Lords Sitting of 3 August 1965

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

MESSAGES FROM THE QUEEN
2.35 p.m.
LORD COBBOLD: My Lords, I have the honour to present to your Lordships two Messages from Her Majesty the Queen, signed by her own hand. The first Message is as follows:
"I have received your Address praying that the European Space Research Organisation (Immunities and Privileges) Order 1965 be made in the form of the draft laid before your House.
"I will comply with your request."
The second Message is as follows:
"I have received your Address praying that the European Launcher Development Organisation (Immunities and Privileges) Order 1965 be made in the form of the draft laid before your House.
"I will comply with your request."

THE WOOLSACK
2.36 p.m.
LORD HURD: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether, in view of the fact that the Woolsack in this House was last refilled as long ago as 1938, and on that occasion wool given by the woolgrowers of Australia, New Zealand and South Africa was used, consideration will now be given to restuffing the Woolsack with wool produced entirely within the Commonwealth, including the United Kingdom.]
THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR COMMONWEALTH RELATIONS AND FOR THE COLONIES (LORD TAYLOR): My
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Lords, the interior condition of the Woolsack, even after 27 years' wear, is quite satisfactory. Although I have not personally inspected the contents of the Woolsack, Her Majesty's Government understand from those who are qualified in these matters that the contents are wearing well, and that even after 27 years they do not need renewal. No complaints have been received from noble Lords who have sat on it during that period. The reason why it was refilled in 1938 was that it was discovered that the stuffing was horsehair, and not wool at all. When the time comes to refurbish the Woolsack, Her Majesty's Government will be happy to act upon the noble Lord's suggestion.
LORD HURD: My Lords, may I thank the noble Lord for that informative reply? May I take it that he agrees that, as right from the earliest days the Woolsack has stood for the importance of the wool trade in England, it is only appropriate that wool produced in this country, in Scotland and in Wales should be included in the Woolsack? Would Her Majesty's Government consider an offer from the British Wool Marketing Board to supply wool from England, Scotland and Wales, and also to collect wool from other Commonwealth countries—including a small one that I happen to know well, the Falkland Islands—so that we really have an all-Commonwealth Woolsack? If the British Wool Marketing Board would see to that, and would also have it restuffed at their cost, would that be acceptable to Her Majesty's Government?
LORD TAYLOR: My Lords, it would indeed be acceptable to Her Majesty's Government. The Woolsack has at present a wooden frame inside it, as well as the wool, and a certain amount of horsehair on the outside of that, which is necessary for comfort. I should just remind the noble Lord that the number of Commonwealth countries which produce wool is quite substantial, and includes not only the portions of the United Kingdom but also Australia, New Zealand, Canada, Kenya, Cyprus, India and Pakistan, and the Dependencies Bechuanaland, Basutoland and Swaziland.
VISCOUNT DILHORNE: My Lords, the noble Lord referred to the condition of the Woolsack. Is he aware that in 1964, at least, there was the need for a

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certain amount of refilling—it had sunk a little? Perhaps that has been made good since that time with horsehair or wool.
LORD TAYLOR: My Lords, I knew it had been restuffed slightly in 1950, but I did not realise that the noble and learned Viscount had himself made a deep impression on it.
EARL FERRERS: My Lords, could the noble Lord give an assurance that the Government Front Bench is not stuffed with a similar material?
LORD TAYLOR: Yes, my Lords.

IMPORTATION OF SMALL ANIMALS
2.38 p.m.
THE EARL OF IDDESLEIGH: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether in future they will consult the Nature Conservancy before issuing licences for the importation of small animals of foreign origin.]
THE PARLIAMENTARY SECRETARY, BOARD OF TRADE (LORD RHODES): My Lords, the Board of Trade already consult the Advisory Committee established under the Animals (Restriction of Importation) Act, 1964, before issuing import licences for animals listed in the Schedule to the Act. A representative of the Nature Conservancy attends the meetings of the Committee.
THE EARL OF IDDESLEIGH: I thank the noble Lord for that reply.
LORD HURCOMB: My Lords, may I ask the noble Lord who has just replied whether he is aware that, in their Annual Report for 1962, the Nature Conservancy issued a statement of policy about the introduction of exotic species, whether animal or plants, and drew attention to the great danger that might occur through the introduction of even apparently harmless species?
LORD RHODES: My Lords, that in itself is one advantage of having the Nature Conservancy represented on the Advisory Committee.
THE EARL OF DUNDEE: My Lords, will the Government allow entry to at least the relatives and dependants of those small animals who are already here?

THE FORESTRY COMMISSION
2.40 p.m.
LORD HURD: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether the appointment of the reconstituted Forestry Commission has been completed, and when a statement will be made on the functions of the new Commissioners.]
THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF LAND AND NATURAL RESOURCES (LORD MITCHISON): My Lords, the appointment of the reconstituted Forestry Commission has not yet been completed. It is expected that it will be completed shortly, and the names will then be announced. No change is proposed in the functions of the Commissioners, except as already explained by my right honourable friend in another place. The matter was dealt with in another place mainly in an Answer given on May 10, 1965, and there was also a reference to it during the debate on the Eighth Special Report from the Estimates Committee, which was printed on May 4, 1965. It would take rather a long time to give even a summary of what was said.
LORD HURD: My Lords, I thank the noble Lord for that Answer. Is it not regarded as a matter of some urgency that the marketing functions of the Forestry Commission should be strengthened? That, as I understand it, was one of the purposes of reconstituting the Commission as a whole. And is it not important that private timber growers, as well as Government foresters, should have the benefit of this strengthened Commission, particularly on the marketing side, as quickly as possible?
LORD MITCHISON: It is certainly important that the best people should be appointed as soon as possible. I think the name of the chairman, a prominent businessman, has already been announced. And I am quite certain that my right

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honourable friend will bear in mind, particularly in matters of this sort, the need to get the best advice, from whatever source it may come.

CITIZENS' ADVICE BUREAUX AND CONSUMER COMPLAINTS
2.43 p.m.
BARONESS BURTON OF COVENTRY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government what progress has been made in the provision of technical advice for dealing with consumer complaints referred to the offices of the Citizens' Advice Bureaux.]
LORD RHODES: My Lords, I understand that the National Citizens' Advice Bureaux Council are currently reviewing the progress which has been made in developing the Bureaux' consumer advisory service and are considering what further facilities may be desirable. When this review is complete the Council will no doubt have further discussions with the Board of Trade.
BARONESS BURTON OF COVENTRY: My Lords, in thanking my noble friend for that Answer, may I ask him whether he is aware that the position at the moment, since this technical advice is not available, seems to be that the staff at the headquarters of the Citizens' Advice Bureaux are being asked to decide matters for which they have not the technical competence, and that, as a result, an unfair burden is being placed on them? Would the noble Lord bear this in mind when he is considering this matter?
LORD RHODES: Yes, my Lords, of course. But as the Citizens' Advice Bureaux are within two months of coming to a conclusion about their requirements, I think that I had better not commit myself.

BUSINESS: THE SUMMER RECESS AND PROROGATION
LORD SHEPHERD: My Lords, at a suitable moment after 3.30 p.m. there will be two Statements. The first will be made by my noble friend Lord Walston, on the White Paper on the work of the Ministry of Overseas Development, and the second will be made by my noble friend the Leader of the House on awards to industry.
May I also announce that it is proposed that this House should resume after the Summer Recess on Tuesday, October 26? It is expected that Prorogation will take place during the week beginning Monday, November 1, and that the opening of the new Session will be on Tuesday, November 9.

REGISTRATION OF BIRTHS, DEATHS AND MARRIAGES (SCOTLAND) BILL [H.L.]
2.47 p.m.
Order of the Day read for the consideration of the Commons Amendments.

COMMONS AMENDMENTS
[The references are to Bill [107] as first printed for the House of Commons.]
Clause 1, page 1, line 17, leave out ("without prejudice to that generality") and insert ("subject to that general duty")
Clause 1, page 1, line 19, after ("utility") insert ("and efficiency")
Clause 1, page 1, line 22, leave out from ("containing") to ("of") in line 23 and insert ("the numbers")
Page 2, line 1, leave out ("last preceding") and insert ("to which the report relates")
Clause 3, page 2, line 24, leave out subsection (3) and insert—
("(3) The Registrar General may, with the approval of the Secretary of State, direct that any other premises shall be used for the deposit of any registers or records in the custody of the Registrar General by virtue of this or any other Act, and such premises, so long as they are so used, shall be deemed for the purposes of the last foregoing subsection to be part of the General Register Office.")
Clause 4, page 2, line 39, after ("Act") insert (", including salaries or remuneration of officers appointed by him,")
Clause 6, page 3, line 18, after ("with") insert ("the")
Clause 6, page 3, line 20, leave out ("or dates")
Clause 7, page 4, line 16, at end, insert ("(in this Act referred to as 'senior registrars')")
Clause 7, page 4, line 45, leave out ("those functions") and insert ("his functions under this or any other Act")
Page 5, line 42, after ("authority") insert ("after consultation with the Registrar General")
Page 6, line 2, at end, insert (", or any person who, but for such service of his as may be so specified, would be such a person, officer or servant as aforesaid,")
Page 6, line 2, line 25, leave out ("may be prescribed for that appointment") and insert ("the Registrar General may from time to time determine")
Clause 8, page 6, line 33, leave out ("strong fire-resisting boxes") and insert ("fireproof safes or cabinets")
Page 7, line 11, leave out ("or strong box") and insert (", safe or cabinet")
Clause 10, page 7, line 35, leave out ("register boxes") and insert ("safes, cabinets")
Clause 10, page 7, line 40, leave out ("power") and insert ("control")
Clause 14, page 9, line 17, leave out first ("and") and insert ("or")
Clause 14, page 9, line 17, leave out second ("and") and insert ("or")
Clause 14, page 9, line 22, leave out from beginning to ("twenty-one") and insert ("within")
Clause 15, page 10, line 9, leave out ("before the expiration of") and insert ("within")
Clause 21, page 13, line 38, after ("shall") insert (", so far as applicable,")
Page 14, line 9, after ("that") insert ("to the best of his knowledge and belief")
Clause 23, page 15, line 35, leave out ("before the expiration of") and insert ("within")
Clause 31, page 19, line 41, after ("her") insert ("within eight days from the date of service of the notice")
Clause 31, page 19, line 42, leave out from ("registrar") to end of line 44
Page 20, line 3, leave out ("before the date specified therein")
Clause 37, page 22, line 6, after ("payment") insert ("to him")
Clause 38, page 22, line 21, after ("payment") insert ("to him")
Clause 38, page 22, line 30, after ("payment") insert ("to him")
Clause 40, page 22, line 39, at beginning, insert ("Subject to the following subsection,")
Clause 40, page 22, line 42, leave out from ("certificate") to ("shall") in line 43
Clause 40, page 22, line 44, at end, insert—
("(2) An abbreviated certificate based on information contained in the Adopted Children Register maintained under section 22(1) of the Adoption Act 1958 shall be in such form as may be prescribed, shall not include any reference to adoption, and may be obtained only from the Registrar General.")
Clause 42, page 23, line 22, leave out subsection (2)
Clause 42, page 23, line 42, leave out ("clerical error") and insert ("such type of error as he may specify")
Clause 43, page 24, line 10, leave out ("or") and insert (", and, without prejudice to the provisions of section 24 of the Adoption Act 1958 relating to the giving or taking of a new name,")
Clause 43, page 24, line 12, leave out ("the Adoption Act 1958") and insert ("that Act")
Clause 43, page 24, line 16, leave out ("before the expiration of") and insert ("within")
Clause 43, page 24, line 20, leave out ("before the expiration of") and insert ("within")
Clause 43, page 24, line 26, leave out from ("if") to ("in") and insert ("the name was changed or given otherwise than")
Clause 43, page 24, line 39, at end, insert ("; in this definition, in the case of an adopted child, the references to the father and mother or to the parents of a child shall be construed as references to the adoptive parents of the child.")
Clause 44, page 27, line 16, after ("extract") insert (", or in any abbreviated certificate of birth,")
Leave out Clause 47
After Clause 47, insert the following new clause—
Search of parochial registers, &c, and provision of extracts therefrom
(".On payment to him of such fee or fees as may be prescribed, the Registrar General shall at any time when the General Register Office is open for that purpose—

(a) cause a search to be made of the aforesaid parochial registers or any copies or indexes thereof on behalf of any person or permit that person to search the registers, copies or indexes himself, and

(b) issue to any person an extract of any entry in the said registers or copies which that person may require.")

After Clause 47, insert the following new clause—
Decrees of court altering status
(".Where a decree altering the status of any person has been granted by any competent court the clerk of court shall where no appeal has been made against such decree, on the expiration of the time within which such an appeal may be made, or where an appeal has been made against such decree, on the conclusion of any appellate proceedings, notify the import of such decree in the prescribed form to the Registrar General who shall thereupon cause an appropriate entry to be made in the Registrar of Corrections Etc.")
Clause 51, page 28, line 33, after ("be") insert ("served").
Clause 52, page 29, line 44, leave out ("which") and insert ("if such reproduction").
Schedule 1, page 33, line 18, leave out paragraph 3.
Schedule 2, page 35, line 12, at end, insert—

("2 & 3 Geo. 6. c. 34.

The Marriage (Scotland) Act 1939.

Section 1(5).")

Schedule 2, page 35, line 16, at end, insert—

("7 & 8 Eliz. 2. c. 5.

The Adoption Act 1958.

In section 22(6) the words 'with regard to the registration of names given in baptism or without baptism after registration of birth and'.")

THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR SCOTLAND (LORD HUGHES): My Lords, I beg to move that the Commons Amendments be now considered. I shall propose to your Lordships in due course that these Amendments be taken en bloc, but it may be for the convenience of the House if at this stage I say a few words about some of the Amendments. Generally speaking, the Amendments are of a drafting nature; but there are one or two exceptions to which I think it would be proper to make some particular reference.
Amendment No. 11 (to Clause 7, at page 5, line 42) really arises from an Amendment moved by the noble Lord, Lord Drumalbyn, when the Bill was being considered in your Lordships' House. At that time he proposed that the words "with the consent of the Registrar General" should be inserted in Clause 7(10). At that time I was not in a position to accept the Amendment, because it was a matter for the normal Whitley negotiation machinery. It was felt, however, that there was quite some useful purpose in the Amendment suggested by the noble Lord, and the opportunity was accordingly taken in the interval to have discussions. As a result, it became clear that an Amendment, not quite in the terms of the original one but moving quite a long way towards it, would not meet with any objection from any of the local authorities. The Amendment which is now before your Lordships' House, which was accepted in another place, obliges the local registration authority to consult with the Registrar General before determining the remuneration and allowances. I think it will commend itself, in particular, to the noble Lord, Lord Drumalbyn.
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Amendments Nos. 12 and 13 (also to Clause 7, at page 6) are, perhaps, typical of one or two others. When the Registrar General and his staff started the work of drafting out the regulations which will be necessary under this Bill, they found that in certain respects the Bill did not in fact do all that is necessary to enable the regulations to be put out in the most suitable form. Amendments Nos. 12 and 13, are two which flow from this particular set of circumstances; and I would draw your Lordships' attention to them. Amendment No. 12 ensures that compensation will be payable to any of the registrars' staff who may be called up for National Service. Amendment No. 13 removes the need to prescribe qualifications, which would thereby become mandatory, and gives the Registrar General discretion to vary or modify de sirable qualifications where that is necessary. The particular field where this arises is where part-time registrars are needed and where it is not always possible to get people with the minimum qualifications who are within the prescribed age limits. It is sometimes necessary to appoint a man over the age of 60. I may say, in passing, that it is not intended to depart from the other two minimum qualifications, which are that the registrar should be of good character and be able to write legibly.
The next Amendment to which I wish to draw your Lordships' attention is Amendment No. 23, which is to Clause 21, at page 14, line 9. This relates to a declaration about a still-birth. As the Bill was worded when it left this House it placed an obligation in relation to the declaration of a still-birth, which could be reasonably made by a medical practitioner or a certified midwife, but perhaps was beyond the competence of anyone else. The Amendment, by inserting the words "to the best of his knowledge and belief" gives a qualification which is desirable where the declaration must be made by someone who does not fall within one or the other of these two categories to which I have referred.
Amendment No. 33 (to Clause 40, at page 22, line 44) inserts a provision about the giving of an abbreviated certificate in relation to adopted children. This is something which has been done for some years, but it is not absolutely certain that within the Registration Acts there is

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statutory authority for the giving of this abbreviated certificate. It was felt in another place that the opportunity should be taken to make the position absolutely clear, although I believe that the noble Lord, Lord Drumalbyn, may say that there is, in fact, some authority in the Adoption Acts.
The next Amendment in which I think that your Lordships would be particularly interested is Amendment No. 44—the new clause relating to search of parochial registers. The effect of the new clause, in place of Clause 47, which was inserted by this House and deleted in another place by Amendment No. 43, is to bring it into line with Clauses 37 and 38; that is to say, the search of parochial registers may be made by the staff of the Registrar-General's Department as well as by the applicant. As Clause 47 was worded, there was no specific authority given to the staff to make such search, whereas where postal application was made, the search could be made only by a member of the staff. There are other circumstances in which it would be desirable that the staff should make the search in relation particularly to valuable old parochial registers, where it is necessary to make absolutely certain that they are in the same condition at the end of the search as they were at the start.
Finally, Amendment No. 45 refers to another new clause inserted in another place which makes provision for an intimation to the Registrar-General of decrees altering the status of any person to be made in the prescribed form by the clerk of the court. This links with some modifications of substance to subsection (5) of the Act of 1855 which was not adequately covered in the Bill as it left your Lordships' House. I do not think it is necessary for me to make particular reference to any of the other Amendments made in another place. I beg to move.
Moved, That the Commons Amendments be now considered.—(Lord Hughes.)
THE LORD CHANCELLOR (LORD GARDINER): The Question is, That the Amendments be now considered. There will, of course, be an opportunity for any noble Lord to move that this House doth agree, or doth not agree, with the Commons in their Amendments.
LORD DRUMALBYN: My Lords, I think it only necessary for me to thank the noble Lord, Lord Hughes, for his explanation, and to say that, for my part at any rate, I express a welcome to all the Amendments from another place.
On Question, Motion agreed to.
LORD HUGHES: My Lords, with the leave of the House, I beg to move that this House doth agree with the Commons in their Amendments, 1 to 50, en bloc.
Moved, That this House doth agree with the Commons in the said Amendments.—(Lord Hughes)
On Question, Motion agreed to.

JUDGES' REMUNERATION BILL
2.55 p.m.
Order of the Day for the Second Reading read.
THE LORD PRIVY SEAL (THE EARL OF LONGFORD): My Lords, this is a short but important Bill. It raises the salaries of the higher Judiciary of England, Scotland and Northern Ireland by 25 per cent. and increases the salary and pension payable to the Lord Chancellor. The Bill also raises the maximum number of Judges who may be appointed to the High Court in England. I say that this is an important Bill because the superior Judiciary, as we must all agree, is one of the vital components of our society; the Judges discharge functions which call for the highest qualities of character and intellect, together with great learning, and it is upon the maintenance of these very high standards that the whole fabric of our civil liberties in this country depends. It is right that Parliament should see that these offices of immense importance are properly rewarded.
I do not imagine that anyone would quarrel with that very general proposition. Your Lordships will, however, undoubtedly be anxious to ensure that the increases proposed by the Bill are as correct as they can be made. I know that a measure to increase salaries is often unpopular with everybody else, and that, whenever it may be introduced, it is always possible to find reasons for saying that the moment is inopportune. Nevertheless, the Government are convinced

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that the Judges' salaries should be increased and that the amounts we are now proposing are right.
The most important provision in this Bill is Clause 1, which provides for the increased salaries, the amounts of which are set out in Schedule 1. The House will see that these increases are substantial; with one exception they amount to 25 per cent. of the salaries fixed by Parliament in 1954. The House may remember that when that measure was passed, it represented the first increase in the salaries of the High Court Judges for over 120 years; it is now over 11 years since those salaries were raised and (since this part of the Bill does not come into force until April 1 of next year) there will have been a 12-year interval since the last increase. As the House will see, apart from the salary of the President of the Probate Division, the new salaries all represent a 25 per cent. increase on the existing salaries, thus a High Court Judge in England, who at present receives £8,000 a year will receive £10,000, and Lord Chief Justice, whose salary is now £10,000 a year, will go up to £12,500. Corresponding increases are made to the salaries of the Lord President and the other Judges of the Court of Session and of the Lord Chief Justice and other Supreme Court Judges in Northern Ireland. The Bill also raises by 25 per cent. the salaries payable to the Lords of Appeal in Ordinary who discharge the judicial duties of this House.
It might appear to some of your Lordships that an increase of 25 per cent. is not in line with the Government's current policy of restricting salary increases to 3½ per cent. This is a fallacy, however plausible at first sight, because the 3½ per cent. "norm" refers to an annual increase, while the Judges' salaries will have remained static for 12 years. Over that period, a total increase of 25 per cent. represents a compound annual rate of 1·9 per cent., so that, far from exceeding the norm, the proposals contained in the Bill are well within it. Moreover, I should point out to the House that since 1954 not only has the cost of living risen considerably, but wage rates have gone up 59 per cent. and salaries 65 per cent. The House will readily appreciate that, if judicial salaries had been increased by anything like these amounts,
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the figures in Schedule I would be very much greater. I do not want to press that point too much. We must recognise that the amounts fixed 11 years ago were not intended at that time to be subject to annual increases and it would not therefore be altogether fair to make a strict comparison with other salary increases over that period. The Government recognise, as every sensible person must, that it is not at all easy to formulate the criteria by which judicial salaries, or for that matter, any other salaries, should be assessed, or to translate those criteria into figures. I think we all recognise that the status of a High Court Judge in England or his equivalent in Scotland or Northern Ireland, should place him in a position of recognised significance in the community, and that he should certainly at the very least be shielded from financial difficulties. Taking all these and other considerations into account, the Government have come to the conclusion that the increases proposed by the Bill are right.
Before I leave Clause 1, I ought to deal very briefly with two other matters. First, your Lordships will see from Schedule 1 that it is proposed that the President of the Probate Division should have a salary equal to that of the Master of the Rolls. The second point arises on subsection (3), from which the House will see that it is proposed that in future judicial salaries should be capable of being increased (but not decreased) by Order in Council, following Affirmative Resolutions of both Houses; hitherto, an Act of Parliament has always been needed and that is why this Bill is now before the House. But the fixing of salaries by Act of Parliament leads to inconvenience and injustice: apart from Ministers of the Crown, I think I am right in saying that no salaries other than those of the Judges are nowadays fixed by Statute. At the same time, the procedure proposed by subsection (3) ensures that Parliament will maintain its control over judicial salaries; it will not, however, have to devote quite so much time to their consideration.
I hope I can take the rest of this Bill quite shortly, although I will, of course, do my best to answer any questions on points of detail that noble Lords may raise. Clause 2 raises the salary of the Lord Chancellor from £12,000 a year to £14,500 and his pension from £5,000 to

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£6,250. The House will remember that the Committee under the chairmanship of Mr. Geoffrey Lawrence recommended a number of increases in ministerial salaries, including those of the Lord Chancellor. The Government decided that, although there was a strong case for increasing these salaries, it would be appropriate to accept for Ministers only one-half of what I may call the "Lawrence" recommendations, and this decision was implemented in the Ministerial Salaries and Members' Pensions Act of this year. Clause 2 could very appropriately have been included in that Act, but my noble and learned friend on the Woolsack did not wish his own salary to be increased before those of his judicial brethren. According, Clause 2, which treats the Lord Chancellor in the same way as other Ministers by giving him one-half the "Lawrence" increases in salary and pension, appears in this Bill and takes effect on April 1, 1966.
Clause 3 deals with an entirely different matter. Under the current law, the maximum number of Puisne Judges who may be appointed to the High Court in England is 56; this number is raised to 63 by Clause 3. The noble and learned Viscount, Lord Dilhorne, and other noble and learned Lords will bear me out when I say that the growing volume of criminal and divorce business, coupled with additional pressure in the Chancery Division, makes it urgently necessary for the High Court to be strengthened. The need is undoubtedly urgent; and your Lordships will see that Clause 3 is the only part of the Bill which comes into force immediately. I need not detain your Lordships for more than a very short time on Clause 4, but I ought just to draw attention to subsection (2), under which a judicial salary is abated by the amount of any pension payable to the holder in respect of any public office. This is no new rule for the Supreme Courts of England or Northern Ireland, but the subsection extends it to the Lords of Appeal and the Scottish Judges. There is nothing I need say about Clause 5, save that, as I have already explained, the salary provisions do not come into force until April 1, 1966, while Clause 3 comes into force at once. Nor is there anything in the Schedules about which I need detain the House. I beg to move.
Moved, That the Bill be now read 2ª.—(The Earl of Longford.)
3.4 p.m.
VISCOUNT DILHORNE: My Lords, it is, I think, the custom in your Lordships' House, as in another place, that when a noble Lord has any personal interest in the subject matter of a Bill he should if he speaks declare it. In view of certain observations made in another place, I think I should declare that I have no interest in this Bill. I shall not benefit from its provisions. Of course, the time may come when that may be altered, but certainly I have no benefit at the present moment.
It was as long ago as March, 1964, that in answer to a Question in your Lordships' House, I gave a pledge that, if we won the Election, we should introduce legislation to increase the salaries of the higher Judiciary. We thought then that that should be done. But we were not able to do it that Session. I remember putting forward the suggestion that in future any increases that might have to be made should be made by Order subject to Parliamentary control, rather than by Bill. And I am glad to see that this Bill provides for that. I also remember that I urged that the position of the President of the Probate, Divorce and Admiralty Division should be made the same as that of the Master of the Rolls so far as salary was concerned. It has always been an anomaly that he has been in receipt of a lower salary despite his great deal of administrative work. This change is indeed a good one.
Apart from those two matters, I do not think that there is anything in the Bill which was inherited from the previous Administration. We had not reached any decision as to the increases to be made; I do not think that we had any talks about that. But we did recognise that there was a clear case for an increase in salary. And I must confess that I am very glad that this Government have introduced this Bill.
I understand that the noble and learned Lord the Lord Chancellor is not going to speak in this debate, as he may benefit from the provisions of the Bill. Of course, he will do so only if he holds his present office in April, 1966. While one might admire his confidence, he knows, of course, that we shall do our best to see that that does not happen and that there

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is a change of Government long before then. Seriously, I should like to congratulate the noble and learned Lord on his success in getting this Bill included in the legislative programme for this Session, when so many other Bills which we were promised have fallen by the wayside. I know that it is no easy task for any Lord Chancellor to get his colleagues to agree to a Bill to increase Judges' salaries, and I expect that the noble and learned Lord had some difficulty in getting his colleagues to agree to this Bill and to the increases he proposed.
I was glad to hear the words that the noble Earl, Lord Longford, used at the beginning of his speech, when he spoke about the need to maintain the present very high standards of our Judiciary. We always take pride in the administration of British justice. Yet there are always those who appear to think that, somehow or other, we should get justice on the cheap. If we are to attract the best brains to the Bench it is necessary to provide salaries and pensions commensurate with their high position. Many of those from whom we wish to recruit Judges are earning very substantial incomes, and if they are to be asked to give up those incomes and serve on the Bench, then indeed it is our duty to see that the salaries are right. I do not wish to say anything more about that part of the Bill.
The noble Earl has made it clear that, although the increase works out at 25 per cent. on one basis, in fact it is well below the 3 per cent. annual increase rate. The Explanatory Memorandum says that the total cost of these salary increases will be some £165,000 a year, and when the new limit of judicial strength is reached they will cost a further £70,000 a year. I should like him, if he could, to give a rough estimate of the net increase to the Judiciary, because, of course, a great deal of the money paid out in additional salary will come back to the Revenue. I have heard it estimated that the net cost of these proposals, which look so formidable, is something in the region—it is hard to estimate—of £40,000 to £50,000. That marks our present situation, if the effect of providing a charge on the Consolidated Fund of some £165,000 in fact means an increased burden of the order of some £50,000. No doubt the noble Earl will be able to
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correct me if the estimate I have given is wrong, and I shall be interested to hear what it is.
The other matter the Bill provides for is the number of Judges. In recent years the number of High Court Judges has been increased very greatly indeed. I do not doubt the need to take power to add to their present numbers, but I think we must recognise that there must be some limit to the number to which they can be increased. I very much hope that the noble and learned Lord the Lord Chancellor is exploring ways in which further increases can perhaps be avoided. It is not easy. But I get the impression that trials nowadays are apt to take longer than similar trials used to take; but that may be only an impression. I hope that efforts are being made to see whether ways can be found for accelerating trials, without at the same time affecting adversely the administration of justice. I do not think there is any more that I need say about this measure, but I do in all seriousness extend my congratulations to the noble and learned Lord the Lord Chancellor on his success in getting this Bill before your Lordships' House.
3.12 p.m.
LORD BLACKFORD: My Lords, I am sure we have all appreciated the persuasive and convincing way in which the noble Earl the Leader of the House and the noble and learned Viscount have explained this Bill to us, and it may seem ungenerous to differ from them in any way. But one cannot help remembering that one of the first acts of this Parliament was that Members of the House of Commons voted themselves an increase in salary of nearly 90 per cent., and at the same time your Lordships' expenses allowance was increased by 50 per cent. So perhaps we ought to commiserate with their legal Lordships in that they are being fobbed off with 25 per cent. I take the point put by the noble Earl about their not having had a rise since 1954, and that therefore the percentage rise per annum is as little as he said. But the idea of an absolutely certain annual percentage rise is quite a new one, and it is doubtful whether it can be sustained in the present circumstances.
I cannot help pointing out that when top and privileged people can obtain rises of this very substantial nature it

