JUDICIAL BUSINESS (APPELLATE COMMITTEES)

HL Deb 10 November 1965 vol 270 cc30-112

THE LORD CHANCELLOR

My Lords, I beg to move the second Motion standing in my name on the Order Paper.

Moved, That this House, in discharge of its constitutional duty to act as the ultimate tribunal in appeals from England, Scotland and Northern Ireland, orders that two Committees, each of which shall include all Lords qualified under Section 5 of the Appellate Jurisdiction Act 1876, as amended by any subsequent enactment, be appointed to hear, during the present Session, such appeals as may be referred to them in order to secure the due expedition of public and judicial business; and that the Committees have leave to report to the House from time to time—(The Lord Chancellor.)

On Question, Motion agreed to, and ordered accordingly.

ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH

2.43 p.m.

Debate resumed (according to Order) on the Motion moved yesterday by Lord Francis-Williams—namely, That an humble Address be presented to Her Majesty as follows:—

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

LORD CARRINGTON

My Lords, as your Lordships know, we have by agreement divided the debate on the Address into three parts. To-day we deal with Economic Affairs, to-morrow with Foreign Affairs and Defence, and on Tuesday with Home Affairs. I must say that I am somewhat surprised to see, having regard to the very few senior members of the Government in this House, that the noble Lord, Lord Shackleton, who is the Minister of Defence for the Royal Air Force and the only Minister in this House who is in a Defence Department, is to answer a debate on Economic Affairs, while the noble Lord, Lord Shepherd, who speaks on Economic Affairs, is to answer a debate on Defence. All of us have a great admiration for the versatility and industry of noble Lords opposite, but I am bound to say that I think it would be very much more sensible if they were allowed to speak for the Department about which they know something: and, from your Lordships' point of view, it would be a great deal more profitable, since, however hardworking Ministers may be, it is quite impossible to speak for a Department for which they are not responsible, other than by sticking fairly closely to what, if we are honest, we all know is usually a fairly uninspired brief.

I am also bound to say that I was surprised that on this economic day the noble Lord, Lord Brown, the Minister responsible for exports, has not been chosen to speak. After all, he has just been appointed as Minister and what he said would have been of great interest to your Lordships. Indeed, it would have been agreeable to compliment the noble Lord in person on his appointment as Minister responsible for exports. But not only is he remaining silent; he is not even here. Perhaps he has been exported. This might he a good moment to remind the Prime Minister and noble Lords opposite that the appointment of Ministers and the setting up of new Departments may be quite a good publicity gimmick, but it does not of itself solve anything, as no doubt Mr. Cousins would tell us if he were able.

This is an occasion on which we can not only review the proposals which the Government have made in the economic sphere, but also assess the success which they have achieved in the past year. All of us can remember the speeches made by prominent members of the Government about what was wrong with the country and what they would do about it if they got elected. It is hardly necessary for me to quote any of the things they said, and perhaps a couple of quotes will do to remind us: Labour will keep prices down", said Mr. Healey in his Election address. The new Labour Government will provide help for the housewife by lowering the rates and steadying prices", said Mr. Jack Diamond. We were told by a number of Ministers that Stop—Go would be replaced by a steady rate of growth and economic expansion. We were told that we were to have a Britain thoroughly modernised and go-ahead—I think "dynamic" was the word then in fashion. We were told that the days of stagnation were past and that the thirteen wasted years would be replaced by a new virility, a new surge forward in our national prosperity. Well, my Lords, we have had a year of Socialism. How much of all this has come true? Are we on the road to the promised land? I do not know about being on the road, but we are still being promised quite a bit.

What has happened? We have had probably the most serious sterling crisis since the devaluation of the pound which took place under the last Labour Government. I hope we shall not hear from noble Lords opposite that the sterling crisis was caused by the balance-of-payments difficulties they inherited. I think Mr. Heath exploded that myth in the speech he made at Brighton at the Conservative Party Conference. If noble Lords opposite have not read it, I recommend it as good bedside reading. I will provide them with a copy free of charge, if they wish. The sterling crisis was caused entirely by the actions of the Government. It was their fault and their fault alone. We have, as a result of the further standby from a number of friendly countries, a respite. Confidence has slowly been returning. This is greatly to be welcomed by everyone, because the strength of the pound is a matter which far transcends the bounds of Party politics. It is vital to all of us. If the pound suffers then all of us—every man, woman and child in this country—suffer. We have this respite to put our house in order, but we have not solved the economic situation. We have got a breathing space, but nothing more, if in that breathing space we do not show to our friends throughout the world that we are capable of putting our house in order, then the confidence which has slowly been coming back will evaporate as quickly as it did last summer. The chief result, as I see it, of the first year of the Labour Government has been a first-rate sterling crisis.

What then of the other promises? Industrial production has been stagnant since the beginning of 1965—there has been no rise there. Indeed, last month industrial production was less than it was in January. The tax burden has increased by £623 million—not much relief for the poor elector there. We have run up international debts amounting to £1,100 million. At some time these debts must be repaid, and they are a vast added burden on the resources of this country. As to prices, they have been rising faster than they rose for years; and, as for keeping prices steady, Britain has changed from having one of the best records in Europe to having one of the worst. Educational and building programmes have been cut back; we are even told, if I read the gracious Speech aright, that we are going back to building licences; motoring taxation has been put up, and the road programme has been slowed down. Home ownership has been made more difficult and more expensive; there are higher mortgage charges and higher rates. Yet the two most senior Ministers in the Government appear to think that this is a good record. In the Daily Mirror of Monday, October 18, the Prime Minister is reported as saying: At last Britain is standing on her own feet: the economy is strong, sterling is strong. How Britain might be standing on her own feet "at last", when in the first year of his Government he has increased our international indebtedness by £1,100 million, is difficult to understand; and how he imagines the economy can be strong when he still finds it necessary to have a high bank rate and to take all the measures which I outlined a moment or two ago to restrict expansion and expenditure, I, for one, find even more extraordinary. He was only following in the footsteps of Mr. George Brown at Blackpool, on September 26, who said that the first year of Labour Government had been a great year for Britain. And yet the Government speakers still go round in their speeches talking about "thirteen wasted years" of Tory government when, as anybody who lived in this country in those thirteen years knows, the standard of life, the prosperity of the people of this country, the homes and the schools that were built, the motor cars that were bought, the television sets and the washing machines, and all the rest of it, all increased at a rate absolutely unprecedented in the history of this country. Our standard of living rose in those thirteen years more than it had done in the entire 50 years before.

It is therefore with critical interest, in the light of all this, that we scrutinise the gracious Speech to discover what Her Majesty's Government propose to do to put right the state of affairs that we find ourselves in; and I am bound to say that I do not find anything very reassuring in the proposals that they make. No doubt—and it is perfectly fair—the Leader of the House will say that they are relying very largely on the National Plan. We are to have, in the not too distant future, a debate on the Plan, and I do not want to anticipate anything that may be said on that occasion. It is a very comprehensive document, and statistically a very valuable one, though some of us have our doubts as to whether the questions that were asked were what one calls num questions or nonne questions. It makes a great deal of difference. It also makes a great deal of difference that those questions were asked, and the conclusions reached before the Chancellor of the Exchequer in July introduced his third and last Budget for the year. But I think there is a lot of very interesting material in the National Plan which can be of great use, so long as we realise that the Plan is an analysis of the problems that face us and not a cure for them.

A great many people think they know what is wrong with our economy, but to know what is wrong is not necessarily to put it right. I read with great interest the action which was required to put right our balance-of-payments problem and which is to be found on page 17 of the National Plan. The proposals are unexceptionable, though in most cases they are not very original, and there is not much indication in the Plan of how they are to be put into effect. For example, defence expenditure overseas will, it is said, be reduced. We have been waiting now for one year for the Government to produce their Defence Review. When, may I ask (and here the noble Lord, Lord Shackleton, will come in very useful) are we likely to get the results of this Defence Review?

It is all very well to say that defence expenditure overseas will be reduced; but where, and how, and when? So far, we have heard nothing but piecemeal decisions; and not only piecemeal decisions, but lack of decisions, all of which is handicapping the Forces in planning ahead and carrying out their present responsibilities. Does the noble Lord, for example, think it a good thing that there should be continual speculation in the newspapers as to the future of the Fleet Air Arm? Does he think that that is good for recruiting? Does he think that the lack of replacement for the ageing aircraft of the R.A.F., and the lack of decision as to what shall replace them, is good for that Service? I very much hope that this evening we shall hear when the Government intend to produce the findings from their Defence Review.

We read in the list of actions required on page 17 that private investment abroad will be limited; and that, of course, has been done. No distinction has been drawn between portfolio investment and the investment of great overseas trading companies, who have been gravely hit by the financial legislation introduced earlier this year and have been put at a great disadvantage compared with their competitors in other countries. I should not have thought that that could be considered to be in the national interest. And so we read on, my Lords. Studies will be made, we are told; plans will be made; committees will be formed; examinations will take place. All this is very vague, perhaps necessarily so, and I hope that this evening we shall hear from the Leader of the House some of the concrete proposals that the Government have to make; because there is not very much to get one's teeth into in the gracious Speech.

There are one or two paragraphs, of a very general kind, about the balance of payments and industry with which all of us would agree, and there is a proposal to introduce a Bill to strengthen the prices and incomes policy. This may well be of great importance, and we shall study its terms with great care. The Government, we are told, are going to do something about the docks. That is greatly to be welcomed, though here again we must wait to see exactly what their proposals are. Apart from this, it seems to me that there are some serious omissions. There is, regrettably, no mention of restrictive practices in management or labour, or of any action on unofficial or wildcat strikes. I should have thought, to put this at its lowest, that these matters merited some attention from the Government. We on this side feel they need to be tackled; and I shall have a little more to say on that in a moment.

We must be grateful at least for one omission; that there is nothing in the gracious Speech about steel. Most of us, and I suspect most of the Party opposite, know it to be absolutely irrelevant to the economic situation; yet I wish I felt that the Government had given up the idea altogether. After what the Prime Minister said yesterday I feel I cannot. I do not think they dare. They are too frightened of their Left Wing for that to happen. We have seen evidence of that in the newspapers this morning. In the meantime, the steel industry is left with its head in the air, which I suppose is better than having its head on the block. We all know the real reason why there is no mention of steel; it is because the Government must keep their eyes on the Liberal Party. We shall no doubt see in this next Session, on other issues as well as steel, that it is really the Liberal Party who are propping up the Government. "Vote Liberal and keep Labour in" should be an attractive slogan for Liberal Party supporters at the next Election.

There is, however, a mention in the gracious Speech of the Land Bill. There may very well be a case for a tax on the development value of land; and, indeed, the Conservative Party has suggested this. But no one can pretend that the scheme outlined in the White Paper is going to add one acre more land to that available for development; that it is going to make the land cheaper or help our economy in any way whatever. The only thing we can be quite certain about is that there will be a large number of additional bureaucrats and forms for the ordinary citizen to deal with—not a very inspiring or encouraging set of proposals for a country faced with grave economic difficulty.

On the last occasion when we had a debate on economic affairs, I ventured to suggest that one of the difficulties which the Government—indeed, any Government—have to face is that over the past twenty years we have had a series of economic crises. On each occasion we have been told by the Government of the day that the crisis was really serious, that it was a matter of our economic life and death, and that unless there was a radical change in the productive capacity of this country and in the amount that it exported there would be a very serious situation indeed. Broadly speaking, however, the crises have been surmounted without any marked sign that many people in this country have responded to the call for an extra effort. The warnings about economic life and death have died away until the next time, and life has continued on its normal course. The economic crises have never seemed to hurt anybody very much: wages have still gone up, the standard of living has still risen and, although one or two people have been hurt, perhaps severely, but temporarily, by credit squeezes, generally speaking, except for the headlines in the newspapers, the crisis has gone unnoticed by the vast majority of the people in this country. I do not think that anybody really believes in it any more.

I do not know whether your Lordships agreed with what I said on that occasion, but there has been quite an interesting sequel during this particular economic crisis. The state of the pound, which I mentioned earlier, caused grave anxiety during the spring and summer, and in the minds of the Press and broadcasters the strength of the pound seems to have become synonymous with the economic strength of this country. Of course it is of vital importance. Indeed, it is perhaps the most important factor in the many factors which form part of our national economic situation; but it is not the only factor. It is perfectly true that if the pound becomes weaker and weaker and our reserves dwindle there comes a time when the country is bankrupt and we have to devalue or take other drastic steps; but the reverse of that situation does not necessarily mean that the economic state of the country is sound.

A rise in our gold reserves over two or three months, although very welcome and a good sign of confidence in sterling, does not mean that all our economic problems are solved. A loss of confidence, a foolish speech, a Party political act by the Government can once again cause a loss of confidence, and the gain of two or three months may be lost almost overnight. Your Lordships will remember the headlines in the newspapers when the last gold figures were announced—"Bubbly Britain", "Bonanza in Gold". One might almost say, "Euphoria in Fleet Street". Is it not natural that most people who read these headlines think that our troubles are over, that the terrible and terrific problems which faced us earlier this year, when everywhere there was gloomy talk of bankruptcy, are a thing of the past and that we can all sit back and expect the National Plan to take us all to higher and higher standards of living without much effort on anybody's part?

I do not for one moment want to suggest that the Chancellor of the Exchequer has encouraged this, because indeed he has not. He has done the reverse: he has said exactly the opposite. But the fact remains that quite a number of the members of Her Majesty's Government have allowed this state of affairs to continue without contradiction and have made speeches, such as I have quoted from the Prime Minister, which have led to the sort of conclusions which I have drawn. Ministers have not pointed out the truth, which is that the reason gold reserves have recently been rising is that a number of foreign countries have given us another standby and we have been allowed to live on credit for a little longer.

We have done little yet to put our own house in order. As The Times said on Thursday last, we are still highly protected. We have an import surcharge of 10 per cent., we have one of the highest protective tariffs, and this year we have suffered from one of the sharpest rises in prices since the end of the war. These are the hard facts of our situation, and I think it is the duty of both the Government and the Opposition, as well as of every thinking man in this country, to stress over and over again that we must put our house in order if we are to influence our friends and allies in the Western world, to have the respect of our opponents, and to continue to raise our standard of living at home.

My Lords, I hope that noble Lords opposite will have read the Conservative Party pamphlet called Putting Britain Right Ahead, a statement of Conservative aims. In it you will find some of the broad proposals which we make to put our economy on its feet. There is a sharp difference between our approach and that of the Government. We want to see encouragement and incentives. We believe that those who are working hard in the interests of the country and are proving successful should be allowed to reap the benefit of their success. We want, as this document says, to see less of the tax burden falling on earnings and on success. We want to encourage savings. We want there to be more opportunity for people to have a stake in the country and to have a bit of capital; and to do that we must change the tax system.

We believe, as Mr. Heath has said, that if you want rapid industrial renovation and high efficiency you must have the incentives to obtain it. We must create a climate in which people are enabled to give of their best, and remove those difficulties to efficiency which all of us know abound in this country. When we are returned to power we shall tackle the problem of industrial relations; and, as the pamphlet says, we would ask the Royal Commission to let us have their views on a number of matters so that we could get on with legislation. And we have made some suggestions about what that legislation should be—not aimed against anybody, but aimed at a fairer deal for everybody, especially the consumer and the ordinary man in the street. Above all, we must ensure that there is confidence in Britain, and that our friends see us as a country with a great future, full of energy, technical skill and achievement.

My Lords, to put it in a nutshell, having convinced the people of this country that we are in a difficult economic situation we must create a climate in which they can increase production, and, at the same time, we must make it possible for those who do increase production to be suitably and properly rewarded. I believe a Conservative Government can do this. Nothing that we have seen from the Labour Government in the last year, or in the proposals that they set before us in the gracious Speech yesterday, leads me to think that they have, that they can, or that they will.

3.7 p.m.

LORD BYERS

My Lords, I must confess at the outset that I do not find myself in very much agreement with the speech to which the House has just listened. It is all very well for the noble Lord to come here and proclaim that, when a Conservative Government get back to power, they will do all these things for which so many of us waited for thirteen years. I would take a different attitude. I think the Government are to be congratulated on surviving a whole year of office. In this, I think they have surprised their opponents as much as themselves. Their determination to survive for a further period is, I think, evidenced by many of the very sensible proposals contained in the gracious Speech.

