§ 2.47 p.m.
§ THE EARL OF LONGFORD rose to call attention to the economic situation; and to move for Papers. The noble Earl said: My Lords, I rise to call attention to the economic situation. I share the deep regret of the whole House that my noble friend Lord Alexander of Hills-borough is not here to move the Motion himself. I spoke to him on the telephone this morning in Manor House Hospital. He told me he is making good progress and hopes to go home for a rest at Easter. I feel certain that the whole House would want to send him a message of good wishes.
For years this Motion was moved by our dear friend the late Lord Pethick-Lawrence, whose criticisms of the Government were once described by the noble Earl, Lord Dundee, who I am glad to think will be speaking to-day, as "always fair, reasonable and consistent". In fact, the criticisms of my noble friend were sharper than noble Lords opposite were perhaps disposed to admit. Two years ago, for instance, he rtferred to [OFFICIAL REPORT, Vol. 231, col. 623]:
all the troubles that have afflicted industry since Conservative Governments have played ducks and drakes with the monetary system of this country.
But noble Lords opposite refused to be at all disconcerted by this. In fact, the noble Viscount, Lord Amory, who had been Chancellor of the Exchequer during much of the relevant period, referred to this as "just one small matter on which
he differed", but agreed that my noble friend Lord Pethick-Lawrence was in particularly good form that day and said that everyone was delighted with his speech. So the matter was disposed of to his satisfaction. But, of course, that "one small matter" that "little local difficulty"—as the Prime Minister said of another Chancellor of the Exchequer who was also disposed of for a time, I am glad to think—was the total mishandling of our financial affairs by Conservative government during the last ten years. That was the main burden of my noble friend's speeches and has been our criticism from this side for a number of years.
§ My mind goes back to the time when we Labour people were in the Government for a number of years. These debates were opened by another old friend of many of us, whom we remember—certainly the Minister who is going to reply, the noble Earl, Lord Sandwich, who I am glad to see is taking part, and the noble Lord, Lord Boothby and many of us—the late Lord Cherwell. None of his opponents ever referred to his economic speeches as "fair, reasonable or consistent". He would have been totally disgusted if he had produced that sort of comment. None of us doubted the depths of his convictions and, as one who had to reply to his speeches, I can testify to the brilliance of his epigrams. Here I am, devoid of Lord Cherwell's gift of biting phrase and Lord Pethick-Lawrence's wisdom, and I must emulate Lord Pethick-Lawrence in at least one respect and try to concentrate on one or two fundamentals.
§ I wish that I could hope to emulate the noble Lord, Lord Boothby, who opened a debate on television in fifteen minutes or so, and set us a salutary example which I do not think any of us has ever tried to follow since. I shall inflict as few statistics as possible on the House, following Lord Pethick-Lawrence's very acceptable example, and I shall leave to other speakers some of the most vital questions—the whole issue of regional unemployment, for example, which, perhaps, from a human point of view ranks highest in our feelings at the moment. I shall not concern myself with the details of the Budget, though I do not want to discourage any 980 other speaker who feels disposed to do so. I want to take the Chancellor of the Exchequer at his own valuation and treat him as a man with a dominant theme, though it will take me a few minutes to reach it.
§ I have spent the week-end reading through the debates in your Lordships' House over the last few years—replied to with supreme assurance and an air of infallibility by the noble Earl, Lord Dundee, the noble Viscount, Lord Hailsham, and other speakers, whatever might be the particular policy of the hour—and, no doubt with less profit, my own speeches, delivered as chairman of a clearing bank, until I retired from that post recently. Surely, all fair-minded citizens can agree that these last years have been profoundly disappointing; that is, if we believe in the potentialities of the British people, and if we believe that the British people are capable to-day of as great an effort as ever and as any other country in the world.
§ I will not go into details—these facts have been given so often—comparing our economic performance with that of other countries, whether capitalist, Socialist or Communist. I am not going to try to introduce new and crafty statistics to-day in order to take anybody by surprise. But, if I may take one illustration, of the twenty countries mentioned in the last Report of the O.E.C.D. we come out last but one in the rate of growth from 1950 to 1960. Then I might take the last year of that period, 1962. In that year our gross national product was stationary, to be kind about it: in fact there was a slight decline. The House is aware that there was a considerable increase in unemployment last year, even before the exceptionally bad weather, and more when the bad weather overtook us. According to the Report of the United Nations Economic Commission for Europe, published yesterday and reported in the Press to-day, our country has the sorry distinction of being the only Western European country in 1962—not last but one this time—whose volume of national output was practically unchanged for the year. (I am quoting from the international Report); and ours is the only country in 1962 of the countries covered where the unemployment situation has seriously deteriorated. Until last year, 1962, we were well and truly bottom of the class.981
§ I appeal to Ministers particularly, but to other speakers opposite as well. Need we go on disputing these facts or brushing them aside as if they were not significant? Noble Lords opposite are not lacking in ingenuity. Surely they can accept what I have just said and yet fall back on what lawyers, I think, call alternative lines of argument. They will not, I hope, demean themselves by making a silly boast of the fact that the standard of life in this country is probably higher than ever before. With the unceasing advance of technology, here and everywhere, it could hardly be otherwise, even if our affairs were administered from Broadmoor—and I do not locate the Government in that institution. It would be impossible, I think, for them to drag down the standard of life that has been enjoyed in the last few years; but there are arguments they could bring forward, with varying degrees of plausibility—though most of us would not accept them, at any rate as a strong excuse.
They could argue that in recent years our country has been subject, through no fault of our own, to peculiar difficulties. There was an interesting passage about that in the speech of the noble Viscount, Lord Hailsham, last April. I certainly do not underestimate the importance or difficulty of the point he raised in this passage, though I do not accept it as a sufficient alibi. He then said: [OFFICIAL REPORT, Vol. 239, col. 948]:
Our economy and currency are unduly vulnerable, for reasons which are not discreditable to us, to fluctuation in international confidence … our material prosperity is higher than ever before, but it is too dependent on the will of others.
That, in my opinion, does not constitute a large alibi for the Government, but there is an important point there which we on this side of the House should be foolish to sweep aside lightly.
§ Noble Lords opposite might argue that things have not gone too well under their policy in the fifties, but that they might have gone worse under ours. Or they could argue that the old policies had not worked, but that if they were given another chance by the electorate they could produce some new ones for sale. None of these arguments would convince us on these Benches, but at least they would make a rational dialogue possible. But a rational civilised 982 dialogue is impossible if the facts of our comparative economic failure in the last ten years are simply denied.
The first spokesman for the Government in our debate last year (and I certainly do not want to pick on him individually: he commands a great deal of respect in your Lordships' House) used these words (col. 859):
I have given your Lordships a pretty cheerful picture.
That was last year; and "I have given your Lordships" was how he was inclined to sum up his own speech. Noble Lords opposite were not, I think, very pleased when the noble Lord, Lord Shackleton, who I am glad to think will wind up for our side to-day, said:
This speech makes me absolutely despair"—
he was referring, of course, to the speech about the "cheerful picture". I recognise, as I am sure does the noble Lord, Lord Shackleton, that despair must rank with spiritual pride as the gravest of sins, but the one is apt to follow the other, and I am afraid that I may commit that same sin of despair this year if the noble Earl, Lord Dundee, and the noble Viscount, Lord Hailsham, still claim that last year's Budget and the policies connected with it were well-conceived and, in fact, were successful. The noble Viscount, Lord Hailsham, said last year (col. 945):
If what we want is re-flation, the Budget is wrong.
He then, very sensibly, said:
The question is whether the appreciation upon which the Budget is founded is a sound one. If it is sound"—
and that means the appreciation upon which it was founded—
the Budget is a good one; if it is unsound, it is not irrelevant, but bad.
§ That was the noble Viscount, Lord Hailsham, last year, speaking with his accustomed force and clarity. It is not a moral offence or a dereliction of duty to make a faulty appreciation, which, of course, involves a large element of prediction. Indeed, it is hard to make a good prediction, and one must not be too critical, because nobody is ever absolutely right in these matters. But it is, surely, now clear to everybody that last year's appreciation, on which the Government based such confident arguments, retailed to your Lordships, was 983 grossly mistaken. It is surely clear to almost everybody—perhaps to the Government themselves; I rather think it is from the way they have acted in recent times—that this policy of last year has had a lot to do with the further stagnation of our economy and the emergence for the first time since the war of a degree of unemployment which has caused, and is causing, so much concern and anger.
By and large, the Economist newspaper is more favourable to Conservative than Labour policies. It never says anything very good of any politician, but, by and large, it is much more favourable to noble Lords opposite and the Government than to our kind of person. So the comment with which it begins its leading article on March 30 is all the more striking. This was before the Budget. They quote Mr. Selwyn Lloyd in his Budget speech last year, in March, 1962, as saying:
I am certain that events will prove the soundness of our policies and the wisdom of our actions.
They go on to say:
Ever since, events have been proving precisely the opposite.
§ Poor Mr. Selwyn Lloyd—whom I respect highly as a man and sympathise with as a Chancellor. At any rate, poor Mr. Selwyn Lloyd!He and his advisers landed us in a sorry mess in 1961, and the country paid a shocking price in the restrictions of that summer, which we on these Benches voted against in July, 1961, with the notable assistance of the Liberal Party, and of the noble Lord, Lord Boothby, who made an impressive showing in our Lobby. But poor Mr. Selwyn Lloyd, his advisers, his team and colleagues, and all the rest of them—
§ LORD BOOTHBY
My Lords, if I may interrupt the noble Earl, may I say that it is nothing unusual for me?
§ THE EARL OF LONGFORD
I am not sure whether the noble Lord refers to "an impressive showing" or to his appearance in our Lobby. In either case, I agree it is nothing unusual.
Poor Mr. Selwyn Lloyd, his advisers, colleagues, chiefs and subordinates landed us in another terrible mess last summer. This time poor Mr. Selwyn 984 Lloyd had to pay the price himself, which is in a sense, I suppose, kinder to the nation. But, in any case, it was a terrible fate for him. It would not be true to say that he went down with the ship; he was pitched overboard. However, that was the consequence of his second great miscalculation.
This brings us to Mr. Maudling and his Budget. I assume that noble Lords have read the pronouncements of my right honourable friends in another place, and I do not want to weary the House with a long recital of the views of the Labour Party on many of the features of the Budget. We welcome a good many things in this Budget. We welcome the Chancellor of the Exchequer as a new ally in the campaign for world liquidity, in which the noble Lord, Lord Boothby—I mention him once again—has played so prominent a part. We welcome, as Mr. Wilson said, his acceptance of the principle of a discriminatory tax relief for industry in development areas, which, of course, does not mean that those proposals cannot be in any way improved on. We welcome the income tax concessions announced by the Chancellor. Mr. Callaghan said:I think that the reductions the Chancellor has made are in the right places. How could I say anything else?—we proposed them.In general, we on these Benches feel that, within the Conservative framework, within the limitations of a Conservative policy, it is a fair and a not inequitable Budget. If we are critical of it from that point of view, it is because all this, in our view, should have been done much sooner.
There are, of course, a number of criticisms which we have made, and which I could make, and which will no doubt be made by other speakers to-day. Personally, I should have liked to see much more done in the way of direct export incentives. I may be more extreme than some of my own colleagues. My noble friend Lord Stonham will speak about exports particularly. We are all agreed on these Benches that the Chancellor of the Exchequer has been too cautious (assuming that he was right to expand, as we do) in his approach to expansion. There is bound to be plenty of room for legitimate differences of opinion here. I do not know that it could be described as a 985 Party matter, but we agree with the genera] feeling of the Economist thatthe Budget as a whole is a signal for half-speed ahead.To quote the Economist for the last time, they say:There is still a residual assumption that caution about expansion now will somehow make it easier to expand the economy more robustly later, without tackling these problems of cost inflation and export stimulation which is almost certainly the reverse of the truth.We consider that, while Mr. Maudling is right to aim at expansion, he has not expanded enough.
But the right honourable gentleman laid the greatest stress on what he called the main theme and purpose of his Budget, by which he and, I have no doubt, the Government will expect to be judged. Mr. Maudling said:The main theme and purpose of a Budget should be crystial clear.Can that be said of his own Budget? He has taken that test, but can it be said that the main purpose and theme are crystal clear? Well, the words seem definite enough. He went on:The theme of this Budget is expansion—expansion without inflation; expansion that can be sustained.I do not want to quibble, but the distinction between the theme and the purpose will not be obvious to everybody. He went on:The purpose of the Budget can also be clearly Stated. It is to do the Government's part in achieving the rate of growth broadly described as 'the 4 per cent. target', which we have already accepted in the National Economic Development Council".He added that he was confident that this target can be attained without any strain upon our currency (those certainly are bold, sanguine, words) if we as a nation have the will to achieve it. He denies that there is a conflict between expansion and a strong pound. He says sound expansion without inflation will not weaken sterling, but strengthen it. There I am not quoting verbatim, but in effect what the Chancellor said in the House of Commons.
Those are bold, heartening words, which we on these Benches and, I am sure, most noble Lords like the sound of. We like the sound of them particularly because we have used them, or words similar, very often. But they are new words—or some of them are—coming 986 from the Benches opposite. What we want to know is what will be the deeds to match them? As the Observer put it on Sunday:Do the Tories really mean it when they say that they are dedicated to economic expansion?Do they mean it when they say:They will risk a run on the pound to keep Britain booming"?It has been pointed out in another place that some of these words, at least, have been used by Conservative leaders before now. They have been used by quite a lot of leaders. Mr. Butler, when Chancellor of the Exchequer, said in 1955:The Budget proposals must constitute before all else, a fresh incentive to the forces of growth and expansion.So eight years ago these words were getting the air. Mr. Maudling in that same debate—he was already a Minister—said that Mr. Butler would concentrate on a policy of expansion, freedom and incentives, which had throughout been his policy, and throughout had been a successful policy.
It is not difficult to find the same thing in the speeches of Ministers in this House. For example, I quote the noble Viscount, Lord Hailsham, in 1959. He told the House [OFFICIAL REPORT, Vol. 215, col. 660]:I ventured to say last summer"—that would have been 1958—that we were a Cabinet of economic expansionists …. Now that we have created the conditions for expansion … we can move forward again along the road of expansion, as we have always said we proposed to.That was about four years ago, and I do not think anyone will claim that during those four years noble Lords opposite have moved forward on a road of expansion, taking the period as a whole. As in 1955, so in 1959, the Party opposite moved forward on a wave of temporary expansion to a victory at the General Election.
I can say this quite clearly and without any affectation—and I am sorry if I upset any noble Lord saying it—but I have worked for eight years in the City among friends and acquaintances, I suppose none of whom would be Labour in sympathy, and I have never found anybody to doubt that there has been, and continues to be, an important correlation between the electoral tactics and the budgetary policy of 987 our present rulers. I have never found anybody in any sort of discussion to say that there is no correlation. If anybody says that the Government make their economic calculations without any reference to electoral considerations I do not accept that as a statement, and I do not believe that anybody in his senses will.
Of course, the expansion soon wore off, once the Election was passed, until we reached the restrictive climax of the summer of 1961. But by April, 1962, the Government were perking up a little, in words if not in deeds—though not very much in deeds. Said Lord Hailsham last year [OFFICIAL REPORT, Vol. 239, col. 948):We are … a Government of expansionists, and we restrict only to the extent that we feel necessary to combat inflation and maintain the value of our currency.These sentiments, as we know, were accompanied by a Budget which, by common consent, can now be seen to have been too much restrictive in spite of their being a Government of expansionists.
The question that arises is whether Mr. Maudling, in his proclamation of expansion and growth, is saying anything that has not been said many times before by his colleagues. Is he saying anything which has not gone hand in hand with a policy of restriction whenever the balance of payments has begun to look awkward? Is he saying anything different, or is there at least an important new emphasis here, pointing to a different policy, as compared, for example, with the policies of the noble Viscount, Lord Amory, and Mr. Selwyn Lloyd? After he ceased to be Chancellor, the noble Viscount, Lord Amory, speaking in this House, said [OFFICIAL REPORT, Vol. 231, col. 663]:… our policy must be to seek the highest rate of expansion that is consistent with a sound balance of payments and reasonably stable prices.I think that anybody who reads that speech as a whole—a speech which made a big impression on the House—would agree with Lord Amory's view that there might be a clash between expansion and ensuring a balance of payments, and that in that event the balance of payments should prevail. At any rate, in the summer of 1961 the noble Viscount, 988 Lord Amory, strongly supported Mr. Selwyn Lloyd in his restrictive measures and came to the conclusion, in fact, that expansion had to wait in order to make sure that the balance of payments was looked after.
These are very difficult questions, and I am not for one moment saying that anybody is lacking in elevation of outlook in forming one opinion. But, at any rate, what we want to know is whether Mr. Maudling is standing for something new and important, or is just repeating the old words, pointing to the old policies, when a difficult situation arises. Are we to assume that, if Mr. Maudling is allowed to continue at the Exchequer for a number of years, he is sure he will avoid the situation which led to the restrictive policies supported by the noble Viscount, Lord Amory, and Mr. Selwyn Lloyd? Or are we to assume, alternatively, that Mr. Maudling reckons that if these restrictive situations arose, we should be able to cope with them without interfering with expansion? You can take the Amory-Selwyn Lloyd philosophy or the Maudling philosophy; but one thing that is quite clear is that these are two quite different philosophies. The old were, of course, defended with great enthusiasm and eloquence by noble Lords opposite, and no doubt they will defend this lot of philosophies with equal enthusiasm; but I know they are nimble-witted (to use an expression which has come into common use) and I ask them seriously whether they are prepared to claim—because it would really be a farcical claim—that Mr. Maudling stands for the same outlook in economies as was presented by the noble Viscount, Lord Amory, and Mr. Selwyn Lloyd.
Two years ago, I myself ventured, in a Chairman's speech, to argue for the need of a new approach to planning. In fact, even in 1961 planning and growth were words that had become fashionable in many quarters. But last April the noble Viscount, Lord Hailsham, was belittling the increasing emphasis on growth, and he was being funny about growth. I do not know whether he will be quite so funny about growth this evening. Said the noble Viscount, Lord Hailsham, last April [OFFICIAL REPORT, Vol. 239, col. 956]:It is for this reason that, although I would count myself an expansionist, I have never 989 wholly subscribed to what I can only call the growthmanship which is sweeping through the dry stubble of the economic underworld like a prairie fire,He went on to belittle the policy of aiming at growth.
§ VISCOUNT HAILSHAM
I do not think so. I went on to say:… with this talk of league tables and a lot of other bunkum.
§ THE EARL OF LONGFORD
The noble Viscount should read his own speeches, although I agree it would be a painful exercise. But I am not going to read the whole of the speech, for that would be an ordeal. The noble Viscount will be speaking for an hour or two to-night, and he will have his chance then. What he did say about growth was this [col. 957]:… my view is that it is efficiency rather than growth as such that I should wish to see this country pursue; and being by conviction an expansionist, I believe that if we do in fact achieve efficiency the other thing that matters in this field, desirable growth, will be added unto us.I have taken what I think is the most relevant passage. It may sound all right to the noble Viscount but not to Mr. Maudling.
§ THE EARL OF LONGFORD
Or the unemployed. Let me repeat what Mr. Maudling has said:The purpose of the Budget is to do the Government's part in achieving the rate of growth broadly described as 'the 4 per cent. target'".That is the direct objective of the Government this year; it was not the direct objective of the Government last year; and that particular approach was belittled and derided by the noble Viscount last year.
What has happened in the meanwhile? A number of things have happened, some of them helpful suggestions, such as the strengthening of the assets available behind our reserves; and some of them very adverse, like the collapse of the Common Market negotiations. But the main thing that has happened has been the emergence of "Neddy", the National Economic Development Council, a force of great influence in our economic affairs. Since I have not been very kind about Mr. Selwyn Lloyd, let me at least say 990 this: that long after many of us have been forgotten it may well be that he will be remembered as the man who pointed the way to "Neddy". I think that he must be given credit for that.
Here we have a scheme, not of Socialist planning—it does not go as far as some of us would wish—but in certain respects it is an important development. It involves voluntary expansion of both sides of industry and co-operation in pursuit of agreed objectives. I have no doubt myself that if Mr. Maudling does, in fact, stick to this plan of pursuing growth by means of planning, he is, in fact, setting our feet on a new path; and I believe that he will be remembered very favourably in history if he is allowed to adhere to that path. It will depend on his success or otherwise in making progress towards an incomes policy. These are issues on which the noble Lord, Lord Williamson, will speak with much greater authority than myself. We shall all want to hear him. It seems unlikely at present that Mr. Maudling will secure the co-operation he wants from the trade union movement. But are the employers and the classes they tend to represent any more ready for sacrifices?
Here I should like to speak very bluntly. I worked, until the other day, for eight years in the City, and in my opinion the true but boring thing to say about City people is that they are just like other people; they do not suffer from some peculiar mentality; they are ordinary, patriotic British citizens, like others. But I am bound to say that, whether in commercial circles or in industrial circles, so far as I know them, I have not found any readiness to take an initiative towards the kind of restraint which they are asking the trade unions to undertake on their part. It seems to be generally assumed by the more comfortable classes in this country that the trade unions, as a patriotic gesture, though possibly in their own self-interest, should somehow restrain from making full use of their bargaining position. While the business community are ordinary, patriotic, law-abiding people, ready to take what comes to them from the Government, I have never found any initiative from that quarter in making sacrifices themselves, and until they do so they will not expect and cannot expect much sacrifice from the trade unions. I believe, to put it bluntly, the well-to-do 991 classes in this country think they are now, through the taxation system, bearing more than their share of sacrifice. That is what one might call their moral approach; and if that is their approach the situation is a fairly hopeless one, unless there are sacrifices all round and sacrifices voluntarily undertaken, as distinct from those which the Government might seek to impose.
I am about to conclude. I do not want to give the impression that "Neddy" is a sacred text and that all one has to do is to turn up the Report and find out how to proceed. According to "Neddy" plans, accepted by the Government, we are hoping to increase the gross national output by 4 per cent. a year between 1961 and 1966 compared with 2.7 per cent. a year from 1956 to 1961. We have already fallen far behind that rate of progress because 1962 was such a bad year; so we must increase well above 4 per cent. for the rest of the period. "Neddy" makes it plain that even 4 per cent. will not occur automatically. There are many aspects of Government policy (I am quoting what they say) as well as many matters relating to management and labour that will help to determine the outcome. It is not something that will come about by itself.
I am afraid we on these Benches have no great reason for confidence in the ability of the Government to organise or inspire the efforts of the people. Nevertheless I—and I think this goes for my colleagues here—wish Mr. Maudling well. In a sense, I wish all his colleagues well, as individuals, and at the same time I should, of course, gladly consign him and all his colleagues, in a political sense, to perdition. But I wish him well in this particular way. His Budget could represent (I do not think it will) not only the acceptance of certain economic ideas—expansion, growth, planning, and so on—which have seemed obvious to many of us for quite a while; his Budget could also, if it were given effect to in times ahead, bridge quite a large part of the gulf which at present exists between the economic and social thinking of capital, on one side, and labour, on the other, Conservatives, on one side, and Socialists, on the other.
This gulf, of which I have been very conscious, working in business for a num- 992 ber of years, cannot be altogether terminated—in fact I do not think it is desirable it should be while we remain a strenuous democracy—but the depth and extent of it in the thinking of the nation has made it impossible for quite a number of years now to find common assumptions in Britain on which to found a common policy and to pursue and achieve a united national effort. Good luck, then, to Mr. Maudling if he sticks to his plan!