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does make more difficult the task of those of us who have to control competitive capitalist concerns, where we are urged by the Press and by the politicians, day in and day out, to export more and more, to cut our costs, to become more efficient and so forth. And is it surprising that our workpeople, our salary earners and wage earners, who, after all, constitute the major item in almost every budget, seeing the substantial rises which occur in privileged places, themselves feel that they would like a substantial share, and put in, I will say, for a rise of 12½ per cent.—half that of the Judges? We say to them, "Ah! But Mr. George Brown says that you ought not to have more than 3½ to 4 per cent." "But", they reply, "what's the good of that to us? Since the Labour Government came into office, the cost of living has already risen nearly 5 per cent., and we want not only to maintain our standards but to improve them."
Many of your Lordships must have seen some weeks ago, at the time of the Magna Carta celebrations, a brilliant cartoon by Illingworth, published in the Daily Mail, depicting the Prime Minister seated at a table, with Mr. George Brown, in scholastic garb beside him, regarding ruefully a charter on which is written: "No wage restraint"; around him stands a bevy of trade union barons, and one of them is saying, "You do not have to sign anything, chum. We will just take no notice of you, as usual." Why do we take no notice of Mr. Brown? Is it not because he preaches an unpleasant gospel? Is it not that, if we were to follow his preaching, we should be involved in some self-sacrifice and self-discipline? In other words, is he not preaching at any rate a part of a very unpleasant truth? If there is one thing more certain than another about democracy, it is that it hates hearing an unpleasant truth, until it is frightened. Until then, it derides and mocks and ignores the prophet of gloom. There are many instances of that. Throughout the 'thirties Sir Winston Churchill was derided and largely ignored as a prophet of gloom when he foretold the approach of the Second World War. Yet that same electorate which derided and ignored him, when frightened of invasion in 1940, clasped him to their bosom, when
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all he had to offer was "blood, toil, tears and sweat."
But an example perhaps more apposite to the present day occurred in 1931, when the electorate were frightened again. Remembering what happened to the mark in 1923, they were afraid that their pound would go the same way. So they threw the Government of the day out on its ear, and elected a Parliament which was pledged to a 10 per cent. cut all all round, including even the unemployed. I think—I hope that I may be wrong—that we are marching steadily towards another 1931. I believe that unless the temper, mood and behaviour of the nation, and particularly of organised labour, changes, we shall reach another crisis. Of course, as a lifelong Tory, I hope that it will be Mr. Wilson's ear which hits the ground. But, in some respects, there is not an awful lot to choose between the Parties. After all, was not the word "Butskellism" coined to indicate that fact?
And is not the sponsorship of this Bill now before the House a case in point? Here we have these two eminent personalities, the noble Earl the Leader of the House and the noble and learned Viscount, an ex-Lord Chancellor, joining together to give a jorum of jam to the Judges. Are they not just like the trade union barons in the cartoon? Can we not see them standing together, towering over poor Mr. Brown, the noble Earl's hand on the shoulder of his colleague saying, "Well, Geordie, chum, you can go on talking about 3½ to 4 per cent. as long as you like, but me and my mate here are determined to give the judges 25 per cent."? Can we not see poor Mr. Brown, gasping from the gashes of Casca Cousins in the Cabinet, gazing up into the eyes of the noble Earl in despair and saying, "et tu, Frankie!"?
LORD BOOTHBY: My Lords, before the noble Earl replies, may I just say that, unlike the noble Lord who has just spoken, I very much welcome the jorum of jam, and join with the noble and learned Viscount, Lord Dilhorne, in congratulating the Lord Chancellor in having got it? As the Government appear to be in such an expansive, generous jam-making mood, I should like to ask the noble Earl the Leader of the House one question: whether they would take into serious consideration the p ossibility of

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giving a pension to all those who have been Members of Parliament for more than 20 years.
LORD REA: My Lords, it is a little difficult to follow the noble Lord, Lord Boothby, but I should like to add to the congratulations and the welcome offered to this Bill. It is, of course, eminently suitable and eminently appropriate that those gentlemen in the very high seats of justice should be put in a place quite above the rat-race, above competition and above every sort of consideration. Therefore, I think that these increases, although they may seem to some of us, who are not so fortunate, to be large, are entirely appropriate.
I suppose that the noble Earl has taken into consideration the position of the slightly lower Judiciary officers, such as county court judges, quarter sessions chairmen, stipendiary magistrates and so on because we should not like to see them left out in the cold. I do not think there is anything with which one can compare them so that there is no obvious discrepancy between them and other increases. The only possible comparison and discrepancy I can make is that a great number of your Lordships who sit on the Back Benches, and work almost as many hours as the Law Lords, have not quite the same salary—in fact in their case the remuneration is exactly nothing.
THE EARL OF LONGFORD: My Lords, I am grateful to all the speakers who, in their different ways, have paid tribute to the ideas behind this Bill. I would inform the noble Lord, Lord Rea, that the county court judges, for example, have received three increases—all, I am sure, richly deserved—in the last twelve years, and I am sure that is why they are not included in this particular Bill.
VISCOUNT DILHORNE: My Lords, I think I am right in saying that they received their last increase in 1964. It was possible to make the increase for the lower Judiciary by orders and in other ways, but not for the higher Judiciary, except by a Bill.
THE EARL OF LONGFORD: I am grateful to the noble Viscount—I am sure that what he says is right. I am also grateful for the not altogether expected support, on a matter of this kind, from the noble Lord, Lord Boothby. I can
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assure him that his suggestion is bound to be attractive, that all Members of Parliament who have served for 20 years should be given some kind of pension. I am under the impression—and he can put me right here—that if he himself were in need, after his many years of service, he would be able to draw some benevolent payment of some kind; but I am sure he is not in need in that sense and therefore he does not qualify.
LORD BOOTHBY: My Lords, I am sure that if the noble Earl, Lord Attlee, were here, he would confirm that that is the most painful form of means test
THE EARL OF LONGFORD: I am quite ready to believe it is, but I am sure that the noble Lord, who has been immensely successful in all fields of national endeavour, would never need to apply for this kind of grant.
I should like to say how much we all enjoyed the speech of the noble Lord, Lord Blackford. He made an eloquent appeal to us to consider the position of the working man against this increase of the remuneration for the Judges. The noble Lord is an eminent banker. I also dabbled in those quarters for a time, but the noble Lord has given a lifetime of service to banking, and I should think that if there are any Judges here (apart from the Lord Chancellor, who feels inhibited from speaking) they would gladly exchange their salaries for the remuneration of the average merchant banker. I offer that as a proposition to the noble Lord. When we learn that eminent bankers are, so to speak, pulling in their belts, then I think we shall have cause to realise that the crisis has become more grave than any of us had supposed.
LORD BLACKFORD: My Lords, banking is one of the "cushy" industries. I am talking about exporting industries, with which I am also connected. I am not a merchant banker, they themselves receive the earth.
THE EARL OF LONGFORD: I think we have contributed enough to human knowledge for the moment. I can only say to the noble Lord, about the 1931 Government, in the light of his very fine and greatly appreciated tribute to Sir Winston Churchill, that one of the most striking facts about the National Government of 1931 was that they would not touch Sir Winston Churchill at any price,

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and kept him out of office for eight years. I feel the noble Lord, Lord Boothby, will not have forgotten that point. So I do not think we need join in any particular tributes to that Administration this afternoon. Nevertheless, I should like to thank the noble Lord for all he said.
The noble and learned Viscount, Lord Dilhorne, reminded us that he himself had said that his Government would do all they could, and I am glad that he feels we have lived up to his ideas. He asked me how much all this would cost, and whether it was true that what would appear to be a gross expense of £163,000, would boil down to a net figure of £40,000 to £50,000. Taking everything into account—the increased salaries, the additional High Court Judges, the clerks and the pensions—I am told that the gross addition to expenditure would be of the order of £300,000. As the noble and learned Viscount will appreciate, I have not in the time available been able to work it out, and I do not think anybody could on the spur of the moment say how much that would be net, but I think it is in the order of £80,000. At any rate, it is of that character.
I do not think I can attempt to add to what the noble and learned Viscount said, because he speaks with such immense authority in this field. He indicated that he himself had no interest in this matter, and he doubted whether the Lord Chancellor would in fact have an interest by April 1, when the Bill comes into operation. I would humbly submit, as a layman among these legal luminaries, that one of them has an interest, and the fact that the noble and learned Viscount felt able to speak and the Lord Chancellor did not, and bearing in mind that both are of equal integrity, suggests that perhaps between them they are agreed who is more likely next April to be the Lord Chancellor.
On Question, Bill read 2ª, and committed to a Committee of the Whole House.

INTERNATIONAL MONETARY FUND BILL
3.28 p.m.
Order of the Day for the Second Reading read.
LORD SHEPHERD: My Lords, I beg to move that this Bill be read a second time. I do not wish to detain the House unnecessarily over the details of the Bill or the Executive Director's Report, which can be found in Command Paper 2675. I am sure the House will agree that this document sets out the subject with great clarity, taking into account its very complicated ramifications. The Bill is simple; it consists of one clause. The House will see that it empowers the payment to the International Monetary Fund of £175 million as our subscription, which represents an increase of 25 per cent. on our present quota and subscription.
I think the greatest significance of this Bill lies in the fact that it is yet another step by this country in international cooperation. It is interesting to note that the International Monetary Fund now consists of 103 nations. The noble Lord, Lord Blackford, in his remarks, referred to the serious times of the 1930s. Certainly they were times of gravity, but I am quite sure that those who watch international trade would see a significant difference between conditions then and now. In those days we had what might be called international financial anarchy. To-day, instead of competition between nations, and countries taking particular actions in their own interests without any regard to others, we have these 103 nations who have come together to see whether, by discussion and by agreement, they can find some way of stabilising and developing world trade.
I am quite sure the House will be interested not so much in the Bill itself but in how the Government see the present situation in world liquidity. The position of the United Kingdom has been for some time that while there is no shortage of liquidity as yet, there are several indications that a shortage might arise. Mr. Maudling, when he was Chancellor of the Exchequer, was among the first to bring this to the attention of the world at the meeting of the International Monetary Fund in 1962, when he also contributed some ideas towards a solution. But the world was not then convinced, and I fear is not yet fully convinced, that action is necessary. Since then, the indications that more liquidity may he needed and that some changes in the system may be required have become clearer to us and also to some of our

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friends, as has also the increased urgency; but there does not appear to be universal agreement on this problem. No statistical proof is possible in these matters, but trends and broad relationships are discernible and it seems clear to us, and indeed to many others, that if world trade is to go on growing without inhibition on this account, some special measures to increase liquidity will be required.
I think a distinction should be drawn here. The actual financing of trade which is done through the commercial banks and the like by the traders themselves is one thing; liquidity, about which we are now talking, is needed by the Governments to finance the swings in their overall balance of payments which arise from the fact that in practice countries can seldom keep in balance on external account. Liquidity provides the element of flexibility and allows time for the imbalance to be corrected without recourse to harmful measures. I am quite sure we should all agree that the situation being what it is, it would be wrong for nations now to take unilateral action. These balance of payments swings are growing larger as trade expands and capital movements become less restricted and are likely to last longer, because domestic considerations, as well as the international obligations to which I have referred, make Governments far more hesitant than they used to be over taking the more violent and unneighbourly measures which often have the quickest effect on a deficit.
There are two further pointers of more immediacy. It now seems likely that the growth in world trade may slow down a little next year. Paradoxically, perhaps, at first sight, this does not, in our view, make the need for providing for a further increase in liquidity less urgent: rather the reverse. In the first place trade will still be expanding, if not so fast; and in the second place it is not the volume of trade itself which the liquidity finances, but rather the increasing swings in balances of payments; and it would be extremely unfortunate if a less favourable trade position were to be further worsened through the inhibiting effect of a lack of international liquidity upon national policies of growth and expansion. The second pointer is, of course, the considerable success the
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United States authorities are achieving in reducing their balance of payments deficit. This is already reducing the outflow of dollars from the United States which has provided a very large proportion of the supply of new liquidity to the world for many years.
The American measures have another aspect which I am sure will be of interest to the House, and I should like to spend a few moments on that, if I may. This is the effect on the United Kingdom's own balance-of-payments position. President Johnson's programme included four main measures: the extension of the interest equalisation tax; the request to banks to limit their long and short term lending abroad; the voluntary limitation upon overseas investment by American corporations; and, lastly, the appeal to American corporations operating abroad to increase their remittances home. It is still too early to make an accurate assessment of the effects of this programme upon the United Kingdom. However, the figure for inward direct investment in the United Kingdom for the first quarter of this year was substantially lower than the average quarterly rate of last year, namely £13 million, excluding oil, as compared with £45 million. This is likely to have been caused in part by the response of American corporations with United Kingdom subsidiaries to the United States Administration's request for an increase in their remittance home of profits which might otherwise have been invested here. We believe that this reduction in investment is likely to have been temporary, and preliminary evidence suggests that outward remittances from the United Kingdom may have dropped back to a more normal level in the second quarter.
Nor do we feel any great cause for alarm at the United States programme in general, the reasons for which we entirely understand and with which we sympathise. The American banks have been asked to take the present position of the United Kingdom into consideration when they play their part, and noble Lords may also have noticed from the American President's original statement that he wished to avoid "beggar thy neighbour" effects.
To return to my main theme of liquidity. Agreement was reached last year both in the "Group of Ten" industrial countries which are members of

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the International Monetary Fund's borrowing scheme, and also in the Fund, that quotas should be generally increased; and when the Executive Board came to work this out in detail 25 per cent. was found to be the figure commanding almost universal support. We ourselves would have seen advantage in a higher figure than 25 per cent. for the general increase. But others favoured less because they did not, and do not, agree with our analysis of a likely liquidity shortage, and to press for more would have aggravated the problem of finding ways to reduce the effect of the obligation to pay in gold one quarter of the subscription associated with any quota increase.
This obligation can, in fact, go some way to offset the increase in liquidity which quota increases are designed to provide, and it hits particularly hard the reserve centres—the United States and ourselves—to whom many other member countries holding dollars and sterling naturally turn in order to buy the gold they need to pay their own subscriptions. The Command Paper shows that a way was in fact devised and agreed for providing relief from the gold subscriptions impact. This, as I am sure noble Lords who have read it will agree, although very clearly presented, is an arrangement of extraordinary complexity. If my right honourable friend the Chancellor could ask for the sympathy of the House and receive it, I am quite sure that I can get it for the asking, because this is a very complex matter.
But, perhaps more to the point, in the case of the United Kingdom this can in effect be spread over five years. We are spreading over five years the burden of paying our own gold subscription of some £44 million, and this should relieve us for quite a number of years of the greater part of a further approximately equivalent burden of selling gold to other Fund members who need it for paying their own subscriptions. As is explained in the Explanatory Memorandum to the Bill, which also recounts the history of the United Kingdom quota, the three-quarters of our subscription which is payable in sterling has no immediate effect upon us at all. We played a prominent part in bringing these quota increases about and we welcome them as a very useful first step towards reinforcing the world liquidity position and as providing
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a more secure base upon which the international discussions can continue.
The international discussions continue, and will continue, and the main questions under examination now are what further provision should be made for increasing the supply of liquidity when occasion demands, and what changes should be made in the international monetary system. Another result of the deliberations of the Group of Ten last year, besides their support for the Fund quota increase, was the setting up by them of a group of experts from their ten countries under the chairmanship of Signor Ossola of the Bank of Italy. The task of this group was to study possible ways of providing more owned reserves. I use the phrase "owned reserves" as distinct from credit facilities, the other half of the liquidity spectrum which is already being somewhat reinforced by the Fund quota increase.
The Chancellor of the Exchequer is announcing to-day that the ten countries have decided that this report should be published on August 10. I understand it is a technical analysis of the various possibilities. I do not expect that we shall find in it references to all the well-known plans for solving the liquidity problem associated with the names of well-known leading economists, but I think that the group have made a thorough study of all the arrangements which were thrown up both in their discussions and in the Group of Ten's earlier discussions last year and which seemed to hold out any prospects of being negotiable. It will also confirm what we already know, that there is a wide divergence of view on these matters.
We recognise that it cannot be any longer regarded as entirely satisfactory to depend indefinitely for owned reserves on the limited and uncertain amount of new gold produced in the world and on the supply of reserve currencies which must derive from deficits in the balance of payments of the two reserve centres. We shall not, therefore, hesitate to look for more rational means of organising the world liquidity system. There is, however, no basic agreement on the nature or the consequences of the remedies. It would not help to achieve success in the continuing international discussions, for Government spokesmen to adopt rigid positions about our own views or to analyse too closely or to criticise the

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position of other countries. The Chancellor of the Exchequer is extremely conscious of this and of the abundance of plans and solutions that now lie in the field. He recognises that if some agreement can be reached on certain basic issues, technical means of implementing the agreement will be available in plenty. It is for those reasons that he has not—and he still takes this view—publicly propounded a detailed solution of his own. He has, however, been in close touch with several of his opposite numbers in other countries, particularly France and the United States, and he has endeavoured, and will continue to endeavour, to search out any possibility of common ground.
The United States has taken a recent initiative by announcing its readiness to attend a world monetary conference and to try to carry the discussions further. Mr. Fowler, the Secretary of the United States Treasury, was careful to say that
"a reasonable certainty of measurable progress through prior agreement on basic points"
ought to precede any meeting, and Her Majesty's Government thoroughly agree with him. It may be noted that insistence on some prior agreement was one of the elements in the French comment on this initiative which was widely reported, and perhaps somewhat exaggerated, as a rejection of the American proposal.
For reasons I have already explained I do not want to go too closely into the details of our own position. We do not shrink from having a basic discussion about the rôle of the reserve currencies, the possibilities of future development and to what extent, if any, the reserve currencies may need to be supplemented by other international units or drawing rights or whatever else may prove to command the greatest measure of common agreement among the nations. And this discussion is bound to involve a discussion of the future rôle of the International Monetary Fund. Her Majesty's Government believe, and I think noble Lords opposite will agree, that the International Monetary Fund has proved a very great success. It has proved flexible and pliant in meeting changing world needs. We think that the International Monetary Fund has deservedly established its central position in the world's payments system and has shown itself ready and capable of adapt
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ing its policies and practices to changing requirements. We therefore approach any discussion about the system with a strong and reasoned preference for reaching a solution which is built upon or is clearly linked with the Fund.
Quite apart from the disadvantage of setting up a second quite separate centre of influence, the international payments system is a field where the confidence of the participants is vital, and this progress towards reasoned change can be made only by agreement. The Government have, therefore, to negotiate patiently, flexibly, but with persistence, towards an agreement to build up on the best parts of the existing system. The next step is a meeting in August of the Group of Ten and thereafter the Annual Meeting of the International Monetary Fund in Washington at the end of September. It will be the aim of Her Majesty's Government to assist in these discussions in every possible way.
In conclusion, may I add my tribute—and I am sure the whole House will join me in doing so—to M. Schweitzer, the Head of the International Monetary Fund, and to all his staff who have given such tremendous help, not only to ourselves but to many of the smaller nations who have come in need. They have deserved well of our support and I hope that we shall continue to give it. I beg to move.
Moved, That the Bill be now read 2ª.
—(Lord Shepherd.)
3.50 p.m.
THE EARL OF DUNDEE: My Lords, this is a very small Bill about a very big subject. It will do a little good, but it is pitifully inadequate to meet the requirements of trade in the Free World. I think it would be wrong to blame Her Majesty's Government for the insufficiency of this measure, because I have no doubt that they have tried, and will try, to do more.
I think that most British Governments have been much more alive than others to the need for greater liquidity, and we have managed to get some improvements made in the system, some of them multilateral and some unilateral. In 1959, we had an increase of 50 per cent. in the quotas of the International Monetary Fund, and later, under Mr. Maudling, we had special unilateral arrangements

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with the United States and with Switzerland; and we also had what is called the General Agreement to Borrow among ten of the leading trading countries of the world. But we have always had to contend against a massive deadweight of inertia, indifference and incomprehension, often combined with short-sighted economic nationalism. The situation has not been improved by the attitude of some of the Central Banks of the world, who have an obstinate fear that better international liquidity will mean more inflation and more improvidence in national spending. They are often inclined to think that individual nations should behave like thrifty and industrious apprentices operating on a financial shoestring, gradually accumulating a little more of the surplus every year and carefully balancing their accounts.
When we talk about this subject collectively, we all agree at once that it would be a mathematical impossibility for all trading countries to have a surplus in their balance of payments at the same time, and that if there were a rule that all trading accounts in the world must exactly balance, and if that could be enforced, then trade would be almost stagnant. But when individual countries consider their own position from their own point of view, they still go on talking as if these impossible, or at least extremely undesirable, economic objectives were the height of economic virtue.
Until last year, the United States of America had had an adverse balance of payments for six years, averaging 3,500 million dollars each year. At the beginning of last year their accumulated adverse balance of payments was no less than 21,000 billion dollars—to the great benefit of the rest of the world, and without any visible adverse effects on the buoyant, booming prosperity of the United States. Now, in the last year, the United States have been taking steps to correct their balance of payments, and they have been congratulated by the financial authorities of the world for taking what is regarded as a most praiseworthy action. But how have they done it? By reducing their investments abroad and by reducing their imports. Is that going to help world trade? On the contrary, it is so likely to lead to a severe depression in world trade that I think that is a reason why the American Government has now agreed with the
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Chancellor of the Exchequer to have urgent discussions in the immediate future on this subject of international liquidity.
If your Lordships take our own humble little problem, our trifling little deficit of £745 million last year, and if you will look at the recent Report of the O.E.C.D., you will see that that is made up as to about half by £370 million in British investments overseas. Of the other half, I think that more than £200 million consists in the cost of defending the Free World by unrequited exports—something which is not done by any other countries, whose financial authorities are now criticising us, except the United States. The remainder of the deficit is more than made up by the cost of stockpiling and importing material for domestic investment, in order to achieve the national I economic growth target of 4 per cent., which was achieved last year, but which has now been reduced to 3½ per cent., a figure that will probably not be achieved in 1966.
Contrast that £745 million with our gross national product of more than £25,000 million and our foreign investments of over £11,000 million. Supposing there were a prosperous small tradesman who had a turnover of £25,000 a year and a portfolio of investments amounting to £11,000 outside his own business, which would probably be worth £100,000 or more, would you not consider it really ridiculous if he had thought himself bound to start cutting down his production and raising prices to his customers because he had an overdraft of £745 at the bank? That is what we are doing internationally. The reason is that there is not enough liquidity internationally to provide a sensible base for world trade.
On this Bill I am not going to discuss the merits of any of the measures, such as the import surcharge (we may discuss that to-morrow) which have been taken. But I would say that measures like an import surcharge are, in effect, the penalty which the rest of the world has to pay for not agreeing to a sensible policy of international liquidity. When we cut down credit and pursue disinflationary policies, when we stop lending money and restrict imports, all other countries with whom we trade tell us that we are un-neighbourly. They say "We cannot prosper unless you take our

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imports, and we must have your capital in order to develop. You are doing a most un-neighbourly thing." But when we do invest our money in their country, and when we do take their imports, all their financial authorities say You are most improvident. We have no longer any confidence in sterling."
We understand that the noble Lord, Lord Shepherd, cannot tell us much about any international discussions which we hope are soon to take place on this subject, in August and September. But how much more liquidity do we want? The noble Lord implied what I was going to say, that we must go to these discussions ready to agree to any solution which we find to be practicable, even though it may not necessarily be ideal. I do not know whether or not it will be a waste of time to talk about the world price of gold, because I do not know for how long the American Government consider themselves bound by the pledge—I think the most misguided pledge—which they gave a few years ago, that the price of gold would not be raised. Ideally, it would probably be much more sensible that we should arrange our world monetary affairs without having to dig a whole lot of metal out of the earth and put it into the vaults of a whole lot of banks. But so long as human beings insist on using this particular metallic substance as a credit base, it cannot perform its function properly if it is artificially undervalued to the extent of about one-half, as it is now.
In order to do its job properly the price of gold ought to be doubled, and, with great respect to our American friends and others, I must say that the reasons given against doing that appear to me to be intellectually contemptible. One reason was that it would help South Africa and Russia, which are both wicked countries. Is it not rather absurd to hamstring the whole of international trade in order to avoid paying a little more for the exports of two countries of whose internal policies we disapprove? The other reason was that, in the opinion of some people, this would involve a devaluation of the dollar. Of course it would do nothing of the kind. To raise the price of gold to its true natural level would mean an alteration, not in relation to the dollar, but in relation to money all
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over the world. It is no more devaluation than a rise in the price in rubber or wheat could be.
What has happened is that all currencies have already been devalued 50 per cent. in relation to gold, but this is not officially recognised. The fact that it is not recognised is a great hindrance to the use of gold in fulfilling its functions as an international credit base. Whether we can do anything or not about gold, we must get more credit liquidity as well, as the noble Lord, Lord Shepherd, said, preferably through the International Monetary Fund. It should be done either by creating some entirely new unit of international currency or perhaps by increasing the quotas of members of the International Monetary Fund—not one every five or six years, but regularly every year in order to build up a vastly greater quantity of reserves.
It has been calculated that in 1938 the total amount of liquid reserves in the world was just about 100 per cent. of the total amount of world imports. In 1963 the proportion of all the liquid reserves in the world, both individually and collectively held, was only 45 per cent. of the total amount of world imports. If you were going to redress the balance you would need to increase liquid monetary reserves in the world by no less than 77,000 million dollars. In this Bill they are increased by just over 4,000 million dollars, from about 16,000 million in the International Monetary Fund to just over 20,000 million. That is the measure of the insufficiency of what we are doing now.
If we want to encourage economic growth, if we want to avoid a trade depression in the world, we must do vastly more than what is contained in this Bill. I hope the Government will appreciate that. And let me say to them that they have every possible motive for putting their view very strongly indeed at these international conferences. Do not let them be humble about it, because the consequences of not getting more liquidity will be very serious, not only to this country but to the Government in power. I am always inclined to take an optimistic view, but if nothing is done to increase the present amount of liquidity, I think that there is likely to be a world slump next year and the following year which might be equal to that of 1931. In the

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Election of 1931 the strength of the Labour Party in the House of Commons was reduced to 50 seats. That means a loss of 260 seats in the House of Commons. But if we can prevent the slump from taking place, I think they may easily get away with a loss of only 100 seats—which would mean that everybody, both here and in other countries, would be very much happier all round.

OVERSEAS DEVELOPMENT
4.5 p.m.
THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR FOREIGN AFFAIRS (LORD WALSTON): My Lords, think it may be be convenient if, with your Lordships' permission, I now repeat a Statement which has been made in another place by my right honourable friend the Minister of Overseas Development on the White Paper on Overseas Development entitled the The Work of the New Ministry. My right honourable friend said in another place on July 20 that she intended to lay before it a White Paper on the work of the Department. This has been placed in the Printed Paper Office to-day.
Her Statement says:
"This is not a moment at which it would be right to announce plans for a significant increase in the aid programme. At a time when we are taking steps to restrain public expenditure and when we must have particular regard to our balance of payments there are limits to the amount of aid we can provide. This makes it all the more important to ensure that our aid is well managed and provided in the most effective forms. The White Paper is designed to inform the House how I intend to achieve this. Our purpose is to help the poorer countries to tackle the problems of development and indebtedness. These problems have if anything, become more acute in recent years. The commitment to give aid for overseas development is therefore a long-term one.
"The White Paper starts with a discussion of the motive and objectives of our aid policy, followed by an analysis of the economic progress of the developing nations. This makes no attempt to minimise the grave tasks
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facing these countries, to which I have referred, nor does it underestimate what has been achieved in recent years through their own efforts in co-operation with the industrial countries and international agencies. I trust that this analysis will lead us to the conclusion that we must not shrink from accepting our share of responsibility.
" In Chapter VII of the White Paper I have indicated the main guide lines which we propose to adopt in our future aid policies. In Chapter VIII our new policy on interest-free loans is explained. In Chapter XI to XIII I have dealt in some detail with technical assistance, to which I attach special importance. Since the formation of the Ministry we have systematically reviewed our operations in technical assistance, and as a result I have some important new initiatives to announce. These relate in particular to the recruitment of British men and women for key positions overseas and to high-level training in this country of specialists in development and administration. I will not lengthen this Statement by going into detail.
"I conclude as I began, by pointing out that we are publishing this White Paper at a time when we ourselves are experiencing serious financial difficulties and are taking important measures to correct them. I am sure that the House will agree that, however much these difficulties must limit what we can do at the moment, our preoccupation with them should not allow us to forget our responsibilities in overseas aid, which forms an increasingly important element in international relations to-day."
LORD CARRINGTON: My Lords, I suppose I am grateful to the noble Lord for that Statement. I realise that the noble Lord is not responsible, but I must tell him and noble Lords opposite that never in my experience have I heard a Statement that took so long to say so little. I should have thought that it would be perfectly possible merely to have got up and said, "There is a White Paper in the Printed Paper Office ". I have no idea whether what is in the White Paper is good or bad, but I suspect that it is nothing, otherwise we should have been told so this afternoon.
LORD BYERS: My Lords, is the noble Lord aware that there are three clichés and four bromides missing?
THE EARL OF DUNDEE: My Lords, could the noble Lord tell us whether any of these interest-free loans have been approved and whether he thinks any are likely to be approved in the next twelve months? Can he say what the estimated amount of our aid is to be next year?
LORD WALSTON: My Lords, there are many things I should like to answer, particularly the comments made by the noble Lord, Lord Carrington, whose experience must be very much less than mine—though I did not think so—if he has never before heard so little said in such a lengthy way. I could point out examples which I think he would agree disprove that statement. With regard to the noble Earl's question, I cannot tell him offhand whether any interest-free loans have as yet been approved. I rather think they have, but there certainly will be a good many in the relatively near future that will be approved. As for the estimated expenditure during the coming financial year, I am afraid I cannot give the noble Earl that answer. That has not yet been decided upon. It comes into the whole ambit of the national expenditure plan.
THE EARL OF DUNDEE: My Lords, will it be much less than the previous figure of £160 million?
LORD WALSTON: My Lords, speaking from memory, the figure is not £160 million but £189 million—
THE EARL OF DUNDEE: Yes, my Lords, but we did not spend it all.
LORD WALSTON: —which has been approved for 1964–65. I should hope, and I say this quite advisedly, that it would not be less than that, because, important though national expansion is—we all agree with that—we must not forget that aid to overseas countries is of international importance. It is not purely an eleemosynary activity which is designed solely to help other countries; it is of assistance to ourselves and to the world in general. I hope that our financial situation is not so stringent, and I believe it is not so stringent, that we shall have actually to reduce the amount given.

