Lords Sitting of 26 April 1966

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Lincoln
Several Lords—Took the Oath.
The Lord Wedgwood—Sat first in Parliament after the death of his father.

TRIBUNALS AND INQUIRIES BILL [H.L.]
2.42 p.m.
THE LORD CHANCELLOR (LORD GARDINER): My Lords, I beg leave to introduce a Bill to extend Sections 1 and 7A of the Tribunals and Inquiries Act 1958 to further classes of statutory inquiries and hearings; to transfer to the Secretary of State the power to make rules of procedure under the said Section 7A in respect of inquiries and hearings in Scotland; and for purposes connected with the matters aforesaid. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read 1a. —(The Lord Chancellor.)
On Question, Bill read 1a, and to be printed.

MISREPRESENTATION BILL [H.L.]
THE LORD CHANCELLOR: My Lords, I beg leave to introduce a Bill to amend the law relating to innocent misrepresentations and to amend Sections 11 and 35 of the Sale of Goods Act 1893. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read 1a. —(The Lord Chancellor.)
On Question, Bill read 1a, and to be printed.

ABORTION BILL [H.L.]
LORD SILKIN: My Lords, I beg leave to introduce a Bill to amend the law relating to termination of pregnancy by registered medical practitioners. I beg to move that this Bill be read a first time.
Moved, That the Bill be now read 1a—(Lord Silkin.)
On Question, Bill read 1a, and to be printed.

SEXUAL OFFENCES BILL [H.L.]
THE EARL OF ARRAN: My Lords, I beg to leave to introduce a Bill to amend the law of England and Wales relating to homosexual acts. I beg to move that this Bill be read a first time.
Moved, That the Bill be now read 1a. —(The Earl of Arran.)
On Question, Bill read 1a, and to be printed.

JUDICIAL BUSINESS (APPEAL COMMITTEES)
THE LORD CHANCELLOR: My Lords, I beg to move the Motion standing in my name on the Order Paper. Your Lordships will remember that on Thursday the House appointed the two Appellate Committees which are the Committees which determine Judicial Business for your Lordships' House. This Motion is for the appointment of the two Appeal Committees which consider applications and petitions for leave to appeal. The reason for appointing two Committees with the same memberships is, as was the case with the Appellate Committees, that when necessary it enables two Committees to sit at the same time. I beg to move.
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 consider, during the present Session, such Petitions as may be referred to them and other matters relating to Causes depending in this House, and to Causes formerly

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depending in this House; and all other matters relating thereto; and that the Committees do appoint their own chairmen; and that, in pursuance of Section 1 of the Administration of Justice Act 1960, in all Appeals in which the leave of this House is required under that Act, the Petition or Application for leave to appeal shall, after being received by this House, be referred to one of such Committees as aforesaid, and such Committee may, after consideration whether such leave should be granted, take its decision and give directions accordingly on behalf of the House.—(The Lord Chancellor.)
On Question, Motion agreed to, and ordered accordingly.

COMMITTEE FOR PRIVILEGES
THE CHAIRMAN OF COMMITTEES (THE EARL OF LISTOWEL): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That in accordance with Standing Order No. 65, a Committee for Privileges be appointed, and that the following Lords, together with the Chairman of Committees and any four Lords of Appeal, be named of the Committee:

M. Salisbury,

E. Attlee,

E. Dundee,

E. Longford,

E. St. Aldwyn,

E. Swinton,

V. Dilhorne,

L. Amulree,

L. Carrington,

L. Conesford,

L. Ogmore,

L. Rea,

L. Shepherd,

L. Silkin,

L. Strang.—(The Chairman of Committees.)

On Question, Motion agreed to.

SPECIAL ORDERS COMMITTEE
THE CHAIRMAN OF COMMITTEES: My Lords, I beg leave to move the Motion standing in my name on the Order Paper.
Moved, That a Committee be appointed to consider all Special Orders in the present Session; and that the Lords following, with the Chairman of Committees, be named of the Committee:

D. Atholl,

M. Willingdon,

E. Munster,

V. Soulbury,

L. Airedale,

L. Archibald,

L. Cawley,

L. Coutanche,

L. Crawshaw,

L. Faringdon,

L. Jessel,

L. MacAndrew,

L. Meston,

L. Morton of Henryton,

L. Peddie,

B. Plummer,

L. Royle,

L. Silsoe,

L. Strang,

L. Terrington.—(The Chairman of Committees.)

On Question, Motion agreed to.

LEAVE OF ABSENCE
THE LORD PRIVY SEAL (THE EARL OF LONGFORD): My Lords, I beg leave to move the Motion standing in my name on the Order Paper.
Moved, That a Select Committee be appointed for the general supervision of arrangements relating to leave of absence, and that the Lords following, with the Chairman of Committees, be named of the Committee:

E. St. Aldwyn,

L. Amulree,

L. Shepherd.—(The Earl of Longford.)

On Question, Motion agreed to.

ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH
2.46 p.m.
Debate resumed (according to Order) on the Motion moved on Thursday last by Lord Cohen of Brighton—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 ERROLL OF HALE: My Lords, after the felicities of last Thursday afternoon we settle down to-day to the real business of carefully and critically examining the content of the Queen's Speech. I am sure that noble Lords will agree that it is right that trade and economics should be debated first, because unless Britain's economy is strong our influence in world affairs, to be debated to-morrow, will be weak and our hopes of improvement in home affairs, to be debated on Thursday, will be deferred. I should like, with your Lordships' permission, to begin by quoting a sentence from the Queen's Speech which I suggest is of paramount importance:
"A prime aim of My Government's policy will be to restore equilibrium in the external balance of payments. They"—
that is, the Government—
"are determined to maintain the strength of sterling."
These are fine words, with which we can all agree, but looking back over the last eighteen months we can see the difference between the fine words of the Labour Government and what they achieved in reality. In round figures, their main achievements during the period of the last Parliament were to allow wages to rise by about 9 per cent. and prices to go up by 5 per cent., while production, which they always said they would be able to stimulate, remained completely stagnant, the figure for production for February, 1966, being exactly the same as that for February, 1965. There was one other substantial increase which I think is symptomatic of the way in which a
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Labour Government believe the country should be run: the increase in the number of civil servants amounted to no fewer than 10,600.
One result of the General Election is that the present Labour Government will have to clear up the mistakes which they made when they were the Government during the last Parliament. They now have their own mess to clear up and can no longer blame the mistakes of the previous Government, as they did—erroneously, in my view—to explain their difficulties in 1964–65. Now they are right out on their own, admittedly with a fairly substantial majority in another place; they are now responsible for their own actions, without any alibis of any sort—not even the alibi of what happened in the last eighteen months.
When we look back over those months, it is clear to see that in their endeavours to contain the economy they concentrated first, I think it is fair to say, on price restraint, and so far I think even they will admit that they have largely failed with the equally necessary wage restraint. The result has been an inevitable increase of purchasing power at a time of full employment, far in excess of the increasing production which should have been its accompaniment. As I think we may all accept, this has led to an excessive demand for domestically produced goods, coupled with increased imports to satisfy this ever-growing demand and at the same time, by those firms which are trying to fulfil their delivery dates on time, in many sectors of industry, a severe over-bidding for scarce labour.
A striking example was quoted to me only the other day. A well-known motor vehicle firm North of the Thames, desperate to get more labour, is now sending buses through the new Thames Tunnel to areas South of the river in order to attract away labour from those factories which are paying lower rates. The only way those factories, which have their own delivery promises to maintain, can retain their labour force is to raise their own wage rates—not in response to increased production, but in order to keep their workpeople. In one of the factories if there is to be any price increase it will have to be reported to Mr. Brown, under his early warning system. This firm, as the rates of wages increase, will have to raise its prices, merely to

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prevent its labour from being poached away by an aggressive firm North of the river. Those Members of your Lordships' House who have industrial interests will be able, I am sure, to quote many similar instances of where an overheated economy leads to wage inflation of this sort.
A further factor, which is within the Government's own control, is the threat of higher taxation, which is causing a beat-the-Budget spending spree. In the last ten days four people have asked my advice on whether they should buy a car before the Budget or after, because nobody believes that the taxes on motor cars are going to be reduced—indeed, most people think that they are going to be increased. This is what happens under a Labour Government. It happened before. The noble Lord, Lord Shepherd, will recollect that when I entered another place away back in 1945, along with many similar people, I suffered for six years under this kind of situation, which is happening once again.
The Government must try to get the economy into equilibrium. This does not require drastic measures of change, leading to massive unemployment or anything of the sort. It requires some lessening of domestic demand, which could perhaps be best brought about by a temporary lowering of the rate of Government expenditure on some of the social services and a temporary lowering of the rate of expenditure by some of the nationalised industries. This need not lead to any increased unemployment. All it would mean is that the labour force would be approximately in equilibrium with demand for labour. This would not only lead to a little reduction in overtime, but also eliminate competitive bidding for labour, which at the present time is doing so much to increase earnings far and away beyond levels which the country can accept.
My own view of the situation is that the Government's solution will be to raise taxes. Indeed, it is widely expected that the Budget this day week will include a number of tax increases of one sort or another. But I would remind the Government, even at this late stage, that this is no solution to the problem. It was tried last year, when a large range of taxes were increased, both taxes on in-
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comes and indirect taxes, and it certainly did not achieve the objective which the Government had in mind. But if the Government are determined to raise taxes, may I make the suggestion that they should be indirect taxes and not direct taxes? It is better, at a time like this, to tax the individual when he spends rather than when he earns. We certainly found that during our thirteen years of office, when we were able to lower taxes in nine Budgets. There is no doubt that savings must go down, if the earnings of the individual are increasingly taken away from him before he can lay his hands on them. The savage increases in taxation last year have only served to show how savings suffer at a time of increased taxation. The latest figures that I have been able to get show that last year the margin of savings was £65 million on the wrong side, which compares with the increase from something like £100 million in 1951 to nearly £2,000 million in 1964—the result of thirteen years of progressive tax reduction by the Conservative Government.
I am sure that the gracious Speech is right in stressing the importance of the balance of payments, in the sentence which I have already read out to your Lordships, as distinct from the balance of trade, which, while it is very important that it should continue, is not the whole story. If we look at the balance-of-payments figures over the years—whether Conservative years or Labour years—it can be shown that, were it not for Government expenditure overseas, our balance of payments would be near enough achieved, taking one year with another. As with Germany, our export earnings plus our invisible earnings would pay for our imports of food, raw materials and manufactured goods.
Therefore, I suggest to Her Majesty's Government that it is to the field of Government expenditure overseas that they must direct their attention, though I accept that this cannot be reduced quickly or easily. Can we really afford at the present time aid to the newly developing countries on the present scale? I think that Her Majesty's Government ought to justify such a continuing burden on the balance of payments. Then (though I do not want to refer to the political question of Rhodesia) we must remember the very serious additional burden imposed by the cost of the Rhodesian

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affair. The blockade of Beira is estimated to be costing us something of the order of £l million a week across the exchanges, and the Zambian petrol lift, which I accept as being necessary at the present time, is costing us, again in round figures, another £1 million a week. So these two items are placing an extra £50 million burden on the balance of payments over a period of some six months.
In addition to that, although world copper supplies are more or less in line with world demand, prices are soaring, and we have to pay these higher prices across the exchanges. There is also the ban on the purchase of Rhodesian tobacco, which means that we are having to pay out scarce dollar earnings to finance the purchase of dollar tobacco. These are additional burdens on the balance-of-payments problem which were not present a year ago.
I should like, in passing, to refer to the great importance of Britain's invisible earnings. I do not make any apology for mentioning this matter once again, because I do not think that the Labour Government yet realise the full importance of Britain's invisible earnings and the great service rendered by the City of London in achieving the figures, which are well known. While it is perhaps too early to expect a change of heart, I hope that during the course of this Session the Government will study ways of ameliorating the situation which arose from the grievous blow dealt by the Finance Act last year to private investment overseas. I think that the lesson is plain for all to see: that British investment overseas, while it is expensive in terms of foreign currency at the time, nevertheless yields good dividends in later years, when money flows back across the exchanges to this country. I hope that during the new Session there can be some change of heart in the Government's attitude towards British private investment overseas.
Another important element in the balance-of-payments problem is the import bill. It is understandable that people in Britain should be very concerned at the present high level of imports. As I mentioned earlier, the fact remains that at the present time imports are being sucked in by an excessive demand which has been created by the Labour Government. If one could buy a British type-
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writer to-day, one probably would; but if a man cannot find a British typewriter, because all the British typewriters are already sold, he buys a foreign one. If the demand were slightly lower, one would probably buy British and the imports would not be coming in. The fact remains that a large part of the excessive imports to-day is caused by demand at home which sucks in imports to fill with goods the shelves in our shops. Apart from that, I believe—and I have always taken this view—that, provided the economy is sensibly managed, imports can take good care of themselves.
But there are those who have other views, and to those of your Lordships who are interested in import saving. I should like to quote briefly from the Prime Minister's speech in January, 1964. It was called an "economic speech", made at Swansea, where he dealt with the subject of import saving. He said that import-saving industries needed to be developed, and this should be tackled with at least the same urgency as the exports drive. He said he was appalled at the big increase in machinery and semi-finished manufactures that had come into Britain in the past few years. He went on to say:
"If I were president of the Board of Trade, I should sit down and work out in detail from the trade returns all those imports which rise sharply when production increases. Then, each would be examined to see whether we could, economically and competitively, find means of producing them in our own factories. The next job would be to discuss with industry, providing research and development contracts where necessary, the prospect of developing home-produced substitutes. This would be one of the priority tasks of our new economic planning machinery."
Do we hear anything of that to-day? What has become of this "purposive" action announced fifteen months ago?
LORD SHEPHERD: My Lords, perhaps I can help the noble Lord. Quite shortly the reports of the local economic development committees will be published. These committees have been very active in connection with what my right honourable friend said in that particular speech.
LORD ERROLL OF HALE: I am glad to have elicited from a Government spokesman an announcement about what has been going on. It has not been easy for us to find out. All the information