Nobody will deny that the Prime Minister is a skilful operator. He has put forward a legislative programme the bulk of which, in principle, commands the support of my colleagues and myself in both Houses of Parliament—a very sensible approach to politics. I do not think this is surprising, because the better measures have been lifted almost bodily from various Liberal policy documents which we have been putting out for the last forty years or more. I refer to leasehold enfranchisement, action to deal with rates and betterment values, although I am sorry to see that there is no reference to site-value rating, which I believe is still a very good answer to this problem.

It is no new experience for the Liberal Party to have its clothes borrowed. On this occasion, however, there is a welcome departure from past practice. The Conservatives, if I may say so, have earned a well-deserved reputation for stealing Liberal ideas for inclusion in their General Election manifestos for the express purpose of obtaining votes, and then ditching them during their period of power. The Conservative Party never breaks its Election pledges: it just ignores them.

I must say that I was very interested in the fictional anecdotes with which the noble Lord, Lord Carrington, provided us, about how things were under the Conservatives. I thought that perhaps I might be challenged about this business of the Conservative Election pledges, because they are making a great deal of play at the moment about Election pledges. I would refer to only three of them. In their Manifesto of 1959, this phrase occurs: Tories keep the cost of living stable. We went into this question for the purposes of the 1964 Election, and we found that a pound which would have bought goods worth 20s. in 1951 was then, in 1964, worth less than 14s.

Then we had the statement in 1957 from Mr. Macmillan about taxation: "We believe in lower taxes". Of course, everybody does! But in 1964 it was discovered that a single man earning between £700 and £1,200, and a married man with three children earning between £1,200 and £1,900, paid more direct taxes, as a percentage of income, in 1961–62 than the equivalent income in 1949–50. Then in 1963 we had a remarkable claim in a Conservative advertisement about motorways. "We will build", they said, "one thousand miles by 1970". Well, my Lords, by 1962 I think we knew that just over 23 miles of motorways had been completed; and construction was going on at about the same rate when the Conservatives went out of office.

So I think that we ought to stop this business of Election pledges and promises, and get on to the things that really matter in the present and in the future. I am glad that we have in the present Government an Administration that has the courage to take up ideas which have been pioneered, many of them, by the Liberal Party, and by others, too, and in a practical way to include them in the gracious Speech and to show that they mean business. I think that is a notable step forward along the radical road, because it concentrates on intelligent, forward planning and social justice at the expense of outmoded Socialism, which I believe has for far too long been an obstacle to the sort of progress we have never been able to achieve under Conservative Administrations.

I welcome the spirit as well as the content of the gracious Speech. There are, of course, a few blemishes. There is this rather sinister illiberal pronouncement about the Government's intention to strengthen the control of Commonwealth immigration. I should like an explanation of what is meant by that. There is a further blemish, one that we shall be forced to challenge, in the proposal to set up a Land Commission; because I believe that the creation of the Commission itself (which is obviously a sop to the old-fashioned land nationalisers) can only increase the price of land and make it scarce. But we welcome the intention to deal with betterment values, which is a great step forward. In general, I think the proposals are a welcome advance on the sort of measures we have had in the past.

The proposal to deal at long last with the plight of public service pensioners and their dependants is an admirable one. We have campaigned for this for a long time, but have been put off by various Conservative Administrations who have told us it could not yet be done. I would say to the Government that I wish that, for once, they would deal with this matter in a really comprehensive way. Can we make sure we are not going to be niggling and mean, that we are not going to have some measure which will try to draw fine lines of distinction between one class or group and another, resulting in anomaly after anomaly, as we have had so often in past legislation? I should like to see a Bill on this subject started in your Lordships' House, so that we can give it proper attention. There has been a great deal of pent-up and silent suffering in the field of public service pensions. I should like to see a humane and generous attitude adopted in this Parliament to this problem.

My Lords, the next point in the gracious Speech to which I should like to refer is transport. I have a suspicion that the Government have still not got the importance of transport in its proper perspective. It is relegated to the end of the speech. It is given about three lines; it is almost an aside, yet we know that in the case of the roads, according to the recent report by Professor Morgan, congestion is costing us something like £1,000 million a year. This is a lot of money, whichever way one looks at it. It must be a tremendous impediment to exporting and to reducing the prices of our goods. I believe that it is completely short-sighted to think in terms of postponing the road programme, or cutting down. We should be getting on with the job. We could approach it, if you like, on a self-financing basis, about which I have spoken so often in this House; but I believe that to give the roads programme the right priority would make a tremendous difference to the solution of our balance-of-payments problem.

I should like next to refer to the question of reform of company law. I think it is a very welcome step; but I hope that it will not be confined to the publishing of political contributions. Of course we should have the full publication of political contributions: it is long overdue. I believe that the shareholders should know, as a matter of principle, about what contributions are made by the companies. I would say to the companies, because as the Chairman of the Party I propose to approach a number of them: "Why have you worried about this? Why not publish?" If you are afraid of publishing, then you had no right to contribute in the past to this sort of thing. The only reason for contributing to political Parties is because you believe it to be in the interests of your shareholders that the money should be spent in that way. If you believe that, then there is nothing whatever to stop you from publishing the facts and saying to your shareholders that you believe it to be in the interests of the company to do so; and that if they do not like it they can vote you out of office or vote against it." I object to this hole-and-corner business, to these fronts like United Industrialists and to operations where there is an indirect contribution to political campaigning. I would say, as the noble Lord, Lord Francis-Williams, said yesterday in his able speech, "Publish and be damned!" I do not see why people should not know exactly where the shareholders' money is going.

But I also believe that there are other things that ought to be looked at in the field of the reform of company law. There are many useful suggestions in the Report of the Jenkins Committee I should like to see the rights of employees dealt with in the Articles of Association, so that they and the shareholders know what their rights are—particularly in the case of large companies. I should like to see the end of nominee share-holding which conceals the true control of the business. This should be abolished in modern society. I hope that the Government will look at that matter.

I was not proposing to deal with steel nationalisation until the noble Lord, Lord Carrington, made the rather cheap jibe about the Liberal Party, a jibe which was out of keeping with his engaging and charming manner. I often wonder how he manages to sit on that Front Bench, surrounded by so much Right-wing reaction. He and his noble friend are a couple of the most unlikely conspirators I have ever seen. But, really, this idea of "Vote Liberal and keep Labour in" is preposterous. Does the noble Lord really want a General Election now? Can we have this on record: that the Conservatives really want a General Election now, despite all the evidence in the country, despite the fact that this is not in the national interest?

VISCOUNT DILHORNE

Do you want one?

LORD BYERS

I want to get a number of measures, for which the Liberal Party have worked and slaved, on to the Statute Book. I do not want, and I do not think the noble Lord wants, to see a Labour Government with a large Left-wing majority returned, which is what would be likely if a General Election were held at the present time. We must be adult about politics in this country. There is another factor. If you do not vote Liberal there is the risk in certain circumstances—not at the present moment—of letting the Tories in. We have had thirteen years of that lot. I believe that we have to get on with the legislation, so much of it so good, and not talk about a General Election (after which I hope we shall see the Conservatives much lower down the list in many constituencies) because this country has to be a radical country.

LORD CARRINGTON

My Lords, will the noble Lord confirm that the Liberal Party do want to see the Labour Government remain in office?

LORD BYERS

I am merely saying that it is very important at the present moment to know that we are getting some of this legislation through. Politics is about power. As a Party, we have had more influence on the Government of the day in the last year than we had for many years previously. I wish to see this power used. We can, I think, take credit for having killed the nationalisation of iron and steel. We certainly can take credit for moderating the extreme Socialism of the Labour Party in another place, and I should like to enjoy this situation, if only for a few weeks.

Leaving aside these Albert Hall meeting tactics, I would return to the gracious Speech, and I want to say to the Government that the function of Parliament is not merely to legislate. I hope that we shall be given many opportunities during the coming Session to have proper discussions in both Houses on improving administration and the efficiency of the national economy, because I believe that the climate of national opinion is gradually changing in favour of a planned economic growth, and it is beginning to be interested in removing the obstacles to efficiency. So far this is only a glint in the eye, but it is well worth fostering. Both management and workers are beginning to realise that resistance to change has got us nowhere. People are now realising that, thanks largely to the National Plan, far from our having unemployment, we shall, by 1970, have a manpower deficit. This is the climate of opinion in which we can get people to take a fresh look at such things as restrictive practices and inefficiency. I do not think we can expect a dramatic breakthrough, but I believe that there is a good deal which may be done usefully by seizing this opportunity.

I am not one to denigrate the National Plan. It is a very good picture of things as they are and as they might be if we could generate the enthusiasm. I still think that some of the targets are too low. I believe there is a good deal to be done in this field in explaining to people, in management and on the factory floor, exactly what we can achieve if we get down to it. I have heard one or two quite interesting remarks recently and I should like, in two minutes, to tell the House about some of them. I think it is now generally agreed that men and management will help to improve productivity when they know precisely what it means in their own department. In the last month one of our better organised industries has introduced a "Black Book". Anybody can write in it suggestions for improving efficiency and to show up bottlenecks and, what is more, say where restrictive practices are holding up production. It has had a very good reception. People have become interested, and this is the kind of interest we want.

Another industrialist said to me the other day that a great deal is talked about restrictive practices, but we should not jump to the conclusion that a practice is restrictive until we have tried to get unions to remove it voluntarily. Quite often attitudes are adopted which may be overcome by discussing the question, not necessarily formally but informally, and saying, "Don't you think it better to do it this way?" This is another contribution which we can make. There are other points which may be dealt with during the debate on the National Plan, but at the moment, the climate of opinion is right for a great deal of educational work to be done.

I find myself puzzled about what is the correct method of measuring such things as increases in incomes and earnings, productivity and the general inflationary pressure. The reason why I say this is that on October 31 the Chancellor of the Exchequer made a statement, which was widely quoted, that earnings had risen faster than productivity. He said that over the first eight months earnings had gone up by some 8 per cent. and, if that continued, inevitably it would mean increasing prices. Of course, he was quite right. In answer to my right honourable friend in another place on November 4, the First Secretary of State, when asked to give the average hourly earnings in the first six months of this year compared with the same period last year, said that there had been an increase of 4.8 per cent. compared with 4.9 per cent. the previous year. Then, in other documents and in other places, there have been references to such matters as the increase in the size of wage settlements. Could we not have some standard formula that we could all use, recognised in the Treasury and in the Department of Economic Affairs, which would show us what sort of inflationary pressures are building up because of the increase in wages and prices? It might not be easy to achieve, but it would make matters easier and then we should all be speaking the same language.

My Lords, generally and in principle I welcome this gracious Speech. We shall examine the Bills and measures as they come up. We are completely free to vote against the Government in either House if we feel that a principle in which we believe is not being upheld, but I say that it is a pleasure to find an Administration willing to forsake an outworn Socialism for the more rewarding path of social legislation based on intelligent radicalism. I hope that we shall go on in that way and not see a Conservative Government returned in the next few weeks.

3.26 p.m.

THE LORD PRIVY SEAL (THE EARL OF LONGFORD)

My Lords, the noble Lord, Lord Byers, who has quickly established himself as one of the most delightful speakers here, has informed us that he and his colleagues welcome the spirit and the content of the gracious Speech. I am sure that all my colleagues here and elsewhere will welcome the spirit and the content, and, if I may say so, the style and vigour of the speech of the noble Lord. I am sure that we must all agree with the noble Lord regarding the letter which he wrote to the Daily Telegraph a day or two ago in which he deplored the recent remarks of Mr. Iain Macleod, who had announced that one of the most important tasks before the Conservatives was to destroy the Liberal Party. Well, that is treated with the contempt it deserves by the noble Lords opposite, and I am sure that none of my friends would echo such appalling language.

The noble Lord, Lord Carrington, raised a complaint about the composition of our speaking team. He was disappointed to find that the debate would be replied to by the noble Lord, Lord Shackleton, and that to-morrow's debate on Foreign Affairs and Defence would be opened by the noble Lord, Lord Shepherd. I do not quite know what has come over the noble Lord. He must be very short of material, as the event has shown. These noble Lords have spoken for the Government before in these circumstances, during the present Parliament and often in the past, and we have never had any complaint, so I do not know what is worrying the noble Lord. He also asked why the noble Lord, Lord Brown, was not present—

NOBLE LORDS

Where is he?

LORD HENLEY

He came in to hear the Liberal speech.

THE EARL OF LONGFORD

He is, to adopt a phrase of the noble Lord, with us in spirit, and was here shortly in substance to-day. He is learning his job and I do not think that anyone can blame him for not insisting on taking part in an economics debate. He is going to make the Government's main speech in the debate on the National Plan, and unless the noble Lord, Lord Carrington, is called abroad, I hope that he will be able shortly to congratulate the noble Lord, Lord Brown. In the time Lord Brown has been in the House, he has, like the noble Lord, Lord Byers, established himself as someone worth listening to and I am surprised that the noble Lord, Lord Carrington, who is always so generous in his attitude to speakers, particularly to a new speaker, should have adopted the tone he did towards a new Minister. However, even the best of us occasionally feel rather waspish when we are in a certain difficulty, and I realise that the noble Lord, Lord Carrington, was speaking off his own subject to-day. I cannot recall an occasion in the years during which he was a Minister here when he took a leading part in an economics debate. My memory may he at fault, but my noble friends Lord Shackleton and Lord Shepherd were speaking away on economics when the noble Lord was prudent enough to abstain.

LORD CARRINGTON

My Lords, for four years I was First Lord of the Admiralty and, curiously enough, I confined myself largely to talking about the Navy and Defence.

LORD AIREDALE

My Lords, was it not the First Lord of the Admiralty in the last Administration who was Minister in charge of the Shops, Offices and Railway Premises Bill?

THE EARL OF LONGFORD

My Lords, I think it all cancels out. I think that when the noble Lord, Lord Carrington, passed from the personal side of his speech to its substance we were not surprised to find that he had only recently extracted himself from naval affairs and plunged into economics. He is so much admired on this side that anything I say is in danger of antagonising even my own supporters, but I must say that the speech he delivered this afternoon was an extraordinary example of the superficiality of a Central Office brief. I will not labour the point, because he is far too popular for me to wish to cause him pain. One does not want to rub these things in. We have all made bad speeches in our time. I have been in your Lordships' House for twenty years and I have made plenty. But the noble Lord did announce this: that the sterling crisis was caused entirely by the Government.

SEVERAL NOBLE LORDS

Hear, hear!

THE EARL OF LONGFORD

Yes, but nobody in his senses supposes that. I suppose that people can argue about the share of responsibility till the cows come home, but nobody supposes any more that when the deficit reached the record level of £750 million or £800 million the whole of the responsibility lay with the new Government. If anybody seriously argued that he would be more suited to a mental home than to your Lordships' House. I do not think that I have ever heard a statement of such outrageous nonsense come from a statesman so much admired as the noble Lord, Lord Carrington. But I do not want to pursue that topic; I thought that I must just speak plainly.

There are grave issues before us. It is agreed that to-day we must concentrate on economic and financial matters. That does not mean that there are not other matters more prominent in the minds of all of us at the moment—I am referring, of course, to the difficulties overseas. But even within the domestic field, I suppose that one cannot draw a hard and fast line between what could he called economic matters and domestic matters. The noble Lord, Lord Carrington, very likely drew as clear a line as one could, but even he at times crossed it and I may cross it myself.

I suppose that nearly all noble Lords on this side of the House are convinced supporters of the Labour Party, less for reasons of economics than because they believe in a different kind of society than we have seen in this country, a society based on far more social justice and animated by higher social principles. Therefore, one cannot make a first speech in a new Session for the Labour Government without indicating that, in the view of most of us, perhaps all of us, economics are a subordinate part of politics. They are inferior to the social aims which inspire the Labour Party, and, of course, in different ways, all Members of the House.

I am not going to deal with these social questions, but I would point out that, during the last year, we passed a great many measures—82 Bills, 11 more than the average from 1951 to 1964—and that a high proportion of these were concerned with our beginning to realise our social ideals. As soon as we came in we straight away moved towards improving substantially the lot of the old-age pensioners, the unemployed and the widows, and we removed the prescription charges. I mention these points now, though it may be thought that they come more readily into Home Affairs, the subject of our debate on Tuesday, because we were much criticised at the time for what was regarded as extravagance, considering the position in which the country was placed. The Opposition, here and elsewhere, did not exactly oppose these social measures, but they opposed the taxation—and in another place they voted against the taxation—required to pay for some of them. It was our Government that took the bold step—an arguable step, but I am proud we took it—of going ahead in spite of the financial difficulties of the position in which we were left by noble Lords opposite. I do not want to intrude further on Tuesday's debate, except to point out that there is a new list of such measures unfolded before us and I am glad to think that they will have the sympathy of the noble Lord, Lord Byers, and his colleagues and that some of them, at least, will have the sympathy of the Conservatives.