THE QUEEN'S AWARD TO INDUSTRY
4.12 p.m.
THE EARL OF LONGFORD: My Lords, with permission I should like to repeat a Statement which my right honourable friend the Prime Minister has just made in another place about The Queen's Awards to Industry. The Prime Minister's words were as follows:—
"The House will recall that on the 4th February I announced the setting up of a Committee, under the Chairmanship of His Royal Highness The Prince Philip, Duke of Edinburgh, to work out a scheme for making Awards by Her Majesty The Queen to industrial units for outstanding achievement in increasing exports or in technological innovation.
The Committee's report will be published and copies available in the Vote Office this afternoon.
The Committee's recommendations are accepted by the Government in full. I would like on behalf of the Government, and I am sure of the whole House, to thank His Royal Highness and the members of his Committee for undertaking this task and for their admirable report.
The Award is to be known as 'The Queen's Award to Industry ', and Her Majesty has graciously consented to the Awards' being announced each year on Her birthday. The first Awards will therefore be announced on the 21st April, 1966. The Committee recommend that there should be a single Award to mark industrial efficiency within the fields of export and technological achievement. The criteria for the Award are listed in the report. Any branch of industry, including agriculture and horticulture, will be entitled to apply.
The Award is to be represented by an emblem which holders will be entitled to display in a wide variety of ways.
I shall be responsible for advising Her Majesty on Awards. In this, as the report recommends, I shall be assisted by a small Committee composed of members from both within and outside the Government service which will draw upon advice from outside its membership as necessary.
The purpose of this new scheme is twofold: to reward and to stimulate. I hope that the Award will encourage industry in its efforts to achieve the improvements in exports and the technological advance on which our national future so much depends."
My Lords, that concludes the Statement of the Prime Minister.
LORD ERROLL OF HALE: My Lords, may I thank the noble Earl for so kindly reading out the Statement which has just been made in another place. I am sure that noble Lords in all parts of the House will wish to join with me in expressing our pleasure that Her Majesty has so graciously consented to the Awards' being announced each year on Her birthday. We should like to echo what the noble Earl has said about what His Royal Highness, the Duke of Edinburgh, has done by being Chairman of this Committee, contributing from his own expert information and knowledge about industry and technological advance to the successful outcome of the work of this Committee.
I have only had a short while in which to look at the report, but that enables me to ask three questions which I hope the noble Earl will be able to answer. First of all, what is an "industrial unit" in this context? Is it to be the main company or an operating subsidiary, and are industrial units in this country which are owned by foreign companies eligible to apply? Secondly, who does the applying? Late in the Statement we were told:
"Any branch of industry, including agriculture and horticulture, will be entitled to apply."
Does this mean that only trade associations and collective bodies are to apply, or does it mean the individual units in a particular industry? Thirdly, and finally, it was said in the Statement:
"The award is to be represented by an emblem which holders will be entitled to display …"
Will this emblem be displayed in perpetuity or will it be for a limited term of years? Also, what happens when the holder of an emblem merges with another firm which is not the holder of an emblem, or is taken over by a firm not itself the holder of one of these coveted emblems?
THE EARL OF LONGFORD: My Lords, in the short space of time available to him, the noble Lord seems to have been able to ask a number of questions which I may or may not be able to answer in the short space of time available to me. So I will do the best I can. A "unit" means any body or group from an individual upwards. In other words, an individual, a one-man business, can count as a unit if it breaks into the export market or, no doubt, shows technological advance. Then the noble Lord asked whether a trade association or the individual unit would have to apply. I understand that it is the individual unit. Finally, the noble Lord asked how long one would be allowed to display the emblem, and my understanding there is that it will be for a period of years. As to what happens if the unit is taken over in the meanwhile, I am afraid that the noble Lord will have to put down a Question and then I will give him the Answer.
LORD BYERS: My Lords, may I, on behalf of my colleagues, welcome the Statement which has been made by the Government? May I ask the noble Earl whether, in view of the urgency of improving our efficiency and our exports, consideration has been given to making these Awards twice a year instead of annually?
THE EARL OF LONGFORD: My Lords, I cannot say whether that matter has been considered. I think that the decision to make the Awards on Her Majesty's birthday must be regarded as definite, and it would surprise me if the Committee had not considered the question of making them more often. But since the noble Lord has raised the matter, it can, of course, be brought to their attention.

INTERNATIONAL MONETARY FUND BILL
4.18 p.m.
Debate on Second Reading resumed.
LORD GLADWYN: My Lords, nobody can doubt the limited utility of this Bill, and I am quite sure that there will be no objection to it in this House any more than there was when it was discussed the other day in another place. As I understand it, the total amount of

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the proposed 25 per cent. increase in our quota in the International Monetary Fund is approximately £175 million, of which £44 million will be payable in gold, the remainder being really a bookkeeping transaction, and the effect of the gold payment being mitigated or cushioned by ingenious arrangements which seem to have the effect of spreading it over a period of years.
In return for this increase in our quota, our drawing rights are apparently—though I am not quite certain about this—increased by no less than £218 million. If that is so, of course, the net effect of the whole transaction is advantageous to us, more especially in the difficult period which we are now going through. But more than that, as has been said already this afternoon, it is a definite if limited increase in that so-called liquidity which everybody recognises as essential if a world depression, with all its catastrophic economic and political effects, is to be avoided.
This arrangement does not, however, in any way solve the looming problem which, as I have recently said, circles around our economic horizon like a great thunderstorm, and the solution of which is obviously getting increasingly necessary. Here there are, as I see it, two distinct problems, though of course they are to some extent related. They are the provision of adequate funds to finance international trade, in the first place; and the defence of the pound sterling, in the second. On the second point I need not dwell at length, beyond saying that if anybody thinks that we can defend the present value of the pound when our real reserves are practically at zero; when our hidden reserves, mainly in public and private investments (even if they could all be realised) are largely balanced by the huge sterling balances which are at the disposal of non-nationals of this country; when we have already borrowed, I believe, something like £800 million; and when our balance of payments is still in substantial deficit; without an enormous national effort—and an unpleasant one, too—and probably a very considerable reduction in expenditure on armaments, then I can only suggest he should have his head examined. Our only real card, my Lords—and I think it is a really good one—is that, since the last thing anyone wants is for us to go "bust", we can
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count on an immense amount of good will, and thus buy time more cheaply, during which we can endeavour to put our own house in order.
On the first point, which is the one that concerns us now, of course, I am a little puzzled to know why the Motion on this very subject, which has been set down by the noble Lord, Lord Boothby, on the Order Paper for so many months, has not yet been taken. It seems to me that, in addition to the noble Lord, there are many of your Lordships who could contribute profitably to this debate. Indeed, I think that the whole subject ought, if possible, to be disentangled from the undergrowth of technical argument which has surrounded it for so long, and brought out into the light of day, as it were, so that the ordinary citizen may appreciate the grave political issues which underlie it and are responsible for the fact that international agreement on how to settle it has not yet been reached.
It is true that, if it were only a question of avoiding the final absurdity, the reductio ad absurdum—that is to say, arrival at a point at which international trade ceases except for barter deals, everybody wanting to have a surplus on trading account and no one being able to obtain credit with which to finance a deficit—any of the solutions and plans so far produced would do. For anything would presumably be better than a collapse of the whole capitalistic system. This, no doubt, is what was implied when, in a recent dialogue organised by the Federal Trust, the celebrated Professor Triffin (who is, of course, an American of Belgian origin) and the equally celebrated M. Jacques Rueff, of France, agreed that, rather than have nothing, they would prefer, each of them, to have the system recommended by the other.
The real point, as I see it, is that some of the systems now suggested would undoubtedly favour one or more of the industrialised nations of the West more than others, and some would be less likely than others to benefit the unfortunate developing nations, as they are called, too. So that, as I see it, is what the present crisis is now really about; and, to be quite specific, it is largely a struggle between those who, up to now, have provided the so-called reserve currencies of the world—namely, the

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dollar and the pound—and those who perforce agreed to the continuance of the 1946 Bretton Woods system when they had hardly any gold and were practically "broke", but now have much more gold even than America, and in addition represent a community which accounts for a considerably greater proportion of world trade than any other Power or group of Powers. I refer, of course, to the European Economic Community, the present members of which held in 1948 only 4·5 per cent. of the Free World gold reserves but now hold 35·5 per cent. the share of the United States of America having dropped during the same period from no less than 70 per cent. to 22 per cent. My Lords, these are remarkable and highly significant figures.
The lead here, naturally, is being taken by the French, since, apart from anything else, the last thing the Germans want to do is to irritate the Americans; but the struggle would have been bound to develop, de Gaulle or no de Gaulle. Put in another way, there really is no inherent reason why the European countries should carry on indefinitely with the so-called gold exchange standard, thus soaking up dollars which represent the deficit on the balance of payments of America—in other words, that they should indefinitely finance this deficit—even though such a process might be well designed in itself to provide an answer, and perhaps an adequate answer, to the present liquidity crisis. This is not just wickedness on their part, my Lords; it is not just nationalism rampant, and all that, as has sometimes been suggested; I think it is an almost inevitable reaction. Because, if they simply did nothing they would certaintly over the years become part of an American economic conglomeration, or whatever you like to call it, in much the same way as California now comes under the jurisdiction of the Federal Reserve Bank of the United States and Scotland comes under the jurisdiction of the Bank of England.
If you look at the problem quite objectively you might well come to the conclusion that this would indeed be the best plan. It would certainly be the best way to form the well-known Atlantic Community, which we say we all want and which I think we all really do want. But, unfortunately, this is where you
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inevitably come up against the famous spirit of nationalism—namely, the desire of at any rate the larger European nations to preserve their individuality, or their identity, or their personality, whatever you choose to call it; or, if they cannot do that, at any rate to preserve some kind of European personality. And this is entirely comprehensible, though it is probably true that, things being as they are, none of the European States can really "go it alone", and that, if it came to a real show-down, they could hardly stand out all by themselves, save perhaps only France, which is self-supporting, but even then only as a result of a terrible drop in the general standard of living. It may therefore be that, if the Americans really get fed up and reduce all their commitments—God forbid!—and the dollar becomes a scarce currency once again, the Americans can, if they want to, force the issue, so to speak; but this, I think, would be only as the result of great distress all round and possibly the emergence in Europe of heaven knows what, but certainly quite sinister, political forces.
So, very broadly speaking, I should say that there are two main schools of thought. There are those who, like M. Rueff, are in favour of letting nature take her course and simply doubling—I dare say even he would not mind actually trebling—the price of gold and thus at one blow enormously increasing the credit available for financing overdrafts and also, as the noble Earl, Lord Dundee, pointed out enormously increasing the value of the huge gold reserves of France, to say nothing of course of Russia and South Africa, though I do not think that this need weigh with us unduly. Nor would it necessitate the formation of any new international body to determine credit policy collectively. Thus it would be entirely in accordance with the nationalistic principles and, in so far as the European Economic Community may now be said to exist, it would not appear to do anything save reinforce the general bargaining power of that huge trading block, either. The difficulty of course is that the Americans are violently opposed to the idea, though it is true that it was effectively their solution about 33 years ago, and it does not find favour in the City of London. Incidentally, it is only in the last few days it has definitely been

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ruled out by Her Majesty's Government. Even what seems to be the French official plan for a "Composite Reserve Unit" which would, as it were, supplement the reserve currencies and give Europe a much greater say in management—even that has very great political connotations.
On the other hand, most of the other plans seem to postulate a sort of World Authority where decisions would be taken by a majority vote, and, no doubt, a majority vote in which we should no longer, with the Americans, find ourselves in a majority. This at the moment at any rate is not a conception likely to be acceptable either in Europe or in America. So, on balance, I think the general idea of a "Composite Reserve Unit", which would somehow provide for increased credit for the sorely tried developing countries, might, in principle be the best line of approach. But if we are to back up the French on this—and here I revert to my King Charles's head—it ought to be on condition that they make it easier, or at least less difficult, for us to join the Common Market. If we ever do so, there is no doubt that our troubles in this respect will be largely ended; for a combination of sterling—the whole sterling area, to say nothing of the unparalleled and unique financial facilities of the London Market—with the great Continental currencies would indeed represent a financial power equal to the dollar; and the way would then be open for the construction of an Atlantic Community on two pillars, which also commends itself, as I have often suggested, on grounds of politics and defence.
So, my Lords, I repeat that when we consider this grave and overshadowing problem it must be with our eyes wide open to the political consequences of any attitude that we may take up. It may well be that the Government are quite aware of that; but it is certainly true, to say the least, that they do not give that impression. In introducing the present Bill in another place the Chancellor of the Exchequer—and I believe I am in order in quoting him—said that he did not feel that he wished:
"to join the band of protagonists who are taking up fixed lines in a field where there are so many issues".
That is not exactly an elegant phrase, but I think your Lordships can see what he meant.
LORD SHEPHERD: My Lords, if the noble Lord reads my speech he will see that that is also what I said.
LORD GLADWYN: My Lords, I am afraid I do not think that the phrase gained in elegance by being repeated I here. The Chancellor of the Exchequer said earlier—and this was also made clear by the noble Lord, Lord Shepherd—that he would not "shrink" from having a discussion on
"the role of the reserved currencies and the extent (if any) they need to be supplemented by any other acceptable international unit or drawing right."
But that is as far as he got. Caution, which may indeed be dictated by our present financial plight, could hardly go further than that. If we really knew what we wanted, perhaps we might do better. But that is the moral of all my speeches.
4.34 p.m.
LORD BOOTHBY: My Lords, I am grateful to the noble Lord, Lord Gladwyn, for the kind remarks he made about my Motion, which has been standing on the Order Paper for many months, and which nobody has touched with the end of a barge pole. I think I know the reason why; but I shall not give it. I should have liked to move the Motion weeks ago; but better late than never! I was slightly encouraged by the speech of the noble Lord, Lord Shepherd, who made it totally clear, by implication, that he, as well as all your Lordships, regards this Bill as totally inadequate to meet the requirements of the present international monetary situation. We all know it to be so. The Bill is a fractional step in the right direction; but it will have no real or vital effect upon the dangerous situation which is coming upon us. This is a problem of immense difficulty and complexity. We know of its existence; we have known of it since the war. No one has found the answer. The few who, from time to time, have thought they had, have disagreed violently with each other.
No-one knows this better than the Prime Minister, himself. In what I regard as the greatest speech he has ever made, to the Economic Club of New York, he said:
"If the volume, however defined, of monetary liquidity does not keep pace with the increase in trade, we do face the problem I

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have mentioned, of the world industrial machine seizing up through a shortage of lubrication. Secondly, I think it is a fact that in international monetary relationships we are in the same relatively primitive stage that national financial systems were in before the great revolution in the use of credit.
"It is not merely that we lack the means of matching the volume of liquidity to the requirements of world trade, without the continuous export of crisis and deflation from one currency area to another: we urgently need to find the means of supplementing world liquidity arrangements with purchasing power to facilitate the financing of approved development plans, without plunging either importing or supplying countries into balance of payments difficulties.
"This problem is urgent. There is too much at stake for it to be decided by reference to national pride or attachment to any particular plan. Even more so is it true to say there is too much at stake for the problem of world liquidity to become a part of the small change of any undeclared conflict for leadership and power within the western alliance. It is not only monetary institutions that are involved, nor yet our freedom to develop wider and warmer exchanges of goods between nations. What is at stake is the prosperity of ordinary men, women, and children all over the world."
He went on to say:
"It will be our responses to the challenge of economic interdependence which will decide whether generations still unborn will pour upon us their blessings or their curses."
That was a remarkable statement to make especially to a New York financial audience.
But my noble friend Lord Baillieu, whose knowledge of international trade is almost unsurpassed, took very much the same view a week or two later, in an almost equally remarkable letter to The Times. He said:
"To-day there is in the making a developing crisis of liquidity, with its manifold repercussions on trade, on employment and human welfare, which bodes ill for the future, and there is the need for some corrective action to meet present balance of payments difficulties It would be far better, however, if measures other than those which threaten permanent prejudice to the future climate of investment opinion could be used.
"The great need is the preservation, and indeed the extension, of the flow of trade and investment between nations, with an international monetary system devised and managed to facilitate this to the full. Only if policies of powerful and highly influential governments are directed to this end will sound economic conditions be developed and proper standards of living established and preserved.
"We have yet to learn in this age"—
and this is the most important passage—
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"that the time span of change—be it in politics or in social or economic affairs—is continually shortening.
"Capital is proverbially a 'shy bird' and the time, in which we are free to take healing action, may not be so long as some choose to think."
I think that is profoundly true. But it does not stop even there. Last, but by no means least, we have the recent observation of Mr. Dillon, in the United States, that the greatest challenge ahead is to work out changes in the international monetary system; and the warning of Mr. McChesney Martin, the Chairman of the U.S. Federal Reserve Board, that he saw "disquieting similarities" between current economic developments and the situation which culminated in the greatest economic crash known to history between 1929 and 1931. And those who have any knowledge of Mr. Martin will know that he is not a man who speaks out of turn, or without good reason.
My Lords, it seems to me that the danger is that the expansion of world trade will soon be threatened—in fact, is already threatened—by a serious shortage of international money, the volume of which will rise at a much slower rate than the needs of world production and trade demand. The problem is to find enough international money to deal with this situation and at the same time to impose, at international level, some discipline on the domestic policies of the countries which are members of the International Monetary Fund. The difficulty is the impingement upon national sovereignty; now alas! more rampant than ever before, because nations are even more reluctant to give up sovereignty in the economic field than in the field of defence.
World trade has expanded four times, in terms of money, since the war. The credit base has only doubled. There are, at this moment 25,000 million dollar American short-term engagements—I am talking in terms of dollars—and 12,000 million in sterling balances, against only 14,000 million in gold held by the United States and 2,500 million in Britain. We ourselves at this moment are attempting, and have been ever since the war, to act as one of the two principal bankers of the world, with liquid assets which can only be described as derisory. If this goes

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on indefinitely, it can, in my judgment, lead only to another almighty crash.
It all stems, of course, from the Bretton Woods Agreement. I have already spoken to your Lordships on this subject, and I will not bore you with it again; but I am on the record. I moved the rejection of the Bretton Woods Agreement in the House of Commons, and got nearly 100 Members to support me, on seven grounds. First, it put the onus of restoring a balance of payments not upon the creditor but upon the debtor nations. Second, it failed to provide adequate liquid reserves for the Free World. Third, it fixed exchange rates, within far too narrow limits, in a world that was still in chaos. Fourth, it committed us to convertibility long before we could possibly hope to carry out that commitment. Fifth, it fixed the price of gold at a ludicrously low level—and here I think that I carry a number of noble Lords with me. Sixth, it was inflexible; and seventh, and finally, that uncoordinated monetary policies, nondiscriminatory multilateral trade and fixed exchange rates cannot, in fact, be made to mix.
My Lords, this led, alas! to hitter argument, in public and in private, between myself and the greatest economist we have produced since Robert Malthus—the late Lord Keynes. He said that we had to have the American Loan on the best terms we could get; and that was it. He said—and Heaven knows it was true!—that he had tried his hardest to get adequate international monetary reserves behind the I.M.F., and he added (this was in private) that he himself was not happy about fixing the price of gold at that particular moment of time. In the end, he was defeated, and I would say brutally defeated, by Mr. Harry Dexter White. I believe, and shall continue to believe to the end of my life, that it broke his heart.
The question is, what is to be done now? I have never deviated in my own views, which are that the I.M.F. should be expanded and given the power to create international credit. I said to your Lordships in March, 1961, that it should be developed into an International Central Bank for the national Central Banks, equipped, like them, with powers of credit creation and contraction. I still believe this to be the right solution. But there is, at present, a fatal snag, which was pointed
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out by the noble Lord, Lord Gladwyn: that no one can yet agree about the method of doing it. Worse still, the degree of confidence for the international co-operation and pooling of national sovereignty in the economic field which would undoubtedly be necessary does not exist at the present time. The breach between Paris and Washington, as the noble Lord, Lord Gladwyn, well knows, is at the moment total. The New York Times recently remarked:
"International monetary co-operation of any kind seems to thrive only under the gun of a crisis."
That brings me to my last point, gold, which has been raised by the noble Earl Lord Dundee, and also by the noble Lord Lord Gladwyn. Sir Winston Churchill has been unjustly accused of taking us back to the gold standard, with all the dire consequences that followed, in 1925. That policy was already decided by the then Governor of the Bank of England, Mr. Montagu Norman, with Baldwin, and with Snowden, before he took office as Chancellor of the Exchequer. I subsequently became Sir Winston Churchill's Parliamentary Private Secretary, and I know that he never liked it; in fact, instinctively he recoiled from it. He once said to me, characteristically, after a conference in the Treasury, "I wish they were Admirals or Generals, I can speak their own language, and I can sink them if necessary. But after a while, when I am talking to bankers and economists, they begin to talk Persian; and then they sink me instead; and I think this a great misfortune for this country." He was right.
I have in my hand a letter from Sir Winston Churchill, written in February, 1932, from Chicago; and because I think that justice should be done to Sir Winston in this matter. I will quote from it:
"I have gone the whole hog against gold. To hell with it! It has been used as a vile trap to destroy us."
My Lords, because we went back on the wrong parity of exchange, at the wrong time, to a rigid gold standard, and without any continuous or effective international co-operation between central banks, that was quite true. Gold was used as a vile trap to destroy us; and we did have, for fifteen bitter years, unemployment figures which ranged between 1½ million and 3 million people, without a break or let-off.

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It can be argued that gold itself is a myth. We dig it out of the ground, as the noble Lord, Lord Gladwyn, said, at enormous cost, and transport it all over the world; and we then re-bury it in the vaults of banks all over the world. No-one ever sees a gold block; and if anyone did, he would not recognise it as such. I saw one the other day, and it did not look in the least like gold. Nevertheless, it is the most formidable myth the world has ever known. It has lasted for a couple of thousand years; and in my judgment it will continue for many years to come, and for one simple reason: it is the only medium of international exchange which, in the final analysis, is trusted by all, by everybody. That is the answer to the gold question, and I think we have to tackle it.
I agree with the noble Earl, Lord Dundee, that the attitude of France, as was also said by the noble Lord, Lord Gladwyn, is of crucial importance. I do not believe that it is as adamant as many people have tried to make out. There was an extremely interesting interview the other day between Professor Triffin—who has been referred to—and Mr. Rau. I will quote one question and answer, because I think they are of great importance. The question was:
"You, Professor Triffin, I believe interpreted President de Gaulle's speech in February rather differently from most people—that the President does not endorse a return to the gold standard?"
The Professor replied:
"Absolutely, yet I have no doubt about my interpretation. In fact it was confirmed by M. Giscard d'Estaing when he spoke at the Sorbonne, and then only two weeks ago I appeared with him and M. Rueff on a French television programme: he confirmed what I had said—that de Gaulle had never endorsed a return to the pure gold standard such as Rueff suggests. De Gaulle left room in his speech for an international credit superstructure which however would no longer be based on the dollar alone …"
Those are the operative words, because, as the noble Lord, Lord Gladwyn, knows better than anyone else, it is total dependence on the dollar that President de Gaulle is determined to avoid; and I think that there is some justification for it. Professor Triffin continued:
"One of the possibilities would be the famous French proposal for a collective reserve unit."
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My Lords, in order to avoid a world recession, we need a breathing space of at least three years in which to devise an international monetary system that will meet the requirements of the modern world. There is only one way to do it—and here I agree entirely with my noble friend Lord Dundee: that is, to raise the price of gold. If we were to combine with the Common Market countries to declare a doubling of the price of gold, all the Americans would be able to do would be, first, to fall in line, and then to talk. This is the compromise solution to which I myself have been driven. Although I make no claim to be an economist (the nearest I got to it was when I had the honour of sponsoring the most distinguished economist in this country, my noble friend Lord Kahn, the other day), I have given more thought to this problem since the war than to any other.
The noble Earl, Lord Dundee, mentioned the possible benefits to the economies of South Africa and the Soviet Union of a rise in the price of gold. What is that by comparison with the miseries that could be caused by a genuine world recession? It is an argument that should not be considered, in my judgment, for a single moment.
Meanwhile, on the home front, it seems to me that Her Majesty's Government could do much to restore confidence in this country abroad by reimposing import controls, which are legal, instead of an import charge, which is illegal; by reducing current expenditure—not expenditure in 1966 and in 1967, but current expenditure, and not least expenditure on armaments—which in our present position we cannot afford; and by encouraging investment in productive industry, not only in companies which operate exclusively in this country, but also in those which are earning abroad money that we most desperately need. I have said over and over again that any attempt to solve the balance-of-payments problem by repressing industrial investment, and with it the modernisation of industry, is a policy of madness. Increased productivity is essential for our survival.
It is all very well for the Prime Minister to chide Mr. Heath, as he did yesterday, for very properly giving instructions that the question of the control of imports should be studied. He was perfectly

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right to do so. The Prime Minister did chide him, and Mr. Heath admitted that he did it. That was right. What the Prime Minister should have done when he came into office was to say to the people studying this problem: "You had better buck up!" He should have sent them a minute headed "Action this day", in red ink. And the controls should now be in operation. As your Lordships know, we are now importing, recklessly and wholesale, all kinds of unnecessary luxury goods for which there is no justification; and which we cannot really afford. If your Lordships go around the West End of London—and not only of London but of provincial cities—you will see the number of luxury goods, foodstuffs and other goods, which are now being brought into this country and which, for the time being, ought to be kept out.
I have kept your Lordships too long, and I know it. I have done so because I am worried. All the evidence points, in my view, to the imminence of a classical credit collapse and liquidity crisis. No matter what the so-called experts say, money, or the lack of it, is now doing the real talking. Falling commodity prices and markets. Japan in trouble. Australia in trouble. India, worst of all. Even Western Europe showing every sign of impending recession. Both Britain and America, as the noble Earl, Lord Dundee, said, trying to get control of their payments deficits by depriving the rest of the world of credits upon which its prosperity ultimately depends. The warning lights are flashing all over the world.
It seems to me that Her Majesty's Government either cannot or will not see this. I have seen it happen before, and in Parliament. I have seen a Labour Government brought crashing to ruin, because Snowden did not know how to deal with the crisis and because they continued that relentless and ruthless deflation under his guidance. I have seen Hitler brought to power because Schacht did know how to deal with the crisis. I have seen the entire British economy saved from utter wreckage by an enforced devaluation which a so-called "National Government" was formed to prevent. Thank God, they did not do it! They were kicked off in the nick of time. Well
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we all know that they were no good; but at least they did not manage to smash the economy for good, as was their original intention.
If I am asked to choose between continuous deflation and reflation, I have no doubt what the answer is. I rate the welfare of the workers of the world well above the convenience of international bankers, who, as the noble Lord, Lord Blackford, has already told us this afternoon, are doing quite nicely. We still have the chance to give a lead.
I want to say something rather carefully, and not perhaps altogether wisely; but sometimes I find myself a little disturbed about what seems to me to be the abject subservience of this Government to the Government of the United States. I do not think that that is the best way to deal with the situation; nor do I think that it is the best way to deal with President Lyndon Johnson, who is a tough boy, but one of the shrewdest politicians in the world, who knows probably better than anyone else what can and what cannot be done in politics. I do not think that the Government should absolutely and completely acquiesce, without question, in every decision by the United States Government, and in every field. They should go there and argue. The President is a good man to argue with, and a tough one, and he might beat them in an argument. But I do not think that we should grovel, to the extent we are now doing, to the United States of America. We have a real chance to give a lead; and, if we do not take that chance, it may well be that the generation still unborn will, as the Prime Minister suggested in New York, pour upon us their curses.
4.58 p.m.
LORD GRANTCHESTER: My Lords, we have commenced a debate on an admittedly complicated subject, much wider than anything contained in the Bill before us. Something has been done to unravel some of the complexities of the subject, and this is all to the good. I think, as did the noble Lord who has just sat down, that the discussions could usefully be continued, for those who have spoken agree on some points with each other and disagree on others.
I have listened to university professors when lecturing express surprise that politicians meddle with the problem of an

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international monetary mechanism which, because of its technical character, they consider should be left to experts to fashion. However, experts agree no more than do politicians on this subject. But in these days Government do rely increasingly upon experts in many technical fields. During the 19th century and up to 1914 Governments were content to exercise supervision and to require honest dealing by those who were authorised to issue currency, rather than to be directly involved. But under the strain of widespread wars standards were abandoned and Governments resorted to what was euphemistically called "flexibility" in monetary management.
So a new weapon was added to the armoury of Governments for use in the struggle for power and pretence. And a sorry story it makes and one of which the European States cannot be proud. Some have cheated more than others. The worst offenders, the Germans in the two decades immediately following the two wars, provoked such a reaction that to-day the German people are perhaps more on guard than any other people against this social cancer, as The Times recently stigmatised inflation, because they suffered the worst from monetary manipulation. To-day we have a situation in which more and more there is, as one Liberal speaker expressed it last week, a smell of economic disaster in the air. As inflation progresses in this country from a steady 3½ per cent. per annum to what looks like being double that this year, the gravity of the situation should be apparent to all.
After two years' study by an international governmental committee, on which most of the so-called progressive nations were represented, we have this Bill which, as more than one speaker has emphasised, does not touch fundamentals. Nor has it any immediate relevance even to the limited problem of liquidity, for the committee's recommendation to increase the resources of the Fund was as a precaution against a situation which might arise at some future date. It would not be right to regard this Bill as making any contribution of substance to the dangerous position in which we find ourselves in this country at the moment.
I am afraid that in the minds of many "liquidity" is often confused with
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"capital". The explanation of the noble Lord, Lord Shepherd, was most lucid, if I may say so with respect, but if one reads the debate in another place I think one finds there were a number of Members who thought they were talking about capital for development rather than liquidity. As noble Lords well know, liquidity is only important in relation to a country's surplus or deficit on its external account of trading and investment. Furthermore, the I.M.F. can really be of assistance only where imbalances are temporary and not due to continuing and heavy capital movements. This is clearly set out in the I.M.F. rules.
With these explanations and reservations, perhaps I may briefly summarise the position as it appears to me. First, the present system, the so-called gold exchange standard, is now generally regarded as unsatisfactory. It could, in any case, only continue, as the noble Lord. Lord Boothby, said, so long as some countries in surplus were willing to finance countries in deficit, accepting the national currency of the deficit country as security for so doing. Of course, if this went on sufficiently long there would be such an accumulation of, say, dollars, for example, if the U.S. was the deficit country, that they would not hold their value. On what would appear to be reasonable grounds to-day, the surplus countries appear to be determined no longer to finance the deficits of the United States and the United Kingdom, thus placing a limit to the amounts of the reserve currencies they are willing to hold.
Secondly, it would be common sense to start any reform from the basis of the system at present in operation, rather than to try to impose a completely new system all at once. Gradual change may involve the introduction of some form of reserve, such as a composite unit based on "stable and freely convertible currencies"—this is important—or increased holdings in gold, which as the noble Lord, Lord Boothby, said (and I agree with him) would probably involve a change in the price of gold, and, I believe, should do so. But if it does, this increase in the price of gold must be arranged in such a way that this does not become a big inflationary operation. A new composite unit or increased holdings in gold would be in substitution, to a greater or lesser extent, for the existing reserve currencies—