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vouchsafed to us so far has been that the sponsorship of most of the important industries to which the Prime Minister referred has been transferred from the Board of Trade to a Department not so closely connected with industry. That is hardly a good start. But doubtless the noble Lord, Lord Shepherd, will be able to reply in more detail to some of these points.
The other constituent of the balance of payments is exports. And I am sure your Lordships would wish me to say that we appreciate what a fine performance has been achieved by private enterprise in the past few years. Both management and employees should be given full credit for their achievement. Here I wish to quote briefly from a paper by Dr. John Treasure, who I think effectively refutes the criticisms which are often made about British industry, as to their laggardness and backwardness, when he says:
"In 1964, the United Kingdom exported goods to the value of £4,254 million. This is a staggering figure and is enough in itself to make one wonder whether current theories about our national inefficiency and inertia are entirely right."
That, in my view, is quite an under-statement. If we were so out-of-date as some would have us think, how on earth did we manage to sell overseas, in the face of fierce competition, these many thousands of millions of pounds worth of goods?
The Labour Government, in continuing the export drive which the previous Conservative Government initiated, have continued the excellent work, and have expanded the export services; and I should like to congratulate them on the many excellent initiatives they have taken. Trade Fairs and British Weeks are more numerous now than ever before. But, if I may say so, as one who was active in this field as a Minister, I wish they would not so frequently give the impression, in official publications and speeches, that there had never been a Trade Fair or British Week before October, 1964. There were plenty of them; and very successful they were, too.
I see that there is renewed talk of the desirability of further export incentives. I hope that the Government will not be panicked into further measures which I believe might do more harm than good. I think the pattern is well established
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of providing export services and other incentives, and that anything more might cost far more than the additional yield in terms of extra exports. The export rebates themselves, which a Labour Government introduced, have certainly had a fine welcome from industry. But one must remember that the cost to the taxpayer is high, and that in fact they have been only a relatively modest inducement to the firms concerned. I think that if the Government are prepared to re-think this issue, they might well consider altering the basis on which the rebate is given. Instead of paying out the rebate on existing exports, most of which do not need this incentive, they should pay out the rebate to those firms who increase their exports, and withhold it from those who do not.
If I am told by the noble Lord, Lord Shepherd, that this would be contrary to the rules of GATT, I would only point out that the import surcharge was a far greater breach of those rules than anything I am now proposing. In any case, it is clear that there is a move on foot on the part of the Government to seek some modification of the General Agreement on Tariffs and Trade, and I suggest that this is one modification which they could usefully pursue, both for the benefit of the taxpayer, who would have to pay out less in the form of export rebate, and because at the same time it would give the greatest benefit to those firms who increase their exports instead of merely keeping them at their present level. The rebate in its present form, between 1 and 3 per cent., represents a permanent one-way devaluation of sterling on current account. I have been told by the chairman of one important export firm that they have applied the whole of their rebate to reducing the price of their products to overseas customers. This may be a very good thing, but it means that they have to sell about 3 per cent. more than they did before in order to bring back the equivalent amount of foreign exchange. This is a small devaluation of the pound.
There is another devaluation of the pound—namely, the arrears of the dollar premium, which as it now stands, at some 21 per cent., is something approaching an all-time high, and is certainly between two and three times the level current in times of Conservative Government. This

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20 per cent. dollar premium that seems to have become a permanent feature of our economy is, I think, a particularly bad advertisement for the stability and strength of sterling. I mention this particularly because it is said in the gracious Speech that Her Majesty's Government:
"are determined to maintain the strength of sterling".
Let them please stop devaluing sterling by means of the back door. It is commonly accepted now that a kind of creeping devaluation is taking place. I think it is important for the Government to say whether, while being determined to maintain the strength of sterling, they are also equally determined to maintain its value amongst world currencies.
In the gracious Speech there is a reference to tariff reductions, and it is said that the Government
"will work for tariff reductions under the General Agreement on Tariffs and Trade and for an expansion of Commonwealth trade."
May I say, on behalf of noble Lords on this side of the House, that we welcome this determination of the Government, and wish them all success in the difficult and prolonged negotiations which take place within the GAAT. I am sorry, however, that no reference was made in the gracious Speech to the early elimination of the import surcharge. This is an increasing irritant among overseas countries, particularly those in Europe, and has done a great deal of damage to cordial relationships which we have hitherto enjoyed with out EFTA partners.
It would be a gesture of confidence, and give great hope to our exporters, as well as to our friends in Europe, if the Government could make an early announcement about the cessation of the import surcharge. I never thought the day would come when an exhibit in a British Fair in an EFTA country would be burned down as a protest against the import surcharge, and I think it is worth the Government's while to look at the matter very carefully. I am referring to the City Pavilion at the Norwegian Trade Fair.
LORD SHEPHERD: My Lords, has the noble Lord any evidence that this was burned down in protest?
LORD ERROLL OF HALE: I have the evidence of the newspapers, and I should be glad if the noble Lord would deny
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what I am saying. He is not prepared to deny it.
LORD SHEPHERD: The noble Lord made a statement.
LORD ERROLL OF HALE: The noble Lord is not prepared to deny it, which is interesting, as he must have all the facts from our own Embassy. However, I hope that the import surcharge will be removed as soon as possible.
But at the present time I should like to suggest that there are two tasks for the Government if the economy is to be strengthened. First of all, they must eliminate uncertainty and, secondly, they must attempt to regain—and I hope they will succeed in this—the confidence and respect of all those engaged in industry and commerce. The two really go together. If those engaged in industry and commerce know what the Government's plans and proposals are, the Government will gain the confidence of all those concerned. If, on the other hand, there is uncertainty, it is hard for those who are trying to run the nation's business to have confidence and respect for the Government in their minds. Unfortunately, in my view there is little in the Queen's Speech to show that Her Majesty's Government mean to do this—indeed, far too much in the opposite direction.
I should like to suggest to Her Majesty's Government that there must be genuine consultation with industry, not just a smokescreen of time-wasting committees, of which I see many are to be kept in being under the umbrella of the National Economic Development Council, whose future is apparently in doubt; but it would be useful to know whether it is to continue or not. There must be genuine consultation on such important matters as investment allowances, and not merely a showing of the Government's proposals to the C.B.I. a few days before the proposals are announced.
Investment allowances are allotted a special place in the Queen's Speech, which says:
"My Government will promote a more positive system of investment incentives",
et cetera. But, of course, industry overwhelmingly wanted what is called free depreciation. They did not want this system which the Government are imposing upon them. The only defence

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against adopting industry's own wishes was that the proposals would have been too costly. But they would have been costly only during the transitional period, and they would not have been costly in the long term. Investment allowances have many disadvantages. One of the most serious is that they discriminate between one industry and another, and another disadvantage is that it is a kind of handout to firms. Under the previous system, a firm had to make its own decision about its own capital expenditure, and then, if that investment proved successful and profitable, it was given tax relief on the profits which resulted. Now, in the North of England and Scotland, a firm will have only to put down 60 per cent. of the money in order to get the investment it wants, the plant, machinery, or whatever it is, and then it will be able to have the profits to itself. If there are no profits, it will at least know that it has spent only 60 per cent. of the total cost of the investment.
Investment allowances are very discriminatory, because some industries which certainly ought to benefit from them have been rigidly excluded Why should road transport be excl Transport within a factory perimeter is included, but if it is a matter of transport between one factory and another that is excluded, because there is apparently something rather naughty or of low priority, if I may put it that way, about road transport, but it is all right if you want to have conveyor belts within your factory.
While the Government have made many references to the importance of export industries, or foreign currency earning industries, why have they discriminated against hotels? The same part of the Queen's Speech says that the Government
"will promote a more positive system of investment incentives to improve the efficiency of those parts of the economy which contribute most directly to the balance of payments and to encourage development where it is most needed."
It is well known that the British tourist industry is one of our most important earners of foreign exchange, and you do not attract many tourists to this country unless they can stay in good, modern, and comfortable hotels. Why deprive the hotels of the allowances which they
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were able to have before? Admittedly they were not as generous as I myself should have liked to announce when I was Minister, but at least it was something. Why deprive them, with their important earning capacity for foreign exchange, of this incentive scheme? Another feature I should like to mention in passing, which I think tells against the investment allowances scheme, is that it will require no fewer than 1,100 civil servants to run it. I wonder where they are to come from?
Then the Queen's Speech announces that:
"A Bill will be introduced to restore public ownership and control of the main part of the steel industry."
I do not think anybody in industry wants this nationalisation measure to take place. I do not intend to take up your Lordships' time this afternoon with a detailed exposition of the arguments against nationalisation. I think, indeed, that only a minority of the Labour Party itself desires such nationalisation. The fact remains that this announcement will create uncertainty, not only in the iron and steel industry, but also among those sections of the Industry which obtain their semi-finished goods from the iron and steel industry; and it will certainly not encourage foreign buyers to go on dealing with iron and steel companies in this country which will be preoccupied with the problems of nationalisation and the reorganisation consequent upon it.
Many people engaged in industry and commerce looked at the Companies Bill which the Labour Government introduced in another place in the last Parliament, and while they liked some parts of it they disliked other parts. Generally speaking, they were getting ready to adapt themselves to the requirements of the new Companies Bill. It has therefore caused some apprehension in industrial and commercial circles that there should be no reference whatsoever in the Queen's Speech to the new Companies Bill. This means further delay and further uncertainty. Are companies to continue in exactly the same way as they have been doing? Or are they to assume that a Companies Bill in the same form will be introduced at a later date, or what? The Government could do a great deal to assist industry and commerce if they were to make plain their intentions regarding

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the Bill which was introduced in the last Parliament. I am sure that the President of the Board of Trade, Mr. Jay, must have made the most strenuous efforts to try to secure a place in the Queen's Speech for this Bill which, I freely admit, is long overdue, and which I wish I could have introduced myself when I was a Minister. It ought to have been brought in. Perhaps the Government could help to remove one area of uncertainty by telling us their intentions in regard to the Companies Bill.
Then in the Queen's Speech there is some reference to the Industrial Reorganisation Corporation. Here again was another important development brought in without any proper consultation with the Confederation of British Industry. It is one of those new bodies which perhaps it would be unfair to criticise too much before one has seen something of its shape, but I remain doubtful as to its value and efficacy. Worthwhile mergers take place in any event; marriages are arranged and fresh developments take place. Is the I.R S confine itself to what is already being done well, is it to concern itself with lame ducks, or is it to pump money in to industry, as one Labour spokesman has described? I personally am always very suspicious when I hear a phrase like this, because the Socialists are always very good at pumping other people's money around the place —it is never their own money they are pumping—and I wonder why it should suddenly be necessary to take £150 million of the taxpayers' money in order to do work which has been going on very well for these many years.
I will hazard the forecast—and shall be quite prepared to be shown that I am wrong in a few years' time—that this may well become another groundnuts fiasco of the 1960s. I hope Sir Frank Kearton, who has taken on this assignment, will remember not only that he is an aggressive takeover bidder himself, but also that there was a time when somebody tried to take him over and he profited a great deal from his stouthearted resistance to being taken over. So, when some small firm chooses to resist the Industrial Reorganisation Corporation, with its £150 million worth of taxpayers' money, I hope he will remember that it would be a good idea to lay
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off and let the small man go on unmolested.
As I have already said, we are faced with the prospect of higher taxation. Here is a field in which Britain is already at the top of the league table, and I do not think it is any matter for pride. As was shown in a recent article in The Times, British industrialists are more highly taxed than any other industrialists in the Western World. I am thinking not of the great tycoons of industry but of those in the middle ranges, men who are earning £7,000 to £12,500 a year, the chairmen of nationalised industries and their deputies, and their counterparts in private industry. That may perhaps explain why during the last year we have been at the bottom of the league table for production. It is perhaps too early to expect a Labour Government to revise the rates of personal income tax downwards, but this, together with restoring confidence between the Government and industry, would do more to put the British economy on its feet than any other single action contemplated in the gracious Speech.
3.21 p.m.
LORD SHEPHERD: My Lords, I had intended to my contribution this afternoon by expressing a warm appreciation to the noble Lord, Lord Carrington, the Leader of the Opposition, for his tributes to my noble friends Lord Cohen of Brighton and Lord Soper who moved and seconded the gracious Address. I must say that in some respects I was taken aback by the speech that we have just heard. I hope that the noble Lord, Lord Erroll of Hale, will read his speech to-morrow to see the contradictions in it, and contradictions in attitude now to the views that were expressed by his colleagues on his own Front Bench prior to the General Election. Perhaps I may say a few words about that later.
My Lords, I should like at the outset of this debate to pay a special tribute to the noble Lord, Lord Carrington, and, if I may, to the noble Earl, Lord St. Aldwyn, and the noble Lord, Lord Rea, for the great help that was given during the difficult eighteen months through which we have just passed. There were occasions when difficult, if not explosive, issues could have created considerable difficulties between our two Houses of Parliament, but through their initiative and our

