ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH

HL Deb 05 November 1964 vol 261 cc138-214

3.12 p.m.

Debate resumed (according to Order) on the Motion moved on Tuesday last by Baroness Wootton of Abinger—namely, That an humble Address be presented to Her Majesty as follows:

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

THE EARL OF DUNDEE

My Lords, may I begin by congratulating the two Ministers who are to speak from the ministerial Bench for the first time in this House, although both of them have been in office before in another place? The noble Lord, Lord Champion, has been with us in this House now for two years. He very quickly gained the regard of all of us by the forceful common sense with which he always speaks, both on industrial and on other matters. The noble Lord, Lord Rhodes, who has been appointed now to the same Ministry as he held in 1951, took his seat only a week ago. We are all looking forward very much to hearing his maiden speech presently.

In another place, Lord Rhodes was universally liked for many reasons, and I am told that the principal one was that he has a remarkably independent mind and originality of expression, which always delight his audience even if they sometimes embarrass his friends. If the noble Lord wants to say anything unorthodox in your Lordships' House, I think he will probably find his colleagues more lenient than they may have been elsewhere, and he will certainly receive every encouragement from the Opposition. To both noble Lords we wish a very happy, though not interminable, period of office.

Economic affairs, I believe, are supposed to be the main subject of our debate this afternoon, but the debate on the Address is not a suitable occasion for detailed discussion, and I will try to give only a bare summary, first of those proposals contained in the gracious Speech on which the Opposition may hope to co-operate with the Government and to help the Government in carrying out their policy, and then of those other proposals in the gracious Speech on which our hopes of being able to support the Government are less bright or, perhaps even invisible.

I am glad that the gracious Speech refers to housing, and I should particularly like to begin by congratulating the Labour Party on having at last caught up with Conservative housing targets. Whether their performance will be equal to ours, of course, is a different question. In 1951 we were told by them that our target of 300,000 houses a year was a dishonest illusion, invented to gain votes. In 1957, long after we had achieved that target, Mr. Harold Wilson told us that we ought never to have done any such thing and that we were spending too much of our national resources on housing and too little on building factories. This year the output of houses has risen to 370,000; and if nothing happens to disturb it, it will be 400,000 next year. We are glad that the Party opposite and the new Government have accepted this target and we will do our best to help them, to support them and protect them against any untoward events which might prevent the target from being attained, as, for example, the introduction of some type of urban land legislation which has always proved in the past to prevent the building of any houses at all.

My Lords, there is also a good deal in the gracious Speech about pensions. We are promised radical changes in national schemes of social security to bring them into line with modern needs. There is a great difference, I think, between the situation now and at the time of the last Election in 1959. At that time the bare bones of Mr. Richard Crossman's pensions scheme were almost indecently and continually exposed to the electors, who did not vote for it. Since 1959 the successive increases which have been achieved by the Conservative Government have put the old age pensioners and other recipients of National Insurance benefits in a far better position than they would have been under Mr. Crossman's scheme.

This time, my Lords, the Party opposite have indicated that a number of interesting things will be done about pensions, but the machinery and the scale of their proposals have been shrouded in mystery. We all eagerly await the lifting of the veil, which I am sure will happen soon, because I think somebody must have a scheme ready; and anyone who looks at the present Government on the overcrowded Ministerial Benches in another place and on the less thickly populated Benches here can easily see that they are all poised for immediate action. We shall look forward, therefore, to the lifting of the veil on their pensions policy with eager curiosity, and, for some of your Lordships I am sure with keen personal anticipation. I have still a few more sad years of penury before I shall become entitled to an old age pension but by that time perhaps (who knows?) the earnings rule may have been abolished, there may have been a change of Government, and we may all enjoy an affluent old age.

My Lords, I think perhaps the principal part of the gracious Speech which will be welcomed and not much criticised by the great majority of your Lordships is the passage which says: My Government will call on trade unions and employers' organisations to co-operate in eliminating those restrictive practices, on both sides of industry, which impair our competitive power and the development of the full potential of the economy. They will take steps to improve industrial efficiency by dealing more effectively with monopolies and with problems arising from mergers. And then the passage: … My Ministers will work for more stable prices and a closer relationship between the increase in productivity and the growth of incomes in all their forms;". All these things hang together; they are all part of an endeavour to prevent prices from rising to such an extent that they will impair our competitive power in the export markets of the world.

I think the Government ought to be grateful to our Party for having dealt in the last Parliament with the thorny problem of resale price maintenance, which is all part of this campaign. A great many of our supporters, both here and in another place, took the view that we ought to have introduced the Resale Prices Bill and the Bill which was being prepared to deal with monopolies and mergers simultaneously, so that everybody might be able to see the whole policy in its right perspective. But now there is only monopolies and mergers left.

The main problems are the restrictive practices arid the incomes policy, and we all agree that solutions to these problems are prime necessities for the future of our economy. Of the bodies which we had set up to try to help us in solving these problems by voluntary agreement, the National Economic Development Council is, I am very glad to say, supported by the trade unions, and I am also glad to see that Mr. George Brown yesterday indicated that the present Government were going to continue to use it. With regard to the other body, the National Incomes Commission, I have always regretted that the trade unions would not agree to serve on this body or co-operate with it. I think that was a great mistake.

The reason usually given for this failure to co-operate is that there is said to be no confidence in the willingness of the National Incomes Commission to deal with other increases in incomes apart from wages. But that is really not so, because the instrument which sets up the National Incomes Commission says: The Commission's required to have regard to the Government's pledge that if any undue growth in the aggregate of profits should result from restraint in earned incomes, that growth would itself be restrained by fiscal or other appropriate means, and the Commission is instructed to report from time to time on the need for any such action. I see Mr. George Brown has referred to some other body called, I think, a Price Review Council, or something of that kind. I do not think it matters to us what name is given to the machinery so long as its object is properly carried out. We must all try to achieve the establishment by persuasion and agreement of an incomes policy.

I suppose it has been the greatest handicap to the growth of our economy since the war that at wages and other incomes have risen faster than productivity. We have been paying ourselves a little too much every year in increased wages or salaries. One can only guess: I should say that the difference between the increases in money wages which have been given and those which ought to have been given may perhaps be only marginal. It may be that if every increase in income since the war had been only 10 per cent. less than it was, then by now the people of this country might be enjoying a 20 per cent. higher standard of living than they do, and in addition they might be able to give far more help than they do to underdeveloped countries. What has happened in general is that this excessive rise in incomes in relation to productivity has not prevented a vast increase, an unprecedented increase, in our prosperity, in the growth of our economy, in the standard of living; but it has prevented us from giving as much to the underdeveloped parts of our Commonwealth as has been given, for example, by France. It has also meant that our reserves have been rather too low for confidence, and that has generally weakened the force of our foreign policy and our influence in the world.

We shall be glad to support the Government in any effective measures which they take to bring about the establishment of an incomes policy. We realise that this will mean restraint on other incomes besides wages, and I am sure the Government, on their part, will realise that it would do no good if the changes in the structure of taxation which are envisaged were to be of such a kind as to discourage the vast flow of private investment, which has increased twenty times over in the last 13 years, and without which we could not have enjoyed an increase in our economic growth and standards of living greater than has been enjoyed in the previous 50 years. So much for long-term policy.

On the Government's emergency measures which they have taken to deal with the balance of payments a certain amount was said yesterday, and we may not perhaps have very much to add to-day. I think that when a responsible Government tell us that our balance of payments is dangerously adverse, and that in their view emergency measures must be taken to correct the situation, we ought at least to refrain from opposing them until we are fully acquainted with all the facts that have led them to that decision. We ought to begin at least by giving them the benefit of the doubt, and we ought to be disposed to support them in doing whatever is necessary for the good of the country.

I must confess that my own previous disposition to help the Government in this matter has been very nearly eliminated altogether by the outrageously fictitious and unfair accusation the day before yesterday by the Prime Minister, repeated again yesterday by Mr. George Brown, that the late Government, and particularly Mr. Maudling, had deliberately concealed the facts of our economic situation from the country for electoral reasons. If there is any statesman, if there has ever been any statesman, who has leaned over backwards to put the whole of the economic facts plainly and repeatedly before the country, it is Mr. Maudling.

When he introduced his last Budget, his 1964 Budget, he told us that he expected that there would be a large adverse balance of payments which would grow towards the end of the year, for several reasons. One was restocking: another was the abnormal extent of foreign investment which was taking place on such matters as the big Shell investment in Italy. Every quarter the figures were published. Nothing was concealed. Every month the trading figures were published, commented on openly and candidly by the Chancellor of the Exchequer, as he then was, both before and during the Election. And it was only a few days before polling day that he publicly commented on the most recent months export figures, which he admitted were in themselves disappointing. We have all learned not to set too much store by any one month's figures.

I can think of no more inexcusable and unfounded accusation than that put forward by the head of the new Government, suggesting that Mr. Maudling, of all people, who has been most continuously frank, had concealed the facts for electoral purposes. One is tempted to make the obvious rejoinder, which I think may quite possibly be true, and to say that it is the Prime Minister who is deliberately exaggerating the balance-of-payments position in order that, later on. he may be able to pose as the man who has delivered the country from an economic crisis which never existed.

EARL ALEXANDER OF HILLSBOROUGH

Nonsense!

THE EARL OF DUNDEE

However, I think we must await all the evidence before we form our judgment. I can only record now my strong adverse reaction to these utterly unjustified accusations, and at least express the probable opinion that it is the Prime Minister, and not Mr. Maudling, who is seeking to deceive the country.

The measures which have been taken are such that if they are shown to be justified they ought not to be resisted by an Opposition. I should say that the 15 per cent, temporary surcharge, if the data are as they are given to us by the Government, might be the best method of dealing with the situation, and therefore I do not wish to condemn the Government for choosing this particular means of trying to correct our balance-of-payments position. I think that we have to wait until we know the whole facts before forming a judgment.

I would remind your Lordships that the Government's White Paper on The Economic Situation tells us several things. One is that there was ample support for sterling in the facilities available to us; and then that there was no undue pressure on the resources of industry calling for action. That means there was no immediate crisis. It is true that the White Paper says that although there was ample support for sterling we cannot rely on those facilities indefinitely. But could not the Government have relied upon them for a week or two, or for a few days, in order to give notice to our friends and partners in the Commonwealth, before they imposed these duties which were learned, I understand, by EFTA and the Commonwealth Governments from the newspapers?

The noble Lord, Lord Walston, who wound up for the Government last night, said that if we had entered into lengthy consultations about this with EFTA or with the Commonwealth it would have leaked out. People would have got to know what was happening and there might have been a flood of imports in order to forestall the remedial action.

But would it not have been possible for our Ambassadors in the Scandinavian countries, in Berne, in Vienna and in Lisbon to be asked to inform the Governments of our EFTA partners confidentially of what vie thought we should probably be compelled to do? Could not our High Commissioners in the Commonwealth countries have been asked to do the same thing? It would not have taken many days to do that. And, surely, even if there had been a leak, which I rather doubt, there would not have been time for any serious flood of imports to forestall the effect of the Government's action; and I am bound to say that the precipitancy of this imposition is one which was not justified by the real economic situation as revealed in this White Paper.

Another thing on which I am most anxious to discover the Government's policy is their intentions in regard to steel. Perhaps some of my noble friends may know more about it than I do, because I think I have been rather unlucky in my attempts to get information. When the Election began I tried to get a copy of the Labour Party Manifesto. I could not get one. There was not one at any stationer's, and I could not get one at Transport House; they did not have a copy there. They were all sold out and it appeared to be out of print. It was only yesterday that I got a copy from your Lordships' Library. It is the only one in existence, apparently, and I have to return it as soon as I can.

The Manifesto contains something like 10,000 words, but it has only eleven words about steel; namely, Private monopoly in steel will be replaced by public ownership and control. During the Election I was unable to discover much about this. I am sure that there must have been a few Labour candidates in some parts of the country—perhaps in Wales Dr the North-East of England—who mentioned the matter in their Election address and in their speeches. But in all the constituencies where I went and where I spoke, over a period of two or three weeks, not one single Labour candidate mentioned steel in his Election address or in the speeches which he made to the electors. I wonder why that was so. Can it have been that a large number of Labour candidates are perfectly aware that the policy of nationalising steel is not only thoroughly unwise but deeply unpopular; that few people are likely to vote for anyone who advocates it, and that it has been put into the programme of the Party only in order to retain and appease the Left Wing, who might revolt if it was left out?

When Parliament met I thought that perhaps the gracious Speech might add something a little more enlightening, but I am afraid that I cannot say that the reference to steel in the gracious Speech is any more clear than that in the Labour Party Manifesto. What the gracious Speech says is: My Government will initiate early action to re-establish the necessary public ownership and control of the iron and steel industry. Is that simply a clumsy and inelegant way of saying "My Government will introduce a Bill to nationalise the steel industry", or does it mean what it seems to be trying to say; that "My Government will initiate some action other than legislation to re-establish the public ownership and control of the steel industry"? And when the word "necessary" is brought in, does that mean that complete public ownership and complete control is necessary? Or does it mean that only some public ownership and some control is necessary, and that the Government will not initiate early action to re-establish the unnecessary public ownership and control of the iron and steel industry?

We are often told by the Party opposite that we are late converts to the idea of industrial planning. This is not true. We have been planning ever since I have been in politics, and certainly it is as long ago as 1953 that we set up the Iron and Steel Board, which in my view is a good planning authority. It has power to fix maximum prices; it has power to recommend the President of the Board of Trade to approve or to disapprove of any improvement schemes and extensions in the steel industry costing over £100,000, and it also has power to recommend other extensions which are not being made but which the Board thinks ought to be undertaken. In my submission, that is all the control which is really necessary in the public interest.

Since the Board was set up very large sums—I think—1,500 million—have been spent on improvement in the steel industry; output has nearly doubled. As for prices, the Eleventh Report of the European Coal and Steel Community states that British steel prices on the Continent are lower than any of theirs. Prices have gone up since the war by only 35 per cent., I think, while wages have gone up by 58 per cent. This industry is an industry whose nationalisation would not be the same kind of thing as the nationalisation of coal, or gas or electricity, where the Government-owned industry would have a virtual monopoly of the home market. Steel is an industry which is fundamental to our exports. Its own direct exports are worth £200 million a year, and it provides components for more than half of all our exports to the whole of the world.

What is going to be the result on our export trade if this industry is managed by the stifling hand of bureaucracy? We have to maintain our export drive against increasingly severe competition from other steel-producing countries, Germany, France, the United States, Japan—none of which is a Socialist country, and all of which are keenly competitive. In my view if we are going to commit this folly of nationalising steel, the result will be that our export trade will decline. All the efforts of the Government in giving tax inducements to our export industry will be "chicken feed" in comparison with the immense losses which will be suffered if the competitive power of the steel industry is lowered by nationalisation. In my view, the consequence of that will be that we shall have, not a temporary balance-of-payments crisis requiring temporary remedial measures, but a permanent one, the results of which will be a permanent retrogression in our economic progress and in our standard of life.