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namely, dollars and sterling. Strictly speaking, dollars can no longer be considered to comply with the condition I just mentioned of being "freely convertible", as they are hedged in by restrictions under political understandings, if not agreements. This applies particularly to the dollars held in the reserves of Germany.
Sterling is under continuous pressure, I would say, not solely financial, but more due to a lack of confidence engendered by the Government; and confidence is as important as, or even more important than, physical reserves. Perhaps, if I may so suggest, the greatest mistake which was made by the present Government was their belief that internal actions had no repercussions upon our balance of payments. This revealed a simplicity which in days of great wealth might have charmed, but in days of strain could only be destructive of confidence; and confidence, once it is lost, is difficult to regain.
Thirdly, the I.M.F. have never said that at the present time an increase in international liquidity was necessary. On the contrary, some maintain that there is too much liquidity, and that it is because of this situation that certain countries tend to disregard the need to exercise monetary discipline.
Fourthly, this Bill is a concession to those who claim that, should the volume of international trade increase, and should countries now running a deficit—that is, the United States and Britain—establish equilibrium, a shortage of liquidity could develop. But the war in Vietnam, if it continues, may well affect the declared intention of the United States to reduce its deficit. So it would not appear that there is any danger of a real shortage of liquidity developing in the immediate future.
This Bill is also a concession to those who would like to see reserves under international control rather than under national control. The Bill will diminish our national reserves. I understand from what he said that the Chancellor of the Exchequer estimates that we might lose £80 million of gold by paying our £44 million gold deposit and by probable sales of sterling by other countries to purchase gold to find their increased deposits with the I.M.F. Even if this gold is re-deposited in London while
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actual payments are spread over a period of years, I do not think it can have quite the same effect, but I should not like to be dogmatic. I do not believe it is quite the same thing as holding the gold in our reserves. The currency deposit carries a gold guarantee which, of course, imposes upon us a potential liability which has not so far been mentioned. I hope I have not misunderstood the position. If I have no doubt the Minister responsible will correct me later. I am also not quite sure, nor was my noble friend Lord Gladwyn, whether the additional drawing rights of £218 million, which the Chancellor of the Exchequer mentioned are unconditional drawing rights, or whether the right to draw a part of it is subject to conditions. I cannot believe that we have an immediate unconditional right to draw £218 million when the payments of the deposit are spread over a term of years.
Fifthly, and lastly, we must resolve, as I think we are all agreed, to create a generally acceptable reformed international monetary system, but the purpose of my introductory remarks was to emphasise that this is not only a question of protecting central and other banks who hold existing reserve currencies or who may hold new forms of reserves. We must say, and make it clear, that no reform will be acceptable to our people unless it enables real "backing" to be placed behind the currencies with which they are issued, so that they have again an honest value. So far this aspect of the problem has been avoided in international discussions. It is avoided in this Bill, and the increased volume of money circulating in this country appears to show that the present Government are unable, or unwilling, to face up to the exigencies of monetary discipline, for which the I.M.F. calls, in addition to the passing of this Bill.
5.14 p.m.
LORD SHERFIELD: My Lords, it seems that there is pretty general agreement that this Bill is a useful step; that in present circumstances it does not go far enough; that it is urgent that further measures of the kind should be taken, and before the Americans bring their external account into balance; and that it is a matter of great difficulty to reach international agreement on the next development—for there are almost as many plans

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as there are pundits, and the various plans tend to be caught up in considerations not only of international interest but of national prestige.
On the latter aspect, there has been in the past some competition between the United Kingdom and the United States as to the precise measures to be followed in setting up an international monetary system—a competition healthy enough, no doubt, but not always conducive to early action. It has been intermittently true ever since the 1940's when, as the noble Lord, Lord Boothby, has reminded us, Lord Keynes proposed a monetary unit called BANCOR and Mr. Harry White, Under-Secretary to the American Treasury, countered with another monetary unit called ISCOR.
In spite of close collaboration in the work of the International Monetary Fund and in international financial arrangements of all kinds, this competition has continued intermittently up to a recent meeting of the I.M.F. and the International Bank, I think in 1963, when proposals more far-reaching than those now proposed were put forward by the then Chancellor of the Exchequer, and were met by quite a different proposal from the then Under-Secretary to the American Treasury. In consequence, no additional measures were then possible. Since that time, noble Lords may be aware that a great deal of study has been given to these matters in the United States, and especially by both Parties in the United States Congress, leading to a number of important reports. The consensus seems to be emerging there of a policy similar to that which is being advocated by many authorities in this country and, I think, supported by the Government, in particular that any further measures should be closely meshed into the existing mechanism of the International Monetary Fund. In view of this, the auspices are, I hope, more favourable for a concerted Anglo-American approach in the forthcoming international negotiations.
I do not find myself in agreement with the noble Lord, Lord Boothby, on this point, and I do not suppose he would expect me to find myself in agreement with him. But I myself am of the opinion that as the negotiations upon which we are now about to embark are likely to be of considerable difficulty, it is very
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desirable that Her Majesty's Government and the United States Government should be agreed about the general programme which they intend to advocate, and should march arm in arm through this particular international labyrinth.
I wish to make only one more point. It is about the price of gold, and it has nothing to do with the arguments for or against this step; it is a purely practical consideration. I think it would be unwise to underrate the determination of the present United States Administration not to depart from the present gold price, and I consider, therefore, that any negotiated and agreed solution in the next stage will have to be sought on other lines.
5.18 p.m.
LORD HAWKE: My Lords, I intervene for only a minute. May I humbly congratulate my noble friend Lord Dundee for a speech very much after my own heart? I have seldom heard a better one on this subject. I intervene chiefly because I do not think sufficient emphasis has been placed on the strain on liquidity caused by the ever-increasing quantity of capital moving about the world. I think that oil money in particular is increasing the whole time, and this is very often owned by countries who find the greatest difficulty in spending it in the short term. We want to try to do something about that, because that puts a great strain on liquidity, and capital is frightened out of one country into another.
I have always been a protagonist of raising the price of gold, but the Americans seem to have the obsession that to raise the price of gold means devaluing the dollar. I remember for many years I received numerous speeches which Senator Fulbright sent to me, and I once had the temerity to retaliate by sending him one of mine on this subject. He had the kindness to reply, and the burden of his reply was that the United States would never devalue the dollar. Of course, it is the most utter nonsense to say that raising the price of gold is devaluing the dollar, and the more we emphasise that the whole time the better. This Bill is certainly useful.
LORD BOOTHBY: If the noble Lord will forgive me, it was President Roosevelt himself who raised the price of gold, in defiance of the whole of the rest of

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the world, and stopped the major recession in 1933. It was the Americans who did that.
LORD HAWKE: I am sure the noble Lord will make that point to the Americans.
LORD BOOTHBY: I have.
LORD HAWKE: I have very often agreed with the noble Lord, Lord Boothby, when he speaks on this particular subject, but I must say that to-day I thought he took a quite unnecessarily gloomy and frightening view of the whole situation. I do not think the world situation is anything like it was in 1931. At the moment we have high wages and a considerable balance of purchasing power in all the industrial countries of the world, including Europe. I recommend the noble Lord to go for a walk anywhere near Victoria at the moment. He will find it absolutely packed with Frenchmen, all presumably spending their surplus wages. In America, the Administration has had the courage and insight to reduce personal taxation. That is leading to great consumption, and, of course, war which is scaling up in the Far East is blowing off a lot of commodities into nothing the whole time.
We want, as the next thing, an international conference to produce a better system all round, but it must take cognisance of the world's commodities. It is not much use producing these liquidity solutions which are of great importance to the more sophisticated countries unless you can do something about the more unfortunate countries which are in a state of deep penury. The more they grow in order to try to get a little more money, the less they get for it, and the danger is that they will become bankrupt. Therefore I welcome this Bill as a first step towards what I hope is a more enlightened look in the world.
5.23 p.m.
LORD SHEPHERD: My Lords, I am quite sure we can claim to have had an interesting debate. The noble Lord, Lord Gladwyn, complained, and I think perhaps, having listened to this afternoon's debate, with some justification, that we had not been able to have the Motion of the noble Lord, Lord Boothby, before us. As the House well knows, there are
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a limited number of Wednesdays which are available for general discussions and we always have a great deal of competition for subjects. I had some discussions with the noble Lord, Lord Boothby, many weeks ago and I informed him that this Bill was likely to arise in this Session. We both took the view that this would be the right opportunity for this discussion, although I think it would be readily admitted that our debate on liquidity has in fact gone a great deal wider than the terms of this Bill. But let us not complain about that.
There are five points which have arisen in this debate. May I say to the noble Lord, Lord Hawke, that I very much appreciated his more optimistic attitude towards the problem than that of the noble Lord, Lord Boothby; but I will come to that in a moment. I think everyone agreed that this is a useful Bill. Also there was the feeling—and I think it was shared everywhere—that the 25 per cent. increase is perhaps inadequate, considering the possible needs that may arise, although again I would remind the House that there is a conflict of opinion. There are some who think there is already too much liquidity in the world and there are others—and we are among them—who think we may well have to increase it. I think we should remember that 103 countries are going to increase, or are expected to increase, their quota by the figure of 25 per cent., and I understand this will mean that the resources of the International Monetary Fund will be increased by these quota adjustments by 5,000 million dollars, a fairly sizeable figure. In view of the fact that the drawing rights will be increased by 125 per cent. of this sum, this means that there will be 6,250 million dollars more which members will be eligible to draw within the International Monetary Fund.
I think I should have mentioned, when moving this Bill, although this particular point is not affected by the Bill, that there are sixteen countries which are invited to accept the recommendations of the Directors of the International Monetary Fund that their own quotas should be additionally uplifted in view of their own capability to meet that quota. So there is not just this 25 per cent. general increase in quota here; we have the extra moneys coming in from these 16 other countries.

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Again, I think everyone agreed that there should be further discussions. This is certainly recognised by the United States of America and ourselves, and I think by most of the European countries—some a little more than others. We will do our best in this matter. We must try to seek an agreement. It has already been said, time and time again this afternoon, that we have many suggestions and proposals; many diverse, some quite contrary and contradictory to the others. I think we should avoid trying to take up a national position in this matter—taking up a position with one country or another group of countries. What we must seek is international co-operation rather than trying to attach ourselves to a particular bloc. That is one of the reasons why my right honourable friend the Chancellor of the Exchequer has been careful not to align himself directly with one particular group or another, or to stand fast on any particular proposal.
I am sorry the noble Lord, Lord Gladwyn, thought we were a little negligent in this matter, but we thought that in view of all the proposals which now exist, one further proposal from us might not make a great deal of useful contribution, and there is something to be said for trying to get other countries to consider the existing proposals and to see whether we can find common ground and then achieve agreement.
I would end by making one comment. I hope that whilst the countries of the world will recognise the dangers that confront us, and particularly the dangers which confront this country, we shall not accept the view that ultimately, and unless there is a major change, we are going to confront the world slump conditions of 1930. In 1930. we knew very little. We did not have the knowledge and experience which is now made available to us by the Directors and staff of the International Monetary Fund and many other organisations. We have learned a great deal. I do not believe that those conditions exist to-day. They could come if noble Lords continually talk as they have spoken this afternoon, of a major slump inevitably arising next year. I think this is utterly wrong. I do not believe it is so, and I think it would be wrong for it to go out from this House that this is possible. But let
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us recognise that there are difficulties and there are possible dangers unless we take the necessary action.
My right honourable friend the Prime Minister spoke about this matter and the noble Lord, Lord Boothby, mentioned his words this afternoon. This is not only known and experienced in this country; it is recognised in many other countries and, my Lords, I believe there is a will and there will be a way out. But it will take time. I think that although we still have time we should press on persistently and flexibly, and in the end I believe good reason will prevail and we shall be able to establish an international monetary system which will be a service not only to the rich and powerful countries which need its support but the developing countries which look anxiously to the future. It is only within this international monetary organisation that the world in fact can prosper and develop. I now ask your Lordships to give the Bill a Second Reading.
On Question, Bill read 2ª; Committee negatived.
Then, Standing Order No. 41 having been suspended (pursuant to the Resolution of July 22), Bill read 3ª, and passed.

GAS (BORROWING POWERS) BILL
5.30 p.m.
Order of the Day for the Second Reading read.
LORD HOBSON: My Lords, I beg to move that the Gas (Borrowing Powers) Bill be read a second time. This Bill is largely concerned with the provision of finance. Although it is not a Money Bill in the strict sense of being certified as such by the Speaker, may I suggest that in the circumstances the House agrees to the proposal that the Committee stage be negatived and that the remaining stages of the Bill be taken forthwith, as indicated in the italicised Order on the Order Paper. I trust that this course will be agreeable to your Lordships.
My Lords, this small but important Bill raises the borrowing powers of the gas industry from its existing limit of £650 million to a new initial limit of £900 million with provision for the Minister to increase this by an Order, requiring Affirmative Resolution, to a sum not exceeding £1,200 million. These are large sums, but, as

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I hope to show, the increase is no more than is commensurate with the change in the scale of operations of the gas industry.
Your Lordships will no doubt have seen the brochure The Growing Gas Industry, which has been prepared and published by the Gas Council. The document outlines the industry's case for additional borrowing powers. It gives a concise account of the recent rapid changes in the fortunes of the industry, of the bright prospects now before it, and of the industry's plans to meet the challenge of the future. The task is a big one. In the space of a very few years the increase in the use of gas has rapidly gained momentum to reach the point where what used to be regarded as the growth in demand in ten years is now experienced virtually in a single year. The industry now expects that by the end of this decade gas sales will be more than half as much again as they were last year—an annual rate of growth of about 7½ per cent. per year. After a period of several years when sales showed little movement either way, gas has in a very short space of time got rid of the aura of an old-established industry struggling against the odds to keep pace with developments in other fuels, and has instead impressed the popular imagination as a growth industry in the van of the country's technological advance. This sudden transition, for which those in the industry have worked with devotion and foresight, has been due to two major and interdependent developments—a technical breakthrough in ways of making gas from new and cheaper sources of the materials for gas making, and the marketing of new, efficient and attractive appliances to meet the growing demand for higher standards of heating comfort in the home.
Although Gas Boards are increasing their sales to industry, the greater part of the revival in demand is attributable to the householder. Annual sales of gas room-heaters have recently been not far short of one million. In addition many more homes are being centrally heated by gas and sales of warm air units and central heating installations are already well over 100,000 a year. The industry expects to continue to gain an important share of the growing demand for higher
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heating standards in the home and in factories and offices. As much of the additional demand is for space heating, it will arise mainly in the winter months and the winter peak demand is consequently expected to increase at a faster rate—10 per cent. per year—than yearly sales. It is this growth in peak demand which determines the rate of expansion of production and distribution capacity and which is largely responsible for the substantial investment requirements of the industry.
The new processes for producing gas from oil have many advantages. They are particularly suitable for meeting the new winter load. Capital costs are relatively low and there is a potential flexibility in operation which should enable them to adapt output more easily than hitherto to fluctuations in demand. There are substantial increases in productivity to be obtained. A typical large new plant is highly automated and requires only a few skilled men to supervise its running. Gas can be produced at a new works only two years after the placing of an order for the plant.
Perhaps the greatest merit of these new processes, however, lies in features which have yet to bear their full fruits. The new plants, drawing on a variety of feedstocks, produce non-toxic gases which are often of higher heat content than present-day town gas and certainly at higher pressures. The gas industry is modernising its distribution system to take full advantage of these new developments. High pressure distribution of richer gases will increase the capacity of existing mains which can then also be used to store as well as to carry gas. The new production processes therefore complement the technical advances in the storage and distribution of gases, advances which are essential if the best use is to be made of any large-scale supplies of natural gas that may become available in the future. Noble Lords will be familiar with one potential new development, the storage of gas underground, from our recent debates on the Gas Bill, which was introduced by my noble friend Lord Champion.
Richer gases, whether from existing feedstocks or from new sources, would probably go in the first instance to industrial consumers, but research is going forward into all the problems connected

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with the general conversion of the public supply of gas to richer gases, including the alterations necessary to consumers' appliances. The gas industry has every intention of supplying richer gases to the householder as and when it becomes technically possible and economically advantageous to do so. There are many uncertainties, and these developments in the distribution of richer gases may be a long way off, but the industry's plans are designed to provide sufficient flexibility to allow further technological discoveries and further changes in the sources of supply to be absorbed as smoothly as possible. The gas industry has been quick to realise and to exploit the potential of recent developments, and the Government believe that not only must its initiative be applauded but also that it should remain as free as possible, within the broad framework of fuel policy and the National Plan, to further the advance of the industry by the realisation of the benefits of cheaper materials and cheaper processes.
In the present and foreseeable state of knowledge of methods of gas making, it is inevitable that the use of coal should decline if the gas industry is to survive and flourish. Gas from coal at present can cost nearly twice as much as gas from oil-based plants. The Gas Council and the Area Boards seem likely, as a result of the Minister's request to consider measures to help the coal industry this year, to use some 300,000 tons more coal in 1965–66 than was expected at the beginning of the year. This is partly a reflection of the increased demand for gas, and though it will help the coal industry, it is not expected to have any significant effect on the financial prospects of the gas industry. Looking further ahead, the Minister is encouraging the efforts of the Gas Council in its research into finding new and economical methods of making gas from coal. Success in this difficult field, however, may prove elusive and may in any event be a very long way off.
It is not only in its rate of growth that the gas industry will be one of those leading the way to the greater prosperity for which we are planning. Productivity has increased sharply over the last few years and further gains are expected as a result of the modernisation now in progress. On its own conservative basis of
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estimating productivity, the industry expects an increase of 25 per cent. over the next five years, but alternative methods of calculation such as those used in the National Plan would put the increase at more than twice as much as this.
The programme of modernisation and expansion to meet this rapidly rising demand has, not surprisingly, led to a sharp increase in the rate of investment. A few years ago the industry was investing at the rate of about £50 million a year. The industry's brochure estimates that investment is now expected to rise from about £117 million this year to an average of about £140 million a year at the end of the 'sixties. In the period from April 1, 1965, to December 31, 1970, total investment is estimated at £780 million, of which £320 million is for gas production and £460 million for distribution and other purposes. The industry's total capital needs, including £50 million additional working capital, are estimated at £830 million, of which some £430 million, or 52 per cent., is expected to come from internal resources, leaving £400 million to be met by new borrowing. As a result, the industry's borrowing powers need to be extended much earlier than had been envisaged even a short time ago. The additional £400 million new borrowing would raise the total borrowing from £585 million at March 31, 1965, to £985 million by December, 1970. The present limit of £650 million is expected to be reached before the end of this year.
The Bill sets an initial limit of £900 million to ensure that, on present expectations, Parliament will have an opportunity in about three years' time of reviewing developments in the gas industry. Thereafter, the Bill proposes a final limit of £1,200 million, some £200 million above the estimate of £985 million of total borrowing required on present plans. The reasons for this margin and the size of the initial and final limits have been fully discussed in another place. I need say here only that the Government accept the gas industry's case for allowing for a margin of the size proposed in view of all the uncertainties about the rapidity with which the industry may grow in the immediate future; and the possibility of North Sea gas is not the only unknown factor to

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take into account. The Minister has also given the assurance that he would not be prepared to authorise any more borrowing than the industry could prove that it needed, and with the many Parliamentary occasions on which the fortunes of the gas industry could be reviewed, other than on the presentation of a Borrowing Powers Order or Bill, it cannot be said that the establishment of the proposed limits would deprive Parliament of proper control over the industry's borrowings. I think that is made adequately clear in the Bill.
The gas industry, therefore, over the next five years expects to expand rapidly and to use a considerable volume of resources, half of which will be financed from its own funds, in order to achieve this. With these large sums at stake, the industry's financial prospects must be sound. The record of the last three years is encouraging. During this time the average revenue per therm from gas sales has risen only a little, despite increasing costs, and the industry as a whole has made good progress towards, and expects to meet, the agreed financial objective of earning 10·2 per cent. gross return on net assets employed during the five years ended March, 1967, although some Boards are not so well placed as others. In its present estimates the industry is quite rightly providing for a higher rate of return in the years ahead.
Investment in gas, therefore, is expected to pay its way by earning a proper return, sufficient to cover the charges on capital and to provide a substantial contribution to the resources needed for expansion. There are uncertain as well as exciting prospects ahead, but the Gas Council and the Area Gas Boards are demonstrating their ability for combining a flair for innovation with prudent financial management, and I am sure that your Lordships will join with me in commending the proposals in the Bill and the prospective developments in the gas industry on which they are based and which I have illustrated. My Lords, I beg to move that the Bill be now read a second time.
Moved, That the Bill be now read 2ª.—(Lord Hobson.)
5.45 p.m.
THE EARL OF DUNDEE: My Lords, when the Gas Council and the Electricity Council were first set up, some years ago, it was expected that the use of electricity would gradually displace the use of gas for a great many purposes. But that has not happened. What has happened is that both industries have expanded enormously, and the increasing use of gas, both for domestic and other purposes, requires a great deal more finance, as is provided for in this Bill. We entirely agree with the Bill, which is a simple one, and except for one small point, of which I have given notice, I cannot see that there is any justification for prolonging the discussion about it, although in another place it was discussed for no less than four and a half hours. Perhaps they are more gas-prone there than we are.
The only point on which I gave notice to the noble Lord concerns subsection (2) of Clause 1, which first provides that any order by the Minister authorising increased expenditure over the amount specified up to £1,200 million shall be subject to an Affirmative Resolution in the House of Commons. That is quite easy to understand. But then it goes on to provide
"and so much of Section 71(3) of the Gas Act, 1948 as provides that orders under that Act shall be subject to annulment in pursuance of a resolution of either House of Parliament shall not apply".
That is to say, the right of your Lordships' House to annul, under the Negative Resolution procedure, any orders arising under the 1948 Act appears to be repealed. I should like to know what is the justification for doing that.
5.48 p.m.
LORD BLYTON: My Lords, this Bill is introduced to raise the borrowing limits of the Gas Council for capital expenditure to enable it to meet its forward plans and development. In discussing this Bill we are bound to ask what effect the forward programmes will have on the other nationalised industries which are in the energy market. Do we go on importing fuel, closing our pits, leaving our indigenous fuel in the ground, and further add to our balance-of-payments difficulties? After years of argument by many of us who spoke from the Front Bench in another place, in Opposition, on the Labour Party's policy of 200 million

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tons of coal in an increasing energy market, and on an integrated fuel and power policy, I hope that this policy has not been abandoned by the Government. We fought for ten years for an integrated fuel policy.
I may be told about the Energy Advisory Council, and I want to be perfectly frank. I cannot see a policy of integration in the energy industries coming from this Council. I cannot see how we can expect a policy of this character when each Chairman, of coal, oil, electricity and gas, will be fighting for his own industry on the basis, "I'm all right, and to the Devil with the consequences upon the other sectors of the energy industries," especially if they are all competitors in the energy field.
This is an appropriate moment for me to question the effect that new gas-making processes are having on the coal industry. I was ten years on the Select Committee on Nationalised Industries, and in the Session 1960–61 the Coal Board told us, when we examined the gas industry, that they believed that gas could be made in large-scale Lurgi plants at a delivered cost to the Gas Board of 8¼d. to 8½d. per therm. The Board proposed, and it was agreed, that fresh details of this Lurgi process should be worked out and carried out jointly by the Coal Board and the Gas Council. In the Report we submittted to the House of Commons in July, 1961, the Committee welcomed this decision, and in considering the relative merits of Lurgi and imported methane we said in our Report:
"Your Committee agree that it would be prudent to see whether the two schemes are enabling the industry to expand before proceeding in one direction or another."
The then Minister of Power, Mr. Richard Wood, ignored this advice, and authorised the Gas Council to proceed with the importation of Saharan methane on November 3, 1961, before the joint study on Lurgi was completed. Further, he told the House of Commons that this decision would not prejudice the building of a large-scale Lurgi plant, yet the effect of this decision was to render the study of the Lurgi plant useless.
On November 28, 1961, the Parliamentary Secretary to the Minister of Power told the Commons that the imported methane, reformed to town gas,
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would cost 8¼d. a therm. The Report of the Lurgi Study Group confirmed the view expressed by the National Coal Board to the Select Committee, that a large-scale Lurgi plant could produce gas enriched to town gas standard at 8¼d. per therm. There was therefore no economic advantage in the imported methane scheme. These imports of foreign methane most certainly aggravate our balance-of-payments difficulties, and a very substantial part of the operations, including field cost of gas, is in foreign hands. This is all the more distressing when Lurgi gas could have been produced at the same cost.
The Minister of Power in 1961 told the Commons that in the year 1965–66, as a result of importing methane, about 100,000 tons of gas-making coal previously allowed in the industry's development plans would not be needed. Yet the gas industry contracted to import 350 million therms per annum, which on current yield of gas per ton of coal is equivalent to 4½million tons of coal per annum. Now we know as a result of a Question in the Commons on March 31 of this year, and a reply by the Minister of State to the Board "of Trade, that the annual foreign exchange costs of imports of North African methane will involve this country in an expenditure of £7 million per annum. All the long-term forecasts given over the years to the Coal Board of how much coal will be needed have been rashly over-estimated. As recently as 1958 the Gas Council estimated that it would need 27 million tons of coal in 1965–66. It looks like being about 17 million now. Estimates for 1970 at one time looked like being as high as 30 million tons. Now the figure is as low as 9 to 10 millions. On June 2 last year, the noble Lord, Lord Erroll of Hale, who was then the Minister of Power, told the Commons that the gas industry would require 14 million tons in 1969. We now know that even that figure does not stand.
It was on these long-term estimates that the coal industry based its plans, invested millions of pounds in pits, bought plant and machinery, recruited and trained workers, built colliery villages and encouraged the supplying industries to expand. The coal industry cannot turn coal on and off like a tap. It takes eight to ten years to sink and equip a colliery

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before the first ton of coal is mined. All this is now to be scrapped; pits are to be closed, involving difficult and social economic problems for whole communities—all because of the too-rapid move from coal. The imported methane project, in my opinion, is a scandal, and those responsible for making that decision in the middle of investigations by the Study Group should be brought to account. I consider that the Select Committee on Nationalised Industries should investigate this matter and challenge those responsible for the waste of public money involved and the added burden to the balance of payments, creating a completely unnecessary burden upon the economy.
The result of the liquid methane project has been that millions of pounds have been spent, both at home and abroad, without any advantage to the gas consumer. I hope that the Government are not going to allow the gas industry to take credit for making a profit which can be achieved only by failing to give due return on investment which has been made for the gas industry by another nationalised industry. Clearly, two courses are open to the nation. The first is to support the Gas Council's hurried abandonment of coal in favour of fuels—feedstocks which cost Britain valuable foreign currency. Such a course would, in effect, throw away public money, which, acting on the figures supplied by the Gas Boards themselves, the Coal Board have invested in gas coal pits. The second course is for the Gas Boards to slow down their move away from coal without swerving from their path towards greater technical efficiency. In this way the nation would obtain some return on the millions of pounds which have been spent by one nationalised industry in support of another.
As I have said before, we have always argued that in an increasing energy market coal could provide a base load of around 200 million tons to meet the energy needs of the country. There are rumours, and even a statement in the Sun, by Geoffrey Goodman, that the Government intend to cut back the coal industry to 175 million tons. If this is correct, it means that to meet our energy requirements other fuels will have to be imported. This state of affairs I regard as
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serious. Our greatest difficulty today is in trying to achieve a balance of payments, and in increasing our exports to meet the cost of our imports. Where are we to get the huge amount of foreign exchange to meet this added importation of fuel if the coal industry is cut down to 175 million or 160 million tons? It is estimated that it will add £80 million a year to our import bill. To-day, oil imports are something like £500 million a year, and as there are also re-exports one can never get down to the true figures. So, as we cut back the use of coal, we increase the country's balance-of-payments difficulties. In my opinion, this is real economic folly and most certainly not in the national interest.
In our energy policy we have fought for a base-load of coal of about 200 million tons. The Government only recently announced a figure of about 190 million to 200 million tons, but now there are rumours that in an economic White Paper on Planning, to be published in September, the coal industry is to be further cut back to 175 million tons. I warn the Government, as an ardent supporter of them, that the present trends in both production and consumption, unless arrested, will even destroy such stated aims. This is a direct question that I put to the Government, especially to the Ministers responsible for planning. Is there really a serious and genuine intention to stabilise coal's share of the energy market at levels which we ourselves have suggested in the past?
I am not alone in being possessed of a strong suspicion that the industry is being allowed to drift until such time that it will not have the men or the capacity to fulfil even the amended target of 190 million to 200 million, or even 175 million tons. We have always known over the years in which I spoke from the Opposition Front Bench for the Labour Party that there were powerful forces pressing for a cutback in coal production. This needs to be said, because the longer the present drift is allowed to continue the more difficult it will be to arrest.
The most serious feature that we face is the rate at which men are voluntarily leaving our mines. In the last twelve weeks voluntary leaving has averaged 1,000 men a week. The figure for 1964 was 10,000 up on 1963, and in the first

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twenty-one weeks of this year manpower in our pits has dropped by over 13,000 —and that is at a rate of 30,000 men per year. In the main, the men who are leaving are the young men, men under 40, and this most certainly affects the quality of the remaining labour force. There is a serious unbalance of manpower at many of our mines. Productivity increases have been seriously impeded in the most efficient pits and coalfields, making others uneconomic and increasing the losses in those already in difficulties.
The stark truth is that there is a crisis of confidence in the future of mining. Recruitment is merely confined to the mining communities with a tradition of mining employment. Our manpower has dropped by 250,000 since 1958. Hundreds of pits have been closed. Intensive rationalisation measures have been adopted, with their effects upon the nature and availability of jobs. The cumulative effect of all these changes has shaken confidence in job security in the industry, and little is being done to restore it. In fact, if we cut back to 175 million tons the position will be further aggravated. It is said that that will dear out 140,000 men from our pits.
I am sorry to say that in recent years judgment of the viability of the mining industry has been based upon short-term market considerations which prevail at the present time, completely ignoring the long-term needs assessed against available resources. The repeated advocacy in a large section of the community that coalmining is a dying industry, that it must give way to other forms of energy, is in a large measure responsible for our existing manpower problem; and continuing this attitude is responsible too for impeding the advance of productivity, thus holding back the viability of this industry.
My Lords, I worked underground in the mines for 32 years, and I have no desire that men should go down to the bowels of the earth to get coal for a moment longer than is socially necessary. But, meanwhile, we must have stability; we must know what is the intended size of this industry. The smaller the industry gets, the more dependent the nation becomes on imported fuels with costs affecting our balance of payments; and the smaller
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it is the less viable and competitive it becomes, because of its fixed charges. The present situation, compelling a smaller industry by the play of anarchic market forces, and the present uncertainty are ruinous. The nation, the Government at least, owe it to this industry to make clear their plans without further delay.
According to the N.E.D.C. Report, based on a 4 per cent, increase each year in total national output, in the next fifteen years we shall need no less than 165 million tons of coal or coal equivalent more than we are using now. Even if coal production continues at about 200 million tons, the consumption of other fuels will have to double in the next fifteen years, and most of these other fuels will have to be imported. Can this nation, which had a deficit of £800 million in its balance of payments in 1964, afford to import between 6 and 7 per cent, more oil every year? We hear every day about the difficulty of pushing up British exports, but we shall have to sell far more goods abroad to pay for the extra imports of oil and other fuels. I know it is argued that industrialists should go for the cheapest fuel that can be got at any moment. Conversion to oil, which is cheaper in a company's own accounts, may not, however, be cheaper in terms of the nation's bookkeeping. How can imported fuels on the scale suggested be cheaper, if their purchase adds to our balance of payments problems?
I believe, and I say this honestly to your Lordships, that in the national interest a healthy British coal industry is the best protection our industrialists and other fuel users can have against rises in world energy prices, which are sure to increase when oil and other fuels have a real grip on British markets. Therefore, it is in the interests of the nation—and this is my plea—that the coal industry, on the basis of the progress it has made and is still making in production per man, should be given time—time to allow the growth in energy to catch up with the present surplus of fuels; time to get on with its policy of concentrating on the more efficient mines, and time to push on with its mechanisation and new technical developments. To give it that time, it needs help in the few years ahead to sell around 200 million tons; and nothing should be done

