job and the slumps in industrial production which decreased the owner's urge to keep his business in production provided the check upon the power of the trade union. The rapacity of the capital owner was kept in check by competition both nationally and internationally. There was a struggle for the market in which too many goods were seeking too few purchasers holding the wherewithal to purchase, and that was the check against the exaggerated reward for capital.
Now both the check against the trade unions of unemployment and the check of real competition against capital have gone in the post-war period, and however much such an idea may be hated by the trade unions and the capitalists we must somehow devise and secure the acceptance of an incomes policy which will replace the old checks and balances. If we are not to see disaster overtake our economy, the discipline imposed by unemployment must be replaced by a self-imposed discipline by the trade unions themselves. In other words, there will have to be a wages policy accepted by them and

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worked by them. I know the difficulties, my Lords—I am a life-long trade unionist—but they must be overcome, and they can be overcome only by a process of education and assuring the trade unions what it all means. I know it is not an easy matter; but we shall simply have to go on pursuing it. I do not want it to be too long term. I hope it will not take too long; but persuade them we shall have to.
Now I turn to the other aspect of it, in which I cannot immage that the noble Lords opposite will be so inclined to nod their heads in agreement. The postwar period has also seen a lessening of the disciplines imposed upon capital by continuing prosperity and the growth of the management of the market. Incidentally, while thinking of this matter over the week-end, I looked at a book which was given to me many years ago as a balance to my study of Karl Marx. It was Hartley Withers's The Case for Capitalism, in which these words appear:
"Is not the consumers' freedom threatened to some extent under capitalism by monopoly, or at least by attempts in its direction on the part of trusts, combines, amalgamations, rings and ' gentlemen's agreements'? If Capitalism plays this game, it will simply weave for itself a rope with which it will be hanged, and rightly, as high as Haman".
All the things which Hartley Withers then said would lead to the hangman's rope are operating now and if disaster is to be avoided from the capital and financial side of our economy, a discipline must be imposed either from within or from without.
How difficult that is going to be has been illustrated by the squeal that preceded and followed the imposition in this Finance Bill of a mouse of a speculative gains tax. If I had not heard the noble Lord, Lord Ritchie of Dundee, put this point so quietly and, on the face of it, so reasonably, I would have gone on to say what I have prepared—perhaps I had better do it. The recent broadside of the Chairman of the Stock Exchange would be laughable if it were not indicative of the difficulties that have to be overcome in this matter of keeping the rewards of the owners of finance in check.
All this amounts to an appeal for the acceptance of an incomes policy by both capital and labour, for without such an acceptance, we shall be in serious difficulty. It does not look to me as
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if the Government's proposal for a National Incomes Commission is going to solve the problem. You do not make a wages policy acceptable merely by changing its name, by calling it NIC. I know that many in the trade unions will be inclined to say that this is Old Nick, a monster in sheep's clothing.
I know that the Government's case is that incomes from the use of capital can be kept in check by taxation. Mr. Maudling, on Thursday last, put it succinctly in these words [OFFICIAL REPORT, Commons, Vol. 663 (No. 153), col. 1861]:
"… the Government have power over the total level of profits and dividends which they have not over the total level of wages. Through profits taxation we have a direct power to impinge on excessive levels of profits."
How can you hope to convince the trade unionists that that power will be used, when they look at the trifling speculative gains tax, when they know full well that much of the stupid ostentatious spending and display of wealth that we see all around us to-day stems from income derived from capital gains? And if ever people with wealth have been stupid, they have been stupid in this ostentatious display. How can you hope to persuade trade unionists that there is nothing in the bag when they see clearly that the bag is overflowing into this stupid display of wealth? Incomes coming not so much from capital gains as from speculative gains seem to us so often not the reward of enterprise but the result of the possession of wealth and the employment of a cunning stockbroker. I think that the indispensable prerequisite for getting a wages policy accepted is the removal of the suspicion that it is all a trick to limit wages and to leave other income receivers free to enjoy the incomes derived from their wealth.
The third and last point I make follows to some degree what was said by the noble Lord, Lord Hawke. All that I have said up to now leads to the point that, without increased productivity and without a real incomes policy, we shall price ourselves out of the world's markets. I appeal to my trade union colleagues outside not to dismiss this with the remark, "We have heard that old tale before." We must recognise in the trade union movement and elsewhere that, if we do price ourselves

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out of the world's markets, our incomes will not double in 25 years, but will decline, certainly relatively and possibly actually. Our task in this matter of exports is not only to ensure that we do not price ourselves out of the market; we must also do everything in our power to increase the volume of world trade. Perhaps I am a little naïve in this matter. I am not an economist. But I hold the view that the reason we have not returned to the old alternating boom and slump of the 150 years before the recent war, is to found in the fact that after the war we so managed our economy that the rewards of our primary producers were kept to a reasonably high level. Agricultural subsidies, comparatively high coal prices, and reasonable rewards for our fishing industry are all part of the story, aided, it is true, by monetary and fiscal measures.
If I am right in this, somehow, by international action, we must keep up the prices paid to the world's primary producers. I am sure that it is infinitely preferable to pay a good price for primary products than to have an immediate advantage of low-cost imports and then to have to try to make up the difference to the producers in charitable aids. As the noble Lord, Lord Walston, pointed out in a recent debate on aid to Commonwealth countries, it is better for the countries producing sugar, cocoa, coffee, rubber, zinc, lead, and the rest, to be standing on their own feet through reasonable prices than to be the recipients of aid which places them in the humiliating position of poor relations. It is also better for world trade that the primary producers should be relieved of the sort of boom and slump which for so long bedevilled our economy and which was to such a large extent cured by the means I have mentioned.
To sum up, we have to increase productivity by scrapping outdated practices and adopting bold new ideas; we have to get an incomes policy accepted, but it must be demonstrably fair; and we have to help to secure by international action a positive increase in world trade.
6.29 p.m.
THE MARQUESS of READING: My Lords, may I start by joining in the
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congratulations that have been offered by preceding speakers to the noble Lord, Lord Aldington, and likewise by expressing the hope that we shall frequently hear him speaking to us again? At this stage of the evening, after a fairly long debate, your Lordships will no doubt be relieved—I myself am a little discomfited—to find that the fruits of my labours have already been devoured, metaphorically at least, by the noble Lords Who have already spoken. I shall do my best not to weary you with repetition, nor I hope in any other way. I should perhaps just add that the amendments I have endeavoured to make while listening to your Lordships have resulted in my note being almost completely illegible.
With that preamble, may I start by saying that in April, when the then Chancellor introduced his Budget, he justifiably pointed to the marked strengthening which had taken place in the whole foundations of the economy, and his primary concern at that time was to ensure that they would be capable of bearing the heavier load which he expected to he imposed upon them as the envisaged expansion gathered momentum. So it is that on this occasion, in order to bring the economy on to the course which has been set for it in the Budget, the total impact of this Finance Bill is required to make only a small adjustment to the wheel, and the engine room telegraph remains at "Half speed ahead". On balance, the improvement has been maintained since April, although there are certain perceptible shifts and changes in the background, particularly overseas, which are a little disquieting and might even lead some of us to question whether the basic assumptions on which this Bill was based are still valid.
In particular, my Lords, the momentum of recovery in the United States has not come up to earlier expectations and Canada has been forced to restrict certain imparts. On top of, or combined with, these other facts there is the ominous behaviour of world stock markets, which surely cannot be ignored, even if the precise significance equally cannot be clearly ascertained at this particular moment. There may also be doubts lurking in some minds at any rate, about whether we, and other countries like us who are concentrating our