My Lords, I hope profoundly that the Government will not commit this folly, and I hope that the country will prosper under their administration. If I may presume to offer them one humble word of warning, it is: beware of professional economists. They are often very intelligent people, but you have to take their advice with caution. The Government have appointed two very notable economists to advise the Prime Minister and the Ministry of Economic Planning about their policy. One of them is a Fellow of my own college, Balliol, at Oxford; the other one comes from Cambridge. I hope that the Government will be very careful. These economists have already had experience of advising Governments about what they ought to do.

LORD BOOTHBY

They have all had revolutions!

THE EARL OF DUNDEE

One of them not long ago advised Dr. Jagan what ought to be done to restore the economic situation in British Guiana. It was a wonderful plan, beautifully worked out and very intelligently prepared. Dr. Jagan applied it, and the immediate result was an armed revolution, in which Dr. Jagan had to appeal to Great Britain to send him an infantry regiment to maintain order. It was rather unfortunate, from his point of view, because he had just been telling the United Nations that the only reason British Guiana was being denied independence was that it was held down by British bayonets. He himself had to call in the British bayonets in order to protect him from the fatal consequences of economic professional advice. And I am afraid that British Guiana is not yet independent, although we all long that it should be.

I do not think that the same sort of thing would happen in this country, at least not to quite the same extent. I do not think that we should have an armed revolution. The worst that could happen probably would be a strong, what might perhaps be called "Freedom from Hungary" movement among the electors, which very soon would sweep the Government from office. But so long as the Government remain in office I hope that our opposition will be fair. We shall do our best to see that our criticism will not be factious, our advice will be sincere, and I think I can also promise that our personal good will towards Her Majesty's Ministers will be genuine.

3.48 p.m.

THE PARLIAMENTARY SECRETARY, BOARD OF TRADE (LORD RHODES)

My Lords, I am nervous, but nothing like as nervous as I was before the noble Earl made such kind comments welcoming me to this House. I do appreciate it. I hope my nervousness will be matched by my modesty. It is not the first time I have spoken in this House, for I made my maiden speech to the House of Commons from the seat here which is now occupied by the noble Lord, Lord MacAndrew, an old friend of mine. I began my maiden speech and the clock seemed to hold my attention, so much so that it became to me as big as Big Ben, and consequently I never heard anything of the speech at all. But when I read it the following day, I thought that it was about the worst that I had ever read.

I should like to answer quite briefly one or two of the points raised by the noble Earl, Lord Dundee. May I say that the reluctance of the unions to join N.I.C. was only matched by the reluctance of the employers to agree on a profits policy? With regard to not being able to get a copy of the Manifesto, may I say that I am not surprised because it was so popular we had not enough co pies for ourselves. I am sure that if we had had a few more we should have got a few more seats. Another point relates to what the noble Earl said in praise of the Iron and Steel Board and their having the power to fix maximum prices. That is precisely what we object to—the fixing of maximum prices.

In a discussion of the economic situation it is often nearly as difficult to agree on what has been happening as upon what is going to happen next. When I reflect on my early struggles in business in those deflationary years of the 'twenties and 'thirties I am certain that both the politicians and the economists did not understand the true significance of growth. And I am certain that the weaknesses in the policies carried out in those days were not deliberately planned, but occurred because we did net know any better. In this Americanised, Keynesian, westernised version of the economy, there are plenty of things that we do not understand yet. But I am perfectly certain that the present Government understand them a good deal better than the late Government.

Now I will turn to the current situation, as I see it. In the past year we have seen, first, a rapid rise in output and activity, and then a distinct slackening off. Private investment has begun to rise rapidly through the boost of the last two Budgets, of investment allowances and the like. Investment continues to rise in the public sector, but there has been a levelling off in consumer expenditure and also in stock building since the rapid rise at the turn of the year. Exports have failed to keep pace. They have lost the momentum which they had early in the year. Imports have risen to a very high level, although the rate of increase has fallen off in recent months. The sum of all these movements is reflected in the latest official statistics: very little rise in total national output between the first and second quarters of this year, and no rise at all in industrial production since February. These are facts.

I have a friend who is a gamekeeper whom I see on occasion. I saw him in 1961 when he said to me, "Look, I can tell as soon as Selwyn Lloyd when there is going to be a credit squeeze." Noble Lords opposite will recognise, I am perfectly certain, and will be familiar with, the ability of a gamekeeper to observe things properly. He said. "When I see on the road which goes over my moor a bus going that way with weavers, and a bus going in the opposite direction with weavers, it is time that there was a credit squeeze, because they are both pinching labour, one from the other." And so it happened. I went up to consult the oracle on the hill just after the Budget. He said, "There is something funny this year. They are not having a credit squeeze and the signs and symptoms are there."

So where do we really stand? The economy, really, is back where it was in 1961. A vast balance-of-payments deficit of between—700 million and—800 million is here this year and another, though smaller, deficit is expected next year. The increase in production is coming to an end because of the inadequacy of our industrial capacity. The warning signs have been flashing for many months. In June the official report on Economic Trends showed that our trade balance on current account had moved into serious deficit in the early part of this year. In August the Board of Trade's published analysis showed that our exports of manufactures had been falling back since the beginning of the year, while imports had continued to rise.

I say quite definitely—and I apologise here if I may have to be insistent, even although this is a maiden speech—that the previous Government took no steps whatever to remedy the deteriorating position. The gamekeeper was right.

There was need for caution; there was need for action; but nothing was being done. Their Ministers continued to proclaim that the economy was basically right. We know perfectly well that all through the Election campaign this theme was running: "Yes, everything is all right. It is not patriotic on the part of the Labour Party to refer to the fact that the economy might be going wrong. Do you not see that you will be tipping off the people abroad to take their money out?" Well, it never happened. They were not frightened of a Labour Government this time.

The previous Government procrastinated, and many of us can guess what sort of remedies they would eventually have adopted when circumstances forced them to. There would have been "Stop—Go" on the pattern of 1957 and 1961; another attack on the living standards of the more defenceless members of our community; and another setback to our hopes for modernisation through increased industrial investment. Yes, indeed, my Lords, the last Government were culpable for this lack of action, and they must accept one of the two premises that I put up. Either they were deliberately misleading, or they were incompetent. I would not like to levy the charge that they were deliberately misleading, so it must surely be the other. The deficit is here staring us in the face, and we had to do something about it and at once. There was no question about waiting or hoping or consulting, however desirable some of those courses may have been. We had to take action. There was a sense of urgency, with a sense of getting our priorities right and with a strong sense of social justice. Noble Lords will be familiar with the steps already announced, and I will not bore the House by going through them, but it may be that other measures yet to be formulated will have to be introduced.

What emerges clearly from all this is that there is no reason why the pace of production should falter. We are a wealthy nation; our people rightly want more and more of the goods and services that go with a high and rising standard of living. The programmes in the public sector will continue to expand. The markets of the world are there and, with the necessary determination, we can sell to them. So industry, board room and shop floor alike, can have confidence in its prospects, and has every incentive to press ahead with the investment necessary to modernise. We have suffered from "Stop—Go" policies now for thirteen years. We all know. The previous Government made it impossible for businessmen to plan ahead for steady and soundly-based economic growth. One of this Government's aims will be to secure closer working relationships with industry, so that the harmful uncertainties of things of this kind can be avoided.

The Government intend to take the nation really into their confidence about their plans for economic growth. Central and regional plans for economic development will be prepared and discussed with industry and commerce, who will have a crucial role in achieving their success. The new Department of Economic Affairs will widen and deepen the work on a long-term national economic plan, formerly undertaken by the National Economic Development Office. All aspects of policy will be geared to the elimination of the obstacles to growth which this planning reveals. Regional plans will take their place in a coherent national framework. They will reflect regional needs and experience, and regional and national planning will each reinforce the other. The new measures affecting office building in the congested South-East of England are an indication that we mean business on this.

We do not believe that all this planning should be done solely from Whitehall. The National Economic Development Council will continue to be an effective forum in which the Government's national plans can be discussed with industry at the formative stages. In the regions, advisory councils representing the main aspects of industrial, commercial and civic life will be set up to work with the Government's regional planning boards.

I want to make one particular point which, among others, is worth stressing. On taking, office the Government found that the public expenditure programmes they are already committed to—and I quote— fully absorb for years ahead the future growth of revenue at present rates of taxation that is, even assuming a 4 per cent. growth rate. Now none of us likes taxation—not businessmen or anybody else. It may be needed to redistribute wealth, but it certainly does not create wealth, and, beyond a certain point, may reduce industry's ability to sustain wealth. So businessmen can take heart from the Government's declared intention to reduce public expenditure on activities which yield little social or economic benefit, and generally to cut out waste. They might also take heart from the thought that, since many major public programmes which are of economic and social importance will nevertheless have to go forward or even he expanded, the way to make the tax burden more easy to bear is really to set about increasing the country's real wealth by more modernisation and efficiency.

My Lords, if this means higher profits for business, so what? My right honourable friend the President of the Board of Trade has already made it clear that the Government have no bias against private industry or against their making profits, provided that those profits are earned by efficiency and not gained by restrictive practices or monopolistic abuses. Here I should like to quote from the yearly report of one of our big public companies which has a very strict sense of its duty to the public. When it is talking about profits and profitability, it says: In this context, profitability has a rather wide meaning. It means not just increased dividends for the shareholders but better value for the consumer, better real wages and conditions for the employee and better opportunities for our suppliers". But, of course, it is vital to work towards an effective incomes policy which relates increases in income of all kinds to increases in productivity. Let there be no doubt about the importance that the Government attach to this. But it must be a co-operative effort between Government, workers and employers, and unless it can appeal to our national sense of fairness, of matching give-and-take on all sides, it cannot succeed. Prices as well as wages and salaries need to be taken into account here, and the setting up of a price review body is an example of our determination to tackle these problems on a broad front. The Government are now beginning a series of discussions, as noble Lords will know from the announcement yesterday, with the trade unions and employers' organisations to hammer out a fair and practical approach to these matters. I cannot believe that responsible people in this mature country will turn their backs on the national interest that is involved here.

It will be consistent with such a policy if the economic climate we intend to establish makes it easier for the go-ahead and competitive business to earn higher profits, because they are the touchstone of efficiency. Profits are now popular all over the world. I was in Russia last year and visited the 22nd Congress Iron and Steel Works, which has 20,000 workers. A noted Communist was the managing director, and as we went through the first shop I said, "Why is it that these men are working so well?" He said, "Well, Liebermann has come on the scene and we are now making profits. We are assessed at 22 per cent. profit". I asked him on what that was, whether it was on capital employed or turnover, and he said, "Capital employed; and we get 6 per cent. of it for welfare". That did not satisfy me, so I said, "But that doesn't answer it". "No", he said, "but if we make an extra profit over the 22 per cent. we are scheduled, we get 80 per cent. of it shared between the management and workers".

That explained it to me. and at the lunch afterwards, when they asked me to speak, I said I had seen the Daily Worker that morning. They must have put it on the table in the bedroom for a certain purpose I suppose to do a bit of brain-washing—but in it there was a diatribe against profits in the United Kingdom. I had it in my pocket, and I pulled it out and said: "This is strange; I am very bewildered, because you are talking about profits here, and how you are going on with them, and yet the Daily Worker says that at home they are evil." So I proposed a toast to high profits, at which all the Russians fell off their chairs. My colleagues told me, "We must tell the Labour Party when we get back that you proposed a toast to high profits." At that moment the Russians asked me to propose another, so I did. I said, "Here's to where the profits go". That suited the Russians—and I suppose it was about the most popular speech I made in Russia. But that is the case. It is where the profits go, how they are ploughed back, what they are used for, that is the touchstone. That is the sense that we want to inculcate.

Here a word of warning, and on this I mean to he serious. To help to remedy the immediate balance of payments problem the Government have had to impose charges on many imports. Businessmen would be very ill-advised to regard this as giving them an easy living on the home market. These charges are only temporary, and industry would receive a very rude awakening if they acted as though these measures gave them the chance to ease up a bit, to make easier profits, to pay less regard to costs or to postpone plans for greater efficiency. That is important. Also, the Government have announced that they will take steps to improve industrial efficiency by dealing more effectively with monopolies and with problems arising from mergers. The Government will call on trade unions and employers' organisations to cooperate in eliminating those restrictive practices on both sides of industry which impair our competitive power and the development of the full potential of the economy. I do not doubt that such progress will involve important changes in our industrial structure. We must continue to adapt if we are to keep our place in the world.

To take advantage of the most rapidly growing markets for our export trade we must look for rapid growth in the modern, science-based types of industry—electronics, chemicals and advanced engineering products. Examples which spring to my mind are nylon, terylene, polythene, silicones, continuous casting, hot-strip rolling, float glass and so on—one could go on for a long time. We have got them: let us give encouragement to the growth industries. Here we must be in the forefront of world developments and ensure that key industries are quick to adapt and invest on the necessary scale to keep abreast with the times. In other sectors of industry, where the flow of world trade is not increasing on the scale that it is in these growth industries that I have mentioned, the demand may not be quite the same; but even here we must fight to maintain our position in world trade. Modernisation of equipment and the introduction of more efficient production techniques will be vital.

There may be some industries which will face a declining market, in view of the growth of secondary manufacture in the less-developed areas. We must expect these countries to continue to industrialise and to make for themselves, and to seek export markets for those types of manufactured goods which it is easy for them to start on in their progress towards full economic development. We cannot hold back this progress, which is inevitable, and it would be against our own interests if we managed it.

Those are the big considerations of the future. The real remedy in such cases, which the Government intend to pursue vigorously under their distribution of industry policies, is to encourage new industries with good prospects for growth to move into any area where employment prospects may be threatened by this type of manufacturing development overseas. These are all big topics, involving big tasks for all of us. The major objective must be to improve our balance of trade so that we can go ahead and achieve this country's full potential for creating greater wealth for its citizens without perpetual difficulties in our international payments. Exhortation is not enough. This Government intend to take action. The measures we have already announced in the White Paper are the first essential step.

My Lords, before I sit down, I want to say just a few words on the 15 per cent. surcharge. We recognise that the import charge of 15 per cent. creates some difficulties, and these are obvious to anybody. Of course there are difficulties, both for the industries here which have to rely on imported goods for some of their purposes, and for our trading partners throughout the world. We are all conscious of this. It was, however, absolutely necessary to move quickly, and an import charge was the only way to do it. To achieve the desired saving in imports, it had to be imposed over the widest possible range of goods outside the foodstuffs and raw material fields; and, to avoid the dangers and unfairness of substitution as between one product and another, or as between one supplying country and another, it had to be applied at a uniform rate on goods coming into the country from all sources.

We believe that this surcharge will, in practice, be simpler and fairer to importers and to overseas suppliers than any arbitrary system of import licensing could hope to be, with all the elaborate set-up of personnel which it would involve and the delay that would have taken place. We had to do it and we are prepared to stand by it. Above all, it is our intention to reduce the charge as soon as the balance of payments permits. And I want to accentuate here the fact that this is not a protective tariff; this is a surcharge on a temporary basis, and we hope that it will not be for long.

Finally, my Lords—and I say this deliberately—this Government intend to to work through deeds and not words. What we want to see is economic progress for all our people. That is our goal. Greater efficiency is the road we are going to take; change is our ally, and effective partnership with industry at all levels will be our method. The country needs a sense of dedication, and through this Government I believe it is going to get it.