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now to impair its ability to produce that amount of coal when it is needed, as I believe it will surely be needed before long. France, Germany, the U.S.A. and Russia have recognised that their national interests are best served by fortifying their coal industries, and it will be a national calamity if we do not do likewise. Given temporary help, coal should be efficient enough to compete on national terms with its rivals, and sell about 200 millions a year on its commercial merits.
This Bill, my Lords, with its forward plans linking the Gas Council to oil, will have disastrous effects on County Durham, Scotland and South Wales, which are gas-coal producing counties. There is great anxiety in these areas, especially in my own county of Durham. We all recognise that uneconomic pits will have to go, and we recognise that a redeployment of men will have to take place. But, unlike the past, it is now essential that, when pits will have to close in these gas-coal producing counties, industries should be brought to the areas before a closure takes place. Whilst younger men will migrate, men over 55 years of age, men like light-rate compensation men and sick men who do light jobs, will have to be catered for at the closing of the pits, as jobs of this kind will be already filled in the receiving areas. In the past, many of these men have just been left with no alternative employment. The importance of looking at book-keeping from a national point of view is clear. If large-scale conversions to oil, because it is cheaper, result in men drawing unemployment pay and National Assistance, how can oil be cheaper for the country as a whole?
My Lords, I have spoken at some length on this Bill; and, while I recognise that the present Minister cannot unscramble the omelette of the La Conche Agreement on liquid methane which the Tories left us with, he can as Minister see to it that coal gets its rightful place in the economy, and that the integrated fuel policy for which we have all fought over the years now becomes a reality, and that redundant men are given work. Otherwise, the mining community will consider that we have broken our pledge to them. It is to this urgent task that I ask the Government to give their consideration, and let us know how far it is
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intended to make our economy dependent on an imported fuel, to the detriment of our own indigenous industry. I have raised these matters to-day as the increased borrowing powers of the Gas Council to meet future plans are to have such a serious effect on our own indigenous industry, and the Government's future plans, which are said to cut back further our own national industry of coalmining, will have such a calamitous effect upon our people. I hope, therefore, that the Government will take note that this whole situation, which we have studied over the years, ought to be based on the policy for which we have always argued.
6.14 p.m.
LORD HOBSON: My Lords, I propose to answer both the points that have been raised by the noble Earl, Lord Dundee, and I shall feel constrained to answer at a little length the speech made by my noble friend Lord Blyton. First, with regard to the noble Earl, Lord Dundee, I entirely agree with him that no one would have anticipated that gas would come to the forefront in the manner in which it has done, particularly with regard to space-heating. It really is an amazing achievement. We were all aware of what was happening in electricity, for obvious reasons which I need not go into—chiefly industrial demand and, of course, space-heating, a considerable amount of which is done by electricity, too. But because of the tremendous growth of this industry we must have this Bill, to provide this considerable sum, rising up to £1,200 million, for extra capital for development of the gas industry. It is a marvellous achievement, and the Gas Council and the whole industry deserve the thanks of the nation for what they have achieved. It really is a first-class organisation, and this afternoon there has not been a single criticism of the industry as such, or, indeed, of their need for capital to develop the industry.
To come now to the point of which the noble Earl, Lord Dundee, was good enough to give me notice (which I appreciate very much indeed), as to what are the powers with regard to the Affirmative Resolution, I have been at some pains to find out what the exact position is. We are not departing from anything that has been done before and under previous

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Administrations. For instance, the practice of establishing an initial financial limit, increasable by Order and subject to an Affirmative Resolution, was established by the Electricity (Borrowing Powers) Act 1959. I do not propose to read the section. That would be rather delaying your Lordships' House at a late hour. Another precedent is in the previous Gas (Borrowing Powers) Act, which has precisely the same clause in it. Therefore, there has been no departure; and I can give the assurance that there is no intention on the part of the present Government to undermine the power of either House in this connection. In other words, to put it in a simple phrase, it is indeed the status quo ante—and I am sure that the noble Earl, having supported this arrangement in the previous Acts under a Conservative Administration, will hardly criticise us for following suit.
I want now to come to my noble friend Lord Blyton. First, I must say that we all realise the lifetime of service which he has given to the mining industry. If any one of us wants to know anything about mining in detail, we always go to my noble friend Lord Blyton. We appreciate his past fight for the welfare of the miners and the improvement of their conditions, and I also realise the tremendous work he did on the Committee of Nationalised Industries when he was in another place. But I must cross swords with him on one or two points which he raised in his speech. It is perfectly true that France and Germany are modernising their coal industries in precisely the same way as ourselves; but it is equally true that France is using natural gas; it is equally true that Germany is developing atomic power; and it is equally true that Germany is taking gas from the Groningen natural gas fields for its industry. So we start off there with the three great industrial nations of Western Europe on a par, because we are all doing precisely the same thing.
As to the idea that we are ignoring the claims of the coal industry for supplies of coal for the gas industry, this really is not true, because, as I said in my speech, the use of coal by the gas industry this year is likely to be 300,000 tons greater than had been expected. Therefore, there has not been any deliberate cutting down of the amount
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of coal which is required for the industry. Nobody is more aware than I am of the social consequences of closing down pits. I was brought up in the Yorkshire coalfield—on the fringe of it, just South of Leeds. I know the upheaval involved. I know there are compact communities with their own social life and, in many cases, their own culture. Therefore, one can appreciate the sense of hardship they must feel when pits are being closed down. But, really, we cannot, in the face of the economics involved—and I should be wrong to give any assurance that we can—go on continually using coal for the purposes of gas making.
I propose to give the reasons why, and I think they will be seen to be quite simple, really, when I quote prices. For instance, gas made from naphtha costs 6d. to 8d. a therm and from imported natural gas 8½d. a therm. Liquefied petroleum gas can be bought for from 6½d. to 8d. a therm and refinery gas for 6d. a therm. Gas produced from coal by conventional carbonisation costs from 12d. to 14d. a therm. Really, these are formidable figures.
LORD BLYTON: I am not talking about the old conventional way of getting gas. I was dealing with the Lurgi plant.
LORD HOBSON: I anticipated that the noble Lord would deal with this aspect: I made the point in my own speech. We have said that if any development takes place for producing gas from coal more cheaply than by other methods we shall be only too pleased to use coal and to help the coal industry. In view of the figures I have given, however, to insist on using coal would penalise our industries and households to an unreasonable extent.
The noble Lord raised the question of Lurgi. I have been at some pains to find out what the real prospects are; but I must be brutal. I will give the reasons why. So far as the Lurgi process is concerned, it is not economic and, so far as can be seen at present, has no future. That had better be understood straight away. What is the position? A Study Group was set up to look into the Lurgi process. It was set up jointly by the gas and coal industries, and it was calculated that the cost per therm would be 9·6d. in a large-scale plant

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This is higher than for gas produced from the new oil-based processes, and the plants themselves are costly. The imported methane is needed almost entirely for enrichment. The Lurgi process produces a gas of low heat value, technically called "lean" gas; and it must be enriched. If we are to give the housewife higher quality and non-toxic gas and move towards the supply of richer gas at higher pressures for industry—and nobody knows better than the noble Lord, Lord Blyton, the amount of gas that is used in the steel-making industry, for instance—it is essential that the developments now taking place in the gas industry should go forward.
When we come to the question of the cut in the coal industry, the Government have not decided to cut the coal industry down to 170 million tons. The Government have, however, agreed with the Coal Board that on present trends the market for the coal industry in 1970 is likely to fall, and steps are being taken to deal with the problem to which this gives rise in the coal industry. Here again, as the noble Lord knows well (and I am sure he will admit it from his knowledge) there is continual consultation between the National Coal Board and the Government, whichever Government may be in power. Let us be partial; let us be political—the noble Lord knows that a Party such as the Labour Party, which was almost founded by the mining industry, whose pioneers came from that industry, are not going to desert their friends and be harsh in their treatment of them. One does not do things like that; and I should be the last to do it.
But the fact is that we cannot get over it. We have to consider development taking place, for example, electricity, with the use of atomic power. An announcement was made only three weeks ago in your Lordships' House about a breakthrough (I hate to use that word) in the atomic energy field by which we are to have higher pressures and higher steam temperatures for the use of atomic energy and in the use of supplies of electricity. These are things that no Government can ignore. It is perfectly true that coal is indigenous. We cannot export coal as much as we used to because of the factors operating in other countries, but Her Majesty's Government will consider
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any development that can take place in the coal industry scientifically or any new processes that can be produced.
So far as our future fuel policy is concerned the noble Lord, with respect, answered his own question; because he stated categorically that a statement of the fuel policy would probably be made in late autumn. I am sure that all the factors that my noble friend, Lord Blyton, has raised will be taken into consideration, but I should be misleading the House, and misleading my noble friend Lord Blyton, if I were to say that coal will be a prime necessity in gas-making in the future. I think I have proved the case. I say, with respect and humility, that the figures as given with respect to the new feedstocks for making coal make this clear beyond peradventure. It is impossible to put the clock back. We cannot do it. I will give the noble Lord this point: that it is true that methane is imported from abroad. It comes largely from the Sahara; but it will interest the noble Lord to know that we are hoping that there are prospects of considerable quantities of natural gas in the North Sea, in our section of the Continental Shelf; and we are developing and not ignoring this kind of interest. There is also the prospect of development of natural gas from Nigeria.
LORD BLYTON: I do not object to finding gas in the North Sea because that does not affect the balance-of-payments problem.
LORD HOBSON: I do not think that this will affect the balance-of-payments problem in the long haul, because it is coming from the sterling area; and secondly (and this is a more important reason) because of the fact that if you are going to increase the price of the prime raw material—which in these cases is gas—for certain industrial processes, the cost of the exports is going to be of such a character that you will price yourself out of the market. The fact is, and we cannot repeat it too often, that the profitability in terms of gas and converting raw materials is more lucrative than exporting the basic raw materials. This is historically true. The noble Lord will find it if he looks up the statistics, past and present.
But I appreciate the position when pits are closing down. One cannot help feeling it. The industry and the unions concerned

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have been very realistic about the situation. I want to assure the noble Lord—though I am sure that, in his heart, he knows it—that the present Government will do everything in their power to alleviate any form of wholesale closing-down of pits that would bring hardship to the milling communities. As the noble Lord himself stated, nobody wants people to go into the bowels of the earth and to hew coal if, as a result of lower prices of prime fuels and power supplies, we can become more competitive. And as a result of this there is more likelihood of the development not only of small factories but of very large and important factories on the North-East coast.
On Question, Bill read 2ª: Committee negatived.
Then, Standing Order No. 41 having been suspended (pursuant to the Resolution of July 22), Bill read 3ª, and passed.

PUBLIC WORKS LOANS BILL
6.28 p.m.
Order of the Day for the Second Reading read.
LORD BESWICK: My Lords, I rise to move the Second Reading of this Bill. The Bill has two purposes. One is to provide a fund for the Loan Commissioners for lending to local authorities. The second simplifies the loaning procedure. The sum provided in Clause 1 is £500 million. It is expected that this will be adequate to enable the Board to meet the requirements of the local authorities within the limits laid down and the percentages already stated, until well within the next financial year. After that period, of course, Parliament will have the opportunity to look again at the situation and make further provisions suitable to the situation then obtaining and in the light of the experience gained by the operation of this Bill.
There is also provision for an amount up to another £50 million to enable the Loan Commissioners to enter into commitments for loans which will, in practice, be taken up after the expiration of the present Act. This follows the provisions of the previous Act, although the amount involved in this Bill is somewhat smaller.
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Clause 2 dispenses with the previous obligation on the borrowing authority to execute a written mortgage before money is advanced. The new procedure, as I think will be agreed, will save both time and labour. Loans which are to be secured on revenues will be made by virtue of a simple agreement on the terms between the Loan Commissioners and the borrowing authority. On the handing over of the money, the loan will be secured automatically on the authority's revenues.
Clause 3 provides a convenient procedure for the recovery of stamp duty in respect of these loans. This Bill is really concerned with establishing machinery, and rather more efficient machinery than previously existed. Both sides will, I think, approve this machinery, although I know that a number of my noble friends would like to see the machine more fully utilised and a greater proportion of local government finance raised in this way. However, I can say that much has been done. The borrowing limits now enable local authorities to get the first £100,000 of their requirements from the Board, as against the previous limit of £50,000. In this way, some of the smaller authorities will be able to raise all their requirements. Larger authorities will be able to get up to 30 per cent. of their borrowing within a year on capital requirements if this figure is greater than the £100,000 limit. In regions in Northern and North-West England, and in Scotland and Wales, local authorities will be able to go to the Board for 40 per cent. of their requirements.
All this, I think, should be helpful and, as I have said, Parliament will be able to review the situation in about a year's time. As can be seen, like the Bill that we have just been considering, this Bill is largely concerned with the provision of finance. Though not a Money Bill, in the strict sense of being certified by the Speaker, I think that in the circumstances the House may well agree that the Committee stage should be negatived and that the remaining stages of the Bill taken as indicated on the Order Paper. In the meantime, I beg to move the Second Reading of this Bill.
Moved, That the Bill be now read 2ª.—(Lord Beswick.)
6.32 p.m.
THE EARL OF DUNDEE: My Lords, we welcome this Bill, which generally carries out what was envisaged by the White Paper of the previous Government two years ago. It was then estimated, in paragraph 18 of the White Paper, that the call on the Exchequer would amount to £200 million in the first year, rising by about £100 million each year to £500 million in the fourth year. In the previous paragraph it was proposed that each local authority should be allowed to meet the first £50,000 of its long-term borrowing needs from the Board in the first year of the arrangements, and the White Paper went on to say that it might be possible subsequently to raise that sum to £100,000. This has now been done.
As for the figure of 40 per cent. mentioned by the noble Lord, Lord Beswick, the intention in the White Paper was that in the first year local authorities should be allowed to obtain 20 per cent. of their long-term borrowing needs, and that thereafter the amount should be increased by 10 per cent. each year, until a maximum of 50 per cent. was achieved in the fourth year. Now an alternative plan, which I think is an improvement, has been decided by the present Chancellor. Instead of going up to 50 per cent., we shall go up to 40 per cent. for the areas which are most in need of this kind of assistance—that is, in Scotland and in the North of England.
The whole basis of this Public Works Loan Board borrowing by local authorities is a form of indirect subsidy which allows them to get money a little more cheaply than on the open market. It also helps the smaller authorities who might have difficulty in borrowing at all. I think that the Government have struck the right balance, and I see no reason to detain your Lordships further on this Bill, of which we entirely approve.
On Question, Bill read 2ª: Committee negatived.
Then, Standing Order No. 41 having been suspended (pursuant to the Resolution of July 22), Bill read 3ª, and passed.

SEVERN BRIDGE TOLLS BILL
House in Committee (on Recommitment) (according to Order).
House resumed: Bill reported without Amendment; Report received.
Then, Standing Order No. 41 having been suspended (pursuant to the Resolution of July 22):
LORD SHEPHERD: My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Severn Bridge Tolls Bill, has consented to place Her interest, so far as it is concerned on behalf of the Crown, at the disposal of Parliament for the purposes of the Bill.
LORD BESWICK: My Lords, I beg to move that the Bill be now read a third time.
Moved, That the Bill be now read 3ª.—(Lord Beswick.)
On Question, Bill read 3ª, and passed.

COMMONS REGISTRATION BILL [H.L.]
6.35 p.m.
Order of the Day read for the consideration of Commons Amendments.

COMMONS AMENDMENTS
[The references are to Bill [101] as first printed for the House of Commons]
Clause 1, page 1, line 11, leave out paragraph (c) and insert—
("(c) persons claiming to be or found to be owners of such land or becoming the owners thereof by virtue of this Act;")
Clause 4, page 3, line 6, leave out ("if the land") and insert ("which")
Clause 4, page 3, line 9, leave out ("so registered") and insert ("registered under this section")
Clause 5, page 3, line 34, leave out subsection (2)
Page 4, line 8, leave out ("or") and insert ("and to any person")
Page 4, line 8, line 23, at end insert—
("(9) A registration authority shall take such steps as may be prescribed for informing the public of any objection which they have noted on the register under this section and of the times and places where copies of the relevant entries in the register may be inspected.
(10) Where regulations under this Act require copies of any entries in a register to be sent by the registration authority to another local authority they may require that other authority to make the copies available for inspection in such manner as may be prescribed.")
Clause 8, page 5, line 30, leave out third ("the") and insert ("that")
Clause 8, page 5, line 34, leave out first ("the") and insert ("that")
Clause 8, page 5, line 44, leave out ("it") and insert ("the land")
After Clause 8, insert the following new Clause—
Protection of unclaimed common land
". Where the registration under section 4 of this Act of any land as common land has become final but no person is registered under this Act or the Land Registration Acts 1925 and 1936 as the owner of the land, then, until the land is vested under any provision hereafter made by Parliament, any local authority in whose area the land or part of the land is situated may take such steps for the protection of the land against unlawful interference as could be taken by an owner in possession of the land, and may (without prejudice to any power exercisable apart from this section) institute proceedings for any offence committed in respect of the land.")
Clause 10, page 6, line 15, leave out from ("prescribed") to end of line 18
Clause 10, page 6, line 29, leave out subsection (4) and insert—
("(4) The Minister shall, before dealing with any application under this section, send copies thereof to the registration authority and to such other local authorities as may be prescribed, and shall inform those authorities whether he has granted or refused the application; and those authorities shall take such steps as may be prescribed for informing the public of the application and its grant or refusal.")
Clause 12, page 7, line 18, after ("are") insert ("varied or")
Clause 14, page 7, line 40, leave out from ("number") to end of line 41
Page 8, line 4, at end insert—
("(3) When the registration of such a right has become final the right shall accordingly he exercisable in relation to animals not exceeding the number or numbers registered or such other number or numbers as Parliament may hereafter determine.")
Clause 16, page 9, line 25, after first ("order") insert ("but subject to any modifications specified in the direction")
Clause 18, page 10, line 28, leave out from ("act") to ("ecclesiastical") in line 29 and insert ("with respect to any land or rights belonging to an")
Clause 18, page 10, line 31, leave out ("preventing the making of") and insert ("treating")
Clause 18, page 10, line 32, leave out ("except where objection is made") and insert ("as an objection")
Clause 21, page 11, leave out lines 31 to 33
LORD MITCHISON: My Lords, in moving that these Amendments be now considered, I would remind you that they are Amendments to a Bill which originated in your Lordships' House. I hope your Lordships will give leave for these Amendments to be considered en bloc. They raise a few substantial points, while some of them are drafting Amend
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ments. I will mention the substantial points and indicate their character, and if any noble Lord requires further information, I will, of course, do my best to give it.
The first substantial point is in the first Amendment. It is a provision for registering ownership arising from a claim to owner or the registration of persons found to be owners or whose ownership is established by this legislation. It seems to me that the point is raised, both here and in another place, without disturbing the position of the Land Registry. The second point (I am taking them in the order on the Order Paper) is in Amendment No. 10, which is about the protection of unclaimed common land. When we considered the Bill at an earlier stage it was pointed out that there were difficulties about people coming on to land and doing damage during the period when there might be no one in a position to protect the common rights and other rights concerned. This gives any local authority in whose area the land or part of it is situated powers to protect the common, as regards criminal proceedings. There was a suggestion here, which has received most careful consideration, that it might be possible to extend this protection to civil actions; but on looking into the matter it proved impossible to deal with questions of trespass and the like, which are civil proceedings, because of the position of the owner of the common lying low, if I may so put it, or being unknown at the moment.
Amendments Nos. 14 and 15 deal with the question which was referred to frequently below as quantification—put shortly, the question of the number of beasts which any complainant might be entitled to put on the common. The matter has for the moment been dealt with in this way, registering a number or numbers, as the Royal Commission suggested, but leaving it open at a further stage to revise the figure registered. That is the meaning of the last line
"…such other number or numbers as Parliament may hereafter determine."
It has now been agreed with the National Farmers' Union that this is the right way of tackling the problem. I do not think that it is in any sense their Amendment, but it evoked a good deal of discussion elsewhere. Amendment No. 16 deals

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with costs, which also was raised in this House. In general, costs are to be county court costs, but there is power by virtue of this Amendment to give directions for a higher scale of costs in cases where it might be appropriate.
The last point is perhaps of less importance, but I will mention it. By virtue of Amendment No. 20, some lines are left out because the Law Society pointed out that in substance they might apply to cases which would be quite different from those to which they were intended to apply, and interested bodies, such as the Commons, Open Spaces and Footpaths Preservation Society, were unable to suggest any cases in which they would apply as regards commons. Accordingly these words are omitted. It is almost a drafting Amendment.
There is one other type of Amendment that I should mention before I sit down. Amendments Nos. 4, 5 and 6 to Clause 5 and Amendment No. 12 to Clause 10 are designed to cover publicity arrangements. Perhaps I need not go into them in detail, unless I am asked about them. I think I can fairly and properly describe all the other Amendments as Amendments of a drafting character. With that and any further explanation that may be called for, I hope that your Lordships will feel that these are reasonable Amendments arrived at after full discussion in another place and meeting the views of the various interests concerned and the views expressed by honourable Members and right honourable Members below on both sides.
Now that this Bill comes back to your Lordships' House, I still feel that it is only the first step towards dealing with commons. What is done under this first step, still more what may fall to be done by way of preparation and shaping of legislation for the second step, will largely depend on the co-operation of the local authorities, particularly local authorities of the first grade (if I may so put it), and also of other local authorities. I feel sure that there is no great bone of contention between us in this matter, but a common interest in the preservation of the amenities and uses of the country before these amenities and uses are too interfered with by development, not only of motor cars but of modern life gener
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ally. The complexity of modern life is clashing with the old institutions which are part of the country, but it is in this case not so much the institution as the purposes of the institution that deserve our protection. I feel certain that I can appeal to noble Lords opposite as well as to my noble friends to do what they can personally—and it should be a very great deal—to see that the purposes of this and succeeding legislation are fully and zestfully carried out. If we do not act now, if we wait any longer, we may well be too late.
Moved, That the Commons Amendments be now considered.—(Lord Mitchison.)
On Question, Motion agreed to.
LORD MITCHISON: My Lords, I beg to move that this House agrees with the Commons in the said Amendments.
Moved, That this House doth agree with the Commons in the said Amendments.—(Lord Mitchison)
THE LORD CHANCELLOR (LORD GARDINER): My Lords, assuming that your Lordships agree that the Amendments should be taken together, the Question is: That this House doth agree with the Commons in the said Amendments?
6.48 p.m.
EARL FERRERS: My Lords, the noble Lord, Lord Mitchison, is always generous in his description of Bills and the Amendments to them, and we are grateful to him this evening for the details which he has given us with regard to the Amendments put forward in another place. This is a new Bill, touching new ground, and it must have given a great deal of anxiety to the people in the noble Lord's Department who had to prepare it and cover all eventualities. We are extremely grateful for the time which I know the noble Lord himself has given to this Bill and I only hope that, now it is about to become an Act, the Bill will work with the success with which the noble Lord hopes it will work.
LORD MOLSON: My Lords, I should like to express my appreciation of what the Government have done. Several of the important Amendments which have been carried in another place deal with matters which were raised in this House first. I would point out that the first one dealt with a matter which I not only raised but pressed very much on Report.

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I pointed out to the noble Lord on that occasion that my Amendment was taking almost exactly the words which he himself had used in reply to the noble Lord, Lord Chorley, on this matter. I am extremely glad, though I was not able to persuade the Parliamentary draftsmen, that an Amendment has been brought in, although it is in a different form, dealing with the matter of claims to ownership, because it really was obscure in the original draft of the Bill, when paragraphs (a) and (b) dealt with definitive title and paragraph (c) was not dealing with it.
I should especially like to express my appreciation of the new clause dealing with the protection of unclaimed common land. This was a matter which we came to refer to as the lacuna. The noble Lord promised me that he would see that a clause was devised in order to give protection. I am sorry that it does not include civil protection and gives only criminal protection, but I am sure that the Government, and particularly the Parliamentary Secretary, have done their best to meet us upon this matter.
We also emphasised very much the great importance of publicity if the necessary claims were to be made, because, under this Bill, if they are not made in time they are extinguished for ever. I think we can claim that in your Lordships' House we raised nearly all the points of substance, and if it was only in another place that the Amendments were finally moved and accepted it is none the less satisfactory to us to find that they have now been accepted and are being incorporated in the Bill. I hope, therefore, that your Lordships will accept the Amendments which have been made by another place.
LORD MITCHISON: My Lords, may I, with any necessary leave, thank your Lordships for the careful attention that has been given to this Bill. I think we have a common cause in the matter. I was once told, "No names, no pack drill", but I might perhaps be allowed to say how much we were indebted to the suggestions of the noble Lord, Lord Molson, in this matter. He spoke, I think, for the Commons, Open Spaces and Footpaths Preservation Society, and the work of that Society—now, I think, celebrating its centenary—has really been singular and valuable to the whole
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country and those who live in it. Therefore, the thanks that I offer to your Lordships on both sides of the House are very sincere. One does not get into a subject of this kind without developing a certain enthusiasm for it, and I am extremely glad personally that the Bill has been passed. This is a difficult matter, and this is, after all, only a preliminary Bill. I am glad, however, that it has met with general approval and has, on the whole, reconciled the views of noble Lords here with those of Members of another place.
On Question, Motion agreed to.

REDUNDANCY PAYMENTS BILL
6.53 p.m.
Order of the Day for the House to be put into Committee read.
Moved, That the House do now resolve itself into Committee.—(Lord Lindgren.)
On Question, Motion agreed to.
House in Committee accordingly.
[The EARL OF LISTOWEL in the Chair.]
Clause 1 agreed to.
Clause 2:
General exclusions from right to redundancy payment.
2.—
(2) Except as provided by section 10 of this Act, an employee shall not be entitled to a redundancy payment by reason of dismissal where his employer, being entitled to terminate his contract of employment without notice by reason of the employee's conduct, terminates it either—

(a) without notice, or

(b) by giving shorter notice than that which, in the absence of such conduct, the employer would be required to give to terminate the contract, or

(c) by giving notice (not being such shorter notice as is mentioned in paragraph (b) of this subsection) which includes, or is accompanied by, a statement in writing that the employer would, by reason of the employee's conduct, be entitled to terminate the contract without notice.