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efforts for a final onslaught upon inflation, may not turn round to find bearing down upon us the still more terrible spectre of deflation. Doubts such as there may be about the continued validity of the assumptions behind this Bill were, I believe, satisfactorily answered in the speech made in another place last week by my right honourable friend, speaking as Chancellor of the Exchequer for the first time; and it was most reassuring to find that he considered the balance of probability points to a vigorous expansion later in the year and, moreover, that he undertook to take action if this expansion should fail to materialise.
My Lords, I am not going to take up your time dwelling upon past events, except to this extent. This time last year we were, of course, in a profoundly different situation. The Budget then had to a large extent already been overtaken by events before the Finance Bill had reached the Statute Book. The fact that these measures Am posed a year ago by the recent Chancellor of the Exchequer were necessitated by a threat to the development of what I might term our banking department still does not appear to be genuinely appreciated in the country as a whole. Indeed, few people yet realise that we have the dual rôle to play of a great trading nation, on the one hand, and of the managers of one of the principal international currencies, on the other. Until these two distinct functions are more widely understood, can we be surprised if many of the more important changes in economic policy are completely misinterpreted by most of the citizens of this country?
It is, I believe, intensely bewildering and frustrating to people to find that, as occurred a year ago, an emergency which had arisen out of our banking responsibilities had to be met by stringent action in the home market. This is a thing which causes a great deal of ill-feeling and, as I say, frustration throughout the country. Therefore, I suggest, it is an urgent necessity to draw attention to the existence of these two distinct functions. This is one of the first steps which should be taken to implement the recommendation in the Report on the Control of Public Expenditure produced a year ago by a group
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presided over by the noble Lord, Lord Plowden.
This Report attached great importance to the creation of an informed public opinion, and I feel that more could and should be done to implement that part of that valuable Report. The explanation of this and other problems to the public in general is, in my belief, one of the fundamental problems of our time. I am not adopting a superior attitude to this at all. I confess that I am just as bewildered by all sorts of problems which are relevant in other aspects of politics and public life; and, indeed, there is a whole host of crucial issues, be they to do with economics, defence or foreign affairs, which have become so complicated that it is extremely hard for the ordinary citizen, however conscientious he may be, to form even an approximately balanced or tolerably well-informed view of the issues at stake. And yet, in the last resort, it is public opinion and the polling booth which are the final arbiters of these issues.
My Lords, the most encouraging feature of the proposed National Incomes Commission is that it provides a focal point for bringing the salutary influence of public opinion to bear upon certain wage claims. In my belief the innate sense of fair play which is such a strong characteristic of people as a whole should ensure that, in exercising its function of creating order out of what I think must be admitted is at the moment a chaotic position, this body will reach decisions that will be both fair and just, as well as conducive to greater efficiency for the country as a whole and all sections of the community. This imaginative proposal offers by far the most hopeful prospect we have yet had of solving one of the most insidious problems that has time and again frustrated attempts to expand the economy and brought great hardship to various sections of the community, it is devoutly to be hoped that the Prime Minister's plea that this proposal should be given full discussion and serious thought will be heeded; and, if I may say so, I was greatly encouraged and much impressed by the remark which the noble Lord, Lord Champion, has just made on this particular aspect of the subject.
I should like, if I may do so without unduly detaining your Lordships, to

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comment upon one reaction to this proposal, namely, the suggestion which has been made in certain quarters—and, if not directly put forward, I think indirectly implied by at least one of the noble Lords opposite who has taken part in this debate—that profits and dividends should be subjected to some similar process. It would be a gross impertinence on my part if I were to endeavour to embark upon a dissertation on the profound differences in the nature and origin of profits, dividends, wages and salaries, but obviously these distinctions must be borne in mind when considering this matter. I should also like again to say, as I said on the only other occasion on which I ventured to address your Lordships, how convinced I am that the division of the fruits of industry and commerce must be equitable; since, to put it on no higher a basis, the full co-operation of all concerned cannot reasonably be expected to be forthcoming if respective rewards are not accepted as fair and just.
If this new Commission's function were to be to repress and hold down wages, the demand for similar treatment for dividends and profits would be more understandable. But, though I have not anything like the experience of other noble Lords, particularly certain noble Lords opposite who have spoken, as I read the function of this Commission it is not intended to do anything of the sort. It has surely been created essentially in order to prevent wages from rising faster than the economy's capacity to generate the additional wealth required in order to satisfy those wage increases. For without this additional wealth the benefit of the higher wage cannot be maintained in real terms. It seems to me that, other things being equal, the Commission would be more disposed to adopt a liberal attitude towards any claims that were referred to it if profits were in a rising trend; and, conversely, that its approach would be likely to be somewhat less accommodating if profits were falling.
There is no doubt that during the inflationary period that we have had since the war it has been far too easy for some inefficient producers to make very handsome profits. But since the whole function of this Commission, and of
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other measures which the Government are pursuing in their economic policy, is to try to exorcise inflation from the economy, it should induce a less debilitating and crisper operating climate for industry and commerce. This, in turn, should exert a strong disciplinary action upon profits. Let us try to project our thoughts forward into the conditions, that are likely to prevail over the next few years, whether or not we do in fact join the Common Market, and let us not allow our thinking to be inhibited by the experience of what has happened in the recent past. I sincerely hope and believe that we are emerging from that phase.
May I add just one point more, this time on dividends? A great deal of confusion is caused by comparisons made between total wages and salaries, on the one hand, and total payments of interest and dividends, on the other, taken for a selected period of years. Such comparisons are virtually meaningless, since the total amount of capital on which the interest and dividends have to be paid is continually increasing. Indeed it should be axiomatic that if there is any growth and development of the economy at all there must be an accompanying increase in the total supply of capital. The increase, of course, comes about in two ways: one by the sale of new securities to the public; the other by the retention or ploughing back of profits remaining after the payment of dividends. I will not attempt to put any such figures before your Lordships, but they clearly result in a radically different picture from that which is presented by a straightforward comparison of the unadjusted statistics such as are often quoted on the platform or in the newspapers.
I deeply regret that my general support for this Bill has to be qualified, in view of the fact that it embodies the tax on speculative gains in the particularly obnoxious form that we find in this Bill. This method of imposing this tax is calculated to inflict the maximum damage in the course of achieving the minimum results. I will not enlarge on this deplorable measure beyond associating myself, as a rank-and-file member of the Stock Exchange, with the weighty objections to it so ably