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general good sense we were able to restrain ourselves. I am perfectly sure that in the months to come and, if I may say so, the many years that are in front of us, we shall be able to continue to work in the same atmosphere.
We have a formidable quantity of legislation outlined in the Queen's Speech and perhaps the last sentence of it, in which we are told that other measures will be laid before us, contains an ominous ring to those of us involved in "the usual channels". We will certainly do out best to see that legislation moves to the satisfaction of Members. I must say that we are in some difficulty, in that within a few weeks we may have to ask the House to see two Bills through Parliament fairly quickly, namely, the Military Aircraft Loans Bill and the British Guiana Independence Bill. Both these Bills should have been introduced earlier, but the General Election came along and they had to be delayed. I hope that the House will understand the time issue and will let these Bills go through quickly.
The gracious Speech refers to three subjects. First of all, peace: the creation of peace and the maintenance of stability, which this House will be discussing tomorrow, and then on Thursday we shall be discussing that aspect of the gracious Speech dealing with the creation of a just society. We are thinking of housing, rating relief and social security, and many other aspects that should make our lives that much better. I suppose that one of the great benefits of an Election campaign is that Members are able to get out of the Palace of Westminster and are able to walk the streets, some of us in the industrial North, and to see acres upon acres of slum property. I was thinking only the other day of a house that I went into in Doncaster, where a young woman was keeping a clean and tidy home, with a youngster, but the house next door had been condemned. It was full of junk and refuse, with clear evidence of rats, yet it would appear that this young family will have to live in their house for at least another three or four years before a new house can be provided. It is true that we have made great strides in sweeping away slums, but what is left is perhaps more poignant and is a greater affront to us. Therefore, having kindled the hopes of many people in the return of a Labour Government, we on this side of the House
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will be determined that during this Parliament we shall not fail to deal with these terrible conditions that still exist in this country.
To-day we discuss the means, because we shall need large sums of money to deal with these problems. The noble Lord, Lord Erroll of Hale, started his speech as though it was rather a hangover from the hustings. He spoke about the Labour Government's responsibility for the economic difficulties of 1964 and 1965. He then complained about and criticised what we did during that period to deal with the situation. Therefore I intend to spend a few moments in giving the House some of the figures which have been achieved in the field of balance of payments which were not available when we had our last debate. Perhaps the noble Lord, Lord Erroll of Hale, has seen those figures. If he has, I think in view of the speech he has just made, that he must have forgotten them. Therefore perhaps he will benefit from the figures which I shall now give.
In October, 1964, we had a deficit of £756 million. We had therefore to deal with it in the short term, but we had also to consider the long-term needs—the needs of developing industry—so that once we were over these economic difficulties we could march forward and keep abreast with the developing industrial countries of Europe. We have done a great deal in planning for the future. If the noble Lord, Lord Erroll of Hale, had been in his place last Session he would perhaps have taken part in the debate on the National Plan. There we had a framework of what industry and Government could do in promoting economic growth and higher, productivity between now and 1970. The National Plan was not dreamt up in some dark cupboard in Whitehall. It arose from the deep consultations between Government and industry and between "Neddy" and the economic development committees, which are doing a great deal of work and are not, as the noble Lord, Lord Erroll of Hale, suggested, a complete waste of time. What the noble Lord said is not a proper tribute to the services of senior men, on both sides of industry, in playing their part in helping this country out of its economic difficulties.
We had these difficulties, this deficit of £756 million. We had perhaps two

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choices in front of us. We could have adopted the method of the previous Administrations in previous crises; we could have had a sharp deflation with resulting unemployment, with a standstill in investment and falling production. True, this would have dealt with the balance of payments, but it would certainly have held back any opportunities for economic development. It would be very much like a relay runner who drops the baton; if you drop the baton in a relay race you have very little opportunity, in spite of the speed of your last runner, to catch up.
We took the view that it would be far better to use selective restraints. We imposed the import surcharge. The noble Lord, Lord Erroll of Hale, knows why we imposed it; although he criticises, he admitted that he himself considered it when he was a Minister. It was a method of holding back imports, which were rising very sharply during 1964. It was the only weapon we had available on that particular front. The noble Lord shakes his head. Can he tell me what other we had?
LORD ERROLL OF HALE: The other one I also thought of, namely, quantitative restriction, which is a better method and would not have been in conflict with our GATT responsibilities.
LORD SHEPHERD: Quantitative controls might have been better, but who swept away all the legislation on which those controls could have been brought into being?
LORD ERROLL OF HALE: The necessary legislation was in being—the Import-Export Act, 1939, under which all imports and exports of this country can be regulated and under which many of the restrictions on importing from Rhodesia have been exercised by the present Government.
LORD SHEPHERD: The controls that would have been required would have needed legislation. We should certainly also have needed to set up considerable machinery. In the time available, having regard to the serious increase in imports this was not practicable. We had no alternative but to proceed to import surcharge. We instituted export incentives, with which, again, the noble Lord dis-
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agrees. We certainly increased taxation by £164 million during 1965–66. We imposed credit restrictions in order to relieve the pressure on imports and shift more goods and resources into exports. We have held back on less essential public expenditure. As to overseas investment we have very carefully looked at Government overseas expenditure, and, as the noble. Lord knows, we have had to put certain restrictions upon private investment. I freely admit that private investment overseas makes a very valuable contribution in income. But what we have been investing in recent years has not been the moneys that have arisen from our own earnings; it has in large part been sums which have been deposited in this country by our creditors, and we have invested those sums overseas. When we do get back into credit, when we get back into surplus, I hope we shall be able to make further investments overseas; but in the meantime these restrictions must continue.
Let us consider what was achieved during 1965. On current account, in 1964 we were in deficit by £406 million; in 1965 this was reduced to £136 million. On visible trade the deficit in 1964 was £535 million; in 1965 that was reduced to £265 million. If you take long-term capital account, the deficit in 1964 was £363 million and it was reduced in 1965 to £218 million. On current and longterm account it was £770 million in 1964, and in 1965 it was £350 million. We made very great strides during 1965. If we can maintain the present momentum, we are within reach of being square on balance of payments very close to the end of 1966. Sterling is strong; there can be no doubt about that. We have ample reserves to maintain sterling, and the Government have repeatedly stated their determination to maintain it. May I say that any noble Lord or any person in a high position who questions this Government's determination to maintain sterling does no service to the nation in any way.
During 1965 our exports were up by 7 per cent.: the exports of machinery were tip by 9 per cent., and the chemical industry's contribution was 7 per cent. And during that period we were able to retain imports by 1 per cent. That is a remarkable figure, when you compare it with the rise in imports of 14 cent. during 1964. That, I think, is a considerable

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achievement, and it vindicates the action that we took in regard to the surcharge and other measures. In 1966, January to March—it is true we have only provisional figures—the trade balance for those three months on average shows a deficit of £24 million. This is similar to the monthly deficit for 1965. But compare it with the deficit for 1964, when it was £45 million. We are hopeful that over the remaining part of this year we shall be able to reduce the visible trade deficit still further.
With regard to imports, I agree with the noble Lord, Lord Erroll of Hale, that they are causing concern. They have risen during the last three months by 3 per cent. over the average for last year, and it is of particular concern that there is this marked increase in imports of manufactured goods. The economic development committees are working actively within their own industries to see what can be done to save the import bill. True, there is not a great deal of noise about it in the newspapers, but there is already a considerable amount of good news for the Government.
Exports during these last three months ran at 5 per cent. over the average for 1965. It is remarkable to see that exports to the United States are up by 20 per cent. over the figures for 1965. The increase to the EFTA and Common Market countries continues, although to the sterling area there has been some decline of about 5 per cent. While we can take pride in the 5 per cent. increase, we are still not matching the world increase in trade in manufactured goods, which increased by about 12½per cent. during 1965. For the future—I am speaking of 1966—there still appear to be good opportunities for this country to expand its exports. Manufacturing costs in Europe are rising and there is therefore more purchasing power. Industrial investment again is strong, so there are good opportunities for the machine tool and engineering companies.
The Board of Trade, which the noble Lord, Lord Erroll of Hale, knows so much about—he has paid his tribute to the Board—is working hard to stimulate interest in British industry in the overseas markets. I should like to give some idea of what has been done. The Board of Trade has participated or assisted in
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trade fairs. In the year ending March, 1966, we supported 96 different fairs, compared with 66 in the previous year. The All-British Fair in Tokyo was regarded by all as a great success. We shall be arranging a further fair in Moscow and another in Mexico in October, 1966.
The noble Lord opposite referred to the fire in Oslo. I have no information on what caused that fire. I saw the reports which I believe the noble Lord saw. I do not know what might have been the cause of it. The noble Lord knows as well as I do that there is some friction between us and EFTA in regard to the surcharge; but to suggest, as he did, that this fire was due to arson is, I think, quite terrible. The Corporation of London had their pavilion burned. This pavilion cost £40,000. The City has planned an emergency display. This is now being made and will be flown to Oslo for the opening of the fair on Friday next. I think it is a great tribute to the City of London that they have responded in this way, in spite of the great loss they have sustained. The noble Lord, Lord Erroll of Hale, may like to know that the President of the Board of Trade has himself passed a message of sympathy to the City of London.
I think we have done something which will please those who have been asking for improvements in managerial education. The Board of Trade is paying half the cost for fifty key executives to be sent to the commercial school at Harvard University for a ten-week course. I think this is good. We may learn a great deal which may be helpful not only to the industries which send these executives, but to our own business schools. The Board of Trade is doing a great deal. In regard to the domestic economy, it is perfectly true that the gross national product in 1965 increased a mere 2 per cent, over the 1964 figure, whereas in 1964 there had been an increase of 4 per cent. and in 1963 one of 5 per cent. There are two reasons for that, and noble Lords know them as well as I do. First of all, there had to be some adjustment in regard to the use of the national resources. We had to shift more goods into the export market, and we had to hold back our own home consumption.
When such a policy is adopted there is bound to be some slackening in growth.

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We have achieved both these objectives. But in 1964 and 1963 we had resources available. We had spare capacity. Many of our companies at that time were working at 75 per cent. or 80 per cent. capacity, and we had a fair margin of unemployed. But the evidence is that in 1965 our entire manufacturing industry was working at full capacity and there was no spare labour. The noble Lord made some point about the tightness of labour. As I have said in a previous debate, we have to get used to the fact that there is going to be a shortage of labour, particularly of skilled labour. In the Midlands, Yorkshire and the Humber area there are at the present moment ten vacancies for skilled labour for every applicant hence the great emphasis which this Government have from the beginning put on increasing productivity. There have already been a number of breakthroughs and the noble Lord will know that the Prime Minister himself intends to chair a productivity conference this year. This is another example of the way this Government have tried to carry on consultations, to carry on dialogue, with both sides of industry.
The noble Lord also complained about the prices and incomes policy and the fact that wages appear to have gone up faster than prices. This is true. But no one can accuse any Minister on this side of not having gone through the length and breadth of this country talking to the unions, talking to shop floor stewards, talking to trade unionists within the factory. This is a public relations job. You cannot use a Statute to enforce wage control. The noble Lord will see that the Prime Minister himself intends to speak to one of the biggest trade unions in this country, the A.E.U., on Friday. It is a great thing when a Prime Minister, with all his responsibilities, is prepared to go and face, as he no doubt will, a fairly hostile audience. The noble Lord shakes his head. But of course a trade unionist looks with suspicion at control, or the suggestion of control, of wages. This is natural. But we are making considerable progress. The union leaders signed the Letter of Intent. They are working hard, but we have still a long way to go.
During the last six or nine months I have done a good deal of talking to men on the factory floor. There is a great deal
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they do not understand or have misconceived, but this endeavour must be carried on. We believe that we shall get this across and that we shall be able to implement the right sort of policy. But, as the gracious Speech says, we intend to bring legislation on this matter before Parliament because we believe that it is right, first of all, that the Prices and Incomes Board should be a statutory board and not, as now, based on a Royal Commission, and that if it becomes necessary for legislation to be used for an early warning system that legislation should exist. We intend to proceed with it.
The noble Lord opposite also complained about the incentive system for industry. The cost of these incentives will be some £25 million. It will be no surprise, I suppose, to the noble Lord that money is short. When we took office we found that future revenues had already been fully allocated by the previous Administration. Therefore, we had to see how we could best use a limited sum. It was clear to us that, having only this limited sum, we should use it for the manufacturing and extractive industries, for plant and machinery, and that if there was to be some discrimination as between one part of the country and another, clearly we should use it to pursuade industry to go to those parts of the country which should be developed and away from the tremendous congestion and pressures within the metropolis. I have no doubt we are right in this matter. The Bill will also extend the Board of Trade powers to create employment in the development areas. Special arrangements for assistance to agriculture, ports and fishing vessels will be in the Bill.
The noble Lord also dealt with the Steel Bill. The noble Lord may be aware that the Iron and Steel Board has reported to-day, and it says that the Board has long considered that the industry needs to be reorganised into fewer but individually larger units, equipped with plant of a greater size than the present average. I think that those who know the steel industry will agree that reorganisation is necessary; it therefore becomes a question of how one arranges it. The noble Lord, Lord Erroll of Hale, does not like the idea of our Industrial Reorganisation Corporation; he thinks that we should not try to get