While I was chairman of a bank for eight years I served—if that is the right word—under six Chancellors. I think that is a better proportion than the nine Defence Ministers in eleven years. I served under six Chancellors, all men of ability and character. Two of them flourished for a while but then, as in the parable of the sower, withered away for lack of economic roots. Two were tipped, or tipped themselves, overboard. The only one of Mr. Maudling's predecessors who enhanced his position was the present Prime Minister, who saw to it that if there was any tipping to be done he was going to do the tipping. It is no good pretending that we on these Benches have any great belief that the good old leopard has changed his bad old spots, or that the Maudling type of policy would be supported when things got difficult. We hope that there is a firm purpose of amendment, but we should like to see signs of contrition first, and perhaps they may be expressed by the Ministers during the debate—I shall be agreeably surprised if they are.
But the matter may never be put to the test. Mr. Maudling has shown himself a highly intelligent and friendly person, with a good grasp of economics. I see an excellent future for him. A year from now, or thereabouts, he should make an ideal chairman of a bank, when another Government comes in, a Government who really believe in planning and a Government who are genuinely devoted to social justice.
§ LORD BOOTHBY
My Lords, does my noble friend really think that any Chancellor of the Exchequer can impose his will upon the Treasury?
§ THE EARL OF LONGFORD
I do not know whether a Chancellor of the Exchequer could. A Government which cannot ought to clear out. I do not 993 think one man can, but he requires the backing of the Government as a whole. I know what the noble Lord, Lord Boothby, will tell us about Mr. Lloyd George, but I think of a better man in our own Party, or maybe even on the Cross Benches. There it is. I think there is a lot to be said in favour of Mr. Maudling's ideas. We very much doubt, in view of past experience, whether they will be given effect to, but we ourselves consider that a different approach is necessary, and we are confident (and almost everybody seems to believe this—even the Government, when they are not putting on too much of an act) that it will not be too long before we are given the chance to prove what we say is true. My Lords, I beg to move for Papers.
§ 3.27 p.m.
§ LORD GRANTCHESTER
My Lords, may I also express my regret at the absence of the noble Earl, the Leader of the Opposition and particularly for the reason for it; we should like to join in wishing him a speedy and full recovery.
The noble Earl, Lord Longford, is a great authority. I am not as convinced as he is of what can be secured in a positive sense by any Government. He has posed very wittily a number of questions to which none of us can pretend to know all the answers. After all, we are not dealing with an exact science in government. Much in any policy must be regarded as experimental, and on this basis surely the fullest co-operation should be given by all involved in positions of responsibility.
Having said that, I want to make some rather simple observations. It is unusual when economic matters are discussed nowadays to hear words to which we are accustomed in our daily lives. The jargon is not so developed or so incomprehensible as that of the scientists. This is no doubt because less money is spent on research in the economic domain than in that of science.
In our schooldays we used to refer to science, perhaps with some foresight, as "stinks". We had no similar expression for the study of surpluses and deficits, above or below the line, as instruments of economic policy, balance-of-payments crises and the like. But in those far-off days we did know that the way to earn 994 more was to work harder or more efficiently; that if you spent more than you earned you would soon be "broke"; that if you "played the fool" you were likely to get the sack; that there were such things as "rainy days" against which it was desirable to provide by saving as a habit; that if you went a-borrowing you were likely to come back a-sorrowing, and anyway you would be expected to produce security and evidence of ability to repay. By and large, in those days, the same rules applied to the Government as to an individual.
For me, that misery which has overtaken the country, out of which the noble and learned Viscount the Leader of the House was trying to shake a week-end audience, started with a lecture from my father on what I should have to forgo because the Chancellor of the Exchequer had raised income tax from 11d. to 1s. Perhaps his conviction that the country had been set on the slippery road was not entirely wide of the mark. Capital was what we accumulated by not spending all our income, and had to be at least ½d. out of every 1s. It is difficult for those who were born after 1914 to appreciate what the necessity for personal struggle inculcated into Victorian generations meant for the building up of the resources upon which we have been drawing and building ever since.
Since the end of the last war successive Governments have fostered the illusion of their superiority, both in wisdom and in action, so it is not surprising that the harassed individual leaves his problems to the Government; and the expectations of industry, expressed in headlines such as we had last week—namely,Industry expects a boost from the Budget"—show how far the country has travelled along the road of diminished responsibility. Somehow, we have to bring home to the individual not only that what he does matters, but that no one is wise enough to relieve him of all thought and of personal effort if he is a normal, healthy citizen trying to earn his living and to get on. After all, few businessmen know much about businesses other than their own in which they are working; and I have never understood how Ministers or Government Departments can be expected to 995 know the answer to every citizen's problems, personal and business. The theoretical advice which economists give has often not been tested in action.
But there is a great deal that could be done to make life less difficult, by cutting out overlapping procedures in different Government Departments and discarding out of date regulations. One has only to listen, for instance, to those engaged in building and construction to realise this. The Board of Trade is involved in industrial building, and when their officials have cleared a scheme I understand that it goes to a new Department concerned with industrial policy at the L.C.C. Architects complain bitterly about the difficulties of getting plans approved, and to get approval they sometimes come away with a plan they hardly recognise as their own work, but which they accept so that the job can be started. It is in matters such as this where government is involved that much could be done to help speed and efficiency, and so to keep costs down.
To give him his due, during his ingenious but rather dull lecture last Wednesday, the Chancellor of the Exchequer did make a timid plea for something we could call "interdependence," when he said that the Government needed the co-operation of all to achieve the desirable aim of expansion without inflation. I would make a plea to Ministers to use the old, simple, direct words to preach the merits of the sterner Victorian virtues. I think the noble and learned Viscount our Leader is often very good at this, and if I may say so, I wish he would do more of it.
What other matters could, and should, be explained in simple terms by Ministers? Surely, that our competitive position has been weakened by a number of restrictive measures taken in other countries, such as the subsidising of building and operating ships, ties upon loans and grants requiring the money to be spent in the country making the loan and the goods to be transported in ships flying the national flag of the exporting country. Commonwealth countries have been setting up industries within their borders and protecting them, if they are uneconomic, with a 996 tariff sufficiently high, after allowing for British preference, to keep out any British imports.
This kind of action has depressed our merchants, who watch foreign and Commonwealth countries taking measures about which they can do nothing, giving them a feeling that their own Government are not doing sufficient to help them. This is understandable. But, fortunately, these obnoxious practices do not yet extend over the whole field of production. Some of them will, no doubt, be considered at the forthcoming Commonwealth Prime Ministers' Conference. But the most unfortunate effect of these practices is perhaps that they distract attention from action which could be taken to secure greater efficiency in production, modernisation of union rules and procedure, and the elimination of practices which impede efficiency and competition.
But, we have to ask, who is going to tackle the difficulties, to work harder, show initiative and take greater responsibility, except he see the prospect of adequate reward? When Gladstone said, "Let the people's money fructify in their pockets" (quoted by the Prime Minister last week), his Government practised retrenchment, not living with an unsecured overdraft of £687 million over and above an expenditure of some £9,000 million raised by national and local taxation, and with £1,000 million of debt to redeem this year. Nor was the Government of those days guilty of devaluing, as did the Labour Government, or of debasing the currency by increasing the issues of Treasury bills to cover over-expenditure, as all postwar Governments have done on a number of occasions.
To come back to the individual, today if the husband decides to work a little harder or longer so as to make up for what his wife might like to forgo so that she can brighten the home, the family is penalised by higher taxation. If for religious or personal reasons he wishes to educate his children outside the standard State scheme, he feels that he is called upon to pay twice: once himself and again in taxation. With all respect to the noble and learned Viscount's weekend oration, I must say I understand some of the moaning. I believe it is rooted in a sense of being 997 harassed and a sense of inability to act for oneself, so that the natural British "pep" evaporates into ineffectiveness. Paying someone else, chiefly Government officials, to do everything for you and for your family is not only more expensive than doing it for yourself, but tends to take the interest out of life. Even the capital gains tax is designed to fall upon the individual only if he acts for himself. Taxes levied for political reasons do not make much sense, but if there is any sense in this tax a little less exemption and a lower rate might make more sense.
The Chancellor of the Exchequer has informed us that he is starting some inquiries, for example an inquiry into gambling, into the merits of an added value tax and other matters. His predecessor did the same a year ago when referring to the necessity for a revision of the structure of taxation, but so far we have heard nothing of this report. I should have thought that the merits or otherwise of the added value tax might have been studied during the long-drawn-out Brussels negotiations, as this is one of the changes which would bring taxation practice in this country more in line with that in some of the Continental countries. While referring to inquiries, may I be a little facetious and ask whether it has occurred to anyone that, to help a reconciliation with President de Gaulle, Mr. Gordon Richardson might be enrolled to deal with M. Pompidou?
I was particularly interested in an article by one of the directors of the World Bank in this month's Lloyds Bank Review. He describes the experience which the World Bank has gained in dealing with governments in the less developed countries. He writes:In the process of learning … both suppliers and recipients of technical assistance have suffered great frustration and witnessed colossal waste of time and money … governments and international agencies are required to continue to operate in ways that the professionals know to be ineffective, comparatively unproductive, if not completely useless.He continues:The World Bank believes an essential condition for the success of the Development Bank is that whatever the source of its capital it should be privately controlled. There is a mass of evidence to indicate that Development Banks both financed and controlled by governments show a strong tendency to become diverted from the paths of sound development and finance.998 Emphasising the key role in development that the businessman plays, he goes on:The forgotten man in the international technical assistance effort is the struggling businessman trying to make something useful for his fellow countrymen.The one thing Governments must do if they wish to promote private initiative for industrialization—and this, in his opinion, is the only satisfactory road—is to establish a climate in which private enterprise can operate and prosper. I would ask the noble Earl who has spoken for the Labour Opposition on the merits of Government planning to bear in mind this testimony from a director of the World Bank. Of course, it is all to the good if the Government can bring together the leaders in industries which have worked out their own plans so that they can be given all available useful information and exchange views between themselves. Co-ordination of this kind is useful and essential to-day.
In offering discriminatory inducements to industries to develop in particular areas, the first pilot schemes should help to show what can be achieved by such means; but care must be exercised. We must beware of increasing costs by adding to the difficulties of management and supervision. Tax inducements are of no avail to a company in the absence of sufficient earned profit. It is the men in each industry who must plan their expansion, the key to which is held by those who sell and who can estimate demand and potential demand.
It is relevant also to ask whether the Governments of the rather more developed countries are being any more successful in the direction of industry or finance than what we hear from one of the directors of the World Bank of results in less developed countries. It is significant that the internal purchasing power of the pound since 1938 has fallen proportionately to the increase in Government involvement and expenditure. In 1938 one pound purchased goods to the value of 12s. 10d. as compared with a pound in 1914. To-day it has fallen to approximately one-third of the 1938 level—less than 4s. 5d. In 1938 governmental expenditure was less than £2,000 million. To-day it is £9,000 million. This fall in purchasing power is not a result exactly calculated to enhance confidence in Government promises to pay inscribed on every pound note; and there are 999 citizens in real misery who cannot multiply the number of their pound notes as they fall in value.
It may be that the arrangements existing between Central Banks may prevent any attempt to undermine a single currency. But it seems to me there is not sufficient concern over the possibility of a gradual depreciation of all Western currencies, as a result of unsound measures while the levels of their exchange rates are maintained as distinct from their internal purchasing power.
There is one other matter to which I should like very briefly to refer. This is the practice of holding the reserves of Central Banks in gold and convertible currencies—what is called the gold exchange standard. An article recently appeared in a French journal, written by a very eminent authority, pointing out the dangers he saw building up under the present gold exchange standard. The collapse of a similar standard in 1931 brings back poignant memories to all of us. The article was headed "The Western world awaits a Statesman who will give it back a currency". The writer made a plea for a study of this problem as a matter of urgency, and I should like to repeat his appeal here. He wrote:In this century of scientific research and planning, is it really too much to ask that those responsible for monetary systems should agree to an objective survey of the ridiculous system under which the United States are exempted from paying most of their debts to other countries?This is of course a reference to the returning to the United States of dollars held as part of a national reserve, instead of asking for payment in gold to which they are entitled. My Lords, although I have ended on a difficult theme which calls for study, I should like to return in conclusion to the simple statements with which I started. For the purpose of communicating—I think that is the word to-day—what is needed is the use of simple words, plainly spoken. There is no short cut to ever-increasing prosperity, and it will be achieved only by greater effort of thought and hand on the part of all involved.
§ 3.55 p.m.
§ THE EARL OF DUNDEE
My Lords, on this side of the House we deeply regret the absence of the noble Earl the Leader of the Opposition, who had put this 1000 Motion down in his name on the Paper. We are glad to hear from the noble Earl, Lord Longford, that he is going on well in hospital. We all send him our best wishes and hope that we may soon have the pleasure of welcoming him back again.
§ THE EARL OF DUNDEE
The noble Earl, Lord Longford, also said how much we miss, in these annual debates on the Economic Situation, the late Lord Pethick-Lawrence. Oddly enough, two noble Lords said exactly the same thing on my way into the Chamber this afternoon—which indicates, I think, the high regard in which he was held. I was glad to hear the noble Earl, Lord Longford, quote some words I once used about Lord Pethick-Lawrence after he had spoken, to the effect that his speeches were always "fair and reasonable and consistent", as I think indeed they were. The noble Earl pointed out that they were also strongly critical of the Government, which is also true. But, of course, the fact that an argument is fair and reasonable and consistent does not always mean that it commands universal assent. Conversely, it is quite possible that a speech or a document may contain a great many things which are quite true and may yet be unfair.
I noticed this morning that the Report of the United Nations European Committee on Economics has just been published in Geneva—I have a copy here—which I am sure is well worth studying when we have time to do so. I do not think either the noble Earl or I have yet had time to do this. But my attention was drawn by a phrase of the Report—because it happens to be on the first page—which refers to British economy becoming ground to a virtual standstill during the latter part of 1962. I think that to talk about our economy grinding to a standstill when, although it has failed to increase as we should like it to increase, it is running still at a record level of employment and production, rather undermines one's confidence in the rationality of those economists, however eminent they may be, who use language of this kind.
§ LORD SHACKLETON
My Lords, may I ask the noble Earl whether this paper is available in the Printed Paper Office?
§ THE EARL OF DUNDEE
I do not know whether it is available in the Printed Paper Office, but it was published in The Times this morning.
§ THE EARL OF DUNDEE
I do not see why it should not be available. I do not think there is any difficulty about getting it, except for the time factor; it was published only this morning. But I have no doubt the noble Lord will have every opportunity of getting it in a few days.
§ THE EARL OF DUNDEE
The noble Lord can have my copy now if he likes. I have finished with it. Perhaps later on, when he has finished with it, he will give it back to me.
If I may now say something about the noble Earl, Lord Longford, I hope he will not mind my saying that I thought his speech in moving this Motion was remarkably moderate and fair—not that there is anything unsual about that—but I rather got the impression, in listening to his speech, that the noble Earl was struggling manfully against an almost irresistible temptation to be unfair. But he successfully overcame it, and I appreciate the tone of his speech very much. The only really untrue thing he said, was when he stated that I was nimble-witted, but it was also a very kind thing to say, because I have always longed to be nimble-witted, and it is nice to hear people talking as if one of your most cherished but unrealised ambitions had come true.
The only really unkind thing the noble Earl said about me, I thought, was when he suggested that I was inclined to talk with an air of infallibility. I do not think I have ever made any pronouncement excathedrâ on any matter of faith or morals, and on the subject of economics I have always wished to try to appear to be very humble and diffident, because I really think that, in this modern world, it is a subject on which no one ought to be dogmatic. I remember once a few years ago comparing the efforts of both political Parties to work out an economic policy for this country to the efforts of two small children trying to ride a bicycle. I sometimes still feel that this is not an altogether inappropriate simile.
§ THE EARL OF LONGFORD
My Lords, I should like to apologise to the noble Earl. I withdraw the suggestion that he has spoken with an air of infallibility: but he has an air of such authority that one in inclined to assume that infallibility goes with it.
§ LORD BOOTHBY
And, on the subject of the bicycle, if I may interrupt the noble Earl for one moment, may I say that you turn the wheel in the direction in which you are falling?
§ THE EARL OF DUNDEE
So many people turn the wheel to the right when they want to go to the left, and vice versa, with results not always in accordance with their political convictions. My Lords, the noble Earl said that he thought I might try to use what he called alternative arguments (a legal phrase, I think he said it was) in reply to his speech, and I confess that I had brought with me a large number of these alternative arguments which I hoped might counter the perhaps tendentious and partisan allegations which I thought the noble Earl might make. But, in view of the noble Earl's speech and of its tone, I have discarded them all, and I shall try to reply to the noble Earl's Motion in not only what I hope will be a short speech, because there are twenty of your Lordships who would like to take part in the debate, but in what I hope, even more, will be an objective speech. I shall try to be as objective as the noble Earl was.
My Lords, the aims of our economic policy are a faster rate of growth combined with stable prices; full employment combined with a better distribution of industry between different parts of the country; and a trading surplus which will enable us to make our proper contribution, both to the defence of the Free World and also to the aid of those less developed countries which we all want to help, in Africa, in Asia and in South America. I should like to begin with a short word about economic expansion in general; then to speak shortly about the local employment question in particular; and, finally, to say something about our ability to help the rest of the world.
When my right honourable friend the Chancellor introduced his Budget last week, his opening theme, as the noble Earl mentioned, was our desire to 1003 achieve the N.E.D.C. 4 per cent. growth target without inflation. My right honourable friend then went on to point out that we could neither achieve this growth target nor, he said, avoid another "Stop—Go" sequence in the management of our economy unless the country was willing to co-operate with us in the voluntary observance of an incomes policy. I think, my Lords, that this has been the most continuous and the most outstanding failure in the 17½ years of our post-war economic history.
Of course, there are other obstacles to economic growth, such as blind and stupid adherence to out-of-date restrictive practices, or slowness in adopting up-to-date methods of production in many industries; but the chief enemy, the main hindrance to a faster economic growth, has been, in my view, our incorrigible determination to pay ourselves additions to our incomes, too often and too much—except, of course, for a few underprivileged classes like probation officers, university dons and Members of Parliament. This has lowered our competitive power; and, of course, the more dependent a country is on exports—and we happen to be more dependent on exports than anybody else—the more damage is done to its economy by this wage-cost spiral from which we have never been able to escape.
All the official statistics which are published about price levels, wage levels, production and so on, alter their basic year every now and then. They do not always have the same basic year, which makes it a little difficult and puzzling to co-ordinate and follow them. I thought that it might interest some of your Lordships if I had a table made showing movements in production, in incomes and in price levels, all with the same base year, the year 1950, for the last twelve years. Taking 1950 as 100, since 1950 our industrial production has gone up from 100 to only 139—not nearly good enough, as I think we should all agree. The gross domestic product is a little worse. Industrial production has gone up to 139, the gross domestic product to 133. If you take wages and salaries, they have gone up from 100 in 1950 to 223 in 1962. The total of all incomes is a little lower; it is 218—that is, only five points lower. Wages and 1004 salaries, which form the greater part of incomes, have risen to 223. Now the price level has gone up from 100 in 1950 to 161 in 1962, and I suspect (although, of course, I have not got any figures to show it) that this rise in price level would have been very much greater if it had not been for the change in the terms of trade which took place in the 1950's, very much to the advantage of industrial manufacturers and to the disadvantage of primary producers.
My Lords, the rise in wages and salaries from 100 to 223 is a rise of 123 per cent. When you take account of the rise in the price level from 100 to 161, that reduces the rise in real wages from 223 to about 70 or 75. By itself I should not object to that, although I am against inflation, as I think we all are. But, if you are only to take these two figures by themselves, a 75 per cent. rise in real value of wages in twelve years is not bad. If it were the case that in order to get that we had to pay the price of a 60 per cent. inflation, well, I think that is a price I should be prepared to pay. But, of course, that is not all there is to it. It is this inflationary wage-cost spiral which is chiefly responsible for the unsatisfactory movement in total production from 100 to only 133, or, in the case of industrial production, to only 139. And these nominal advances in wage levels would have been far more valuable if industrial production and our exports had gone up more rapidly than they have done.
I am not going to trouble your Lordships with further examination of figures, but you will have noticed, probably, that the Economic Report this year gives figures of hourly wage increases for the last three years: 6.6 per cent. in 1960; 5.2 per cent. in 1961; and 4.8 per cent. in 1962. You can see from the table, going back to 1950, that there have been two periods in particular when industrial production was fairly satisfactory, when it was going up by four or five points—and in one case eight or nine points—in two years. If you compare the inflationary wage-price spiral with that, you always find that the benefits of this in crease in industrial production have been checked by inflation, which means that we buy too much from abroad; we cannot sell our exports because of costs which are going up and we are unable 1005 to get the imports we need. We therefore have a financial crisis and this wretched "Stop—Go" restriction. That was particularly bad in 1960, after 1958.
There was a very big and satisfactory increase in total production from 1959 to the end of 1960, but the increase in incomes was so excessive that it led to the very favourable trade balance of 1959 of £350 million being converted into a large deficit in 1960, and this led to the restrictive necessities of 1961. Unless we can manage to keep the increase of incomes a little behind, and not a little in front, of the increase in production, I do not see how it is possible to avoid the same thing happening again.
Some of your Lordships may be inclined to ask: instead of aiming at an increase of wages combined with stable prices, would it not be better still to aim at stable wages with falling prices? That would perhaps strengthen our economy even more. It would mean, too, that the receivers of stable wages became a little better off, because with falling prices their wages would be worth more and would have this additional advantage: that all these 3,¾ million people to whom the Chancellor last week gave relief from paying any income tax at all would go on not having to pay income tax at all. Whereas the probability is that very soon most of them, owing to wage increases, will come back again over the exemption limit.
But the Government feel that an attempt to prevent any nominal increase in wages in order to bring prices down, though it might strengthen our economy a lot, is psychologically impracticable. Everybody has got into the habit of looking upon it as a divine right that he should have some increase in his nominal income every two or three years. And since an incomes policy can succeed only by general consent and by voluntary action among all the different sections of industry, I think your Lordships will agree that my right honourable friend the Chancellor of the Exchequer is right in the target he set last week: that is to say, wage increases with a limit, he hoped, of 3½ per cent., combined with an industrial growth of 4 per cent., which we hope will result in stable prices and a strengthening of our economy.
The noble Earl, Lord Longford, was good enough to admit that if we have 1006 economic planning at all we must expect some errors to occur in it. You cannot expect human beings to estimate with unerring accuracy facts which will govern our economic policy for one year or two years ahead, or whatever the period may be. The noble Earl rather tended to suggest that the policy of Mr. Selwyn Lloyd last year was flatly irreconcilable with that of the present Chancellor of the Exchequer. I should rather put it this way. In 1962 we had economic estimates of what was likely to happen. For the first half of the year they were right. We thought the economy did not need any monetary stimulation. During the second half of 1962 it turned out that those estimates were wrong; the demand and foreign trade declined when we expected them to increase. I would only comment on that that we very soon began to take remedial action.
First of all—I am not arguing whether it was enough or whether it should have gone sooner—we did take off the regulator. In September we first of all remitted special bank deposits amounting to £160 million. I went into this in our debate on February 19 and I am only briefly reminding your Lordships of the summary. There were reductions of purchase tax on cars from 45 per cent. to 25 per cent., and then reductions of all 45 per cent. class purchase tax articles down to 25 per cent. Then there were post-war credit repayments of £42 million; a reduction in bank rate from 4½ per cent. to 4 per cent.; private investment allowances last November in anticipation of the Budget; a £70 million increase immediately undertaken in public investment, and, after that, at the beginning of this year, the Chancellor decided to increase public investment by £200 million. Now, in last week's Budget, he has further stimulated the economy by a tax remission of £269 million, which is designed partly to increase purchasing power among those people whom he carefully defined, but which is also weighted in favour of the development areas, because a good deal is in the shape of special tax remission for people to set up factories there.
