§ 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 5 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 6 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 7 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 8 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 9 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 10 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, 11 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 12 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 13 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 14 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 15 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 16 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 17 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 18 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.
19 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 20 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 22 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 23 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 24 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 27 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 28 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.
29 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 30 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 32 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 33 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?