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firms to amalgamate. We believe that the steel industry is so vital to our economy that reorganisation should take place. We believe that the only way this reorganisation can be obtained is through the purchase by the State of the shares of the 13 companies. I understand and appreciate that noble Lords, and perhaps the directors and some of the shareholders of the steel industry, will disagree with us, but we clearly now have a mandate. The noble Lord, Lord Carrington, may have been right in 1964 when he said that we had not a mandate for such major legislation, but I am sure he will agree that we have now got it and I hope that this House will see that the Bill proceeds through expeditiously. Undoubtedly we will listen to all noble Lords have to say, but clearly we intend to proceed with the Bill. I hope that the directors and executives of the steel companies will now respond to the invitation of the Minister of Power and the Prime Minister to come forward and discuss the best and most efficient method of bringing their companies together. The door of the Ministry of Power will be open to them.
One last thing I should like to say in regard to the Queen's Speech—the noble Lord, Lord Erroll of Hale, did not touch on this subject, I think—is on the question of the docks, As the noble Lord knows from his experience as a Minister in the previous Administration for many years, the state of affairs in the docks has been very worrying—in fact, when we took office it was very close to chaos. One of the first actions which were taken by my right honourable friend the Minister of Labour was to ask the noble Lord, Lord Devlin, once again to sit on a Committee dealing with the docks. The noble Lord, Lord Devlin, agreed to do so and reported, recommending that there should be regular employment in the docks; that there should be a revision of the pay structure and the abolition of restrictive practices; that there should be a drastic reduction in the number of employers; and that there should be provision for welfare amenities.
The Minister of Labour set up the National Modernisation Committee under my noble friend Lord Brown. I am quite sure all noble Lords hope to see him out of hospital soon and back at his job—I am told that he is in fact now out of hospital, and it is gratifying to know that;
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but I do not think we shall be seeing him for some weeks yet. He has rendered very great service on this difficult Committee. We are now setting up similar committees for the local docks so that we can get matters moving there. The Minister of Labour has published the Dock Labour Scheme which will institute regular employment. Discussion on pensions and sickness pay is making very good progress. We shall need to have legislation in this Parliament to deal with the port employers. The National Dock Labour Board has completed a survey on the amenities of the docks. Here again legislation and funds will have to be made available by Parliament. As the noble Lord will know, the pay structure and the level of pay have caused further difficulties. I am very pleased to see that the noble Lord, Lord Devlin, has once again undertaken to use his knowledge and resources in chairing this particular Committee. I hope that in the not too far distant future, in terms of months rather than years, we shall be able to create a new basis, so that our docks can be worked far more efficiently than has been the case in the past.
There is much more that I could say. There is a great deal which was said by the noble Lord, Lord Erroll of Hale, and which certainly needs answering, but I will leave that to my noble friend Lord Champion. My Lords, we are going to be judged at the end of these five years on the economic base which will exist then. I have no doubt that we shall achieve a proper base for this country, so that it will be able to move forward. I am quite sure that, with the co-operation of directors, management, and trade unions, we shall have created new, vital industries. Perhaps the great question on which the nation will judge us is how we share the fruits of our labours. I do not believe that there is anybody in this House who does not believe that the fruits of this country can still be shared more equitably. This is what we shall try to do. If we fail, it will not be for want of trying. I hope that the Prime Minister's belief that this is going to be a great Parliament will prove to be correct, and that all of us, in all quarters of the House, will have cause to be proud to have had a share in it.
3.56 p.m.
LORD SIEFF: My Lords, as I rise to address you for the first time, I am deeply

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aware of the ancient traditions of this House and of the high standard of debate and statesmanship for which it is renowned. Therefore, I beg your Lordships' forbearance and indulgence on this my maiden speech.
In the gracious Speech from the Throne, Her Majesty the Queen stated that:
"My Government will continue to develop, in consultation with management and unions, the agreed policy for productivity prices and incomes."
I do not pretend that I can deal with these problems in detail, but I should like to touch upon one or two of them, lightly perhaps, because they are extremely complex problems. Perhaps I ought, to begin with, to declare my interest because during my business life, which has been very long, I have thought a great deal about the working principles and philosophy which are conducive to sound economic growth, and particularly the sound economic growth of the organisation with which I am associated. I believe that the experience I have gained may have some relevance to the infinitely more complex problems of the national economy.
Lying at the core of our economic problem is the need for a special attitude of mind on the part of those engaged in industry and commerce, and an understanding of sensible co-operation with all the human factors engaged therein. To break down the element of fear, suspicion and insecurity is a very difficult thing to do when dealing with human relations, but it has to be done if industry is to reach the high degree of efficiency which we all desire. Even with advanced mechanisation and automation, the human factor still determines the cost of production of the article, and it is self-evident that the need for good human relations between management and worker is essential if plant and machinery are to be fully utilised. I would just add, for it is relevant to my point, that in the growth of the business with which I have been associated for so many years we have relentlessly pursued the policy of relying on British goods and British produce. We have developed a special kind of relationship between the supplier or manufacturer and ourselves. It has become a co-operative process in which the needs and tastes of our customers are
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translated into specifications and production schedules.
This concept depends on very close cooperation between manufacturers, merchants, administrators, designers, engineers, scientists and technologists. My firm has found a ready response in British industry. I know that it is fashionable nowadays to denigrate our country's achievements, but I say categorically that I believe that the quality and workmanship of British manufactures at their best is unequalled anywhere in the world. The development of what I believe to be a unique industrial relationship, based on mutual understanding and affinity of interests, has enabled us so to reduce the import content of our merchandise that 99 per cent. of the goods we sell—namely, textiles and foods—are manufactured in this country, resulting in considerable savings of foreign currency.
I should like to draw your Lordships' attention to the National Economic Development Council's proposals for action by industry, and for
"co-operative action by industry and the Government."
I believe that the magnitude of the problem is such that the greatest contribution must come from industry itself, with cooperation and help from the Government. I entirely agree with the stress laid in the Report on exploring possibilities of cost reduction, on design, on marketing and on research. The effort to reduce costs, or at least to check their inflationary rise, is the biggest problem facing industry, and it is here that the help of the Government is most urgently needed. It is in this area of general economic policy that the Government themselves are also facing their greatest test. It is most important that production and distribution costs are not burdened with excessive labour costs resulting from inflation, excessive indirect taxation, and excessive paper work resulting from the complex requirements of a swollen Administration.
The concepts of quality and value of articles and goods are interlinked. Quality implies attractive and pleasing appearance, serviceability and consistency of large-scale produced goods. Above all, it implies that these goods are wanted at the price that will satisfy the people who buy them. This is the practical test without which quality would be an abstraction, and it is here that the efficient producer plays his part. In Great Britain, where,

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by comparison with most of the world, the standard of living is high and the population is educated and skilled, there is a market for quality goods. It is in the field of quality that British manufactured goods can establish a stronghold on public demand, and meet the challenge of foreign competition at home and abroad. With greater mechanisation and speedier progress towards automation, it is possible for our factories to produce goods at very competitive world prices. We should not try, however, to compete with the low-wage countries in producing cheap, mass-produced and highly labour-intensive goods, as we could not hope to win on price alone. The Government, of course, should be watchful that our industries are not being injured by subsidised foreign imports, and I fully endorse the suggestion in the National Economic Development Council's Report that the Board of Trade should be given wide powers to impose provisional anti-dumping duties in appropriate cases.
While I agree that Government action is needed to protect domestic industry from disruption or material injury resulting from the importation of goods which are subsidised in costs or by cheap labour, we must be very careful that we do not shelter inefficiency and isolate the home consumer and the producer from new goods and new ideas from other countries. While in the company with which I am associated we rely almost exclusively on goods manufactured in Britain, we purchase an insignificant amount—something like 2 to 3 per cent. —abroad, mainly from high-wage countries. This is because the qualities and designs of the cloths we buy are not always available at home, and I contend that such imports, like imports of certain types of machinery, are beneficial to the country's competitive efficiency.
Modern machinery, frequently renewed to keep in step with the pace of the world-wide technological revolution, is the driving motor of economic progress, and here the special tax incentives recently announced largely meet the recommendations of the National Economic Development Council's Report. Yet, even with the advance of mechanisation and progress to automation, the human factor continues to dominate production. In most fields of consumer goods, quality control is still dependent on the keen and discerning eye of the
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workers on the floor of the factory, as well as on a sense of responsibility and involvement by management. The contribution of good quality to our production could easily be wiped out by a failure to spot a fault in the process or material at the very beginning of the chain of production. The losses from unsuitable raw materials can be minimised if production requirements are studied; and the most suitable materials are specified and secured.
We come then to the question of cooperation. The N.E.D.C.'s Report, in its recommendation for industry, stresses the need for
"close contact between producers and customers … co-operative research and technical development by related industries"—
And—
"co-operation on an industry-wide or firm to firm basis."
All interchange of ideas is, of course, in the interest of a healthy economy, so long as it does not damage competition. I am somewhat puzzled, however, that the list of the areas of co-operation does not include that between the retailer and the manufacturer, which in my experience has been most fruitful.
The National Economic Development Council reiterates the suggestion, first introduced in the Trend Report on the Organisation of Civil Science, that the Government should use their buying power to stimulate rapid technological development. They should take
"initiative in pressing their suppliers to produce goods for them which compete effectively with imports in terms of technical quality and design".
This is something which, as retailers, we have always been doing. We have found this "technological merchandising", as we call it, profitable to all concerned, including the manufacturer, and highly beneficial to the customer. This has resulted in a very substantial saving in imports, by encouraging British production.
There is another area of co-operation between all those involved in production and distribution, not on the firm-to-firm basis but as persons and individuals. Unless there are harmonious relations between people at work, output is lost through strikes and restrictive practices, and machines are not fully utilised. Consumer demand, quality, quality control, efficiency or sales—all these lead to

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people. The whole process reaches its climax in a personal situation when goods are bought over the counter. If we are to achieve quality in production, there must also be quality in human relations. Much can be done by the enlightened employer and by the unions. In my experience, staff are very responsive to good treatment; and they appreciate pleasant working conditions and welfare amenities. It is only when they see quality highly regarded in their day-to-day working life that they will fully identify themselves with quality aims in production and courtesy in human relations.
My Lords, it may be that I have travelled beyond the orbit of what I set out to discuss. Nevertheless, I think it is the duty of those who govern to establish the conditions whereby more harmonious relations will exist between employer and employed in the economic life of our country. If I am repeating myself, I beg your Lordships' forbearance and understanding, because to me it is the nodal point of all our efforts. Unless we progress in them we shall never be able to solve our economic problem satisfactorily.
4.13 p.m.
THE MARQUESS OF SALISBURY: My Lords, I should like, if I may, before I come to the subject to which I propose mainly to direct my remarks, to say one word of very warm congratulation to the noble Lord, Lord Sieff, to whom the House has just listened with such deep interest. It was indeed, if I may say so, a very notable maiden speech. I have been a Member of this House now for over 25 years, and one of the things I have learnt is that there is no subject, whatever it may be, that does not produce in this place speeches of the highest interest and of recognised authority. The speech by the noble Lord, Lord Sieff, this afternoon, I am sure we shall all agree, certainly comes into that category; and I feel certain, if I may say so, that any contribution which he feels able to make in the future on these subjects, of which he knows so much, will be regarded by us all as a most valuable addition to our debates. There is only one matter on which I have to quarrel with him, and that is that he has made me very shy in following him, for he obviously speaks on such matters as human relations in
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industry with far more authority than I can possibly do—and that is the subject to which I propose to devote my remarks. But I comfort myself, after listening to him, by the thought that I do not believe he will disagree at all with what I propose to say.
My Lords, as a good many of you know, on previous occasions in recent months when I have taken up the time of the House I have devoted my remarks almost entirely—perhaps some may feel to excess—to another subject. But this is not the occasion for that subject, and to-day I want to say a word to your Lordships on this very different topic—the structure of industry and the relations between employers and employed. I understand that this is the proper day for raising this topic, and I only hope that what I say will not appear too academic to your Lordships.
I think I can at any rate claim that this is a subject which certainly is topical. Not a day passes that we do not find the newspapers full of references to one or another aspect of our industrial situation, and to the part which the trade unions play in this. We are told of strikes here and strikes there, of interruptions to production and of restrictive practices by both parties in industry which render our country less and less able to compete with other nations in the industrial field. Some people blame the employers for that, some people blame the trade unions; but they all seem to take the view that something is seriously wrong.
My Lords, actually—and I think the noble Lord, Lord Sieff, would share this view—I do not believe that, taken over the whole country, things are so bad as they might appear from the Press. If the old proverb is true which says, "No news is good news", certainly, judging by the columns of the newspapers, it is equally true that nearly all news that is thought worth printing is bad news. And this is no exception. Yet, actually, as we all know, a large part of industry—and the noble Lord bore this out—must be working well, or not too badly, and producing some first-rate stuff, or we should be even worse off than we actually are.
But, clearly, things are not entirely right. Otherwise, why are there so many unofficial strikes—that is, strikes against the advice of the official leaders—and