LORD DRUMALBYN LORD DRUMALBYN moved, in subsection (2), to leave out all words after "dismissal" and insert:
"for such conduct as would entitle the employer to terminate his contract of employment without notice, whether the employee is dismissed with or without notice, and whether

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any notice given is that which in the absence of such conduct the employer would be required to give to terminate the contract."
The noble Lord said: I beg to move the Amendment standing in my name. It does not look as if in this House we are going to be of quite so much use on this Bill as we were on the last one; nevertheless, I think we should try to be of some use by drawing attention to some of the points of practical difficulty in its application. This Amendment is one which arises out of an Amendment made in another place in order to meet suggestions by the Opposition. In meeting these suggestions, I am not quite certain that some new difficulty has not been created.
The position, as I see it, is this. Here we are dealing with the exclusions from the right to redundancy payment. The first exclusion is that where a man is dismissed for misconduct (I am using colloquial language) without notice, he is not entitled to a redundancy payment. Where he is dismissed for misconduct with shorter notice than would normally be given under the Statute—where the employer, for example, says, "You go at the end of the week"—in that case, again, he is not entitled to redundancy payment. In another place it was represented that it might be convenient, possibly for both parties, and there might be no particular trouble, if the employer were to say: "All right. You are out; but you may stay until the end of your normal period of notice". This, as the Committee know, would be four weeks in the case of someone who had worked for over five years, and two weeks in the case of someone who had worked for over two years.
In another place, the Amendment in subsection (2) was introduced to enable a man to be dismissed with full normal notice, provided only that the notice then included, or was accompanied by, a statement in writing that the employer would by reason of the employee's conduct be entitled to terminate the contract without notice. The reason for that, I understand, was that there was a strong desire not to create any administrative confusion in this matter: that either you went on normal notice, in which case prima facie you were entitled to redundancy payment, or you went on the spot, when prima facie you were not entitled to redundancy payment.
I wonder if it is quite right to tie down to the question whether or not this evidence is provided. After all, it is rather an act of grace on the part of the employer to say: "All right. You work out your notice, but you will have to go after that". It seems rather unfair that he should have to make the redundancy payment, nevertheless, despite the man's misconduct, despite the fact that he could have been dismissed on the spot, and merely because he has acted in this way and has omitted, maybe through ignorance, to give, together with the notice, this statement in writing. The purpose of this Amendment is merely to try to avoid the requirement that this statement in writing must be given. I move it because it seems to be a little unfair to make this requirement, and, as I understand it (I may be wrong about this), so to speak, cancel the exclusion from the redundancy payment simply because of what may be a pure administrative slip in a factory or elsewhere. I beg to move.
Amendment moved—
Page 2, line 22, leave out from ("dismissal") to end of subsection (2), and insert the said words.—(Lord Drumalbyn.)
THE PARLIAMENTARY SECRETARY, MINISTRY OF TRANSPORT (LORD LINDGREN): I could not claim that on the Second Reading of this Bill the Opposition were given adequate replies on the number of points that they raised. That was due entirely to the extremely late hour, for this House, at least, when we had that discussion. Therefore, subject to your Lordships being prepared to bear with me and not being too bored, I propose to deal more fully with the Amendments that are going to be moved to-night, including this one, because most of the points of real substance that were raised during the Second Reading debate have been quite properly brought out in the Amendments on the Marshalled List.
I hope to be able to persuade the noble Lord that this Amendment is unnecessary, because the Bill already provides for all the possibilities when the employer dismisses the employee for misconduct. The purpose of subsection (2) of this clause is to make it clear beyond doubt that an employee rightly dismissed for misconduct (except when he is already under notice, in which case he will be dealt with under Clause 10) is not entitled

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to a redundancy payment, irrespective of whether there may also be redundancy at the time. These matters are dealt with, as the noble Lord has suggested, under paragraphs (a), (b) and (c) in this subsection. They deal respectively with the situations where the employer dismisses a man without notice (which is in paragraph (a)), dismisses with less notice than he would have been required to give if the worker had not misbehaved (which is in paragraph (b)), or lets the worker work out his full notice to which he would otherwise have been entitled, or even more than that, despite his misconduct (which is in paragraph (c)). That is the paragraph with which the noble Lord has specifically dealt this evening. So far, the Bill and the noble Lord's Amendment differ only in presentation.
It would not be true to say that, under the subsection as it stands, the employer who allows the worker some notice, or his normal notice, is in any way prejudicing his position or exposing himself to the possibility of a reference to the tribunal by so doing. It will, of course, be open to the employee who is dismissed for alleged misconduct to appeal to the tribunal on the grounds that he did not in fact commit misconduct, and that the real reason for his dismissal was redundancy. But the employee can do this whether he was allowed notice or whether he was not—that would make no difference to the position.
There is one extra requirement in the Bill under paragraph (c) which does not, appear in the Amendment we are discussing—namely, the requirement on the employer, when he allows the employee to work out his full notice, to give the worker a written statement making it clear that, because of the employee's misconduct, the employer was entitled to dismiss him without notice. This requirement is necessary so that if the case goes to a tribunal there will be a record available that the allegation of serious misconduct was in fact made at the time of the notice. Without such a provision, it might be difficult for the tribunal to establish what had happened. For example, while the employer would claim that there had been misconduct and that therefore no payment was due, the employee might contest this and point to the fact in support of his argument that he was given normal notice. This requirement is, therefore, a
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necessary protection for the parties. But these cases will, of course, be
rare, and it is not, therefore, an onerous requirement on the employer to give a written notice in such circumstances. Indeed, in view of the importance of the transaction, it is a very reasonable one. This is the only difference between the present provision in the Bill and the noble Lord's Amendment. I hope he will agree that the difference represents a necessary protection, not least for employers themselves, and in the circumstances I hope that he will withdraw his Amendment.
The noble Lord mentioned the case of an employer who forgets that there is a requirement under the Bill for notice to be served on a worker whom he has dismissed for misconduct. But the number of employers who have no office staff is very few indeed—as few as the number of workers who are likely to be dismissed in these circumstances. In most organisations where redundancy is likely to arise there is a fairly large staff department. All the ramifications of Industrial Injuries, National Insurance, Pay-as-You-Earn, and all the rest of it, make a staff department and a personnel manager an essential part of modern business, and in those circumstances I do not feel that this provision is likely to be onerous on the employers. In fact, it is for the employer's protection, and to enable him to justify, or to give evidence of, facts which arose perhaps three weeks, a month, or, if it is a long-service employee, six weeks before, and of which memories of circumstances might be blurred at the time the matter goes to the tribunal.
LORD DRUMALBYN: I am very much obliged to the noble Lord for his explanation of the reason for this. Of course, this Bill applies not only to those organisations which have staff who can look after matters of this kind; it applies also right down to the employer who employs only one person, even to a person who employs one domestic servant. So it will not be as straightforward as the noble Lord suggested in all circumstances. I should have liked, had it been possible, that this should not be an absolute requirement, but should only be taken, as other things in the Bill are taken, as prima facie evidence by the court. But I quite see the difficulty here. One of my reasons for raising this question is that I think the more publicity

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that can be given to this, and the more it can be brought to the attention of trade associations and the rest, the better. If this is to be a requirement, it is as well that everybody should know it. I hope that as much publicity will be given to it as possible, and in that hope I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 2 agreed to.
7.8 p.m.
VISCOUNT FALMOUTH VISCOUNT FALMOUTH moved, after Clause 2, to insert the following new clause:
Redundancy payment may be varied
". Notwithstanding the provisions of this Part of this Act, in any case in which a tribunal, on an application being made to them in that behalf by an employer, are satisfied that an employee who is entitled to a redundancy payment under this Act has received an offer of suitable employment the acceptance of which by him would not result in any loss of earnings nor necessitate the payment by him of any expenses, the tribunal shall, after taking into account all the relevant circumstances, make such determination as to the amount of the redundancy payment to which the employee is entitled as seems to the tribunal to be just and equitable ".
The noble Viscount said: I must first apologise to the Committee for not being present at the Second Reading of this Bill, which was so well described as a landmark. I have a personal interest in the Bill, both as an employer and as one who is closely connected with an employers' association. In moving this Amendment, I take into account the general principles of the Bill which were so well received in your Lordships' House on Second Reading, and must attract the support of all good employers. But there are important points which I think require the attention of the Committee.
I move the addition of this new clause, on the grounds that the full redundancy payment should not be made where suitable alternative employment is provided with another employer, and where the employee does not suffer any loss of earnings or expenses in moving house and home. The need for the mobility of labour has always been emphasised by all Governments, and I would submit that the redundancy payments are intended, in part, to compensate particularly the younger man for the inevitable costs of
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movement from one part of the country to another where there are fresh jobs available. As the redundancy payment depends on length of service, part of the payment is intended—and very rightly so, in my opinion—to compensate for what one might call the loss of expectation arising from long service. Nevertheless, I think I should make the point, that if part—and I say advisedly "if"—of the redundancy payment is to cover loss of earnings or expenses incurred in moving home, that part of the payment must surely be restricted to cases where these factors apply.
It would seem, therefore, that if the mobility of labour is to be encouraged by this Bill, where an employee has the opportunity to move, perhaps far away to another job, suffering loss of earnings and incurring expenses, he should get the full amount of the redundancy payment; but if he has the opportunity to accept suitable employment which does not involve him in any expense or loss of earnings, the amount of redundancy payment should be limited to the long service element and be determined by the tribunal which is being set up under the Bill. I beg to move.
Amendment moved—
After Clause 2, insert the said new clause.—(Viscount Falmouth.)
VISCOUNT FALKLAND: I support this Amendment. As I said on Second Reading, I think the tribunal should decide the amount of a redundancy payment when there is no expense of residential transfer. I cannot see that a payment intended to encourage mobility of labour will serve this purpose unless it is paid only in respect of this. I still think it is human nature to get the greatest advantage from a redundancy payment, and residential change is likely to be avoided, if possible, or at least deferred. The general principle of redundancy payments will have the support of good employers, but I think there are points of detail which require change before the Bill reaches the Statute Book.
LORD LINDGREN: In spite of the plausible manner in which the noble Viscount, Lord Falmouth, has moved this Amendment and the noble Viscount, Lord Falkland, has supported it, I cannot advise your Lordships to accept it. It

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would destroy the basic principle of the Bill which, as the noble Viscount said, has been widely accepted by both sides of industry during our consultations and has indeed received wide support in Parliament, the Press, and throughout the country. This principle is that workers must be entitled to a legal guarantee of compensation on redundancy and that this should relate to the loss of security built up in the job, as measured by length of service put in with the employer, as well as loss of earnings. Without such a guarantee, the Government believe that the scheme could not make the necessary impact on the attitudes of workers towards desirable industrial and economic changes.
If this new clause were accepted, an employee would never know in advance of redundancy what compensation he was to get or, indeed, if he would get anything at all. The provision suggested in the Amendment assumes that the only things for which a redundant worker ought to be compensated—assuming he finds fresh work—are direct loss of earnings or increased expenses. But there are many other factors involved. First, the worker has to abandon a familiar working environment round which he may have built much of his life, and start again in a different setting with different workmates. That is something which no worker can be expected to welcome, and the older one gets the less one welcomes it. Then there is the loss of security. Because of the general operation of the "last in, first out" rule, the longer the worker has been in his existing job, the more security against dismissal he has built up. Once he moves to another job, he is back at "square one" and liable to be among the first to be dismissed if there is redundancy.
Even though a worker finds suitable work with comparable earnings, he may well lose in other respects because of his reduced seniority; for instance, in such matters as pension rights, entitlement to sick pay and holiday pay.
Even if it were possible to measure all these things precisely in monetary terms, the sort of provision envisaged in the Amendment would be quite impracticable. It envisages a separate determination by the tribunal—with no rules to guide them—for all workers who receive offers of suitable employment not involving
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direct financial loss, and whose employers choose to take the matter up. Any arrangement on these lines would produce an impossible amount of litigation, and widespread anomalies, and injustices as between workers with one employer and workers with another. The new clause is concerned with offers of suitable alternative work, but it pays no regard to when that work materialises, whether immediately or after the worker has suffered a spell of unemployment. Nor does the clause say anything about what is to happen if the new job folds up within a short period. If the object of the Amendment is to fit the compensation to the hardship suffered after redundancy, it obviously ought to have regard to these factors, in particular, to how long the worker remains unemployed before starting fresh work.
However, one has only to think of the need to have regard to any unemployment to see how completely inappropriate is a scheme of lump-sum compensation for that purpose. Reducing hardship during unemployment is the function of unemployment benefit under the National Insurance scheme; and this is precisely the trouble. The noble Viscount's approach is, I say with respect, mixing the two things up. It is trying to make redundancy compensation do the job that unemployment benefit ought to do. The noble Viscount wants the amount of compensation to reflect the hardship the worker may encounter after he becomes redundant; and a spell of unemployment would be a major element in such hardship. But this must be dealt with through unemployment benefit; and, as your Lordships know, the Government have that matter under review at the present time. We have always regarded better provision through unemployment benefit as complementary to the present Bill.
I am quite sure the principle in the Bill is right. Redundancy compensation should relate to length of service in the job and should not be conditioned on what happens to the worker afterwards. This has always been the principle behind the "golden handshake" for managerial staff who become redundant. Nobody has ever suggested that compensation to a company executive should be reduced because he had found himself an opening with another firm, and it would be quite

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wrong to apply such a principle to workers generally. The Bill follows the practice under existing voluntary redundancy schemes which provide for lump-sum compensation related to length of service.
I therefore trust that the noble Viscount will be satisfied with the explanation that I have given and will not press the Amendment.
7.19 p.m.
LORD DRUMALBYN: If I may say so, I think my noble friends have been feeling their way towards something which I know has troubled a good many of us. It is all very well to have a "by and large" scheme of this kind, but you really cannot claim then that you are giving compensation in respect of redundancy where what happens on redundancy will be so different as between one person and another. This is a basic difficulty and it is not overcome in any way. Indeed, it is accentuated by unemployment benefit, because, while one man may go direct from one job to another without incurring any expense and, as the Amendment says, without any loss of earnings—and possibly even with greater earnings—another man, who has served for exactly the same time, may remain out of a job for a long period and may have to move somewhere else. In a sense that is not justice. It is not fair, as between one and the other, that they should receive exactly the same compensation.
We understand the terms of the Bill, and the question raised by the Amendment—and it is a fundamental one to the Bill—is whether it would have been possible to draft the Bill in such a way that one part of the element of redundancy, as the Amendment suggests, would be related to length of service in time, and the other part, also based on years of service but taking into account what happened to the person afterwards related to the degree of hardship in the individual case. Of course that would not be easy for the tribunals, but I should have thought some guidance of a general character could be given to the tribunals, and that before very long standards would be worked out to deal with this particular aspect.
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I cannot advise my noble friends to press this Amendment, because clearly it is too late at this stage to make such a fundamental alteration to the Bill. I have every sympathy with them, however, in drawing attention to this very great difficulty of dealing fairly between two people in identical circumstances, both of whom will get the same redundancy payment but one of whom seems to need it and the other does not. This is the basic difficulty. I am glad that they have drawn attention to it. I am afraid that it is too late to do anything, but perhaps one of these days something may be done about it.
LORD LINDGREN: I am grateful to the noble Lord for having extended the discussion a little, because it gives me the opportunity to say this. Nothing is fair in this world between two individuals in apparently the same set of circumstances. There may be two workers who have been working for the same employer for the same length of time, and hardship arises when they become redundant. If one worker was fortunate enough to have had no family sickness he may have a nest-egg tucked away in the Co-op., or in war savings, or something like that. The other fellow, in exactly the same conditions, may have had a couple of kiddies ill for a long while, and may have spent a lot of money, in spite of the Health Service, in trying to get them back to health. Or he may have suffered considerable hardship because his wife is incapacitated and he has had to pay for someone to come in and help with the children. As soon as you get outside the general principle with which the Bill is concerned—that is, that where a worker has provided continuous service over a long period of time and then becomes redundant he is entitled to redundancy payment—and try to do something more, you get into all sorts of situations which, in the end, would come down to having a means test.
I would make this point—and I hope that the noble Lord will not think I am trying to bring in class warfare. If a business executive is declared redundant, the board of directors give him £5,000, or three years' salary, or twelve months' salary; and nobody calls it a question of hardship. The real hardship, very

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often, is that if a worker misbehaves himself, as we were discussing on a previous Amendment, he gets the sack, but if a business executive misbehaves himself it becomes incompatibility of temperament and he is given a year's salary. Where is the relationship of hardship in the two cases?
LORD DRUMALBYN: The trouble is that these "golden handshakes" are not standardised. The noble Lord is not introducing a Bill to standardise "golden handshakes". He is introducing a Bill to standardise redundancy payments, and this is the whole difficulty involved, owing to the different circumstances between people with very much the same length of service with the same employer and so on.
LORD LINDGREN: If you have been with a firm twenty years, even a "copper handshake" is more welcome than nothing.
VISCOUNT FALMOUTH: I am very grateful to noble Lords for having brought out these points in this discussion which perhaps were not fully brought out on Second Reading. I beg leave to withdraw the Amendment.
Amendment, by leave withdrawn.
Clause 3:
Dismissal by employer
3.—
(2) An employee shall not be taken for the purposes of this Part of this Act to be dismissed by his employer if his contract of employment is renewed, or he is re-engaged by the same employer under a new contract of employment, and—

(a) in a case where the provisions of the contract as renewed, or of the new contract, as the case may be, as to the capacity and place in which he is employed, and as to the other terms and conditions of his employment, do not differ from the corresponding provisions of the previous contract, the renewal or re-engagement takes effect immediately on the ending of his employment under the previous contract, or

(b) in any other case, the renewal or re-engagement is in pursuance of an offer in writing made by his employer before the ending of his employment under the previous contract, and takes effect either immediately on the ending of that employment or after an interval of not more than four weeks thereafter.

7.26 p.m.
LORD DRUMALBYN LORD DRUMALBYN moved, in subsection (2), to leave out paragraph (a) and the words "in any other case," at the beginning of paragraph (b). The noble Lord said: There are two cases here and the effect of this Amendment is to remove one of them. The first case is where the dismissal takes place and then, before the period of notice elapses, the man is given another contract to come into effect immediately on the ending of his first contract. In that case the consequences follow that there is no redundancy payment that can be claimed. In the other case, which is the one which, under the Amendment, is left as the only case, there is a period of four weeks after expiry of the notice during which the employer may renew the contract—"an offer in writing made by his employer".
There are several difficulties about the first case that I am seeking to leave out. Let me take this one to start with. It may be that the employee himself does not want to take his redundancy payment. He may have received an offer of employment a day or so after his notice expired, and he may want to go back, and he does not want to take his redundancy payment; he wants this to be regarded as continuous employment throughout. He does not envisage the possibility of his becoming redundant at a later time and he wants it to run right through. There is a technical difficulty, as I see it, here. It may be subsequently discovered that he has not taken his redundancy payment when his employment does come to an end, and he will then be debarred from getting it, if that time occurs more than six months after his failure to claim his redundancy payment. He may lose it altogether. If the noble Lord looks at Clause 9(2) that seems to be the effect.
Then there is the whole question of temporary closures. This was argued in another place and I need not go into it in detail. Where there is temporary closure, undoubtedly the normal thing would be to lay off people; but it has not always been done in that way in the past, and I think it would be a good thing if the noble Lord were to make it clear that this is the way it will have to be done in the future if this clause is to remain part of the Bill. It is very important. That old habit of paying people off, having a temporary closure and then re-engaging

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them will expose the employer to having to make redundancy payments. Therefore the only way in which ho can deal with that kind of situation in the future is to lay the men off, and, if the lay-off is not too long then there is continuity of employment.
There is the third case I should also like to mention, namely, the question of run-down, possibly with staggered discharges. Here, in the case of, say, a cut—quite a large reduction in the number of people employed—the employer may not know at the time when he gives notice which of the men, or how many of them, he is actually going to take on again. In such a case I think it would have been the practice in the past normally to give the lot notice and then re-engage those he wanted to take on again. This, at any rate, is one way of doing it. If this clause remains as it is, I suppose that instead of doing that he would have to lay them all off until he had made up his mind. I am not at all sure. That is the case one had in mind.
I quite appreciate that the Bill is drafted with the object of encouraging employers to make up their minds as soon as possible on this matter, and to plan as far ahead as possible, but that cannot always be done. If an employer had not decided which of the men he was going to keep on and which he would have to release, it might well be that, although a man was taken on again, merely because the contract had not continued from the point where it had left off without any interval at all, the redundancy payment would become payable. That is in spite of the fact that the man was going on working for the same employer, in spite of the fact that he had suffered no loss, and in spite of the fact that he might never become redundant at all after that and would get his pension in the end. It seems odd. I should have thought that it would be better to have only the one case and to give a four weeks' interval. That is why I have put down the Amendment, and would ask the noble Lord to explain the position of the Government upon it. I beg to move.
Amendment moved—
Page 4, line 3, leave out from beginning to ("the") in line 11.—(Lord Drumalbyn.)
LORD LINDGREN: I most gladly give the best explanation I can of the clause. In doing so, I must advise your Lordships not to accept the Amendment, and I hope to persuade the noble Lord that it was not necessary for him to move it. Let me first of all make clear what the effect of the Amendment would be. Subsection (2) of Clause 3 deals with cases where a worker's existing contract is terminated by his employer, but before the termination takes effect the employer offers to reengage the worker and the worker accepts re-engagement. This situation might arise where after the worker has been given notice, the situation changes and the employer finds that he can keep the worker on, either in his old job or in an alternative job. Paragraph (a) of the subsection says that where in these circumstances the terms of the new contract which the worker accepts are the same as the terms of his previous contract, then the re-engagement must take effect immediately if the worker is not to be treated as redundant. Paragraph (b) says that where the terms of the new contract are different from those of the previous contract, the worker will not be treated as dismissed provided the re-engagement takes place within four weeks.
The effect of the Amendment would be that this four weeks' grace would be allowed in the first case—that is, where the terms of the new contract are the same as those of the old—as well as in the second case, where the new contract is different. But these two cases are essentially different. The first case is where, in effect, the worker is re-started in his old job. But keeping a worker without work for up to four weeks and then re-starting him in the same job is really, as the noble Lord himself suggested, lay-off and has always been considered to be lay-off. It should not involve any termination of the worker's contract. When a worker is laid off, his contract is not terminated. It is right that, if an employer intends to keep a worker idle for a short period, he should not be encouraged or allowed to terminate the contract for that purpose. What he should do is to lay the worker off. We have ensured in Clauses 5 to 7 that if he does lay men off for periods of less than four weeks he will not be obliged to make payments under this Bill, and that is his guarantee. His proper course in the

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circumstances we are discussing is to lay the worker off, and thus avail himself of the protection of the clauses relating to lay-off.
I should like to make it clear that where the subsection talks about re-engagement taking effect immediately on the ending of the worker's employment under his previous contract, this does not necessarily mean that the worker must actually start work on the day following the expiry of his previous contract. It means that his new contract must begin to run from that time. He does not have to be at work. He may be laid off for some time, provided always that his new contract allows for lay-off; and the situation as regards any entitlement to a redundancy payment would then be governed by the provisions of the Bill relating to lay-off in Clauses 5 to 7.
It may be said that under some contracts—for example, where employees are on a fixed salary—the employer has not got the right to lay people off without pay, and he could not therefore avail himself of the protection of Clauses 5 to 7. But the whole point of such contracts is that they give a certain guarantee of security against short-term fluctuations in the work. The effect of the Amendment would be that even where the employee has a contract of this kind, it would still be open to the employer to keep him idle for up to four weeks without incurring a redundancy payment. The employer could terminate the existing contract, and offer re-engagement on exactly the same terms as before, but starting only after an interval of up to four weeks. For all practical purposes, that would be a lay-off, despite the fact that the worker's contract is designed to safeguard him against such breaks in employment.
I suggest that the right course for an employer who wants to re-start a worker in the same job after a short interval is to lay him off, where the terms of the contract permit this, and the position would then be governed by the lay-off provisions in the Bill. The Amendment would permit what would in effect (though not in form) be a lay-off, even where the worker's contract did not permit lay-off. I must therefore advise your Lordships to reject the Amendment. But, rather than that we reject the
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Amendment, I hope that the noble Lord will in fact not press it.
LORD DRUMALBYN: I am grateful to the noble Lord for his explanation, and I certainly take the point that this would have the effect of enabling employers to, so to speak, provoke a gap in the continuity of employment without there actually being a gap from the point of view of a redundancy payment, but at any rate enabling them to lay men off and re-engage them "ad lib." I would agree that that is not desirable. The only point I should like to put is this. I am still not quite certain why it is necessary to include the provision that the contract of renewal should be identical in order to comply with paragraph (a). It might be a better contract of employment. Why must there be the provision that it must be identical? I do not quite understand that.
LORD LINDGREN: In those circumstances it would not. It is hardly redundancy if you get a rise; an improved contract would be a rise. It is a safeguard for the worker for re-engagement on the same terms and under the same conditions—not less than that. It could be more, and there might even be certain variations in conditions which would not really amount to a lessening of the value of the contract.
LORD DRUMALBYN: These are complicated provisions. I am grateful to the noble Lord for making them so clear. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 3 agreed to.
Clause 4 [Employee anticipating expiry of employer's notice]:
On Question, Whether Clause 4 shall stand part of the Bill?
7.41 p.m.
LORD DRUMALBYN: May I raise a point on this clause? The point I have in mind is in relation to the question of the run-down of a factory's work. Could the noble Lord make this clear to me, for I am not clear about the interpretation of this matter? As I understand it, the longer the notice of the run-down given, the better. One may have, for example, a decision to close a factory in a year's time and to reduce

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employment at, say, staggered three-monthly intervals. What this clause has to deal with is the employee's giving notice before the employer's notice expires. I take it that the intention here is to encourage planning; and as part of planning, if one is having a phased rundown, the employer has to be able to depend on the employee's remaining until his time comes to go I take it that the object of the clause is to encourage that. There is what is called the obligatory period, which is the period of normal notice. The idea here seems to be that the employee may be able to give notice of termination during the obligatory period, and there can then be an adjustment about his redundancy payments. That is reasonable, because he may get the offer of a job which will not stand open until his time comes to be discharged.
It is important to try to get clarification on this matter, because it is a difficult clause. I hope that my understanding is right; that a redundancy payment is not payable to an employee if he goes during a period of long notice, except during what is called the obligatory period, the period of statutory notice, the four weeks or two weeks before the time when he is scheduled to go. Then, within that period, he can give notice and some adjustment may in consequence be made in the redundancy payment. He will get the redundancy payment if he stays till the end of his notice, and can get a modified payment if he goes during the obligatory period. Is my interpretation of the matter correct?
LORD LINDGREN: I rather anticipated that the noble Lord might raise this point on Clause 4. If I understand the noble Lord aright, he has asked whether the provisions of Clause 4 (which protect the rights of workers who leave before their notice expires) should operate only during the "obligatory" period of notice, as this is defined in subsection (5) of Clause 4. The meaning of "obligatory period" can be illustrated by an example. supposing under his contract a worker is entitled to two weeks' notice, but his employer chooses to give him two additional weeks ex gratia, making a total of four. Then the last two weeks of the total four weeks' notice would be the obligatory period—that is the period to
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which the worker is entitled under his contract. It is necessary in the provisions in this clause to hold a balance between the interests of the worker, on the one hand, and those of the employer, on the other. The worker may have excellent reasons for wanting to leave before his notice expires—for example, he may have been offered a job elsewhere. On the other hand, the employer could be greatly inconvenienced by a worker leaving in advance of the expiry of his notice: if he were a key worker, for instance, the employment of other workers might depend on his staying on.
We have therefore thought it right in a case where the employer gives longer notice than he is strictly required to, that he should not be penalised for doing this, in the sense that his workers would have a right to leave at any time during the extended notice and still appeal to the tribunal for the whole or part of a redundancy payment. If the provisions in Clause 4 applied throughout notice, whether it was notice as required by the contract or ex gratia notice, we think the effect would be bound to be to discourage employers from giving their workers any more notice than they were required to by the terms of the contract. This would be most undesirable. As the noble Lord said, employers should be encouraged to give the longest possible notice of redundancy, and the value of long warning and notice in resettling the displaced workers has been repeatedly demonstrated in recent experience. I am sure therefore that it would not be desirable to extend the provisions of Clause 4 so that they applied throughout notice and not just during the obligatory period of the notice.
As the noble Lord has said, in present circumstances, where redundancy is likely to occur, the greater the length of notice, the better. This is so for two reasons, not only from the point of view of the employee, and his opportunities, but also because the Ministry of Labour are given time to put in experienced teams and, in consultation with the men, to make arrangements for other suitable employment.
Clause 4 agreed to.
Clause 5 [Lay-off and short-time]:
LORD DRUMALBYN LORD DRUMALBYN moved, in subsection (2), after "reason of" to insert

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"absence of or". The noble Lord said: This is a comparatively simple Amendment which I can explain quite easily. As subsection (2) of the clause stands, it says:
"Where by reason of a diminution in the work provided for an employee by his employer (being work of a kind which under his contract the employee is employed to do) the employee's remuneration for any week is less than half a week's pay (calculated in accordance with Schedule 2 to this Act), he shall for the purposes of this Part of this Act be taken to be kept on short-time for that week."
This, of course, is for the purpose of calculating short-time. Under the Amendment subsection (2) would read:
"Where by reason of absence of or a diminution in the work provided…"
and so on. Many contracts of employment provide for guaranteed minimum wages. The guarantee may be half or more, possibly three days at the normal rate of pay. That being so, it looks to me as if this clause would tend to debar people who have this kind of contract of a guaranteed minimum wage from taking advantage of the lay-off provision.
I realise that these guaranteed minimum payments are made in order to cater for "lay-offs" in industries which are rather liable to "lay-offs", and the noble Lord's answer may be that this is, as it were, part of the bargain. On the other hand, if "lay-offs" occur very frequently, quite obviously the employees will not relish having to live on what may be very much less than half of their wages. Although from the point of view of the calculation for the purpose of redundancy payments they will be getting half the normal wage, they will not be getting half the total earnings. I wondered whether there was not some reason to include provision for allowing people who are being kept for pretty long periods, or perhaps for too frequently recurring periods, on a guaranteed minimum wage, to have also the advantage of the lay-off provisions in the Bill. I beg to move.
Amendment moved—
Page 6, line 18, after ("of") insert ("absence of or").—(Lord Drumalbyn.)
7.52 p.m.
LORD LINDGREN: I rather assumed that the noble Lord's Amendment was directed at the case where an employee does no work at all during a particular week, but nevertheless gets some pay
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under a guaranteed-week agreement. Most of the guaranteed-week agreements are for half pay or more, but if the pay is less than half a week's pay, as defined in Schedule 2, we want the worker to be treated as being on short-time for the purposes of Clause 5. That means to say that a guaranteed-week payment which operates in many industries at many times should, at least for the purposes of the Bill, be for half a week's pay or more. If it is less than half a week's pay, then we want the case to be dealt with on a short-time basis.
May I say, first, that this situation is not likely to arise very often? It would be very rare for a guaranteed-week agreement to provide for less than half a week's pay—excluding overtime, of course—and still rarer for the situation to continue for four weeks or more. I think, however, that I can reassure the noble Lord, in that the effect which he wishes to achieve with this Amendment is already achieved by the subsection as drafted. I am advised (and I must rely on the advice I am given) that the word "diminution" in line 18 is wide enough to cover cases in which the employee is provided with no work at all during a week. In short, the total absence of work is an extreme case of "diminution".
LORD DRUMALBYN: That, I am hound to say, is rather an unexpected interpretation of "diminution." It is a a sort of dolce far niente. But I think the assurance which the noble Lord has given amply covers the point, and I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 5 agreed to.
Clause 6 agreed to.
Clause 7 [Supplementary provisions as to redundancy payments in respect of layoff or short-time]:
On Question, Whether Clause 7 shall stand part of the Bill?
LORD DRUMALBYN: May I ask the noble Lord how long he expects the tribunals to take to give a decision? The length of time is very important when considering the procedure under this clause for dealing with "lay-offs" and short-time, with the employee giving notice, and the employer giving a counter-notice that work is expected to resume shortly and last for at least thirteen weeks

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and so forth. There is quite a pile-up of time. Before the employee can give his notice, four weeks have to elapse; then there is a week in which the employer can give his counter-notice; then there are the four weeks which might elapse during which the short-time or lay-off might continue. Then there is the question of the tribunal giving its decision—taking into account the further four weeks—and then there are another three weeks in which the employee can actually serve his notice. I wrongly said "serve his notice" beforehand, and I should have said "gives notice of intention to claim". This is a very long period, and I think that a good deal depends here on how long it is expected that the tribunals will take to give a decision.
I wonder whether the noble Lord could also say exactly how he envisages that the test of whether an employee is to be eligible for redundancy payment will be conveyed to the tribunal. As I see it, in the normal way there would first have to be the four weeks, then a period of intention to claim, then the employer's counter-notice, and then he would have to wait for another four weeks before the case would even get near a tribunal in the usual way. It is a long time for the employee to be laid off or put on short-time, and I wonder what comfort the noble Lord can give on this point. I quite understand that in the early days a tribunal may be somewhat flooded, until it gets a rhythm of working and so forth, but it would be helpful if the noble Lord could give us some idea of the time involved.
LORD LINDGREN: We all hope that the numbers of these cases will not be excessive. It is hoped that the tribunals will not be unduly overworked, and that they will give their decision within a few weeks. But, of course, the rights of the worker, or of the employer, for that matter, will not be in any way affected by delay in the tribunal arriving at their decision. We hope that a decision will be arrived at in a few weeks, at the maximum.
LORD DRUMALBYN: It is not a question of the worker's rights being affected. The fact remains that the possibility of his getting a redundancy payment is quite a strong incentive for him to wait for the conclusion. I think
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this is the way that things are quite likely to work. If a man is laid off, he wants to know whether he is going to get the redundancy payment, and he will not go unless he is sure of it.
LORD LINDGREN: To put it in colloquial language, a bird in the hand is worth two in the bush. But if there is unemployment there is unemployment pay, so there is a certain amount of sustenance coming in. The tribunal's decision arises more in the difficult cases, and we are hoping that those will be comparatively few. But the obvious course is to get to the tribunal as quickly as possible.
Clause 7 agreed to.
Clauses 8 to 10 agreed to.
Clause 11 [Exemption orders]:
On Question, Whether Clause 11 shall stand part of the Bill?
7.59 p.m.
LORD DRUMALBYN:I have what I regard as a rather important point to raise on this clause. This is the clause which deals with exemption orders, where employers already have, or subsequently make, redundancy agreements of their own. The clause allows the Minister to make an order excluding the operation of Clause 1 of the Bill where an employer makes, or has made, an agreement for redundancy payment, if he—that is, the Minister—is satisfied that it ought not to apply. I should like to ask the noble Lord some questions on this.
First of all, may I ask him what will be the criteria—apart from willingness to submit differences as to entitlement to the tribunal, in accordance with subsection (3)(b) of this clause—on which the Minister will judge whether or not to exclude the operation of Clause 1? I take it that one obvious example is that the payments provided for in the agreement should be not less than those provided for in the Bill. Are there any others?
Secondly, may I ask him: what happens in the case of an existing agreement which is less advantageous to the employee than that provided for in the Bill? Is it the Government's intention that this Bill should supersede agreements that do not measure up to the standards laid down in the Bill, and that such agreements should be discontinued?