I come now to economics. We all agree that none of these social advances which we all want can be achieved unless the economy is sound and progressive. Let me take the Economic Plan. The attitude of the Liberals, I think, is on the whole cordial towards the Plan. The attitude of the Conservatives is more ambiguous. I am not quite sure where the right honourable gentleman Mr. Heath now stands. Before the Plan was published, he described it as: the biggest publicity gimmick which the Government have so far produced. There has been some argument about whether somebody had conveyed an advance copy to him. But I think that he has run away from that position since. Perhaps in the course of the debate we shall be told.

Mr. Enoch Powell has spoken much more harshly about the Economic Plan. He said: There is only one kind of national economic plan which would be safe for Britain—that would be a plan of which nobody took any notice. Perhaps the noble Earl, Lord Dundee, will tell us whether the views of Mr. Powell are repudiated by the Conservative Party. I am going to ask him only one question, so perhaps it is not too much to ask for an answer to this. Are the views of Mr. Powell on planning in general, and on the National Plan in particular, repudiated, are they representative, or have they just not come to the notice of the Conservative Party? Perhaps before nightfall the noble Earl could tell us where they stand.

Here is the Economic Plan, with its provision for a great many social ad- vances. If we did not realise it before reading the Plan, we realise now that certain defined increases in exports and investments and certain arrangements for imports are necessary if these social benefits are going to be realised and production increased by 25 per cent. between 1965 and 1970.

THE EARL OF DUNDEE

My Lords, I am not going to answer the noble Earl's question now; I will try to do so when I speak.

THE EARL OF LONGFORD

Is there not an answer ready?

THE EARL OF DUNDEE

As I have not spoken yet and as the noble Earl is making a speech, may I ask him whether the views of Mr. Frank Cousins on incomes policy are repudiated by the Government?

THE EARL OF LONGFORD

My Lords, by some extraordinary sort of prevision, I thought that this was the kind of point the noble Earl might wish to raise. No, I think it is a natural association of ideas. I would only say this about Mr. Frank Cousins. He is a man of strong loyalties and it may be that at certain times it is difficult for him to sec where his loyalty lies. I am not speaking for anyone else. I am giving my own opinion and I hope the noble Earl will take it as that. Just as the noble Lord, Lord Carrington, has strong loyalties to the Brigade of Guards, of which he was such a distinguished and gallant member, and if the point of view of the Brigade of Guards came into conflict with the point of view of the Government he would have to search his conscience, so has my right honourable friend strong loyalities. Noble Lords can snigger away to their hearts' content. Speaking purely for myself, I think that in England a man who has loyalties and does not abandon them or cloak them or fake them is more respected than a man who does the opposite. Therefore I think Mr. Cousins to-day is very much respected, while I agree that there are difficulties in a situation of this kind. The noble Earl asked me a question, and I should appreciate his attention. I am giving the noble Earl my opinion on a personal point which I am bound to say I thought it rather foolish to raise: nevertheless, I am giving it, and I say that Mr. Cousins is more respected because it is realised that he has these loyalties and is nevertheless trying to do his duty.

The question arises: what reason is there to think that we shall be able to achieve the target set in the National Plan? Why should we be more successful than our predecessors? We all know that they managed an expansion in production every four years or so and I need not elaborate the point, it is so familiar here and elsewhere—that by some strange coincidence the year that they managed the expansion in production was always an Election year. We hope to do much better than that. But we are asked and noble Lords opposite can ask it—why we expect to do any better? What is there in the record of the last year to imply that we shall be able to sustain this annual growth rate and not just achieve it every Election year?

Here perhaps we may turn to The Times leading article referred to by the noble Lord, Lord Byers (or the noble Lord was making the same point as was made in that leading article), of Monday last. They said: It would have required great faith in Mr. Wilson's Administration at the nadir of its fortunes last January, that it would still be there when the new session came round, and inordinate faith to believe that it would have a better chance of remaining there than at any time during its twelve months of office. That is the view of The Times: that we are more strongly entrenched at the present time than at any moment in the last year. If things had gone so badly as the noble Lord, Lord Carrington, would have us believe, it is strange that we are so popular. Popularity is not the only test of merit, but it is much better than unpopularity, which I am afraid is the position of the noble Lord's Party. In the last year, according to The Times we established ourselves rather more firmly than might have been expected.

The Times, in the same article, refers to: the Government's success in persuading foreign bankers that sterling must be bailed out at all costs and eventually convincing those who deal in the currency that devaluation is off. So, considering what we have been told in this House at different times during the last year, that seems to be quite an achievement: namely, that we have even- tually convinced those who deal in sterling that devaluation is off. I should have thought that the noble Lord, Lord Carrington, who I know is essentially fair-minded, might pay some tribute to that achievement.

The same point is made by another paper, the Economist, which under its present editorship, young and somewhat brash as one must call it, could not remotely be described as favourable to the Government. The Economist says: Although foreign confidence in Britain's Labour Government last November reached an all-time low, it has now recovered to a remarkable high;"— this is in the current number of the Economist— anybody who has talked to foreign central bankers in recent weeks must report that they now regard Mr. Wilson as a most thoroughly respectable chap. That is the view of the Economist, which, as I say, is far from friendly to the Government. And I am sure that these hankers would agree that the same thing goes for Mr. Callaghan.

The noble Lord, Lord Carrington, who was not very nice about the Government as a whole, did speak up for the warning given by Mr. Callaghan. Indeed, when the Chancellor of the Exchequer spoke at the Mansion House the other day, he was able to report that during the last twelve months exports had been rising steadily, public expenditure had been brought under control, the pressure of demand was easing off, and the economic future of the regions had become more secure. The deficit", the Chancellor of the Exchequer said: on our balance of payments is much reduced, and sterling is correspondingly safe". All that, after what we have been through in the last year, deserves what Mr. E. M. Forster called "two cheers", but it did not get many cheers from the noble Lord opposite. It is a remarkable achievement, I should have thought, and historians, I think, will judge it in that light. The Chancellor paid high tribute to the Governor of the Bank of England, which will give much pleasure in this House, where he is so well known, and to others who have helped us.

But, as the noble Lord, Lord Carrington, said, the Chancellor did warn us that there is still a long way to go: and naturally I would repeat that this afternoon. I would much rather be accused of being dismal than complacent, and I do not want to give an impression that the battle is now over. It seems that the public have realised, in a non-technical kind of way, that we in the Labour Government were faced with exceptional difficulties; they have realised that we did not hesitate to take unpopular steps to cope with them, and that under our auspices the country is beginning to get its head above water. I do not make any claim higher than that, but that is a claim that many of us would have hesitated a year ago to suggest that we should be able to make this afternoon.

I will inflict as few figures as possible on the House this afternoon—and I must congratulate previous speakers on avoiding them, so far as possible—but a few cannot be left out. We all know that we had a deficit last year of £750 million—£800 million, if you count the deferment of the interest and capital on the North American loan. We cannot at this moment, in the middle of November, say what it will be this year, but certainly there has been a tremendous change for the better. In the first half of the year the overall deficit was reduced to about £100 million, compared with over £300 million in the first half of 1964. We have every reason to hope that we shall achieve our goal of reaching equilibrium during the second half of 1966. A considerable element in the improvement comes from a change in the balance of private commercial investment here and abroad, and that must be attributed, partly, at least, to some of the measures taken in the Budget, some of which were very much criticised in this House.

But the relationship between visible imports and exports has also been far more satisfactory than it was last year. If you take a comparison between January-September, 1964, and January-September, 1965, you find that exports have increased by 6.2 per cent. and imports by only 0.6 per cent. So, not surprisingly, the visible trade balance is very much better. This result has not arrived by chance. I will not go into all the measures that have been taken to bring this about. They have been fully described, applauded and criticised—or, at any rate, discussed—in this House and elsewhere. But we are entitled, keeping our fingers crossed, and, using the Chancellor of the Exchequer's image, clinging to our winter coats, to congratulate all, not just the Government (perhaps no-one is really attracted by a Government which congratulates itself) but the British people, and particularly those most directly concerned with the export trade in the last year.

In the few minutes more that I intend to keep your Lordships—and it will be only a few minutes—I should like to dwell on the feature of our economy which is causing most anxiety to the Government at the present time. I am not referring to the production figures, which have been somewhat static recently. I think the noble Lord, Lord Carrington, did not make enough allowance for seasonal figures, but the production figures have been static recently. Taking the first eight months of this year compared with last, there has been an average gain of 3½ per cent. in production. But I admit that the improvement was primarily in the last quarter of last year. I would add, without trying to apologise for it or boast of it, that the far-reaching redeployment of resources, which is an integral part of our plan, especially to achieve our aim for exports, does not help the figures of production in the first year: in fact, it may hold them back, and it is only later that this redeployment may have its overall effect on production.

I am not referring to production. I think we need not be too disquieted about that, and most certainly I do not refer to any lack of business confidence. Fixed investment in manufacturing is still running at a high level, and in the first six months of this year was something like 11 per cent. higher in real terms than for the same period in 1964. My right honourable friend the Prime Minister yesterday reiterated the importance we attach to investment. He said: The Government's review of incentives and of the means of creating other selective policy weapons to encourage investment and modernisation has made good progress … we intend to publish a White Paper in the near future …"—[OFFICIAL REPORT, Commons. Vol. 720 (No. 1), col. 37, November 9, 1965.] No doubt we shall want to discuss that when it arrives. But it is surely striking —I think a dispassionate judge would find it interesting—that there has been this surge of business confidence during the first year of Labour rule.

We have often been told in this House, and elsewhere, that the business community would never have confidence in a Labour Government. May I quote one or two specimen sentences from an article in last Saturday's Financial Times: The other major factor which has sustained investment is the maintenance of business confidence, in itself a function of the continued level of demand…. Most investors seem to have come to the conclusion that the only policy to follow is to disregard the taxation changes in the Budget and to carry on as before…. Any break in general confidence might well find prices at their present level vulnerable, but then there are no indications that business is declining. I think it is at any rate interesting that there is so great a measure of business confidence at the present time.

I should be accused, fairly enough, of selective quotation if I left the matter there. The article in the Financial Times is headed: The economy still at high pressure. It points out that labour costs have been rising sharply and that the rise in wage costs has far outstripped any productivity gains. That was referred to by the noble Lord, Lord Byers, and the Chancellor of the Exchequer has given us a serious warning lately.

I must leave this all-important issue of prices, productivity and incomes to the noble Lord, Lord Shackleton, but I must make one remark of my own. In our debate at the end of July I referred to the collective or group selfishness which tends to be equally common in every section of the community. I suggested then, and I should venture to repeat now, that this group selfishness is even more insidious than individual selfishness, because this is so easily disguised as a form of loyalty—loyalty whether to one's trade union, business, society or whatever it may be. Those of us who have never earned our livings with our hands are far too ready to conclude that a policy of income restraint means primarily a policy of restraint by the trade unions, or at least we expect that the initiative will come from them. It does not always occur to us what is surely the obvious truth, that from those to whom most is given most is required; and that an example in not exploiting the advantages of one's position should be set by the most priviledged sections of the community. I should like to think that both among the business community and among the trade unions a new outlook is beginning to show itself. It is an outlook which must be shown equally all round. There is no question, therefore, of our underestimating the seriousness of this issue, particularly in view of the recent warning of the Chancellor.

I will not recapitulate the steps that the Government have taken to make an incomes policy a reality—the noble Lord, Lord Shackleton, will have a good deal more to say about that—but I would quote one final passage from the Economist and the Economist is no friend of Labour. The Economist said: Certainly Labour now looks a better bet as the Party that might some day bring an incomes policy to fruition than the Conservatives, because the Conservatives are at present in the unfortunate process of running away from any determination to implement an incomes policy at all. Those are not my words; those are the words of the Economist. The Economist adds a cryptic comment, which noble Lords can interpret as they wish. They say: The most dangerous anti-planner on this matter may well prove to be Sir Keith Joseph"— I do not know why they have picked him— the shadow Minister of Labour, not Mr. Enoch Powell, the Shadow Minister of No Defence. That is the assessment of the Economist.

I am certainly not going to end on the plea that we have only to go on doing what we have been doing and all will be well. That attitude is not the attitude of the Government in any way at all. I think Mr. George Brown is justified in treating it as an historic landmark when both sides of industry are officially co-operating in working, on a voluntary basis, an early warning system for prices and incomes. But we are all aware that it is a far cry from that kind of top level acceptance, still in its early days, to making a psychological reality of the incomes policy among the countless firms and factories.

The House is already familiar with the terms of the gracious Speech, but I should like to underline just two sentences: My Government will strengthen and develop the policy for productivity, prices and incomes which they have agreed with management and unions. They will introduce a Bill for this purpose, and will continue to develop the policy in co-operation with all concerned. There is much that remains to be worked out here, alike in theory and practice. The thinking of my Party has moved on, and many of us are not ashamed to admit that we are still anxious to learn, and hope we are still capable of learning. If we are able to learn lessons from the Liberal Party we are grateful, and it may be that the Conservatives can teach us something, though I am not quite sure at the moment what that something would be. The deep instinct which makes a man or a woman a Socialist should find full expression in the latest developments of our philosophy, but I should hope and believe that, no doubt with differences of emphasis, the new policy—the policy of planning by the co-operation of both sides of industry—will come to be accepted, not just by one Party or two Parties but by the nation as a whole. Certainly this country must find an economic policy which unites, rather than divides, if we are to raise our own standards of living, if we are to help our own weakest brethren, and if we are to face responsibilities in the world and to the world, which were never greater than now. When we look beyond our own shores we see a world which is ready to accept a lead. But we in this country are incapable of giving a lead—and I am sure everyone will agree with me—unless we are economically strong, and it is in that spirit that I am commending the Queen's Speech, and particularly its economic aspects, to the House of Lords this afternoon.

3.58 p.m.

LORD HANKEY

My Lords, I have listened with great interest to the speeches we have just heard. Obviously I cannot hope to compete with the wealth of wit and brilliance to which we have been treated. But I should like, with all diffidence, to draw attention once more to the great importance of achieving a fundamental improvement in our balance of payments and general economic performance. We have made an epic defence of the pound in the last year. One must congratulate the Government on the many new measures which they have taken and on the considerable success they have achieved, but, as has been recognised already in this debate, it has been done only with the help of the I.M.F. and of the Group of Ten, help given on a really vast scale. Now that times are getting better, we shall have to repay that.

On the basis of over five years' experience at O.E.E.C. and O.E.C.D. in Paris, I can assure your Lordships that our friends do not like being "touched" for such enormous sums, and that they really look to the people of this country to pull together and to keep their affairs in better order. Our policies are now very closely and critically scrutinised by our friends overseas. They think we have begun our recovery pretty well, but they hope soon to see real results in a better current balance, especially an even better export performance, and a better balance of capital movements: in short, a better basic balance of payments. I am greatly relieved to see that the correction of our balance-of-payments deficit and of the fundamental economic weakness which has recently afflicted our country is one of the foremost priorities of our National Plan. I think it is quite extraordinary that in the space of only one year the Government have not only created the Department of Economic Affairs but drawn up a fairly extensive National Plan in consultation with wide sections of industry and labour. This reflects the utmost credit on all concerned, and of course it now remains to execute the Plan effectively, and I underline the word "effectively".

Our friends overseas are conscious of the fact that we are now taking radical measures to ensure that our resources are used to the best advantage. If inflation is to be kept in check and if we are not to price ourselves out of the world markets, where we have already lost so much ground, then it is universally regarded at O.E.C.D. as essential that incomes should not increase faster than productivity. It is equally essential that the Government should set a good example to the rest of the community and not appropriate more resources and funds for the public sector, either at home, or still less overseas, than the economy can be made to afford. I earnestly hope that the Government will live up to their good intentions and good beginnings in this regard. It will not be easy, but as the noble Lord, Lord Byers, pointed out, the Plan should provide a new framework of calculation and also a quite new background for negotiations on these issues. Therefore, I believe that there are real advantages to be derived from our National Plan. I hope that it may in time become non-controversial.