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why should a Royal Commission have been appointed to go into the question of the trade unions? I have no doubt that the Commission will give this extremely thorny subject the fullest consideration, and after a good deal more than the nine months of a normal pregnancy will produce a Report which may or may not be pigeon-holed. But, my Lords, the existence of such a Commission surely should not have the effect of debarring us here, during the whole period of its gestation, from ventilating our views on a subject so important to us all.
There is one thought, whatever the Report may say, that I should like to put into the minds of this very wise and experienced House, and it is this. Whatever are the rights or wrongs of the trade union problem, whether some restriction of their powers is required or not, I do not believe personally that a policy of more restriction of the powers of the trade unions will by itself really, cure the ills from which industry is suffering, I believe the malady to be too deep-seated to be dealt with merely by measures of that kind; that the problem of the relationship between employers and employed is one of the oldest in the world; and that to find its origin one has to look back into the far distant past, when men first employed each other.
At that time there was a conception of the relations between employers and employed which was pretty generally accepted by both sides; and it is a conception, I think, which is fairly widely accepted even now. It is that labour is a commodity to be bought and sold like any other commodity, the buyer getting it at the cheapest price he can and the seller holding out for the best price he can get. That is a conception that I believe still persists fairly widely, and I believe it is always a bad one. For its very essence is that there is a conflict of interest between the employer and the employed, which is bound in the end inevitably, where no level of wages can be found by negotiation which is acceptable to both sides of industry, to lead to all those kinds of industrial strife with which we are all so familiar. The situation in more recent times has been further complicated by the doctrine that the level of wages should not be what the industry can pay but what, on the grounds of social justice, the workman should receive.
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My Lords, in saying what I have I do not want to suggest that the employer is always right and the unions are always wrong. Far from it. The opposite may very often be true. But what I am arguing is that a system based on an inevitable conflict of interest between employers and employed must be a bad one and that, sooner or later, if we are? to have enduring industrial peace, it must be replaced by some other conception where the interests of both parties are accepted by both sides in industry as being the same. In other words, it must be replaced by what I call the more modern conception that capital, management and labour are partners in a common enterprise; one lending money, another lending expertise, another manual labour to a joint concern from which all, by the very fact of their co-operation, jointly benefit. I think one may describe it in that way. It is, in fact, the conception of a body, like the human body, whose various members although having differing functions are yet essential to each other and essential also to the health of the body as a whole—and no part of this body can prosper on the injury to any other part.
I fully realise, too, that I may be told by people who know much more than I about industry, by people who are actually engaged in industry, that this picture, the broad lines of which I have tried very briefly to draw, is jejune and, in particular, grossly over-simplified. I fully realise that a great deal of industrial strife to-day results not from any dispute on wages but from disputes between conflicting unions, which have nothing to do with the employers at all; from disputes over what is regarded as the unfair treatment of some individual workman, and so on. There can be innumerable causes which gradually lead up to industrial action. But I believe that if it could be established and generally recognised that all who are concerned in industrial production, whatever part they play, must be regarded as partners in a common enterprise and entitled to be treated as partners, a very different climate would be established in the whole of industry and a far healthier climate than perhaps exists to-day.
This, of course, at any rate at the start, in my view, is more a matter for the employers than for the unions. If their employees are to be regarded as

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partners in a common enterprise they must be treated as partners to a much greater degree than they often are at present. The representatives of those who lend their labour—those whom one might call the "manual capitalists"—will have to be told more of the progress of the businesses in which their lives are invested; they will have to be brought more into consultation; they will have to be treated much more in the way that the representatives of those who lend their money are treated already to-day. No doubt in the earlier stages, like any other novel conception, these ideas are bound to be viewed, by some at any rate, with distrust. But, fortunately—as I am sure many noble Lords here this afternoon know far better than I—these ideas that I have tried (I am afraid so crudely and inadequately) to sketch in to your Lordships are already very much in the minds of, and being given practical application by, a large number of progressive employers the form of joint works committees, joint industrial councils and many other similar bodies. A start, in fact, has already been made—a big start, I imagine—in some industries and some firms.
My Lords, it is, as I see it, the political Parties which are at present seeming to be hanging back. A good many years ago now, in the days of Lord Butler and his property-owning democracy, the Conservative Party seemed to be converted to the broad ideas of industrial co-partnership. And more recently, I think I am right in saying, the same idea, to their great credit, has been blessed by the Liberal Party. But, broadly speaking, it seems to me that the politicians of all Parties still seem to fight shy of pressing for some more definite advance. It may be that to many industrialists the idea of taking labour into their confidence is too novel a conception to be easily digested. It may be equally that there are still trades union leaders who, having been brought up in the old idea of capital and labour as inevitably opposed forces, regard co-partnership as only another capitalist dodge to do them in.
However, my Lords, we in this House, whatever our origin or Party, sit here not as capitalists, nor yet as trade unionists, but as representative Englishmen charged with the duty of examining
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objectively the ills affecting our country and trying to find some cure for them. What I would ask the Government to-day is that they—both they themselves and, one would hope, the Royal Commission too—in examining the relations between employers and trade unions, should not merely concern themselves with the legal position of those unions and the rules and regulations that govern them, but also regard it as within their purview to examine these wider aspects which I have tried, very diffidently and inadequately, to put forward to-day. No matter if these ideas are bound to be of slow growth; no matter if, inevitably, there can be no standard pattern for their practical application—for the structure of industry, as we all know, varies from product to product, and very often from firm to firm—let us put our feet on the right road, and the time will come, I firmly believe, when it will be possible for capital and labour to work together in harm and confidence as allies and partners, and when our present troubles will appear to our children, and to their children, only as a bad dream of the past.
4.29 p.m.
LORD SAINSBURY: My Lords, as a fellow retailer and a very old friend, may I be allowed to add my congratulations to the noble Lord, Lord Sieff, upon his notable maiden speech. It is just the sort of constructive speech that we who know him well would have expected him to deliver; and I am sure we shall all welcome his contributions to our debates. The gracious Speech contained a very impressive list of proposals that should ensure that this Parliament will be among the most interesting and important of recent years. It would be impossible in a short speech to range over the whole economic field and I should like to concentrate my brief remarks on one aspect only; namely, the prices and incomes policy.
Despite the progress made since October, 1964, such as the Declaration of Intent, the setting up of the National Board for Prices and Incomes and the effects of their reports, it is as important as ever to prevent extensive increases in prices and incomes if we are to have a hope of solving our economic difficulties and turning our backs for ever on the "stop-go" policies of the last decade. I regret that, so far as food is

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concerned (and I must, as usual, declare an interest), there are certain disturbing signs of more than seasonal price increases taking place which may set off a further price/wage spiral. I have in mind particularly the price of meat, a commodity which forms a substantial element in the retail price index of food and, indeed, in the overall cost-of-living index.
The official price index prepared by the Ministry of Labour is inevitably published with a considerable time lag. The latest figures we have for February show that food prices are some 2·6 per cent. higher than at the same time last year. This is not a high figure, if you consider that February, 1965, compared with February, 1964, showed an increase of 4.3 per cent., but I believe there is reason to be concerned at some trends which are not yet reflected in the official index. For example, the wholesale price of Danish bacon, which was £250 a ton a year ago, has now risen to the record level of £340, an increase of 36 per cent. The price of meat, another very important item in the housewife's shopping basket, is up by about 10 per cent. compared with the same time last year. This could conceivably please the Minister of Agriculture, because the cost of farm subsidies is reduced as market prices rise. However, wearing his other hat, as Minister of Food, and with responsibility for food prices, under the First Secretary of State and Secretary of State for Economic Affairs, he must regard these price levels of meat and bacon with considerable concern.
Another Minister, the Chancellor of the Exchequer, is undoubtedly disturbed, because higher meat prices also mean that our imports are costing more and our balance of payments suffers. The extent to which our payment position is affected by this is not inconsiderable. In 1965 we imported over a million tons of fresh and chilled meat, including bacon, at a cost of over £300 million. An increase of 30 per cent. in the price of bacon and 10 per cent. in the price of meat could therefore mean an addition of more than £50 million to our import bill. What gives rise to even more concern is that the current higher level of meat prices is likely to continue for some months ahead. Therefore anything the Government can do to increase supplies would be helpful.
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May I suggest, so far as bacon is concerned, that the Minister of Agriculture has a look at the possibilities of doing so under the international understanding on the supply of bacon to the United Kingdom market. This international market-sharing arrangement surely places a collective obligation on those countries with large shares to keep this market adequately supplied. This, in my opinion, they have not been doing during April. As regards meat, we have in the past, as undoubtedly your Lordships will remember, asked overseas countries to send us less. Perhaps now the time is opportune to ask them to send us more.
It is hardly necessary to underline the danger that when higher prices for meat and meat products are translated into an increase in the cost-of-living index there will be added pressure for higher wages. Those with knowledge of the commodity markets will be aware that invariably prices swing too far. Even in this inflationary world, meat prices, in my opinion, will not always remain at their present level. I have always believed that the First Secretary of State was right in realising from the start that if you are to restrain incomes you have to restrain prices first. In my view, you cannot reasonably expect the unions and the workers of this country to refrain from pressing for higher wages when prices are rising rapidly and continuously. But in the existing serious economic situation of the country there is no justification for the unions to press for higher wages on the basis of only temporary price increases. The duty of the Government, therefore, in my opinion, is to stand firm against any unreasonable wage demands based on temporary increases in prices, while at the same time exerting all their influence and power to keep prices in check. The aim must be to have orderly growth in incomes related to increased productivity and stable prices.
That, my Lords, is why I welcome the proposals in the gracious Speech for legislation to reinforce a policy
"for productivity, prices and incomes …while preserving the voluntary principle on which it is based …"
The somewhat disappointing trade figures for the first quarter of the year emphasise the need for such a policy, because without it I cannot see how our export prices can remain competitive. I am sure we

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would all agree, on both sides of the House, that the better way of solving our balance-of-payments difficulties is by increasing exports rather than by restricting imports, however justified restrictions may be in times of exceptional difficulty. A great deal was accomplished under the last Labour Government, and will continue to be accomplished under the new Government, to encourage the better use of all our resources. No one would deny that the road is hard and that much remains to be done, but under firm government and in partnership with the people of this country we on these Benches do not doubt a successful outcome.
4.40 p.m.
LORD HANKEY: My Lords, I have listened with great interest to the speeches that have been made in this debate. It seems to me that the programme of economic action contained in the gracious Speech is in many respects an excellent one, but I venture to wonder whether it really goes far enough or whether it will take action quickly enough. On an average, we seem to have a balance-of-payments crisis once every three years. We have already gone through a year or eighteen months since the last one, and on previous form we ought to be thinking of being ready to face more trouble in about eighteen months' or two years' time. Frankly, we have not very much time left in which to correct the basic defects of our economy which I believe are responsible for our predicament.
The National Plan and the prices and incomes policy, in my opinion, are excellent but they have not yet shown very practical results. Perhaps it was hardly to be expected that they should. They certainly ought to be pressed forward by all means available. But there are certain features on which we are still particularly defective. I was grateful for what the noble Lord, Lord Shepherd, said about the docks. It is clear that progress is being made on this question, but I believe that no time is to be lost in making sense of the situation in the docks. It is incredible that an island economy like ours should have tolerated the disorder and gross muddle that has gone on in our docks for so many years. Some of our shipping lines unload their goods at Rotterdam, after discharging
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passengers at Southampton, and I do not see any reason why the ship turn-round in London or the Mersey, or at others of our great ports, should be any less good than it is at Rotterdam. I hope that the Government will press forward their actions until the situation in our great ports is at least equal to that of the ports across the Channel.
Another point which needs urgent attention is our system of statistics. Our statistics of industrial production are unreliable and are much delayed. When the then Chancellor of the Exchequer, Mr. Maudling, produced his Budget to Parliament in 1964, it was based on the assumption that our economy was growing at the rate of 6 per cent. It was only six weeks later that we discovered, to our astonishment, that our economy had been stationary since the beginning of the year. When the present Chancellor of the Exchequer, Mr. Callaghan, produced his Autumn Budget in 1964, it was based on the assumption that the economy was stationary. We were electrified to learn, in December, that the economy had been advancing since September at the rate of 5 per cent. per annum. I believe that the situation is the same to-day. But, as will have been seen from the Press, the Confederation of British Industry and the Board of Trade do not agree about what is the present situation.
How can we safely base our policy for the control of the British economy, at a time when we are running it at a state of near-inflation, in the hope of getting better growth—even less, how can we safely base a policy of relating wage increases to increases of productivity on such a system? We just do not know what is the situation. From my five years' experience of O.E.C.D., I am quite sure that the American system, at least in this respect, is much better than ours, and I would venture to make the highly unpatriotic suggestion that we should get an American consultant to advise us about the system of statistics of industrial production, and that thereafter we should invest in the best possible system of British computers, so that we have the best possible up-to-date system of statistics in this field.
The same applies to the statistics of the percentage use of industrial capacity. The Americans always seem to know what it is. I greatly admire them for this, though