These measures must be combined with plans to smooth the industrial changes which are taking place. The Government believe that they are taking the necessary action to fulfil the N.E.D.C. growth target of 4 per cent. growth without inflation. But this is National Productivity 1007 year. Productivity does not mean more employment; it may mean less employment. It means producing more goods with fewer workers. That, in itself, is a good thing for our economy, but it means that we must take special measures to deal with the position, to meet the shortage of skilled workers in some trades and to deal with the redundant workers whose jobs cannot be continued in other trades. We must have measures not only to deal with redundancy, to which the Minister of Labour referred the day before yesterday, but also more expenditure and a great deal more thorough administration in industrial training, which my right honourable friend also spoke of on Monday. Your Lordships had a comprehensive and, I think, valuable debate on this subject on February 11.
This expansion of productivity must not be confined to the congested conurbations of the South East and Midlands. I do not accept the disparagement, of which we have heard a good deal lately, of the Local Employment Act. It has done a great deal of good, and it was very favourably received when I had the duty of piloting it through your Lordships' House a year or two ago. But we all agree that it has not kept pace with the need for further stimulation in the development areas and that additional measures are necessary.
I remember your Lordships discussing all these questions thoroughly, as it is our duty to do. I remember the debate on Scottish economy on January 23, initiated by my noble friend Lord Polwarth, who very fairly paid tribute to the Local Employment Act. He mentioned what it had achieved in Scotland, but said it was not enough. The phrase he used was, "We must make the carrot more juicy." Four or five noble Lords urged strongly that we should have a pulp mill at Fort William, which could be done only by Government aid, and I am glad to think that since that debate both these things have been done. £10 million have been allocated as a loan to Wiggins Teape for a mill, a new venture which will mean a great deal in future to the economy of the Scottish Highlands and in the Lowlands I hope the new grants and free depreciation allowance will make the carrot juicier.
The more we examine into them, the more we feel that both the standard 1008 grants, 35 per cent. for buildings and 10 per cent. for machinery, and the very attractive provision for three years' appreciation all being put into one year, as the management desire, are strong and powerful inducements and will be a great stimulant throughout Scottish industry, and I hope in other development areas, too. The Scottish economy cannot be brought into full modern maturity in a few years, but if we add up the measures taken—at Bathgate, one new growth point, an additional 6,500 are going to be employed, and another 10,000 in the Paisley area; the start on the new Tay Bridge (and I am glad to see that the noble Lord, Lord Hughes, started the building of this bridge with his own hands, an appropriate thing, since it was he who for many years was Chairman of the Tay Road Bridge Committee and did so much to bring this project to fruition), the additional £2 million on Scottish Road expenditure, the new strip mills coming into operation in Lanarkshire and the graving dock at Greenock—although all these seem little in comparison with what is needed, they are a powerful initial stimulant for starting growth points and for attracting other industries. I hope that more industries will come to Scotland, knowing that they will find there a good, hard-working labour force and a delightful place to live in. It will pay them well to come in larger numbers.
I will conclude with a word about the export position. The actual figures for the present moment are good, so far as they go. There has been a change of £140 million in our balance of payments. Instead of being £72 million on the wrong side, there is £67 million on the right side, and, when we bring in the balancing items, which have escaped being recorded, we have a surplus this year of £103 million. Besides the reduction of £61 million in the deficit in trade, exports rose by £123 million. This rise took place in the first half of the year. Imports rose by only £46 million, and the invisible account, which had deteriorated the year before, was reversed and the net surplus increased by £62 million to £138 million.
But on present form we do not think that there will be any great increase in foreign trade or in demand this year. Therefore, we must make a particular endeavour to make our own exports more 1009 competitive than they are now. I am not going to give any estimate of how much we hope to allow for the purpose of further expenditure overseas, because that depends on so many factors which are incalculable. I think it partly depends on what happens in the United States and whether President Kennedy can persuade Congress to stimulate the American economy by reducing taxes, and other measures. Another possibility of expanding world trade is the "Kennedy round" which, in the long run, if it is successful, may be more important, though its effects will take a little longer to show themselves.
But there are many factors outside our control which govern the possibility of our overseas earnings in the next year or two. The amount which we had expected to contribute in aid to underdeveloped countries last year was £180 million. I think that in fact it will not prove to be so much, although our commitments for the future appear to be going up. But our desire, subject to the export surplus which we can earn, is to contribute more. The Chancellor mentioned last week that he was going to try to increase our aid by an allocation of £10 million for connecting the demands for British goods for underdeveloped countries with under-capacity in Great Britain. He gave several examples of what he was proposing to do in providing loans for Pakistan and India. Another example where both our trade and that country's interests might benefit from this scheme is Chile. Our Ambassador at Santiago has recently approached the Chilean Government with an offer to make them a loan of £1½ million, to be spent on capital goods by British industry where there is a surplus capacity.
Our desire is to do more than we are doing now to help under-developed countries, both by capital investment and by technical aid. In particular, we should like to do a little more to help the United States in associating ourselves with the alliance for progress. But that all depends on what we can earn. It is no good saying we are going to devote 1 per cent. of our national income to foreign aid or Commonwealth aid, giving them 1 per cent., whatever it may be—£250 million—and then not earning that in export trade, with the result that we have a balance-of-payments crisis. That 1010 will do no good to anybody. We must earn the money first. But we must keep that object of increasing our help to the countries which need it before us.
We must remember at the same time that, apart from the United States, we have more military commitments overseas in the defence of the Free World than any other country. That is an unrequited export; we do not get anything for it in return. Our expenditure on military forces overseas in 1962 was £249 million. That, of course, is only a small part of our total expenditure on Defence, but it represents that part of Defence expenditure which has to come out of our overseas earnings, and to that extent reduces our ability to give the larger sums we should like to give in foreign aid. I should like to put on record that our desire is to increase aid when we can sufficiently increase our overseas earnings.
As the noble Earl, Lord Longford, said, you cannot expect your calculations always to be right. I am very far from claiming dogmatically that ours are; but, to the best of our belief and according to the information at our disposal, the Government are doing what they can to achieve the 4 per cent. growth target, to keep prices stable, to distribute industry better in this country and to provide for the discharge of our obligations, both military and economic, to the Free World.
§ 4.33 p.m.
§ LORD WILLIAMSON
My Lords, we should be grateful, I think, to the noble Earl. Lord Longford, for submitting this Motion on the Order Paper, which gives us an opportunity of discussing what is a very serious economic situation. I join with my noble friend in sincerely trusting that the Leader of the Opposition, Lord Alexander of Hillsborough, will soon be fully recovered and back in full health in your Lordship's House. I have listened carefully to the noble Earl, Lord Dundee, and I was pleased to hear him speak so confidently of the increase in our exports and improvement in balance of payments, because if one factor had to be singled out as differentiating our position from that of some other countries, I think it would be the recurrent and dangerous weakness of our balance of payments; and to a large extent this 1011 derives from the inadequacy of our exports. It is on this that I should like to address your Lordships this afternoon.
We are 50 million people crowded in these Islands, producing only half of our food and having very few of our own raw materials. Therefore, imports on a vast scale are essential, and these must be paid for by an almost ever-increasing scale of export. When we talk about increased growth, which presupposes increased imports of our raw materials commensurate with that growth, it is axiomatic that we cannot afford to grow unless a way can be found of greatly expanding our exports, or unless we can find some other way of correcting our balance-of-payments problem. The right honourable gentleman the Chancellor of the Exchequer, in his Budget speech, said [OFFICIAL REPORT, Commons, Vol. 675 (No. 91), col. 477] that the main conditions of a successful export drive are clearly a general expansion of world trade. And the right honourable gentleman the President of the Board of Trade, the following day, said [col. 654] that our national prosperity is dependent on world trade. Of course, this goes without saying; it is not a new concept; and it has applied with equal force certainly during the past twelve or fifteen years.
The first point to which I would draw your Lordships' attention is that world trade in manufactured goods has been expanding steadily every year since the end of the war; and, secondly, the plain, indisputable fact is that we have been consistently losing our percentage share of it during the same period. The average rate of growth in the volume of world exports for manufactures during the past ten years has been about 7½ per cent. per annum. This is a substantial increase, and here was the opportunity for the United Kingdom to secure a reasonable share of it. But, for whatever reasons, we have failed to do so. I apologise for giving your Lordships these figures, but they are alarming, and they are figures which have been discussed over the last ten or twelve years at the National Production Council on Industry, with the Chancellor of the Exchequer in the Chair, and at the National Joint Advisory Council to the Ministry of Labour.
I will not start at 1950, because there were some countries which had been 1012 devastated and had had little time to rehabilitate themselves up to 1950. If we take 1953, which is eight years after the war, our share of world trade of manufactures was 22 per cent., and it has fallen each year since then until in 1962 it reached the low percentage of 15.2 per cent. But what is more disconcerting, by contrast, is that in 1953 the share of Western Germany was 13.4 per cent., and Western Germany has built up her exports and increased them every year until in 1962 her share was 20.4 per cent., which is 5 per cent. more than ours. France and Italy have also increased their shares in the same period, but less substantially.
The question, therefore, is: What are the reasons? We listen to expert economists, and we read their writings, and when we have finished we are more confused than when we started. I say to the noble Earl opposite that although we have been increasing our exports every year during the past ten years, we have not been getting our share of the increase in world trade. I have the figures from the Board of Trade, and perhaps your Lordships will forgive me for quoting them. I speak of the period 1958 to 1961. The increase in exports were: Germany 44 per cent.; France 44 per cent.; Italy 82 per cent.; Holland 41 per cent.; Sweden 42 per cent.; Japan 40 per cent., and the United Kingdom 16 per cent. It should be borne in mind that this failure in exports has taken place during a period of a highly prosperous home market. Surely, it is not outside the range of possibility to examine and find out the specific reasons for our shortcomings in this field. So far as I know, no real effort has ever been made, or, if it has, we have not been given the results. Unless something on these lines is done, how can we attempt to apply the remedies or find the correct solutions?
There are constant exhortations to industry to export more. But why not try to find out, industry by industry, the facts, the relative prices, quality, delivery dates, design, sales techniques, credit facilities and commercial policies generally. Some sections of British industry have a creditable export record, and are constantly seeking new markets. But there are some thousands of smaller firms which do no exporting at all, and do not even attempt to do so. Of course, small firms have neither the resources. the 1013 administration or the know-how, and this can be readily understood. But why cannot they be encouraged to get together in group associations for export selling as, indeed, has been done with considerable success abroad? The Government might well examine this technique and, if they find it justified, take the initiative in encouraging this type of collective association. Smaller firms, exporting only a little, could, collectively, make a substantial contribution to the volume of our exports. In any case, the time has surely arrived when industries or firms which could export but make little or no effort to do so should be reminded of their obligations, especially those which make calls on imported raw materials but prefer to take the easier road of selling on a prosperous home market.
The National Economic Development Council have estimated that a rate of increase in exports of about 5 per cent. per annum is required, and that this should be reasonably possible to achieve. The Council go on to say that this rate of increase is required to secure an improvement in the balance of payments from a deficit of £77 million in 1961 to a surplus of £300 million in 1966. So far as economic growth goes, we have fared no better than we have in exports and, as my noble friend Lord Longford has said, we are at the bottom of the league.
I do not apologise for bringing out these facts in your Lordships' House, because they are certainly being discussed outside, often in a more serious vein. Only yesterday, Dr. Beeching is reported to have called attention to our economic malaise, and given his opinion in forthright language as to what ought to be done. He is reported as having said that some industries are being propped up, and that unless we take steps to re-shape our economy, ultimately we may be forced to do so. With regard to the more rapid use of modern techniques, over the past fifteen years or so a great deal has been accomplished by co-operation between management and unions. In 1948, we had operating the Anglo-American Productivity Council. We sent 60 teams from British industry to the United States, who came back and issued their reports. This was followed in 1952 by the British Productivity Council, with 100 local associations or committees spread all over 1014 the country. This work is constantly going on and, this being Productivity Year, an intensive campaign is in progress. Nothwithstanding that, some of the local committees are not as active as they might be. On the other hand, the overall success of the Council's efforts ought not to be underestimated.
Of course, one fact that cannot be overlooked (and I say this to the noble Earl opposite, following his reference to efficiency, new machinery and new methods) is that there is still a great underlying fear in the minds of work-people that new techniques, work study and redeployment of labour may result in some of them being thrown on the scrap heap. There have been some unfortunate instances of redundancies, without any form of consultation or adequate notice, or any efforts to rehabilitate those affected. And these have not helped. There are cases on record of firms who, having planned the introduction of new methods of production, including labour saving devices, for months and months, have given notice only at the last moment that hundreds, and sometimes thousands of men would become redundant within a week or a fortnight. It is this sort of inefficient labour relations that places great obstacles in the way of better cooperation between management and labour. It creates suspicion and a lack of confidence which are an impediment to the work of a responsible British Trade union leader.
I am glad to see that the right honourable gentleman the Minister of Labour made a speech on this matter yesterday. There is plenty of evidence to show that many firms and industries have carried out their redeployment of their labour force, have introduced modern techniques and labour-saving devices without any worker having lost his employment. By suspending recruitment and, where necessary, retraining, it has been found possible to accommodate those displaced from their normal occupations. I say to your Lordships that one bad employer can do more damage to industrial relations than many good employers can do good. It is the incidents arising out of backward labour relations which receive the publicity, whereas there is a large field, the major part, where excellent joint relations exist, and where 1015 there is the fullest confidence between management and labour.
My noble friend Lord Longford asked me if I would say a word on the incomes position, and I am pleased to do so. The first point is that the Trades Union Congress, and the trade union movement generally, are agreed that an incomes policy based on increased productivity is essential. I sincerely trust that that is not disputed, because it is on record. It has been declared constantly that if consumption exceeded the national income it could only end in disaster, and the wage-earners would suffer most. This means that an incomes policy should apply with equal force to all sections of the community, and not only to the lower paid sections. It is a great pity that the whole of the White Paper applies to wage-earners and salary earners, and talks of 2. per cent., and then says that continued restraint in profits and dividends is a necessary corollary. Does anybody expect the trade unions to cooperate in these circumstances?
I have already said that it is in the interests mainly of the wage-earners and the workers that there should be an incomes policy. What happened in 1961? The first attack of the wage freeze was on the lowest-paid workers in the country, Government industrial workers and the workers in hospitals. I do not want to take very long on this point, but I say to your Lordships that I am perfectly certain that if an incomes policy could be propounded which would apply all round—and so it should—I am perfectly certain that the Trades Union Congress and the trade union movement would co-operate. I have here a list of 157 industries, and in 130 of them the basic wage is £10 or lower—and these are the latest figures up to March, 1963. It is all right to say that earnings are increased by overtime and bonuses, but there are many of these work people who have no opportunity of receiving bonuses or overtime.
My Lords, I come to my last point. There is a growing volume of opinion in the country which believes that one of the great disabilities affecting our industrial and economic progress is the absence of reliable information from time to time of our available resources, manpower, investments, raw materials, and 1016 so on. In the absence of this information, and in the absence of any sort of planning, the deployment of our resources must be a hit-and-miss affair. With regard to manpower, we do not know, with a few exceptions, what are likely to be our requirements in the various industries for a few years ahead. I understand that in the United States its Department of Labour has done this in considerable detail for 1970. We ought to have some idea, surely, what are likely to be our investment resources, and, from that, some idea of the directions in which they should be deployed to the best national advantage. This presupposes some sort of planning, though for some unknown reason the word "planning" is not a good label.
I was very pleased to read that a Conservative Member in another place, Mr. Gresham Cooke, last Monday said [OFFICIAL REPORT, Commons, Vol. 675 (No. 94), Col. 1022] that for the best use of our technical resources in future, whatever Government are in power, there will have to be more planning. Any efficient business must look ahead and plan; any prudent family must mind its income and expenditure. So what is the difference so far as the nation is concerned?
France, Italy and Japan have formulated long-term policy programmes with targets to aim for. The French plan, which I have studied on the spot—and I do not overrate what they are doing in France—is formulated by commissions of civil servants, industrialists, trade unionists and experts. There are no compulsions or directives, but a voluntary co-ordination of plans in which all those party to them concur. All the evidence is that the French economy has had remarkable success. France has secured a growth rate of 5 per cent.—a rate about double that in the United Kingdom—and the actual production targets set in the plans have been achieved with remarkable accuracy.
We are living in a world of change and we must be prepared to shed some of our outmoded methods—including the trade unions—and adopt other policies more in keeping with the world as we find it. We are a great nation, rich in inventive genius, technological and manual skills, a nation capable of reaching great heights of performance 1017 when put to the test, as two world wars have shown. It is said that we are at our best when we have our backs to the wall, and if that time has not arrived why should we daily until we reach that undesirable position? What is really at stake is our capacity, not only to raise our living standards but to maintain the standards we have so far achieved; and, of course, it is important in the world to help other peoples to raise theirs more rapidly. If this fact is accepted, out-dated and out-moded conceptions should be relegated to the dustbin. In their place should be substituted new ideas and a great co-operative effort to back them, so putting the nation in its rightful place as one of the most advanced and, potentially, one of the most prosperous nations in the world.
§ 4.56 p.m.
§ THE EARL OF SANDWICH
My Lords, having come but a little way up the passage to this place, I do not know whether it is proper for me to claim the indulgence of your Lordships for one who addresses you for the first time. One of your Lordships has been good enough to say that he thinks it might also be the last time. I regret that I cannot say to-day that I will not disappoint him. I am grateful to follow the noble Lord, Lord Williamson. A long time ago, when I was feeling very much younger than I do now, and when he looked exactly the same as he does today, we sat together in another place. And may I say that I enjoyed listening to him then, and I enjoy listening to him now? It is one of the fascinations of this place that you arrive here and meet the same people all over again. It appears that all roads lead to Rome and that it is a case of Plus ca change, plus c'est la même chose.
I should like to speak under three headings this afternoon. The first is about the balance of payments, and if I am a little direct I hope that no Rules of procedure governing a first speech will prevent my noble friend, the Leader of the House, Lord Hailsham, from dealing in his reply with these defects. I must confess that I am fundamentally nervous of the whole sterling position. This is shown up in the very figure to which the noble Earl, Lord Dundee, has referred: the balancing item of £128 million in 1018 Table 12 of the White Paper, Cmnd. 1984—incidentally, a very sinister figure. This £128 million is made up of £25 million adverse balance of current and long-term capital transactions, and £103 million adverse balance of monetary movements. In 1962, the gold and currency reserve fell by £183 million; and in the months of January and February this year, according to the document Economic Trends, they fell again by £24 million. This figure would have been very much worse had not the Government borrowed £90 million in these particular months, last month and the month before "from other central banks". The Chancellor told the House that he had done that, in column 472 of Hansard.
In these circumstances it is very doubtful in my mind whether the Chancellor was wise to inject so much money into the economy in this Budget, particularly as it came immediately after the fairly lavish concessions which he bestowed in the autumn months. It is difficult in reading the Financial Statement to find out in the total of the concessions made in tax this year how many of them are caught up with the concessions made last autumn, but I should think that the total sum realised must be getting on or for £700 million or £800 million. The borrowing requirement of this year's Financial Statement of £687 million is the highest since 1959, and, as we all remember, the Budget of that year was followed by a Budget which imposed very drastic new taxation, particularly in profits tax and in tobacco duty, in order to overcome the disadvantages caused by that distinctly inflationary Budget.
This is 1963, another famous "off" year. In 1961, in the early months, just where we are to-day, Mr. Selwyn Lloyd borrowed substantially and secretly from the central banks. That is what Mr. Maudling has just done, although not so secretly. A run on the pound took place in the summer of that year, and in July Mr. Selwyn Lloyd was forced to borrow another £750 million from the International Monetary Fund and institute a crash deflationary programme. The parallels are not very pretty. I know that the present Chancellor has categorically stated that the country's fundamental economic position is much better than it was then, but I am afraid I find myself incapable of following his arguments. I 1019 am afraid that again an unwise political expediency is shrouding the truth.
I have for a long time held very precious what is called the Colin Clark thesis; that is, that if in a free society in peace time the expenditure which the Government manipulate rises above 25 per cent. of the gross national product inflation is certain and cannot be stopped. All the figures, so far as one can adduce them, and our experience over the years since the war seem to prove the accuracy of this theory. Of course, in war we are saved from the consequences of it because millions of people voluntarily sacrifice the good things of life for the sake of winning the war. And in a Communist or totally controlled autarchic society the same principle prevails because everybody is anxious to co-operate to the full—and there are sanctions if one does not—to achieve the peace-time national target. But in a free democracy the quality of life is absolutely vital and precious to people and they are not going to sacrifice it no matter what the Government do; they are going to demand higher wages through the trade unions, as we have continuously seen since the end of the war; they are going to disinvest if they have any capital at all. They are going to beg, borrow or steal the money in order to live in the way of life to which they are entitled.
The aggregate of this total private expenditure comes on top of the aggregate Government expenditure and, in circumstances like these, promotes an inflation. High taxation receipts encourage the Government to spend, but leave the aggregate of private expenditure untouched. So I have ventured to take out the figures for the combined central and local government expenditure for the five years 1958 to 1962. They do not include the expenditure for which the nationalised industries are responsible. Add that to the figures I am about to give and you will have a stupendously larger total. I propose to express them now as a percentage of the gross national product in each of those years, 1958 to 1962, and you will see at once how far these figures are elevated above the minimum figure to which Colin Clark referred of 25 per cent. The total State plus local government expenditure 1020 for these years is 36.2 per cent. for 1958, 36.6 per cent. for 1959, 37 per cent. for 1960, 38.2 per cent. for 1961 and 39.2 per cent. last year. Your Lordships can at once see that the situation continues to deteriorate. I venture to make the assertion that, unless drastic steps are taken to off-load about £500 million or £1,000 million of public expenditure on to the private sector, inflation will continue and devaluation cannot be avoided in the long run.
Last year I gave to the House of Commons the methods by which I thought the enormous reduction in expenditure should be achieved, but I will leave further reference to that for another occasion; I do not think it is appropriate for the debate to-day. I should, however, like to do my best to convince your Lordships that we do not now live in a Keynesian era; we live in a post-Keynesian economy. Pump priming by pouring out money to individuals in the form of increased pensions or National Assistance, establishing advance factories in development areas to make what is by no means certain to be sold—the very word "advance" is frightening in this respect—allowing trade unions to put up wages by even the 3½ per cent. to which the noble Lord, Lord Williamson, has just referred, will all be of no avail; depreciation of the value of the pound and ultimate devaluation is absolutely certain. Therefore I find the Chancellor of the Exchequer's engaging optimism in his Budget speech utterly misplaced.
I come now to the reform of the tax structure. Here I believe a very great opportunity has been missed. By-elections have been lost over the last year or two precisely because the professional and administrative classes, from the top to the bottom, feel themselves to be underprivileged beside the swaggering and arrogant world of business. Nothing is done, either in this Budget or outside the Budget, to restore the pre-war salary and pension differentials in order to place these people alongside capital profiteers with their free services and expense accounts. I believe that some urgent things ought to be done in this regard, and I am very distressed that we do not find them even hinted at at the major economic moment of the year. Income tax and surtax should be combined and 1021 scaled down to a top limit of 10s. Turnover, or added value tax on goods sold at home on the home market, should be instituted to provide the necessary money, together with a 10 per cent. tax on all home advertising. The Beveridge system of universal insurance hand-outs should be abolished, and generous and immediate benefits substituted on a simple test of needs and means. There is no sign in the Government to-day, even of thought being given to this, much less action.