We are greatly indebted to the Conservatives for starting the National Economic Development Council. Now it is time to carry the work forward. The system of Indicative Planning, as it is called, does not involve the State in enforcing on unwilling businessmen courses of action which they reject. It does not involve undue State interference. It should enable us to eliminate or reduce the shocking but hitherto apparently unavoidable stop-and-go episodes that have been so harmful to our rate of economic growth.

The businessman is now being consulted in a way he never has been, and never could be, before. When the system of "Little Neddies" is fully elaborated the Government and the Ministries concerned should gain immeasurably in knowledge of what the businessman suffers and what he needs, and the business community can now be informed authoritatively which way the wind is likely to blow for each industry and for each region, and that should help our businessmen to invest capital profitably, which, after all, is their principal headache. This is the modern way to do things. It works very effectively in France. Except for Germany, almost all our European partners in O.E.C.D. have adopted systems of planning or programming. In this era of planning we should not be left behind.

I agree with a remark that has already been made in this debate that our statistics should be made suitable for this computer age. It has been said that the relation of statistics to economics is the same as the relation of a lamp-post to a drunken man: the lamp-post is more suitable for support than for illumination. So I hope that our statistics will be brought up to date and streamlined, and made more useful for the needs of this inflation-ridden age. The difficulty we have to face is that it is so hard to know where we are in economic terms at any given moment.

But, my Lords, planning by itself does not ensure that our balance of payments will be corrected. Even if we ensure, as the Government have indeed done, that more resources are not consumed at home but are made available for export, that is no assurance that those resources will, in fact, be used to make goods that will be sold abroad at prices and with delivery dates which compete in these competitive times. In spite of all that has been done, and it is already a great deal, I wish to urge that much more study and much more detailed work is needed on this side of our affairs.

I am glad that the Economic Development Committees are to deal with the problem of exports. So long as the profit motive is the main incentive in industry and commerce, exporting must be made to pay. We have already taken some small steps in that direction. Where there are difficulties or impediments to our exports, the whole machinery of government should, if necessary, be used to remove them. This is not just a matter for the Board of Trade and the Foreign Office. Questions of credit, transport, docks, shipping, taxation allowances, labour relations, regional developments, housing and roads and others are involved in this vital problem of our balance of payments.

T think that the noble Earl, Lord Longford, recognised that everyone is involved. We are indeed all in this together. What is needed is a new relationship of cooperation between Government and both sides of industry and I believe that this is slowly coming about. The big and little "Neddies" should be able to develop new types of co-operation. The Export Councils should be invaluable. But all this needs pressing forward, otherwise we shall once more have acted too little and too late. I am afraid that unless this is repeated and reiterated, we shall again become over-confident or complacent, as we did in 1962 and as we have done between all preceding crises. It is essential not only to pay off our debts but to build up our reserves as other European countries have done, and to maintain also a better growth rate than in the past. A present we are being steadily outpaced. My Lords, perhaps the most important aspect of all is that our industry should be encouraged and enabled to use the latest machinery and the newest techniques where they can be made to pay. This is, indeed, inherent in the Plan. Unless we do this, we cannot expect our exporters to hold their own at a time when so many foreign countries are being helped to industrialise and to install the latest machinery. I went to a conference in Japan a few years ago. A leading member of our Embassy in Tokyo had been visiting Osaka and had been amazed at the capital-intensive development of the textile factories. Over lunch one of the Japanese directors said to him, "You really should not be so surprised. You have misunderstood our position. Japan will not for many years more have a large reserve of available labour, and we are no longer a very low-cost producing country. We are, on the contrary, very much afraid of the really low-cost producers who are arising on every hand further South. Japan can only hope to meet this situation by adopting the very latest techniques of production."

Japan has certainly had the most amazing success in many fields by applying this doctrine, and we have been very glad and interested to welcome her as a full member of O.E.C.D., where she plays her full part. As a contrast, when I was coming back from Budapest, some twelve years ago, I met a British engineer in the train—quite a rarity behind the Iron Curtain. He told me that he had been installing the latest British textile machinery in Bulgaria. I asked how we were getting on with it in Great Britain, and he said that, unfortunately, the textile firms in Lancashire were so much in debt that they could not afford to buy it; and even if they did, the workers would not work it. He said, "In a short time you will find that there is not much left of the textile industry in Lancashire". I am afraid that Lancashire has certainly had its difficulties and, I believe that his words have, to a certain extent, come true.

My Lords, I think the moral is obvious. We cannot stand still; we have to move forward. Any industry, management or trade union which falls behind or prevents progress, is not only sacrificing its own future; it is acting in a way pre-judicial to the interests of the whole of this country. I am glad that our National Plan recognises the need for constant progress and I make no excuse for driving this point home from the Cross-Benches. The danger of wider unemployment and a reduced standard of living in this country is, I believe, only to be expected if we do not keep up with the enormous progress which is being made overseas, and if we fail to adopt and work the newest techniques and machines; or if we price ourselves out of the market by slackness in our cost and price policies. If foreign countries make ships, for instance, in a new and better way, then I think we should do the same whenever it can possibly be made to pay. I venture to think that we have reached the point in our efforts when the Government of this country, whatever its Party, will have to make it its business to see that no local impediments or sectional interests stand in the way.

Before I sit down, I should like to draw attention in this connection to the rather chaotic situation in our transport system and docks. I am interested to see that the noble Earl, Lord Jellicoe, put down a Motion in the last Session referring to this situation. It is only slightly better than last year. Our progress has been much too slow. Yet we cannot expect to cure our balance of payments while industrial delivery dates are rendered uncertain by undisciplined acts or dyed-in-the-wool traditionalism in our railways and docks.

The present state of affairs is much more harmful to our exporters than to our importers. We import our food and raw materials, whatever happens. But our exporters cannot be expected to compete effectively across such hazards to their raw material supply and delivery dates in the bustling and competitive world overseas. Many people overseas are now in a rather big hurry. When the Swedes built a very large shipbuilding yard, some seven or eight years ago, they laid the keel of the first ship while the yard was still under construction. You can see that the delay of a week or a fortnight in the delivery of essential components or machinery to such people drives them into an absolute frenzy. I hope that the work of the Economic Development Council on the Movement of Exports will be successful. It deserves every possible support.

In short, it is for all of us in this country to choose. Either we keep right up to date, and in the forefront of progress, or we must expect a fall in our standard of living. We have avoided this by the narrowest of margins in the last year. If we fall behind, we shall discourage our clients overseas and see our industries decline, one by one. Our balance of payments is not only a matter for economists; it is now a matter for the whole community. As the National Plan recognises, both our current account and our capital account will need to be watched. I greatly hope that, as things improve, now that we are over the worst of the crisis, the Government will see that there is no complacency and that this country's economy and balance of payments are at last set on a permanently more stable course. I am glad the Government have promised to take extra measures, if necessary.

My Lords, if I have spoken at greater length, or more frankly than is customary for a newcomer to your Lordships' House, I beg for your indulgence. But after many years spent at home and overseas in dealing with these questions I wished to try to impart a real sense of urgency to this problem. I believe that a solution is essential for the success of our National Plan and for the wellbeing of our people. I am sure that we are set on the right road. But we now need to correct this fundamental imbalance in our economy, and finish the job quickly, before the next storm comes. On previous form we have no time to lose.

4.17 p.m.

LORD SALTER

My Lords, I am sure that I speak for everyone in this House when I express our sincere appreciation of the speech to which we have just listened, enriched as it was by the experience to which the noble Lord referred and also, I may say, by the very high reputation he gained in the Service by his work. I regard it as a special privilege to be able to say this now, because it happens that I was for many years a friend and an intimate colleague of his father, both before the First World War, during that war and in the Peace Conference afterwards, and I know that he was one of the greatest officials who has ever served this country. After that, of course, came also his later services as a Minister and member of this House.

My Lords, I do not propose to inflict a speech upon you to-day. I want to speak on only one point, and on that only for a very few moments. I do not dissent from what the noble Earl, Lord Longford, said about confidence in the pound being greater at this moment than it was or than I think most of us expected it would be at this date. But I think that makes it all the more essential to say starkly what is certainly the truth, that if the pound should go on losing its purchasing value (that is, if the costs and therefore prices of goods and commodities increase so much more rapidly than American dollar prices as during this last year) it will not be possible to continue with success the policy of the Government to maintain the present currency value of the pound. That is, among other things, one reason why I think we should all hope for the success of the efforts Mr. George Brown is making, with the aid of the organisation presided over by Mr. Aubrey Jones, who was formerly a Conservative Minister, to keep a proper relationship between incomes, which are spending power, and productivity.

Let us remember, too, that if, because of a much greater rise in costs and therefore in prices in this country than in America, the Government are unable to maintain their currency policy, then the great loans which we have raised, and which will have to be repaid, and the loss of the realisable securities that we have parted with, will have been all in vain. Again I emphasise that the real and lasting value of a currency is what it will purchase of commodities and services which the public wants, and without that foundation financiers' confidence for the moment is a misleading guide to the future.

4.20 p.m.

BARONESS PLUMMER

My Lords, I am glad that the noble Lord, Lord Byers, is here, but am sorry that I cannot see Lord Rea. I say this because I want to start my speech by apologising to them once again, in that I am going to speak on agriculture. Last Wednesday we had a debate on agriculture which, to me at least, was one of the most interesting I have heard for some time. Nearly every speaker had something valuable to contribute—full of information, advice and even exhortation. I did not agree with all of them, but one was made aware of the deep knowledge and experience of noble Lords interested in agriculture. I got the impression that, on the whole, there was not much wrong with our agricultural industry which could not be put right with intelligent and honest discussion, as in the past; nor was there any feeling that our Minister of Agriculture was not indeed doing everything in his power to help it.

I did not participate in that debate because I wanted, once again, to stress the importance of agricultural exports in relation to the balance of payments—hence my desire to speak to-day. Noble Lords will remember that in my maiden speech I mentioned some sort of board or council to co-ordinate and encourage exports of agricultural products. This was again mentioned in last week's debate by my noble friend Lord Champion, when he said [OFFICIAL REPORT, Vol. 269 (No. 118), col. 660, October 27, 1965]: with the Minister's encouragement, the interests concerned will soon form an Agricultural Export Council which will be eligible for assistance in its activities from all sources provided by the Government, the British National Exports Council, the Board of Trade Services, and those of our posts abroad. In his winding-up speech, the noble Earl, Lord Ferrers, said [col. 668] that he was grateful to Mr. Fred Peart, the Minister of Agriculture, for establishing some form of export body to try to encourage all sections of agriculture, as a whole, to make a set at exporting some of their goods."— acknowledging the difficulty, but realising the great step. I hope this body will start to operate soon, for there are ominous signs of strong competition at this time for markets in Eastern Europe, especially from France and the United States, with the full support of their respective Governments.

We are better equipped than any other country in the world not only for exporting livestock and machinery but for teaching other countries, especially the underdeveloped countries, how they can produce economically their own immediate needs. In fact, in exporting our know-how we could relate it to the aid which these countries need so desperately.

Besides being the greatest tractor exporter in the world, we could also export our knowledge of how to build—here I am again repeating myself—the fertiliser, herbicide and vitamin plants, the feed mills, the irrigation plants, and dams, and how to provide drilling equipment for water. There are also the food processing and packing plants, the freezing plants. We can provide expert advice on how to make veterinary instruments and utilise the results of our veterinary research—how to control disease and supply the laboratory equipment for the control of animal diseases.

We are able to do this because of the accumulation of years of research on the part of the Ministry of Agriculture, through their Agricultural and Horticultural Advisory Councils, their Experimental Centres, the N.A.A.S. regional experiments, the Plant Infestation and Veterinary laboratories, the National Institute of Agricultural Botany and the Agricultural Extension Services—not forgetting the Agricultural Research Council which has just produced its Report for the years 1963 to 1965, a magnificent production. The close link between the Ministry of Agriculture and the Agricultural Research Council provides the result of years of research for practical application for the Ministry of Agriculture's experimental centres, which in turn is used by N.A.A.S. and then passed on to the individual farmer. I submit that in no other country have we such an excellent chain of communication, from basic research into agricultural problems, through to its practical application on the farm. So, with the concerted efforts of all these bodies, including those ancillary industries which might contribute to the activities of the proposed Export Council, our expectations can be fulfilled.

My final plea is rather an unusual one; it may perhaps be a psychological one. It is to try to "bridge that gap" between the agricultural industry and the rest of the community. In the past, to the ordinary citizen, a farmer was a man with some acres of land, some cows, some pigs, some chickens and, if he was up to date, a tractor or two. And—most important of all—he kept his money under his mattress. I agree that it is an old point of view, but it did exist. But now there is a new picture in the minds of the urban population. It is that the farmers keep their money under their Jaguars. Of course, neither is true.

I wish the National Farmers' Union, instead of launching a campaign complaining about unfair Price Reviews, would launch another kind of campaign—one to convince people that the farming industry is not a section of the community divorced from the rest of the people, but in fact is part of the huge effort of the whole country. If they were to explain how the results of research produced by the Ministry for the industry are for the ultimate benefit of the consumer, it would go a long way to help narrow, if not close, that gap. I wish they would announce the part that agriculture can arid will play in helping the balance-of-payments situation, which must be the concern of every thinking man and woman of this country.

4.28 p.m.

LORD BARNBY

My Lords, I find myself fortunate in following the noble Lady, who has just given us further confirmation of what we looked forward to after her maiden speech, that her knowledge of agriculture would make a helpful contribution to our debates. I should like to repeat to the noble Lord, Lord Hankey, the congratulations that were just proffered by Lord Salter. Many of us who will remember his father and the great services to the country that he made before he entered this House, will have listened with great interest to the able and fluent speech which the noble Lord has just made to us.

The gracious Speech contains promises of much legislation. We must congratulate the Government on their courage in embarking on such a campaign, even though they may do so with but an infinitesimal majority, though they no doubt count on the support of the Liberal Party. Here I would commend to the noble Lord, Lord Byers, a reflection on the result of the Canadian Election. There was never a better opportunity for the Liberal Party there to make great headway than was the case with the Liberal Party in Canada, under Mr. Pearson.

LORD BYERS

My Lords, the noble Lord really does not know very much about Canadian politics if he can make a remark like that. He must know the difficulties at the present moment between the French and the English Canadians.

LORD BARNBY

I must confess to the noble Lord that I have been going regularly to Canada for over fifty years and have included on my many visits Ottawa, so I think I can claim to have been in touch with politics in Canada. Indeed, I have just returned from a spell in North America, and there in Canada what does one find?—a bounding prosperity.

LORD BYERS

Under the Liberals.

LORD BARNBY

They have been bailed out by the Communists, for if it had not been for the sale of surplus wheat they would not have got going as they did. As regards the United States, how buoyant is their economy; how great their prosperity! This has been brought about by a reduction of taxes, by increasing the buying power, by expansion of industry and by increased profits' contributing to the national revenue, so that they have made a great success of deficit financing. I read political economy at Oxford, and I have studied it ever since. It all seems so different from the policies of our advisers in this country for so long. Anyone recently returning to this country, as I did, would be surprised to find the degree of activity and employment, something which many did not expect would follow the measures which the Socialist Government felt right to impose.

If I may follow the lead of the noble Earl the Leader of the House, I should like to quote from the Financial Times of August 3 this year: There seems little prospect of moderating the rise in wages until Mr. Callaghan's deflationary measures begin to have their effect on the unemployment rate. My reflection on that statement is that it was also the massive support of the United States, in giving a lead to world bankers, which bailed sterling out. In addition, the Socialist Government have adopted the policy which was often recommended to the Conservative Party, that of protection. Those twin moves have undoubtedly mitigated the expected effects. At any rate, a tribute is due to the Socialist Government that activity has remained high.

On other counts one has misgivings. The incomes policy seems to be a flop. Wages are advancing more rapidly than incomes, as was emphasised by my noble Leader. After all, what are trade union leaders paid for, except to do their best to raise wages and to improve the working conditions of the people who pay them? Personally, I have never felt that Mr. George Brown's policy, even by a combination of effort on the part of the Federation of British Industries and the Trades Union Congress, could succeed. The Acts relating to redundancy and employment are producing a hoarding of labour; wages are rising beyond the "guiding light". It seems to me that the early warning proposals are just "cuckoo-land". When one has in mind what was said by the noble Lord, Lord Shawcross, in a very impressive speech to a vast audience in the Albert Hall this morning, a speech of candour and courage, a speech made in the presence of Mr. Callaghan, indicating how conditions in this country at present produce a vast wastage of labour, and what was the possibility of present production with 3 million less workers, there is no need for anybody in this House to make any further comments. Mr. Callaghan will have ample opportunity to reflect on what Lord Shawcross said this morning.