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expounded by the noble Lord, Lord Ritchie of Dundee. But I would add one comment, particularly in view of a remark made by the noble Lord, Lord Champion. My objection—and I think this is the general case—is not to the principle of the tax. I concede that. I entirely agree with the noble Lord on the principle that there is no reason why a certain form of activity should escape tax altogether when other forms of activity are subject to tax. The whole objection is against the particular and, if may say so, peculiarly inept manner in which the tax has been imposed. That is the root of these objections. But, my Lords, since we must consider this Bill as a whole, and have no way in which we can modify any of its individual proposals, may I just say that I warmly support it as an integral part of the Government's economic and financial policy, in which I have the greatest confidence.
6.49 p.m.
LORD MOLSON: My Lords, when we consider this Finance Bill we must regard it as the last act of policy of the late Chancellor of the Exchequer. Therefore, I think we should remind ourselves of the change that has taken place in the general economy of the country in the last twelve months. It is reasonable, I think, to say that that is largely due to the courageous measures that my right honourable friend took. In contrast with last year we now have a strong pound; we have a balance of payments very greatly improved; exports are now rising; prices appear to be more stable, and, as a climax—and I only regret that it happened after he fell from office—the repayment in full of the loan which he had to contract in order to meet difficulties largely originating before he became Chancellor.
This contrast between the position now and twelve months ago deserves, I think, to be set against the general course of the movement of the pound sterling since the beginning of 1957, when the present Prime Minister took over. There have been three Chancellors of the Exchequer during that time who have gone. It is difficult to resist the impression that they have gone because they sought to resist ever-increasing public expenditure and what has in fact proved to be a highly inflationary policy. The graph published
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in The Times last week shows how the decline in the purchasing value of the pound which began in 1938 has continued under Socialist and Conservative Administrations with not much difference in the general trend.
There have been several speeches today with which I find myself in almost complete agreement. I think the speech of the noble Lord, Lord Champion, must have commended itself to moderate men in all parts of the House. The speech with which I found myself in disagreement almost from beginning to end was the speech of the noble Lord, Lord Lucas of Chilworth. In particular, I should like to say that I thought it unfair to criticise officials of the Treasury for the policy that has been followed by the Government that they have served. If they have given advice, and if they have had a policy, I think the taxpayer of this country considers, now that another place has abandoned its traditional task of safeguarding the pocket of the taxpayer, that that task is discharged in so far as it is discharged at all, by the permanent officials of the Treasury. I welcome the reorganisation which is being made on the lines of the Plowden Report, and I only hope that in future a longer view will be taken of the ultimate consequence of every increase in expenditure that takes place.
There are many people who criticise the late Chancellor of the Exchequer, and this Finance Bill in particular, on the ground that they want more growth. That was the gist of the speech of the noble Lord, Lord Lucas of Chilworth. I think that my noble friend the Leader of the House put his finger on the real point when he said that we must distinguish What kind of growth of production we desire to have; and I think he said (I took down his words as best I could) that growth may mean production of unwanted and unsaleable goods.
The Prime Minister, speaking in another place, laid down as the three objectives of economic policy the maintenance, first, of full employment; secondly, of steady prices; thirdly, of a strong currency; and, fourthly, of expansion or growth. I regret the use of the words "full employment", when that phrase is an inaccurate quotation from the title of the White Paper issued by the Coalition Government in 1945.

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The objective there, to which both political Parties pledged themselves, was the maintenance of "a high and stable level of employment". I think that to put full employment first betokens a Stock-ton-on-Tees outlook and a reversion to a pre-war age, when the problem was unemployment and deflation, not inflation and constant increases in price, which is the problem with which we have been faced ever since the war. With this reconstruction of the Government, it is important that all Ministers should be forward looking.
The main Obstacle to the growth of economic production at the present time is shortage of labour, especially skilled labour. Increased investment, however desirable in itself, leads to increased demands for skilled labour, which is particularly scarce, and it does not always result in any great reduction in the demand for unskilled labour. That is the effect of restrictive practices and of the policy of some, at any rate, of the trade unions. In the last twelve months the employment position has improved; by saying "improved" I mean that there is less of a burden upon the labour supply. I regard it as an improvement that in May, 1962, there were 48,000 more unemployed than vacancies, whereas a year ago there were 152,000 more vacancies than unemployed. I believe that growth depends upon the absorption of this labour, and therefore it is this margin which gives us the prospect, which I am sure we all have at heart, of an increase in really valuable production.
When unemployment is still only 1·8 per cent. it cannot surely be argued that there is any need for a dose of inflation. Indeed, to increase our economic well-being what is required in many branches of the economy is not increased but reduced production. We are burdened at the present time by Scottish coalmines, included in the index of industrial production, which are working at a heavy loss. Not only is there a loss on production but this coal is surplus to requirements and is being stored. Exactly the same is happening in the case of Lancashire—redeployment in the cotton mills is not to be deplored. As I think my noble friend the Leader of the House implied in his speech, it means a redeployment
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deployment of labour from less productive industries to those for the future, Where the production of this country is going to be higher per man and is going to make a more valuable contribution.
Why do we hear this talk of a stagnant economy? Anybody who talks of that should look at page 1 of the Monthly Digest of Statistics and see what the gross domestic product has been. For 1961 it was an all-time record, and some of the figures for the first quarter of 1962 are entirely satisfactory. Concentration seems to be upon the index of industrial production which excludes agriculture, transport and the services. A rising standard of living such as this country has enjoyed to such a remarkable extent during the last eleven years naturally results in more leisure, more variety in the demand for goods, a higher quality in those goods, more durability and, above all, more services. None of that is included, and it is entirely wrong to suppose that the measure of the prosperity of the country depends merely upon the production of goods. When there is talk about the percentage increase per year being less here than it is in some other countries, it is necessary to bear in mind this peculiarity about percentages Which I was taught long ago When I studied mathematics: the percentage depends upon the percentage you start from.
SEVERAL NOBLE LORDS: Hear, Hear!
LORD MOLSON: And, of course—and I was very glad to have those cheers from the Benches opposite—it was comparatively easy for there to be a great increase in production during the period the Socialist Government were in office, because in 1945, at the end of the war, things were in bad way. Now, after eleven years of Conservative administration, with ever-increasing prosperity, it is virtually impossible to have the same percentage of increase as in the days when the Socialist Government were in power and when our economy was getting back on to a peace-time basis.
LORD STONHAM: What we are complaining about is that in the last two years there has been no increase at all.
LORD MOLSON: I do not think that is strictly true. Although I do not want