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Is this the Government's intention? Then, what consultation has there been with employees' organisations on this aspect? Does the noble Lord know whether any of them are likely to expect redundancy payments both under the Bill and under the private redundancy agreements which already exist? Here, I am talking, first of all, of those agreements whose benefits are not equal to the benefits in the Bill.
Then, thirdly, what happens if one of the parties (presumably the employees' organisation) refuses to join in the application for recognition of a private scheme which is better than a public one? Because the Minister cannot act on this at all unless it is—to quote the words of the Bill:
"…on the application of all the parties to the agreement…"
All the parties to an agreement—both sides of the industry involved—have to agree to such an approach, and I am asking what happens if one of the parties does not agree. Here, may I ask the noble Lord, is it expected that in such a case the employer should modify the private scheme, whether by agreement or not, so that the payments under the public scheme and the revised payments under the private scheme will equal the present payments under the private scheme?
One can quite easily envisage that this kind of arrangement could be made if there is in existence a fairly generous private scheme. What would happen in such a case would be that, while maintaining the total level of the private scheme, the employer would make up the benefits that he has to pay under the public scheme to those of the private scheme. Is that what the Government envisage should happen in a case of this kind, where the Government do not recognise the scheme, or where there is not such an application—or even where there is? Is this the sort of arrangement that the noble Lord envisages should be made?
As I see it, the employer will in any case have to pay his contributions: there is no exemption. And he will have to pay the redundancy payments under the Bill as well as continuing the private scheme. One can envisage that happening, but it does not seem very
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likely that employers would be willing to do that if the private scheme were already more generous than the new public scheme, the scheme in the Bill. I should have thought that the Minister might have taken powers to make regulations about this matter similar to the powers he has taken to make regulations under Clause 14, which deals with the exclusion or reduction of redundancy payments on account of pension rights, which is a different matter altogether.
There is one other question I should like to ask the noble Lord. Here we have the position, as I understand it (I cannot find anything in the Bill to the contrary), that, whether the Minister recognises the scheme or not, the employer has to continue making his redundancy payment contributions. The only benefit that he would get from recognition of the scheme, as I understand it, is that the Fund would pay the public share of the redundancy payment, up to the amounts that will be paid under the Bill—but no more—and the rest he would have to find himself. These are points on which I think it is very important the Government should at least express an opinion, and say whether they can give any guidance. Where there is an existing scheme, should that scheme be continued in addition to the public scheme and, if not, how should it be adjusted in order to take account of the public scheme? I hope that the noble Lord will be able to give us some enlightenment on this, because it is an important matter.
LORD LINDGREN: I made a note of most of the noble Lord's points, and I hope to be able to deal with them; but if I miss any then I hope he will intervene. As to the question of the criteria for exemption, the main safeguard will be the fact that the trade unions have agreed to it. In the case of this Bill, we are relying very largely on the agreement of the trade unions to the scheme. I had been prepared to deal a little more fully with this point on the Question, Whether Clause 14 shall stand part of the Bill?—where, as the noble Lord says, we in fact deal with the question of superannuations, in particular; but I think it is quite useful to deal with it here, and that it may be helpful if I explain the position now.

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All employers will be required to make lump-sum payments to redundant workers not less in amount than is required by the Bill. The only other payments which may reduce an employer's liability under the Bill will be superannuation payments in cases which will be prescribed by regulations under Clause 14. A great variety of payments for redundancy are provided in the private sector and the nationalised sector under existing schemes. They consist of ex gratia lump sum payments, continuing weekly payments, contingent on the man being unemployed, and, in some cases also an element of pension provision. Where payments under existing schemes are of precisely the same character as those required by the Bill, it would be reasonable to expect that the amount of payment under the Bill would be offset against the payment under the scheme. But it would not be possible to provide in the Bill a satisfactory legal definition of the kind of payments which could be offset which would be comprehensive enough to cover all varieties of payment and equitable as between employer and employee. If one were to attempt it, it might prove to be narrower and more restrictive in scope than would be desirable.
We consider it preferable that employers themselves should, where appropriate, provide in their schemes that payments under them will be in fulfilment of their liabilities under the Bill. This is a more flexible arrangement, and will avoid the many disputes and anomalies that might arise. The noble Lord did not suggest it in his speech, but it has been suggested that the trade unions might not be willing to give up the rights that their members already have under existing agreements and that they might insist on having them as well as the rights under the Bill. I would not expect this attitude to be taken where payments under existing schemes are precisely the same in character as the payments required by the Bill. But, in view of the great variety of existing schemes and the many conditions attaching to payment under them, I think it must be a matter for negotiation.
The Bill creates a new situation and existing agreements must be looked at in the light of it. It would be very difficult for the Bill to anticipate the
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results of these negotiations by saying precisely how the arrangements should be altered; and that, in effect, is what we should have to do. I hope that that explanation meets the main points raised by the noble Lord. He referred to the question of consultation. There was consultation with the trade unions during the compilation of the clause in the Bill.
LORD DRUMALBYN: I am grateful to the noble Lord. Of course, in his reply he has reverted to the point of the Amendment of my noble friend, because, if my memory serves me aright, in the coal industry you have this type of redundancy arrangement which is relative to the weeks of unemployment. It is tied to that, at least, for a certain period. So there you get a totally different kind of redundancy payment; and it may be that there will have to be some modifications, as the noble Lord said, of these agreements. I understand his point that where there is the same kind of redundancy payment as is provided for in the Bill, no doubt the redundancy schemes can be treated more or less as one and merged administratively. I do not know how publicity is going to be given to this, but a certain amount of education about it will have to be given. There are going to be points of difficulty, teething troubles, in regard to this Amendment and we want to smooth them out so far as possible.
LORD LINDGREN: The safeguard is in the main that there are existing redundancy schemes and that they are in industries which have a strong trade union tradition and in which employers have looked at the problems of redundancy ahead of the Government. They have shown the way for what the Government are now doing. This Bill makes a national standard; it is up to the trade unions, whether in the electricity, gas, coal or railways industries, which have existing redundancy agreements to renegotiate in the light of the Redundancy Payments Bill and of its effect on their schemes. It is far better that there should be negotiation between the employer and the employee in the light of this Bill, than that there should be any interference on the basis of the Bill. If I may put it colloquially, in these industries the employer is not likely to take advantage of the worker. There are strong and

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experienced trade union movements in them, trade union movements which have experience in negotiating redundancy agreements.
Clause 11 agreed to.
Clause 12 agreed to.
Clauses 13 to 26 agreed to.
Clause 27 [Contributions to fund]:
On Question, Whether Clause 27 shall stand part of the Bill?
8.15 p.m.
LORD DRUMALBYN: This clause provides for contributions to the Fund and for those contributions to be varied or revoked by a subsequent order under subsection (4). May I ask the intention under this particular clause? Of course, the contributions are, I understand, 5d. additional on the National Insurance stamp for men, and 2d. for women. What I feel is that there is a good deal of uncertainty of what the actual cost of the scheme is to be to start with. That is indicated by a later clause which has a fairly wide span of drawing possibilities to finance the Bill. How does the noble Lord envisage that these orders will be made, and in what circumstances? In the normal way, National Insurance contributions are varied only when changes in the National Insurance scheme are made; and one would not expect that the Government would, if I may use a colloquial expression, "mess about" with National Insurance stamps for this comparatively small amount of an extra penny or so. even though it would be required.
I think the noble Lord, if he would, ought to say a little about the finance of this scheme. We hope his estimates will turn out to be right, that it will not be necessary to alter the National Insurance stamp after the first year and that his present estimates will hold. But one never knows when National Insurance rates will have to be varied. Is it the intention, by and large, of the Government not to make variations except in line with National Insurance variations on this matter?
LORD LINDGREN: As the noble Lord has said, the payments intended at the commencement are 5d. a week for men and 2d. a week for women. Also, as he said, they will be included within the National Insurance contribution. The normal method is that a stamp is pur
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chased from the Post Office and stuck on the card. I believe that in these modern days many employers frank the cards. All those things will proceed as at present. The extra yield of the contribution is expected to be about £18 million per annum. This should be sufficient to cover the Fund's commitments for a substantial period ahead. Estimates of expenditure are, of course, open to a considerable margin of error and provision is made not only to vary the contribution in either direction but also, under Clause 35, for advances to be made from the Consolidated Fund to cover any temporary shortage.
It is not intended to vary these contributions unless it is absolutely necessary. It will be the intention to vary the surcharge if the income of the Fund is much greater or much less than is needed. Changes would be aligned with changes in the National Insurance contribution, as the noble Lord has suggested. We must hear in mind that all these additions to the contributions for social welfare, National Insurance and the rest impose a very heavy charge on industry in regard to administration and clerical organisation. Everything will be done to minimise any fluctuations and changes that might be necessary. Of course, there will not be variation other than within the National Insurance contribution.
Clause 27 agreed to.
Clauses 28 to 33 agreed to.
Clause 34 [References and appeals to tribunal relating; to payments out of fund]:
8.20 p.m.
LORD DRUMALBYN LORD DRUMALBYN moved, in subsection (2), to add to paragraph (a):
"whether or not a payment has been made to the employee under subsection (2) of section 32 of this Act."
The noble Lord said: The clause states:
"Where any such claim or application is made or such prior notice is given—"
this is a reference to the tribunal—
"there shall be referred to a tribunal, in accordance with regulations made under Part III of this Act,—…any question as to the liability of the employer to pay the employer's payment."
My Amendment would add:
"whether or not a payment has been made to the employee under subsection (2) of section 32 of this Act."
Under Clause 32(2), the Minister may make a payment on the application of an employee if he is satisfied that a payment is due. Subsection (4) of that clause gives the employer the right to appeal if the rebate is reduced, but it is not clear that the employer may appeal against his liability where the Minister makes a payment, so to speak, on his behalf—because the employer has not made the payment—and then tries to claim the money back. It is not clear that an employer can appeal against the Minister's claiming back the money and can deny liability. The Amendment would make clear that there is a right of appeal against being "dunned" by the Minister for a payment which the employer feels that he does not owe.
If the employer succeeds, presumably the Fund would have to meet the payment made to the employee in error. I should like the Minister to tell me what would happen in such a case. This does not seem to have been provided for in the Bill. Will the Fund have to bear the expense of the Minister's error, or will the Minister reimburse the Fund under Clause 55 as expenses? I beg to move.
Amendment moved—
Page 29, line 20, at end insert the said words.—(Lord Drumalbyn.)
LORD LINDGREN: I hope to be able to reassure the noble Lord that the result which the Amendment would secure is already achieved by the Bill. The type of case to which the Amendment is directed is one in which the Minister has already made a guarantee payment to the worker out of the Fund because he is satisfied that the payment was due and the employee has been unable to obtain it from his employer. As I understand it, the Amendment seeks to put it beyond doubt that the fact that the Minister has already made a guarantee payment of this kind should not prevent an appeal to the tribunal on the question whether the employer was liable for the payment in the first place. I am advised that under the clause as it stands there is nothing to prevent an employer from making an appeal in these circumstances. The fact that the Minister was satisfied that the employer was liable and acted by making a payment himself would in no way prejudge the issue; any more than if the
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worker was dissatisfied with the amount paid by the Minister and appealed to the tribunal.
In the normal way, any question about the employer's liability would be cleared up before the Minister made any payment to the worker, usually by reference to the tribunal; but such a question could arise after the Minister had made a payment—for example, because the employer decided to contest the liability—or because fresh evidence had come to the attention of the Minister casting doubt on the worker's entitlement to the payment. If this happened, it would be open to the employer or the Minister to appeal to the tribunal, and the issue would not in any way be prejudged. The Amendment, therefore, does not add anything of substance to the clause. The noble Lord asked what would happen if the Minister paid in error. Of one thing we may be certain, he would have to chase for a long time before he got the money back. The Fund would have to stand the loss if the Minister paid in error.
LORD DRUMALBYN: I am obliged to the noble Lord for his explanation. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 34 agreed to.
Clauses 35 and 36 agreed to.
Clause 37 [Continuity of employment in case of strike]:
On Question, Whether the clause shall stand part of the Bill?
VISCOUNT FALMOUTH: As I understand it—I hope that the Minister will be able to throw some light on the matter—Clause 37 says that when an unofficial strike takes place in breach of a contract of employment, the continuity of service of an employee for the purposes of calculating redundancy payments is not broken. If this clause remains part of the Bill, I fear that it may be taken that unofficial strikes in breach of a contract of employment are counternanced by the Bill. We all know that all sections of industry speak against the follies of such strikes and the great harm done to the good industrial relations which we are trying earnestly by this Bill to improve.
The argument will be put forward that because an employee took part in an unofficial strike, without perhaps fully realising or considering the implications

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of his action, he should not be deprived of the right to redundancy payments, as he might have given years of most loyal service to his employer. That is a strong argument; but, equally, the employer is expected to carry on his business in a law-abiding and reasonable fashion. Should not an employee, in turn, be expected at law to exercise reasonable responsibility, knowing that by taking part in an unofficial strike as distinct from an official strike he would be breaking his continuity of service? I therefore think the clause should be deleted.
VISCOUNT FALKLAND: I wish to support the deletion of the clause. I think that the amendment to the Contracts of Employment Act, 1963, should be deferred until the Royal Commission has reported. I understand that their Report will include the question of contracts.
LORD LINDGREN: There has been a considerable amount of discussion about this clause, both in your Lordships' House and in another place. In a way, that is entirely right and proper, because the problem involved, taken at its widest, presents a difficulty. But, on looking at the whole content of the redundancy scheme, I think that any impartial observer would be bound to say that a disproportionate amount of time had been given to this comparatively minor aspect of it. And I think that, despite this, the debates held on it have been neither very constructive nor very conclusive; they have been conducted throughout on a narrow Amendment which makes no positive contribution to the solution of these difficulties.
I would direct your Lordships' attention to the precise effect of this Amendment. It amounts to saying that the previous Government were right when they introduced a penalty clause into the Contracts of Employment Act, under which any strike in breach of contract broke continuity of service and, furthermore, that this should be the pattern in the case of redundancy payments as well. I submit that these propositions are quite untenable. I will not detain your Lordships by recalling the arguments with which my colleagues and I opposed the original provision in the Contracts of Employment Act, but we thought then that it would do no good to industrial relations and we certainly have not qualified our
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view in the light of experience since the Act was passed. In the Second Reading debate on this Bill noble Lords accused my right honourable friend the Minister of Labour of inconsistency in, on the one hand, saying that he would be reluctant to propose major changes in the law relating to industrial relations before the Report of the Royal Commission on Trade Unions and, on the other hand, making this particular change. This is really a somewhat misleading account of the actual situation with regard to the law in this field.
The fact is that the general understanding of what constitutes a strike in breach of contract has been thrown into such uncertainty as to constitute in itself a serious and important change. This clause is largely necessary because of that change, which has made the penalty clause in the Contracts of Employment Act a much wider one than was ever intended. Since the decision in Rookes v. Barnard, it has been more than ever clear that a strike in breach of contract embraces far more than the kind of irresponsible action which employers and good trade unionists alike want to discourage. It is quite likely that the great majority of all strikes, official or not, responsible or not, could be held to be in breach of contract. It was certainly assumed at the time the Contracts of Employment Act was passed that, if workers gave due notice before going on strike, they would not be in breach of contract, but since Rookes v. Barnard great doubt has been cast on that proposition and a distinction between strikes in breach of contract and other strikes can no longer be assumed to depend on how much notice of the strike is given. The Trade Disputes Bill which we have discussed this week in this House in no way affects this.
In this position of complete uncertainty, it is wrong to retain the provision to which I have referred in the Contracts of Employment Act and, still more, to extend it to this Bill. I must confess that I am surprised that some noble Lords have thought that this sort of penalty clause is appropriate to this Bill. I do not think that such an approach has much regard to the realities of everyday industrial negotiation. It amounts to penalising all workers, it may be to the extent of several hundreds of pounds, at the time of redundancy, when relations in the firm

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are already tense, on account of a strike that happened five, ten or fifteen years before. It is easy to imagine the bitterness and resentment this could cause, particularly if workers had gone on strike, as they might well have done, on the instructions of their trade union. I suggest that it is unrealistic to think that the majority of employers would want to impose a penalty years after the event in this way.
The Amendment would also create considerable difficulty for employers. Most employers when they came to make redundancy payments would want to disregard strikes in the remote past. But the Redundancy Fund would not be able to do so. If it came to be known that a strike had taken place—and your Lordships will recall that the scheme will be administered through the offices of the Minister of Labour, who will often know about these things—a rebate could not be paid in respect of the period before continuity was broken. The employer would have to meet all pre-strike payments out of his own pocket. The Redundancy Fund carries only a twenty years' guarantee. I have been on strike only once in my life, and I am very proud that I went on strike in 1926 in support of the miners, but that is more than twenty years ago. But if a man had been on strike only nineteen years before, he would be liable to this penalty. To bring these matters up again in a difficult period makes it, as noble Lords who are associated with industry will know, easy for things to flare up when redundancy is in the air. Tension is high and to aggravate it by having a clause which penalises workers for having been on strike, whatever the reason, some long time ago is unnecessary. I hope that noble Lords will not press the Amendment.
LORD DRUMALBYN: I should like to support my noble friend's Amendment. As the noble Lord opposite knows, this is a matter on which we are bound to disagree, and I think that it would be wrong if we did not express our disagreement, as it has been expressed elsewhere. First of all, let us get one thing straight. There is no suggestion at all that every strike would be a break of continuity. I know that the noble Lord did not mean to convey this, but he did so accidentally in the course of
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his remarks. That is not the proposal. The suggestion is that the position should be left as it is in the Contracts of Employment Act, 1963. I think that I ought to remind your Lordships of exactly what that Act says. Paragraph 7(2) of Schedule 1 says:
"The continuity of an employee's period of employment is not broken by a week which does not count under this Schedule, and which begins after it has come into force—
this is not what happened fifteen years ago—
"if in that week or any part of that week the employee takes part in a strike except where the employee has, in taking part in the strike, broken his contract of employment".
What this clause does essentially is to leave out the words
"…except where the employee has, in taking part in the strike, broken his contract of employment".
LORD LINDGREN: I assume that the noble Lord appreciates that the breach of contract is completely changed by the Rookes v. Barnard case.
LORD DRUMALBYN: I was coming to that. I am afraid that I can deal with only one point at a time. The purpose of putting this into the Contracts of Employment Act was to try to get throughout industry a fresh respect for contract, which I think we all recognise is exceedingly important in the modern world. The noble Lord talks of the penalty clause. The penalty is that it breaks a period of employment from the point of view of the Contracts of Employment Act so far as the giving of notice is concerned. So far as this Bill is concerned it would, as the noble Lord has said, have broken the period in calculating the redundancy payment, and it might be quite serious. But this is something that people should think of at the time when they are thinking of breaking their contracts. I should have thought it was important that they should have this in mind when they consider, if you like to put it in a rather unmoral way, whether it is worth while to break their contracts or not. This is why we attach importance to this and feel that it should remain in the Bill.
But, again, at this stage we know what the consequences would have been if we had sought to oppose this clause—we should have lost three months while

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the Bill went back to the other place—and we on this side are just as anxious as noble Lords opposite to get this Bill going. Therefore, although we strongly dissent from noble Lords opposite, we do not think it is right to have a confrontation (I think that is the word) on this particular issue at the present time.
I would say only this further. As the noble and learned Lord the Lord Chancellor said, at the time there were any number of interpretations of the effect of Rookes v. Barnard. I do not think any of us here at the moment are lawyers (perhaps there is just one noble Lord), and we should not like to go into this point, but my recollection is that Rookes v. Barnard was not about actual strikes but about the threat to strike and intimidation. That is not just going on strike and the breaking of a contract. I have difficulty in seeing what Rookes v. Barnard has to do with it. However, having registered our strong dissent on this (as the noble Lord knows, we should have liked to take up a good deal more time with it, but I think we have taken up the minimum we possibly could), I would not advise my noble friends to persist in the Amendment, although I hope it will not be withdrawn.
On Question, Amendment negatived.
Clauses 38 to 45 agreed to.
Clause 46 [Procedure of tribunals]:
8.43 p.m.
LORD DRUMALBYN LORD DRUMALBYN moved, in subsection (2), after paragraph (f) to insert:
"() for enabling appeals to be brought from a tribunal to the National Insurance Commissioner or a deputy Commissioner appointed by Her Majesty for the purposes of the National Insurance Act 1946. or to a tribunal presided over by the National Insurance Commissioner or a deputy Commissioner: and the said Commissioner or deputy Commissioner shall be deemed to have been appointed also for the purposes of this Act."
The noble Lord said: This is the last Amendment on the Marshalled List, and even although the noble Lord may not agree with it, I do not think it can be described as particularly contentious, especially as his noble friend Lord Blyton also expressed the view that it would be a good thing if we had some procedure in the Bill for appeal to a tribunal. I think the noble Lord, Lord Blyton, would have preferred some kind of appeal to an umpire.
It occurred to me, for reasons which the noble Lord will appreciate, that possibly the National Insurance Commissioner and his deputies could hear these appeals. There are advantages and disadvantages in such a system if there are to be appeals at all. The advantage is that the National Insurance Commissioners are there as an appeal body. Whether or not it is an advantage that they are already hearing appeals of a similar character, in the sense that they have to hear appeals on unemployment benefit (as to whether a person has left the job voluntarily or through misconduct, and so forth; and generally the question of entitlement to unemployment benefit), or whether it would be embarrassing to have appeals possibly from two directions, so to speak, one from the insurance side and the other from the redundancy side, I do not know. At any rate, I put down this Amendment because I felt there was some opinion that it would be a good idea to have an appeal, other than an appeal on law alone (for which I believe the Bill, in a rather cryptic way, already provides), of the same kind that already exists in regard to National Insurance. As the noble Lord said earlier, substantial sums, particularly to the people concerned, are involved, and it seems perhaps a little hard, whether it is the employer or the employee, that they should have to be content with one decision when they feel strongly that they have a good case. I beg to move.
Amendment moved—
Page 41, line 19, at end insert the said subsection.—(Lord Drumalbyn.)
LORD LINDGREN: I have listened with great interest to the arguments which the noble Lord has deployed in favour of this Amendment. I entirely agree with him as regards the potential importance of these tribunals. We see them as responsible bodies who will build up a valuable expertise in labour matters and provide a ready and accessible form of settling disputes. We recognise, too, that they will be concerned with a number of difficult issues and that there is a need for a system which makes for consistency as between decisions of individual tribunals. But we feel confident that the system of the Industrial Tribunals which we propose to use for purposes of the Bill, and to which much

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thought has been given, will satisfy these tests. Under this system, the Industrial Tribunals are required to give reasons for their decisions, and there is a right of appeal to the High Court (or, as the case may be, the Court of Session) on questions of law. We have carefully considered the need for any further appeal provision, but we believe that the chairmen and members of tribunals will have the necessary qualifications and experience to deal with disputes satisfactorily without this.
As well as chairmen selected from panels of persons with legal experience (appointed by the Lord Chancellor or the Lord President of the Court of Session), and members representative of both sides of industry, there is a President of Industrial Tribunals for England and Wales and Scotland respectively, each served by a central office. We think that this system will prove flexible enough to adjust to the build-up of a work-load which we cannot accurately estimate. We also believe that the existence of the Presidents to co-ordinate the work will make for consistency in tribunal decisions. We have had full consultation with both sides of industry on this form of organisation, and it has also been approved by the Council on Tribunals. A relevant point is that the volume of work and the number of tribunals will not be comparable with that of the local appeal tribunals under the National Insurance Scheme, on which the noble Lord has to some extent relied as a parallel. Those tribunals—of which there are over 200—dealt with some 36,000 cases in 1964. The work of the industrial tribunals will not be on a scale approaching anywhere near this.
The work of the industrial tribunals on redundancy cases will be similar in many ways to the work of the existing compensation appeal tribunals, which is to be transferred to the industrial tribunals under Clause 44 of the Bill. There is no right of appeal (except on questions of law) from the compensation appeal tribunals. We are satisfied on the best expert advice that the tribunals will function satisfactorily without appeals machinery on questions of fact, and that to introduce such machinery would be productive of more litigation without securing any significant advantages. I
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hope that, in view of this explanation, the noble Lord will not press his Amendment.
LORD DRUMALBYN: I thank the noble Lord for his full explanation. I quite understand the point of view. I personally should doubt whether one could expect to get the consistency in decisions and the building up of Case Law to cover the whole country without a sort of apex to the triangle. The noble Lord relies only on a base. Personally, I think there ought to be an apex, and I rather regret that he does not see his way to having an appeal tribunal on these matters. He said that people with the necessary qualifications and experience would be recruited. But the recruiting of such people is no guarantee that they will reach the right decisions. There will be some that get by which might be caught by an appeal court or tribunal, and I rather regret that there is not to be one. There it is. It is not provided for in the Bill, and we know how it is.
As this is the last Amendment, I should like to thank the noble Lord for the trouble he has taken in dealing with the points. I think our discussions have been of real value, and that when some of these remarks are read people will get a clearer idea of how the Bill will work. I am bound to say, however (I hope that I am not too much out of order in making this remark now: I do so to avoid making it later), that it is the most extraordinary procedure for a Chamber which is supposed to he, at the very least, a Revising Chamber, that it has no opportunity to revise even what it does itself, and has to carry the whole of this complicated Bill through its Committee stage, Report stage and Third Reading, all in one day, at a fairly late hour. It would not be human for us not to protest at this, and I do not think it was entirely necessary. I believe that it would have been possible, and possibly advantageous, to give us a little more time on this Bill, and I hope that the Government will manage their affairs rather better in the future.
Amendment, by leave, withdrawn.
Clause 46 agreed to.
Remaining clauses and Schedules agreed to.
House resumed: Bill reported without amendment; Report received.
Then, Standing Order No. 41 having been suspended (pursuant to the Resolution of July 22):
LORD SHEPHERD: My Lords, I have it in Command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Redundancy Payments Bill, has consented to place her interest, so far as it is concerned on behalf of the Crown, at the disposal of Parliament for the purposes of this Bill.
8.54 p.m.
LORD LINDGREN: My Lords, I beg to move that the Bill be now read a third time. This is a substantial and important Bill, which will take its place as a major contribution to our industrial and social legislation. It is both a humane measure and one that can help us to get on with two of the most urgent tasks facing our economy—learning to live with technological change and securing the most efficient deployment and use of scarce manpower resources. For these reasons the main principles of the Bill have already been widely welcomed, both inside and outside Parliament. We have already put in hand the administrative arrangements for launching the scheme at the earliest possible moment. My right honourable friend has said that we hope to do this by the end of the year. Before then there are several sets of regulations to be made and a good deal of other work necessary to prepare and publicise the scheme.
Before we part with this Bill I should like to say a brief word about its effect on labour mobility. It has been suggested in some quarters that one effect will be that workers will be less inclined to leave contracting firms and industries to seek work elsewhere, because they will want to hang on in the hopes of receiving compensation. Obviously, the Bill is not designed to give positive encouragement to voluntary movement of this kind. But I do not believe that it will prove a significant hindrance to movements of labour which are desirable from the point of view of the economy generally. The important thing to ensure is that workers are willing to move to other jobs when they have become surplus in their existing jobs, or when redundancy is in definite prospect.
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The experience of the many firms who already operate redundancy schemes has not been that such schemes make changes in labour complements more difficult to achieve. On the contrary, the schemes have been invaluable in carrying through the necessary changes. I have no doubt that the provisions of the Bill will similarly help forward the changes that have to be made in industry.
There has also been the suggestion that the expense of redundancy will cause employers to hang on to labour longer than they should. But I think the present funding arrangements, which provide for rebates of about 70 per cent. of payments from the Redundancy Fund, dispose pretty effectively of that point. My own conviction is that the Bill will go a long way towards creating a more co-operative attitude to the process of modernisation and more efficient deployment of labour with which we must urgently come to terms.
I commend the Bill to your Lordships, and thank noble Lords opposite for the assistance they have given in the Committee stage of the Bill.
Moved, That the Bill be now read 3ª.—(Lord Lindgren.)
LORD DRUMALBYN: My Lords, I had not intended to say anything else, but as the noble Lord has been good enough to say a word on Third Reading I should like to add what will be a very brief word indeed. All I should like to do is to welcome the Bill, and express the hope that it will fulfil the expectations which the noble Lord has mentioned. We wish the Bill well, and we hope that the Government will get it going with the least possible delay, and that it will have the effect of improving the general atmosphere in industry, of encouraging modernisation and generally increasing mobility and contributing to the economic welfare of this country.
On Question, Bill read 3ª, and passed.