Finally, I would make three comments. First of all in relation to the foreign investment policy—

THE MINISTER OF DEFENCE FOR THE ROYAL AIR FORCE (LORD SHACKLETON)

My Lords, may I interrupt the noble Lord? I did not quite know what he was talking about when he mentioned this conference at which Lord Shawcross apparently spoke so bravely. Did he say that it was to-day? I have not heard what it was about.

LORD BARNBY

The Institute of Directors held their annual conference in the Albert Hall, which was attended by some six thousand people, and it was there that Lord Shawcross took the opportunity of enlightening us on the economic opportunities which the Socialist Government now have.

I was about to say that I think that the foreign investment limitation by the Government is wrong, and at that meeting this morning speakers, among them Lord Shawcross, drew attention to the degree to which this policy would inter- fere with this country's exports. I urge that investment and initial allowances should be increased to encourage re-equipment. On this point the gracious Speech indicates some hope. I would also add the suggestion that assistance should be given to the construction of buildings in industries like cotton, which are subject to imports from low-wage countries. I would pay tribute to the Government for having helped one particular industry, the wool textile industry, in regard to a rebate on wool-top exports—a matter that was for so long delayed because of resistance by the Customs and Excise Office, although our noble colleague Lord Rhodes was himself satisfied as to the need for such a rebate.

My Lords, I would ask: what are sanctions but economic warfare? Surely this is an appropriate matter for mention in a debate slanted to economics. I am convinced that there is an enormous number of people in this country who would be absolutely against the employment of sanctions under any conditions. They can never succeed. After all, they failed against Italy, they failed against Cuba; and one's mind goes even further back to the days after the Kerensky Revolution, when there was talk of applying sanctions against Communist Russia.

Personally, I dislike coercion. I am indignant that the United States should encourage its representative at the dis-United Nations to say that, should economic sanctions be contemplated by the British, that action would be supported by the United States Government. It is none of their business. British voters resent it. As a Yorkshireman, I resent coercion. I deplore the Prime Minister prematurely making skin-creeping threats. Is it as though to punish naughty children? What would be the ultimate goal should sanctions be applied (and Rhodesia was mentioned in the gracious Speech) for then, of course, the people who would be worst hit would be the non-whites. Gradualness in advance to black rule is essential. Anyone who knows the native habitations around Salisbury in Rhodesia knows the prosperity and that there is no oppression there. One man, one vote, is impracticable, particularly if, as so often happens, there is only one candidate. How can the votes of illiterate people living in kraals be obtained? It would seem appropriate that from Government spokesmen there should be some debunking of the fulminations of pocket-sized black Caesars who, by unconstitutional dictatorship, preside over several emergent countries.

There have been suggestions about force. Force, I take it, means military force—white men shooting white men. On the last occasion when this was suggested in Britain Sir Edward Carson described such action as asking troops to be assassins. I myself was astonished at the suggestion by the most reverend Primate that force should be employed. As a churchman I was shocked.

LORD BYERS

He never said that.

LORD BARNBY

Anyhow, he has proved a divine boon to the cartoonists.

LORD SHACKLETON

My Lords, apart from the noble Lord's inaccurate reporting of the Archbishop, I hope he will not take this much further unless he is going to give some notice to the Archbishop. I do not think the Archbishop would have expected an attack on him at this moment in a debate on economics. I did not quite understand the noble Lord's reference to white men shooting white men. Is he suggesting that it is all right provided that there are no black men present?

LORD BARNBY

My Lords, I would say to the noble Lord that I respect his feelings, but as a churchman I also am entitled to my feelings. It shocked me that his reported remarks should have produced his picture with a Crucifix composed of two Army rifles.

In the U.S.A. desegregation is widely admitted to have been too speedy. I suppose that it is now fifty years since I first toured the South in the United States. To-clay Congress, on the suggestion that the government of the District of Columbia should be handed over to a municipality composed of 80 per cent. non-whites, has resisted the President.

I well remember 1914, though I was not then in Parliament, and the effect that threats to coerce the North of Ireland galvanised the Conservative Party into violent resistance. Surely at any suggestion of sanctions now, the Conservative Party would produce similar resistance. I have re-read the Hansard of those debates, and the intemperance of the language generated. I remembered the indignation in the country. The events nearly produced a mutiny in the Army at the Curragh.

The other day I went to Williamsburg in the United States. Perhaps other noble Lords will have seen the remarkable contemporary restoration to the Independence Period which has been done there by the Rockefeller interests. It is worth a visit. There I watched the film which included the speeches of the Fathers of the Republic on the alleged injustices of the Mother Country, the lack of understanding of the rights of the white settlers in a land captured from barbarism. There was the poignant grief of the Loyalists, who felt driven to the necessity of opposition. There was the concluding drama of the lowering of the Union Jack and the raising of the Stars and Stripes, for which we all have such respect, which helped us to defeat Nazism along with the gallant help of the settlers in Rhodesia, whose fathers had carried civilization into black Africa. Economic sanctions would be warfare. That no such development could arise must be our prayer.

4.46 p.m.

LORD WINTER BOTTOM

My Lords, I hope that the noble Lord, Lord Barnby, will excuse me if I do not follow him down the rather peculiar lanes into which he has led this debate. I shall return to the gracious Speech with its many interesting proposals—too many, perhaps, because all of them are worthy of a speech, though I shall resist that temptation.

LORD BARNBY

My Lords, does the noble Lord insinuate that I digressed from the gracious Speech? If so, I hope he will note that I emphasised that anything in the nature of sanctions would be economic warfare, and that certainly is appropriate in a debate slanted towards economics.

LORD WINTERBOTTOM

I am certain that the House will appreciate that clarification. I think that the House would gain value from considering the gracious Speech, which the Government have placed before it this year, in relation to the gracious Speech last year. The two are, in fact, two aspects of the purpose of the present Government, and through them both runs a continuous theme. That theme is the determination to master our economic environment. This, of course, is nothing new. It is something that has been attempted by many Administrations; in fact, by all recent Governments, both here and abroad. One of the fascinations which I found in the 1959 Election, for instance, which was followed shortly afterwards by the American Presidential Election, was that this esteem of the mastery of our economic environments was common to all the debates in both countries.

We ought not to forget that the Conservative Administration which preceded this one made a very useful and significant contribution towards creating the machinery necessary for the purposes which we both share. The machinery which they created has proved inadequate, and it is, of course, for this reason that the present Labour Administration are applying greater intellectual effort, more machinery, better brains, towards the solution of the problem and the achieving of the ends we are all wanting to see. Perhaps I am an optimist, but I feel that already some signs are showing that we are succeeding in our aims. The much derided "Stop—Go" was a better thing than the damaging boom and slump which we knew between the two wars, and in its place we are trying to put what I should like to call a "Faster—Slower" approach to our rate of economic growth.

It is at the moment far too early to recognise success, but perhaps we are on the verge of it. The reason why I hold this optimistic view is the way in which our economy is remaining strong and vital, in spite of the series of economic restrictions and reduced consumer purchasing power placed upon it by the Chancellor of the Exchequer. The Economist has said that the present Chancellor's economic restrictions are more severe than those imposed by Mr. Selwyn Lloyd in 1960 and 1961, but, nevertheless, the economy has remained strong and buoyant. From past experience, we might have expected to see by now, I think, a slowing-down of our economy. Yet, as the noble Earl, Lord Longford, has pointed out, the growth of our economy continues, if at a slower rate, and only in a few places are there signs of slackening to be observed.

I believe that the continuing strength of our economy is due to three causes, two of them good and one bad. The first of these causes is the fact that planning in industry as a whole is, I believe, a much longer-term affair than it was until recently. Of course, all the great industries of our country have planned for long periods of time—five years, six years, and so on; but this tendency has not been general. In smaller, less highly capitalised industries a much shorter view has been taken of the economic situation; but the tendency now is to look into the future, to plan ahead, to make an estimate of what is likely to be achieved; to make the necessary investments to achieve the policies felt necessary and then to go ahead with those policies and those investments, whatever the economic weather is at the time.

The noble Lord, Lord Carrington, was pointing out the fact (and perhaps criticising them for it) that the British people have not been automatically moulding their policies to the economic weather of the day. He said that if the sun goes in we should cut back investment, and "wait and see". This. I think everybody will agree, would be extremely unhealthy. But I think it is a good thing that, at least in industry, the decisions of boards of directors and the managements of the nationalised industries should not be affected by the short-term—

LORD CARRINGTON

My Lords, I think the noble Lord misunderstood me. That is not what I was suggesting. What I was saying was that I thought that all the economic crises we have had since the war had blown over without anybody having done very much, and that, as a result, no one really believes it when we are told that there is an economic crisis. That was my point.

LORD WINTERBOTTOM

I agree with the noble Lord: this is the problem of the man in the street. He has always "had it good", and thanks, perhaps, to both Administrations, he thinks he has a right to expect success. Nevertheless, I should hope that, whereas he may learn that things are not so good as they may seem, industry will continue, as it does at present, to take the distant view; will look to the future, and will base its policy upon that view. I believe that this tendency among the smaller firms to think long-term will be reinforced by the existence of the National Plan, which I believe will assist everybody to think into the future and to make plans on the long-term basis.

The second factor which I believe has kept our economy strong is the Government's decision to free the development regions from the restrictions placed upon the nation as a whole. This I regard as a most important innovation, the benefits of which we are just beginning to see. I expect many noble Lords have read the Economist's Supplement on Scotland this week. Personally, on reading it I found it a most fascinating and exciting document. It read almost like a James Bond thriller. From its description of what was happening in Scotland to-day, one could see a rebuilding and a restoration of the Scottish economy—the building of roads, the attraction of new industries, the laying-down of the whole infrastructure of a modern industrial society. What I look forward to seeing, as I am certain every noble Lord does, is that, as a result of these new policies, a new creativeness will arise in these areas which are now backward and suffering from declining industries—areas in which the Industrial Revolution first exploded, and which to-day bear the traces of that explosion—and that they will in due course advance in front of those areas which are prosperous to-day.

But in that Economist report one extraordinary fact stood out: in Scotland, with all the construction work that needs to be done, and is being done, there are at the moment 9,000 construction workers unemployed. This, it strikes me, is a fact of significance. If 9,000 skilled men are out of work now, how many people are there in that area who are not employed but who would like to work, and who would work if work were available? I believe that it is the growth within these areas, which is starting and which will gather momentum, which is at the moment keeping our economy as a whole on balance and steady.

The third reason why I believe that our economy still remains strong is not, I think, a good one. It has been mentioned by several speakers, including the noble Lord, Lord Hankey—whom I should like, as a newcomer myself, to compliment on his maiden speech. The hard fact, my Lords, is that towards the end of last year our economy was grossly overloaded; and I believe that in some areas it still is. I know from experience that anywhere from the Trent southward there is a shortage of labour of every kind, and this is not healthy. My hope is that the selective disinflation which the Chancellor is introducing will bring back some measure of order to the situation, and will enable the demand for labour to be brought into a closer relationship with the supply.

But this over-demand for labour in large areas of this country has had one unfortunate effect which the Chancellor has drawn to our attention recently. I refer, of course, to the continued rapid rise in earnings. There is an important paragraph in the gracious Speech referring to Government policies which are designed to correct this, but I would suggest to your Lordships that there are limitations to what a Government can do in this matter. We can legislate for some sort of early-warning system so that the Government of the day can have some influence on the growth of wage rates, but what the Government cannot do is to legislate for an increase in earnings. Because earnings, which are something different, arise as the result of negotiations on the shop floor in each particular plant, and these are not the subject—

LORD BARNBY

My Lords, if the noble Lord will allow me to interrupt, can he indicate how any firm which is forced to raise its prices, and which has to give early warning, is going to deal with the inflow of orders which will be stimulated by the requirements of the Government's proposed legislation?

LORD WINTER BOTTOM

I am sorry, but would the noble Lord please repeat that question? I did not quite get the whole of it.

LORD BARNBY

My Lords, my understanding is that it is suggested there should be an early warning system of the increase of prices, and I asked the noble Lord whether he could help us by explaining how it is expected that any firm forced by circumstances outside its control to raise its prices would be able to deal with the inevitable inflow of increased orders which would make the situation that much worse.

LORD WINTERBOTTOM

My Lords, I think the important fact in the Government's policy is that both prices and incomes are under the supervision of one body. The two are linked; the two will naturally have to be considered together. I expect that, in practice, as the Prices and Incomes Board gets into its stride the correlation of these two factors will become easier and more effective. But I am not speaking specifically of wage rates at the moment; I am speaking of earnings and of the phenomenon known as the wage drift. I should like to give your Lordships two figures. If we consider the growth of wage rates over the last ten years, we find that wage rates increased by 59 per cent. while earnings increased by 72 per cent. This is a very important factor when one is thinking of planning prices and incomes.

I submit that a Government can do nothing about earnings since these are negotiated at plant level between management and labour. But I believe that what we can do is to get generally accepted as a principle in these negotiations at plant level that wage rates and earnings, bonuses and piecework rates, must all be related to productivity. The noble Lord, Lord Byers, mentioned one plant where this particular problem was successfully faced. I know of another where a properly devised and properly prepared incentive scheme caused a rise in productivity of 22 per cent. which was rewarded by a rise in earnings of 13 per cent. If my simple arithmetic is right, this caused a drop of approximately 10 per cent. in the wage costs of this particular product. We cannot stop this.

What we are talking about now, in the short term, is how we can use our existing plant. We could do a lot in the future by increased investment; but in 1966 what we must do is to use our existing plant more effectively. This can be done only by negotiation on the shop floor between the unions and management. I suggest a great deal can he done, and the noble Lord, Lord Byers, and I have given examples. I should like to make a further plea. Do not let us become hypnotised by new investment. There is much we could do in this country by better utilisation of existing plant. I would suggest that better utilisation is as important to our recovery as a higher rate of investment. No one would deny the men in a plant higher earnings if, as a result of those higher earnings, productivity increased. This can only be done by national education and in this the National Plan and all the bodies which spring from it have a most important rôle to play.

LORD BARNBY

My Lords, would the noble Lord not agree with Lord Shaw-cross's suggestion this morning that some 3 million people now working could be saved if full productivity could be achieved?

LORD WINTERBOTTOM

If we could get a 20 per cent. increase in productivity, we should have a surprising number of people available for other jobs or for greater productivity in existing plant. That is why I remain an optimist. There are enormous factors of strength and sources of unused skill and capacity on which we can draw. I believe that we are going to be able to do so. I do not agree with those pessimists who say that by the middle of next year we shall see half-a-million unemployed in this country. I believe that this pessimism is just as dangerous and foolish as is excess optimism. Although we have not yet created the body of knowledge and machinery to enable us to get our economy on a steady rate of growth, I nevertheless believe that a beginning has been made; and when we hear the gracious Speech next year we shall see how this theme is being carried to a further stage of success.

5.5 p.m.

LORD FRASER OF LONSDALE

My Lords, I apologise for missing an hour of the debate. I had to rush over to the Ministry of Pensions to sign a report and I thought there was a great deal more time than there was. I heard the three opening speeches and, if I may say so, I thought they were a very agreeable controversy. The noble Earl the Leader of the Labour Party said that, following their philosophy—these are not his words; I am shortening what he said—the Labour Party thought that economics were subservient. I do not remember to what; but presumably they were subservient to Labour Party policy.

THE EARL. OF LONGFORD

My Lords, I said that they were subservient to our social purpose; in other words, they were a means and not an end.

LORD FRASER OF LONSDALE

That is just how I understood it. It is rather like saying you can cut a coat without regard to the size of the cloth or that you can drink more than a quart of beer out of a quart glass. I do not think that is possible.

LORD HOBSON

It is a false analogy.

LORD FRASER OF LONSDALE

You can make the suit a tighter fit and ill-shaped or you can make the beer weaker, but you cannot get more. I have taken up this point which was made so charmingly by the noble Earl because it happens to be the only precise point about which I want to make a speech to-day.