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to delay matters, I turn to page one and I find that the gross domestic product in 1960 was £22,150 million, and in 1961 it was £23,437 million. So I do not think that that intervention is statistically correct. I wish that the Prime Minister had put the objects of economic policy in a different order. First, a strong currency; second, steady prices; third, a growth (and I would interpose words here) of efficient and saleable production; and, fourth, a high and stable level of employment.
The wage pause, to which reference has been made to-day, although only temporary, was, as I ventured to say in a letter to The Times, unfair, ineffective and betrayed confused thinking. I welcome the Incomes Commission as being useful, so far as it goes, and I am very glad that thoughtful noble Lords opposite, like Lord Champion, say that they hope that careful consideration will be given to its operation. But I cannot wholly share the Prime Minister's optimism when he said [OFFICIAL REPORT, Commons, Vol. 663 (No. 153), col. 1760]:
"I cannot believe that in practice the parties would not give weight to the Government's expressed view, and I cannot believe that either side would disregard it."
In view of some of our experiences in the matter of wage settlements recently, I do not share the Prime Minister's confidence in either side of the industry. Nevertheless, I do believe that there is great scope for men of good will, who now accept the need for an incomes policy, to work together in or 1er to ensure that, as the economy expands, so the increase in nominal incomes is kept broadly in line with the increase in true wealth. As the noble Lord, Lord Champion, said, the automatic checks of the past of chronic unemployment have gone—and we rejoice that they have gone—and it will be necessary to put something in their place.
My Lords, we have heard that at the first meeting of N.E.D.C. under the present Chancellor, there was a general complaint by industry about its prospects. I think that industry is always asking for easy sales and assured prospects, and I was very glad when my noble friend, Lord Reading said that one of the troubles in the years after the war has been that industry has enjoyed
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excessive prosperity. No one who has enjoyed the excess of any good thing likes to be deprived of it, but there are occasions when it is desirable that that should be done. I want to see keener competition and keener prices. That is one reason why I should welcome our entering into the Common Market. I believe that lower prices are a far better way of raising living standards than by an increase in nominal wages or nominal dividends.
My Lords, our financial policy should aim at stability of prices; for that will remove at any rate some of the uncertainty that is now troubling the industrialists. We must also make sure that in our policy we do not have a recurrence of these balance-of-payments crises every two years or so. Since the war (and here I am quoting the Leader of the House of Commons) we have had them in 1947, in 1949, in 1951, in 1955, in 1957 and in 1961. The Prime Minister, in one or two speeches, has referred to the desirability when driving a motor car of sometimes using the accelerator and sometimes the brake. That, of course, is quite true. But no one who is constantly either accelerating recklessly or applying the brakes drastically is considered a good driver.
What we must aim at now, as has been said by almost all noble Lords who have spoken, is some greater stability in the economy. But if we must fall into error—though I hope we shall not—then surely at the present time deflation would be better than inflation. As my noble and learned friend the Leader of the House said, it is easier to start inflation than to end it. And at present, if we do get deflation, if we do get a serious fall in prices, if we do get a serious increase in unemployment, then, either by reducing taxation or by lowering the bank rate, or by any other of the techniques with which we are now familiar, I feel sure it will be possible to revive the economy. But once we have a raging, tearing inflation we are still without the controls that are needed to restrain it.
So it is that, when this change has taken place at the Treasury, those of us on this side of the House look forward to the future with hope, though not without some slight apprehension. I share

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the optimism of my noble friend Lord Aldington, whose speech we all so much enjoyed and which I, as an old friend of his, particularly welcomed. Nevertheless, I hope that it will not be considered that at this juncture anything in the way of an inflationary move is required. I think that is the greatest danger that faces the country and the Government at the present time.
7.8 p.m.
LORD SHACKLETON: My Lords, we have been fairly well round the economic circuit to-day and we ended up, as we should do, with a fairly firm deflationary speech, I would say, coming from an erstwhile inflationist, as he very fairly pointed out, from the days when inflation was much more needed. We had also some extremely interesting speeches, and most especially I would welcome the maiden speech of the noble Lord, Lord Aldington. It is a custom in this House that we ate even nicer about maiden speeches than they are in another place, but it was, if I may say so, an enjoyable and generally pleasing speech. The noble Lord knows how pleased his friends are to see him with us in this House. I should also like to utter a word of sympathy to the noble and learned Lord the Lord Chancellor. This is the second time he has encountered a Second Reading on the Finance Bill. On the last occasion in another place he made the winding-up speech, and I had rather hoped he was going to do in a rather more specialised form what so many of us in this House who made our maiden speeches in the Commons have done; I hoped he was going actually to wind-up the same debate in both Houses. But he has been spared that, and we are to hear from the noble Earl, Lord Dundee.
I was tremendously impressed, as I always am, by the noble Viscount, Lord Hailsham. We like his philosophy. He enjoys it and the House derives stimulus and, I would say, elevation. But I am not sure whether philosophy or even the puncturing of mythologies is quite so valuable in this field, where we are dealing with very hard economic facts, in which the final judgment depends on a very narrow and detailed examination of certain trends. I thought the noble Lord, Lord Hawke, summed
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up very clearly the two different ways in which one can look at the economic situation. But that is not to say I did not greatly enjoy the speech of the noble Viscount, Lord Hailsham. I think one ought to keep all his speeches, because they are so splendidly quotable—I hope usually in his defence, but no doubt on other occasions against him—and I hope he recalls precisely what he says. But there is a consistency in his philosophy to-day. He is rather following the noble and gallant Viscount, Lord Montgomery of Alamein, higher and higher into the stratosphere, and taking a stratospheric look at our economy. I think we really need to come down to very hard facts. There are certain points I want to make, and I shall try to controvert certain of the views that have been expressed, especially some of those expressed by the noble Lord, Lord Molson. But I am very well aware that there are sometimes two ways of looking at the same fact and two ways of interpreting it.
I am sorry that custom prevents us from doing more than make a passing reference to the Finance Bill. Whereas I should not wish to increase at all the powers of this House in this respect, I am sorry that we cannot perhaps help another place, especially since it was so obvious that there are feelings in another place that the Budget and the Finance Bill are becoming a very heavy burden. There were interesting discussions about the possibility of a division of the Finance Bill into that part of it which is involved in tax raising and that part involved in tax management. But, fortunately, we bundle the whole thing together in this House, which makes for a jolly debate, and it may well be that if we really were to spend more time helping another place we should need a large number of additional Peers—and to pay them, furthermore, which would obviously be inflationary.
There have been one or two references to certain aspects of Government fiscal policy. I think the regulator, as it has been called, has been a valuable device to introduce into the Government's armoury, and infinitely preferable to that extraordinarily half-baked payroll tax which was completely misconceived. Undoubtedly, it had a rôle in the right place, but the theory that it