4.15 p.m.

VISCOUNT AMORY

My Lords, it is a great pleasure to me to find myself following the speech of my friend of many years' standing, now Lord Rhodes. Lord Rhodes has great experience in industry; he has a dry sense of humour and a robust spirit in attack and defence. In some ways, I think the notice that noble Lords will remember is written above the cage of an animal in the Paris Zoo would apply to the noble Lord, Lord Rhodes: This animal is very wicked; when attacked he defends himself. That notice is, of course, in French; but I did not repeat it in that language for fear that my French would not have been understood. The noble Lord, Lord Rhodes, remembered his maiden speech in this Chamber when it was used by Members of another place. I remember mine, too. I made it from the place immediately behind that now occupied by the noble Lord, Lord Champion, and it was such a poor speech that I could not bring myself to read it the next day. But if noble Lords detected very faint notes of controversy in the speech to which we have just listened, I think it may well be that it will be the least controversial speech we shall hear from the noble Lord. But I am sure, from the sample we have heard, that noble Lords are going to enjoy the noble Lord, Lord Rhodes, as a Member of this House.

My Lords, I wish to dispel your fears on one point. I have no intention of dilating on all the economic implications of the proposals in the gracious Speech. This would be an intolerable ordeal to inflict on your Lordships. I wish at the start to apologise to the noble Lord, Lord Champion, because another engagement which I will explain to him will make it impossible for me to hear his reply; but I promise to read it. I am going to confine my remarks to two aspects of the economic proposals in the gracious Speech. First, I should like to say a word or two about the general aim, and, secondly, to refer to two of the specific measures so far proposed. The broad aim I understand to be to ensure that the economic resources of the nation are fully employed. That is an aim with which we shall all agree. It would be the aim whichever Government had been in office at the present time. It is right, too, that we should do our best to see that these resources are progressively more efficiently and effectively employed. All our future hopes depend on that. But all our post-war experiences show that success depends on not overloading our existing resources with an excess of demand.

About the past, my Lords, I will only say this: ever since the war each Government of the day has tried to do its best to reconcile the attainment of four objectives simultaneously. These, I think, are well understood: to achieve full employment, or to do so as near as possible; to get a stable price level; to have a sound balance of payments; and to achieve a steady rate of expansion. All Governments have failed to achieve complete success there. It has been easy to pull off two of the objectives; it has been quite feasible to obtain three; but to obtain all four simultaneously, and to hold that position for more than relatively short periods, has defeated all efforts to date. Nor, to the best of my knowledge, has success been fully attained in any other democratic industrialised country. No country has yet succeeded.

But if we can agree on an effective incomes policy, I should think our chances of success in reconciling those four objectives will be enormously improved. We must all hope that success will be attained there; and in that matter, as in many others, I am sure that every noble Lord on this side of the House would wish to offer the present Government his best wishes in a difficult task. But if 13 years of Conservative Government did not see the solution of this elusive problem in its entirety, noble Lords on this side of the House can claim, without fear of contradiction, as the noble Earl, Lord Dundee, said, that these years have seen a more rapid and more continuous improvement in the standard of living of the nation in general, however measured, than in any comparable period in our history.

Noble Lords on this side will also claim with justification that at the end of that period our national assets, in terms of industry, homes, schools and the condition of our land, are in better shape than ever before in our history. One of the most satisfactory features of all is the high current level of personal savings, more than 15 times as high as it was 13 years ago.

The proposals in the gracious Speech are mostly couched in general terms but certainly add up to an ambitious and many-sided programme of intentions. Many of those intentions, such as fostering improved methods of technique and efficient performance, are excellent. But the Prime Minister, I must say, in some ways reminds me of the herald in one of Stephen Leacock's stories who leapt on to his horse and galloped off madly in all directions". I believe that it was a French Minister who said: To govern is to choose. There is some danger in the Government's programme, it seems to me, in that it appears to allot a large number of equal top priorities. In fact, some of them will obviously have to be relegated or downgraded to a lower position.

This programme is clearly going to impose substantial additional demands on our resources, and that sort of programme would really be appropriate to a situation in which our economy is understretched, with substantial spare capacity—and I believe that that is not in fact the situation to-day. Our economy, based, I emphasise, on its current level of efficiency, is pretty fully stretched. The question will arise, therefore, I should have thought, in existing circumstances: where are the required resources to come from? The answer will be given, "From greater efficiency and more economical use of man-power and capital." And, in the long term, that is without any question the right answer, and any effective measures designed to improve our average performance must, and will, receive, I am sure, our strongest support. But, unfortunately, pending such improvement—and it does not happen in a day or night—any overloading of our economy is likely, from past experience, to result not in greater efficiency but in a less efficient use of our resources, if competition weakens.

There is no doubt that our besetting sin as a nation in the economic field since the war has been our persistent tendency, almost a habit, of spending in advance the improvements in productivity we have obtained. In that sense we have shown a continuing tendency to live above the national income we have earned. So I fear that the Government's programme, desirable as much of it is, contains the seeds of inflation in the immediately foreseeable future. If that does happen, to that extent it will not succeed.

That brings me to the specific measures so far proposed. One, which, I agree with my noble friend Lord Dundee, seems utterly unrelated to any economic requirement I can understand, is the proposal to renationalise the iron and steel industry—whether because it occupies "a commanding height" or because it is alleged in some undefined way to have "failed the nation" has not been explained. Is it to be taken over because it has done well or because it has done badly? I confess that I feel rather perplexed. And this is a proposition that the Government seem to feel calls for no explanation or justification whatever. But thinking which concludes that, because a vital national industry must be subject to regulation when necessary, therefore it must be taken into public ownership, is really somewhat anachronistic. I agree with what my noble friend Lord Dundee said about that. Many people might have thought that twenty years ago, but to-day I really cannot understand why anybody considers it is necessary to own an industry to see that it is regulated, if and when necessary in the national interest.

Another measure I should like, to comment on is the import surcharge. While I agree wholeheartedly with my noble friend Lord Dundee that, when we are satisfied of a national urgency, then we ought to have a strong bias, if we possibly can, to support the measures proposed by the Government of the day to deal with it, I ant very sorry that the Government have thought it necessary so impulsively to choose this particular remedy. I agree that it is preferable to quantitative restrictions. I agree, too, that it is far preferable to currency devaluation, because the benefits of currency devaluation are purely temporary, while the damage can he very permanent indeed. I am very glad that the Government are not contemplating that alternative. With the surcharge, let us hope, at any rate, that such damage as it does do may not be permanent.

But the doubts I have about the surcharge arise from reasons which I am sure the Government cannot fail to understand, first, because it invites copying and even rataliation, to the detriment of our export trade. Secondly, if it works, it will almost certainly have some inflationary consequences, because it will reduce the total volume of goods, available. Thirdly, because the replacement of imports by home-produced goods, in the present circumstances and state of industry, may well reduce the volume of product;; available for export. And, lastly, their protective influence while they are on, though we hope they will be on for only a short time, is exactly the opposite kind of medicine to that which the present condition of British industry needs. It needs more vigorous competition at home, not less. So long as the surcharge exists, we shall, I suppose, be one of the most highly protected countries in the world.

It may well be that, in the short term, these surcharges will be effective and quick in securing a reduction in imports. Nevertheless, all in all, for the reasons I have mentioned, plus the damage caused to our relations with our overseas trading partners, and in particular with our EFTA partners, and because we shall be setting an example so much in conflict with the policies we have urged on others, I personally feel that we shall be paying a very high price for such short-term relief as it might afford. The Government have the advantage of a plethora of technical advisers and I rather wish in those circumstances that they had given themselves a little more time to consider this matter. As regards the technical advisers, I fancy that the Prime Minister may possibly at times feel rather like the author who put at the beginning of his book: I want to express my thanks to my dear wife, without whose assistance this book would have been written in half the time. If the latest balance-of-payments forecasts are critical enough to justify such an emergency step, then I should have thought that this import surcharge would have quickly to be followed by some other measures, fiscal or monetary, because the surcharges themselves are really attacking the symptom of a disease and not the disease itself. Therefore, I do not believe they can succeed alone. Professor Frank Paish, an economist whose skill I personally hold in great respect—indeed, of all the economists of the past twenty years his forecasts have proved the most correct—holds that our balance-of-payments troubles have invariably proved a symptom of incipient excess internal demand. He suggested that we ought to be grateful to our balance of payments for giving us timely and early warning of incipient internal inflation. He has deduced that when our spare manned industrial capacity drops below a certain level, then straight away our economy begins to show signs of overheating and balance-of-payments troubles develop. He believes I understand, that our present spare capacity is just within the danger zone now.

The aim of the fastest safe rate of expansion is a correct aim. But the present fashion in many quarters of allotting top priority to growth or expansion of any kind, at any rate, is, I believe, a very silly fashion indeed; and I shall be surprised if events do not make this obvious before very long. I want to repeat that sensible, attainable, affordable growth is a necessary and proper aim, and, indeed, without it our future would be dim. We should be seeking continously to raise our sights in the light of experience, but to-day, in many quarters, any query of maximum expansion regardless of the limitations of existing resources is apt to be hailed with the derisory cry of "Stop—Go." These two short words, in combination, have become, temporarily at any rate, very dirty words indeed. But the speed of almost any machine, if it is to operate efficiently, must be subject from time to time to regularity adjustments, through a governor or other mechanism. Good car driving surely means a touch of the accelerator at one time and a touch of the brake at another. It becomes poor driving when these alternate actions, are applied at the wrong time or with excessive violence.

When I was at the Treasury I used to say two things—in fact I used to say many more, but I will not weary your Lordships with the rest this afternoon. I used to say that Governments had seriously undertaken the responsibility of keeping the national economy on an even keel only for the past twenty years or so. I agree with the noble Lord, Lord Rhodes, when he says that in the 'thirties neither economists nor the Government knew how to do this. Since the war, Governments have begun to learn; and I think economists, too, although sometimes I am less sure of that. I used to say that as time went on, and as we acquired more experience of dealing with changing economic situations, quite different from pre-war situations, then we could hope with confidence that we should steadily improve our performance in two ways.

First, we could improve it by learning to use the existing instruments of control more delicately and by inventing more discriminating instruments; and secondly, by edging, in the light of experience, ever closer to complete full employment of our resources in manpower and capital without inflation. If, therefore, when we deride "Stop—Go" we mean only to deplore the imperfections of our present state of knowledge and expertise, then I think that is fair enough. But if we mean to deride any attempt to avoid either excess or deficiency demand by regulatory action, then we are talking nonsense; and I think that many folk are talking nonsense on this subject at the present time.

My own fear, if indeed the Government are going to superimpose a broad programme of increased public expenditure requiring additional resources on our present level of activity, is that we may soon find the familiar signs of inflation- ary pressure and rising prices. Then the Government will be forced to use all the traditional instruments, fiscal and monetary, very late, whether they like them or not.

Therefore I would urge noble Lords on the Front Bench opposite, with or without the aid of their plethora of technical advisers, to make sure that they are treating the disease itself and not its symptoms; otherwise they may find themselves imposing restrictions which will have exactly the opposite effects to those they intend and may do positive and lasting damage to our export trade, which I know it is their object, and their right object, to encourage in any way they can. If that were to happen, then all of us would be equally sorry. We should be sorry because, though we may differ as to means, all of us in this House desire the same end—namely, the strengthening of our national economy and the continuing improvement of our national life.

4.36 p.m.

LORD THOMSON OF FLEET

My Lords, in rising to speak in your Lordships' House for the first time, I claim your Lordships' indulgence, because it is with a sense of diffidence and humility that I venture to speak to your Lordships to-day. Perhaps I may be excused if I say a word or two about the long road that I have travelled, from my birthplace in Toronto, Canada, to where I stand before you here to-day. While I believe it is some years since a Canadian accent has been heard in this House, I follow some distinguished citizens of my country who have served here in past years. I hope that I can acceptably carry on the contributions which they made at that time to your Lordships' deliberations.

It is my hope and belief that in years to come citizens of other countries of the Commonwealth may be represented in this House, because it seems to me that such representation could only have the effect of strengthening the ties of our great Commonwealth. I trust that Her Majesty's Government may share this hope with me. I realise, of course, that there is already a great wealth of experience in this House of those who have lived and served with great distinction in many Commonwealth countries. I think the noble Viscount, Lord Amory who preceded me, is a good example of this. As a Canadian, I am, of course, fully aware of the great services that he rendered to this country in Canada, where he was very popular.

Now that I am here, I hope I may have the honour of addressing your Lordships from time to time. My experience of Canada and Canadian affairs, of mass media of communication, not only in this country but in the new nations of the Commonwealth and all over the world, and my experience of business and commerce, may, I hope, allow me to make a useful contribution to your Lordships' deliberations. When I speak to your Lordships I hope that my talks will be short, clear and concise. I promise you that I shall always speak with the good of the nation in mind rather than that of any political Party.

I am greatly concerned about the economic situation of this country, and I am completely convinced that daring and radical measures must be taken to maintain, let alone improve, the standard of living of our people. We have in the pattern of our life, through habit and custom, a built-in rigidity which must be attacked and broken down. In my judgment, this involves both management and labour, and what must be done will be both difficult and painful. Carrot there will be, but there must be stick as well. Some of the necessary actions, I am sure, will be bitterly resented. But any Government which assumes the task of keeping this country in the forefront of the advanced nations of the world must have the courage to take these necessary measures.

There are many business enterprises in this country which have efficient and forward-looking management; but there are many others which have not. It is my opinion, from my own observations in Canada, the United States and Britain, that, by and large, business management in this country does not measure up to the high standards set in other advanced countries of the world. Why is this the case? I think largely because of a general lack of competition in many industrial fields. Let me hasten to say that I am speaking generally. There are, of course, many spheres, including my own, where competition is very keen indeed. But I believe that this lack of competition here is prevalent in more fields than is the case overseas. I believe it should be the responsibility of the Government to ensure that measures are taken which will stimulate competition and encourage business ventures, particularly in their initial stages.

I think that an effective way to accomplish this would be an incentive tax structure for new companies in the early years of their existence. The generous depreciation provisions for new buildings and machinery, brought in by the previous Government, in my opinion not only deserve complete support, but should even be amplified. In many instances in this country, I feel, management has grown too old and has not kept up with technical developments in the management field. Too often they are managing in the style of twenty-five years ago.

The way of advancement for younger men to top management is too often blocked, and young executives are frustrated. These are the men who should be advancing into the top ranks of management. They are usually more open-minded, more aggressive and more open to change. In my own business I offer every encouragement to our young executives, and if I have had a measure of success it is largely because I have a keen, aggressive and ambitious group of young, men who are given a great deal of authority and operate their particular section of the business as their own. They are in such a hurry to go places that I have to keep moving rapidly to get out of their way. That is a kind of management which is not always prevalent in this country. Too often it is based on the principle of seniority.