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I am not sure that they are so good in this field as in the other I have mentioned. But I believe that at a time of near-inflation—and the speech of the noble Lord, Lord Shepherd, shows how important it is to know when we are near production ceilings—it is vital that we should have the best possible statistics in this field also.
I am going to follow the noble Marquess, Lord Salisbury, in having the temerity to say something about industrial relations. Both Conservative and Labour Governments have actively encouraged the growth of the national economy, but we still continue to lag behind our partners and competitors. Our expansion in this country, according to O.E.C.D. statistics, is less than half that of the O.E.C.D. average, and considerably less than that of our main partners in Europe or in America. I do not think that this is entirely due to the high rates of interest, though I agree with what the noble Lord, Lord Shepherd, said, that we had to divert resources into exports; and in this we have to some extent been successful. But I think that we could do much better still if we did not suffer from the hit-and-run tactics which go on constantly in our industries. I believe that much of our failure to expand has been due to poor industrial organisation, to poor industrial relations and to real disorder in our trade union affairs.
Having had a good deal to do with some of our leading trade unionists over many years, I know that we have many of the best trade unionists in the world. But we tolerate in our industries a state of affairs which deprives the leaders of a great deal of the power which they ought to be able to wield. We should never allow nurses in hospitals to say which operations should be conducted, but that is not more absurd than that rail workers should dictate how the liner trains are to be used or how other measures of modernisation are to be applied. Last week there was a strike in a B.M.C. factory against the fact that the car delivery workers had gone on strike in conditions which the other workers thought unreasonable. If two Members of your Lordships' House were to have a dispute in Piccadilly and hold up the traffic for even five minutes, there would be no end of a fuss, and there would certainly be legal proceedings. But if a number of
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men, for reasons with which their trade union leaders do not in the least agree, hold up production, causing the loss of millions of pounds a day and the loss of export orders, and, incidentally, diminishing the earnings of their workmates, this is not contrary to the law and there is not very much to be done except wring our hands in despair. Our conciliation system is excellent, but I would suggest that it is not enough. I am not imagining things when I say that this has a bad effect on our exports.
When I was Ambassador in Stockholm a new model of a British motor car was produced, and it was decided to introduce it to the public for the first time in that city. This does not happen every day, and although Embassies have to be careful not to favour one firm against another, we decided to "go to town". The publicity boys were turned on full steam; my wife was photographed in her best hat smiling out of the window of the car; I drove the car round the town and said what a fine car it was—and, indeed, it was a very good car. The result was exactly nil, because a strike took place in Coventry shortly afterwards and lasted for six weeks; the same week that this strike was settled, there was a strike in the Port of London, and no motor cars could be shipped to Sweden until the beginning of the autumn, which happens on August 20. The result was that everybody was in despair, and the agent of this famous motor car firm decided to work for Mercedes. I have never taken part in a worse fiasco.
Only last week there was a strike in another industry in the Midlands in which it was alleged by the workers that six agreements had been broken by the employers. For all I know, that was absolutely true. But the interpretation and application of agreements can be, and I submit should be, a matter of law. In this field, however, we in the United Kingdom have virtually no law, and there are no special courts, as there are in many countries from one end of Europe to the other—countries of the most varied political complexion. Therefore, I think that our system must be regarded as quite out of date, and that it is unworthy of the United Kingdom.
People frequently accuse the employers of not communicating their plans better to the workers. I agree that this is important, and in this respect I was much

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impressed with what the noble Lord, Lord Sieff, said in his most interesting maiden speech. But how difficult it is for any managing director or board of directors to deal with five, or even fifteen, trade unions. You can deal intimately with one or two, but it is extremely difficult to deal with a large number.
In a number of countries there has been a major reform to deal with this situation. In Germany, for instance, after the last war when the trade unions had to be de-Nazified, they were all abolished, and the Germans have been left with a relatively small number of unions. In Sweden, when the Socialist Government came to power in the 'thirties, they decided to reform the unions on an industrial instead of a craft basis, and they now have only one, or at most two, trade unions for each industry to deal with. This makes it much easier. There is no doubt that the state of communications in those countries is much better than it is here. In Germany there are, by law, established assemblies of all the employees in each works and an elected works council, and there are representatives of the workers on the boards of joint stock companies.
We obviously have to find our own way of doing these things, and we have shown—Fairfields, for instance—that we can be imaginative and do things in a new way. I believe our experience proves that we cannot leave all this to chance. The state of affairs in the United Kingdom seems to me to prove, as nothing else could have done, that really effective, powerful trade unions are essential for the orderly development of our industry. I strongly urge the Government to tackle this and to produce a forward looking, imaginative, and, about all, constructive solution that will enable the best elements to co-operate. I feel that the present system makes it hard for those who believe in co-operation in production to work together, and it is in fact a bonus for those who want to create trouble. What we want to bring out is the great common interest of management and unions in a successful and expanding industry.
So, in short, I urge that the two sides should be made to talk and not to fight. As a diplomat, I make no apology for putting that idea forward. I believe that
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trade union agreements ought to be enforceable by law, as they are in many countries. There should be special courts to do this special work, which is complicated. The right to strike, in my view, should in some way such as this be canalised, like the right to carry fire arms. It obviously cannot be abolished, and will always endure. In this way, I feel that trouble-makers could be kept in order, and we should give our great trade union leaders a real chance to show what they can do.
The Wars of the Roses resulted in the loss of all our continental connections. The Civil War in 1640 resulted in the Dutch Fleet sailing up the Thames with a broom at the masthead. Unless the Government take steps to end our present industrial Wars of the Roses, I am afraid that the present chaos may well end in another devaluation. This would be quite disastrous for both the Government and the country, including the workers. I believe that we have not very much time, and I urge the Government to try to speed up the work of the Royal Commission on Trade Unions, which is really of great importance at the present time.
Sometimes we hear it suggested that the situation is not so bad as it is represented. I do not agree with this. Between 1957 and 1962 the Germans lost 3·7 million working days by strikes and the British lost 28·7 million. The German workers involved numbered 387,000, and the British workers involved numbered 8·5 million. I believe that more recent statistics are as bad, if not worse. Loss of time in strikes is, of course, not the only factor. But can we wonder that our share of world trade has fallen, while the German share has risen?
It is true that in this country we have "never had it so good". But it is, to say the least, regrettable that the O.E.C.D. now lists this country as sixth among European countries in terms of gross national product per head.
I think that our weak economic position also affects our foreign policy. We obviously ought to be getting into Europe, or to be thinking hard about doing so. But I really wonder whether it is safe until we have corrected some of the structural defects in our economy. Personally, I am full of admiration for what the Government have done—I cannot think how they have done so much

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in so little time—and I admire the courage and enterprise which the Prime Minister and his colleagues have been showing. But what we now need is a real constructive effort from them in these fields, in addition to the action which they are already taking.
5.0 p.m.
LORD WILLIAMSON: My Lords, we have had a very interesting speech on industrial relations from the noble Marquess, Lord Salisbury, and also, to some lesser extent, a speech on industrial relations from the noble Lord, Lord Hankey. I do not intend to make my speech on anything the two noble Lords have said, but I should like to bring things into their proper perspective. I think the speech of the noble Marquess was fair and reasonable. He laid emphasis on strikes and restrictive practices, and asked why there are so many unofficial strikes. I listened most carefully to the noble Lord, Lord Hankey, and I thought, if he will forgive me for this criticism, that, to say the least, there was in his speech a little exaggeration. Industrial relations in this country are not poor. We have better industrial relations than any other industrial country in the world, including Western Germany. There is no disorder in trade union affairs. Of course, now and again in these democratic institutions there are difficulties, but, by and large, they are not too bad as democratic bodies go.
I noted that the noble Lord, Lord Hankey, gave figures about our strikes and compared our record with that of Western Germany. I shall read with interest, and very closely, the speech of the noble Lord in Hansard to-morrow, but I will make this categorical statement now in your Lordships' House. If we go back over the past six or seven years, it will be seen that we have one of the best records in Europe and the world: better than the United States, and surpassed only by one or two Scandinavian countries. Good gracious! the last time I looked at the figures—and if I had known this was going to happen I should have brought them along—I found that for something like 25 million people gainfully employed in this country every day, in all industries and services, in 1963, I think it was, only 3 million working days were lost, which was half the figure of the next best in
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Europe, outside the small Scandinavian countries.
I myself have always condemned unofficial strikes and will continue to do so. Out of the number of recent strikes 95 per cent. were unofficial strikes, which is not a very good thing so far as trade union discipline is concerned but to say that only 5 per cent. were official strikes is a good thing so far as industrial relations go. Nevertheless, I should like to say this to the noble Lord, Lord Hankey: we can never give up the right to strike. This is the very basis of industrial democracy, and I should like to stress that. I hope that strikes will become unnecessary, and for the time being we must try to minimise them. What matters is not so much the number of days lost by these strikes but the disorder and dislocation in some of the industries which takes place as a result. No doubt the Royal Commission on Trade Unions will have something to say about that.
The noble Lord, Lord Erroll of Hale, in opening this debate, felt it was right that trade union and economic affairs should be debated first, because it is on the solution of these questions that everything else depends—and I think noble Lords would generally be in agreement with that. For the purpose of this debate, I thought that, as a matter of interest, I would look at the gracious Speech for 1964. I was reminded of this passage:
"My Government will call on trade unions and employers' organisations to co-operate in eliminating those restrictive practices, on both sides of industry, which impair our competitive power and the development of the full potential of the economy."
It is reasonable to expect that since that time there would have been a more realistic response to the elimination of restrictions and impediments towards a more efficient and prosperous economy, especially from those sections most directly concerned and especially, too, having regard to the very high standards of living which are at risk and in grave danger of being eroded. Whatever progress may have been made—and no doubt it could justly be claimed that in some directions advances have been achieved—nevertheless, over a large part of the field things are pretty much the same as they were, and in some respects not so good.

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In 1964 and, indeed, for a long time before that, we were not paying our way. And we are not doing so to-day, which is a prime reason for our financial difficulties. We are doing too little, and we are paying ourselves too much for it. We are all enjoying ourselves so much that nobody wants to hear about the mundane matters of an adverse balance of payments and an increase in the National Debt. This is one reason, at any rate, why the Prime Minister had to blast away with most unusually forthright words in his speech at the Scottish Trades Union Congress the other day. What the Prime Minister said to the Scottish T.U.C. was that the nation would be sunk if prices and incomes went on rising higher than productivity. These are serious words from the Prime Minister, but they are true, and they are words which must be repeated time and time again until they sink in. The tragedy is that every intelligent trade unionist in his heart knows this to be true, but when it comes to curbing income rises, or taking any of the remedial steps for which the Government and others equally anxious about the situation are calling, it is always, "The other fellow is meant to do so, and not me." In other words, it is "they", and not "us".
I think I should say here that it is not only workpeople who are to blame. For a long time they were ready to believe that it was ordinary commercial practice to get as much as one could for what one had to sell, so they cannot be blamed for placing a high scarcity value on their labour. This has led to a great deal of wage auctioning, aided and abetted by some employers. In conditions of full employment and, in some areas, of over-full employment, this is disastrous. It is in these conditions that high-profit industries have wage and salary inducements to attract labour. If the truth were known, it is probably these industries and firms who are best able to afford to harbour surplus labour. Management has a great responsibility here and cannot divest itself of blame.
I now come to the gracious Speech, and I would refer specifically to the paragraph which states:
"My Government will continue to develop, in consultation with management and unions, the agreed policy for productivity, prices and
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incomes. Proposals for legislation to reinforce this policy, while preserving the voluntary principle on which it is based, will be laid before you."
In some quarters the words "proposals for legislation to reinforce this policy" are causing quite a hullabaloo. Personally, I regret this hint of resorting to legislative action. All those who value and wish to che ish voluntary democratic procedures will be sad that the Government have found it necessary to suggest intervention in the wages and salaries field further than is required and accepted in the wages council section of industry. But what on earth are the Government to do? It is argued, as I understand it, by some trade unionists that while they accept the need for an incomes policy, the T.U.C. is operating its own voluntary early warning scheme and this should be allowed to operate in order to measure its success or otherwise before the State intervenes. As I read it, this is precisely what is intended by the paragraph in the gracious Speech. If the voluntary principle succeeds and the T.U.C., or any other authority in the wages and salaries field, is able to show to the Government that legislation is unnecessary, legislation will not be introduced. Perhaps my noble friend the Minister who is to reply to this debate will be able to tell your Lordships if this is the case. If it is, neither the T.U.C. nor anybody else has anything to fear; but, on the other hand, if the T.U.C.'s early warning system fails, then surely in such a grave situation as we now face the Government have a duty and a responsibility to intervene.
Reduced to simple terms, what the argument is about is whether or not there should be a "free for all" in which the strongest and the most powerful grab as much as they can for themselves, leaving the less fortunately placed sectors to scratch along as best they can, or whether there should be reasonable restraints exercised all round in order not to overload the economy and to help to keep prices steady for everybody. The "free for all" has been condemned by every responsible trade union leader over the years, and I was happy to see that during the past few days the leaders of the Union of Shop, Distributive and Allied Workers have succeeded in persuading their membership to accept the principle of the prices and incomes policy. We can only hope that other unions will