I find, therefore, that the concessions made in income tax merely tinker with the problem that is involved here. A married man with three children earning £2,000 a year gets £30; one earning £1,000 a year gets £20; one earning £900 a year gets £7; and below that nothing, for the clear reason that at that low salary he has worked himself out of the tax scales altogether. The married man without children at £2,000 a year gets £13; at £500 a year he gets £11, and below that little, for the same reason. The single man earning £2,000 a year gets £6; at £500 a year he gets £3, and then—the surprising one—at £300 a year he gets £5. Nobody seems to get more than £30 per annum, even the fabulous £100,000 a year man who is always provided for in the tables but whom one never meets in the flesh.
I do not think the principle here is entirely clear, although the Chancellor has talked generally about aiding the family man. The people helped the most, and then only to the extent of one-sixtieth of their incomes, which is not too generous, are married men with three children, earning over £1,000, and youths earning £6 a week. I agree that these benefits are to be welcomed; but, like the parable of the rich man who could not get his neighbours to the feast, the very meticulousness of the preparation exposes its gross inadequacy.
There was a great deal of heartsearching throughout this bitter winter—a winter so reminiscent of 20 years ago, when we were losing ship after ship and battle after battle. Letters and leading articles in the newspapers expressed the bewilderment of the ration at what was going on, the snubs we were receiving and the inadequate way in which society responded, and they urged our leaders on to imaginative action. Even to-day, the leading article in The Times returns to the same theme. Much grace has to 1022 be extended to a Government which leads a nation into an economic cul-de-sac like the Common Market. People are generous at heart, and they expect a time to elapse before spectacular advances are made in any other direction. But about one or two months, perhaps three months, would, one would have thought, be the time limit. In that time it was hoped that the Government would resile from its defeat, and people thought that the Budget might be the first occasion on which a major advance of some sort or another would take place. Yet here we are again, with, this time, a new and enlarged Chancellor, but with the same old Treasury mills grinding exceedingly small and giving, at the same time, the same fudged reliefs that Mr. Gladstone gave.
Let us take, for example, some of the cross-headings of the Budget statement—land tax, match duty, tobacco dealers' licences, mineral depletion, stamp duty, foreign spirits, home-made beer. Gambling is mentioned and conveniently avoided: how Mr. Gladstone would have agreed with that! Tax reform is mentioned and conveniently avoided—and no doubt Mr. Gladstone would have agreed with that, too. The significance of the Gladstonian red box rests not in the fact that Mr. Maudling failed to take it into the Chamber of the House of Commons, but that the Treasury retained it in Great George Street. They are the masters now, and Ministers increasingly seem to dance to the tune set by the Civil Service.
My noble friend Lord Hailsham the other day said that the machinery of government was creaking. It is not even moving sufficiently to emit a noise of any kind; the inertia is complete. Although we may joke about it, it is quite a serious question. Many men in all walks of life, not only where you might expect informed criticism, in the highest circles of the City perhaps, or in the universities, but generally elsewhere throughout the country, consider it a serious question. People are asking themselves whether Ministers are now no more than cogs in the machine, creatures that move in predestined grooves. I am sure that one day in this House my noble friend will have the opportunity of carrying further his happy and carefully-thought-out remarks about the machinery of government.
1023 Finally, may I do what the Budget does not attempt to do—namely, turn overseas. Sir Winston Churchill said yesterday that Britain, with the Commonwealth, was a great sovereign Power. I believe that the Government should pay Sir Winston a compliment by proving the truth of this in the coming months. I should myself greatly like to see four things done: first of all, to institute bilateral tariff talks between members of the Commonwealth, with the object of discovering whether it is not possible in some commodity or another to lower tariffs mutually between them; then to engage in a search to see whether those lowered tariffs could be extended, under a sort of "most favoured Commonwealth nation" device, to other members of the Commonwealth; and if this were possible to present the issue to GATT, and to say to GATT, "We want to make amendments in your rules sufficiently to allow of an internal discriminating scheme for the Commonwealth, such as you allow for the Common Market and for other trading arrangements." That is the first thing.
The second thing I should like is for the Government to make extremely clear, in speech after speech, that Britain is not troubled by the tariffs that certain Commonwealth countries have put up against her products; and deliberately to pour coals of fire on the heads of Commonwealth Ministers who have arranged those tariffs, by saying that we welcome in this country the arrival of products from certain industries manufactured in the Commonwealth; that we can always leap over the tariffs that Commonwealth countries charge by making the sort of machinery and apparatus, and supplying the technical "know-how", that they cannot manufacture and supply for themselves. There are no tariffs on bridges for Sydney Harbour; no tariffs on aircraft, on automation to make motor cars, on turbo-alternators, on thousands and thousands of different and more modern devices in the electronic world. We could easily manufacture those and send them to sophisticated members of the Commonwealth, and we ourselves ought to be prepared to accept the secondary products of the Commonwealth.
Thirdly, as I ventured to state in a short letter to the Daily Telegraph last week, 1024 it is time the Government began to think about what it is going to do, from the long-term point of view, about British agriculture. If we had gone into the Common Market our food costs would have risen roughly to the level which Europe pays for its food: about one-third or one-quarter of the family income. What about doing it anyway?—allowing food prices to rise, and instituting a tariff on all imported foodstuffs, including those from the Commonwealth, because otherwise the British farmer would never be protected, and then handing back to the Commonwealth countries the proceeds of the tariff on their food, provided that we can get the Commonwealth to agree that this very large sum—which I think would be of the order of £200 or £300 million—would be spread over the underprivileged members of the Commonwealth, and used to buy British products and the products of those nations like Australia and New Zealand which had passed the money on.
Finally, is there no hope of setting up a Commonwealth Bank and Payments Union which would have the same effect as the European Payments Union, now abandoned, and which could be used to enable Britain to send large loans to Commonwealth countries overseas for the purchase of our goods without bringing about a terrible minus figure in the balance-of-payments White Paper and causing the Zurich bankers to rush for cover? If it is possible for the mass industries and centres of capital in New York and Washington to send capital to New Mexico and California, anywhere inside the 48 States of the American Union, without incurring a balance-of-payments crisis, why is it not possible for Britain—which, with the Commonwealth, according to Sir Winston Churchill, is a great sovereign Power—to do the same thing, although its Commonwealth is maritime?
I implore my right honourable friend and members of the Government to think in more imaginative terms about the decade into which we are moving and to think in terms of using the vast resources of the Commonwealth for the purpose. It could be made the most wonderful vehicle possible for the revival of Britain's greatness. It is larger than China in population; it is larger than Russia in territory; the members of it, 1025 it being a maritime Commonwealth, are instantly in touch with any situation in the world, and it can, if properly directed, use its influence for pacification and amelioration.
I was looking the other day at the famous words of Lord Balfour's great Declaration of 1926. His words appear to me to be more true to-day than ever, even though independence has come to all but a few members of the Commonwealth. May I remind your Lordships of his words?:Autonomous communities within the British Empire, equal in status, in no way subordinate one to another in respect of their domestic and external affairs, though united by common allegiance to the Crown, and freely associated as members of the British Commonwealth of Nations.That is the road to Britain's destiny, and ultimately also, pace the United Nations, the road to world order.
§ 5.25 p.m.
§ LORD BOOTHBY
My Lords, it is a particular pleasure to me to congratulate the noble Earl, Lord Sandwich, upon his splendid maiden speech. I am sure it held, and often riveted, the attention of you all. We have been friends now for over 30 years, and throughout that period I have always found myself either in ardent agreement with him, or in passionate disagreement. It is exactly the same this evening. I agree with him about the Treasury; I agree with him about the legitimate and deeply felt grievance of the professional classes of this country when they see the "racketeers" rolling around from suite to suite in Bentley motor cars, apparently oblivious of what they spend, and nobody getting at them at all. On the other hand, I think that the Colin Clark thesis is absolute rubbish. So there we are.
All I would say to him at the moment—and I think I speak on behalf of all your Lordships—is this: may be never leave us, especially after his triumph this evening! I think it was the noble Lord. Lord Stonham, who remarked once that anybody who had come to the House of Lords and wanted to return to another place ought to have his head examined; and I would strongly commend that advice to the noble Earl. He will adorn this House, and he will also find it a great advantage to be able to speak whenever he likes without having to 1026 catch anyone's eye; and, even more, to know that he is going to speak.
This afternoon we have to consider our economic position in the aftermath of what I can only describe as the Brussels crash—for crash it was! It is no use saying that it has made no difference. British industry was being geared, and to a large extent was geared, to entering the Common Market; and now we have to change gear. But I think it is worth while saying just a word or two about the Common Market itself, because it is a powerful instrument in the hands of President de Gaulle, and certainly not one to be dismissed out of hand by this country or by any other. After only five years of full operation its gross national product stood at £78 million, and industrial production had steadily risen. It also has, as the noble Lord, Lord Williamson, pointed out, a greatly increased share of world trade. The prosperity of continental Western Europe to-day is without parallel in history; and we must face that fact. By comparison I want to suggest, in what will be a very brief speech, that the economic achievement of both the United States and the United Kingdom during the last five years has been pitiable.
At a time when underdeveloped countries all over the world, within the Commonwealth and without it, are crying out for capital goods, our industrial capacity is grossly under-used. In steel it is still running at between 50 and 60 per cent., both in this country and in the United States. Unemployment in both countries is severe; our share of the export trade in manufactured goods is declining year by year, whereas that of the Common Market is increasing; productive investment is sagging, one-fifth down since last year—and I am referring to productive investment in private manufacturing industry. When we should be thinking in terms of economic growth and expansion, we are talking about the danger of further deflation and depression on both sides of the Atlantic. Surely we have learnt by this time that deflation does not help the balance of payments in this country. Every time we have gone in for it, it has made the situation worse.
Now one word about the Budget. I take a slightly brighter view than the noble Earl, Lord Sandwich. I think it is not bad. I just think that it is wholly 1027 lacking in imagination—there is not one spark of it. A radical reform of direct taxation and of corporation taxation—and here I entirely agree with the noble Earl—has been called for for the last ten years. It is still not forthcoming. My Lords, if I had ever become Prime Minister of this country (and I still think it a great pity that I never did: and I privately mourn the country's loss), I should have appointed the noble Lord, Lord Eccles, Chancellor of the Exchequer. But, thinking it over, I feel that I should have done him a great disservice, because the fact remains, as the noble Earl has just reminded us, that the Treasury never change: they have not had a good idea for half a century. They have beaten every Chancellor of the Exchequer, with, as the noble Earl, Lord Longford, pointed out, the single exception of Mr. Lloyd George, who had to create his own Civil Service to beat them. I think that my noble friend Lord Eccles, if he had been appointed Chancellor of the Exchequer, would have been sunk, as so many other Chancellors have been, without trace. The Treasury are too formidable and too powerful; and I have yet to find the man who can beat them. But I am sure they are the nigger in the woodpile. I am sure they are the Department who are holding this great country down the whole time, unless, as the noble Earl pointed out, we are in some frightful crisis.
There is at least one good thing in this Budget, the reduction of the stamp duty on Stock Exchange transactions. It is a constructive proposal; and I should like to congratulate my noble friend Lord Ritchie of Dundee on his tireless efforts for this overdue reform. Because there is no doubt, despite what some of the economic pundits of the Labour Party say, that this duty has had the effect of discouraging foreign investment in British industry. I think it is high time that this change was made. I also welcome the steps (though I agree with the noble Earl that they are comparatively trivial) to increase employment in areas which have been hard hit during this hard winter; and particularly, if I may say so, in the North of Scotland. But I can find in the Budget no direct stimulus of any sort or kind to the export trade which is what we most need at the present moment.
1028 My Lords, before I sit down I want to put just two proposals to you. The first I have made before. We should, I think, take the lead in pressing for a substantial increase in the liquid reserves of the Free World. I suggested this to your Lordships in a debate which I initiated two years ago. These reserves are at present quite inadequate to support the volume of production and trade which the two major international currencies, the pound and the dollar, have to carry. This has a disastrous effect, not only upon the national product of the United States and the United Kingdom, but upon the national economies of underdeveloped and impoverished countries all over the world. I warmly support Mr. Harold Wilson in his advocacy of an international monetary conference—what he has described as a "Summit Economic Conference of the Free World." I disagree with him on one point alone. The new international monetary system, which I believe must replace the one that has clearly broken down, must be more flexible than that which was established at Bretton Woods. The present exchange rates are confined within too narrow margins to take any strain at all, and therefore too often result either in economic stagnation or, as the noble Earl, Lord Sandwich, has warned us, in devaluation.
After Mr. Kennedy became President of the United States, he said in his Message to the Congress on February 6, 1961:Increasing international monetary reserves will be required to support the ever-growing volume of trade, services and capital movements among the countries of the Free World. Until now the free nations have relied upon increased gold production and continued growth in holdings of dollars and pounds sterling. In the future, it may not always be desirable or appropriate to rely on these sources. We must now, in co-operation with other lending countries, begin to consider ways in which international monetary institutions—especially the International Monetary Fund—can be strengthened and more effectively utilized, both in furnishing needed increases in reserves, and in providing the flexibility required to support a healthy and growing world economy. I am therefore directing that studies to this end will be initiated promptly by the Secretary of the Treasury.And, for good measure, Mr. Robert Triffin, a great economist in the counsels of the President at Washington, added:For a long time the monetary gold stock of the world has been rising much more slowly than the volume of trade.1029 My Lords, this situation can be remedied by turning the International Monetary Fund into a true Central Bank for Central Banks, with adequate powers of credit creation or contraction. But, again, nothing has been done. The President said that he had directed inquiries to be made. But, if he did, we know nothing of the result. That is, I believe, one of the main causes, if not the main cause, of the economic decline of the United States and the United Kingdom during the past five years, in sharp contrast to the Common Market. Neither of the currencies which have to carry the main burden of international trade is on a solid basis.
My second proposal—and I think I might carry the noble Earl, Lord Sandwich, with me here—is that we should do everything we can to extend and expand East-West trade. It is, I believe, the only hope of diminishing the rigours of the cold war. We should, I think, make long-term trade agreements with Russia, with China, with all the countries on the other side of the Iron Curtain. The strategic lists of prohibited goods which were devised by the United States may have had some validity ten years ago, but they do not make any sense to-day. Most of the things that are on the strategic lists they are now making just as well, and in some cases better, on the other side of the Iron Curtain. And, my Lords, I submit that we have nothing to gain, and much to lose, by making war on the standard of living in the Communist world; because the higher that standard of living rises, the greater the chance of peace will be. I am glad that Her Majesty's Government seem now to be giving every encouragement to this.
Finally, I would just say this. Our greatness in the past was built up on world trade. The Dutch, the Belgians, the West Germans, with nostalgic memories of the Hanseatic League, are beginning to turn away from the landlocked, inward-looking economic community envisaged by President de Gaulle, to the open sea. The rôle of Britain and of the Commonwealth, as I see it in the future, is to act as link and linchpin, not only between the two sides of the Atlantic Ocean, but between the Continent of Europe and the world.
§ 5.40 p.m.
§ VISCOUNT YOUNGER OF LECKIE
My Lords, in addressing your Lordships 1030 for the first time, I should like to ask for your usual indulgence. I should be rash indeed to follow so many distinguished political speakers into the realms of the pros and cons of the Government's economic policy. I am going to ask your Lordships to follow me for a few minutes in a glance at the industrial problems of our present economic situation, and particularly to consider what we may reasonably expect industry to do to co-operate with Government action in solving these long-term difficulties. I say "long-term" because I do not propose to refer to the emergency measures which obviously have to be taken to meet the present crisis. But the long-term measures should be aimed, I suppose, at reducing the frequency and the severity of the periodic crises, which have beset us for so many years, and possibly at finding means in due course to prevent them.
I have been following, not political arguments but the trend of public opinion, so far as one can judge it from the Press and other media, and it seems to me that the consensus of opinion is rather swinging to the idea that, whether the Government have struck the right or the wrong financial balance in their measures, there is a great deal that industry can do, and should be doing, for itself to improve the present situation. One of the encouraging things about the public discussion which has been going on so widely in the last month or two is that I think one can detect a reasonable measure of agreement on certain aspects of our economic situation. There is a certain measure of agreement on the nature of the present set-back; there is a certain measure of agreement on the long-term target at which we should aim for growth; and I think there is also a general agreement that this intractable problem is not going to be overcome by any single panacea, but will require a combined effort from a great many different people working from a great many different angles.
I think also that people feel that changes in organisation, changes in official policy such as we have been discussing, however good they may be—and, of course, they have their place—are not going to achieve our object unless they are accompanied by a real change in human attitudes. That means, a change, I think, for 1031 all of us, all of us engaged in the productive side of the economy and also consumers. To anyone who is familiar with the classical economist, one of the mysteries since the war is what has happened to the consumer. And some of your Lordships may have seen that only recently a publication appeared which referred to the British consumer as "an affluent sheep". Without subscribing to that extreme view, I would say it is surely a very severe come-down for Adam Smith's consumer, with whom many of us were once familiar and who was supposed to provide the regulator of our economy at home.
I think that fact is relevant to the question of our export trade, because if you have, as we seem to have had since the war, a market at home where it is much too easy to sell goods and services, whether they be good, bad or indifferent, because for some reason the consumer is not exercising his rights, and if at the same time you have the export consumer who has retained his selectivity and his independence of mind, then you are faced with exactly the position which we have had, where the attractions of the home market are very much too great. I think that people who have not actually taken part in the export trade are apt to under-estimate the difficulties which it involves, and to forget that these difficulties are very different from one industry to another.
There are, of course, many industries which obviously, by their nature, cannot export; there are others which depend on exports for the greater part of their trade; and there are still more where exports are really a marginal part of their trade, the overheads being largely carried by the home trade. If the home trade is uneconomically run, if we are getting poor production, rising costs, bad service and long deliveries, these quite obviously hamper our export trade, either directly or indirectly. It does not follow that these inefficiencies are in the export trade itself: many export trades depend for their components on numerous small firms which either do not or cannot export.
What I think people are trying to suggest is that, apart from the consumer end of it, we as producers must try to change our attitude from what it has been during the last ten or twelve years. It 1032 is usually described as a change from rigidity of outlook to elasticity of outlook. That sounds very nice in theory, but, of course, it is not nearly so attractive when it is applied in practice. But, in so far as industry is willing to meet new conditions of time, and in so far as it postpones the day on which innovations are made, so much more severe will be the shock when the time comes. It is really like physical health; the longer you put off taking treatment the more severe and drastic will be the treatment when it comes. That, I am afraid, my Lords, is what we are facing at the moment, and the railways are probably as typical an example as any. Therefore, I think we want to consider what can be done to change this attitude of mind in all parts of the productive side of our economy. If you study the reports in the papers and elsewhere, I think myself that you can get some encouragement, because I feel that there is definite evidence that leaders in industrial life, both on the management side and on the union side, are fully aware of the need for this more elastic attitude and are doing their best to fulfil it.
It is the next stage which is so difficult: to bring it home to the individual industry. I am afraid that for nearly all of us the rigid maintenance of the status quo is always more attractive, more easy, than the prospect of constant and unpredictable change. Therefore, it is a difficult thing to put across, and I think some newspapers I have read have tended to take the view that it is impossible. My Lords, I hope that is not so, and I do not myself believe that it is.
The only reasons I will give are these. In the first place, we have an increasingly well-informed and intelligent population studying these problems for themselves; in the second place, we have ever increasing facilities for the dissemination of information by Press, wireless and television which gets into the people's homes; and, thirdly, and by no means least, one must remember that we are constantly getting into the economy an infusion of young men and women who have a wide education; and I suppose it is true that the young have a natural aptitude for elasticity whereas those of us who are older must face the fact that we tend to be a little rigid in our outlook. But I think it is a hopeful 1033 prospect, and I would suggest to your Lordships that anything we in this House can do to convince the man in the street of the need for change, and for a generous attitude to changes as they take place, will be of great advantage and will certainly improve our prospects of achieving the steady economic growth for which we are all looking.
§ 5.52 p.m.
§ LORD STONHAM
My Lords, I am glad it has fallen to me to congratulate the noble Viscount, Lord Younger of Leckie, on the wise, informed and balanced speech to which we have just listened, a speech into which he managed, despite the subject, to enthuse kindness and warmth. I know we shall look forward to hearing him again. I said I was glad it had fallen to my lot, because for many years his younger brother was a friend of mine and of many others on these Benches in another place, and we always held him in high regard. I was very pleased also to hear from the noble Earl, Lord Sandwich, the most controversial non-controversial speech I have ever listened to. There was scarcely a sentence that I was not stimulated by hearing, and scarcely one sentence in three that I did not want violently to contradict. But I hope—and here I echo the hopes of the noble Lord, Lord Boothby—that the noble Earl will continue in his place, because his contributions are always stimulating. He mentioned that my noble friend Lord Williamson looked the same as he did fifteen years ago. I can assure the noble Earl that he, too, does. He does not merely look the same; he stands the same way and he delivers exactly the same ideas that I heard 18 years ago in this very place. He has not changed a bit, and I think that is a very good thing, because I think he is the one remaining fount of the pure milk of ancient Tory doctrine.
§ LORD STONHAM
Then I have found another point of agreement with the noble Earl. Indeed, towards the close of his speech he made some observations on agriculture which I hope he will take the opportunity to develop at another time, because I feel that, at least on some of them, revolutionary as they appeared to be, it seems likely I shall find some points of agreement with him.
1034 Having dealt with two maiden speeches, I have to confess that, unlike my usual feelings in economic debates, I speak tonight "under the influence"—under the influence, in fact, of the best piece of economic writing that I have read this year. I am not referring to the Beeching Plan nor to Mr. Maudling's Budget, but to The Times editorial "The Tide does not Wait". I read it again last night, and I think that if it were stuck up in every board room, every factory and every Government Department, and read frequently, it would be a far more powerful weapon in our economic recovery than either the Beeching Plan or the Budget. No one can dispute that thecrisis inherent in the political and economic situation of Britain is a moral one.—orif dynamic leadership is to replace pragmatic apathy, it will not be because of the fear of the dole or the hope of a douceur. It will be because Britain has once again become a nation caring about the state of its society.I wish I had been able to write that, and I wish I felt able and competent to follow that advice in an economic debate. If one were to follow such advice one must reject recrimination and back-tracking and look forward, or, to paraphrase the same leading article:The Government cannot in isolation spend a nation out of its growing crisis without a balance-of-payments debacle sooner rather than later. We can only succeed by building up a morally healthy, efficient Britain, innovating and exporting to its fullest capacity.I believe that is absolutely the case and whatever has happened I feel it is imperative for those of us (and I suppose that includes everyone) who firmly believe in the future of our country to try to make some contribution as we see it.
I must say, before I entirely leave the possibility of controversy, that I agree with what has been said about the Treasury, but I would ask both the noble Lord, Lord Boothby, and the noble Earl, Lord Sandwich, to take heart this year about it: because this year, for the first time for some years, the Treasury "boys" have refrained from making a forecast about prospects of trading this year. That should give heart to all of us; because when they confess in this way that they do not know, then there is a chance that those of us in industry might be left to get on with the job. For that reason 1035 I should like now to make a few modest suggestions regarding exports. I warmly support the Chancellor of the Exchequer's determination to link additional aid to underdeveloped countries with spare productive capacity in this country. I think it is about time that we started to do what other countries have been doing, because this is an important matter of using our idle productive resources. I would draw the Government's attention to one example of this—I refer to the rather alarming position of the steel works plant industry.
In 1946 the British steel industry had a capacity of only 12½ million tons. That is now being doubled, and under N.E.D.C. plans it will increase to some 30 million tons by 1966. Expansion presumably would have been much larger than that if the industry had not for some time been working well below strength; but it now means that for the next five or six years investment in new plant will be very much below the present level. This will have serious repercussions on the steel works plant industry, and on employment in such areas as Scotland and the North East—the very areas the Chancellor of the Exchequer and we are most anxious to help.