There is a deep-down reluctance in this country to change. I quite understand why this should be the case. Great basic alterations in the pattern of life do not readily come about in a country as bound by habit and tradition as Britain. In Canada, life is continually changing. New communities are springing up; natural resources are being developed on a massive scale in many directions, and the whole economy of large sections of the country changes rapidly. One is used to change, accepts and welcomes it, because with such change come great opportunities. Such rapid developments cannot take place in Britain. Massive natural resources are not readily available for new development. The economy of the country can change only slowly. Dynamic new opportunities cannot occur. This makes it all the more necessary that we must have management ever alert to develop every new possibility.

But, my Lords, there is another equally or more important aspect of increased production, and that is the labour situation. In my opinion, it is iniquitous that a workman should be confined entirely to his own particular trade and unable to perform other duties which he is perfectly capable of doing when he is not occupied at his regular work. This, of course, is caused primarily by the proliferation of unions, which require that a member of one union must not

Intrude on the work of another union. So long as union demarcations exist and manpower is not efficiently used because of such demarcations, we shall never be able to compete for exports with those nations where such practices do not exist; and this is the situation in most of those nations who are our competitors for export business. For instance, in the United States there is one union each for most of the big key industries. One union only negotiates with motor car manufacturers; one union only negotiates for the whole steel industry, and one union only negotiates for great mining complexes. This is the pattern in most major sectors of American industry, and in many of the European countries as well.

In my opinion, we must in this country move in the direction of industrial unions. If the unions will not do this voluntarily, then the Government must take a hand. In this direction lies a great measure of stabilisation of labour. The complications for industry in this country can readily be instanced when it is pointed out that Fords at Dagenham must negotiate with 22 unions, whereas Ford's in Detroit negotiate with one.

We talk about the fact that we have almost no unemployment in this country. This is an idle boast. We have a very large amount of concealed unemployment; that is, through restrictive practices and forced employment of more men than are reasonably required to do a job. Concealing unemployment by forcing business to carry more men than are necessary is indefensible. It completely distorts the commercial picture, forces up costs, and is a deterrent to business expansion. These men should be available for a general expansion of industry. We are always pressing for more exports, and our ability to sell abroad depends largely on what our goods cost to produce. We shall never match prices that can be quoted by other advanced industrial countries of the world while we are paying more men than are necessary for efficient production.

I can quite understand why labour is so concerned about forced employment of more men than are actually needed. This is a carry-over from the depression days, when to lose a job was almost a matter of life and death. I believe that if a man who is willing to work is made redundant through no fault of his own, then it is the responsibility of his employer, and of the nation, that he should be ensured freedom from distress until another job is provided. I believe that if in such circumstances a man were guaranteed a large percentage of his usual earnings for such period as is necessary for re-training and the provision of a new job, labour would drop unreasonable manpower demands and businesses could operate efficiently with men doing a fair day's work for a fair day's pay.

It would be a great step forward if a general agreement could be reached between management and labour to the effect that labour would accept the transfer of jobs within an organisation where all the men employed were not required in their present capacity. There would then be a clear incentive for management to expand. This could mean either larger operations in their present sphere or, alternatively, moving into an entirely new type of product. If management could reduce their present working staff to their reasonable requirements, but have the responsibility of transferring surplus men to a new operation, this would help to ensure that there was no labour redundancy, and it would be a challenge to management to expand their business activities. Surely this is an initial step to a reasonable solution of the present surplus manpower situation.

It is in the interests of labour that men should be better paid, and I am convinced that labour wages in this country are generally too low. But higher pay is possible only if the proper number of men are employed in any particular capacity. One of the world's top management consultants has given some facts about the inefficiency of our business here that are positively staggering. For each person needed to produce a ton of steel in America, three are needed in Britain. It takes from three to six times as long to build a house in Britain as it does in America. He estimates that British shipyards could operate with 40 per cent. fewer men if labour were employed efficiently. If that situation were remedied, we should be back in the shipbuilding business on a competitive basis again.

There is a final conclusive proof of the inefficiency of our productive processes. If we divide the number of people in the work force into the gross product, here it comes out at £1,000 of goods and services per person, whereas in America it is £3,000. That clearly points out why our general wage scale in this country is so much lower than in America. Each person there turns out so much more. This comes about through our bad organisation, bad labour practices and general inefficiency. There is no doubt that what is needed in this country is more production, more output of goods and services.

What stands in the way? Certain understandings, agreements and customs regarding production, sometimes one management with another, sometimes one union with another, and sometimes management with labour. I believe that all agreements that have the effect of restricting output or the efficiency of operations are contrary to the public interest and under the law should be subject to appropriate penalties. Surely this is a good basis for dealing with monopolies and restrictive practices.

My Lords, the matters on which I have spoken to your Lordships to-clay are, of course, capable of great amplification. Obviously I have just touched on the fringe of what I think is the basis of the whole future prosperity of this country. I am very hopeful that the Government will tackle these problems with courage and energy, and irrespective of Party. If they do so, they should have the undivided support of everyone who has the future wellbeing of Britain at heart; and I am sure that that includes all of us.

4.52 p.m.

LORD SAINSBURY

My Lords, I consider it a privilege to be the first to congratulate my noble friend Lord Thomson of Fleet in one of the most stimulating and challenging speeches I have heard in this House in the brief time in which I have been a Member. He has wide and very successful business experience in many parts of the world, and I feel that we should be grateful to that great member of the Commonwealth, Canada, for sending to us so many of her famous and very successful sons. I am sure that I speak on behalf of all your Lordships when I say that we hope that the noble Lord, Lord Thomson of Fleet, will speak frequently in this House.

Many experts—and I certainly do not include myself as one of them—have analysed in, recent weeks the economic problems facing the nation. Various remedies have been recommended by them, but I think I am right in saying that most are agreed in the diagnosis of the illness, namely, that the present payments crisis is not of financial origin; speculation does not come into it. It is, above all, a trading deficit, aggravated by an outflow of long-term rather than short-term capital; not a temporary strain, but a continuing payments deficit.

As the gracious Speech indicated, to cope with the situation short and longer-term measures are called for. As all your Lordships know, a short-term measure was applied last week when the Government imposed the 15 per cent. temporary import surcharge. As deflationary measures such as raising the bank rate, restricting credit and capital investment were rejected by the Labour Government as a policy of despair, the Government had the choice of introducing import quota restrictions or tariff surcharges. Quotas are cumbersome to operate, unavoidably discriminatory in nature and, in addition to this, as The Times stated, it would have taken at least two months, if not longer, to set up in Whitehall the machinery which is necessary for the administration of quotas. As the Government had to apply immediate measures, I think that the chosen solution is the better method to overcome the difficulties. I personally agree with what the Chancellor of the Exchequer said at the Mansion House Dinner on Tuesday night, that there is a case for the revision of GATT in this matter because the Treaty seems deficient in prescribing only one legitimate method for dealing with a substantial balance-of-payments deficit.

It is accepted that the surcharge should be reduced as soon as the balance-of-payments position allows, and abolished as soon as possible. Seen in this light, perhaps our European neighbours, once they have got over the initial shock, may understand that we had no alternative but to take urgent and drastic action. Countries' memories, like individuals' memories, are sometimes conveniently short, and it is interesting to recall that when faced with difficulties in 1957 France imposed a 20 per cent. tax on imports other than essential raw materials. We should all agree, on both sides of the House, that the temporary surcharge on manufactured imports must not be a shelter for inefficiency or an excuse to raise prices unjustifiably.

As all your Lordships would agree, the real problem facing us is twofold. First, we are importing too many manufactured goods that we should be able to produce at home. Whatever the reason—price, earlier delivery dates, superior design or styling—this trend must be reversed. The second problem is the unsatisfactory level of our exports. Between 1953 and 1963 Britain's share of world export markets for manufactured goods fell from 21 per cent, to 15 per cent. At the same time our nearest competitor of comparable size, population and industrial capacity, Western Germany, raised its share from 13½ per cent. to over 20 per cent. By the summer of 1964 Britain's share had dropped to under 14 per cent. Long-term measures must deal with this basic problem. The new tax rebate on exported goods is the first step in this direction. The White Paper on the economic situation envisages further export-promoting measures such as cooperative selling arrangements for small firms, improved export credit facilities and the setting up of a Commonwealth Exports Council.

However, all these measures, in my opinion, will help to increase our exports only if we are able to put an effective check on rising prices. The gracious Speech mentions the need for more stable prices and the White Paper on, the economic situation states that a Price Review Body will be established. It is easy to suggest that increasing wages are responsible for mounting prices. I do not want to go into the question of the wages-prices spiral, which reminds me of the eternal argument: which came first, the hen or the egg? But I believe that it is a great over simplification to blame solely wages for higher prices and our declining share of world trade.

May I once more quote West Germany's example? As the Economist stated recently: Its strong growth continued against a background of remarkable stability. Although the labour market was extremely tight, increases in prices have remained very moderate. In some cases unit labour costs have actually declined slightly. Surely the German experience shows that increased efficiency is often able to absorb wage increases and suggests that our somewhat disappointing export performance may be partly a reflection of inefficiency in some of our industries.

Alexandre Dumas once said: All generalisations are dangerous, even this one". It has become a commonplace that an effective incomes policy is indispensable, both to the success of planning in a free society and to the solution of our economic problems, but nothing is gained by underrating the difficulties. However, there are hopeful signs. Mr. Leslie Cannon, General President of the E.T.U., said a few days ago that If this Government fulfils its pledges to widen the area of social justice, to take radical and practical steps to give an earnest of their good intentions … such a Government should have the right to ask the trade union movement to agree to an incomes policy. In my opinion, the relationship between full employment and under-employment, on the one hand, and an incomes policy on the other, has not received sufficient attention. The labour market in many areas and many trades shows signs of being overstrained. Some employers are offering higher wages to win manpower from competitors; others hold on to labour unnecessarily. Demarcation agreements, to which my noble friend Lord Thomson of Fleet referred, and other restrictive practices contribute seriously to the under-employment of labour. Furthermore, there are serious obstacles in the way of labour mobility. The White Paper on the economic situation envisages provisions for severance payments, an improved system of transfer grants and other measures", and the gracious Speech refers to the improvement of the arrangements for industrial training and for the retraining of workers changing their employment. If we are not able to improve the deployment of our labour in our economy, I cannot see how we shall be able to maintain an effective incomes policy and rising production with stable prices. Sir Robert Shone. Director General of N.E.D.C., rightly stressed recently that Britain must make the fullest and most efficient use of its human resources.

In conclusion, may I just say this; our economic difficulties are a challenge to all sections of the community—Government, trade unions and employers—and if all work together in the interests of the country as a whole, I am sure they can be overcome.

5.5 p.m.

LORD MELCHETT

My Lords, I should like first of all to add my congratulations to those of the noble Lord, Lord Sainsbury, on the maiden speech of the noble Lord, Lord Thomson of Fleet. It certainly must be one of the most outstanding and remarkable speeches on economic affairs which your Lordships have beet privileged to listen to in the House for many years, and I hope not only that Lord Thomson of Fleet will receive the congratulations he deserves but that what he said will be noted by the Government and other noble Lords who have wide interests outside the House, in industry and public affairs generally. So often something really important and outstanding of this sort is brought to the attention of the House, some really important speech is made, and then time goes by and it gets somewhat lost in the general run of affairs; and the importance of what has been said this afternoon I do not think could possibly be over-emphasised.

Having said that, I should like, for a very short time, to speak about the longer-term structural changes in our economy which are promised in the paragraphs dealing with economic policy in the gracious Speech. We have also in recent weeks had the Statement which was published on October 26 on the economic situation and which gives a little further insight into the Government's general policy on economic matters. It is still early days, and I suppose we must accept that this is a preliminary view. However, I think there are some very important points which already emerge.

The immediate measures, the import charges and the tax rebates dealt with in that Statement are to be only temporary. Without full knowledge of the facts—and no outsider can have full knowledge of the facts—I do not believe it is very useful to criticise these measures. It may be that the best choice of available alternatives was made. My own feeling is that it is a matter of relatively little importance compared with the longer-term policies to come. The Government, however, in their Statement, start from the belief that the underlying economic situation remains, as they say, profoundly unsatisfactory. This implies that it has been unsatisfactory for some unspecified period in relation presumably to what could have been achieved. I think such a sweeping statement, without qualification, is completely unjustified. I believe that very much has been achieved in the nineteen years since the last war. In fact our growth rate and our increase in exports in those years compare very favourably with the achievements of any period during the last hundred years.

Nevertheless, as we all know, our position in the so-called "international league tables" has not been particularly encouraging, particularly if one looks at the decade of the 'fifties. What is not so well understood is that these simple comparisons can be very misleading and give a poor picture of our performance unless this performance is studied in much greater depth, particularly in regard to the impact of the post-war factors that came into the various economies compared at different times. I mention this, not as an excuse for our own performance but merely to indicate that if these tables are used to draw a comparison of the relatively poor performance of the United Kingdom in these years there is a great danger that we shall exaggerate the possibility of achieving higher exports and faster growth within the confines of our existing economy to-day.

This is what I believe is happening at the moment. We are setting ourselves growth rates which we have never achieved in recent years and which we shall almost certainly not achieve without making major structural alterations in our economic arrangements. The stubborn refusal of exports to rise, the intractable nature of our balance-of-payments problem, the sluggish growth rates despite high investment, should at least commend fresh appraisal of these problems.

The most disturbing feature of the new Government's approach, so far as it has been revealed to us, is that they appear to accept that a substantially higher growth potential in the United Kingdom economy in its present form in fact exists, and that all that is necessary (here I think I am quoting from the White Paper, The Economic Situation) is to get sufficient faith in the possibility of long-term economic growth or adequate recognition of all that it involves. I see great danger in the simple belief that our problems all stem from the mismanagement of the economy by the authorities. Many dedicated public servants and a succession of Chancellors of the Exchequer, including the noble Viscount, Lord Amory, who spoke earlier this afternoon, have struggled with these problems. They have not all been fools; they have not all lacked a social conscience, nor have they failed to appreciate the need to accelerate the process of modernisation.

Establishing a Department of Economic Affairs and a Ministry of Technology may well help, but I believe that it will prove no more than the shifting of emphasis and priorities within a system which itself is incapable of sustained growth rates which will bear comparison with the larger economic complexes of Europe, the United States, Canada, as the noble Lord, Lord Thomson of Fleet, mentioned, Japan and, in the near future, the Eastern bloc countries. It may be worth mentioning that the recent and optimistic forecasts which this country gave to O.E.C.D., if projected ahead to 1980, would leave us operating at a productivity level 25 per cent. below our principal European com- petitors. The vital structural changes which are required are not so much within our own economy as in the relationship of our economy to the rest of the world.

My own conviction is that our performance in the last decade has, in fact, been quite good, if judged against our existing growth potential. It is difficult to be certain about this, because, as has been pointed out recently in a study done by Mr. Knapp and Professor Lomax, which was published in Lloyds Bank Review in October, there is no tested body of economic knowledge about the factors which really determine growth rates in capitalist economies. I emphasise this point because I think it underlines the fact that there is insufficient evidence to assume that our difficulties are due to mistakes in policy. In my view, they are more probably due to a combination of factors at work which are, to a large extent, independent of policy, or certainly of the policy over which the Government have control, dealing with the economy of the United Kingdom alone.