I think it was in the Daily Mirror on Monday that I read that there are far more clouds over Britain than there are over Central Africa or even over the moon. I commend this to your Lordships as a pearl of wisdom. Indeed, there are. That is what worries me about the gracious Speech. It forecasts a programme which, if attempted in full, would be Parliamentarily impossible and financially disastrous in the present state of the country.

I will not impinge on Foreign Affairs or domestic affairs or on to-morrow's debate, but one cannot speak twice and therefore I want to make just one remark about Central Africa which is entirely relevant to finance. Almost incidentally when talks are going on in Rhodesia, a Minister or at any rate a civil servant (I do not remember which) is sent out to discuss with the Rhodesian Government methods whereby we in Britain could pay for the higher education of Rhodesians. I have no doubt that this is a very admirable purpose, equally admirable to the higher education of our own people. But I am bound to wonder whether we can afford this kind of thing. We are not the people we were a hundred years ago, and I call to mind suggestions that in certain circumstances we might take such action as would render both Rhodesia and what was Northern Rhodesia unable to earn their livings. There are very few countries in the whole of Africa able to earn their living, and even some of those that are receive bounties and gifts and aid from us. And so we contemplate, within a week, educating these people and at the same time making up for the fact that their economy might be upset because of action taken here. I do not think that we can afford these things. That is the only observation I intend to make about Rhodesia, because I know well it is a matter that is exercising many minds at the present moment.

Only a day or two ago my noble friend Lord Conesford, stimulated by a statement made from the Benches opposite that we were going to lend £10 million to India, said, "Who is going to lend us the £10 million to lend to the Indians?" The answer, given by the noble Lord opposite, was, "You and me"—meaning the taxpayers of this country. That answer is only partly true. We have not the money. We have to borrow to pay our own way, let alone to lend money to other people. So we go on, with contracts, obligations—I will not call it threats—statements of intention, all of which are going to cost us more money than I believe that we as a nation can make. Our hearts are running away with our heads. We are aiming to be more generous than we can afford to be.

That is almost all I want to say, and I will conclude with this thought. I suppose all of us would like Britain once again to be a Power with great influence in the world. She will not gain influence in the world, my Lords, by meddling with the affairs of other people all over the world, by sustaining the United Nations, by paying a great deal towards it and by paying the subscriptions of half-a-dozen other countries as well. That is what we are doing. Just as in the case of India, we are lending money in order that they may pay it to U.N.O.

LORD BARNBY

And the Sudan.

LORD FRASER OF LONSDALE

I do not know about the Sudan; maybe it is in point as well. All over the world we are buying trouble. We have not the money to pay for it, let alone the money to buy ourselves out when we have bought it. As I have said, here in Britain we are attempting a programme which I think is an impossibility and is not viable. If Britain is ever to be great again, the first thing she must do is set her own house in order, stop looking for trouble all over the world, stop trying to police the world, and stop trying to shoot the moon. There are many better things to do.

5.13 p.m.

LORD PEDDIE

My Lords, many points of view have been expressed during this debate. To my mind, at least, one truth has been made evident: it is that there are many facets to this question of economic development. I propose to deal with only one, the human factor. I believe that to be the all-powerful consideration. It is the one which affects and influences all others. Human reaction and attitudes of mind provide either the accelerator or the brake in respect of economic development. I am convinced that no policy of development, no programme of mechanisation, no scheme for trade development, can possibly succeed unless the attitude of mind of workers and management is in tune with the forces of progress. I doubt whether in respect of either management or labour we have at this point of time an attitude of mind in perfect tune with progress.

I know it to be a hackneyed expression that to-day our national problem is that of economic change, or industrial transition. Nevertheless, it is true. There is no doubt that over the past few years, and within the memory of us all, there have been revolutionary developments in science and technology which have changed, or rather which have distorted, society. New products have transformed the character of industry and new techniques have lowered craft boundaries. In my opinion, it is the speed of orderly transition which is important. Speed is the essence of the problem. It is not the fact that we know or that we get change; the real point at issue is the speed of the change. The lower the speed of industrial change, the greater our economic difficulties. We may be progressing, other nations may be progressing, but only if our rate of development is equivalent to theirs as each succeeding year passes will our difficulties be reduced and our competitive strength enhanced.

Comparing the experiences of many of our competitors in the industrial sphere and in the economic field with our own, we find that we have no justification for pride. Our productivity per head is lower than that of most of the other nations, and to-day we are only the thirteenth richest nation per head of popu- lation. Our proportion of world trade has steadily gone down. I know it is easy to find reasons or possible excuses for this retrogression, and that is the whole tragedy: that it is so easy to find explanations for this lack of progress. We talk a lot in this House about industrial development, and we all realise that industrial change is inevitable. I think we also realise that no nation can isolate itself, Britain less than most. I am convinced that the impact of economic and financial change has been more severe on Britain than on any other nation in the world.

A generation ago we had an economy based on a world-wide Empire. We were a leading exporting nation and the financial centre of the world. We now see the emergence of new and independent nations and the rapid industrial development of our competitors, and this has created an entirely new economic situation. Special and current problems have resulted from the need to adjust ourselves to this new economic situation. My Lords, let us face the fact that few people, including ourselves, like change. It is not easy to discard old habits. History has taught us a fact which I am sure that the Labour Government keep in mind: that it is necessary to direct the course of industrial change. We have had the experience in this country of industrial development which accepted no social responsibility and no obligation to the workers, and this left a legacy of bitterness and suspicion. In more recent days we have seen mass unemployment, and that is something not easily forgotten.

I believe that those experiences provide the underlying principle and justification for the Government's policy on economic affairs. Everyone realises that restrictive practices, of which there are many in industry to-day, are anachronistic. But merely to condemn them is not enough neither is it realistic. We have to recognise that originally these practices were developed to protect craft status and what the worker believed to be his legitimate interests. To-day, the changes in industrial methods have caused the lines of demarcation between one craft and another to become almost unrecognisable. Instead of giving protection, the old protective practices have become restrictive practices and have placed a barrier against the improvement of standards and the full employment of new industrial processes.

I believe that to-day we have the knowledge, I am sure that we have the Government, and we have the sense of social responsibility and the influence of organised labour to ensure equitable progress. I think that we can all agree on one thing: that there is no hope for Britain economically if we fossilise the present. It is essential to modernise. Some people believe—I have heard it expressed many times in this House—that we need only increase the number of computers and the number of automatic machines, and the job is done. There is much more to it than that. It is necessary to create also the right public attitude, one that can appreciate the necessity for new technologists and accept the responsibility for their use, as well as their benefits.

Merely to increase the capital content of industry and the number of machines serves us not at all. Indeed, at a particular point of time, it might add to the cost of operation, unless we were able to secure, both in terms of management and of labour, the ability to employ those machines to the full. But I would say that it is far more difficult to change the attitude of men than it is to build the machines. I believe that a change of mental attitude is necessary as much for management as for labour. As one who has spent many years in management, I am conscious of the different forms of restrictive practices that can be found on the shop floor itself. Management, possibly with justification, condemns the workers for these restrictive practices but, at the same time, pursues outworn methods and has a tired approach. Management condemns, again possibly with justification, the workers for refusing to accept blindly new industrial methods, but makes no attempt at all to build an effective down-the-line system of communication.

I believe that the trade unions have to recognise that the job of management is to manage. It is not the job of the trade union to manage. At the same time as the development of our economy necessitates the building up of new industries, it requires the progressive, rational and reasonable running-down of some industries, with the maintenance of efficiency at the same time; and this demands a down-the-line communication, so that workers, individually and collectively, are fully appreciative of what is going on. We find workers being blamed for their inability to accept some change in method of operation—some readjustment of their hours, it may be—believed by their employer to be right, but never properly put over.

I believe that joint consultation on a rational basis is a plain necessity in industry like our own, which has not only the task of building up new industries, but also the task of securing a far more effective redeployment of labour within our economy. I believe that Government policy on these matters of economic development is vital. It should be directed towards two things—first, to encourage industrial efficiency, innovation and change; and, secondly, to do what few Governments in the past have achieved; that is, to take full cognisance of the human factor, and obviously protect individuals from the harsh effects of industrial transition.

There is no doubt at all that industrial transition which will benefit the State may impose serious burdens on the individual, and it is necessary for the Government to deal with that position, recognising that only if they do so can they stimulate confidence in industrial progress and secure understanding that this is the factor which influences the standard of living. The relationship between productivity and the standard of living is not always obvious to most of us. I do not think that the majority of workers fully appreciate it. I do not think that there has been an opportunity for people to realise that their individual and collective effort has a dominating influence on the standard of living to-day and to-morrow. But I believe that the programme put forward in the gracious Speech indicates that the Labour Government are pursuing both of these objectives.

A social policy is an essential corollary to industrial development: we cannot get the one without the other. It is necessary for a Government to pursue its economic policy parallel with its social development, which permits the workers to secure the full benefit from the increased productivity for which they have worked. All these problems are interrelated, and so is their solution. There is no one magic solution. Questions of housing, training, redundancy payments, are factors which affect the mobility of labour, which, in its turn, is an important factor in securing the continuing development of the nation.

I believe that the Government are to be congratulated on their National Plan. It provides a realistic target of a 25 per cent. increase in productivity by 1970. But the fulfilment of that plan can be achieved only through effort. I know that there are many people, not confined to any one sector of the community, who fool themselves by thinking that they add to the nation's wealth by higher money incomes, incomes that buy less with higher prices. That foolish idea has been partly responsible for many of our economic problems in recent days.

I would say—and I am sure that my noble friends would agree—that legislation can provide only a framework for action. It is not by itself a panacea for our industrial problems. There is the human tendency for people to take things easy. Both management and labour are as keen as each other to find protected positions, from which they can stretch out, yawn and even go to sleep. But they are liable to be rudely awakened and find that their comfortable posture is no longer protected from the outside world. It is not so much physical inertia that we are suffering from today as mental inertia. Indeed, it has been said in the course of this debate that men show willingness and employers eagerness for more overtime. True, overtime is all too frequently a disguised method of additional payment. Nevertheless, there are many cases where people have to stay at work for that length of time. The solution of our problems is not to be found simply by doing a bit more of the same old thing. Effort means expending the same amount of energy doing different things.

I would remind noble Lords opposite that, in spite of their apparent conversion in recent days, they still have a lingering affection for laissez-faire economic policies. If that is so, it is a dream from which they need to be wakened, because laissez-faire is just not practical in the real world of to-day. It is true that competition in certain circumstances can stimulate efficiency. But even in industries where competition is acknowledged to be keen, there is no guarantee that it operates in the manner classically prescribed for it; that is, in a way in which the customer benefits through falling prices.

As noble Lords may know, I am a member of the National Board for Prices and Incomes, and that precludes me from making any comment on that subject, except to say that in the reports themselves there is an indication that they have turned up many cases in which, in spite of appearances to the contrary, market mechanism has proved to be defective. These reports have also unveiled defects of labour relations, instances of which can be found in many of our industries. They have demonstrated that improvements can be made in the traditional wage-fixing procedures of industry.

On both sides of industry the investigations of the past few months, not only by the Prices and Incomes Board, have demonstrated the overwhelming importance which habit plays in the way people go about their work to-day. We have suffered from years of consistent neglect of these problems, and the result is the well-known prevalence of restrictive practices and managements where custom and practice take the place of initiative.

My noble friend Lord Winterbottom made reference to the better employment of labour. I agree with him. It is vitally important to introduce new machines; it is even more important, at this point of time, to seek a more intelligent redeployment of labour. Only recently, as is evidenced by one of the reports of the Prices and Incomes Board, there was a statement made, and accepted by the employers, that the most intelligent use of labour in an industry secured an increase of productivity of from 15 per cent. to 25 per cent. without any increase in mechanisation. That could possibly be reflected in many other industries.

This brings me back to my first point. The most important factor to-day is that of keeping regard for the human factor. I believe that the programme outlined in the Queen's Speech is an example of the realistic determination of the Government: realistic, because it provides orderly progress, first things first, and all within the capacity of the nation; determined, because it continues to pursue a related social and economic policy which is the very basis of Labour philosophy.

5.33 p.m.

THE EARL OF DUNDEE

My Lords, may I first, on behalf of my noble friends on this side of the House, congratulate the noble Lord, Lord Hankey, on such a thoughtful and interesting maiden speech, based on all the experience he has had in his long work at the Foreign Office and as our representative on O.E.E.C. and O.E.C.D. When your Lordships referred yesterday to the speech of the noble Viscount, Lord Addison, I thought that everybody who followed him dwelt with rather unnecessary emphasis on the fact that he must be getting rather tired of hearing compliments paid to his father instead of to himself. I shall not repeat this redundancy in the case of the noble Lord, Lord Hankey. I will only say that if in 1939 the Prime Minister at that time had followed the present Prime Minister's practice of only creating Life Peers, it is still possible that we might have heard the noble Lord make his maiden speech to-day, but not absolutely certain. We hope to hear the noble Lord speak on many occasions in the future.

In last year's debate on the Address I began by expressing my best wishes to the noble Earl opposite and to the Government on assuming office, and by wishing them a very happy, though not interminable, period in that office. I also respectfully did my best to offer them a little advice. I should like now to repeat my good wishes at the beginning of this new Session, and also to compliment them on the rather limited respects in which they have followed my advice. I particularly implored them to abandon the foolish and disastrous proposal to nationalise the steel industry, which I thought, and still think, would have particularly injurious effects on our export trade. Now it is not mentioned in the Queen's Speech. It is true that the Prime Minister said yesterday that it was only postponed; but I cannot help hoping that if the Government feel able to carry out the first year of their National Plan sitting comfortably down in the warm valleys and only communicating by radio telephony with the commanding heights, then perhaps next year they may again feel able to omit this proposal, without even thinking it necessary to apologise. I never really thought that my advice played any great part in this omission, and now I realise that it was entirely due to the noble Lord, Lord Byers, and to the activity of his Party.

Both the noble Lord, Lord Byers, and the noble Earl, Lord Longford, said a great deal about planning, and particularly the National Plan, and I propose to devote the few remarks which I have time to make in following the two noble Lords on this subject. The noble Earl, Lord Longford, particularly asked me a question about Mr. Enoch Powell. I dislike interrupting the noble Earl, and I did so only because I thought that before he finished his speech it was only fair that I should ask him a similar question about Mr. Cousins. I think my reply might be very much on the same lines: Mr. Powell, too, is a man of great intellectual honesty and great singleness of purpose, and it is better to have a loyal man like that on your side than one who may sometimes take refuge in prevarication. I should think that this is partly a question of semantics. Human beings cannot live their lives for even one day without planning. That is why we have been given the gifts of reason and imagination. I think that perhaps a man of Mr. Powell's intellectual integrity might particularly react against those plans which are put forward, which, after all, are very numerous and which contain a great deal of imagination and very little reason.

But I should like to make it clear, as I have always done in this House, that we are in favour of planning. I was in favour of planning long before the noble Lord, Lord Byers, got here. I remember in 1959 making a speech to your Lordships about our planning programme, and, oddly enough, the particular item I was talking on then was that which the noble Lord, Lord Byers, mentioned—namely, our road programme. I should like briefly to remind your Lordships of what our plan was. It was what was called a rolling five-year plan: that is to say, every year we planned five years in advance. But we did not wait five years to start a new plan. We began the new plan next year, always going five years ahead, going one year in advance. The noble Lord, Lord Byers, said something about our not having done enough mileage. I do not know what he thinks is enough mileage. We managed to build 1,000 miles of dual carriageway, whereas ten years ago there was none; and that is not counting the 300 miles of motorway.

At the time when I was speaking I pointed out that our expenditure on new construction and major improvements had gone up (this is Exchequer expenditure alone, not counting local authority contributions) in two years from £15 million to £47 million. That was in 1959. In 1961–62 it had gone up to £71 million, in 1963 to £94 million, and in 1964 to £123½ million and that was still going on. I should like to emphasise to the noble Lord, Lord Byers, that we did not stop, delay or reduce any part of that programme in the squeeze of 1957 or the squeeze of 1961. But what has happened this year? In the proposals announced at the end of July, the Chancellor of the Exchequer has decided to postpone all new major road projects, except in the development areas, for another six months. That means that about £30 million worth of new projects are held up, together with another £25 million worth of improvements and construction in the form of grants through the local authorities. I think there you have the difference between Tory planning and Socialist planning.

LORD BYERS

Both equally bad.

THE EARL OF DUNDEE

The noble Lord thinks it is equally bad to postpone the road programme as not to postpone it.