Since the war, manufacturers of steel work plants have increased their output some 14 times, in real terms, to a current value exceeding £26 million a year, of which at present 20 per cent. is exported. They have built up teams of highly skilled design engineers and made large investments in the most modern machine tools. They are now faced with the problem that for the next five or six years the demand for plant from our own steel industry will not exceed £7 million a year, compared with the current level of £19 million. There is spare capacity, as we all know, in the general engineering field, and thus there are no alternative home projects to fill the £12 million gap. It would be disastrous for the longer term future of British steel if the design teams had to be dispersed and the plant industry contracted. The only hope is to fill the gap with increased exports. Fortunately, other things being equal, this efficient industry can compete successfully in, and with, any country in the world; but they cannot sell abroad unless they can trade with countries where the demand exists, and unless the Government make it pos- 1036 sible for them to offer terms comparable to those which foreign Governments make available to their manufacturers.
Western European steel is overexpanded, and we cannot look for orders there, so the greater volume of exports will have to be obtained from the Iron Curtain countries or from developing countries. Steel plant orders of some £12 million have recently been obtained, in face of intense competition, from three different Iron Curtain countries. Of course, further orders will be conditioned by the availability of foreign exchange. Here, I fully support what the noble Lord, Lord Boothby, said about a vigorous effort to increase trade with the Iron Curtain countries. Russian and Roumanian oil would be a typical exchange. It also means resisting the doctrinaire efforts of the United States to impose unfair restrictions on our manufacturers.
In this connection, it was heartening to note the Foreign Secretary's uncompromising attitude to suggestions that we should not sell steel pipes to Russia. If the Americans had their way, we should refuse to buy cheap oil and agree to keep our people unemployed in the North-East. We should thus be two-way losers, because we get nothing in return from the United States, which has not hesistated in the past, and will not hesitate in the future, arbitrarily to deprive our manufacturers of United States orders which we have won on price and quality. We must tell the Americans quite bluntly that we do not intend, because of their political views, to be deprived of orders that we can win on merit.
In developing countries, orders for plant installations depend entirely on financial aid in some form or another. In recent years, our credit terms have been either too short or too costly. That is why there is scarcely a single major British post-war plant in South America. Fortunately, the E.C.G.D. facilities have now greatly improved, and the system of financial guarantees has been a great step forward. But they are still not comparable with the more flexible system operated by the United States, whereby credit facilities can be adjusted to the needs of the customer.
It is also a major handicap to British firms that the only aid attracting Government guarantee is loan capital. 1037 Obviously, the best help we can give to developing countries is investment, which must be given the same protection against political and transfer risks as loan capital. The Germans, Japanese and Americans, our principal overseas competitors in this, as in most major industries, operate such schemes; and if we really mean business in exports, and are determined to cure unemployment in the heavy industry areas, we must give our exporters the same facilities as their rivals, and thus give them the chance to compete on equal terms.
A typical example of this sort of thing is mentioned in the Guardian only this morning. We look like losing an order for an alloy steel plant which the Indian Government wish to instal at Dargapur. The British tender was attractive and was approached in general acceptibility only by the Japanese offer. But the decisive factor is the credit terms; and here the Japanese, who are fully supported by their Government, look like getting the business on credit terms alone. This will be particularly unfortunate, because we recently played a major part in installing a £120 million plant at Dargapur. It is not only a matter of business, but of prestige; and it will cost us dearly if the Japanese break through in this market. The British firms concerned have already had to sack some hundreds of skilled men. This is a typical case coming within the Government's policy, which the Chancellor has just reaffirmed, on idle productive resources, and I hope that they will look at this again before it is too late.
Another vitally important step in creating jobs, and indirectly helping exports, is the Chancellor's decision to allow firms in areas of high unemployment to write off for tax purposes, at any rate they choose, the cost of immobile plant and machinery. I welcome this. It is an innovation which is intended to give and must give—I will not say depressed areas, but areas of high unemployment, some advantage in investment so that firms can be attracted there. But I would point out that they are only taking a leaf—and just one leaf—out of the book of the system of corporate taxation which is used in Sweden and is expressly designed to encourage the whole of manufacturing industry to invest in new and up-to-date buildings and plant.
1038 Swedish tax rules promote the building up of tax-free investment reserves for economic stabilisation. They are specifically designed to stimulate the use of private capital in the fight against recession, unemployment and economic instability. The corporations make returns of net profits in the ordinary way and are then permitted to set aside up to 40 per cent. of their pretax net income as an investment reserve. They have to deposit a substantial part of this reserve with the Royal Bank of Sweden and must obtain approval from the Labour Boards, though that is almost never withheld when it is shown, as it usually can be, that the need for labour exists. All or part of these reserves can be used for new buildings, for the acquisition of plant and equipment, for the purchase of stock materials and, in special instances, for the promotion of export sales. This opportunity to accumulate such reserves has encouraged manufacturers to maintain a progressive attitude towards production and to provide for the future.
The taxation rules for the depreciation of machinery and equipment are also extremely flexible in Sweden. Within broad limits, corporations are allowed to write down the value of plant and equipment in the manner which best suits their business. The Government, as I say, have already, in effect, conceded this point with regard to areas of high unemployment in this country. I am sure it will be very important work of attracting employment to those areas, particularly of the most efficient firms. My own view is that it should stay as a special privilege for those areas for an appreciable time of some years. But I think its effects should be studied generally so that the system may well be enlarged for the benefit of manufacturing and productive industry as a whole later on. There is no doubt that in industries where we are completely competitive in design, price and everything else with the Swedes it is just this difference of tax structure and their ability to build up reserves and write off plant which gives them the edge in competing with us for overseas orders.
Finally, I would emphasise that it is utterly useless to talk of expanding exports unless we are going to make absolutely certain of sufficient and, indeed, abundant supplies of power. I think it amounts to a scandal the way 1039 the Government during recent years have literally played with fire to the extent that they have not insisted on sufficient investment to provide the plant that was known to be needed for the power for industry. For years the electricity generating plant programme has not been enough to meet the anticipated peak demand. We have positively invited black-outs and power shortages, and we have thus jeopardised the country's economic growth. This cannot be allowed to continue, especially as the demand for power is now expected to increase at the rate of 10 per cent. a year—and that allows for the N.E.D.C. 4 per cent. annual increase in production.
Last year we had a record installation of plant of something like 2,750 megawatts; but it was not nearly enough to meet the growth in demand. I know that we had a severe winter, but we must expect to have some bad weather at some time in the winter. On January 22 this year the potential demand was about 32,000 megawatts and the maximum load that could be carried was less than 30,000 megawatts. During this year the plant that will be installed will bring us to the maximum load that we ought to have been able to carry last year—namely, 32,000 megawatts. Meanwhile, the demand will have increased by a further 10 per cent., and we shall be that much behind all the time—at least a year behind—and we shall not catch up unless we have a crash programme or an increase in the next four years in the programme originally planned.
It seems basic common sense that the programme must be geared to anticipated demand. otherwise we are asking for trouble. But it will mean a very large investment in plant, and if the industry is to be asked to undertake this, they must he given a definite assurance that, since we are planning to-day for anticipated demand five years hence, once the programme as planned is going to be progressively installed the Government will not interfere with it. It is absolutely catastrophic to go up and down in a matter of that kind and there must not be arbitrary cuts. Secondly, subject to pricing and tendering arrangements which are fair to both sides, the orders should be placed with British firms. Anything else is surely unthink- 1040 able; and certainly we should not get any orders for large plants of this kind overseas. I hope that, especially since the industry in turbo-alternators is at present working at only 60 per cent. capacity, these matters will be quickly cleared up and the necessary assurances given.
If we are to cure unemployment and to achieve our growth targets, we must create first stable conditions in which our manufacturing industries can plan their investment programmes in confidence. We have not only to create the framework. We must create confidence that those stable conditions will continue, that the programme will go on, and that firms will not be let down as they have been time and time again. That is one of the basic reasons for the malaise of which we are aware, and of which the article to which I referred made such a point. If we can have this firm policy, and it is carried out wisely; if we can give the men on the factory floor the confidence that if they work and co-operate they will not be working themselves out of a job; and if, too, we make sure that if our people have done their job and are really competitive we do not lose export orders because of some special conditions which are given by foreign countries and which our people cannot enjoy, then I believe the recovery that we all want to see will begin to come. If we do these things, I am confident that we shall at last begin to get away from the bottom of the league and play the part that Britain can and should play.
§ 6.18 p.m.
§ LORD ECCLES
My Lords, I should like to join with the noble Lord, Lord Stonham, in congratulating the noble Earl, Lord Sandwich, and the noble Viscount, Lord Younger of Leckie, on two most interesting maiden speeches. I am so glad that my old friend Lord Sandwich decided to make the short journey, of which he spoke, from another place. Your Lordships would have suffered a loss if he had not taken that decision. I have the impression that the attention and interest with which your Lordships received his fine speech this afternoon will soften his thoughts, and he will soon echo the words of the poet:…port after stormie seas…does greatly please.1041 I do not have the same lack of faith in the Chancellor of the Exchequer as the noble Earl, Lord Longford. I am sure that the Chancellor means to stick by his declaration that expansion is now the Government's first aim.
§ THE EARL OF LONGFORD
I am sorry to interrupt, but plainly I did not make myself clear. I have as much confidence in the Chancellor as one reasonably can have in a statesman of an opposite Party, but I have grave doubts as to whether he will be allowed to stick to these policies.
§ LORD ECCLES
That brings us back to the Treasury, to which I shall have to refer, since the noble Lord, Lord Boothby, made so much of that Department.
I believe that this Budget will be seen in time as the first practical step towards a workable policy for a 4 per cent. growth. The new theme is the right theme but, as Mr. Maudling stressed in his speech, this policy will fail unless the general public grasp the extent to which their co-operation is essential. As the Chancellor said, the Government can give a lead, but the public must do the rest. He claimed that the measures which he had already taken, before the Budget and in the Budget, added up to the strongest lead which the Government should give in present circumstances. That is a very large claim. I wonder whether we are quite satisfied that the Government are doing all they should to promote expansion, encourage exports and hold off inflation. I suppose that we should all give somewhat different estimates on each of those aspects of a growth policy, and perhaps the most important question is how much influence the Budget will haw on smoothing the way towards a reasonable incomes policy. This was what the noble Lord, Lord Williamson, in his most interesting contribution, was asking us to consider.
Mr. Maudling did very well, in my view, to stop the argument about which comes first, expansion or an incomes policy. He told the House of Commons that the choice is between having neither expansion nor an incomes policy, and having them both together; and he said he had decided that the best way to get both was to put expansion first. That is a novel and bold decision which must 1042 carry some risk to the balance of payments. Like most great shifts in domestic policy, it starts from a revised judgment about human nature. The Chancellor must have had to ask himself: how will capital and labour behave if the economy is pushed into rapid growth? Will they be content with reasonable shares of the increased output, or will the old mixture of ignorance and self-interest land us once more in inflation? I am sure he was right to take the optimistic view and to give us a chance to behave well under conditions of rapid expansion.
I cannot help reminding your Lordships, after what the noble Lord, Lord Boothby, said about the Treasury, how completely this decision of the Chancellor reverses the pessimistic view held so tenaciously by the Treasury ever since the war. Up to now the authorities have believed that inflation was always just around the corner and, therefore, that it was their first duty to put an old-fashioned defence of the pound in front of economic growth. For some time I have been out of sympathy with this orthodox Treasury doctrine. It seemed to me that we should put investment and efficiency in the economy first, and then should not be afraid of experiments with the effects of expansion upon the costs of exports.
I thought that that risk had become worth taking for two reasons: first, because in the last year or two the quality of management in British industry has been improving very fast. An older generation has been disappearing, and the younger men who are coming forward are showing how a more professional approach to the job can quickly bring results in the level of management. From what I have seen of them in the last year, I believe that we can trust these younger men to act responsibly, even if demand is pushed up more rapidly than seems likely at present. The second reason is not very different. It is that there is now plenty of spare capacity in modern machines and plant. Formerly, if demand rose sharply, obsolescent expensive machines had to be pressed into service and, naturally, average costs of production rose. But now the spare capacity that we have, if the new machines were used to the full, could produce some all-round reductions in costs. Therefore, I believe that contrived expansion is less of a risk now than at any time since the 1043 war; and I hope that not only our own country but other countries also, will go for it.
I should not like your Lordships to think that, in chiding this great Department of State, the Treasury, for hanging on so long to the outworn pessimistic policies, I forget that for years they stood almost alone against the economic disasters that so many of the post-war political ideas seemed certain to bring in their train. After the war, despite the fact that we had become the largest debtor in the world, pretty well everybody thought that he had a right to enjoy a much higher standard of life than before: everyone came to think that his salary or wages ought to go up every year, whether his own or the nation's output justified it or not. With what mounting dismay the Treasury must have seen the American and Canadian loans squandered on current consumption; the nationalised industries becoming dependent upon public funds, not only for their capital requirements, but also for their huge deficits on current operations! And, above all, how they must have trembled when they saw, year after year, the total of incomes rising faster than output, and rising by figures too big to be offset in any budget, and too big to be handled by the normal monetary measures!
All those factors were unknown before the war, and under their combined influence the financial authorities found themselves losing control over the things which it was their first duty to keep intact. As a result of pressure born of universal suffrage and of the bargaining power of labour under conditions of full employment, the threat of inflation became a permanent threat, so that it required a permanent coherent policy to meet it. The authorities, one would suppose, must have been aware how completely different the new situation was from the intermittent speculative booms that we had known before the war. Yet successive Chancellors were advised to use the measures appropriate to a wholly capitalist economy, run on rules drawn up on the "old-boy net"—bank rate, credit squeezes, exhortation on the virtues of restraint, higher taxation, and so on. Having mistaken the nature of post-war society, they naturally took the wrong steps to keep it in good health. It is infinitely to Mr. Maudling's credit that he 1044 has now at last put an end to that long chapter of error and frustration.
§ LORD BOOTHBY
My Lords, if the noble Lord will forgive me for interrupting, he can hardly deny that there have been a certain number of speculative booms in the post-war period, as well as in the pre-war period.
§ LORD ECCLES
With respect to the noble Lord, the real threat of inflation has not come from speculation, but from the hundreds of millions of pounds in one year by which incomes exceeded the value of production. It is the magnitude of the increase in incomes which is changing the whole situation.
I should like to turn for a moment or two to the advice which, in my judgment, the authorities ought to have been giving over the last few years. I feel sure that modern financial policy should differ radically from pre-war policy because of the social and political revolution which we have been through since the great slump of 1929. It required a generation or more for the granting of universal suffrage to work its way right into our political life, and it took World War II to show that full employment is there to be enjoyed, provided that demand is deliberately maintained at the right level.
In these changed circumstances the authorities ought to have seen that they had to deal with the general public and not just with a select company of bankers, economists and Ministers. The whole of the electorate are now actively and continuously in the battle for or against inflation. It simply is not possible any longer, by taking counsel in Great George Street and manipulating the levers of monetary policy, to bring about changes in the economy which the ordinary man rejects either because they have not been explained to him or because they conflict with what he conceives to be his own interests. Who to-day really believes that a rise in the bank rate, or a system of special deposits, or even a few hundred thousands of extra unemployed will by themselves stop the annual demands for increases in wages and salaries? Sound monetary policies help to restrain, but they can no longer control, the rise in incomes nor are financial measures a substitute for better general and technical education, or for more efficient management of our firms both large and small.
1045 We all know now that the keys to a high rate of growth without inflation are to a large degree non-monetary. This is the change since pre-war. They are, in fact, a reasonable attitude towards incomes, a greater supply of skilled manpower and a willingness to make large investments in the basic services which industry requires for its operations. In the old days it was right to defend the pound by making money scarce and dear. The only way to do it now is by refusing to allow a high and steady rate of investment to be sacrificed to the extravagant appetite for current consumption. If that can be done the pound will look after itself.
I could wish that the Treasury had given a more positive lead in maintaining investment at a high level. Their role here has become crucial. We do not live any longer in a wholly free enterprise economy in which investment takes place only when the employer can see ahead of him the market for his products. A large part of the initiative of investment has now gone elsewhere. Of course, if we lived in a Communist State then all investment would be centrally planned and consumption would come after, a very bad second. Nobody in Britain wants to go to that extreme, but we must recognise that we live in a mixed economy, in which more than half the total investment in the country is already done in the public sector. In no year since the war have the Government, the local authorities and the other public bodies been able to start anything approaching the number of capital projects which they knew were urgently needed. They were held back year after year. Why? Because of the fear of using up too many resources. I believe that that fear has for some years now been exaggerated. At any rate, it would have been very much less potent if the argument for linking growth with an incomes policy had been put across to the public much earlier. How good, then, it is to see that this argument is the centrepiece of Mr. Maudling's Budget!
In the light of these considerations about the past, what can we say about the Chancellor's more important proposals? The theme is certainly right, but, even with all that he had done before Budget Day, I cannot be sure that the measures in the Budget are going to be enough. It would he very 1046 sad if my right honourable friend came to share the fate of a motorist in a strange land who, with great courage and skill, found the right road and then forgot to put enough petrol in his tank. I fear that that may happen. It is very difficult to guess how near we shall get this year to a 4 per cent. growth rate and a 3 per cent. to 3½ per cent. incomes policy. The Chancellor's discrimination in favour of investment in the areas of high unemployment will do good, but it cannot do it quickly.
As I said earlier, there is to-day a large amount of spare capacity in industry, and that must be taken up before there is any great rush to build new factories anywhere in the country. I should have thought it more urgent and more effective to concentrate upon increasing the demand this year for the products of heavy industries. I think that was the point made by the noble Lord, Lord Stonham. I should think, too, that the best way to do that is by adding to the investment programmes of the public authorities, which means placing contracts as soon as the Government are willing to do it. I say that because confidence in the private sector will not be easy to stimulate owing to the ominous prospects of the General Election. If the Party opposite really think that managers and engineers welcome the possibility of a Government that is wedded to more nationalisation, more taxation and more controls, then I advise them to send some of their friends round and make a few inquiries. At any rate, it is true that with the Socialist clouds lying heavily on the horizon the private sector of the economy needs a stronger tonic than in a normal year. Therefore one asks: is the Chancellor's stimulant strong enough?
§ LORD SHACKLETON
My Lords, would the noble Lord allow me to interrupt him? Is he seriously suggesting that the present situation with regard to investment in the private sector is due to the prospect of a (general Election? Is that his serious economic argument?
§ LORD ECCLES
I am afraid it is. I wish it were not so, but I happen to know that quite a number of people put into the icebox their plans because they 1047 are afraid that they might get a Government which did not favour private enterprise. People are like that, you know.
§ LORD ECCLES
People sometimes have memories that go back a few years. I was saying that I think the most powerful ingredient in his mixture is probably the £700 million deficit. In one way or another the Chancellor of the Exchequer will have to finance that very large sum; and, greatly as National Savings will help, he can find part of that money in a way which will increase the amount of cash available and the lending powers of the banks. I find it very hard to judge how expansionary the Budget is without knowing how my right honourable friend intends to deal with the deficit.
On the other hand, the effect of the income tax reliefs on purchasing power can neither be early nor very formidable. They begin only in July, and we do not yet know how such marginal additions to the weekly cash will be spent. Nobody, I think, would claim that they are likely to result in many more orders for heavy industry; and as for the consumption industries, I should think it possible that their benefits would be largely offset by the increased rate demands and the increased National Insurance contributions.
But, what is more important, I cannot see that these income tax reliefs are going to do anything to help us get to a reasonable incomes policy. The pressure for wages and salaries beyond what the country can afford nearly always starts with a wish to reinstate some differential. The process begins with the lowest paid workers and it goes up through the others, very often in the style of a game of leapfrog, one section of wage or salary earners trying to get a jump ahead of another. As these low-paid workers (and there are many millions of them) do not pay income tax at all the Budget reliefs can do nothing to influence them to abate their claims; indeed, the Budget reliefs will slightly open the differentials between them and the next band above them. I hope that the income tax reliefs are good politics, but I do not think they can be described as good growth economics.
1048 I would much rather have seen this £180 million spent on improving the capital assets of the country in such fields as transport, power, education, housing and so on. It may be a fact (and I want to ask my noble friend the Leader of the House about this) that the Government have authorised such large additions to the investment programmes in the public sector that this action which they have taken, plus the financing of the £700 million deficit, will be enough to generate a growth rate of 4 per cent. this year and, therefore, a higher rate next year; because if we get the 4 per cent. this year then we shall be on the up, and next year will be higher. If they have done that, they really ought to give us the details. They announce their capital projects one by one and we can never get—at least I have never been able to get—a picture of what the total looks like. I wonder whether my noble friend would ask the Chancellor to consider producing a running total, say once a month, of all the capital programmes in the public sector, showing what new authorisations have been given during the past month, and possibly breaking it down into England, Scotland and Wales. Because I am fairly sure, from the business people I know, that a total of that kind, kept going month by month, would make a much more rapid impression on business confidence than the tax changes in the Budget.
In conclusion, I would remind your Lordships that when we are investing our own money we usually prefer the shares of a company which does not yield very much on the dividend but ploughs back plenty of profits, and gives us notice of an interesting expansion programme. Over a period the company which does the opposite, and pays out all it earns, is not a good investment. In this age of rapid technical change, when machines and assets become obsolescent so quickly, the same is exactly true of the economy. Either we plough back every year very large sums in development and improvements, or we shall not be a good prospect. Our own people will have no satisfaction and no sense of purpose until the Government give them a strong lead in aiming at growth through greater investment, even if it means some holding back of current consumption. I hope that the Budget, what was done before it and what is going to be done as a result of it, will 1049 add up to a lead of this kind. If it does, Mr. Maudling will have many opportunities to bring in many more Budgets in the future.
§ 6.45 p.m.
§ THE EARL OF PERTH
My Lords, two maiden speeches in an afternoon is a treat, and a treat worth waiting for; and for me to hear my noble friend Lord Sandwich speaking in the same place as I am is a particular pleasure that I have not had before. He and I were at Cambridge together and have been close friends ever since. He and I often disagree, but that is the fun of the thing. I am sure all your Lordships have been greatly stimulated by what he has said to-day.
On one thing I think that he and all your Lordships who have spoken to-day are broadly in agreement, and that is that our economy in the last years has lagged behind in the race for world trade and we, the great industrial nation of the past, are fast losing out, although we are sheltered behind a high tariff wall. Perhaps I should not say "although"; perhaps it is in part because we are sheltered behind high tariff walls. I had hoped, and I think many of your Lordships had hoped, that going into the Common Market would provide the solution of our problems in the sense that we were going to face stiff competition, and would have to put our house in order and become efficient, and that everyone was ready to face this, particularly those in industry, because they knew they would subsequently have a large home market where they could take their chance. To me, therefore, the failure to get into the Common Market is a great tragedy. I think there is a real risk that that having happened, we may go back very much to thinking, "Oh, well, it did not matter too much. We will carry on in the same old way". I am quite sure that we cannot go back to "business as before". What we must do, above all else, is to ensure that the fundamental basic structure of this economy is efficient.
So far as I am concerned, the recent Budget and Government action generally in the economic field need to be measured on the basis not only of whether they are going to provide for growth or full employment but, at this time, equally of whether they will help from an efficiency point of view. On 1050 the question of whether the Budget is going to help sufficiently to get things going, some opinion we have heard has been that the Chancellor of the Exchequer has done too much. I think the noble Earl who made his maiden speech felt that. Others have said it is not enough. These are matters of opinion. If I myself had to guess, very likely I should say the Chancellor had hit the bull's eye. But I do not think we need worry too much, because lie has said if it is not sufficient he will take further measures to ensure that more is forthcoming, and, equally, we know that if it is too much he can take measures the other way. So I do not think we need worry too much about that. The fact that matters is that he is prepared to move one way or the other. That, of course, is of first importance in regard to incomes policy, about which I need not speak, as so many of your Lordships have already spoken about it this afternoon.