The Government's proposals for economic planning, for nationalisation, for the stimulation of science and technology, and the righting of assumed wrongs of past policies do not, in my view, go to the roots of the matter. They must determine whether there is any substantial growth potential in this island, if we are to remain isolated from the great and expanding economic community of Europe, with a small and largely protected home market, and with hopelessly small unit sizes in all our industries, including steel, chemicals and all the major basic productive industries.

If we look around Europe to-day, to Japan and the United States, we find that the basic unit sizes of the major industries are far ahead of anything that we have in this country, with a few notable exceptions—and those are a small number of companies. As the noble Lord, Lord Thomson of Fleet, has said, we are no longer competitive in many areas. These small unit sizes are sustained fundamentally by a lack of competition. In addition, we carry a share of international expenditure on defence and aid which is not borne in anything like equal proportion by other advanced industrial countries. Finally, the burden of the reserve functions of sterling, which should long since have been passed to the International Monetary Fund, is an additional structural problem which is not suffered by the industrial countries with whom we are trying to compete.

I believe that if a determination of the real growth potential in the existing circumstances were made, it would indicate that many of the institutions and habits that we take for granted were acquired at a time when we enjoyed almost effortless superiority in the world. They are the main factors which will limit our ability to compete and overcome our problems. The world is changing fast, but the inertia of our well-tried system seems to prevent us from facing up to the realities that now surround us. Here I would endorse every word that the noble Lord, Lord Thomson of Fleet, said about management and the structure of labour and management relations in industry in this country. Here again, we are largely protected from the real winds of competition which the bigger economic complexes are now feeling and are organising themselves to deal with.

There is no doubt in my mind that we can, and will, remain a major industrial nation, and a major influence in the world for peace and prosperity. We shall not do so if we rely on the momentum of the past shored up by domestic expedients. We must join a wider community of nations, put our faith in interdependence, for our economic development as well as our defence, and arrange to share our inherited international responsibilities with others.

5.16 p.m.

LORD BOOTHEY

My Lords, I intend to be very brief indeed—in fact, to be precise, about four-and-a-half minutes. I want to say, at the outset of my remarks, that I have seldom, if ever, enjoyed a speech more than that of Lord Thomson of Fleet. Without question, it was the most brilliant and the most stimulating maiden speech I have ever heard in either House. Your Lordships may remember that some months ago I suggested that the Press Lords should attend this House more frequently, and express their opinions. I can only say that this afternoon that observation has been justified to the hilt. I do not think that any of the others could possibly do as well as Lord Thomson of Fleet; but I think we should have them here, and listen to them with keen interest, Lord Thomson of Fleet has set them an example which they should all follow. They should come here, they should talk, and they should allow themselves to be questioned.

In particular, what I should like to say about his speech is how much I agreed with his refreshing views on the subject of union demarcation, about which he knows a great deal; about the necessity and desirability of bringing into this House, if it is to continue as an effective Chamber, members of the Dominion countries, because we have far too few of them; and thirdly, about restrictive practices generally, which he and we all know are not confined to one side of industry.

The Government really must tackle these restrictive practices on both sides of industry. If they do so, they will do more to increase our productivity than any other Government has ever done. Every Government has talked about this, to my knowledge, for forty years. None of them has done a thing. The present Government have also talked about it. They have had only about 19 days to do anything, but perhaps they will now really tackle this matter. I am encouraged by the words in the gracious Speech where they say that they are going to take both the employers and the trade unions by the scruff of the neck, though they did not actually use that precise expression, and tell them to "chuck it" and get on with the job. It is essential that restrictive practices on both sides of industry should be abolished in this country if we are to keep our place in the modern world.

There are only one or two other points that I want to mention. Dr. Balogh and Dr. Nicholas Kaldor have been very close friends of mine for about thirty years. I am devoted to them both; I admire them; I adore talking to them, in private, at Oxford or Cambridge. But I regard their accession to "the Corridors of Power" as far more dangerous than that of the noble Lord, Lord Snow, whom I had the privilege of introducing to this House yesterday. My reason for this is a perfectly simple one. It is that for the last thirty years I have been consistently right about economic affairs, and they have been consistently wrong. That is all. I have no other objection to them. I am, as I have said, devoted to both of them personally, but they are just not right. I beg the noble Earl who leads for the Government opposite to bear this in mind; and whenever they submit any recommendations to Her Majesty's Government I ask them to take it as practically axiomatic that precisely the opposite course should be taken.

The day before yesterday I went to another place and listened to the debate on the Address. All went smoothly until the Prime Minister raised the question of the Smethwick election. I could not make head or tail of this. I had already dealt with it extremely well to an audience of 30 million on television on the night of polling day. I said it was a most disgraceful episode; in fact, I said the most disgraceful episode in British politics for the last 150 years. Sir Gerald Nabarro, who was with me on the programme, said, "What exactly do you mean?", and I said—and there was a very much larger audience listening than that which listened to the Prime Minister in the House of Commons—"Where was it said If you want a nigger for a neighbour, vote Labour?" Sir Gerald, in his inimitable style, replied, "It was said in Birmingham, Alabama"; and I think there was really nothing more to be said on this particular subject. While I am on the subject of Sir Gerald Nabarro, may I say that I think he is an indispensable——

LORD LINDGREN

Clown.

LORD BOOTHBY

I was going to say an indispensable ornament in our public life, and he must be restored to it at the earliest moment; the Prime Minister has the power to do it, and I hope he will quite soon. We cannot do without Sir Gerald Nabarro. He is absolutely essential to the public life of this country.

What I wondered, as I listened to the speech of the Prime Minister—and I hope that one of Her Majesty's Ministers will give the reply to this before I sit down—is whether he is deliberately riding for a crash or not. I am absolutely convinced myself that Parliament and the country are well prepared to give this Government a very good chance, for at least two years, to see if they can make it; and that even the iron and steel Bill will go through. They are committed to it. It is only a paper transaction, when all is said and done. I think we shall want to see the shareholders get a square deal. I do not think it is of vital importance, but I think the general view of the House and the country is to give the Government a really good chance.

It seemed to me that the Prime Minister, in his opening speech on the Queen's Address, which is an odd thing to do, in the last part of his speech was deliberately provoking the House as if he wanted to bring about a crash and another Election as soon as possible. That would be a very great mistake. We want a change. My Lords, if I may say so, with humble respect to my noble friends—or should I say my ex-noble friends—who sit on the Conservative Benches, they are badly in need of a rest, I think for quite a little time. They want a couple of years at least to recharge their batteries. We have a lot of fresh blood in, a sort of Kennedy infusion—even Kaldor and Balogh; for God's sake, it is better than nothing. We have a lot of new blood in on the other side, with thoughts and new ideas. Everybody wants new ideas. I should like to see this Government have a good run, and I think they will get a good run; but they have got to behave nicely if they are going to get it. And I did not think the Prime Minister behaved very nicely for about ten minutes when 30 or 40 Members of Parliament walked out. It is not a very good start, and I wondered whether he was riding for a fall. I should like to be reassured on this matter, because I should like to see them there for at least two years. Then we shall see what happens after that.

In conclusion I would say this. I have said what I have got to say about iron and steel. I think that is the only particular issue that could come to a crunch. I think the Government are totally committed to it. I do not think it really makes very much difference, one way or the other; and I think, if they want it, they will get it. I should like to add this. I think that, on the whole, to put a curb on imports—provided it is temporary is a better way of dealing with a balance-of-payments crisis, which we are in at the moment, than the use of bank rate. I have always opposed the manipulation of the bank rate, the "Stop-and-Go" tactics which were used by the noble Viscount who has happily left the House; but I think that "Stop-and-Go", a bank rate at 3 per cent., 6 per cent., 7 per cent., then back again to 5 per cent., only upsets the business community, and makes it very difficult to plan for future expansion. The 15 per cent. import tax, provided it is regarded as a temporary measure, is far better than a rise in the bank rate, which was, it seems to me, the only alternative.

I come back, in the last sentence of my speech, to what was said by the noble Lord, Lord Melchett. I think that the root cause of the troubles—and we shall find them increasing in the years that lie ahead—is that there is not enough international liquidity in the world to-day to provide for, and sustain, the volume of trade and production that we are likely to see during the next decade. I have always been opposed to the Bretton Woods agreement on that account, as was Keynes. The noble Lord knows very well that he proposed a solution in the form of "Bancor". It was rejected, brutally, by Mr. White and by Mr. Vinson at the time, and I think that it killed Keynes. But I am absolutely sure that, within the next decade, we shall want a great deal more liquidity behind sterling and the dollar to sustain the volume of world trade.

That is one of the difficulties confronting what we call the Free World—to sustain the volume of trade and production. I hope that Her Majesty's Government will make a very strenuous effort now to get down to this problem. They did a little bit cheese nibbling in Tokyo the other day, but that is not really the answer to the problem. What we ought to do is to t urn the International Monetary Fund into a Central Bank for central banks all over the world, with similar powers of credit creation or contraction. Then I think we should really see our way through to a world of growing prosperity. We are living at the moment in a world of new and developing countries. Development is in fact the imperative of our time. Nothing else is comparable. We can never get through unless we have greater international liquidity, unless we have greater international credit. I do not advocate world-wide inflation; but we have simply not got the liquid reserves available to carry out the development, trade and construction required in the world to-day. And if all the wealth is held on to by a dozen countries, and the rest of the world is left in abject poverty, then nothing but disaster and danger lie ahead of us.

5.30 p.m.

LORD BROCKET

My Lords, the last speaker, the noble Lord, Lord Boothby, seems to be rather in favour of inflation as regards the length of his speech, because he worried me very much when he started by saying that he was going to speak for only four minutes.

LORD BOOTHBY

And that was right.

LORD BROCKET

That was one-third of the time he took. If I may say so, I was very delighted, because that gave me a little more time to think about what I was going to say, so I am very grateful to him. I would also, if I may, as a humble Back-Bencher, congratulate the noble Lord, Lord Rhodes, on his maiden speech. No doubt we shall hear from his Lordship many more times in his official position. I feel that this afternoon we listened to a most remarkable speech by the noble Lord, Lord Thomson of Fleet. I am not the first person who has said that, but I feel that we gain very much from noble Lords who come from other parts of what, thirty years ago, we used to call the Empire and now call the Commonwealth. I think it is very fortunate that there was no 15 per cent. surcharge on Lord Thomson of Fleet when he came over here, because that might have frightened him off, and we are very pleased to welcome him.

If I may, I will deal with two subjects this afternoon, the first of which is quite short. I welcome the phrase in the gracious Speech which states: Central and regional plans to promote economic development, with special reference to the needs of the under-employed areas of the country, are being prepared. I welcome that phrase very much, because I could not help feeling, when the South-East Study was brought out last June or July, that there was too much emphasis on, and too much encouragement to, people swelling the numbers of population in the South-East; and not enough encouragement to the areas in the North-East and the North-West where there is much unemployment. I welcome this statement of intention, because I am connected in business with all these areas. I also welcomed the activities of the then Lord Hailsham, now Mr. Quintin Hogg, in his efforts for the North-East, and also the efforts for the North-West; and I must not exclude Scotland or Wales. But I hope that the new Minister of Housing and Local Government, before he proceeds with certain developments in the South-East, will take a wide look at the problem of the whole of Britain.

Noble Lords will remember that some time ago we had a debate on the New Towns, which largely concentrated on Stevenage. I must say—although this is only a small point—that I was very sorry when the late Minister of Housing and Local Government started the machinery for an inquiry into doubling Stevenage, which is to take place on December 7. I hope that he may consider looking at this matter from a much broader view and that, before allowing the machinery of this inquiry to go forward, he will reconsider the whole matter further. If he thinks that the doubling of Stevenage is a debatable point (which quite frankly I do not, as I think it is very bad planning in every way) then let us have an inquiry later on, in the New Year. A great many people, such as the Hertfordshire County Council, Stevenage Urban District Council and various other local authorities, are going to be put to a great deal of expense, and if this is against the general policy of the Government it seems a pity that that machinery should be proceeded with at the present time.

I come now to another most important part of the gracious Speech which states: At home My Government's first concern will be to maintain the strength of sterling by dealing with the short-term balance of payments difficulties and by initiating the longer-term structural changes in our economy which will ensure purposeful expansion, rising exports and a healthy balance of payments. Of course I agree entirely with that statement, and I agree that imports into this country have been running at far too high a rate. But I regret to say that I do not agree with the method which Her Majesty's Government are employing to deal with the problem. I think that noble Lords who are interested in finance would all sum up the position in the way it was summed up, in a very remarkable speech this morning, by the noble Lord, Lord Robbins, in the Albert Hall at the Institute of Directors' Annual Conference. He said that two years ago the position was jogging along all right. Now there is a deficiency of up to £800 million, which we all regard as most serious. He then said that aggregate expenditure has increased too rapidly. That means that inflationary pressure at home has caused more imports, because wages have risen faster than productivity; and when wages rise faster than productivity there is more money to be spent and more imports coming into this country. Of course, imports must be limited in some way or another. However, I also feel that Government expenditure itself is very inflationary.

Before my election to the House of Commons, in June, 1931, my nearest neighbour in Hertfordshire was Mr. George Bernard Shaw. He said to me: "You are a young man; I am very old. But let me give you some advice. If you are a Tory, be a Tory and retain your Tory voters. If it is a question of an auction sale we"—that is, Mr. Shaw's Party, which is now sitting on the Government Benches—"will win every time." At the present time it is rather like an auction sale. Even the Tory increase of expenditure had been estimated for the next four years at over £1,900 million. When that is added on to £5,000 million, which is the normal Budget, it becomes so large that, quite frankly, even from a nonpolitical point of view I think it is bound to cause more and more inflation.

I do not know what the Government's estimate is, but I feel that expenditure should be looked at very carefully, indeed. I am glad to welcome the assurance of the Government that it will be looked at very carefully, because it is running away with the financial stability of the country and is definitely causing inflation. As the noble Lord, Lord Robbins, said this morning, cost inflation is the basis of our troubles.

LORD BOOTHBY

My Lords, if the noble Lord will forgive me, I have already provided him with a solution. We can print the money in Washington.

LORD BROCKET

My Lords, that is a very good intervention, but I suppose the money might be printed anywhere, even in Hampshire, where the £5 notes are printed already. To return to the subject, a 15 per cent. surcharge has been suggested on all imports into this country. In my opinion, as an industrialist, confidence is absolutely essential for the development of trade, and there is no doubt that the sudden imposition of this 15 per cent. surcharge has been received badly by the countries in Europe, GATT, the, EFTA countries and so on. So far as I am concerned, they will have to look after themselves, and they are very capable of doing so. But there is one other point.

Your Lordships will remember the very stiffly worded communiqué which was sent to Southern Rhodesia by Her Majesty's Government, in which I think the words "rebel" or "rebellion" and "traitor" were used. It may have come from the Prime Minister, because as the noble Lord, Lord. Boothby, said, he used other words in the House of Commons a day or two ago, which I will not repeat. But that was a most stiffly worded communiqué and it was written in that way in order to stop unilateral repudiation of an agreement which had been entered into and was part of of the law of our land. But this 15 per cent. surcharge is in unilateral repudiation of agreements which have been entered into by this country with other countries.