LORD BYERS

My Lords, will the noble Earl allow me to make just one point? He has been talking in terms of £25 million. £90 million and £130 million. Professor Morgan has shown that it is going to require an expenditure, on average, of about £500 million, and it will have to be self-financed. It is an entirely different concept which is required.

THE EARL OF DUNDEE

if the noble Lord had been able to wait a little longer, we might have been able to get to that figure, but meanwhile this Government has set it back. Tory planning goes forwards: Socialist planning goes backwards. I am trying to point out that that is the difference between their planning and ours.

The noble Lord, Lord Byers, also said some general things about the Government's National Plan. He said that it was all based on Liberal policy documents, and on stealing Liberal ideas. I do not know whether he is right or not, but when I read the Plan I was a little disappointed in it, and perhaps that is the reason why I found it so disappointing. It aims at an increase of only 25 per cent. in our gross national product over the next six years. Surely, that is a miserable figure when you remember that under "Tory stagnation" in thirteen years the gross national product went up by 46 per cent., and in the last six years—which is the comparable period to the next six years—it went up by 25½ per cent. So that is the Government Plan which they have pinched from the Liberals.

LORD BYERS

My Lords, must I go on correcting the noble Earl? When I was talking about pinching things from the Liberals, that was in respect of some of the measures in the gracious Speech, and not in the National Plan at all. I think the noble Earl will see that in Hansard to-morrow.

THE EARL OF DUNDEE

The National Plan is referred to in the gracious Speech. I thought this was the paragraph the noble Lord was referring to: In implementing the National Plan My Government will extend the range of the Economic Development Committees and encourage British industry to achieve greater competitive efficiency by reorganisation"— and so on. However, I think it is a pity that the economic growth aimed at by the Plan should compare so unfavourably with what the Party opposite have always described as stagnation.

The noble Earl, Lord Longford, went on to refer to what were the two most important subjects on which the whole Plan hangs, and they are indeed contained in the next two paragraphs of the gracious Speech—that is, providing incentives and the incomes policy. I have not time to go into these in any detail, and I am only trying to be constructive with regard to incentives. I would say, without wishing to start a controversy about it, that I think the Government's financial policy, the increase of £600 million in taxation, the increase in the income tax, and the imposition of the corporation tax and capital gains tax, all combined have not provided an incentive to people to save. National Savings, I am afraid, have already gone down, and I hope that industrial investment next year will not follow suit.

What I would suggest to the noble Earl and his colleagues is that we should revise the corporation tax. I do not ask him to abolish it, but to revise it in such a way that it will bear less hardly on small dynamic companies rather than the big prosperous companies who get off much more lightly under it. In regard to the capital gains tax, I think there are a number of changes which ought to be made in it, but perhaps the most essential one is to protect the taxpayer against being taxed simply on inflation when there is no real gain. In the last twelve months we have already had the pound going down in value at the rate of 1d. a month. It is worth nearly 1s. less now than it was a year ago. Therefore, anybody who sells a piece of property for 20s. when it was valued a year ago at 19s., might now be liable to capital gains tax, although the difference has been entirely due to inflation. I think that one of the incentives to save which ought to be given some attention is to remove that anomaly from the capital gains tax.

The noble Earl went on to say that the noble Lord, Lord Shackleton, was going to speak on incomes policy, although the noble Earl said a good deal about it, too. I should like to say only one thing about it. I hope the Government will approach it, as I am sure Lord Shackle-ton will, not in a spirit of arrogance or cocksureness, but in the spirit of humility. After all, our incomes policy, although it was not as successful as we should have liked it to be, was very much more successful than the policy of the present Government has been so far. Prices have gone up by 4.8 per cent. up to August, and they are probably higher now. As the Chancellor of the Exchequer told us the other day, wages have gone up by about 8 per cent. If you were against an incomes policy, you could easily make a pretty strong attack on the basis of those figures. But I think we should all still keep on trying. I think this is a matter on which we ought to agree. But there are two conditions which I have always believed are essential to a successful incomes policy. One is the removal of restrictive practices, and the other is much greater competition in industry—the removal of obstacles to competition by measures such as the Resale Prices Act which we carried through last year. I think this ought to be given much more prominence than it is given in the Plan.

Finally, about the deficit. I am so fond of the noble Earl, Lord Longford, that I have often spent a great deal of time in trying to educate him about the deficit. I do not believe he has got to "A" level yet, but I hope he has got to "O" level, and I should like to keep on persevering. He returned again to what I have often told him is a mistake, that the deficit was responsible for the crisis in sterling. He will remember that on October 26 the Government published a White Paper in which they said: There is no undue pressure on resources calling for action. That was perfectly true: there was not. The crisis, as they admitted later in November, was due to confidence factors later on. But this deficit was not, and ought not to have been, unexpected by anybody. It was spoken of, and the reason why I have mentioned it is that I am afraid the Prime Minister (as I told the noble Earl before, and he would not believe me; I had to refer him to Hansard, and it took a long time) stated that Mr. Maudling had tried to deceive the electors at the Election by pretending that the deficit was not so great as it was, whereas in fact Mr. Maudling had in fact rather tended to exaggerate it. Not only that; he had anticipated it in his Budget statement and had explained to the country what measures he had taken to provide against it by increasing liquidity, by special arrangements with the International Monetary Fund and the United States. So in the autumn of last year this deficit was amply covered, and there was no reason why a financial crisis should have followed from it.

My Lords, what are we to do about the deficit in the future? I want to make it absolutely clear that we ought always, whether we have a deficit or a surplus in our trade, to pay the strictest attention to the economy to avoid waste of every kind. I certainly do not criticise the Government for being anxious to get rid of the adverse balance of trade, but I do think that the priority which is given to that purpose in this National Plan is perhaps a little excessive. The whole document is dominated by the thought, "If only we can get rid of this deficit then we can begin to have a little fun. There will be an extra £8,000 million, of which we can spend £4,500 million more on personal consumption"—of which, I am glad to see, £300 million is on drink.

I am not arguing in favour of profligacy of any kind, either in finance or in trade, but I would put this point to noble Lords opposite: suppose we all engaged in trading with each other—I sell something to the noble Earl, Lord Longford, he sells something to the noble Lord, Lord Shackleton, and the noble Lord, Lord Shackleton, sells something to the Liberal Party—we cannot all have a favourable balance. It is just possible that we might all be all-square, but if somebody has a favourable balance, then somebody else must have a deficit, and if you are going to make it a virtue, as I think O.E.C.D. is apt to do, for every trading country to have a surplus, and to say that any trading country which has a deficit is a financial delinquent, then you will never get real world economic growth.

There are only two remedies. One is a greater international liquidity. I think all British Governments have been better than other Governments in this respect, and I do not blame our Government for our failure to get wider measures of liquidity than they have got. But it really is ridiculous that a country which has £11,000 million worth of foreign investments, of which the Prime Minister boasted after he had made an awful fuss about our miserable position, should be considered a financial delinquent because we are £750 million overdrawn. It does not make common sense.

We must try to have much greater liquidity than we have now. Better liquidity can give you a better credit base, but in addition you also want a wider trading base, and I am afraid I must end on a note of disparagement because I do not think the paragraph dealing with this in the Gracious Speech goes far enough: My Government will continue to work for the greater unity of Europe. They will seek to strengthen the European Free Trade Association and to promote co-operation between the Association and the European Economic Community, and the establishment of a wider European market. In spite of that last phrase, my Lords, although these sentiments are quite unexceptionable, they do not go anything like far enough, and I do not think they will give the impression to our friends and allies in Europe and the rest of the world that we are in earnest about this. This should not be a matter of amour propre at all. We are a great European nation and a great world nation, and we are entitled to give our advice to the rest of the world. General de Gaulle has a right to state his opinion; equally we have the right to state ours, and to go on stating it, whatever the obstacles may be; and our opinion, which I believe to be right, is, or ought to be, that it is to the benefit of the whole world that we should have a united Europe commercially, and to some extent it must inevitably follow, politically.

That is not a thing which we are seeking for our own advantage; it is because it is to the advantage of France, Germany, Italy and all the countries of Europe, and the United States of America, too, and to the Communist world indirectly, because the sooner the Communist countries get accustomed to trading with another great agglomeration of trading nations close to them, the more easily they will be liberated from the shackles of their present political and commercial system. Above all, it will be for the benefit of the undeveloped countries, because the rather miserably inadequate aid they are now getting could be immeasurably increased out of all recognition if we had in Western Europe a full union which should include not only the present European Economic Community but Britain and the whole of E.F.T.A. as well.

5.55 p.m.

LORD SHACKLETON

My Lords, it is customary, in winding up, to refer to the fact that we have had a wide-ranging debate, but I must say I never expected the mutiny of the Curragh to be introduced into a debate on economics as the noble Lord, Lord Barnby, introduced it, at least by implication. I have been a little disappointed by the speeches from the opposite side of the House, and I exclude the excellent speech made by the noble Lord, Lord Byers, who, we must still remember, does belong to the Liberal Opposition, and also with the exception of that of the noble Earl, Lord Dundee.

I must say I found his speech in striking contrast to that of the noble Lord, Lord Carrington. I can now see why Lord Carrington is so worried about inter-changeability among speakers. I have not heard the noble Earl, Lord Dundee, on defence recently, but I have heard the noble Lord, Lord Carrington, on economics, and I cannot say that he added a great deal to the debate. I do not want to say much about his speech, because my noble friend Lord Longford dealt with it, and it is lucky that our protestations of affection for one another across the Floor of the House, which I believe to be genuine, should at least help to comfort us in our disappointments. May I, therefore, wish the noble Lord, Lord Carrington, a successful trip to Australia, where I believe he is going shortly.

I must say also I am surprised that he referred to the fact that briefs are uninspiring or that it is impossible for a Minister, speaking on another subject—a situation which we have to face very much in this House—to depart from the brief that he is given. Of course the noble Lord, Lord Carrington, in common with other speakers from the Opposition, really gave us nothing of Conservative policy in this matter. I am not complaining against the noble Earl, Lord Dundee, because his speech, and indeed many of the speeches, have been rather speeches by reference. We have had a reference to a Conservative pamphlet. I must admit that I have not read it in detail. Indeed, I must confess that I do not always read all Labour Party pamphlets in detail, and it is better if spokesmen, particularly members of the Opposition, are going to advocate Party policy, that they should put it before the House rather than refer us to another document.

I found the speech of the noble Lord, Lord Barnby, particularly confusing in this respect, because he referred to an eloquent speech made by the noble Lord, Lord Shawcross, which he praised for courage in the face of several thousand members of the Institute of Directors. I should have thought it was the Chancellor who ought to have been praised, but perhaps I did not quite follow what the noble Lord was saying.

LORD BARNBY

My Lords, my reference was because I thought the noble Lord, Lord Shawcross, had previously been a member of the Socialist Government, and I particularly admired his courage in very logically saying what he did say.

LORD SHACKLETON

My Lords, clearly anyone who leaves the Socialist Government and moves to the Institute of Directors finds himself in an excessively hostile atmosphere. My difficulty was that we did not know what Lord Shawcross said; and since Lord Barnby did not tell us I cannot answer it'. Therefore, I do complain about speeches by reference.

Having made those rather more particular criticisms, I consider it interesting that the noble Lord, Lord Carrington, was able to get in certain questions regarding the Defence Review. It may well be that the noble Earl, Lord Jellicoe, will be able to ask the same questions to-morrow, and I think that probably he will not get much of an answer, at the moment when the Defence Review is proceeding. However, I admit that it was probably difficult in an economic debate for an ex-Defence Minister not to trail his coat a little. Not only would he like to know the result of the Defence Review—so would I. I think many people will be glad when it is over. But I would repeat that a Defence Review of this kind is not a thing that can be hurried. The subjects are of such depth and profundity that if there is a criticism it is not that the Government are taking too long over it but that circumstances require us to make decisions more quickly than we should wish: we should prefer to make them after even more thorough consideration.

LORD CARRINGTON

My Lords, I do not want to pursue this matter: it may be debated to-morrow, as the noble Lord said. But can he give any indication when we are to get the results of the Defence Review, because there are a great many very important matters awaiting decision?

LORD SHACKLETON

I agree that there are a great many matters awaiting decision. I should not like, however, to give an exact date. Consideration is going on. But I should like to make one point clear: it may be possible, as certain aspects of the matter become clearer, to take decisions on those particular points; and certain decisions have already been taken which will not await the wider consideration—in other words, the pattern in which those decisions will have been set. I would assure him that information on those will be given as soon as possible.

I would agree also with the noble Earl, Lord Dundee, in congratulating the noble Lord, Lord Hankey. It is a matter of great satisfaction to have somebody (and this is one of the peculiar virtues of your Lordships' House) who has such wide experience in a field in which he can talk with great authority to the House. The loss to the Government, whatever Government it may be, in not having him representing us in O.E.C.D., following his previous distinguished career, will, I hope, he our gain. We have had many distinguished civil servants who sit on those Benches; and there was a famous occasion on which they all ganged up on an official line and both the Conservative Government and the Opposition were opposed to the Cross-Benches.

We have had some interesting speeches this afternoon. I will try to deal with some of the particular points, and come back to this very difficult question of incomes and prices. I entirely agree with the noble Earl, Lord Dundee, that this is a subject we must approach with humility: it is a very difficult one. But at least I think we are agreed that it is one of the most vital subjects, and I will therefore devote a few minutes towards the end to this particular matter.

First of all. I was very pleased to hear what the noble Baroness, Lady Plummer, had to say about setting up an Agricultural Exports Council—A.E.C. I am not sure whether they chose the title well. It is always important, as we know with children, before choosing names to see how the initials come out. "A.E.C." could he confusing with other names. As the noble Baroness rightly said, we have a great deal in this country that we can export, consistent with our international obligations, under the agricultural umbrella: not only livestock for breeding, machinery, and so on, but also "know-how". We have one of the finest agricultural extension services in the world, and officers of our National Agricultural Advisory Service serving for short terms on loan to developing countries provide just one valuable way of getting this "know-how" to those who need it. There are other ways in which we can, and must, increase the return we gain from abroad from this vast and progressive industry of ours, and in this the organisation of an Exports Council will be invaluable.

The noble Baroness referred to the statement made by my noble friend Lord Champion in this House at the end of the last Session. As a result, renewed impetus has been given to the process of crystallising opinion in the industry. What seems to be wanted is that a small group of those most directly concerned should get together in order to formulate concrete proposals for getting an Agricultural Exports Council created. In order that a meeting of this sort may be held as soon as possible, the Ministry of Agriculture will act as convenor, and the proposals which emerge will need to be discussed in an industry-wide form. I must emphasise that there are quite a large number of organisations in the agricultural industry that are closely interested and have a valuable contribution to make in promoting exports, and the A.E.C. must be the industry's own show. To-day's discussion will, I hope, serve to stimulate still further interest in the formation of an export body and an awareness of the useful rôle it could play. The noble Baroness will not expect me to comment on her remarks about the National Farmers' Union, but I have no doubt that in the context of what she said this particular further evidence of Government interest will be relevant, and I am indebted to her.

There are a number of other particular points to which I should like to refer. The noble Lord, Lord Byers (and I shall deal later on with some of his more general aspects), made certain particular points. I do not think I have time to go into the question of company law reform. This is a matter in which I, like he has, have been interested for a number of years, and it has just occurred to me that this is perhaps a suitable subject for debate in your Lordships' House. We are never able to debate this sort of subject in detail in a general debate on the humble Address. I do not think this is a matter in which I am offering Government time in any way, but there may be opportunities when we could have a further look, not only at all the proposals which the Government may put forward but also at wider issues in which I am very interested. Because the question of company law and the understanding of what might be called the ethos of the company in this matter, is something to which a good deal of thought is being given; and some of this thought needs bringing out into the open.

This leads on to the point which the noble Lord made; and, of course, my noble friend Lord Peddie, in a very interesting speech, was referring to these questions of efficiency and administration. This is a matter in which I have been deeply interested, and the Government are deeply interested. It is a fact that not only is there a shortage of economists on the Conservative Benches, but there is also a shortage of managers. It is rather surprising when I look at those who have spoken to-day, and who have had direct experience of management in industry in the context of the problems of increasing present-day productivity.