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could be used as a regulator is the sort of thing that really worries one about Governments, Chancellors and the Treasury, in that they could have got that particular one so wrong. Now they love the regulator so much that they make permanent a large part of what had been done under it, and take powers to do the same thing again. I do not know whether, strictly speaking, those powers could not mean that the rates go up 10 per cent. and come down 20 per cent. But, none the less, I go no further than to say I think it is unfortunate that once again a temporary tax has become permanent, particularly such a tax as the fuel tax.
There is another general point with regard to the Budget. I still think it is a pity that there is no increase in personal allowances, and I hope that the Government will bear that in mind in another year. In passing, I should like to make an appeal that the B.B.C. should not be taxed on their surplus from the licence revenue. The Royal Commission on Taxation recommended that the B.B.C. should be taxed only on what might be called their trading activities. That they should be taxed on the surplus, the money they are saving for future expenditure, which has already been taken from the taxpayer, seems to me to be an absurdity. I think it is legitimate to raise that point on the Second Reading of the Finance Bill.
I should like to turn very briefly to the speculative gains tax. I appreciate that certain noble Lords object to it, not just on the grounds of the undesirability of levying the tax, but on the way it is collected. It seems to me that the arguments in favour of treating it as income tax are extremely powerful, and, of course, they have been sanctified by practices abroad. In this I would support the Government. But, equally, if it is so objectionable in its present form, ought we not perhaps to consider seriously before the next Budget, instead of these rather objectionable, fiddling taxes which noble Lords have said are not likely to bring in much revenue—they certainly do not bring any sense of justice—.the introduction of a proper capital gains tax; and, I would say, a capital gains tax at a lower rate than income tax, however it may be assessed? I do not see how any one can think it right that the salary earner, or the person
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dependent on direct income, should have to pay tax, and those who may receive these capital gains in a form which is immediately expendable—such as a rights issue which, as noble Lords know, can be sold and cash received straight away—should not pay a tax on them.
I do not want to develop this point further, but I would agree with those noble Lords who feel that our economy has readily become distorted to an absurd degree. It is absurd how many people—and I think this goes for many of us in this House—instinctively now look for capital gains, or some device like a "top hat" scheme, or whatever it may be, as the only way of making some money. While I think that the timing of the reduction in surtax was extraordinarily unfortunate last year, none the less there is a case for reductions for earned income, reverting if possible to a more traditional pattern. I do not know if this will ever be possible, but I am quite certain that it will not be possible unless there is a proper capital gains tax.
LORD RITCHIE OF DUNDEE: My Lords, would the noble Lord include in "a proper capital gains tax" gains from such things as bingo and football pools?
LORD SHACKLETON: My Lords, I do not honestly know. I think there are arguments against it. Personally, I do not play the football pools or bingo, and I do not know. I think that is a difficult point, but the fact remains that gambling of that kind has generally been accepted, and there are considerations why that should be so. But I do not think this affects the main basis of my argument. I do not think it affects the view that, if we decided it was necessary to tax capital gains, we should not allow ourselves to be thwarted by the technicality of whether or not we should tax bingo.
LORD RITCHIE OF DUNDEE: Or premium bonds?
LORD HAWKE: My Lords, I do not think horse racing has been mentioned. I do not think the noble Lord or his friends would ever so tax betting on horses that it ceased, and the breeding of horses also ceased. This is precisely a parallel case. The Chancellor is at the moment killing the speculator who levelled out the market, because he has levied this tax in a peculiar way.
LORD SHACKLETON: I do not think we have time for a full debate on these rather interesting side aspects, but the House knows perfectly well that it would not depend on this particular, narrow issue. I would say that noble Lords, if they seriously put forward this argument, are showing a certain frivolity, not merely now but in their attitude towards the much more pressing issue of trying to achieve a stable economy in which a workable incomes policy is a possibility. I would say to the Government that a workable incomes policy is simply not "on" at the moment, and one of the reasons is that there is this feeling of a lack of equity in the taxation picture.
I shall want to return to this more when I say a few words on the subject of the National Incomes Commission, but I would now say just a word or two to the noble Lord, Lord Molson, regarding his estimate of how well the country is doing. I entirely agree that the balance-of-payments situation looks a little better at the moment, and certainly our reserves position looks a great deal better; and it is a matter for satisfaction that we have been able to repay the loan as we have. I may say that I think it is also a matter of satisfaction that we were able to get that loan. I think it shows a real improvement in the international situation of a kind that might have saved us in earlier crises. It is a net gain, and a very important one.
I shall say a few more words later on about liquidity; but there are depressing aspects. The pay pause has not really worked as well as people thought it would. Pay has continued to rise, particularly since October, and if the object of the exercise was to prevent that, it does not seem to have succeeded. Certainly manufacturing production has not gone up. There are a number of other indices which are equally worrying, but most alarming of all, I think, is the fact that investment, particularly in private industry, looks like declining in the course of the next few months. Certainly profits have been squeezed, but against that one notices that dividends have gone up. I do not think that is, except in a psychological sense, of very great importance to the general position of the economy.
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Then prices, of course, have continued to rise. But the most worrying thing is this—and this is the side that the noble Lord, Lord Hawke, referred to when I mentioned (I do not know whether he was here when I referred to it) the very fair statement of the two views that the economists take—that in a period of restriction of this kind it is absolutely essential that production must rise. This was in fact the burden of what the Chancellor said at the time; he said that what we have to do, in effect, is to hold back a little and put in a little more effort. But, in fact, production and productivity have not risen. To this extent we are, in terms, from an inflationary point of view—not from a balance-of-payments point of view, but from another angle—in as vulnerable a position as we were before the pay pause was ever introduced.
If in fact we are going to see a surge forward of expansion during the autumn, then I think we may be in just as vulnerable a position, and those who hold the views of the noble Lord, Lord Molson, in this matter may well be justified in saying that the only thing is to stand still, and we cannot afford that degree of inflation that will come about through an expansion of production. Indeed, we do know that a good deal of the improved currency of our reserve position is due to these movements of capital which are not directly related to the direct earnings of this country, either in invisible earnings or in exports. So I do not think this is a matter on which we can be extremely comfortable; and it is against this background that the Government have produced old NIC, or young NIC, as it may be, and have sprung it on the trade unions.
I would have thought that most of us in this House, except perhaps the noble Lord, Lord Grantchester—and even he may be in favour of it—would be in favour of some form of an incomes policy if it is workable; but this is not going to be an incomes commission. It is in fact a complete euphemism in that sense. It means a wages commission, and it means to the trade unions, unfortunately, a wages restraint commission. It will hardly even deal with salaries. How in fact this Commission is at this moment going to adjudicate on these highly technical claims based