I intend to deal with only one country, and that is a country which I know very well—the Republic of Ireland. Ireland is in a particularly special position. Geographically, it is one of the islands comprising the British Isles and it is very near to us—just across the Irish Sea. Every year we import from Ireland almost the whole of our store cattle, which helps our farmers here very much. In fact, the imports of store cattle and other agricultural produce from Ireland come to roughly £100 million a year—I think the exact figure is £98 million. The rest of the exports to England from Ireland amount to roughly £50 million a year. On this £50 million a year there will be, of course, the 15 per cent. surcharge.

Now I must take your Lordships' memory back to 1938. It will be remembered that there was what were called "the Troubles" in Ireland some long time before that, between 1916 and 1921, but in 1938 a comprehensive Treaty was drawn up and agreed to between Britain and Ireland. It was signed by the leading Ministers of both Governments, and this really is the Treaty on which the neighbourly relationship between Britain and Ireland is founded. The Treaty had three parts. The first part of the Treaty was devoted to the ports. Your Lordships will remember that the British Admiralty had certain rights in certain ports in Ireland, and those ports were given over to the Irish Government. The second part was financial, and £10 million sterling was to be paid by the Irish Government to the British Government in final settlement of all outstanding financial debts. The third part of the Treaty was an agreement on tariffs, and I feel I must say that the 15 per cent. surcharge is in direct contravention of the Anglo-Irish Treaty of 1938.

In 1956, when the Irish position was unfortunate, as a result of an excess of imports there, Ireland introduced special import levies; but they did have consultations with the British Government before doing so and those import levies were introduced with the agreement of the British Government. This 15 per cent. surcharge, which is, as I say, in contravention of the Irish Treaty of 1938, is, of course, a tremendous shock to Ireland, but I should like to say, as a Member of the British House of Lords and as a British-born subject, that I do not think it is going to do very much good to Britain; because, of all the countries in the world, Ireland, which is a very small country, last year imported from Britain (or there was exported from this country to Ireland, whichever way you look at it) £157 million worth of goods. Per head of population, that is £52 per annum, or £1 a week. So every person living in the Republic of Ireland pays £1 a week for British goods.

LORD BOOTHBY

My Lords, may I ask a question, simply on a point of information? Is the noble Lord quite certain that this 15 per cent. surcharge does apply to Ireland? I thought it did not.

LORD BROCKET

My Lords, the 15 per cent. surcharge applies to roughly £50 million worth of Irish goods exported to England, and it applies to these particular sorts of exports: clothing and footwear, £7.1 million or 86 per cent. of the total of clothing and footwear; textiles, £7.2 million or 79 per cent. of their total. The next one is headed "Beer", which is, of course, largely Guinness, and that represents 94 per cent. of the liquid exports from Ireland.

LORD BOOTHBY

That is the end!

LORD BROCKET

I think that milk, another liquid, is included in agricultural products, so that would be all right. But these figures show that, taking that 94 per cent. of their liquid exports, adding 15 per cent. is a lot; and it means that people living in the North of England, who drink Guinness, may have to pay more. Then we have machinery and transport equipment, £5 million, which is 53 per cent. of the total exports from Ireland; and paper and paper board, £2.2 million, or 88 per cent. That shows that England has an enormous proportion of the exports from Ireland, looking at it from the Irish point of view.

But the important thing from the British point of view is that Britain has a trade surplus with Ireland approaching £20 million a year. So, if the Irish Government thought that it was "fair enough", as one might say, in retaliation to put a 15 per cent. surcharge on anything coming from England it would mean there would be 15 per cent. on that trade surplus, and the English exports to Ireland are £160 million a year, which is very considerable for such a small country. I would suggest that Her Majesty's Government might well reconsider this question, because, not only is Ireland geographically situated West of Britain but it is the only country that is a Republic which is administered by the Commonwealth Relations Office. It has always been admitted that it has a very special position apropos Britain, and as I say, it is still administered, even to-day, by the Commonwealth Relations Office.

I hope your Lordships do not think that I am just making a plea for the country from which my ancestors originally came, but I do feel that, in general, this confidence that is essential in order to conduct trade with other countries in the world has been rather rudely shaken by this sudden imposition of 15 per cent., not only on European countries but also on Ireland. I hope that Her Majesty's Government will give my plea for this country special consideration, and also see whether confidence can be restored with the other countries in the world.

5.46 p.m.

LORD HAWKE

My Lords, we have had two maiden speeches of outstanding quality, the first front the noble Lord, Lord Rhodes. The name is greatly honoured in my family. In fact, I have in my hall a full-length portrait of the second most famous member of the clan in action. The noble Lord, Lord Thomson of Fleet, I think, told us a lot of home truths that we ought to know and who is in a better position to know what goes on in the restrictive practices world than a newspaper proprietor?

I think the new Government in coming in has most unfairly castigated Mr. Maudling. They rattle skeletons in all the cupboards in Whitehall, but the British public regard these exercises with amused scepticism because they know perfectly well it is all part of the political game, and that every new Government always finds cupboards full of skeletons. Mr. Maudling had been making the most determined effort to keep the British market open to the goods of the world until the last possible moment. He took a risk in doing it, and he did not quite bring it off. Events were just too much for him. The purchasing power in the home market increased rather faster than he expected—purchasing power through wages, salaries and realised capital profit—and some of our export markets went sour on us due to causes not of our making. But his action has meant that the rest of the world is going on planning for expansion. All over the world the miners, the plantation owners, and so on, are planning for increased production which they would perhaps not have done if we had applied the "Stop". The world will reap the benefit of this when the new raw materials begin to flow—which, judging from past form, they will probably do from the end of 1965 onwards.

Now our position is beset by a number of permanent difficulties. I do not refer to the very obvious one that we have to import an enormous proportion of our requirements; that is obvious; but we have got wedded up to fixed exchanges. All Governments are pledged to provide completely full employment in all circumstances, and it has become in the modern world unthinkable that anybody's remuneration should be reduced. A Government can do it by taxation, by import duties or by devaluation, but it can never be done by an employer to an employee. Formerly salary workers were the ones who expected an annual increment: now shareholders, to make up for the fall in the value of motley, and wage earners, expect the same—and very often shorter hours to boot. If the trade union leaders cannot get it for them, there will always be unofficial strikes; and the strike seems to me to be a more powerful weapon in our modern, complicated society than it ever has been. The trouble is, my Lords, that strikes, like crime, pay in Britain to-day. That is half our trouble.

Then we have the built-in subversive element in industry. Every employer knows it; and every employer knows how difficult it is to get rid of it. In any vulnerable place where some small quarrel can be exploited and some small key industry can perhaps put out of work a large quantity of men and thus help bring Britain toppling down, these people are burrowing away like white ants the whole time.

We have subscribed to international agreements aiming for freer trade in the past. It would make it easier for us to export even if we did not always remember that it makes it much easier for others to export to us, too, and we are just about the best market in the world; probably a better market than most of our competitors. We have probably the best merchants and retailers in the world and their arrangements for scouring the world for goods to titillate the appetite of our people are unrivalled.

It is not always price or quality that leads to imports into this country. It is very often novelty or even a status symbol. After all, when we go through our congested cities and see these vast American motor cars about, do we think the people who imported those cars did so because they are better? They imported them as swank to show how rich they are. We are not particularly favoured by the sun in this country and we have become a nation of sun seekers, and more and mote of our people are accustomed to travel abroad and spend money abroad. Every year others come to us from abroad; but on balance we are well down on that exchange. All these factors constitute a sort of economic strait-jacket, and when something has to go it is the price level, and when the price level goes it means that we tend to import more and export less.

Therefore, we can agree with the Government and every other speaker that one of the keys to the situation is an incomes policy at home; but I would couple that with a much more improved selling policy abroad. I think the Government ought to probe these selling arrangements market by market and industry by industry because there are a lot of industries which do not export very much and which probably could. When I say "incomes policy at home", I do not think an incomes policy at home obtained by bargaining with the Trades Union Congress is the slightest use unless the profit can be taken out of unofficial strikes. Meanwhile we are faced with the inflexible conditions. I believe the Labour Government will have to employ some form of "Stop and Go", though of course it will be called something different; but it is very difficult to see what else can be done to maintain full employment in a free country in the conditions of the economic strait-jacket in which we exist.

I return to another subject—curiously enough, one on which I made a maiden speech about eighteen years ago. This is the subject of the proliferation of Ministries. The argument went roughly like this. It is not a Department that makes a decision; it is Her Majesty's Government that makes a decision. Therefore, every Department concerned in making it—generally there are more than one—has to be co-ordinated and consulted and you have to get its agreement. And you cannot get any decision in Whitehall without the arguments being put on a file. The file does not leave the Department. Therefore, when the enterprise in which you are engaged requires the agreement of more than one Department you have either to carry on a lengthy correspondence or else you must have an inter-departmental meeting. The more Ministries or Departments you have to assemble round the table——and one must always remember that one must assemble people of the right calibre—the more difficult it is to collect them, and probably you will have to submit to a lengthy delay. By all means have Ministers in charge of subjects; but do for heaven's sake try to keep them within the existing Departments of State. To create new Ministries is merely to put Whitehall in a most hopeless tangle.

Other people have expressed their disquiet at the two extreme economists who have arrived as advisers in Whitehall. As a King's College man I ought to prefer the advice of Professor Kaldor as I have always been a follower of Keynes, but the reports of the sanguinary results of his advice rather make me prefer Dr. Balogh. My advice to Dr. Balogh would be, "Watch Professor Kaldor", and to Professor Kaldor, "Watch Dr. Balogh", and to Mr. Wilson not to take the advice of either of them.

This is one point which I think ought to be made on a different day of this debate, but I consider it an important one: it concerns land and planning. There is one thing that makes me extremely disquieted about our situation in Britain to-day and that is the fact that a committee, an authority or a man, by drawing a line on a map can put untold wealth in the hands of one person and deny it to another person. It is a great tribute to the integrity of the professional classes of this country that no major scandal has developed out of this situation. I am very doubtful whether the barrier can be preserved for ever. If Her Majesty's Government can find some system which will avoid that extreme situation then I think it would be very desirable for the whole country.

I have not been so enthusiastic for free trade as many other members of my Party, because I always thought it would lead to payments difficulties, so I am not so shocked at Her Majesty's Government's action as some noble Lords on this side of the House. But the import surcharges have certainly created a great furore. There are two facts here. Why is it that when Britain does anything to restrict trade there is an enormous hullabaloo, whereas other people do it every day and get away with it? In my experience of international trade, which I admit is a bit stale now, it is not tariffs which were the real restrictions but quotas and exchange control. You can jump over tariffs, and in fact when the Ottawa duties were applied a great many of the Continental manufacturers jumped over the resulting differentiation and carried on their trade. You cannot jump over exchange control or quotas, and I think a fair question that Her Majesty's Government could ask their critics is which would they have preferred them to do.

From my few remarks one can see that, in my humble opinion, the gracious Speech is a mixture of good and bad but no more than one would expect from a Prime Minister who has to try to govern the country with a very small majority and is at the same time the manager of a coalition of Radicals and Marxists. So long as he keeps the Marxists locked up, the bulk of the British people, I think, will wish to give him a fair run for their money.

6.0 p.m.

LORD DRUMALBYN

My Lords, we have had a most agreeable debate to-day and I think that the temper of it has been remarkably constructive. I should like to start off by congratulating my old friend (if I may so call him) the noble Lord, Lord Rhodes, and by welcoming him to this House. We have exchanged words across the Floor of another place, and words, perhaps less acrimonious, in the Smoking Room many a time, and it is with great pleasure that I welcome him here. I cannot say that I remember his maiden speech, any more than he does, but I can say this: that I am certain it was not so robust, and perhaps it would not be unfair to say so contentious, as his speech to-day. He put his points very clearly indeed. I am sure if they had not been, he would have lost sight of the clock. I think that the noble Lord has run true to type, true to the nature of the beast (if I may say so); but we like that nature and hope that we shall hear from the noble Lord very often, as undoubtedly we shall. We will do our best to work with him so far as possible, no doubt chasing him from time to time. At any rate, he has established himself already in the House, as everyone knew he would do.

My second task is the very pleasant one of saying with what great pleasure we listened to the speech of the noble Lord, Lord Thomson of Fleet. There are subjects on which we are perhaps accustomed to be a little too cautious. We tiptoe past a number of subjects and we are told that we must not disturb or interfere. The noble Lord has made a speech to-day which I think will reverberate for a very long time indeed, arid which will be of the greatest use to the country as a whole. I am sure that the whole House is extremely grateful to him for the lead which he has given to-day.

There are four or five major subjects that have occupied the House to-day, and in winding up perhaps I may be permitted to refer to them. The first is the need to keep down prices in order to be competitive. The second is the need for an effective incomes policy. The third is the question of restrictive practices. The fourth is the need, perhaps the slightly disputed need, for an import levy and for better training for export and commerce; and lastly, there are the very interesting speeches of my noble friends Lord Amory and Lord Melchett. My noble friend Lord Amory, asked whether the targets for growth were actually attainable; whether the Labour Government are not trying to do too much; what is the growth potential of the country and what might there be if we did as my noble friend Lord Melchett advised and linked our destiny rather more closely than we have so far been prepared to do with other members of the Council of Europe. I hope we shall hear something from the noble Lord, Lord Champion, in reply on all these points, and I should like to develop one or two of them myself.

I think that we should all agree that, for a long time, from the economic point of view, our most pressing need has been to develop our exports. Certainly, for one who has been at the Board of Trade in the past year—and for a previous sentence also—this is something which has never been very far from one's mind. May I, if I can, without presumption, put the aims of the Department with which I was, in this way? The first aim was to remove obstructions to trade and to reduce tariffs; the second, I world say to my noble friend Lord Hawke, was to encourage the observance of rules; the third, to make British products more competitive by stimulating competition, by seeking progressively to eliminate restrictive practices, by encouraging and assisting the modernisation of industry and the economy as a whole, and by sound measures to promote the better distribution of industry.

I think that in these we have been remarkably successful, partly due to the steps that were taken in the Budget of 1963, the free depreciation allowances, the development districts and growth areas and the standard grants. So I think that it is as well to record that in the past few years, from April 1, 1960, to July 31 of this year, to the latest figure I have, there were no fewer than 1,260 projects, to provide nearly 150,000 jobs, which were initiated at a cost of something like £115 million offered to the firms concerned and not declined. This, I think, gives the Party opposite a remarkably good start.

The other things that give them a good start are plainly acknowledged—the institution of the National Economic Development Council; and the two growth areas, on the basis of which further development is now being made; the regional studies, which are now going to be carried still further, and, not least, I think, a degree of future planning of public expenditure that we have never had before. I think this is a better inheritance than any Government has left to its successor. Of course, there is the one snag—the balance-of-payments problem.