But there is one thing that took place in the debate in another place which I heartily welcome—namely, both from the Government and from the Labour Party there was a clear denunciation of devaluation as a cure for our ills. It is not a cure; it is cheating. If we can keep exports going in the next few months, or year or two—I think that there is an encouraging sign in that the position of America is improving, and their demand is one of great importance for us—then I think we still have time on the basic side of our industry to get the efficient state which is of such importance. The noble Earl, Lord Longford, recalled how the Leader of the House last year was advocating efficiency above all. I am sure that that is right. I am not at all sure that the Government are not in fact doing what is needed in this respect.
I say that I am not at all sure because, quite frankly, we do not get the whole picture. This is much the point that the noble Lord, Lord Eccles, made when he said, "I do not quite know what is being done in the way of investment on the capital side." We know that a lot is going to be done at the present time in regard to education, particularly on the technical side. We know that training centres are being set up for new jobs. We know that a great deal is being done in the way of new investment in power and that, thanks to Lord Robens of Woldingham and the miners, the fuel industry is in a much 1051 better position than it was. We know that Dr. Beeching has a plan for the railways. We know that a lot is happening on the roads. Then there is the Rochdale Report on the ports. But these things are not, as it were, all put together. It is difficult even for us in this House, and for other people who study these things particularly, to know just what is happening and how far we are going in achieving efficiency in those spheres in which the Government can make us efficient.
If that is true of us, how much more true must it be of people generally? I ask the Government most sincerely to think a great deal more about trying to tell the country just what they are up to at the present time. I suspect that what they are doing is right, and I suspect that it is good, but we really do not know about it. I think it was Lord Grantchester who said that what we want are simple words. I am trying to echo the same thought in a slightly different way. I am all for the National Economic Development Council. Obviously, this is a fine body, and it is going to be of great benefit in pointing the way and, in degree, educating the Government and some of the top people, if I may put it that way, who are concerned with these things. But they are not the Government; they are not the leaders. What we need in this context is clear leadership and description of what is planned for efficiency in the country. That we have got to have if industry is to work and if we are to hold our own in the world markets.
I now turn to Scotland. I have the pleasure of saying "Thank you" twice to the Chancellor of the Exchequer, to the Government, to the noble Earl, Lord Dundee, to the Secretary of State for Scotland, or to anybody else concerned, for what has been given to us. Again and again we have asked the Government to reveal to us what might be the carrot—the "juicy carrot", I think was how my noble friend Lord Polwarth described it—for inducing industry to come to Scotland or to come to the development areas. Now, at long last, we know. It has been a long and uphill task to find out. But now we are told what it is, and I think it is a most satisfactory and fine vegetable. We have been told that there will be good grants for building and new plant, that there will be free depreciation; and so far as the Scottish Industrial 1052 Council is concerned, they can take up their task with a certainty and with renewed vigour.
My second thanks is concerned with the pulp mill at Fort William and the loans which the Government are to make. Forestry and tourism are the key to Highland prosperity, and now I believe that they can go forward with a great deal more confidence. Generally, I feel more hopeful that Scotland will make the change from heavy industry and coal to a more widely balanced economy in the coming years. We shall, of course, again ask for other things—for instance, I can think of a need for help on the air services, on which there is to be a debate at a later date. But generally I am encouraged.
On the general subject of Scotland's needs, I would come back to a point which I have talked about in the general context. I recall that in a previous debate the noble Earl, Lord Dundee, mentioned the development department which the Secretary of State was to set up for coordinating the development plans of the various Government Departments who are to operate in Scotland. This followed out the recommendation of the Toothill Report. But here again I do not know what is happening: I have not seen anything emerging. I do not know exactly, or in detail, what is being planned, or what is being done for Scotland. I know that we have had the Mackenzie Report on Power. There is also the Rochdale Report, which deals with Scottish ports as well as those of England. We know that a great deal is being done in regard to roads and education—the same sort of thing, but in perhaps greater measure, as is happening all through the country. When we have had this body set up by the Secretary of State, particularly to coordinate. it is not enough, I suggest, just for the Secretary of State to know about these things. It is essential that the people should be told the whys and wherefores of, and where they fit into, the plan. Then, I know, the Scots will not fail.
§ 6.58 p.m.
§ LORD WALSTON
My Lords, expansion and exports are really the two themes of this debate, and every noble Lord who has spoken has been insistent on the need for both these things. Various reasons have been given why we are 1053 lagging behind. Nobody has denied that we are lagging behind, and seriously so. The noble Lord, Lord Eccles, if I understood him correctly, mentioned that one of the reasons why we were lagging behind in our expansion was that there was insufficient investment at the present time, due to the uncertainty about the Election. In fact, when my noble friend Lord Shackleton specifically asked him that, he replied in the affirmative. So if we are all agreed that we must have expansion, and the noble Lord, Lord Eccles, and his friends feel that expansion is being held up through uncertainty over the Election, surely it is in the interests of the country, if not of his own Party, that the Election should not be delayed.
I do not think any of us on this side of the House would suggest that it is this uncertainty which is the only reason why we are lagging behind. We have, of course, been lagging for many years, even when the prospect of an Election was far from us, so we must look far wider than that. We must also look, in passing, to see how this Budget is helping us. The noble and learned Viscount last year, in a similar debate, suggested that the days of the Budget were numbered, in so far as its importance as a factor in our general economic planning was concerned. He was absolutely right in that. There are many more acts the Government can do to promote the economy of the country than merely once a year preparing a Budget. None the less, the Budget of itself is clearly of some significance.
I shall mention two points in the Budget in this particular context. Expansion, it is hoped, will be achieved by increasing demand through increasing purchasing power, and for that reason certain cuts in income tax have been made. Those cuts, in my view, are at the right end. They are just and they are wise. But I do not really see them increasing in any way the demand for the sort of goods which we need to produce if we are to have this genuine expansion. In the last few days I have asked a number of people in the income bracket of from £600 up to £1,500 a year —the people who have benefited most from this Budget—what the cuts will mean to them. Not one of them has said to me, "I am going to buy a new washing machine or a new motor car 1054 with the extra money." One at the top of the scale said, "Probably we shall have a slightly longer holiday in France as a result of it"—which is not going to expand our economy. Another said, "It will help me pay the school fees of my son ", which, again, is not going to help much. Another one, a little lower down the scale, said, "I shall probably smoke a few more cigarettes, and possibly drink another pint of beer on Sundays." The one at the lowest end of the scale said, "This will just about cover the extra rates I have to pay on my council house." I do not know whether that is a lair cross-section, but I do not think we can look to this very reasonable concession in the Budget as in any way stimulating the production of this country.
When it comes to encouraging exports, we had hoped for great things; we had hoped that there would be something in the nature of a turnover tax, an added value tax, or something of that kind, but all we get is the announcement that an extremely able and distinguished banker is going to look into this matter. Well, surely, that is not at this stage a good enough way to try to encourage exports, if there is any urgency at all in the matter. It would be all right if this were a slow, academic exercise, where one might be interested in getting an answer in 1967 or 1968; but when the country is crying out for more exports, why do the Treasury and the Government have to wait until pressure has built up from the organs of public opinion, from the Economist and the Financial Times, from business men and bankers, and then, as it were, reluctantly say, "We will bring somebody in from outside to suggest to us what to do"? Surely, that is the job of the Government themselves, with their own officials—those very able people, who have come in for a lot of criticism which I think rightly lies at the doors of the politicians themselves. Surely it is their job already to have looked into this, to have themselves brought up ideas and then to have said, "Yes, we like it and will do it" or "No, it is no good", rather than to plod slowly along and to start thinking about it at this late stage.
I suggest that there are some other reasons why we are suffering from this serious situation; and it is significant that not one noble Lord who has spoken from either side of the House has 1055 attempted—not even the noble Earl, Lord Dundee—to minimise the gravity of the situation. It is a frank admission of failure on the part of the Government, and, while we should respect them for their frankness, we cannot respect them for bringing us to this state of affairs. I suggest that there are other factors which we should look at, which have either not been mentioned at all or which have not been sufficiently mentioned during this debate.
We used to hear a few years ago that one of the reasons for the inefficiency of labour was full employment, and there were some of the tough business school who said, "What we need is a good dose of unemployment, and we shall then get more discipline among the workers and get better work done." I will not develop that argument or refute it. Similarly people may have said—I have not heard many say it, except in the context of the Common Market—that what management, exporters and industrialists in this country need is a buyer's market in place of a seller's market, in order to force them into more efficiency. They have been confronted with the competition in the export field of other industries, and, with some notable exceptions, in general they have failed. They have withdrawn from the export trade and, instead, concentrated on home production and home sales. But even now, even with what appears to be some form of concession, we, the affluent sheep—to use a phrase from the admirable speech of the noble Viscount, Lord Younger of Leckie—the consumers, are always being confronted with a sheer unwillingness on the part of the manufacturer to meet our demands or to take any trouble to give us what we want.
Only the other day I was anxious to put in a new conveying system in the grain storage on my farm—admittedly not a very large contract, one involving a few thousand pounds. One firm I went to, which had supplied me in the past, sent down a very polite young man, who, I believe, was one of the firm's principals, to discuss it with me, but thereafter they refused to do anything whatsoever. They would not send down a draughtsman, an engineer or anyone to take the measurements. The 1056 measurements were left to me to take, and they refused to take any responsibility if the measurements were wrong.
§ LORD WALSTON
They clearly did not want the contract, and they did not get it. That is not the sort of attitude which is going to lead this country to greater and more efficient production. One has examples of this all over the country, as well as abroad. Again, taking my own small experience, I tried to buy fertilisers for my West Indian farm, and invited contracts from English, Dutch and German suppliers. The English supplier, a producer of compound fertilisers, refused to tender; they were not interested; they were satisfied with the home market and were unwilling to develop farther afield. Therefore the contract, small though it is, goes to Holland. Such examples can be extended throughout the whole range of experience, I would dare to suggest, of any noble Lord in this Chamber who is engaged in any form of business at all.
What we need is to change this climate of complacency and of satisfaction with the existing state of affairs, and to replace it with a "go-getting" idea of more business, more turnover, more profits. How can that be achieved? One thing that is needed is to recreate, or possibly to create, a feeling among all those engaged in industry, of justice with regard to rewards. The noble Earl, Lord Dundee, mentioned the interesting figure that wages and salaries in the past ten years, since 1951, had gone up by 116 per cent. That was an important figure and a disturbing figure in view of the general rise in the gross national product.
What he did not mention—and I am sure it was not in any way done intentionally—was that the wages had in fact gone up by some 191 per cent., whereas salaries had gone up by 243 per cent. In other words, the people who are defined in the Government's statistics as salary earners as opposed to wage earners—which, by and large, I think one can say, are the managerial class—have in fact had a greater proportionate increase in their salaries than 1057 the workers have. I do not attach a great deal of significance to that figure, but when we are talking of wage freezes and restraint, I think we should realise that, although wages have gone up well in excess of productivity and of gross national product, on the whole the benefits received by the managerial side have gone up even more than that.
But we must do far more than simply alter the balance somewhat between the different classes of people engaged in productive industry. What we must also do—and this is very long, very slow, and very difficult—is somehow to alter the general balance of rewards as between people who do different things; who are the producers, the manipulators or the exchangers. I am not suggesting at all that we could get on in this world without the people who process, who exchange, who manipulate. They are all important. But when we talk of expansion, when we say that we must produce more in this country, we must, if we are honest, realise that it is the people who are engaged in industry in one form or another who are the ones we want to get at. There is no getting away from the fact to-day that, if you contrast the stockbroker, the manufacturer, the middleman, the farmer, the land speculator—I do not use that word in a derogatory sense—and the exporter, it is the stockbroker, the middleman and the land speculator who make the biggest profits, and the manufacturer, the farmer and the exporter whose profits are at a very much lower level.
I received to-day from the Ministry of the noble Lord, Lord St. Oswald, some figures which have some slight interest in this connection. I hope your Lordships will bear with me, but it is one of my hobby-horses. These are official Ministry of Agriculture, Fisheries and Food figures, comparing prices of wheat, flour and bread between 1958 and 1962. During that four-year period, the average price of home-grown wheat increased by one-quarter of 1 per cent.; in other words, it was virtually static. The average price of all imported wheat went up by just over 5 per cent. The weighted averaged of those two wheats in the proportion in which they are used in the grist went up by some 4.7 per cent. Therefore, the wheat moving into the mill cost 4.7 per cent. more. But the flour coming out of the mill did 1058 not cost 4.7 per cent. more; it cost 7.4 per cent. more. In other words, either the costs or profits of the miller had increased by that much more, whereas the home producer of wheat, the farmer, received only one-quarter of 1 per cent. more.
That is not the end of the story. The baker, buying his flour at a price which was 7.4 per cent. higher than it was four years ago, did not simply pass that on to the consumer and charge 7.4 per cent. more for his bread; he charged 12 per cent. more for his bread. So here again you have the picture which we see all through: the farther you went from the primary producer, the greater has been the effect of this inflationary rise which we have been experiencing throughout these years. I cannot believe that so long as that continues we are going to encourage the right sort of people to go into occupations of the sort the country most needs: the productive occupations, the manufacturing occupations and the exporting occupations. Recently there has been, as some of your Lordships will doubtless have read in The Times, correspondence on this very subject. An admirable letter to-day suggests that what we need is to encourage the brightest and best of our school leavers and university leavers to go into creative occupations, instead of into the professions of stockbroking, accountancy, and so on. But how can we encourage such people to do that, when not only public esteem but material rewards are so worked that, by going into these productive occupations, these young men and their advisers, their parents and their teachers, know full well that they will not enjoy such a high standard of living in the future as they will if they go in for the manipulative and the exchange professions? This may be an idealistic point, something which is too far removed from the facts of to-day, to be thought about seriously. But I do not believe that we are going to get any long-term, permanent, radical improvement in our present situation until we face these facts, and until we attempt by a variety of means to alter this balance.
One way of doing it, which a Budget could have done, which the last Budget attempted ineffectually and half-heartedly to do, is by a capital gains tax. Another way is by some form of taxation, call it a wealth tax if you like, whereby revenue 1059 is raised not from those who earn and who produce—in other words, you can quite drastically lower the income tax on such people—but from those people who have accumulated wealth by some form of capital gains, which at the present time escapes the net of taxation.
I should like to move on to a second and final point which has been mentioned both by the noble Lord, Lord Eccles, and by the noble Earl, Lord Perth; that is, the need for a far more comprehensive form of planning of the whole of our national economy. We have recently had the example of the Beeching Report—an admirable document, a courageous document, and a document which faces the facts, many of them unpalatable. But the Beeching Report by itself is—I will not say valueless, but it is no more than a very valuable ingredient which is necessary for the whole proper planning of our economy, just as were the Rochdale Report and so many other reports we have had.
We cannot in this day and age believe or maintain that we can effectively plan our economy piecemeal by simply saying one day what we shall do with our railways, the next day what we shall do with our roads, the day after what we shall do with our docks, and so on. We must bring them all in, and it must be the job of the Government to make that plan. They should, of course, have been doing it these five years past. They have delayed doing it, whether through inertia, ignorance or doctrinaire attitudes towards it, I do not know. They are slowly coming round to it, and we give them credit for that. But now let them go faster and bring them all in together.
I will give your Lordships another small example of the sort of thing which results from this piecemeal planning, the lack of any co-ordinating plan. In the north of Lincolnshire, at a small place called Keelby, there is a fairly modern power station which was sited with due regard to coal supplies and to bringing in the coal from the Doncaster coalfields in the most efficient and effective way. It was sited on a railway line and it was sited on a waterway, so the coal could have been brought in either by water or by rail—and, of course, it could also have been brought in byroad. In fact, it is at the present time being brought in by 1060 road because, on a strict, individual accounting basis, it is cheaper coming by road. But even though the coal may cost 6d. a ton cheaper to transport by road, when you take into account not only the wear and tear on the roads but the inconvenience to the other users of the roads and the delays resulting from this very heavy traffic, and when you also take into account the losses entailed by the railways in not carrying this coal, and by the waterways in maintaining the canal but having no traffic on it, and all the other factors which come in, surely a very different answer is arrived at.
Similarly, if we are going to put up our new power stations, we must decide, as a part of our national policy, whether it is going to be more efficient to run them on solid fuel or on liquid fuel. On the whole question of transport, we must decide whether we want to have pipe-lines to carry our coal, as indeed they can, or whether we should have the coal transported by some other means—or, indeed, not transported at all—to these power stations. In countless ways of that kind we must have far more co-ordination of our national economic plan; and, of course, coupled with that, we must bring in these other things which have been debated during the past months in your Lordships' House. We must consider the areas of the North-East, and what really is the policy for them, the whole question of location of industry, redundancy, training centres, colleges of advanced technology—the whole gamut of the essentials of modern economic production must be brought into consideration by one co-ordinated and effective decision-making body, which in the final resort can be only the Cabinet.
I myself believe that, until these two things happen—until we have a coordinated planning mechanism, planning our industries on a national basis instead of on a piecemeal basis; and until we have, at the same time, a conscious effort to redistribute the rewards of industry so that the people we most wish to encourage (the producers, the manufacturers and the exporters) get the major rewards—we shall never achieve what is essential for the survival of the country. It will take many years to do, but I have sufficient confidence and optimism to believe that, once we set out on this 1061 path, and once we make it clear to all those concerned that this is our intention, all, or almost all, of the people who really matter in this, whether they be the workers, the management; the planners, the scientists, the technicians or whatever they may be, will co-operate, and we shall not have, as we so frequently do now, scientists going to America because there are greater opportunities and greater rewards, and we shall not have people taking off that extra afternoon in order to play golf because it is not really worth making the export effort. I believe that people will start to co-operate in a way which has not been done in the past few years, but in a way which must be done if we are to emerge from this appalling quagmire of inertia and depression which has permeated the speeches of all noble Lords to-day.
§ 7.25 p.m.
My Lords, we have had the pleasure of listening to two able and pleasant maiden speeches, one from the noble Viscount, Lord Younger of Leckie, and one from the noble Earl, Lord Sandwich. I listened to the noble Earl's speech with the greatest of pleasure, though, like the noble Lord, Lord Boothby, I found remarkably little in it with which I agreed; but I hope we shall often hear those particular views pressed forward in this House, because they are so refreshing. The noble Earl who opened the debate cut sundry gibes at the former Chancellor of the Exchequer for having got his assessment of the economy wrong. If he did so, he was in very good company, because every central banker in the world was in exactly the same boat, as appeared when Mr. Per Jacobsson gave them all a little exhortation on the fact that they had been fighting the battle of inflation when they should have been worrying about deflation. So at least Mr. Selwyn Lloyd was in good company.
One salutary result which emerged from the Budget of 1962, which was a depressing Budget at a time when the world was heading towards depression, was that it brought about a considerable reorganisation in industry, largely by the dis-hoarding of partially-employed people, and the result has been that most industries to-day are in a considerably better state to compete, both at home and abroad, than they were a year or 1062 so ago. But this dampening effect has, of course, been extremely discouraging for all forms of investment in new plant, particularly at a time when existing plant was not being fully used. This has set the scene for the Budget of 1963. We have an opportunity to expand, and to expand from a sounder basis than before—and that I read as the theme of the Budget, which is: investment by industry by means of tax reliefs for new plant.
But, with the noble Lord, Lord Eccles, I share some doubts whether, at a time when there may not be sufficient hope of employing that plant, the inducement is sufficient. Because although a certain amount of investment goes on always, in order to improve efficiency, and so on, major investment for expansion largely comes about through somebody thinking that he is going to sell more at the end; and when existing capacity is not being used to the full, then the prospects of selling more than the existing capacity can produce and so occupying the new plant are not always very bright.
I do not see in the Budget any very strong, new inducement to promote private consumption, which would, of course, encourage investment. I do not propose to worry your Lordships with the exact figures, but when one considers, on the one side, the reliefs in personal taxation, and, on the other side, the higher National Insurance contributions, the higher rates, the higher fares and the higher expense of this dreadful winter which most people have suffered, there is, on balance, precious little spending power left to most people. Of course, the recipients of any balance will be those who receive from the National Insurance Fund from July onwards—the old, the unemployed and so on—and, on the whole, these are not the buyers of consumer durables, which is that part of business which tends to be in the doldrums. So for the future, inducement to industry to invest is dependent rather on the annual growth of incomes, without a great deal of overtime at the moment, and the natural increase of the earning population.
For expansion, then, we look to Government spending below the line and how it is going to be financed. If the people go on saving at the rate they have been, and the Government receive their share, the Budget overall deficit is by 1063 no means stimulated. On the other hand, if people spend more and the Government have to expand the floating debt, then a very different story could arise. I agree with the noble Lord, Lord Eccles, that whether this Budget is sufficiently stimulating depends on circumstances at present unknown; in fact, it depends on the disposition of people to save during the coming months. I would suggest to the noble Lord, Lord Williamson, who has a great belief in plans, that it is that particular type of factor which can set every plan awry. You cannot foretell whether people will save or spend six months ahead; and the difference can wreck your planning.
But the Budget is only a part of financial strategy and, on the whole, these days it tends to be an over-emphasised part. If Britain is to expand, we must get higher output from the same manpower, and we must get re-deployment. The Opposition hold up as an example to us the expansion in Europe over the last few years; but they tend to gloss over the fact that Germany has had an immense access of labour in the shape of foreign workers and refugees; that France has had its Algerian refugees and also an immense reservoir of underemployed people on the land. Italy, we know, still has a huge pool of unemployed in the South. We have only our natural increase of population and any redundancy in our shrinking industries; so it is very important that we should get a proper re-deployment.
I should like to quote a few remarks made by Mr. E. J. Hunter, president of the British Employers' Confederation, to the Directors' Council of the Tyneside Productivity Association at Newcastle upon Tyne the day before yesterday, quoted in The Times of to-day.Unless we tackle the fear of redundancy and unemployment with courage and resolution there is little likelihood that the enthusiasm of the nation for a growth programme can be sustained.Those, I think, are wise words with which nobody can quarrel, and I leave them with my noble friend, the Lord President.
I welcome the provision for retraining in the Budget; I think it is one of the most important aspects of it. I look forward to the day when we shall see 1064 engine-drivers driving bulldozers, signalmen turned into carpenters, and such like. We have a very great deal to do in this country, and the industry most involved is the building and construction industry. We have to modernise our roads, docks, houses, gaols, schools, hospitals, barracks and all sorts of things; and it is essential that the Government make the plans for doing this. In the N.E.D.C. green document, The Growth of the United Kingdom Economy, this industry reckon that they can get a target of increase from 1961 to 1966 of 23 per cent., with certain provisos. My first reaction on reading it was that I was doubtful whether the target was big enough; and secondly, the provisos were so hedged and numerous that it struck me they were extremely unlikely to get that target unless something were done about it.
One of their most important provisos was that they had confidence that the demand would be there in the future, and that they invested sufficient money in increasing the supplies of materials et cetera now; because this industry is particularly susceptible to what is known as "Stop-Go". At that stage I would ask my noble Leader if he would look at the particular evidence of the building and construction industry in this N.E.D.C. document and say whether he is really satisfied that this industry under its present proposals can meet the demands which the necessity to modernise Britain is certainly going to put upon it. I do not ask him for an answer. I ask him to look at it.
Then I come to a vital point: that is, this trouble about "Stop-Go". In the past, "Go" was for everybody; "Stop" was always put on the Government programmes. We all remember that whenever there was any question of the economy running red-hot the demand was always for cutting down public expenditure. If, this time, the public sector is to spearhead our expansion, then some method must be found of dealing with a possible private sector boom which may result from the public sector boom and try to displace Government projects from the front priority, if the economy cannot stand both. In other words, the projects must be selected by need, and not by the fact that applied formerly: that some were sponsored by the Government in 1065 some way, and the desirable ones by the private sector.