BRITISH EQUIPMENT FOR AMERICAN PHANTOM AIRCRAFT
8.59 p.m.
THE EARL OF KINNOULL THE EARL OF KINNOULL rose to ask Her Majesty's Government, following the confirmation of the British order for American Phantom aircraft, whether they can now announce how many British

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aircraft manufacturers will be supplying equipment to these aircraft. The noble Earl said: My Lords, I feel that I must almost apologise to the House—all those who are left still in the House—for this being my second Unstarred Question within two days. The Question to-night on the Phantom aircraft was in fact postponed last week in order to have present to-night the considerable reinforcement or, perhaps I may say, the strike reinforcement, of my noble friend Lord Jellicoe, who, of course, has a wealth of background knowledge on the Phantom aircraft.
The question on the equipment to the Phantom aircraft really stems from the Government's Statement at the time of the cancellation of the TSR2 last April. The Government then undertook to see that as many British manufacturers as possible would be given a chance to submit a tender for supplying the equipment for the British order of some 300 American Phantom aircraft. If one hazards a guess that each aircraft will cost something in the region of £1 million and that the cost of each aircraft, if broken down in percentages, runs out at 35 per cent. for the airframe, 30 per cent. for the engine, and some 35 per cent. for the equipment—and perhaps the noble Lord would comment on these figures in his reply—the order at stake for the British manufacturers must be something approaching £100 million. On top of this must come the cost of spares, which I believe could well amount to a further 40 per cent. of the total cost of each aircraft. Thus the 130—odd British manufacturers competing to win some orders not only could well earn a large sum of money but could also save the country at the same time over £100 million worth of precious dollars.
Yet, my Lords, with all this information and background knowledge I was appalled to learn recently from a responsible aircraft manufacturing company that in the main the British manufacturers—and I do not include, of course, the Rolls-Royce Company with their Spey engine but the smaller companies—regard this Phantom aircraft order with a certain despair and apathy and are wondering whether winning a contract is really worth their while. This sounds incredible, but the reason is that the
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Phantom aircraft is a highly sophisticated aircraft and it naturally has highly sophisticated equipment. If the British companies do not have immediately available comparable equipment for which to tender, they feel it would be hardly worth their while going through all the processes of designing equipment to specification, testing it and eventually placing it for tender.
Besides all this extra expense, which I understand the Government are prepared to meet in the form of a 20 per cent. subsidy for successful tenders—and here again perhaps the noble Lord, Lord Shackleton, will confirm this—there is the problem of the delay of delivery. It could well be that the McDonnell Company would advise the British Government that if the delivery of this aircraft was wanted on time, say by 1969, they would not be able to wait for some of the British equipment to be specially designed and fitted. Yet a third problem which apparently may arise is that the American security will require a fairly extensive screening of any British technicians who wish to visit the McDonnell company, and this again can cause further delay.
All this paints a fairly gloomy picture, and I hope that the noble Lord, when he comes to reply, will have a more cheerful answer, for the aircraft industry is saying quite clearly at the present time, and I am sure the noble Lord is aware of this, that it cannot live without creative talent and that building other people's aircraft would eventually kill this talent. This industry is at present admired throughout the world for its skill and know—how, and if it ever loses its impetus it will also lose its advanced technical knowledge.
I should like to ask the noble Lord two specific questions regarding the Phantom aircraft. The first is about the cost of spares, for, as I have already stated, this may be as high as 40 per cent. of the total cost of the aircraft, or some £40 million. Will the cost of the American-supplied spares be on a fixed price basis, or will the cost be at the mercy of the American companies as to what they wish to charge? Secondly, when the aircraft goes into service, will the maintenance and support be entirely carried out by the British Support and Design Company, which I believe is working closely with the McDonnell

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Company in America at the moment, or will American technicians be required as well?
I hope I shall not be straying too far from the purpose of this Question if I say that many people believe there are important lessons to be learned from the Phantom order. One of the main lessons to be learned is that the aircraft industry is entitled to receive from the Government a specification of a military aircraft that the Government really want. Yet another lesson is that when the Government enter into a joint aircraft venture with another country, it is hoped that they will firmly declare at the outset what percentage of the project will be British-made, and not leave it to bargaining at a later stage.
My Lords, the question of the Phantom aircraft has been debated many times before, and mostly in a heated atmosphere, which I am sure will not be the case this evening. But I believe everybody recognises that this is a magnificent aircraft, and the purpose of my Question to-night is simply to find out how successful the British companies have been so far in their tendering for supplying equipment to this aircraft. I hope the noble Lord, when he replies, will have something heartening to tell the House on this matter.
9.7 p.m.
EARL JELLICOE: My Lords, my noble friend need make no apology for introducing, this subject to your Lordships even at this late hour. The Phantom will be an absolutely key aircraft for the Royal Air Force and the Royal Navy in the next decade or so; I cannot see how either Service will be able to do without it. The decisions which the Government take on it will, as my noble friend has said, intimately affect the British aircraft industry, especially on the engine and components side, and—this is of a different order of importance—I am glad that my noble friend has introduced this topic because I must confess to a certain personal interest in this particular aircraft. I disclaim that wealth of knowledge which my noble friend kindly but incorrectly attributed to me, but it just does happen to be the only aircraft in which I have flown really fast and fairly high personally. In view of this, I hope the noble Lord, when he replies, will be able to tell us much more
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than we have learned hitherto about the intentions of the Government.
There has been a great deal of speculation about this project lately, and I hope the noble Lord will be able to take this opportunity of scotching some, at least, of the wilder rumours we have read in the Press. As for the general setting, my colleagues and I do not claim that we should never place orders for military aircraft abroad, but we do feel that we should tread carefully. We shall not maintain a healthy aero-engine industry or a healthy avionics industry in this country unless it is based on a healthy airframe industry, and it is difficult to see how that can be maintained without some British orders for British military aircraft.
I hold that when we go shopping or co-operating abroad for military aircraft we should look first to Europe, and Western Europe as a whole. If in the last analysis we need to buy American military aircraft—and I would not and could not deny that there may be occasions when there is that need—we should aim to get something really solid in return, a really adequate quid pro quo. The obvious and direct quid pro quo, as my noble friend mentioned, is the incorporation in any such aircraft of the maximum amount of British manufactured equipment. I should have thought this would be an absolute condition of any substantial "buy" across the Atlantic, and across the exchanges, provided that the performance of the aircraft is not impaired, provided that its date of entry into service is not prejudiced, and provided that the cost of the resulting modifications is acceptable. I would assume that the noble Lord would accept this broad position, but can he tell us what the Government have done, and are doing, about it?
In this context, I should like to put two general questions to him. My first is to ask whether the Government have safeguarded these principles in their contractual arrangements with the Americans. Do our inter-Governmental agreements provide, or will they provide, for the fitting of British designed equipment when it is readily available? Or, alternatively, do they provide, or will they provide, that the main contractor, in this case the McDonnell Aircraft Company, will give preference to the fitting of British equipment manufactured under licence in

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this country? Can the noble Lord confirm that there is a firm understanding on those two points between the two Governments?
My second question is a corollary of my first. I understand (I may be wrong about this) that the British-engined Phantom should have a substantially better performance than the Americanengined Phantom. I also understand that the British engine, the Rolls Royce RB.25, has considerably more development potential than its American counterpart, the General Electric J.79. That being so, there seems an obvious case for the Americans to adopt the British variant for their later production models, possibly for the United States Air Force, and probably, I should have thought, for the United States Navy and for the Marine Corps. There is a lot at stake here commercially.
Each of these aircraft has two engines and a couple of these engines, quite apart from research and developments costs, cost something over a quarter of a million pounds plus. Thousands of these aircraft have been ordered for the United States Forces. The adoption of this engine by the United States Armed Forces, if only for the later production models, could in itself be very important. One hundred American aircraft fitted with this engine would mean £25 million plus in sterling for this country. It would not only be important in itself, but would also be important in doing perhaps more than anything else to open the door for the introduction of the Rolls Royce-engined Phantom into countries other than the United Kingdom and the United States. Can the noble Lord tell us what chance there is of persuading the Americans to adopt the Rolls Royce engine for their own Phantoms? Can he tell us what the Government have done to further what seems, to me at least, to be a great export opportunity for the British aero-engine industry?
I should like to turn to some more detailed matters. First of all, a word or two more about the engine. In all I have been saying up to now I have been assuming that the project for incorporating the Rolls-Royce engine into this aircraft was going ahead. That was certainly the case when I last knew something in detail about this project. It
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was certainly my opinion that, so far as the Royal Navy was concerned, this particular aspect of the project had to be proceeded with. As I understood it—and I should like to know whether this is still the position—the American-engined Phantom could not be satisfactorily operated from at least our smaller carriers. But we have recently seen rumours in the Press that this whole programme is likely to be abandoned, that the Royal Navy was to receive no Phantoms at all, and the Royal Air Force was going to receive only the American-engined Phantoms. The Ministry of Defence have dismissed these reports, I am glad to say, as purely speculative. I hope that this evening the noble Lord opposite will be able to go much further than that by telling us that these reports are in fact quite unfounded.
On June 30 he told us (I am referring to column 960 of Hansard) that he did not foresee any increase in cost of a kind which would affect the numbers ultimately to be decided upon by the Defence review. He was there referring to the possible escalation of the project of "engining" this aircraft with British engines. I hope he can confirm this evening that the programme itself is secure and also that the numbers within that programme are secure. I will not ask for precise details about numbers, although, given the American directness about numbers, I have always thought that our coyness about aircraft numbers was rather absurd. However, I hope that he will be able to give your Lordships and myself some general assurance both about the numbers of aircraft in this programme and about the programme itself, I know that this involves money, and I know that I may here be treading possibly on rather delicate ground, in view of the decision taken by the Parliamentary Labour Party yesterday about Defence economies. That perhaps makes it all the more important that we should have some assurance on this particular point.
I hope and trust that we may receive this assurance, because I can see no particular reason, in the quite imperfect state of my knowledge, why this particular programme for incorporating British engines in this aircraft should be endangered. There have been some technical difficulties—there are bound to be—over the marriage of the Spey to the Phantom.

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I understand that these difficulties have been overcome. I gather that the cooperation between the McDonnell Company and Rolls Royce has been excellent, as indeed has the co-operation between the managers of this programme across the Atlantic—the United States Bureau of Weapons and the Ministries of Defence and of Aviation. I gather, further, that Rolls Royce have met all the pretty tight dates in the development of these engines.
Finally, the noble Lord himself told us five weeks ago that we need not accept that the costs of this programme on the engine side are mounting excessively at the present time. That, I may add, is also my information. In view of this, I trust that the noble Lord can scotch these rumours that the programme for the Spey-engined Phantom is in any way threatened. As I see it, the Spey engine represents by far the most important piece of British equipment which can be married into this project.
Like my noble friend, however, I should like to know what other opportunities for the introduction of other British components into this aircraft there may be. Avionics (to use the jargon) represents a high proportion of the cost of any military aircraft. What British avionics will be incorporated into the Phantom project? Will there be a British-produced flight simulator? Or will there be a British-produced reconnaissance pod, of which we have read in the Press recently? What about the weapons system? Most of this, as I see it, must inevitably be American. A modern military aircraft is more or less built around its weapons system, and to tackle that at this fairly late stage in development is probably a dangerous thing to do. However, I should like to ask the noble Lord whether it is intended to incorporate a British weapons system into this aircraft and, more particularly, whether he believes that the Anglo-French A.J. 168, the air-to-surface missile which is under development, could, and should, be fitted to the Phantom.
There is also certain ancillary equipment. I assume that the noble Lord will be able to tell us that it is the intention to fit the British Martin Baker ejector seat into the aircraft. I take that to be axiomatic, as I think it is going into the American versions of the Phantom. I also trust that he can confirm that the
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tyres will be British, and that the wheels and brakes, if not of British design, will at least be of British manufacture. I know that these items may sound fairly small beer, especially at this hour of the night—indeed, they are rather small beer. But this sort of equipment has a fairly short life, and the aircraft itself has a fairly long life. Therefore, in the long run these items are quite important.
I have only one further question to put to the noble Lord. My noble friend touched on the question of the servicing and maintenance arrangements for the Phantoms for the Royal Air Force and the Royal Navy. I shall be interested to hear what the noble Lord has to say in reply to that point.
I should like to ventilate one further possibility with the noble Lord. A vast number of Phantoms will soon be in service with the United States armed forces. Presumably, a large number of these are likely to be deployed in Europe. Is there not a chance of securing for British firms the potentially important contracts for servicing these aircraft? Has this possibility been explored?
At the start of my brief contribution to this discussion I confessed to a certain personal interest in this project. But I should like, in conclusion, to make it clear that I am not asking the noble Lord for information about this project merely to satisfy my personal curiosity. I am asking for it—and I hope that he will be able to give us full and satisfactory answers—because I believe that the way in which the Government handle this project is very important indeed for the Royal Air Force, for the Royal Navy and for the British aircraft industry, and not least for the future pattern of British American co-operation in armaments production.
9.22 p.m.
THE MINISTER OF DEFENCE FOR THE ROYAL AIR FORCE (LORD SHACKLETON): My Lords, even if the noble Earl, Lord Kinnoull, was gloomy—I think quite unnecessarily gloomy; and he hoped that I should be able to allay his gloom—I agree entirely with him, as with the noble Earl, Lord Jellicoe, that this is a very important subject. It is very important that the Government should give as much information as they can. I hope to give rather more information than the previous Administration

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were wont to do on this sort of subject. Certain points were mentioned by the noble Earl where, fortunately or unfortunately, we are following the precedents set by our predecessors, but we hope even to put some of that right in the course of time. There is much to be said for giving as much information as one can.
Both the noble Earl, Lord Kinnoull, and the noble Earl, Lord Jellicoe, went rather outside the Question at certain points, and in the interests of good order in this House I do not propose to enter into a general debate on the aircraft industry. I would just say to the noble Earl, Lord Kinnoull, that if he wants to discuss this on another occasion we shall be glad to do so; but I do not think I can enter into questions about whether the aircraft industry has been given the right specifications. This is a much more complex subject, and I would not accept for one moment that they have not been given the right specifications. I repeat, for the record again, that the TSR 2, whose passing we all lament, and whose operational requirement never changed, was a good aircraft, but the cost got beyond our capacity to meet. That was the difficulty, and I must make that point clear.
For reasons which I hope will become obvious in the course of my answer, I cannot reply to the noble Earl's Question in precisely the form in which he asked it. My answer will be very much in the nature of a progress report. Your Lordships will appreciate that the building of an aircraft is a lengthy process, and not all decisions about its equipment need to be taken at the moment when the initial order is placed. Although, as noble Lords know, the initial order has been placed, certain decisions can follow that afterwards, even though the main configuration—to use the appropriate American jargon—we are now using is established.
First of all, let me deal with the point which the noble Earl, Lord Jellicoe, made, about what he described as the quid pro quo. I have always understood quid pro quo to be a question of selling other equipment in return for buying a foreign country's equipment. But in the context in which the noble Earl was using the expression, it was related to
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the amount of British equipment that can go into American aircraft which we are buying. I think I am correct in saying that that was his meaning. Here I am glad to say that under the agreement which we have entered into, up to 50 per cent. of the fly-away value of the whole aircraft can be of British manufacture, and we are certainly hoping that we shall be able to get up to that figure.
The noble Earl, Lord Kinnoull, gave a breakdown between equipment, engine and airframe. I think his broad division is near enough. I could quibble on a few percentages, but for convenience in this context we might as well say one-third each—perhaps a rather higher proportion on equipment. At the moment, about one-third, by value, of the equipment to be installed in both the Royal Naval and Royal Air Force Phantoms will, we hope, be of actual British design and manufacture—and I stress that this is British-designed as well as British-manufactured equipment. This proportion may well increase as time goes on. In addition, we hope that some of the American-designed equipment and components will be made in this country. If we are to discuss this, I think it would help your Lordships if I went into some detail, because it is important to get the detail in order to get the full flavour of what is happening.
I should like to deal, first of all, with the question of British-designed equipment. In this case we are taking an item which has been, or is being, developed in this country, possibly for a completely different aircraft, and adapting it to fit another aircraft—in this case the Phantom. In some cases the amount of adaptation—integration, I believe, is the term commonly used—may be small; in other cases large. Integration is the actual fitting of the equipment into the weapon system. Adaptation is not the end of the story, for this equipment has then to be installed in the Phantom, probably necessitating some changes in the detailed aircraft design; and then the aircraft has to undergo a period of test flying in order to prove that the equipment works satisfactorily in the aircraft, in conjunction with all the other equipment already in it. For we must not forget, my Lords, that the Phantom, as I think the noble Earl, Lord Jellicoe,

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said, is a highly complex weapon system; and a change in one part of it, however small, is almost certainly going to affect the performance of some other parts unless special precautions are taken.
All this design effort by the equipment supplier and the aircraft constructor, and the subsequent proving flying, is bound to cost money, and since it is highly skilled labour that is involved, the cost must inevitably be heavy. Your Lordships will therefore see that changes of design in the equipment for the aircraft are not to be entered into lightly. But this does not mean that there may not be good reasons for accepting the costs of such changes as are required to operate it under conditions which are not quite the same as those under which the Americans at present operate it.
A major example—and the noble Earl, Lord Jellicoe, is quite correct about this—is the engine. It is necessary to have more thrust, in order to enable the Phantim to be operated from some of our aircraft carriers which are smaller than the American carriers. The previous Government—and the noble Earl played a valuable part in this—decided that the Pratt and Whitney J.79 should be replaced by a developed version of the Rolls-Royce Spey—the engine which also powers the Buccaneer aircraft, as well as the B.A.C. 1–11 airliner. A programme to develop the Spey to the required power, a task which involves the addition of reheat, was begun last year, and I am glad to be able to say that it is proceeding well. Under the present programme the first Spey-powered Phantom is planned to begin its flight trials in June, 1966. The R.A.F. Phantoms do not need the Spey in order to perform the tasks that the R.A.F. require of them, but there are obvious advantages in keeping the R.A.F. version as similar as possible to the naval version. We are therefore planning at present to have the Spey in all our Phantoms, together with a starter unit made by Plessey and a fuel-flow meter made by Elliott.
Now I come to the point at which the noble Earl referred to certain remarks which I made in a debate on June 30, just before the agreement was signed. I must tell your Lordships that the cost of the Spey has increased considerably—for research, development and production. In this connection, let me also say that the
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present progress in the development programme, which has not yet passed beyond the bench-testing stage, is most satisfactory. The engine is producing a thrust greater than its design value, and the fuel consumption is well within the specified limits. But the present estimates—and I stress this—considerably exceed the estimates made when the noble Earl was himself in office. They were estimates which were considered by him and his colleagues to contain an adequate allowance for possible cost increase. I am not getting at the noble Earl here; I am merely stating a fact. We know these difficulties.
As a consequence of this, and in the light of the importance which must be paid to the cost of this aircraft, the engine programme is being kept under the most careful review; and I fear I cannot say more on this aspect beyond referring to the point the noble Earl made in relation to remarks I myself made in the earlier debate. There I did say that there were difficulties, but that they were not such as seriously to affect its viability. I was referring there to the aircraft as a whole: I was not referring, as he implied, specifically to the engine. I was being very careful about it at that particular moment, and was indicating that the future of the programme was not affected significantly by the increase in cost. But we have got to watch these costs, and it is for this reason that the engine programme is being kept under very careful review. As I said during the debate on the Motion moved by the noble Lord, Lord Thurlow, in accepting British equipment in our own American-built aircraft we must be careful not to get the worst of both worlds. I shall come on to other aspects of the Spey later.
A second reason for having British-designed equipment installed in our aircraft is that its performance is superior to, or as good as, that of the American equipment installed—I am talking about equipment generally—and that, while the latter (that is, the American equipment) may be adequate for our minimum needs, we are prepared to pay a premium in order to obtain the superior performance in the use of British equipment. This is a matter which calls for fine judgment. We have all the time to consider delivery schedules, for our Phantom construction

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programme is integrated with the programmes for the United States Services, and we have to be certain that all the necessary development and production can be done in time to catch the first production aircraft. Failure to do this would cause a hiatus on the aircraft production line, and thus inevitably cause us heavy additional costs. With these considerations in mind, present plans provide for the installation in the R.A.F. Phantoms of the navigation and attack system being developed by Ferranti, radio sets made by Plessey and Ultra and other electronic equipment made by Cossor. Some of these equipments may also go into the Royal Navy Phantoms.
The noble Earl has referred to other items of equipment. Again, I will try to pick these up. I believe he asked about the United Kingdom weapons, and said he meant to ask about the simulator and reccepods. I cannot remember whether he actually asked these questions.
EARL JELLICOE: My Lords, I can reassure the noble Lord. I did.
LORD SHACKLETON: I may say that I appreciate the willingness of the two noble Earl to give me information which has enabled me to give them information in exchange. It is our intention that the simulator shall be of British manufacture, again provided that it does not prove to be too expensive. We also intend to design and manufacture our own reconnaissance pod. As regards weapons, it is our intention to try to make provision for the carriage of many British stores. We still confirm the possibility of incorporating the AJ. 168 into the weapon system. We are hopeful that it may be possible to incorporate this.
There is also another category of British-designed equipment that we wish to have in American aircraft that we buy. This consists of items which the Americans have themselves installed in their own aircraft. In the case of the Phantom there is one such item, the Martin-Baker ejection seat, two of which are installed in each aircraft. I think I should like to take the opportunity of saying how very delighted we are that the Americans have made this choice and we are very happy that this company's long association with aircraft
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flown by our pilots as well as those of other countries will be continued. Those of your Lordships who are aware of the history of the Martin-Baker ejection seat will, I am sure, join with me in saying how delighted we are to see that Sir James Martin's great contribution was recognised in the Birthday Honours. There are many pilots who owe their lives to his design. This list does not necessarily exhaust all the British-designed items that will go into Phantoms. There are a number of items which do not have to be built into the aircraft during construction—I mentioned a few—but can be added afterwards. There are other items about which the final decision does not have to be made at the time the aircraft are ordered.
Quite apart from the question of British designed items, there is another field where we hope that there will be significant work for British industry, and that is in the manufacture of equipment, components and materials to American designs. Here there is no question of any expensive development programme, but the product must be identical with the American one so that we can integrate our own spares organisation with that of the United States armed forces and thus reduce our supply costs. Where British firms are invited at our request by the McDonnell Aircraft Corporation to tender for the delivery of items to American design, they will, of course, be in competition with American sub-contractors.
The decision whether or not a British bid shall be accepted will be based primarily on two criteria: will the offered delivery date match the aircraft production programme and does the price compare favourably with the price of the lowest American bid? Obviously, many of the competing American firms will already have produced some of these items for the Phantom. Their capital costs may well have been largely amortised, and their workers' experience will have cheapened considerably their production costs. This would naturally put our own manufacturers at a considerable disadvantage and, in order to overcome this, we have decided that a British bid will be accepted if the total cost—that is, the delivered price to McDonnell's—does not exceed the lowest American bid by more than a reasonable margin. The figure of 20 per cent. which the noble Earl gave is broadly correct, but I must

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emphasise that it is only one of several criteria to be taken into account in reaching a decision on a particular item. This premium is, of course, a special measure in somewhat exceptional circumstances.
We consider this arrangement a reasonable compromise between our desire, on the one hand, to obtain a large share of the aircraft for British industry and, on the other, to avoid having to pay too great a cost for it. The same condition will apply in the case of the C.130 aircraft. The United States Government has agreed also that no United States Customs or other duties will be payable on items of British manufacture imported into the United States for incorporation into our aircraft and that the provisions of the "Buy American" Act will not apply.
My Lords, the same general principles will also apply to British-designed items of equipment where the operational requirement is not paramount. In this case, however, I should make it plain that the premium must cover not only the delivered price of the item but also the appropriate research, development and production costs of installing and proving it in the aircraft. The competition for the supply of "Chinese copies" is now in progress, and up to the present time some 77 British firms, including our main aircraft constructors, have been, or are, in the process of being invited by McDonnell's to submit quotations for a great number of items for the Phantom. But until the closing dates for these competitions have passed and we can see the quotations which have been made, we shall not know the final results and be in a position to give a fuller answer to the noble Earl's question.
There were a number of other items which I should like to pick up: I wish to try to answer all the points raised by the noble Earl. He referred to wheels, brakes and tyres—and I agree that these are important. The design of the wheels, brakes and tyres for our Phantoms, which will be the same as used by the United States Navy, was put out to open competition and British firms were invited to tender. A technical assessment of these tenders proved an American design to be the best, and this has therefore been selected. However, we hope that it will be possible for this design to be manufactured under licence in this
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country. The noble Earl referred to the size of the Phantom order. Certainly there has been speculation in the Press on this subject. I am afraid that I am not in a position to give the final numbers. Obviously, any significant rise in cost is bound, depending on its amount, to affect consideration of the numbers of aircraft that we can afford. But in the first instance the number of Phantoms to be ordered will be determined by the outcome of the Defence review. In the meantime, we are conforming to American practice in ordering these aircraft by batches, rather than by one single large order. At the moment I do not think I can go beyond this. I stress that, in arriving at numbers, the decision and proposals will be related to the Defence review and the numbers that we think we shall need. Clearly at some point, if the cost became too excessive, it might affect the numbers we should buy. Plans for the in-service date I should mention still remain pretty well the same. We hope to introduce the Spey-engined Phantom into squadron service with the Royal Navy and the Royal Air Force during 1968–69.
My Lords, let me refer briefly to the possibility of the American use of the Spey in their Phantoms. Although we have not lost all hope of persuading the Americans to adopt the Spey in some of their Phantoms, I must admit that prospects are not too bright. It is not here a simple question of a quid pro quo, but an assessment by the Americans of their need in terms of cost effectiveness for the advantage that the Spey would undoubtedly confer, and this is particularly an aspect of the cost sensitivity study. There were some references also by both noble Earls to the service and maintenance side.
EARL JELLICOE: My Lords, is the noble Lord now leaving the question of engines?
LORD SHACKLETON: Yes.
EARL JELLICOE: He said that he would come back to it, but I should like to ask him a couple of questions. I am disappointed about what the noble Lord has to say about the expectation of America buying the British engine. I assume from what he has said that the Government will continue to bring

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pressure on the Americans in this respect.
But the point I wish to pick him up on is this. He said that the Spey programme was being kept under review by the Government because of cost increases. I do not wish to quarrel with this being kept under review, or with the contractual disciplines to which the noble Lord referred, but could he tell us whether the increase is mainly on the "R and D" side or on estimates for actual production costs of the engines? Secondly, can he tell us whether the order for the first production batch of these engines has been placed? Finally, when he referred to ordering by batches, it seemed to me that there is a danger that if we order by batches we are likely to increase the ultimate costs. Can the noble Lord say how that danger is being circumvented?
LORD SHACKLETON: My Lords, the noble Earl has asked me a lot of questions and I will try to answer them. The cost of the Spey has increased both in relation to research and development and in relation to unit costs. It is a very fine engine and we hope that it will be possible to sell it in other countries. We think that it is going to give a fine performance. The fact is that the cost has increased considerably, but I should prefer not to make more of that. Perhaps I should tell the noble Earl that if he based his estimated costs of the Spey engine on his memory, his memory was faulty, because he quoted a rather excessive figure on that occasion.
EARL JELLICOE: For two.
LORD SHACKLETON: Perhaps we shall leave the price factor at the moment, but I should be glad to go into this matter in more detail with him. I forget the noble Earl's other questions.
EARL JELLICOE: My Lords, they were two, and I apologise for being rather lengthy. The noble Lord said that the costs of the Spey engine were being kept under review, and I asked whether he could confirm that the order for the first production batch had been placed. It is my understanding that it ought to have been placed some little time ago, if dates were to be kept. The second question was: could he explain how he can reconcile ordering by batches with keeping costs down?
LORD SHACKLETON: My Lords, let me deal with the last question first. It is the American experience that ordering in batches is a good way of doing it. Obviously, this is a matter to which consideration has to be given, but I think it is fair to say that the manufacturers have some idea of the ultimate order given. Of course, there is always some element of risk. There is always the possibility that aircraft projects may be cancelled, as has happened in the past, either by the previous Government or by this one. The American system which we are following we find to be a satisfactory one. The basic order for the Phantom has only just been placed and, to the best of my knowledge, the order for the first batch of Speys has not been placed. On this I will let the noble Earl and, if he wishes, the House know.
On the question of service and maintenance, Hawker-Siddeley Aircraft have received a contract to learn all about Phantom in order that they may perform such post-design work as may be necessary in the course of time and also repair and maintenance work which is beyond the facilities of the Service. Ferranti will work in connection with Hawker-Siddeley on the electronic side and the weapon system in the aircraft. I think the noble Earl was concerned that a high proportion of HawkerSiddeley servicing staff would have to be American. Frankly, I do not know where he got this information from. The fact of the 'matter is that HawkerSiddeley's people are already in America for the purpose of getting all the knowledge and experience which will enable them to do all the future maintenance and servicing over here. I have inquired into this, so far as I can in the time, and that is my information.
The noble Earl also referred to security clearance, and this ties in with the question of co-operation by McDonnells. There is this question of delays in security clearance of United Kingdom personnel wishing to discuss classified matters with U.S. manufacturers. Your Lordships will appreciate that many aspects of the Phantom are naturally classified by the U.S. Government, and in order for U.K. personnel to obtain security clearance United States Government security procedures must be observed. But in order to facilitate the participation of British

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firms in the Phantom programme, the time taken to obtain clearance has been reduced, on average, to approximately one-third of the normal time. This could be informative, or it could not be, but I can assure the noble Earl that I have heard no complaints on this, and it is one of the matters to which attention was paid. That is why we were most gratified that there was this improvement in clearance.
I can now confirm the answer that I gave to the noble Earl on the Phantom. Although full engine contracts have not been placed, we have placed sufficient contract authority to enable the manufacturing programme to be maintained. In other words, we are well up with the game on the Spey.
I should like to take this opportunity of acknowledging the very ready cooperation in this matter—and, indeed, in the matter of installing other British equipment—that has been extended by the United States Government and the McDonnell Aircraft Corporation. We have on all occasions found the utmost willingness to meet us in our desire to obtain a large share for British industry. Having myself spoken to officers who have recently been over there, I know that they have been immensely impressed by the co-operation and willingness, indeed the keenness, of McDonnells to get British equipment into their aircraft. The challenge is now for British industry, and it is up to British industry to meet it.
THE EARL OF KINNOULL: My Lords, before the noble Lord sits down, can be answer a point that I made regarding the cost of repairs? I asked whether the American-supplied spares are on a fixed-cost basis or not.
LORD SHACKLETON: American-supplied spares will be related to the American Armed Forces' own system of support. There are two kinds (I do not want to go into too much detail), one called the Augmented Support System, run mainly by the manufacturers, and also the Co-operative Logistics Supply System. Under our agreement, we are entitled to participate in the Co-operative Logistics Supply System at the same prices as are paid by the American services.
EARL JELLICOE: My Lords, before the noble Lord finally sits down, I should like to thank him for the full information he has given to your Lordships on this matter. I think it has more than justified my noble friend's Question. I only wish that he had been able to scotch just a little further some of the rumours we have heard. However, he has done a great deal to reassure us on at least some of the points.
THE EARL OF KINNOULL: My Lords, perhaps I may associate myself with those remarks, and thank the noble Lord for his interesting reply.