I do not think there is any dispute about the objectives which we all share. What undoubtedly is likely to be disputed is the method of achieving them. It is the main proposal of the gracious Speech and it is adopted in advance of any Parliamentary sanction. We have to examine it in the light of the need to secure the greatest possible degree of national effort. In passing, may I say that we read today of another example of action being taken in advance of Parliamentary sanction, and I hope very much that we shall not have too much of this. Otherwise, one would have expected a sentence something like this to be in the gracious Speech. My Government will treat Parliament as a rubber stamp". Too much of this action in advance of Parliamentary consideration and approval cannot be desirable.

Some of the means proposed will command general support in Parliament. The gracious Speech says: My Government will take steps to improve industrial efficiency by dealing more effectively with monopolies and problems arising from mergers". I have no doubt that the same intention, in almost the same words, would have appeared in the gracious Speech if the Labour Party had won nine fewer seats and the Conservative Party had won nine more. We welcome the intention and we look forward to early measures to implement the White Paper on monopolies and mergers submitted by the last Government. We shall be interested to see what changes in these proposals the new Government suggest.

I turn now to the question of stimulating competition. The last Government secured the enactment of the Restrictive Practices Act, to ensure that agreements between producers in restraint or diminution of competition were registered and were examined by the Restrictive Practices Court to decide whether or not they were in the public interest. Some reinforcement of this legislation is needed and was foreshadowed in the White Paper to which I have referred.

The next task is to deal with the restrictive agreements within firms or between employers and employees in industry generally. On this the gracious Speech declares the intention of the Government to call on trade unions and employers' organisations to co-operate in eliminating those restrictive practices, on both sides of industry, which impair our competitive power and the development of the full potential of the economy. Again, I should like to welcome the intention, for this, as the debate has brought out, is fundamental to the objective of making British goods more competitive abroad. But may I ask this question of the noble Lord who is to reply to the debate? One cannot help being struck by the difference in the words used in these two sentences which I have read out, the one taking steps to deal with monopolies, and the other calling on the two sides of industry to co-operate. I would ask the noble Lord, if he can, to make the intention here a little clearer. Are the Government going to take steps with which the trade unions and employers' organisations are invited to co-operate? Is that what it means? Or does it mean that the trade unions and employers' organisations are simply to be invited to co-operate together? We should like to know what the Government's initiative in this matter is.

The noble Lord, Lord Rhodes, said that talks had already been initiated in this matter. I could not help noticing that the noble Lord, Lord Thomson of Fleet, went so far as to say that should unions not agree voluntarily to discard demarcation agreements and unite together, then the Government should step in. Is this what that sentence means? Obviously one would proceed by persuasion, if at all possible, and I hope that more than persuasion will not be necessary, but I should be grateful if the noble Lord, Lord Champion, would say what are the Government's intentions in this matter, because of the great importance that has been laid on this subject throughout the debate. There is no doubt that in the past these restrictive practices have arisen, as the noble Lord, Lord Thomson of Fleet, said, largely out of a fear of redundancy; and we welcome very much the action to improve still further the arrangements for industrial training and retraining of workers which are foreshadowed in the gracious Speech. If the noble Lord, Lord Champion, can tell us a little more about this tonight we shall be grateful to him.

It would be an over-simplification to say that if an industry is to be competitive abroad there must be competition within it at home. Some industries may be too small in scale to sustain competition with other British firms if they are to be competitive with foreign imports and this is a point to which the noble Lord, Lord Melchett, referred. But in a vast and complex industry such as steel, in which major companies are not limited to production of a basic commodity as with coal, but stretch far into the processes of fabrication, manufacture and construction, it is difficult to see what possible competitive advantage may be derived from eliminating competition between different owners.

As I see it, the only arguments which have been put forward so far are, first, that the Labour Party have done it before and will do it again because they still believe in it; and, secondly, that there is no price competition—this is, I think, what the noble Earl, Lord Longford, said—between steel companies in heavy steel products. But that argument has been removed by the Restrictive Trade Practices Court, which decided that the agreement between steel companies, including the publicly owned one, I believe, to sell at the maximum prices fixed by the Iron and Steel Board should be terminated. In any case, it was not disputed that the prices charged were fair and reasonable. The Court merely decided that such an agreement could work against the public interest and, therefore, should be discontinued. The fact that the steel industry is already subjected by the Conservative Government's legislation to a degree of public control and supervision which exceeds any other, I believe, in the private sector, is apparently not to be enough for the Government.

In order to get the best out of the nation, in order to evoke the greatest national effort, surely a Government must adopt policies which will commend themselves to the great mass of the nation and will be recognised as both fair and necessary. I would remind the noble Earl, Lord Longford, that at the last Election the combined total number of votes cast for the Parties opposed to the nationalisation of steel exceeded those of the Labour Party and Communist Party combined, which I believe are in favour of it, by no less than 2,860,000, if my arithmetic is right. Indeed, in 1951 the balance in favour of denationalisation was well over 600,000.

THE PARLIAMENTARY SECRETARY, MINISTRY OF TRANSPORT (LORD LINDGREN)

My Lords, can the noble Lord tell us of a single steel town where the workers did not return a Labour candidate in favour of nationalisation of steel?

LORD DRUMALBYN

No, I have not examined that in detail. But we are not a syndicalist nation yet. This is not a matter which could be decided purely on the basis of what the workers in any particular industry thought.

LORD LINDGREN

With respect, I should think that the average steel worker knows a little more about steel than the landladies of Blackpool or Brighton.

LORD DRUMALBYN

We are, after all, a democracy, and the question is what commends itself, both in principle and in practice, to the majority of people in that democracy. Whether the Government consider public ownership of steel necessary or desirable, it is certainly not relevant to our immediate short-term problems. I see that even the Daily Mirror to-day calls it "the great irrelevancy", and says: It will not close Britain's trade gap or widen it. It then goes on: It will not boost exports or depress them. While I do not altogether agree with that view because I believe that the effect of nationalisation is likely to he a lowering of efficiency in the long run, if it is as irrelevant as that, surely it ought not to be done in a year in which we are faced with particular problems. The Labour Party gave no pledge in their Manifesto that they would take steel under public ownership in their first year of office. However strongly they believe in it, there is no excuse for indecent haste in introducing such a measure. There can be only one reason for such haste, so far as I can see, and that is the fear that they will not be in office for more than one year, and their anxiety to exploit to the full the (should I say?) peculiarities of our electoral system to defeat what I believe is the will of the majority of this country.

I turn now to the general economic situation, and I will, if I may, look hack a little, as the noble Lord, Lord Rhodes did. The noble Lord, Lord Rhodes, said that we are now back to 1961. There is one notable respect in which we are not back to 1961, and it is that production is very much higher to-day than it was in 1961. Indeed, looking at the index of industrial production published in the Board of Trade Journal for October 30, I see that in 1961 the index stood at 114 on the base year of 1958, and it is now, and has been for a considerable time, at 127. To that extent, at any rate, we are certainly not back to 1961.

In the autumn of 1962, the last Government, with strong encouragement from the Labour Party Opposition, took measures to stimulate the economy and to reduce unemployment. I think that, in doing so, they had two related aims in mind, both of which, I believe, the Labour Party fully shared. One was a steady rate of growth, which would avoid the necessity of checking expansion when the increase in incomes outran the increase in production. The second was a mechanism for ensuring that incomes did not expand too rapidly in relation to production.

The means chosen then was the National Incomes Commission. I share the view that has been expressed that it does not very much matter what we call a body, so long as there is a body to deal with matters of this kind. Perhaps the noble Lord, Lord Champion, when he winds up, will be able to tell us a little more about the functions of the Price Review Commission, of which we have not heard a great deal. But if it is going to work along the lines which we had in mind, searching out the facts both in regard to wages and salaries and in regard to profits, then we shall be quite content.

The essential point, I think, has been well recognised; that is, that there is a difference between the treatment of profits and dividends and interest, on the one hand, and wages and salaries, on the other, simply because in relation to the same period of time during which these work there is a considerable disparity, since the profits cannot be ascertained until well after the wages and salaries have started to operate, and the profits are, of course, residual. So there is no doubt that they cannot be treated in exactly the same way. What we want to see is a method of dealing with them that will be universally accepted as fair. The search for such a method must continue, and we will give it the fullest support.

The last Government recognised all along that the current balance of payments, which in 1962, according to the figures I have before me, was £115 million, was bound to run against us in the early stages of expansion. The first quarter of 1963 was remarkably good; the second quarter about average, and during the remainder of the year the favourable balance dwindled away. This year we have seen exceptionally high employment, a high level of demand, a high level of investment, and rising order books for both home and export sales. Imports have risen substantially, as they were bound to do, through restocking and higher prices (I believe that the average level is running at about 5 per cent. above that of last year) through prosperity, which has sucked in additional imports, and through a degree of forestalling; and that, I think, was bound to happen. But in the past six months, as the noble Lord, Lord Rhodes, has said, exports have not continued the strong rise of the previous fifteen months. Moreover, the index of production has, as he said, obstinately remained unchanged since February.

It reminds me of a period in my previous career when a boiler was being inspected. We had all observed for a long time that the boiler behaved as it was supposed to, and pressure did not rise above a certain point. It had been inspected regularly for years. When a new inspector came along, the boiler was dismantled, the gauge was dismantled, and it was found that there was tissue paper still in the gauge which had stuck the needle at that particular high point, so that it would rise no higher. One would almost feel that there is something like that sticking the index of production.

Can the noble Lord, Lord Champion, say anything about this to us? It is a puzzling matter, and we should be grateful for his guidance in this matter. Can it be that the high level of investment that has been going on in the past few months has not yet had time to work itself through in further production? Can we expect that, as a result of this investment, we shall be seeing a higher level of production in the course of the next few months?

We believed, and still believe, that the gap would start to close about the turn of the year. I understand from the Government's White Paper that they think that also, but they consider that it will not close enough for the purposes of the strength of sterling. In spite of that belief, Mr. Maudling thought it right, as he put it, to have all the possibilities of import restrictions and export subsidy re-examined, in case it should be necessary to take special measures. In consequence, it was possible for the new Government to take action almost immediately after taking office. That is not to say that they were necessarily right in so doing, or that the measures which they took were the right measures. As has already been said, we have not really the full elements that would enable us to judge this. But let it be said quite openly that there is nothing disgraceful about temporary borrowing to enable expansion to take place.

LORD LINDGREN

Except that we have to pay it back.

LORD DRUMALBYN

Certainly. But there is nothing disgraceful about it. We certainly have to pay it back, as we are paying back loans which were borrowed under the Labour Government in the '40s and '50s.

LORD HOBSON

Not from Japan.

LORD DRUMALBYN

These are facilities which we arranged in order to avoid our having to resort to the old "Stop-Go" method, which is something which we all wanted to avoid.

The noble Viscount, Lord Amory, in a very cogent speech, has questioned whether it is even Possible to avoid such measures altogether. I am bound to say that the lenders have shown a good deal more confidence in this country's ability to correct the present imbalance than the new Government have. I would not blame the new Government at all for playing safe, and not relying on our expectation of a movement in the opposite direction towards the end of the year. But I should blame them if they represented that the measures they have now taken were urgenly needed to prevent economic disaster. I should see that as an attempt to create a myth that they came into office in October, 1964, in the midst of a serious crisis. On the information available to me, I do not believe that that crisis exists.

Obviously, we have balance-of-payment difficulties, but I do not believe that there is a in the sense that the Labour Government are at present making out. They have admitted in their White Paper that, with the facilities available which the previous Chancellor of the Exchequer arranged, the strength of sterling can and will be maintained. It is therefore reasonable to question whether to impose a 15 per cent. surcharge suddenly, and so soon, and after so little examination and reflection, and without Parliamentary sanction, will bring advantages in any way com- mensurate with the harm done to our national reputation.

I repeat that our objective has been to remove obstacles to trade, and to establish rules of fair trading. We have been at pains to set an example in keeping those rules. It will not do to say that the rules are wrong. They may be wrong, but these are the rules; rules to which we agreed, and by which we ought to bind ourselves if we expect others to be bound by them. Are we alone to be free to judge which rules to keep and which to break? The noble Lord, Lord Rhodes, said that there was absolute necessity to act at the present time. It is up to the Government to demonstrate that there was that absolute necessity if they wish us to take that as proved. It is not as if this country is alone in incurring an adverse balance of trade this year. Other countries have faced similar problems, and yet we now make it more difficult for them to sell to us and so improve their adverse balance. It is natural that they cannot be very pleased.

The object was said to be to arrest the tendency of imports to rise and to get exports on an upward trend. The Board of Trade Index shows imports for the third quarter at the same figure as for the second quarter. It is not so much the slight tendency of imports to rise, as the failure of exports to do so that should give us the main concern. So I should like to ask: how will the surcharge get exports to rise? Will not increased production of home goods be needed to replace imports which they will now be able to beat on price? Is it thought that the increased volume will enable British exports to under-sell their competitors abroad? What about machinery? Will machinery which has previously entered the country duty-free because there was no similar machinery made here be exempt from the surcharge? If not, why not? What about chemicals and semi-manufactures, which together are 2.1 times (as I read in the Financial Times) as much as manufactured goods, so far as imports are concerned? In the short term they could not very rapidly be replaced.

If the object was to arrest the tendency of imports to rise, why was it necessary to impose the surcharge on goods which had already been consigned to this country? Would not the bills of lading have shown when the goods were shipped? I believe that if the Government intend to adhere to this surcharge they would get it accepted as much more reasonable and fair if they were able (I do not know whether they are, and I hope that the noble Lord, Lord Champion, will be able to answer this point) to make a concession such as I have suggested. Although, in theory, manufactured goods could be switched to another country, it is likely that the great majority of goods already consigned here would enter. I do not think there can be any doubt whatever about that. The object should surely be not to impose a penalty on goods already shipped, even if it is desirable to reduce further the number of orders placed goods that are going to enter anyway. It cannot affect the amount of imports entering this country. The only possible way—I again come back to this point—is to make British industry more competitive abroad. This is the point on which we shall expect to hear most from the noble Lord, Lord Champion.

My Lords, the export subsidies, in so far as they are permissible under the rules of GATT and EFTA, are to be welcomed. But are they of a size to have any effect upon our ability to compete? Will the noble Lord, Lord Champion, say something about that? There is no short cut to becoming competitive. Greater efficiency, more competition through modernisation and better equipment, through better training of management and workers, is the only answer. This is, and must be, a national effort. In seeking to achieve that effort the Government can rely on the fullest cooperation from the Opposition. What I do beg them to do is to discard everything that is irrelevant to the achievement of that objective.

6.35 p.m.

THE MINISTER WITHOUT PORTFOLIO (LORD CHAMPION)

My Lords, this is my maiden speech from this Box, and although not without experience of Boxes on both sides of the Table in another place, and from the Opposition Box here in this House, I feel strangely naked. I have not even a Portfolio to cover my nakedness. But I will do my best, and I start by craving your Lordships' indulgence, as did my noble friend Lord Rhodes to-day.

It falls to me, in winding up, to congratulate him on his maiden speech in this House and at the Box. It was my pleasure many times to listen to the noble Lord, Lord Rhodes, when he was Hervey Rhodes in the other place, and always, as to-day, I would say that his speeches were imbued with sound common sense and the knowledge that comes from being a successful businessman. I must say that I regard his appointment here as an inspired one. It is customary always for us to say that we hope we shall have the pleasure of listening to the noble Lord on many future occasions. When I hear this I always think that this is a direct intervention, often given with tongue in cheek, because my experience of politicians is that there is nothing they hate so much as listening to another politician, especially when they themselves are waiting to make a speech. Despite all this, I am sure we shall welcome the future interventions of my noble friend Lord Rhodes, and I am sure the House will listen to him the more readily because of his speech here to-day.