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on skills and all the differentials that are involved, which may bring in questions like fringe benefit, and so on, which now take up a lot of the time of a large number of negotiating bodies; and how, unless it is to be a vast bureaucracy with a very great staff, it is going to undertake this task at the moment, I simply do not know.
I think there is a case for a body to do the sort of thing that the various Royal Commissions or Committees, on doctors' pay, and so on, have done. There is a great deal to be said for a continuing body working on things of that sort. But I simply cannot see how, except on the basis of the Government's throwing off their responsibility to this body, it can possibly undertake what the Government expect of it. There is, of course, no mention of profits. It is just conceivable that the Government, in their enthusiasm, might wish to suggest that this body looks at profits, but I think it would be exceedingly difficult for it to look at profit margins as well; and, unless it is going to investigate all the industry of this country and take over the Government, I think it is a very doubtful starter.
My Lords, there is another argument against this. For a hundred years we in this country have been building up a system of wages settlement and collective bargaining, and that system has essentially been built up against a democratic background of individual unions doing the best for their members, sometimes (though not always) heavily in competition with one another, but always trying to co-operate. The introduction of the idea of a National Incomes Commission at this moment, after ten years of the Government's obsession with their particular mythology of "setting the people free", as I think my noble friend Lord Stonham said, is not such as to arouse the confidence of the unions at this moment. They would argue that the Government have had their chance. They certainly had their chance before the 1950 Election, or after they came into power in 1951, when they had the perfectly sensible (in many respects) Conservative Worker's Charter, to introduce contracts of service, and so on. But now they are looking around desperately. First of all we had the guiding light; we had the pay pause; and now we have "Nick". I would say
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that it is an inept proposition at this moment; and the rough treatment it has had from the trade union leaders is a measure of their suspicion of the Government's attitude. To introduce it at a moment when costs are rising, and when the economy, let us face it, is still relatively stagnant—even though noble Lords may say it is going to expand, we do know that it is relatively stagnant—is extremely unfavourable.
My Lords, I do not think that we can work an incomes policy nationally, and I do not believe that a democratic Government, whether it be a Conservative Government or a Labour Government, can do it in this country, except against a background of continued expansion. It can be done only if we can achieve the sort of 4 per cent. annual increase mentioned, so that individual groups will not be worse off as a result of particular allocations of wage benefit or increase in one direction. It is only, in fact, by having this sort of expansion that we can hope to solve our problems, including the problem to which I think the noble Lord, Lord Molson referred—that is, the problem of the industries which are declining, and in which it will not be possible to avert the decline; and in Which, to be frank, it may not be desirable to try to avert the decline. But we cannot deal with them unless we are in an expansionist situation in which costs are increasing.
If we leave aside what I would have called the mythologies in which this Government have indulged in the last few years, and which they may now be departing from, the problem is still this two-year cycle of difficulties in our balance of payments. It is extremely difficult to correlate the exact effect of our balance-of-payments difficulties with inflation; but I am sure that all noble Lords, and I should hope in time all Governments (and I certainly would include this Government) are aware of the absurdity of running the affairs of a nation of 50 million people on short-term movements of this kind. For even if certain remedial measures work, as the noble Lord, Lord Hawke said, they are apt to work at the wrong time, and you find yourself accelerating as you go downhill and braking as you go uphill. In fact, one of the main conclusions of the Radcliffe Report was that one of the

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remedial measures taken by the Government has always tended to work at the wrong time.
We are still in a vulnerable position, and the expansion and progress of this country depend to a very large extent on our ability, by means that may be quite irrelevant to our Teal needs, to convince people abroad that it is worth while hanging on to sterling. There are certain encouraging signs. There has been an increase in the meetings of GATT which again points to a certain freeing of trade. But I should have thought the main objective that any Government ought to pursue now—and I hope that the new Chancellor will do this—is an advance to still more and more international liquidity; and, in particular, some form of protection or security for the two main currencies, the dollar and sterling, which are apt to be so vulnerable. It is inconceivable that a firm would be made bankrupt, would be unable to get accommodation and would have to cut back production if it faced the sort of minimal difficulty in terms of its total operations that this country may have had to face; and a bad year's trading would very rarely knock out a successful company. What we need is the equivalent of an international bank that will do what a bank or other credit-providing institution can do in this country. I know that it is too much to hope that this problem will be solved in the near future, but it is the most pressing, I think, of all the economic problems which are bedevilling the expansion of this country.
My Lords, to sum up, I would say that the results the Government have achieved are not good enough. It is not that we can apply any very obvious standard of comparison. I think we can obviously point to the greater growth in Europe at the moment, and I am not necessarily meaning France or Germany, but a country like Sweden, which has maintained a fairly steady growth over a number of years. As it is, we find that the sort of things which we need to do, and which this country so particularly has a responsibility for doing (because we still accept our responsibilities in the world, I think, to a greater degree than some other countries) we have not the production to do. And it is a little late in the day for the Government to wake
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up and talk about purpose when there has been such an obvious lack of purpose in our economic policy in the past. My Lords, I welcome the signs of some advance to economic sanity and to the puncture of mythologies, but I am not so hopeful as some noble Lords are about the effect of Government policy.
7.35 p.m.
THE EARL OF DUNDEE:My Lords, when I came into the House this afternoon, rather hurriedly and a little belatedly at twenty minutes to three, the first thing that I heard was the voice of my noble friend the Leader of the House floating distantly through the Prince's Chamber informing your Lordships that he did not intend to talk about the Finance Bill, which I had previously imagined might have had something to do with this debate; but since then I believe every one of your Lordships who has spoken, except for a brief moment of aberration by the noble Lord, Lord Shackleton, has displayed an equal indifference to the Motion which is now before your Lordships' House, and I think it would be very unsporting of me if I were now to begin, at this time of night, to start a discussion on the Motion which we are supposed to be debating.
Having listened to this debate now for just on five hours, I really feel, quite honestly, that the only thing that is left for a Government winding-up spokesman to do is to thank your Lordships most sincerely for all the very valuable and constructive advice which has been given in this debate from all sides of the House. My noble friend Lord Aldington, to whose admirable maiden speech I will return in a minute, told us that he had once been described by the newspapers as a mugwump, and he defined this as a person affecting superiority to Party politics. As my noble friend has only lately joined us, I hope he will believe that in this House we sometimes have quite good debates on Party politics, although we have not had any Party politics to speak of this afternoon. I am sure, on the other hand, he will realise that superiority to Party politics is not always an affectation. It may more often proceed from common sense and from goodwill, as I think it has done this afternoon, and I am very grateful for