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follow in its wake, because a "free for all" in the wages field must mean a "free for all" in every other field, and this would bring chaos and anarchy.
I do not apologise to your Lordships for again referring to the question of the most efficient use of manpower resources. In the economics debate in your Lordships' House on May 26 last year I referred to the increase in manpower between the years 1954 and 1964, and pointed out that the additional manpower of 1,800,000 had been swallowed up in distribution, professional, scientific and catering services, while during the same period manufacturing industry had suffered a reduction of something like 140,000. We have been told this afternoon from the Government Front Bench that for every one skilled man available in the North of England there are ten vacancies, and yet with an increase in manpower over this period of 1,800,000 manufacturing industry gets none of it and finishes up another 140,000 short. That is the economics of the madhouse. No wonder there is bargaining for labour among manufacturing firms, and a colossal increase in overtime, which is now running at something over 18 million hours a week. It is incredible that the average working week now of 47 hours is as long as the average in 1938. More incredible still is the fact that output has been static since February 1965. It is reported that the Confederation of British Industry has now, if belatedly, decided to ask its members to review their use of manpower. This is to be welcomed, and I am still of the opinion that it is time the Government initiated a top level inquiry into the labour resources of the nation with a view to their more efficient and economical use.
One of the factors which many people must find distasteful in this situation is that every time we are brought face to face with our financial and economic difficulties we are bailed out and put once again in pawn, when we ought to be squarely facing the situation. I believe the country would respond and meet the difficulty, as indeed it has done on more than one occasion in our history, but we are let off the hook, only to go on floundering about until the next bill comes up. If this Government can stop the rot and bring the nation to exert itself towards a solution of our problems by turning their back on the out-moded
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methods of the 1920s and 1930s, I believe this will be a substantial step towards getting the country on an even keel.
LORD FRASER OF NORTH CAPE: My Lords, may I just ask the noble Lord, who is a great expert on these matters, one question. Surely legislation would help trade union leaders? It is not necessary for it to be used, but surely it would be a good thing for it to be there.
LORD WILLIAMSON: I apologise to the noble Lord but I did not quite understand his point.
LORD FRASER OF NORTH CAPE: My Lords, I will not press the matter.
5.19 p.m.
LORD CITRINE: My Lords, my first words must be of congratulation to the noble Lord, Lord Sieff, for the most thoughtful address that he gave this afternoon. I was particularly struck by his insistence on the importance of human relations in industry, and with his phrase that the human factor continued to dominate modern production. Some of us have been saying that, with less effect and less experience in the great world of industry that he serves, for a long time. I think most of us who share these views are conscious of how much depends on those who are at the head of affairs in particular firms and industries as to how far that fact is realised and acted upon. I hope the words used by the noble Lord, Lord Sieff, will be appreciated and widely applied by his fellow employers.
I also wish to congratulate the noble Lord, Lord Williamson, on his speech. He always was, within my knowledge, an outspoken critic of failings in the trade union movement or in the economic sphere, never afraid at any time, no matter what audience he was addressing, to speak his mind; and he has done so to-day. It may be that noble Lords who have not served the country through the trade union movement may not understand how difficult it is for a trade unionist to make a speech of that kind. It would have been very much easier for Lord Williamson to indulge in platitudes, which are so easy to roll off the tongue, in respect of the claims of labour, rather than discuss its obligations and its duties. My only regret is that unfortunately, for reasons which we partially understand, such speeches are seldom reported as

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adequately as circumstances warrant in newspapers which reach the workers. I am not making any charge against any newspaper or newspapers. I am simply hoping that editors will realise that in the circumstances in which this country finds itself it is very desirable that workers should have the facts presented to them as they are seen by experienced people such as Lord Williamson.
I want to refer in broad terms to the gracious Speech from the Throne. The comprehensive character of the measures mentioned is something on which I warmly congratulate the Government. Their determination to stimulate efficiency in industry seems to me to go right to the root of our present problems. The reference, too, to the Government's readiness to co-operate fully with employers and trade union bodies is also, to my mind, of cardinal importance.
I hope that I shall not be misunderstood when I say that I think its importance is even greater to-day in respect of Governmental activity than it has been for some time. Some of your Lordships may have read in The Times an analysis of the composition of the Labour majority in the House of Commons. I am not critical of that: I myself made a similar analysis before that letter appeared. But it showed very clearly how the House of Commons is more and more becoming representative of sections of the public who are not, in the broad sense of the term, trade unionists. I think that that is an inescapable result for any Government that proposes to govern the country as a whole. Once the determination was taken, I think in 1918, to broaden the basis of the Labour Party, it became inevitable that, step by step, there would be seen in the Government, in high positions, men with very little direct working-class experience. That follows, and I hope that I shall not be regarded as making any complaint about it. Teachers, economists, doctors, sociologists, journalists now figure in greater numbers in the House of Commons in the Labour movement than I think at any other time in our history.
Why am I saying this? I am saying this because, while I recognise that it is a good thing for the country and the Labour movement that the best brains that are to be found in the electoral
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sphere are representing the policy of the Labour Party in the House of Commons, I do not disguise from myself that very often intellectual capacity is not accompanied by wide experience, and there is the tendency for people, with the best intentions in the world, to become theoretical and academic. The trade union movement has its roots in the workshops, in the mines and the factories, and it is people from that movement who alone have the necessary experience to be able properly to interpret the desires from time to time, as they occur, of the working people.
So, as I say, I welcome the Government's stress in one of the paragraphs in the gracious Speech to co-operate so fully with the trade union movement. But that co-operation can be effective only if full notice is taken of the representations made by the trade unions, whether through the Trades Union Congress or otherwise, and if there is some evidence that the Government are acting on the constructive advice which they receive.
I wish to refer, as the noble Lord, Lord Williamson, did, to the Productivity, Prices and Incomes Policy. It is amazing how some of the phrases which fell from him find a replica in the notes that I made, less than half an hour ago. Naturally, people applying themselves from the same broad experience of this kind of subject tend to think in the same way. It was remarked many times, in the Press and elsewhere, that the late Ernest Bevin and myself, without any direct collaboration, reached the same conclusions on matters of trade union policy and action. Some little while ago, while the General Election was taking place, I gathered from a heading in The Times that the Parties were agreed on the necessity to restrain inflation—not on the methods, but on the principle and desirability of it. Most of your Lordships will have read the very trenchant analysis in The Times leading article as to why we were in the present economic difficulties. I do not share all the reasoning behind that leading article, but I recognised the truth of many of the observations that were made.
But although political Parties may agree on the necessity to restrain inflation, what of the bodies outside? What about their own members? Lord Williamson has spoken about that, and

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I do not wish to cover the ground to which he has referred. I remind myself that the trade union movement, and the whole system of negotiation between employers and workpeople in this country, has been on a voluntary basis. In many countries, State regulation of such matters has gone infinitely further than anything that has ever been contemplated in this country, either by organised employers or by the trade unions. I am glad to see the Government's reference to the voluntary system. But it is quite conceivable that, step by step, other measures may have to be taken. Compulsory notification of applications for advances may easily, in the minds of trade unionists, be a precedent for other kinds of compulsion; and these are suspicions which are so easily aroused that I hope the Government will tread very lightly indeed in dealing with this very difficult subject.
I ask, what about the members of the trade union movement? Did they in fact support the policy? Did other people support the policy, as did the Parties themselves? Did they want to curb inflation? Undoubtedly, there cannot be any hesitation in saying that the educated, informed trade unionist understands the consequences of inflation, but I am perfectly certain that that does not apply to the average member of the rank and file. They do not bother their brains about whether or not applications are in excess of the so-called norm. They think in terms of how much money they can get, and how few hours they can work for the services they perform.
We were badly out of line in that respect in 1965. Every union believed its members to be underpaid, and there is more or less of an escape clause or a paragraph in the policy that has given them room to make their applications. I do not think that that process will necessarily be continued in 1966 and onwards. There were reductions in hours during 1965. While I could not say that the 40-hour week had been completely established throughout industry and commerce, at the same time the major problems have been resolved and people are, by and large, working a 40-hour week. The reduction of working time by a couple of hours in itself tended to increase the hourly rate of pay, and that tended to show that the increase in wages greatly outdistanced the norm that
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was laid down as the desirable end. I do not think that is likely to recur anything like so excessively during the current year and in successive years.
But I ask myself, will restriction of wages applications to the norm satisfy the members of the unions? It is hard to find out the answer to this question. For many years the Trade Union Movement has urged on the Government of this country a planned economy: in other words, that the Government should be the instrument which plans the general structure of society and its activities—perhaps not so much in regard to the structure as the day-to-day economic services. I do not think that the logic of that has ever been represented to the ordinary trade unionist. In my day as Secretary of the Trades Union Congress I certainly never did it. I did not turn to any trade union audience and say, "That means you, and your wages also". But I believe that modern society itself cannot effectively deal with modern problems without some measure of planning. Although it may be a case of hit and miss for a good many years to come —as we saw in Soviet Russia, for instance, where the Government had absolute power—none the less, none of us can escape the view that some measure of consistent planning is necessary for the economy as a whole.
I echo what my noble friend Lord Williamson said: it is always the other fellow to whom one is applying this stricture, and never to ourselves. If we talk about inefficiency in industry we never mean ourselves—oh, no! I have heard many speeches, and made a good many myself in this House, about inefficiency in industry, but if anybody told me that I was an inefficient administrator, or that the industry which I was serving was an inefficient one, I would have repudiated it indignantly. I do not think many people would admit that their services and their industry are, in effect, inefficient. We always think about the other fellow.
We must try, if we can, to educate people to realise that a policy must apply to all. Incomes, wages and salaries are of vital importance to a planned economy. This cannot be escaped. That was found out in Soviet Russia, where they went to extremes that would not be tolerated in this or in any other democratic country. They allotted a certain amount of the

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national product as a sort of wages fund, and then they left it to the trade unions, through their planning councils, to fight out with the Government what the respective portions should be for the different industries—neat, clean, but not giving to the workers the same opportunity as is done in this country to determine their remuneration. I think that the trade unions have a duty to educate their members to a realisation that a planned economy means, in essence, that wages and salaries, as well as other classes of income, cannot be ruled out and must be brought broadly within the same overall category.
At the same time, I am by no means persuaded that it is a good thing to try to rush to that position. The one thing that I believe people learn in dealing with human beings is the comparative slowness of change. I have spoken about it in other connections in this House, but, most assuredly, in regard to industrial change, where the human element is concerned, it is extremely slow. It may be forced on individuals, but there is always a reaction that is quite undesirable. What are we seeing to-day? If one can dignify certain categories as "workers", what are the teachers, doctors, professional workers and journalists doing? Are they bothering their brains about inflation? Are they bothering to keep their applications within the norm that has been laid down by the Government? I devoutly hope they are, but I have seen no evidence of it. We are dealing with those workers who, without undue flatterly, one can say are the more educated sections of the community who labour.
What about the trade unions? As everybody knows, the T.U.C. has most courageously broadly accepted the Government's productivity, prices and incomes policy; but there were a substantial number against it. It has always been a question, in any voluntary organisation, as to how far an executive body like the General Council of the T.U.C. can go, as it were, in carrying out a policy against the wishes of a large number of its members—large in the sense that individual unions represent a different number of members. The biggest union, the Transport and General Workers' Union, have completely repudiated the policy. They will have nothing to do with it; they
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will not base their policies upon that consideration at all. I wonder what the late Ernest Bevin would have done—not in his capacity as a Labour Minister, but in his capacity as a trade union officer dealing with the claims of his members. I am sure that he would, like myself, be most suspicious of anything savouring of Government intervention. In those circumstances he would do his best to preserve the voluntary character of the arrangements which the Union came to on behalf of its members. He would be especially resentful of any suggestion of penalties on the individual trade union member. After all, that has been hinted at by the Government. While my memory perhaps is not of the best, I think that that was shown in the memorandum on which the Bill was to be based and which was published before the General Election.
I am very—how can I put it?—apprehensive indeed of any Government embarking on the lines of trying to force by legislation what they cannot achieve by voluntary means. The system is on trial. We have a Labour Government in office. We have trade unions which, by their contributions, and very much by their efforts, have established that Government. What are the leaders of those unions to do? The advice which Sir Winston Churchill once gave to me is applicable in this connection. He said to me, "Citrine, you must never get too far away from your troops". Of course, it was a pretty obsolete metaphor, because to-day, I understand, the leaders of the troops are well in the rear; but it was very clear what was intended to be conveyed. The trade union leader depends upon his members. Most of them depend for their election to office on their members, and at the most they can exert only a moral influence.
I rejoiced, with my noble friend Lord Williamson, when I saw in this morning's papers the reference to the Union of Shop, Distributive and Allied Workers. I do not know whether what was said by their President represents the policy of the executive of the Union, but it was a most courageous statement, and I wish that I could hear more similarly courageous statements in the trade union world today. All of us will watch with great care and anxiety what happens in the National Committee meetings of the Amalgamated

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Engineering Union. Here, there is only one thing I can predict, because I have always tried to indicate that nobody is expert in this field: my prediction is that the decision of the A.E.U. will not be unanimous.
THE MINISTER WITHOUT PORTFOLIO (LORD CHAMPION): That is a safe answer.
LORD CITR1NE: Evidently others share that view.
The crux of the matter, it seems to me, is that the average trade unionist cannot see the application of the prices and incomes policy to other sections of the community—I am not now referring to prices, but am thinking entirely of income. There is the old axiom, which the noble Lord on the Woolsack so well understands, that it is not enough to do justice; it has to be shown to be done. That is precisely where we stand now. The average man does not see the effect of an incomes policy on people other than wage and salary earners. If I had any influence on Government policy, I would make that an essential point of my propaganda so as to indicate what is being done in that field.
The trade union movement bases its hopes of curbing inflation on increased production. I dislike saying things which appear to be pessimistic, but increased production is not an easy thing to achieve. Governments can encourage; Governments can help. But Governments cannot transform industry very quickly. There are such enormous variations between firm and firm, and between industry and industry, that to expect an automatic increase merely because a beneficent Government wishes to encourage such increase is, to my mind, living up in the clouds. I cannot see any material overall increase in production for some considerable time. Even if new machinery is installed, even if administration is brought up to a high level by managerial consultants and managerial courses, and all that sort of thing, increased production will be a comparatively slow process.
It may be effected by Government measures in another sphere. What kind of measures? Dare anybody mention it? The Times seems to think that nobody dare mention deflation. They now have
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another expression, disinflation, which I presume means restraining consumer demand in some kind of proportion to increased productivity—a very desirable end, but one which is not easy to achieve. I presume that was what the Labour Government attempted in the Budgets of 1965; not to deflate activity completely, but to prevent demand rising so as to contribute to inflation—in other words, to keep it in balance with increased productivity.
The unions are afraid of deflation. They do not like the word. They remember 1931, and, as everybody knows, a period of full employment since 1938 has not removed that kind of fear. They remember the millions of unemployed, and they are afraid that if they pass into a period of deflation it will sooner or later bring unemployment to very large proportions. Personally, I do not see that that is in the least likely. On the radio last evening I heard an economist, Andrew Shonfield—a man whose writings always seem to me to be well balanced—say that he felt that the Government's measures had not yet taken full effect. He thought it might be that we were moving into a recession. Just think what those words me If he is right, it means that it is going to bring unemployment. I once heard a Minister, in very private circumstances on the National Council of Production in industry, say, "Nobody knows how deep unemployment would have to go in order to ensure that there was no inflation." Those are the fears in the minds both of the trade union officials and of their better informed members.
I cannot see as an expedient, and an early expedient, any real alternative to restraining consumer demand. I know well that once that is done, whether by direct or by indirect taxes, there will be argument after argument about the ineffectiveness of those methods. If there is any suggestion of the Chancellor's increasing direct taxation, people will get up and say, "You are destroying the means of financing industry: you are taking away the opportunities of people to invest their money in capital." Nobody ever thinks about the bingo halls, or the bookmakers' establishments, or the amounts spent on tobacco, drink, and what might be called luxuries—nobody mentions those. Wherever taxation is increased, it always means, in the eyes of