The Government programme and Budget is going to be judged on its effect on the modernisation of Britain, and I think the Chancellor has made a good start. It is impossible to say whether he has been too bold or too timid till we know what the spending and saving habits of the British people are going to be over the next six months. But there is a great deal of imagination in this Budget.
§ 7.38 p.m.
THE MARQUESS OF READING
My Lords, although it would be tempting to pursue a number of the interesting points which have been contributed from both sides of the House, I can assure your Lordships that at this late hour I shall resist any such temptation. I propose to confine myself to welcoming two specific proposals in the recent Budget Statement—namely, the proposal to reduce the 2 per cent. stamp duty and to remove existing restrictions upon the issue of bearer securities.
Since I raised my own very small voice a year ago in support of these proposals it might appear ungracious on my part if I failed to express my appreciation and satisfaction to-day. I hasten to add, however, that I do not suffer from any delusion that the decision was influenced by any words of mine, when so many other representations have been made from infinitely more exalted and august quarters—notably, as the noble Lord, Lord Boothby, has said, by the noble Lord, Lord Ritchie of Dundee. Your Lordships will also recall the plea for the abolition of the stamp duty made very recently by the noble Lord, Lord Terrington, a plea which he ingeniously contrived to incorporate into his observations on the Stock Transfer Bill. I should like to congratulate the noble Lord upon the almost startling alacrity with which the Chancellor of the Exchequer has gone halfway, at least, to meet him, and to express the hope that by this time next year he will have stood the noble Lord the other half.
Anyone who has any practical experience of these matters will be able to testify that these proposals will remove two obstacles which have hitherto severely restricted an important sector 1066 of our financial machinery in extending its overseas business. It is surely not only improvident but also the height of folly to tolerate the continued existence of unnecessary impediments which restrict our capacity to increase our invisible earnings, and which thus, to quote from a recent statement by the chairman of a leading merchant bank:might deny us the opportunities which undoubtedly exist to develop London into a major international market for long-term capital".No less encouraging than the proposals themselves were the terms in which the Chancellor of the Exchequer introduced them. It has been a long time, but at last a Chancellor has publicly recognised the important contribution which our highly developed financial machinery makes to our balance of payments and has shown himself sympathetic and ready to assist in developing its full potential.
I adhere to my resolution, and will avoid any temptation to stray farther and comment upon other aspects of this most constructive Budget, except to say how much more invigorating this theme of expansion without inflation is than the previous refrain: "Lead, guiding light, amidst the encircling gloom."
§ 7.43 p.m.
§ LORD SHACKLETON
My Lords, perhaps I should take this opportunity, in the absence of my colleagues on this side of the House, to make the nice remarks that I wish to make about the Budget. I knew that it was a mistake for us not to put down a Motion of censure! But, in winding up, at least the noble Viscount, Lord Hailsham, is here. On this occasion I am at a disadvantage, because in our recent exchanges I have usually spoken after him, and to-day he is to follow me.
It is inevitable that in a debate of this kind we should cover a wide field and that there should be differences, but there has been a surprising measure of agreement among some of your Lordships. The noble Lord, Lord Hawke, for instance, made a number of remarks, with practically every one of which I was an agreement. I think it is a measure of the degree of advance that has taken place in the last year, signified by the repentance of the I Government in regard to past policies, 1067 which has led to a degree of acceptance of a Budget which I cannot recall in my political life. That is not to say, however, that we do not have some criticisms of it.
In the course of this debate we have had two admirable maiden speeches. I am not sure whether I should say "admirable" of the maiden speech of the noble Earl, Lord Sandwich. He made a very characteristic one—but perhaps I should reserve my remarks until he returns. I was very much charmed by the speech of the noble Viscount, Lord Younger of Leckie, and the appeal that was contained in it for a responsible attitude. This is a theme that has occurred during the debate and it is rather satisfying to find that those speaking from the Cross Benches, or without a particular political viewpoint, see it in these terms. It clearly is incumbent on the Government to try to secure a greater degree of national unity in regard to economic problems.
In an extremely able and witty speech, my noble friend Lord Longford clearly demonstrated the blunders of last year, blunders which I think have been very nearly admitted. The noble Earl, Lord Dundee, made a speech which was infinitely preferable, to my mind, to the speech made by the Government spokesman last year. There was an admission of misjudgment, and it might well be that this is in response to the principle enunciated by the noble Viscount, Lord Hailsham, when he said, "Truth needs publicity". This great truth may have had some effect upon the Government. I think that it is a most encouraging development that the Government should admit when they are in error. I only hope that Governments of all colours will do this. I hope that when there is a Labour Government they will sustain this, but it may well be that they will not be guilty of quite the same type of blunders and therefore have less to apologise for.
Obviously, some of the attitudes to this Budget were predictable, and there have been certain remarks of a kind which clearly would come from certain quarters. It has been said that not enough new money has been injected. This is a point on which I agree with the noble Lord, Lord Hawke, who was concerned whether enough lift had been given to consuming power. This is some- 1068 thing which is a little surprising. The income tax concessions will not begin to have their effect for another three months. I have not heard in advance whether there is any technical explanation for this. If there is, I am prepared to accept it. We have also to take into account that the Government have already given certain boosts to spending power; but these are certainly not enough if we are to solve the problem of unemployment, with which the noble Viscount is particularly concerned.
Referring to the N.E.D.C. target, we know that the 4 per cent. which the Government have accepted is not in itself enough to solve the problem of unemployment. Certainly it is not enough to solve the unemployment in the special areas, although we welcome the measures to be taken in these areas. The noble Lord, Lord Boothby, made reference to the baleful hand of the Treasury. The Treasury have been coming in for some rather unfair criticism, but certainly caution has influenced the Chancellor to an extent. We ought now to be aiming at a much higher level in national production in the course of this year, and to obtain that there will need to be a further release of spending power.
The noble Earl, Lord Dundee, was good enough to pass across to me this document, reported in The Times this morning, from which he quoted one passage which I agree is, if taken literally, a little unfair. The economy has not ground to a virtual standstill, in the sense that machines have ceased to work, but I am wondering whether, from the Government's point of view, this is perhaps a fortunate mistake in translation. If one regards the economy as something that is continually going forward, it is true that it has stopped recently; and if one wishes to use more vivid language, it is permissible to say that it has ground to a standstill. It is a fateful fact that, as a consequence of past Government policies, there has been virtually no advance in production, and a negligible advance in exports. Our production target—or rather, the N.E.D.C. target—is of course, now unattainable. We talk about the N.E.D.C's 4 per cent. target, but that, of course, is a target which they had set for an earlier year, and we are falling well behind this.
It is, I think, deplorable that this last year's misfortune took place. It was not 1069 for lack of warning voices. There were any number of voices, both in and out of Parliament, pointing to the mistake in the Government's attitude. The Government finally saw the error of their ways: they sacked the Chancellor of the Exchequer and they also sacked the noble Lord, Lord Eccles, to whom I should have liked to make a number of remarks, because I found his reflections on his advisers in the Government, and their responsibility for the errors of the Government, quite distasteful. I do not think it lies in the mouth of an ex-Minister to blame the advice that the Government have had. I am sorry that the noble Lord is not here at the moment to hear these remarks; perhaps he will come back, and I will then repeat them. I am sure the noble Viscount the Leader of the House will agree that it is reasonable to expect that those who have taken part in a debate should be willing to come in at some stage to hear replies.
§ LORD SHACKLETON
Clearly, the noble Lord, Lord Eccles, is not merely a repentant sinner; he has blamed it, like Eve, on the serpent—the serpent in this case being the Treasury. I do not think it is suitable for him to do this. It is all right for the noble Lord, Lord Boothby, because we know that he has been continually critical of the Treasury all his political life. But the noble Lord, Lord Eccles seemed to live quite happily with them. In those circumstances, I feel that it is inappropriate to make that sort of criticism.
I am neutral in this matter. I think the noble Lord is being a little hard on the noble Lord, Lord Eccles. I thought he made a good speech and one that was not unduly hard on the Treasury; and I think perhaps the Treasury would admit that.
§ LORD SHACKLETON
The noble Lord, Lord Eccles, always makes an excellent speech, and that is what is so distressing: that in his excellent speeches come such deplorable sentiments. At any rate, noble Lords on this side of the House had noted the effect of what he was saying, and we welcome it, as we do among all these reformed ex-Ministers. Ex-Ministers of Defence, we find, 1070 immediately start supporting conventional arms and are opposed to nuclear weapons, to some extent, or a number of them; and we find that ex-Ministers who have had responsibility for our economy (and the noble Lord, Lord Eccles, was at the Board of Trade) have also changed their views. After those perhaps unkind words, I may say that with a great deal of the speech made by the noble Lord, Lord Eccles, I agreed; but I felt that I must deal with this particular point.
The real difficulty that is haunting us, and has always haunted us, is the balance-of-payments problem. Our criticism of the Government's policy is that after the Budget in 1959, which had this happy coincidence of occurring in such popular fashion just before the Election, the Government were faced by a balance-of-payments problem, but did not contribute to improving the efficiency and expanding the economy. They tried to solve their balance-of-payments problem simply by contracting demand. I hope that one of the lessons we have learned is that these problems cannot be solved purely by contracting demand. We realise that it is an extremely difficult course to follow, but the present Chancellor of the Exchequer has, I think, made a much bolder attempt, and I would say a much more intelligent attempt, than has ever been made before. Certainly in reading his speech I found it a much easier one to follow, and it showed that there are occasions when it is helpful to have at a Department a Minister who knows something about the subject. I think he has a quality which has perhaps enabled him on this occasion to stand up to the Treasury in a way the noble Lord, Lord Eccles, was perhaps unable to do—although I have always thought that Lord Eccles was pretty bright on the subject of economics. The fact is that the present Chancellor of the Exchequer has shown a considerable advance.
A number of points have been raised in the debate and we have covered so much ground that I do not propose to touch on aspects of the Budget. I would, however, just make one point in regard to stamp duty. I cannot help feeling that stamp duty has not been the obstacle to investment that some people think (though I fully accept that it is a trouble, and it is a matter which certainly is in the mind of every director of any large company 1071 concerned with capital problems); and certainly I should be very surprised to know that it has been an obstacle to foreign investment in this country. Those men who have to take investment decisions will obviously take it into account. It is a factor which, as I say, is troublesome, and therefore rightly regarded as a psychological obstacle.
THE MARQUESS OF READING
My Lords, if I may briefly interrupt, would the noble Lord take it as evidence that this is an impediment to development of overseas business if I give him the example of a gentleman in Paris (this is an actual case) who wished to buy a certain number of leading industrial shares in this country, but finally executed the business in New York, because it was cheaper, due to the incidence of the 2 per cent. stamp duty?
§ LORD SHACKLETON
It may well be there are such cases, and I fully accept that example. I do not want to go on for too long, and I think the noble Lord will agree that I am not making too heavy weather of this point. But it is arguable that this type of portfolio investment is not necessarily entirely in the interests of the country, for other reasons. It may be, in certain circumstances, a strengthening of the outward flow of money. I do not want to make more of it beyond making the point that I do not believe it is of great importance. I think that psychologically it may have been a bad thing to abolish it. It has been interpreted, or misinterpreted it may be said, as a further advantage to those who make money from capital gains and from speculation. I would only say, in the situation in which noble Lords have argued, that nationally we have to try to arrive at a degree of agreement among all sections of the community. I do not think it was, to say the least of it, an entirely unmixed gain to remove it.
I should like to turn briefly to the subject of exports. My noble friend Lord Stonham dealt with this subject at length, and there is a complaint that little has been done in the way of giving incentives to export industry. This is a matter which people talk about rather easily, but are rather more reluctant to be precise about. It is also interesting to note the extent to which opinions waver. People who have in one year strongly advocated 1072 incentives for exports, have in another year said that they have changed their minds. But the fact remains that in certain ways our exporters are at a disadvantage. I am informed—I do not know how accurate this is; I have not checked it—that it is very much easier for an exporter of American aircraft to borrow money from the Export-Import Bank at a lower rate of interest than it is for an exporter of British aircraft. If this is so, then clearly the exporter can legitimately claim that he is at a disadvantage.
I should like to turn briefly to the subject of the development districts, which have been specially the responsibility of the noble Viscount, Lord Hailsham. We made criticisms in our recent debate on unemployment that the development districts and the Local Employment Act were not entirely suitable for the present situation. We said that the districts were too small, and that it was not therefore suitable for solving these regional problems. I rather gather that the noble Viscount has certain views himself on this subject. The noble Earl, Lord Dundee, was at pains to defend the Local Employment Act. This is not the time to discuss it in detail, but we should be interested to know from the noble Viscount in what respects he thinks changes ought to be made. On this subject, surely it will be easier—or perhaps it will not—to administer the aid that is being given to these areas on a regional basis rather than on these rather narrow district bases.
I must admit that I am extremely interested-and it is certainly the view of most noble Lords on this side of the House-to hear that the Government's proposals in regard to capital allowances, recurring grants and so on, are not just a minor sop to opinion; that they represent a real and flexible use of planning to deal with these problems. The fact that the Labour Party thought of it before—the noble Viscount will expect me to say this, because it has been said on other occasions—and that this has been advocated, does not detract from the rightness of the action in this matter. I warn the Government, however, that it is one of those instruments which will need very careful watching. Already one has heard complaints from other sides. One is even hearing complaints from 1073 other industries, and it will do us no good if, as a result of its not being watched and being too rigidly administered, other aspects of industry and other areas feel at an undue disadvantage.
Here I should declare an interest. It is a matter which I do not think will receive much support from my side of the House. The fact is that the distribution trade—and it may well be in the public interest at the moment to limit development and building in the distribution trade—is at a disadvantage, and it will not do us any good in the end to have an efficient end to the chain of production and distribution. I merely leave this point with the noble Viscount.
I should like to refer to the speech made by the noble Lord, Lord Williamson—a very interesting and valuable contribution—in which he spoke with all that great knowledge which comes from years of public service as a trade union official, and, furthermore, as a former Member of another place. He made the remark—and one would emphasise it again—that the trade union movement would be likely to respond to proposals in regard to an incomes policy, provided that they are regarded as fair and just. It is a tragedy that the Government have so mishandled their incomes policy and the way in which they have put it forward. We have criticised the way in which it was put forward in the past. We have criticised the rather naïve way in which the Government thought that at a very early stage the Incomes Commission would be capable of judging, not merely what was a suitable wage rate, but what were suitable profit rates for industry. If they are to do this, they will need a vastly greater amount of information than is yet nationally available.
I think it is clear that an advance towards a national incomes policy is going on all the time. I remember, back in 1945 there were certain advocates of a national incomes policy. This came particularly from those industries like the mining industry and others who had been at a disadvantage. Sometimes, as the relative position of people changes, you find that their support for a national incomes policy becomes rather less. But it is a necessity, and the Government somehow have to undo the harm they have done 1074 in the past by mistaken economic policies, and a feeling that they were not being fair. I am sure we should agree that this must be the aim of national policy. Whether this Government are capable of doing it is another matter, but we have noted these signs of reformation and hope they will continue along this path.
I think the most important part of the Chancellor of the Exchequer's speech was his attitude to the balance-of-payments problems. I have reserved these remarks until the noble Lord, Lord Boothby, came back here, because I, with lesser voice and certainly less effectiveness, have been preaching the same sort of line as he has: that it is ridiculous that this country or, indeed, other countries, should be stopped in their tracks by the technical problems of international liquidity. What is so interesting about the Chancellor's speech is that he has had the courage to look at the reserves, the International Monetary Fund and the help of the bankers as something which is to be used in order, not to stop the economy and bate it out until they have reduced demand so much that imports have fallen off, but as something to enable the economy to go on advancing. This is a view which will not commend itself to the noble Earl, Lord Sandwich.
I will take this opportunity of saying how delighted I was to hear such a typical speech from him. I remember when I spoke in another place just after him, I was so enraged that I had something to say about the venom dripping from his mouth. This never bothered him very much, and the noble Earl has continued to be a scourge to the other side quite frequently, and, usually very unexpectedly, a scourge to his own side. We always recognise, however much we may disagree with his views, whether they be Cromwellian or merely misguided, as we may think, that he holds them strongly. Whether I share the views of other noble Lords in that I wish him to remain in this House, or whether it would be better for him to continue this needling of the Government in another place—certainly I think he would find more scope there—we on this side will do our best to provide him with suitable targets, and 1075 I have no doubt that his own side will also do the same.
My Lords, that was a slight departure from the subject of international liquidity, but it is a fact that the present Chancellor of the Exchequer has now done what has been pressed on him by a number of people, not least of all—and this is significant—by the T.U.C. Clearly, risks have been taken, and we shall watch with interest, but I am extremely hopeful. I only hope that his policy succeeds and that if he fails it will not be blamed on the Treasury, because this is thought to be his own work and not that of the Treasury.
§ LORD BOOTHBY
My Lords, if the noble Lord will forgive my interrupting for one moment, may I hope that he will realise that the ancestors of the noble Earl, Lord Sandwich, supported alternately both Cromwell and Charles II?
§ LORD SHACKLETON
No doubt, like the noble Lord, they had their own consistency; and that we recognise.
The hour is getting late and I do not think I need say more about the subject of international liquidity, but I should like to turn to another point that the noble Lord, Lord Eccles, made: the suggestion that it was wiser to invest in the public sector to-day and to concentrate on this, because private investors would not be willing to invest because of the imminent threat of a Labour Government. At the present moment private investment is 20 per cent. below what it was a year ago.
I do not think that this has been caused by the threat of a Labour Government, because a year ago the present Government were a great deal more optimistic about their prospects than they are today, and the Chancellor of the Exchequer made it clear that he thought it was likely that private investment would begin to pick up. It is a very serious economic fact that it has fallen as low, but this has been due to economic policies, to judgments which have not been related to political considerations. For those of us who are in business, and meet our business colleagues, I really think this is an unworthy argument, rather comparable to the argument of the noble Viscount, Lord Hailsham—and he will not be surprised that at some point 1076 in this debate we should draw his attention to his statement:Can you wonder that foreigners speculate against the pound? How can a General Election remove uncertainty when it is want of confidence in the declared policy of the Opposition which is causing the alarm?I am very tempted to use a phrase which I am sure my noble Leader, Lord Alexander of Hillsborough, would have used, and did use in another place, and call it "piffle and poppycock"—and perhaps the noble Viscount remembers when my noble leader used that phrase in another House. I suppose the noble Viscount would argue that the fact that the exchanges are holding firm now is due to an assumption that the Government will, after all, win the Election. We realise that there is always a danger of a run against the pound. What is encouraging to-day is the extent to which Mr. Maudling and the Leader of the Labour Party are agreed on certain aspects of international finance, and I think the support which Mr. Wilson gave to the Maudling view in Washington will not have escaped notice in other parts of the world.
I would end only by saying that the noble Viscount, Lord Hailsham, is one of our leaders who has never shrunk from giving a lead. I do not think that the Chancellor's Budget, admirable as it is, is the kind to give the stimulus which some noble Lords have called for in producing a national effort, and the criticism that has come, as much from the Conservatives' own side as from the Opposition, has been on the absence of belief in the determination of this Government to tackle the fundamental obstacles to advance. Everybody knows how much the noble Viscount would like to see increased production and increased wealth, so as to do the various things in the field of education and science which he knows to be necessary.
But this is a matter of national attitude, and one of my criticisms of the Government—slightly relieved by the flexibility of the present Chancellor's policy—is their general rigidity in their attitude to national affairs, to our educational system, to our social structure and so on. We shall not get an advance until we have a Government who are able to show that they do believe, more profoundly than this Government have shown signs of believing, in a rather better 1077 society. Here I am with the noble Earl, Lord Sandwich, and others in lamenting the deplorable spectacle in regard to certain aspects of social life, in gambling and so on. I am not blaming this wholly on the "Opportunity State" of the Conservatives, but it is to some extent a by-product of it. I hope, therefore, the view that we can now relax in our attitude to financial decisions and that we need not be quite so hidebound in austerity in regard to financial decisions will not mean that we shall not face up to some of these things which have become rather a public scandal to-day.
The Opposition are not proposing to divide the House on this occasion. We consider there are many aspects of this Budget of which we approve. We think it is a tragedy that we have had to wait so long for it. We are glad that some signs of repentance have been shown by the Government, and we hope that they will show further repentance in other directions and will continue to listen to the advice that they receive, not only from people outside Parliament but from the Opposition.
§ 8.16 p.m.
§ VISCOUNT HAILSHAM
My Lords, I have sometimes thought that an anthropologically-minded Martian, viewing our annual Budget from a spaceship, would quite certainly conclude that he was in the presence of a tribal fertility festival connected with the Vernal Equinox—something perhaps halfway between miCarême and the festival of Adonis in the Ancient World. There is the same excitement mounting at the time of the first daffodils; the same sense of mystery and awe in the presence of the unknown; the same resort to the mysteries of pre-scientific methods of prophecy and divination; and when it is all over, and Hampstead Heath is, as it were, littered with paper bags and little notes saying that various speakers have had to catch a train and therefore cannot wait, the unfortunate Government spokesman, like an elderly Mrs. Mopp with spike and basket, is left to pick up the remains.
Certainly I was glad that my noble friend Lord Sandwich—whom I should like to join with others in congratulating upon his welcome appearance in this House after a proper period of reflection and upon a most enchanting maiden speech—drew attention to the fact that 1078 my right honourable friend the Chancellor had pretermitted one monstrous ceremony in this absurd liturgy to which I have been referring; namely, the idolatrous elevation of Mr. Gladstone's box—a form of fetish worship which every Chancellor who has observed it has lived to regret. Whether the box was actually burned, as I recommended in my speech on this occasion last year—one of the few passages which the noble Earl, Lord Longford, did not quote in extenso—I cannot possibly say. I imagine myself that some devout Brahmins in the Treasury have probably kept it for private adoration in some little shrine of their own.
I thought, however, that my noble friend Lord Sandwich was perhaps a little unjust in twitting my right honourable friend with a closer resemblance to Mr. Gladstone than he himself showed. I thought that the earlier and perhaps the most spectacular part of his speech was somewhere nearer Mr. Gladstone even than that of the noble Lord, Lord Grantchester, since he thought that the injection of £350 million into the economy, which would certainly not have been approved by Mr. Gladstone, was bound to lead to an economic disaster, a view which, naturally, I cannot be expected to take.
I did not give the noble Earl, Lord Longford, quite such high marks as did my noble friend Lord Dundee in his opening speech on the Government side. I thought he made a somewhat bewildered speech, hesitating on the brink of criticism but not quite certain what criticism to make. Was it, to begin with, a Budget which was going to benefit only the well-to-do? He had doubts about that, because manifestly this would not be correct. Was it, on the other hand, a Socialist Budget? He thought perhaps it was, but that made it difficult to criticise. Was it an Election bribe? Well, at one time he seemed to be saying that; but he hastily said he thought it was timid and cautious and not going nearly far enough.
§ THE EARL OF LONGFORD
If I may interrupt the noble Viscount, is he quite sure he is talking about my speech? He seems to have it all written down. He is making exactly the speech that more than one of his friends made in the House 1079 of Commons. The words "Election bribe" did not come in on this occasion.
§ VISCOUNT HAILSHAM
Nothing I have said in this sentence has been written down in any shape or form: I was only teasing the noble Earl. But I thought that there was more than an element of this criticism in his speech. Although in his cautious way he did not exactly identify himself with the words "Election bribe", he reported from the City, where he is such a prominent ex-banker, that no one there failed to believe there was a certain correlation between this and other Budgets and the periodicity of our General Elections. My own view is that these criticisms are all self-cancelling, a view which I suspected the noble Earl, Lord Longford, himself took, since in the end he appeared to jettison them all and indulge in a certain amount of humour at the expense of my right honourable friend Mr. Selwyn Lloyd.