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all the sensible, careful and sincere advice which we have had.
May I particularly express my gratitude to the noble Lord, Lord Champion, for his very helpful speech? He talked about the necessity for abolishing restrictive practices, both among men and among managements, which I think was very true and well said. He added that the trade unions and the managements must both decide to get rid of restrictive practices. He argued that the discipline of an incomes policy must be imposed voluntarily by education; and I equally agree with what he said following that about the dangers of unwise and undisciplined action by certain financial organisations or certain organs of capitalism which can, if they are not controlled either by public opinion or by some other means, inflict equal damage upon our economy.
My Lords, if I may just return again now to my noble friend Lord Aldington, I should like to congratulate him on the excellence of his maiden speech. I hope that now he is in a more leisurely Chamber than the other one he may find time to come often and to contribute to our debates on all kinds of subjects. In his short and admirably expressed remarks I thought that he put the whole sense of this debate. He said that our objectives were faster growth of Britain's wealth, full employment, expansion of social services and aid to underdeveloped countries. I know that my noble friend Lord Molson, for good reasons, put these things in different order, but I took them down as I listened to my noble friend Lord Aldington, who went on to say that we were not expanding so fast as we ought to be doing; we needed increased competitiveness and the nation must have the will to grow. He thought that the nation wanted to understand more about the facts of economic life.
It is not a good thing for a Government speaker ever to indulge in too much optimism, because if you allude to something which is going well you are always accused of complacency. Your task is to think of how it could be made better. But I certainly could not accept the suggestion that there is any kind of stagnation in our economy at the present time. My noble friend Lord Molson quoted the figure of the gross national product. I have the percentage figures
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for industrial production since 1958. Taking 1958 as 100, they are: 1959, 105; 1960, 112; 1961, 114; and now, in May of this year, it is 116. That is not an enormous rate of growth, from 100 to 116 in 4 years, but it is very far from being capable of being described as stagnation of any kind.
LORD SHACKLETON: My Lords, the noble Earl really must know that there was a sudden burst about 1958–59 of ten points, and in fact there has been only a 3-point rise in the last three years.
THE EARL OF DUNDEE: My Lords, I have carefully given the figures year by year in order to moderate the excessively wide distinction which the noble Lord is trying to make. Certainly there was a greater increase from 1959 to 1960 than in the year previous or in succeeding years. We cannot expect a regular, uniform increase, because things do not work that way. There has not been one big increase followed by no increase at all. The figures have gone up from 100 in 1958 to 116 in this manner: in the first year to 105, in the next year to 112; and then we have a smaller increase from 112 to 116 in the last two years.
VISCOUNT ALEXANDER OF HILLSBOROUGH: Over the whole of production?
THE EARL OF DUNDEE: This is industrial production, not gross national product.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, this is exceedingly confusing, to have different bases for the figures given. The noble Lord quotes 1958 as 100 and moves from there. The O.E.C.D. figures go back to 1951 and they show that our record, compared with anybody else's is exceedingly poor. After the noble Viscount's speech, I turned to those figures, because I thought that we were entitled to look at the whole 10½ years of the Conservative Government.
THE EARL OF DUNDEE: My Lords, if the noble Viscount wants to go back so far as that, since 1951 the rise in our standard of living has been as great as it had been during the preceding fifty years. I was going to say that I am grateful to the noble Lord, Lord Shackleton, for not having drawn up

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any league tables, because they are often misleading, for many reasons, which I do not think I have time to go into now, though I have done so before in economic debates in your Lordship's House. All I am putting now is that the growth in the country's industrial output makes it meaningless to talk about stagnation. It is not a word which can be applied to our economy at all at the present time.
The noble Lord, Lord Shackleton, was also good enough to refer to the improvements in our exchange position and in our exports. Our exports for June have gone up to the record figure of £328 millions, and they have gone up every month this year—£300 million in January, £307 million in February, £312 million in March, £314 million in April, £316 million in May, and £328 million in June. The figure for the second quarter of the present year is £958 million, which is a substantial increase over any quarter of last year. All I am putting to your Lordships is that it is nonsense, in the light of what is happening, to talk about stagnation; but I fully agree with the noble Lord, Lord Shackleton, in saying that it is not good enough. That was also said by my noble friend Lord Aldington.
I should just like to ask two questions: why do we want our economy to grow faster?; and why is it not growing so much as we want it to grow? I do not think that we want it to grow faster for purely material or selfish reasons. It is not true to say that the people of this country are thinking of nothing but material comforts and more conveniences of life. One reason why we all think that it is imperative to get a faster increase in our economic growth is because it will increase our ability to assist the underdeveloped countries as much as we want to do. I think that this is going to be one of the greatest tasks in international politics in the 1960's. If we are not able to fulfil that task, then freedom and the future of the whole of humanity will suffer. Together with the United States and with all other industrial countries, we have got to help the peoples in Africa, in Asia and in South America. Whether we do it from inside the Common Market, where many of us believe we could do it far more
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effectively, because the whole point of the Common Market is to have a larger unit of production, like the United States, which is able to have a great export which can be used to help underdeveloped countries, or Whether we do it from outside, it has got to be done. That is one of the reasons why we want a quicker growth in our production.
Why is it not growing fast enough? I think that we should all agree that there are a number of reasons, but the greatest one is inflation. We have been given good advice from many quarters of the House on all kinds of aspects of managing our economic affairs. My noble friend Lord Reading and the noble Lord, Lord Grantchester, both spoke about monetary policy, which is of great importance, but, of course, it is not the only instrument of economic control. One of the great disadvantages of relying entirely on monetary policy is that sometimes it not only stops inflation, but stops growth as well. It stops a whole lot of enterprises which you do not want stopped.
The noble Lord, Lord Lucas of Chilworth, and others, my noble friend Lord Molson in particular, have talked about the need for more competition, of the many ways in which we can try to encourage competition and discourage inefficiency. The noble Lord, Lord Lucas of Chilworth, particularly asked what we were going to do about retail price maintenance. As your Lordships know, the President of the Board of Trade has been considering with his ministerial colleagues whether any changes are called for in the Restrictive Trade Practices Act, 1956. It is a problem of very great difficulty which has given rise to sharp divisions of opinion. We have not yet reached a conclusion as to whether any development of that Act is necessary, but as soon as my right honourable friend has done so he will, of course, inform Parliament. Your Lordships are already aware of the action which is proposed in the Molony Report. Whether or not it will be associated with another Weights and Measures Bill I do not know. Whenever I see the noble Lords, Lord Stonham, Lord Latham, Lord Silkin and others sitting opposite I think bitterly of the many long days and nights that we spent toiling with this Bill and I