The noble Lord, Lord Thomson of Fleet, has also, I would say, made a speech of truly outstanding merit. I was delighted to be reminded of his Commonwealth backbround, and I agree with the noble Lord, Lord Boothby, that we should delight in having more Commonwealth representatives here, especially if they were of his quality. The noble Lord gave us some sound words on business management and its failures in all too many cases, but he quite rightly mentioned the fact that there are some successes in management which ought to be emulated by those which are not so successful. I welcomed his speech, and, despite anything I have said about our not really liking other people's speeches, I shall look forward to his future interventions in this House.

The noble Lord could say again and again much of what he has said to-day. Even as a trade unionist—and that is my background—I applaud much of what he said about the trade unions, without, of course, agreeing with everything. Nevertheless, I agree that restrictive practices on both sides of industry must go if the economy of this country is going to do what we want. I am sure we shall be happy to hear the noble Lord again especially on these matters which he so rightly stressed to-day.

May I thank the noble Earl, Lord Dundee, and the noble Viscount, Lord Amory, for their kindly references to myself, for which I am very grateful. I noticed that the noble Earl, Lord Dundee, rather suggested that he thought we ought not to sit here for an interminable period. That is perhaps an understandable sentiment, coming from him, but he was rather kinder than the letter I received from the noble Lord who will speak opposite me on agriculture, who said that he hoped our exchanges would be as courtly as they were in the past for the very short period ahead. I should also like to thank the noble Lord, Lord Carrington, for his brief but kindly reference to myself on Tuesday last.

Before going on to speak about this debate, in particular I heartily endorse what my noble Leader said yesterday about our relations to this House, and as his Deputy it will be my task to support him in treating this House with the respect it deserves; and, while I am a Party politician and a member of a Party Government, I nevertheless recognise that as the Deputy Leader of this House I shall accept the position of being a servant of the House. I am sure that this will be the sort of thing my noble friend will do, and in this I will support him.

My task is to reply, and at not too great length, to a debate which I should say has maintained an extraordinarily high level, the so-t of level that this House can attain when it sets about the job of doing it. But to reply to all the speeches that have been made, and all the points that have been made, is a task which I could not possibly attempt. Despite the invitation of the noble Lord, Lord Drumalbyn, I cannot reply even to all his points, but certainly I will write to him on the major ones, which I do consider important. But if I tried to answer all those speeches in my reply to the debate I should become wearisome to the House, to say nothing of becoming wearisome to myself.

The first thing I would mention is the point made by the noble Earl, Lord Dundee, on the suggestion that my right honourable friends Mr. Wilson and Mr. Brown had charged the last Government with hiding the facts before the Election. I am not going to attempt to reply for them; they are well able to look after themselves. If I am going to charge the late Government with anything, I must charge them with their failure to deal with the situation before the last vital Election. The facts were there; they were known to everybody, and action should have been taken. The drift should not have been allowed to continue, as I believe it did.

LORD CARRINGTON

My Lords, I hesitate to interrupt the noble Lord, but if the facts were known to everybody, why does the Prime Minister accuse Mr. Maudling of having concealed them?

LORD CHAMPION

My Lords, the facts were certainly known to the Government. I cannot answer for anything the Prime Minister has said. I agree with what the noble Earl, Lord Dundee, said about this: that of course we had seen these things published as a result of the Government papers; of course we had. If I had any charge to make it would be that the whole thing was played down in the newspapers which were opposed to our Party; and played down for electoral advantage.

THE EARL OF DUNDEE

But I think Mr. Maudling referred to these matters in his Press conferences in public, as well as repeatedly in speeches throughout the Election.

LORD HAWKE

My Lords, I think that Mr. Maudling the whole time expected the export figures to be improving. As a member of the general public with some little knowledge of these things, I expected every month's export figures that came out to be up, and so did he, and that is where the disappointment arose.

LORD CHAMPION

He was disappointed and so were we, but we did not have the extent of the borrowing going on in order to try to keep the economy running at a certain level revealed until after the Election. The noble Earl, Lord Dundee, and the noble Viscount, Lord Amory, talked about the precipitancy of the action of the Government in imposing this 15 per cent. import charge. I have nothing to add to the statements of the noble Lord, Lord Rhodes, to-day and the noble Lord, Lord Walston, yesterday. The fact is that some such action was necessary in the circumstances and this shock action was taken, I think rightly taken, by the Government very quickly after it came into office.

The noble Earl, Lord Dundee, made a suggestion that we had somehow been hiding our intention to nationalise steel. I am rather surprised at this considering the fact that to renationalise steel has been our stated policy ever since the Government of 1951 to 1955 wrongly, I think, denationalised steel. We did not hide this in the debates at that time. We made our declaration quite clear and we have ever since made it clear to every one concerned that if and when we came to power we would renationalise the steel industry. I am not going to go deeply into this matter of the steel industry today, for clearly we shall have an occasion upon which to debate this before very long. I do not think there is any doubt at all that legislation will be forthcoming during this Session of Parliament which will nationalise steel. If noble Lords wish something more on this, they will see that yesterday my right honourable friend the First Secretary of State made a pronouncement on steel which for the time being is, I think, as much as one could expect from the Government. I am not going to repeat it here to-day, although of course I have its terms immediately before me.

I should like particularly to refer to the point of the noble Lord, Lord Brocket (although I do not see him here), about the Anglo-Irish Treaty. Because of the fact that there is a meeting being held to-day between the Prime Minister and the Prime Minister of the Irish Republic, a meeting intended to bring out a discussion of the problem of the imposition of import charges on our Irish imports, it would be clearly unwise for me to comment on what he said. But of this I am sure: my right honourable friend the Prime Minister will have brought to his notice the well-informed speech of the noble Lord.

I am not going to go over the whole of the background to this position we find ourselves in to-day and of the decision to issue a White Paper and impose the 15 per cent. import charge. My noble friend Lord Rhodes developed this. I must mention that our experience this year, both in imports and exports, shows very clearly that the basic trouble with our economy is that in too many cases our industry is uncompetitive. A healthy growth of exports is the vital achievement towards which we must work. The actual task of exporting must finally rest on firms which produce the goods which we can and ought to sell abroad. In this the Government can play a vital role in establishing the economic conditions which will do most to foster the growth of exports.

Although it might now be called a dirty word, there have been "Stop-Go" policies during the past decade. These were short-term palliatives which cured the balance of payments at the expense of much waste of resources. These policies discouraged investment in the technical changes needed to keep our industry in the forefront of development and progress. Therefore, they contributed to our lack of competitiveness in the international field. The Government pledge a new approach to these problems. We will not take refuge in holding down our growth rate below that of all our major competitors, as did our predecessors.

I recognise the wisdom of the words of the noble Lord, Lord Melchett, in this, that to some extent the league tables have to be viewed with suspicion. Perhaps he would do me the honour of looking at the report of an economic debate of last year when I said precisely this—that one has to look at the particular figures that appear in this so-called league table as the background to some of the advances that were made by some of the countries. Nevertheless, I think that the words of the noble Lord, Lord Thomson of Fleet, indicate that there are some serious shortcomings within our economy. I am sure that the noble Lord, Lord Melchett, would agree here with both the noble Lord, Lord Thomson of Fleet, and myself. Both in management and in the trade unions there are restrictive practices which simply must go. If they do not, our chance of achieving the sort of thing that we seek to achieve will be virtually impossible. We found a serious situation requiring urgent and decisive action, and first we had to take an emergency measure. As your Lordships all know, this emergency measure was the imposition of the 15 per cent. charge on all imports excepting foodstuffs, tobacco and raw materials. This really is an emergency measure. It cannot be stressed too often that this is the case. Somehow, the import bill had to be cut, and cut quickly.

These import charges have inevitably attracted a great deal of criticism from individual industries within this country, and from overseas countries, and also, to a small degree, in this debate to-day. My defence against these criticisms is a simple and, I think, compelling one. We cannot, and could not, afford to continue the present rate of imports. If the present balance-of-payments deficit of £700 million to £800 million were allowed to continue, our gold reserves would be exhausted and the pound would collapse. We did not like imposing this 15 per cent. import charge, but it simply had to be done. Desperate diseases require desperate remedies, and our balance-of-payments problem had become truly desperate. If there are better ways of solving this problem in the short term, we shall be glad to learn what they are. But I have listened attentively to this debate to-day, and I have not heard a single suggestion which could be regarded as a remedy, or something that could have been used as a remedy, for the situation that we had to face on coming in to Government.

The Government explored the idea of quantitative restriction, but this would have involved an unacceptable delay, and it would also have involved a much more serious interference with trade over a narrower field which is susceptible to quota restrictions. Perhaps I am wrong in this—because, after all, I am talking about a most knowledgeable noble Lord—but I cannot agree with the noble Viscount, Lord Amory, that the effect of the import charge will necessarily be inflationary. Indeed, I think that it will be, disinflationary. To some extent it will have the effect of running down existing stocks which have been purchased by businessmen over the past twelve months, and it will, I think, cause a deferring by consumers of their purchases. I think. this will have the effect of introducing some disinflationary element, rather than an inflationary element. But, of course, this has yet to be seen. But in this matter the Government think that this may well be the case.

In all this business of the import charge and its imposition, the Govern- ment carefully considered their international obligations and came to the conclusion that a temporary—and I cannot use the word "temporary" too often—import charge would be the least damaging to international trade of all the courses open to the Government in the short term to deal with the economic situation we face. The loss of reserves, with its disastrous consequences, just had to be faced, and faced quickly.

The other important decision announced in the White Paper was the decision to relieve exporters of some part of the burden of indirect taxation which enters into their costs. By contrast with the import charge, this relief for exporters is a permanent measure, and it falls within the framework of our international obligations. We expect that this reform will help to remove one of the obstacles to our exports. The 1½ per cent. rebate looks small but will help exporters, although it will cost the Exchequer something like £70 million per annum. This loss of revenue will be well worth while if it does, as we think it will, give a powerful boost to our exports.

So much, my Lords, for the short-term measure. I agree with the noble Viscount, Lord Amory, that the short-term policy may well have some unfortunate effects unless, in the long term, the measures that we propose succeed. The long-term measures decided upon by the Government have been outlined in the White Paper. They are designed to release to the full the country's economic potential. They are designed to set about exploiting the genius of our scientists, our technicians, and the resourcefulness of our managers, and improving the overall efficiency of our labour force. To bring this about it has been necessary to set up two Ministries to meet the needs of an expanding science-based economy. On the one hand, the Department of Economic Affairs will develop growth policies designed to avoid the "Stop-Go" of our predecessors and to stimulate economic activity throughout all the regions of the United Kingdom; and, on the other, the Ministry of Technology will help to bring the untapped potential of our scientists to the forefront of our drive for higher productivity.

We recognise, as many noble Lords have done to-day, that there are serious obstacles in the way of a faster rate of growth. The first that I must mention is that of the immoblity of labour. Here we are confronted with a great human problem which must be treated with realism, and above all with compassion. In this, compensation for loss of security in employment would play a large part. This would involve severance payments, and I was glad that the noble Lord, Lord Thomson of Fleet, mentioned this particularly in his speech to-day. I must admit that when I was a wage-earner the thing I feared most was the loss of employment—in days when, of course, severance payments were never thought of.

But, despite severance payments, the loss of employment, the shifting of the home, will still be something of a tragedy for those whom it affects. It will be our job to do everything in our power to ensure that we lessen the effect of the blow on those who will have to suffer as a result of the changes in industry which we shall simply have to bring about. We also say that we shall improve the transport grants on removals. The thing which I also think is extremely important is that we shall have to increase the already existing provision to enable men to change from one skill or craft to another. As a start, the training centres are to be increased to step up the annual output to about 12,000. In all this we expect the industrial training boards set up under the last Government's Act to be helpful. I support the plea of the noble Lord, Lord Bracket, that we must proceed to a more rapid development of the underemployed areas. We are setting up a strong regional planning unit in the new Department of Economic Affairs to work with the new regional interests.

I must turn for a brief moment to the fields which attract more publicity than those I have already mentioned—namely, Government expenditure and an incomes policy. On Government expenditure, this is a matter of deciding priorities, and this applies to all expenditure. Whether it is on the Concorde or whether it is on anything else, we must examine on the lines: "Is this the right priority?"; "Is this the right thing to do in the existing circumstances? This examination is proceeding, and I hope that as a result we shall establish priorities which are right for the country in the circumstances of our times.

Finally, on incomes policy, I welcome the words of the noble Viscount, Lord Amory, on this subject, but I feel I cannot do better in this regard than to refer to the remarkably fine speech of my noble friend Lord Williamson on Tuesday last, a speech which was not only very much to the taste of the House but which was also to my own taste; for with him, have spent much of my life in the trade union movement. To plan any economy must necessitate the planning of the growth of incomes, but it is impossible to say at this stage the precise form which the discussions will take. The precise form of the system to be adopted to bring about an incomes policy will actually emerge from the discussions that are now taking place. I agree with the noble Lord, Lord Drumalbyn, not only that we have to endeavour to secure that the trade unions and employers get together, but also that the Government shall co-operate with any body which is set up by these organisations to ensure that taxation and other measures run parallel and help this whole business of an incomes policy.

What is clear to me is that an incomes policy must be socially just and adjustable to economic priorities. It must apply to all forms of income. And in all this prices have a crucial role to play, and the Government intend, as the noble Lord, Lord Drumalbyn, has said, to set up a Price Review Body. I cannot give him any more information on this subject at this time. We have had only ten days or so in government, and it is a little early to have finally decided the form, but the intention is clearly expressed in the gracious Speech and it will be carried out.

THE EARL OF DUNDEE

My Lords, can the noble Lord tell us whether this body will replace N.I.C., or will they both exist together?

LORD CHAMPION

I was talking of a price review body related to prices. The noble Earl has gone back to incomes policy. I should not like to say at this stage whether or not some other form of N.T.C. is to be developed. Something will clearly have to take its place, but something which is acceptable to both sides of industry and to the Government. This is the point that matters here.

Thirdly, while realising that an incomes policy is vital to the, sustained growth of the economy, the Government also realise that the chance of achieving success in this field would be seriously prejudiced if the Government were to check the rate of economic expansion. I agree with the noble Earl, Lord Dundee, that all these things hang together. You cannot separate one bit from all the rest. In all this the Government do not regard the attainment of higher productivity as merely a question of having more to distribute. We do not believe in productivity for productivity's sake. What we are seeking is a very much higher degree of productivity it is true, but our effort is designed to ensure that such economic efficiency as we manage to attain is used for humanitarian social needs, for without those ends in view our reason for being on these Benches will be lost.

EARL JELLICOE

My Lords, on behalf of my noble friend, I beg to move that the debate be now adjourned until Tuesday next.

Moved accordingly, and, on Question, Motion agreed to.