He dwelt, as indeed did the noble Lord, Lord Shackleton, on the supposed failure of the Budget of 1962. I thought the noble Lord, Lord Shackleton, went much too far in the same direction, when, as I thought, he seemed to lump the measures of 1961, which quite certainly succeeded in defeating the balance-of-payments trouble that we were in then, with the Budget of 1962. But it is, of course, true, as successive Chancellors of the Exchequer of different Parties have discovered, that long-range economic forecasting, like long-range weather forecasting, is not yet in a scientific stage. I think the noble Lord, Lord Hawke, pointed this out when he said that, whatever may be true or untrue about the forecasts upon which the Budget of 1962 was based, it was an expert forecast shared by, I think, the chairmen of all the central banks in the world.
In that connection I would utter a mild protest, even at this late hour, against the persecution of that eminent and recondite body of men, the Treasury. They are, of course, not a separate power in the community. They are civil servants like any other civil servants, and Ministers must take responsibility for what they do. It is quite wrong to accuse the Treasury of being some kind of Fourth Estate of the Realm who are the legitimate targets for criticism as distinct from their so-called political masters. Still, it is as well 1080 to remember that forecasting in economic events is not at its scietnific stage; it is especially valuable to remember for those who preach the necessities of planning. It is also well to remember that Chancellors, even if they be responsible statesmen, and therefore having to answer for their decisions, have to base their plans and their Budgets upon long-range forecasts, not of their own making but prepared by experts either in the Civil Service or outside it.
Of course, some of the parameters cannot be identified at all; even ex post facto analyses contain the so-called "balancing item" to which the noble Earl, Lord Sandwich, referred, I thought inaccurately; because in this particular case it is a favourable item and not an unfavourable item. But it does mean there are sometimes some hundreds of millions of pounds, and in the last case £100 million, in our balance of payments of which the experts have lost trace altogether; and other variables are equally difficult to assess.
I think the short-range forecasting is by now accurate enough, but before the Finance Bill reaches the House of Lords, usually in July, my experience, which now goes back six years, has been that some of the long-range forecasts of the best experts in the world are beginning to look a little dubious. This gives and can give grounds for unseemly mirth on the part of the political opponents of the particular Chancellor of the day. There have always been tipsters who have backed one of the other horses in the race. I say this with particular reference to the exciting and agreeable speech of the noble Lord, Lord Boothby, from the Cross Benches: what the wise man really seeks to know is whether in any particular case the apparent prescience of the tipster was based on luck or on some more scientific way of assessing evidence.
Whatever may be the cause, it has of course been increasingly apparent in recent years that by one device or another Chancellors may need between Budgets to alter the whole tone of our economy. By last July, it is quite true, as I pointed out at the time, as noble Lords who were there will remember, the Budget was already beginning to show a more reflationary trend than had appeared in April. By November the purchase tax 1081 was cut and the new depreciation and investment allowances were announced. The fact is that the great climacteric of Budget-making, if only because of the importance of Government action in regulating the economy, has declined. The economy needs constant adjustment, and regulation cannot take place only once a year. One may regret this, as I gather the noble Lord, Lord Grantchester, did, since he was convinced that when income tax was raised from 11d. to 1s. in the pound we were on what he described as the beginning of the slippery slope.
I believe that these considerations are worth stating, because I thought that the noble Earl, Lord Longford, was wrong in seeking to discern a difference of philosophy between this year's Budget and the last, or in suggesting that Mr. Lloyd then had the idea that in order to encourage exports it was necessary to sit wholly on home demand. I do not think that was the case. As I pointed out at the time (and the noble Earl, Lord Longford, did quote this), Mr. Lloyd's Budget was based upon the premise that in a period of conflicting portents it would be wise neither to inflate nor to deflate. It was based on the forecast that demand would rise more vigorously than turned out actually to be the case after July, and that our exports would form a part of a world trade far more active than it turned out to be. I think it is fair to say that there was also the uncertainty of the Common Market negotiations. Without going the whole way with the noble Lord, Lord Boothby, I would agree with him entirely when I say that I make no doubt that if these negotiations had turned out better there would have been a surge of confidence and investment in this country, and in other countries, which would have reflected itself in employment figures and in private investment.
Another and more favourable event which has taken place in the course of the last year, and which has made expansionary policies far more easily followed, is that to which the noble Lord, Lord Williamson, referred; the gradual development and the emergence as an instrument of planning and great importance of the National Economic Development Council. Be that as it may, from July onwards it became clear 1082 that some measures of reflation were necessary, and accordingly my right honourable friend has been applying them ever since. It is, I think, fair to say that, so far as I know, Mr. Lloyd, whom I am no longer bound by the conventions of life to support, was quite justified in saying that many of these reflationary measures were left behind by him before he went in July, and that therefore the Chancellor was continuing or carrying out a policy, the earlier part of which Mr. Lloyd had prepared for him.
§ THE EARL OF LONGFORD
My Lords, might I ask the noble Viscount one question? In that case, why was Mr. Lloyd removed? After all, he stands high personally. He is reorganising the Conservative Party. But it was clear that he stood for a different lot of policies. Why was he removed?
§ VISCOUNT HAILSHAM
My Lords, it is not for me to speculate on why Ministers are removed; otherwise, I might be discussing why I was removed.
On the whole, the criticism of my right honourable friend is that he has been over-cautious, although there have been a number of critics (to whom I will refer later) who made the opposite complaint—in effect, of extravagance, whether in preparation for an Election or not. But on the whole, however, I think that the preponderance of complaint has been that Mr. Maudling did not go far enough. I find it something of a surprise that a Budget which provides for a deficit of nearly £700 million overall and nearly £200 million above the line should be described as timid or ridden by the Treasury, or lacking in imagination, as the noble Lord, Lord Boothby, described it. I would respectfully suggest, even to my noble friend Lord Eccles, with whose careful and most informative speech I found myself largely in agreement, that one should remember the reply which was' given by the friends of the first Lord Jellicoe to those who criticised his caution during the First World War; that they should not forget that he was the one man who could sink the entire British Navy and lose the whole war in the course of an afternoon.
What I think is even more strange is that the Budget should be criticised on these grounds by some of the very people 1083 who are the first to ask that we should at last leave behind the policy of "Stop and Go". The price of not using the brake is apt to be that one must be a little cautious in the use of the accelerator. My right honourable friend has, in fact, injected £350 million into the economy by his Budget, on top of his previous injections; and he has, in addition provided himself with the regulator, with freedom for himself to use it in a reflationary direction even during the Long Vacation. On the whole, therefore, my impression—and this was shared by the noble Lord, Lord Shackleton, who said that there was a great degree of acceptance which he did not remember in his experience—is that this Budget has been fairly well received, and deserves to be well received.
It had three main purposes. The first was to inject a sufficient amount of demand into the economy to cause a general upswing without creating inflation. The second was to use the tax reliefs generated by the first in such a way as to make the incomes policy acceptable and possible; and the third was to help the development districts by the new cash terms for assistance under the Local Employment Act and by free depreciation which, although it has been canvassed widely on both sides of Parliament before, is, in fact, a revolutionary departure—particularly revolutionary for a Chancellor who is alleged still to be under the thumb of reactionary and immovable officials—a tax holiday for fixed plant and machinery established in the development districts.
The noble Lord, Lord Shackleton, asked me questions about the development districts. These, of course, are matters which quite legitimately arise, and must sooner or later be publicly discussed. But he is premature in asking me to state the Government's views about what should be done, if anything, and we must, I am afraid, postpone the answer to that question to a later occasion. I do not think he need be unduly complaining about the absence from the provisions of the tax holiday of the distribution industry. I do not think my right honourable friend in any way desired to relegate that industry to something of secondary importance; but I think many of us feel—it may indeed even be true—that if 1084 you get manufacturing industry into an area it will thereupon become profitable and reasonable for investment to take place in the distribution trades, to satisfy the demand which will be generated by manufacturing industry. At least, we certainly hope that this would be the case.
Several critics—the noble Lord, Lord Grantchester, my noble friend Lord Sandwich and my noble friend Lord Boothby—have complained that there has been no more vigorous move towards tax reform this year. To them, I would say this. Tax reform of the kind which certainly the noble Earl, Lord Sandwich envisaged is one of the most expensive operations in the calendar, because an amalgamation of taxes, particularly of surtax and income tax, which is what my noble friend specifically mentioned, could really be done only by an overall reduction, the difficulty arising, of course, in the difference in rates between the so-called unearned element of income and the so-called earned element of income; and the overall reduction is bound to be applied, from the point of view of what noble Lords opposite call social justice, somewhat capriciously to those people who would happen to be worse off if the rationalisation scheme were carried out without reduction.
This year, of course, there has been an overall reduction in taxation. But to apply that sum of money in support of tax reform would, I think, have made it impossible, or at least more difficult, for the Chancellor's principal theme, which was to use the tax reductions as I have explained, in support of his main objectives—the realisation of the N.E.D.C. target of 4 per cent., and to couple these tax reductions with the emergence of an incomes policy. If I may say so, I was a little disappointed that no one praised my right honourable friend for honouring in one year his predecessor's pledge to abolish Schedule A, not only because it was a pledge but because, for various reasons, it will have the added advantage of benefiting the very classes which have had most to complain of about the working of the rating system. For the rest, the Chancellor has chosen to concentrate his tax reductions on the lower income ranges and on the income-tax payer in those ranges, to the exclusion of company income tax. I think it was primarily for this reason that he rejected a reduction of the standard rate.
1085 My noble friend Lord Sandwich pleaded, to me, at any rate, the most moving and persuasive plea, for the professional classes, of which I can honestly claim to be a member. Ordinarily I should have been very willing to listen to this complaint, but in fact it was this year that the surtax payer began to benefit from Mr. Selwyn Lloyd's previous reduction of surtax, and so this year there is a benefit to the professional classes. Other speakers referred to the fact that all the beneficiaries of the income tax reliefs will, of course, be above the minimum level for direct taxation. Well, of course, by definition that is so, but the fact is that the purchase tax which was reduced in November forms part of this whole spectrum of tax reliefs. That applies over the whole range as well. The effect of the tax reliefs granted over the relevant band of the spectrum of incomes is to grant a wage increase of 2 to 2½ per cent. without raising wage rates or prices. I believe that this is both shrewd politics and sound common sense. Quite obviously, the whole policy we are discussing will collapse without an incomes policy, and a measure of this kind will help to make an incomes policy more acceptable. The figure that I have given of 2 to 21½ per cent. over the wage-earner range goes, I think, a little way to meet Lord Sandwich's argument that no one seemed to be getting more than £30.
§ LORD SHACKLETON
My Lords, may I interrupt the noble Viscount? Does he in that calculation take into account the increased National Insurance contributions?
§ VISCOUNT HAILSHAM
I do not think so. I should not like to answer that question with complete assurance. Nor does what I have said take into account—which should be taken into account if the whole picture is to be looked at—the increased social security payment which the increased contribution is designed to effectuate.
I can understand the disappointment of my noble friend and of Lord Boothby who complained that there was no tax on gambling. As I seldom bet and never smoke, I was looking forward to yet another voluntary tax which I should not choose to pay. All the same, one has to recognise the force of my right honourable friend's countervailing arguments. It is easy to exaggerate the amount of money spent on betting. The figures 1086 quoted are not, in a sense, real money like the money spent on drink or tobacco, but the same money rolling round again and again. In this way £1,000 million in the bank can very easily be reduced to something like £10 million injected into it. However, I am quite sure that the Chancellor would like to get his hands on some of this money if he could. Of course, I suppose he does get some money from the bookmakers paying income tax rates and other taxes, which he could never do when they were on the streets spreading corruption to escape detection; so, presumably, there is a new source of income from that money already.
§ LORD STONHAM
My Lords, may I interrupt the noble Viscount for a moment? The Inland Revenue were not in any way concerned how, and from where, bookmakers got their money, and how illegal they were. All they were concerned with was their income, because the street bookmakers used to pay income tax.
§ VISCOUNT HAILSHAM
I thought that the noble Lord was a little less naïve than that. Most of the transactions being in cash, it was relatively easy to avoid paying the full rate of duty which would otherwise have been incurred.
I was a little surprised, but extremely glad, that no noble Lord came forward to complain of the failure of my right honourable friend to abolish fuel oil tax. I know that it is in theory a bad tax, but it has operated effectively to encourage the coal industry at a time when things have not been going too well for it. I myself went down a pit during the course of my wanderings in the North-East, and I must give my own testimony to the admirable morale of an industry which is having to contract quite savagely, of the hard work below ground, the willingness to accept productivity at the expense of jobs, the determination to "make a go" of it in face of the inevitable pit closures. For those reasons I think the Chancellor of the Exchequer had solid grounds for not adding another discouragement, at least this year, to men who deserve so well. In fact, he chose an alternative which cost the Revenue more or less the same sum—the halving of the stamp duty. I feel that on the whole this was a popular choice, and those who criticise 1087 the retention of the fuel oil tax must remember that within the Chancellor's basic Budget judgment they would probably have had to keep the stamp duty at its old level for another year.
I do not think I need spend too much time on the critics who have thought that the Budget is not financially sound because it erred on the side of excessive extravagance. On the whole, apart from the noble Earl, Lord Sandwich, and the noble Lord, Lord Grantchester, who I think sympathised with that point of view, this criticism has been very limited in scope. This was partly due to the fact that the critics must have been greatly disarmed by the words which my right honourable friend used in the Budget speech itself. I do not myself know that I have ever heard a Chancellor put the issue in a more forthright way. I think these words justify the claim of my noble friend Lord Eccles that, in many ways, Mr. Maudling was breaking new ground as a Chancellor by his present Budget. My right honourable friend said [OFFICIAL REPORT, Commons, Vol. 675 (No. 91), col. 471]:Sterling is subject to many influences. As an international currency it is to some extent open to the shifting currents of world trade and payments, and to political developments. But we must always distinguish between the intrinsic strength of sterling, which is what is most important, and temporary movements of confidence. So long as our economy is sound and our position competitive, the intrinsic strength of sterling must be great. We may face short-term fluctuations of one kind or another, but we have substantial resources available to meet them.I should like to echo what has been said by more noble Lords than one, and certainly by Lord Boothby, about the need for increased international liquidity, and although I do not wish to take the praise from Mr. Wilson for what he said in the United States, which I thought was both timely and useful, I should like to register the fact that this has been the view of the Government as well for a considerable period of time.
To return to the complaint that the Chancellor of the Exchequer has been too bold, I come back to the importance of an incomes policy. I think that, but for that, and but for its success, this criticism might well have had more force in it. Indeed my whole theme, both last year and this, has been that a policy of 1088 reflation by itself is not enough and therefore one condition of the success of the Government's policy is the acceptance of this truth not only by the Government but by both sides of industry. I was very glad to hear the explicit assurance of the noble Lord, Lord Williamson, that this was also the view of the Trades Union Congress, and I certainly hope that we shall be able, through N.E.D.C. and other means, to bring this to fruition.
My Lords, the connection between the Budget and the incomes policy is therefore exceedingly close. The Budget is designed to do the Government's part in establishing the conditions for a successful incomes policy, and this it does, first, by giving a considerable stimulus to demand and so promoting the expansion of production. The object is to secure a growth of output broadly in line with the objective set by the National Economic Development Council. The Chancellor made it clear in his speech that if expansion at this rate could be sustained the sights for the rate of increase of incomes could be raised to a 3 to 3½ per cent. level.
Secondly, as I think my noble friend Lord Eccles said, the Budget has helped to create a suitable environment for an incomes policy, by giving the relief from income tax on the broadest possible basis. Everybody who pays income tax benefits from the Budget, and the benefit is proportionately greatest for the taxpayers in the lowest range of incomes. In this way, as my noble friend pointed out, the Budget has broken out of the vicious circle that expansion depends on incomes policy and incomes policy depends on expansion. I feel myself that my right honourable friend has given a lead to the other elements in the economy, whose co-operation is necessary if the programme as a whole is to be successful.
My Lords, at the conclusion of my remarks I feel that I should return to my perpetual theme, that the Budget by itself will not enable the country to emerge from its economic difficulties. As I think several noble Lords have pointed out (and may I, in passing, congratulate the other maiden speaker, the noble Viscount, Lord Younger of Leckie, on a very successful début) the Budget is only one side of a grand design of modernisation which is beginning to take shape before our eyes. The noble Earl, Lord Longford, talked about a Government 1089 which really believes in planning, and the noble Lord, Lord Williamson, also spoke of an absence of planning. My Lords, I have never liked to use the word "planning", because until recently to do so has been to involve oneself in a sterile and often meaningless controversy about semantics. But it is idle to pretend that, in any rational sense of the word, planning does not exist, or that, except in the sense that we on this side of the House do not believe in the rigidity of physical controls, there is any real sense in which we can be said to be hostile to planning.
Just let me refer to the number of plans and the amount of planning which is known to exist. A Hospital Plan exists and has now been published. Whether or not they have been published, plans for schools exist all over the country. Plans exist for roads, and the Road Plan will be co-ordinated with the Railways Plan, which has been published and which will be pursued along its constitutional course. In the autumn, or when he reports, Lord Robbins will give us an opportunity to provide a plan for further education. As one noble Lord reminded us, my noble friend Lord Rochdale has given us a plan for ports. The Committee presided over by Sir Burke Trend is considering a plan for the Government organisation of science. A plan is in course of preparation for the North-East region, and plans will inevitably be required for Scotland, London, the South-East and other parts of the country.
There is certainly a plan, let me reassure the noble Lord, Lord Stonham, for electricity generation, although there again it is a little difficult to forecast ahead what the exact requirement will be in this country, as in this connection the time lag between the commencement of a power station and its commissioning is of the order of five years. Lord Plowden has produced a plan which has revolutionised Government forecasting in financial matters. There will be plans for housing announced from time to time. There are plans for redundancy and industrial training announced by my right honourable friend the Minister of Labour. Arid, of course, last, but by no means least, there is the National Economic Development Council itself, which, as I said before, is a formidable new instrument of planning 1090 on the French model, without which I think industrial planning would really become an impossibility.
Of course there are also vital problems which no amount of planning and no fiscal incentives will by themselves solve. It was to this that I was referring when I ventured to tell the House last year that there is no more dangerous delusion than to imagine that the unemployment in this country will be completely obliterated by monetary and fiscal measures alone. Nothing will prevent the closing down of some obsolescent steel plants. Nothing except sheer political perversity will prevent the closing down of many branch lines and many services and stations on our railways. Nothing will halt the gradual movement from coal to oil in many fields. Nothing will arrest the development of industrialisation in Asian and African countries, sometimes in fields in which we have held in the past a virtual monopoly; and, indeed, we should not wish to see those countries not progress into industrialisation. Automation is on the way in almost all of the industries of the country. All these things are going to spell redundancy and they are going to spell movement from one job to another. As I think the noble Earl, Lord Longford, himself said, these things are not in themselves undesirable or unhealthy signs, although failure to cope with the problems to which they give rise would certainly be a serious failure on our part.
Several noble Lords have talked about exports. I think it is too late this evening for me to embark on this most important subject. I would, however, say that I entirely agree with the thinking of those noble Lords who have said that one wants to expand trade with the Iron Curtain countries. I share the views of the noble Lord, Lord Boothby, in that respect. I think that peace is more likely if there is an interchange of trade than if there is no interchange of trade, although we sometimes find that the Russians, who are very shrewd negotiators, spread stories about the likely amount of business which can be done and the terms on which it can be done, which when one comes to negotiate with them prove to have no reality at all.
I have taken the point of the noble Lord, Lord Stonham, and others about 1091 credit. Again I think I could not discuss that in detail this evening. The fact is that there must be a commercial judgment about viability of credit and of terms of credit in any given case. There is no virtue, in the long run, from the point of view of our balance of payments, and only a temporary advantage from the point of view of employment, in giving unrequited exports. Therefore one has to relate the terms of credit one offers to the creditworthiness of the customer and to the extent to which he is already a customer on a long term.
On the question of public service investment, I largely agreed with my noble friend Lord Eccles, but with this gloss which I should like to put upon what he said. I think my right honourable friend has fully seized himself of this point. Public service investment has been rising very fast, and this year, as a result of his measures partly designed to deal with the unemployment problem and partly to deal with the inherent necessities of the case, it will be increased by something of the order of 10 per cent. I could give more detailed figures.
My noble friend Lord Hawke asked me about the construction industries. We are increasing the capacity of those industries as fast as we can. But I agree with him that there is a serious danger, especially in some areas in the country, that the limiting factor upon our public investment will not be capital but will be a shortage of skilled manpower. We shall then be faced, unless we improve our training facilities, with the intolerable paradox of a shortage of skilled labour and unemployment coexisting at the same time.
My Lords, I am grateful to noble Lords for the courteous way in which this Budget has been received, and I apologise for the length of this answer. I also apologise to any noble Lords who may have stayed to listen and whom I have not answered in detail. I think it has been a most valuable debate for us all, and I have myself greatly enjoyed it.
§ 9.1 p.m.
§ THE EARL OF LONGFORD
My Lords, the main arguments from this side of the House have been very well pre- 1092 sented by my noble friends Lord Shackleton, Lord Stonham and Lord Walston, and by Lord Williamson, to whom I am particularly grateful because he came into this debate at my suggestion. We have had other very interesting speeches from, to mention only some of those who are here now, Lord Perth, Lord Grantchester, Lord Reading and Lord Hawke—and I was going to add Lord Eccles, but I am not sure in what sense he is here now. He introduced a pleasant touch of ruthlessness into the debate, and he bids fair to become the James Bond of the Upper House. Then we listened, as usual, in a fascinated way, to Lord Boothby. We have also heard the two maiden speeches which have been rightly so highly praised; and perhaps I could make a point which may not have occurred to noble Lords. Too often in recent years people who have come to the House of Lords have found it rather different from what they expected. They find all sorts of people here now—scientists, provincial professors, and professional men of one sort or another—and I think to see a real Lord in the old sense would be quite a fillip to them. In future when they come to this House I think they will find in Lord Sandwich the kind of gentleman they expected to see when they obtained tickets. And if they hear that his new colleague is a retired brewer, I think they will feel that this also is in the same way of thought.
I am very grateful to all those who have taken part. I am most grateful to the Ministers, who have taken immense trouble. I do not know which Minister I am most grateful to, but the noble Earl, Lord Dundee, referred to my speech as "objective", which to me was the same kind of bewildering compliment (to use a phrase derived from the noble Earl) as when he found himself called by me "nimble-witted". I feel that this was a very just return, and I am grateful to him for his speech. The noble Viscount had a task which was clearly going to exercise his debating gifts. He had the past, the present and the future to deal with: an indefensible past—and, to do him justice, he did not spend very long on defending it—but an eminently defensible present in the sense of a Budget which has met with a great deal of goodwill; and, if I may say so, he handled that, as one would expect, with maximum ability.
1093 As regards the future, there, as he so rightly pointed out, we are all in the dark, but I was a little disquieted by one or two phrases which dropped from him. He implied that there really had been no change of emphasis at all in the Government this year, as compared with last. There I rather blame myself. I think I forced him, from a debating point of view, to take some such line as that, and I therefore do not want to take it too tragically. I feel myself that Mr. Maudling and his colleagues have, in this Budget, struck a new note, and I certainly do not want to muffle it before this debate ends. We go away from this House all satisfied, I think, that there is a great possibility in this new approach to planning, Whether it is to be carried out in the way we hope, and who will carry it out, remains to be seen; but I am very grateful to all who have taken part, and I beg leave to withdraw my Motion.
§ Motion for Papers, by leave, withdrawn.