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earnestly hope that, if it should be produced again in the next Session, the other place will not arrange their affairs so inefficiently that they will not be able to give any attention to it at all.
There is the monetary policy, encouragement of competition, and, as the noble Lord, Lord Champion, so rightly argued, there is the need to remove restrictive practices, both by trade unions and employers; practices which were started long ago in order to deal with the situation in which unemployment was prevalent, and which are now 30 years out of date. There is the possibility of controls of all kinds. I have often told your Lordships that we do not rule out controls. The noble Lord, Lord Stonham, suggested this afternoon that we should prohibit or control those imports which we need least of all, and I can assure him we have never ruled that out as a possibility. The reason why we have come down against it is that we think that, on balance, it would hurt us more than it would benefit us, because other countries would retaliate and the result would be, on balance, that our export trade would suffer.
But the main reason why we are not growing as fast as we ought, I think everybody will agree, is wage-cost inflation. It is not necessary, I thank, to go into figures showing the exact relationship between rises in incomes and productivity. What has happened again and again is that, as a result of incomes increasing a little too fast, prices have gone up, which has lowered our competitive power. The result is that our exports have gone down and our economic growth has suffered. The problem which we have been wrestling with ever since 1945 is how to prevent wage-cost inflation without interference with liberty.
My Lords, there are all kinds of ways in which you might do it if you did not mind about liberty. The noble Lord, Lord Shackleton, criticised the National Incomes Council which is proposed, because he thought it was an inept proposition; and, indeed, many people have criticised it because it has no power. It is purely a device for examining wage claims and focusing public opinion upon them. We all agree about that. But let us see what the alternatives
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will be. It seems to me that the only measure not to be described as an inept proposition would be legal control of wages. That would be a very difficult thing to impose over the whole range of industry. Of course there are many indirect ways in which something of the kind might be done. One suggestion I have sometimes heard is that this payroll tax should be used not as a general tax but as a selective instrument; that a poll tax of whatever you like, say a pound a week per employee, might be imposed on any industry which increased wages beyond whatever the guiding light might be. Of course, the Government would have to decide on which industries this tax should be imposed.
That is an example of something which would have some "teeth" in it and which would not be such an inept proposition. It could not be criticised on that ground, but I do not know what is likely to be said about it by trade unions or employers, or by the country in general.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, might I say that I am not quarrelling with the method of reply, but I am not getting at the moment any reply to the case I submitted: that, compared with other countries, there has been no undue application for increases of wages beyond other costs, and that in many other countries they have gone much higher in percentage than we have. I have had no reply upon that. As for the last remarks of the noble Earl, how does he think he is going to get the sympathy and co-operation of the trade unions on such a basis as he has just put forward?
THE EARL OF DUNDEE: Did I say it would get the sympathy and co-operation of the trade unions? Surely I was arguing that if you are not going to pursue a voluntary policy then what instrument are you going to propose? I asked, supposing we had a proposal of this kind, what would be said about it by the trade unions. I do not think that the noble Viscount had been listening to me. What indeed would be said by the trade unions and by public opinion?
But it is possible that methods of legal control of that kind may one day, in a different climate of public opinion,

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come to be regarded as not being incompatible with a free country. I do not know. At present I think we must try to influence incomes and prevent price inflation by means which are not compulsory and which do not interfere with what are still regarded, and which I personally hope will always be regarded, as the political principles of a free country. That is the policy which we are now trying to pursue. We believe, as my noble friend behind me said, that independent and informed public opinion in this country is taking a greater interest in economics than it used to do, and therefore our hope is that liberty, freedom of negotiation, may be preserved, and that it will be possible to preserve it. It is a very difficult task to preserve freedom of contract without interfering with the right of people to earn and to pay what they wish. We hope that this will be possible in future in a condition of full employment; that we may be able to preserve full employment with individual freedom in this country.
On Question, Bill read 2a: Committee negatived.
Then, Standing Order No. 41 having been suspended (pursuant to the Resolution of July 25), Bill read 3a, and passed.

LEITH HARBOUR AND DOCKS ORDER CONFIRMATION BILL
Brought from the Commons; read 1a, and (pursuant to the Private Legislation Procedure (Scotland) Act, 1936) deemed to have been read 2a and reported from the Committee.
LOCAL GOVERNMENT (RECORDS) BILL
Returned from the Commons with the Amendment agreed to.
LOTTERIES AND GAMING BILL
Returned from the Commons with the Amendments agreed to.
LONDON BRIDGE IMPROVEMENTS BILL [H.L.]
  LONDON COUNTY COUNCIL (IMPROVEMENTS) BILL [H.L.]
    SCOTSWOOD BRIDGE BILL [H.L.]
      SOUTH STAFFORDSHIRE WATER BILL [H.L.]
      Returned from the Commons, agreed to with Amendments: the said Amendments considered and agreed to.
PORT OF LONDON BILL
  BRITISH TRANSPORT COMMISSION BILL
    NORTHAMPTON CORPORATION BILL
    Returned from the Commons with the Amendments agreed to.
MANCHESTER SHIP CANAL BILL
Returned from the Commons with the Amendment agreed to.