I do not know whether the noble Lord, Lord Byers, is also briefing the noble Lord, Lord Barnby, on management at the same time, but these matters are absolutely fundamental to the success of our National Plan. The National Plan can only be art outline; it is an intention: it is leadership. And it is leadership that this Government are trying to give, something which has not been given in such a definite form in the past. So I welcome the points which the noble Lord, Lord Byers, raised. I will not get into a discussion as to how far our policy is that of the Liberal Party. I remember that the Liberal Party Yellow Book of the '30s was certainly one of the most progressive documents of its kind.

LORD BYERS

It still is.

LORD SHACKLETON

I read it quite recently and commend it to your Lordships.

I should now like to turn to certain of the points, and particularly that made by the noble Lord, Lord Salter. The noble Lord is more experienced in economic administration than, I should think, practically anyone in this country, and therefore we tend to listen with respect to what he has to say about maintaining the parity of the pound and the need, to achieve that end, to maintain the stability of prices. I am not sure that his proposition, in quite such simple form, is strictly valid. If our competitors aboard are experiencing a rise in prices, then the need for us to hold our prices stable while maintaining the sterling exchange rate is that much less—in other words, we all sin together—but perhaps this is a small piece of sophistry on my part.

What the noble Lord is saying is that we cannot hold the present parity of sterling if we allow our prices to get out of line with those of other exporting countries, and, since these countries, on the whole, are succeeding in keeping their prices down, it is absolutely vital for us to do the same. I could not agree more completely with the noble Lord. This, of course, is only on this particular issue. There are other absolutely vital reasons for keeping prices down, which bear more indirectly through the effectiveness of our exports, and I will deal with them—does the noble Lord wish to intervene?

LORD SALTER

My Lords, perhaps I might recall exactly what I did say on this point—namely, that if an increase in prices in this country is as much greater as the increase in dollar prices in America as it has been throughout this last year, it will not be possible permanently to maintain the present policy of the Government, which is to retain the currency ratio with the dollar at its present rate.

LORD SHACKLETON

I do not disagree with the noble Lord's general proposition, but I do not want to get into a detailed discussion on the components of this particular equation. Of course I agree in general terms.

Since we are now on this subject of prices, productivity and earnings, I should like to deal with the point made by the noble Lord, Lord Byers, in regard to a possible discrepancy in the measurements that are applied. In any consideration of economics or costs there will be any number of factors that can be applied. It is difficult for us to judge a particular economic situation, or a particular aspect of it, by a single factor. There are a number of measures in other fields by which one judges efficiency: profits is one; and there are many others. I would assure the noble Lord that there is no discrepancy between the statements made. The precise figure depends upon the series used and the period covered. Average hourly earnings rose by 4.8 per cent. in the six months up to April, 1965. This was the figure quoted in the First Secretary's Answer. The 8 per cent. figure relates to the increase in the national wage and salary bill in the second quarter of 1965 compared with the year earlier. This is an example of the danger of what might be called "selected statistics". I can assure him, however, that these statistics were not selected by the Government with intent to deceive, but were merely most useful for illustrating the particular point. If the noble Lord would like to discuss this aspect further, I should be happy to do so; but I do not think we can hope in this field to achieve the sort of simplicity which would make this matter much more intelligible to us all.

Then again, allowing for the probable rise in employment which took place over this period, this would mean an increase of a little over 7 per cent. in average earnings per head. But, as stated in the National Plan, the underlying rate of increase of productivity may now have reached a rate of about 3 per cent. per annum. Thus, there is still a gap to be bridged from both sides. A further increase in productivity is both necessary and possible. Recent, and still incomplete, evidence suggests that there was a slower growth in earnings in the third quarter of this year, and a smaller growth seems likely in the year ahead.

Of course we then run into difficulty. My noble friend Lord Winterbottom, in an extremely interesting speech, indicated one of the difficulties we are in with regard to broad planning. Economics has always had this difficulty, that you can either have your broad macroeconomic approach or your micro-economic approach, and you may be able to lay down your general criteria only to find that an enormous increase in productivity is achieved in a particular area, as the noble Lord suggested, and a consequent opportunity for wage increases.

I should like to deal in a little more detail with this question of prices and incomes policy. In the past year, both word and deed on the economic front have been dominated by the balance of payments difficulties. On this we are all agreed. Twelve months ago we faced a most serious situation. I do not think I will get into a further argument on whether or not a deficit of £800 million is serious. The Conservative Party perhaps think of it a little more lightly than we do. But I do not think that any Administration in recent years has achieved such a striking figure. Nevertheless, there was a large external deficit and there was speculation against sterling. Our immediate aim has been, and still is, to eliminate the deficit and restore confidence in the pound. We have gone a long way—I think this is acknowledged—in achieving this; but we still have a long way to go, and we shall then have to repay the debts incurred in financing this deficit.

Our fundamental aim, of course, is to prevent all this from happening again. No Government has yet succeeded in doing so. It may be said that this is a most ambitious aim, but it is the theme which runs through the National Plan. For too long the United Kingdom has suffered from a weak balance of payments. I will not go on quoting this, beyond saying that this always leaves us vulnerable to this situation. In order to meet it, it is vital to keep prices in check. Indeed, one reason why the country has not broken out of this spiral in the past has been its failure to check the continual spiral of costs and prices.

I think the noble Lord, Lord Barnby, and possibly the noble Lord, Lord Hankey, expressed some anxiety, or some doubt, as to the success of this, but I would draw attention to what the noble Earl, Lord Dundee, said. We are right at the beginning of this matter, and we cannot be over-confident. But we can he determined in this matter; and that the Government are. If we could stabilise the general level of prices, so that unavoidable increases in some cases are offset by reductions in others, we could transform the balance of payments overnight, or at least in the course of a short time; and we would, incidentally, get rid of a good deal of discomfort and actual suffering in this country. It is not always realised that rising costs and prices weaken the balance of payments in a number of ways. First of all, and most obviously, rising home costs make it difficult for British manufacturers to keep down their export prices. Then, again, there is the pull of the home market with prices rising. Thirdly, when prices of home-produced goods go up, people naturally want the cheaper foreign goods, and so imports rise. I would not say that the spiral I have drawn is a complete one, but we are agreed absolutely on the seriousness of this.

These tendencies have been all too evident in the past, and not only in Britain, for prices have risen elsewhere. We can in fact be relieved that our prices have risen less, perhaps, than in some other leading industrial countries, but in the last year our price index has been affected by certain special factors: the increase in indirect taxation, which, after all, forms part of the Government's programme to restrain demand, and the increase in import prices helped to push the index up. But in the last few months I am happy to say prices have been much steadier. Between the second and third quarter of the year the price index rose only by a half a point.

The noble Lord, Lord Carrington, said that this year we had seen one of the sharpest rises in prices since the war. The actual increase in retail prices from September, 1964 to September, 1965 was 4.8 per cent. I know that Conservatives are sensitive about their thirteen years, but the 7 per cent. increase from April, 1955, to April, 1956, seems to be a higher achievement than this Government achieved; then, again, there was a 5½ per cent. increase from June, 1961, to June, 1962, achieved in the mid-period—not immediately after an Election but well before the following one. Of this increase of 4.8 per cent., two-fifths, or 1.8 per cent., is accounted for by the special measures which we were obliged to take to deal with the situation we inherited.

Whether or not our record is worse or better than that of other countries, it clearly is not good enough. Other countries are not faced with our particularly persistent and acute balance-of-payments problems. This is of more vital importance to this country. We need to do a great deal better than others are doing—that is, to avoid the increases which occur elsewhere—if we are to regain a larger share of world trade. Now, when overseas markets are expanding, is the time to start reversing the trends of earlier years. Also, of course, we want to put an end to the erosion of real income at home and the misery that this causes, which has resulted from a steady rise in the cost of living over the last twenty, indeed twenty-five, years. I think we are all agreed that it is in the nation's interest and in everyone's personal interest, that we should strive to keep increases in wages, salaries and other forms of income in line with the increase in national productivity.

Your Lordships will remember that this was part of the Joint Statement of Intent signed by representatives of unions, management and Government in December last year. This was the beginning of the new positive policy of productivity. As we have begun, so we have gone on to hammer out a policy which would be acceptable to those concerned with decisions on incomes and prices. Good progress has been made, and the credit for this must be shared by those whom we have consulted on both sides of industry at every stage. It took several months to work things out. The policy was finally launched at the end of April, when it was endorsed by an overwhelming majority at a national conference of trade union executives.

Shortly before, the National Board of Prices and Incomes—an independent body—had been set up under Mr. Aubrey Jones. This was only six months ago. The Board quickly became a going concern, and the Government have already asked the Board to examine eleven cases—five of increases in prices, five of increases in incomes, and one involving both. The task of the Board in these cases—a Board of which my noble friend Lord Peddie is a distinguished member and therefore is unfortunately prevented from speaking on this interesting subject—and the criteria which they apply in assessing increases in prices were set out in the agreed White Paper last April. The Board itself said in its report in June that it regarded its function as that of dealing with increases in prices which result from old habits, inherited attitudes and institutional arrangements. The Board has reported on five cases referred to it and its reports are very lively, constructive and readable. Indeed, I should I like to congratulate it on the readability of its reports, which might seem to be of a fairly dull nature. I could give your Lordships some details, but I do not think that I should take up much time on this beyond showing that this aspect of Government policy is beginning to bite, and to bite well. It is already having an impact, and, as I have indicated, in recent months the average level of prices has hardly risen at all. There is evidence that many firms are reluctant to risk the scrutiny of the Board which might follow if their prices were raised; this is perhaps speculative.

On the incomes front the outlook is less cheerful. Many of the recent pay settlements are above the norm of 3 to 3½, per cent. a year, the rate which represents the expected growth in productivity over the next few years. Higher increases are bound to affect costs per unit of output and thus to push up prices. For this reason, and in the light of experience, the Government have decided that more could and should be done to make the existing policy effective.

The gracious Speech refers to the Government's intention to introduce legislation early in the Session designed to carry forward the national policy on prices and incomes. One part of the proposed legislation will be to provide for the reconstitution of the National Board for Prices and Incomes on a statutory footing. The most important part will empower the Board to require witnesses to attend and give evidence, and to require the production of documents and other information. At the same time it will be possible to provide for a sensible and flexible procedure for the conduct of the Board's work which leaves a proper discretion to the members, bearing in mind the importance of obtaining reports quickly, particularly where the cases referred to the Board concern specific prices or claims. This will provide the Board with enabling powers to set up a statutory system of early warning and a standstill on changes pending the report by the Board. It will be possible for these powers to be brought into operation only by an Order in Council subject to the Affirmative Resolution procedure.

The powers will be threefold: to require notification of intention to increase prices or charges, and notifications of claims relating to pay or other conditions of employment and of proposed settlements of such claims; second, to refer to the Board for examination, in the light of the considerations of the national interest set out in the White Paper on Prices and Incomes policy, any existing or proposed price and any claim or settlement; and thirdly, to require such proposed price or pay increases to be deferred until after the Board has reported. The proposed legislation will be based firmly on the principle of achieving lasting progress by consent. It is not intended to seek powers to enforce the findings and recommendations of the Board; it is not intended to prevent negotiations from freely taking place at the end of the day. Indeed, it is wholly consistent, in the view of the Government, with what the noble Lord, Lord Hankey, had to say regarding the type of indicative planning which is so essential in a democracy such as ours. In considering whether to exercise the power to set up a statutory system the Government have willingly pledged themselves not to come to a decision before consulting the T.U.C. and the Confederation of British Industries. The Government hope that this statutory power will be kept in reserve.

Your Lordships are aware of the very important progress made towards setting up a voluntary system of early warning of intended price and pay increases. It is a subject for the greatest congratulation, in the light of remarks which noble Lords have made about the rôle of trade unions historically, that the T.U.C. did agree, by a clear majority, to adopt a procedure whereby a Committee of their members would collect advance information from the unions about wages and salary claims. The Committee will themselves scrutinise and discuss these claims before they are submitted to employers, with the aim of seeing whether they are compatible with the agreed national policy. This system is already in operation and the T.U.C. Committee has already considered 51 claims and arranged for further discussion on five of them. We all hope that this voluntary system will prove effective, and the Government are determined to do all they can to promote its success.

The importance of achieving the objectives of this policy is so vital to national well-being that a limited form of insurance is considered to be a prudent and reasonable step. We are not out to impose a wage freeze or even a pay pause. All we want is to limit pay and increases to the average level which we estimate can be absorbed by a rise in national productivity. As present, we put that at 3 to 3½ per cent. It is, if I may say so to the noble Earl, Lord Dundee, a higher figure than has been achieved in the past, which was an average figure over thirteen years of 2½ per cent. Perhaps at this late hour we shall have to agree to differ on this. But if industry can find ways of achieving a more dramatic increase, we shall be willing to raise our sights.

There was a particular point to which the noble Lord, Lord Winterbottom, referred, with which I partially dealt, and that was the question of wage drift. This question has been pretty fully discussed, and the intention is that the early warning system should be applied to local and company negotiations as to all others. But, clearly, this is the detail where the hard thinking and the hard work have got to be done. Perhaps it is because the noble Earl, Lord Dundee, and I have been debating with one another for so long on economics that we have either taught one another something or I have learned something from him, but I do strongly agree with him about the problem of international liquidity. It is a subject for satisfaction that increased international liquidity, arrangements with the I.M.F., arrangements which the previous Government have made—and I acknowledge the debt of this country in this matter—have succeeded in getting us through a particular crisis, and it is striking how greatly co-operation has improved between Governments and the Central Banks in dealing with these issues of international finance. These theoretical sinister figures, the Gnomes of Zurich, have now become the Angels of Zurich in the present operation, and we must acknowledge the support that has been given by countries, particularly, of course, by the United States.

THE EARL OF DUNDEE

My Lords, looking to the future, the noble Lord would agree, would he not, that what has been done is nothing like enough?

LORD SHACKLETON

My Lords, I was about to go on. I do absolutely agree that much further progress is necessary. The road is still faced with plenty of problems in the field of international liquidity, and these will grow. Unfortunately, not all the countries share our particular views on this matter, but Her Majesty's Government believe that the difference of approach shown by different countries should not prove to be irreconcilable. We are certainly playing a full part in the discussions that have now begun in Paris between the Group of Ten countries, since we believe it is an urgent task to make plans in good time before there is a threat of interruption of trade through lack of means of making payment.

Your Lordships have seen enough and heard enough to be aware of the measure of real success that has been achieved in the past year, a success which has led to a great deal of confidence in industry, and this is perhaps one of the most striking indicators in the present situation. But it remains true that to be steering the right course is not to guarantee safe arrival. What always used to concern me when I was in Opposition was the rather easy optimism in those days of the then Government, and it would be disastrous if we were to allow the favourable aspects of the present situation to beguile us into relaxing our policies. The coming twelve months, with the expansion of the home economy proceeding at a comparatively slow pace—a euphemistic phrase—will be a testing time. Vigilance will be necessary if the Government's supreme objective of external equilibrium during the course of 1966 is to be met, thus permitting a start to be made on repaying the heavy short-term debts which we have had to contract overseas in order to lead us through the critical twelve months just past.

I believe that there is a fundamental difference in the approach of this Government and the last. The last Government's attitude was well summed up by Mr. Reginald Maudling, who said: I think our besetting weakness is the inability to rise to the challenge until the challenge really stares us in the face. But it is not altogether a disagreeable weakness. My Lords, it is a very disagreeable weakness. This country has paid for it, and we are determined to take a tougher approach to these problems than has been taken in the past.

Much of the legislation which we shall bring forward is directly relevant. Indeed, I would say that those aspects of social legislation which some noble Lords may think not relevant are in fact just as relevant as the others, because it is only on this basis that we can proceed with the Government's plans for the future for the building of a more efficient, a more dynamic and a more generous life for all our people. This is where I should like to say to the noble Lord, Lord Fraser of Lonsdale, that he misunderstood my noble friend Lord Longford. What my noble friend was saying was that the attaining of increased production and wise economic policies were not aims in themselves; they were a means to an end. But clearly it is apparent that the Government, because they are so determined to achieve the good end, will have the highest regard to these economic considerations.

Because time is late, I shall not argue the finer points about importing to export again, or borrowing to lend again. We on this side of the House, and in the Government, are confident that we are making a really good beginning and a very determined beginning, and that this will lead to a future in which, on a strong economic basis, we can play our full part both in maintaining peace—and it has been strongly stressed that a successful economy is fundamental to our foreign policy—and in relieving distress at home and poverty throughout the world.

THE DUKE OF DEVONSHIRE

My Lords, I beg to move that this debate be now adjourned.

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