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some critics, drying up sources of investment. I want to know what other methods are open. What in fact are they?
I have tried to state, factually, I hope, and not with any political bias (I am not suggesting that I can escape from an environment of so many years in the trade union movement, but I hope that I speak without bias), a problem which, in my judgment, requires the best brains of politicians and public men generally. I hope, therefore, that this matter will be lifted above Party politics, and that, instead of this continuing inflation which is destroying the value of money and bears so hard on people with fixed incomes, particularly the older people, means will be taken to secure that the spending spree which has gone on so long will at last be brought under some measure of control.
5.50 p.m.
LORD HAWKE: My Lords, we have been most honoured to hear a brilliant speech from one of the great retailers of our country. He shows a grasp of industrial matters which is given to few other people, and I hope we shall hear him many times aMy noble friend Lord Erroll of Hate started the debate by making what I thought was a studiously moderate speech from the Front Bench. But he was leapt upon, as if by a tiger, by the noble Lord, Lord Shepherd, when there was some allegation that the British pavilion in a fair in Norway had been sabotaged by fire. When I happened to glance at the tape on my way back from tea, I found that the fire in the pavilion is being treated by the Norwegian police as a suspected case of sabotage, so I hope that the face of the noble Lord, Lord Shepherd, will in due course be red.
I hope it is not too cynical a view to suggest that the history of our land is a tale of great and heroic deeds by individual Britons, but is a long catalogue of errors and omissions by their Governments, relieved by only too few gleams of genius. In the records of the last eighteen months I have so far failed to detect any gleams of genius, and I can only hope that historians may have better luck. I must say that I do not have one-quarter of the faith which the noble Lord, Lord Citrine, has in Government's ability to plan the economy, or to plan
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anything else. I can call to my aid the examples which have prevailed in those countries where the Government have tried to plan everything, but which have been a grave failure.
I think that the gracious Speech is singularly uninspiring. The Labour Party is fond of ascribing to itself some sort of monopoly of the great moral principles, but I must say that I should have liked to see a little more of what I regard as enemies Nos. 1, 2 and 3 creeping their way into the Speech. I should have liked to see:
"My Government will stick at nothing to halt the inflation.
"My Government will give the utmost priority to seeing that crime does not pay.
"My Government will introduce legislation at a very early date to amend the laws on gaming and gambling."
To-day we are talking about economics, though I suppose that whether or not crime pays is an economic subject. But I propose to confine myself more to the first of those evils, which is inflation.
It has often been assumed that a mild form of inflation is the inevitable price to pay for full employment, and that has been more or less tolerated since the war. But of the situation has got quite out In ten years the retail price index has gone up by 34 per cent., and by 17½per cent. in the last five years. This has inflicted great hardship on all those whose income does not expand, and has played ducks and drakes with all contracts entered into by such people as contractors, shipbuilders and the like. Your Lordships will have read the story of the near bankruptcy of a shipbuilder because inflation made the selling price of his ship fail to cover its cost of building.
If you lend to the Government, say, £100 at 5 per cent. less tax, and are repaid £105 at the end of ten years, you have roughly got 3 per cent. net interest on your money and are then paid back in pounds worth 15s. It is not a very good bargain. The only reason why Government and industry are able to borrow at long-term fixed interest at all is that insurance companies are selling what is, in effect, a future contract in fixed money terms. People only take out policies because they hope that the equity and property portion of the insurance companies' portfolio will enable them to pay out bonuses sufficient to offset

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the fall in the value of money; and, of course, the insured badly needs the death cover at the same time. But without the insurance companies nobody in this country could borrow at fixed long-term interest to-day.
Sir Miles Thomas, Chairman of the National Savings Movement, has gone on record as saying that the whole Movement is menaced by inflation. The main cause of inflation is that it has become the habit for every wage-earner and salary-earner in the country to expect each year a larger rise than in the year before; and for wage-earners to work fewer hours at the normal rates of pay, and more hours at overtime rates, under the pretence of shortening the working day for social reasons. Where there are more jobs than men these demands are acceded to. It is much cheaper to pay, in the hope of passing on the cost, than to say, "No", and possibly have a strike. Incidentally, since profits often, but not always, bear a relation to costs, profits tend to go up, too. This, of course, feeds the demand for more pay, though profits are ephemeral and relate to the past, while wage rises are permanent and relate to the future.
Most people, of course, welcome the ideas behind Mr. Brown's prices and incomes policy, but not so many think that it can work in a period of over-full employment. The claims, backed by the threat of a strike—even, in some cases, by a strike itself—have been so successful in the past that even if unions could be persuaded to hold their hand, I do not know who would stop the "unofficials", often the Communists, when they took over. The noble Lord, Lord Williamson, gave the history of our record of strikes, which in comparison with other countries, measured in man-days lost and so on, is a good one. But what is not really calculable, and is extremely relevant, is at what cost we have bought off these various strikes. In other words, if our inflation has been worse than that of these other countries, it means that we have paid a heavy price in inflation instead of a heavy price in loss of production. I am afraid that somebody has got to show that strikes do not pay. It is a most expensive exercise for industry, and the onus will really be on the Government, as the biggest employer, directly and indirectly. I am afraid that the general public will suffer
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greatly, but one hopes that one example will be enough.
Meanwhile, the increased spending power created by the rise in incomes over the last two years is there, and causing acute embarrassment to the balance of payments, both through the over-purchase of imports and through over-indulgence in foreign travel. On these occasions the Chancellor of the Exchequer is always tempted to impose some swingeing taxation, which is, of course, effective for a time, but it is not long before the stronger members of the community collect more pay to pay the taxes, and we are then back to square one.
While the squeeze is on, output falls more than the overheads; but employers continue to cling to their skilled labour because they know that it is only a temporary phase and they will want those chaps again soon. So the squeeze does not have enough effect on the bargaining power of the men to obtain enough extra to pay the extra taxes. I believe that more should be done to withdraw purchasing power by increasing savings lent to the Government. At the moment the whole atmosphere for savings is bad. People have seen their savings eroded by inflation, and the impact of the Welfare State is against reliance on the individual effort in favour of reliance on the State to provide.
We must remember that when the State provides, the burden falls largely on industry, thus increasing the cost of production, or on the taxpayer, thus putting up the cost of living. What we have to do is to encourage wage-earners to give up present purchasing power in order to provide for the future. I say "wage-earners" because among salary-earners the custom of saving through insurance policies, and so on, is much more widespread. It is the modern, monied wage-earner who is the chap who has the money which is not being saved. The difficulty is that we are likely to be met with the answer, "Why should we save for the future when the State will look after us, and, if not, our employer will give us a pension?"
A great untapped source of savings lies in the hands of the young marrieds, or those about to be married. They know they will want a house one day, but they leave the saving for it so late, until just before they are thinking of getting

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married. They are relying on Santa Cross-man to provide. One gets a temporary withdrawal of purchasing power if one increases the rate of the down payment on a hire-purchase transaction—and this I hope the Chancellor will do next week. On the other hand, if one reduces the period of time over which payment may be made for the article, one promptly adds to what the victim calls the cost of living, and if he gets half a chance he gets a pay rise to cover that.
Now the Chairman of the National Savings Movement, knowing the dangers, is going to press the Government for a State unit trust to invest in equities. I think that, socially, it is a splendid idea for everybody to have a stake in British industry, but it is not so beneficial to our economy as making investment in Government securities attractive to our people. The Government, with their immense programmes of capital works—and the local authorities, too—are in desperate need of people to lend money to them; and if we can rehabilitate the Savings Movement it would be of immense importance to our economy, not only by helping the Government in their programme but also by a withdrawal of purchasing power from the market. The Government will have more than one reason, in fact, to stop inflation. Not only must the Chancellor regain the confidence of foreign holders of sterling, but he also must restore the confidence of the British people in their own currency—and one of the best ways, of course, is to stop inflation.
I am afraid the situation has not been helped by the reforming zeal of the Government. Somebody remarked to me the other day—somebody who is very nearly a civil servant, but not quite—"The trouble about the Labour Government is that they pick on some abuse that they see going on in the economy that concerns a comparatively small number of people, and they then proceed to legislate and provide an immense administration to cover the whole nation". That may be fair comment, I think. But reforms are never cheap. There are already, as we have heard, more than 10,000 more civil servants, and there are many more to come if they can be recruited. The decision to recast the whole tax system has thrown millions
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of man-hours upon industry, and it will not be surprising to the noble Lord, Lord Williamson, to realise that a very large number of the extra people employed in office work that he mentioned have probably been put there to fulfil the tasks that the Government have thrown upon industry. In fact, it looks as if this system may result in a breakdown of the normal efficiency of the Inland Revenue. If, in the future, it is intended to apply the capital gains tax as at present visualised to chattels, the enforcement, I suggest, will certainly break down. I may add that if the Chancellor fails to stop inflation, it would be grossly dishonest to tax as capital gains the inevitable rise in value of chattels.
All this has led to an aggravation in the inflation of salaries, and that is a significantly silly thing to do at a time of over-employment and at a time when we are struggling to increase our exports. As well as this, it will hardly induce foreigners to hold sterling if we produce a new system of taxation which may or may not punish them but which, from the uncertainty of its application, must result in an atmosphere of unease. My Lords, the last time I spoke on the Address I suggested that it would be wise for the Prime Minister to ignore the advice of his Hungarian-born economists, and I rather wonder whether he does not wish he had taken that advice.
6.7 p.m.
LORD LEATHERLAND: My Lords, the noble Lord, Lord Erroll of Hale, who opened this debate with a most comprehensive survey, is a very accomplished Party politician, and I think he trailed before us quite a number of tempting Party targets. There was "creeping devaluation", there were "cuts in the social services" and there was "arson in the pavilion". But I am going to resist the temptation to reply in Party terms because I think many of the matters that have been before us this afternoon, and many of the speeches that have been made, have risen above Party polemics and have tried to make a contribution towards the wellbeing of the nation. It is in that frame of mind that I venture to address your Lordships, but first I must say that I was very pleased indeed to hear the speech of my noble friend Lord Sieff. I think it was extremely

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useful. It came to us from a man with vast experience; and as he was speaking, and I noticed that he was only two yards away from me, I thought how peculiar it was that there was probably less than two yards between our respective ideas.
My Lords, if there is one thing that is vitally important to British industry today, and to the nation, it is the need to increase productivity man by man, and a little later I hope to say a few words to your Lordships about a particular aspect of this problem in a way that I trust will be helpful. But, first of all, I do not believe in nagging at the man who is trying to do his job. I do not believe that the top managers of British industry are a crowd of incompetents; nor that the British worker spends all his day waiting for the tea break or for the shop steward to blow his whistle and declare a wild-cat strike. People do not strike, my Lords, unless they feel they have a real grievance; and the number of working days lost in this country through strikes and other industrial disputes is considerably less than it is in most of the other leading industrial nations of the world. We might not believe that if we took all our views from the newspapers. There are some newspapers—and the television—which deliberately magnify news about industrial disputes, so creating an entirely wrong impression and doing immeasurable harm to this country, particularly in the eyes of foreign buyers and our would-be customers; and I would appeal to them to be a little more balanced in their assessment of these incidents in the future.
All the same, my Lords, despite the fact that millions of people are doing their best for their industries and for the country, the fact remains that output has not risen here anything like so much as it has in many other countries, and the rate of productivity is most disappointing. All this must be changed if this country is going to remain as an industrial leader, if we are going to get our balance of payments right, and if the worker in Britain is to enjoy the standard of life which we all envisage for him. That has to be made clear; And I am very pleased that two noble Lords with such long trade union records as the noble Lord, Lord Citrine, and the noble Lord, Lord Williamson, also emphasised that point.
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Far too many of us in this country are trying to live on the hangover from the last century when we had huge investments abroad, when we constructed and operated most of the railways and ships in the world, and when we had a steady stream of dividends coming in, the fruits of the Industrial Revolution, which enabled us to balance our payments and which provided us with the steam for our future development.
But two wars have blown that away. We have been deprived of many of our investments; we have been landed with a burden of debt; we have had our export trade interrupted and, as a result of those wars, many of our former customers had to industrialise themselves and thus render themselves independent of the things that previously we used to sell to them. At the same time many of the subject races and the emerging countries have given their people an improved standard of living; and that has meant that we have had to pay more for many of the materials that we buy from them—and I say "Thank goodness for that!" While all this has been going on, coal, which was one of our most fruitful exports, has found itself gradually being overtaken by oil which now represents one of the biggest items in our yearly imports and one of the most prominent "red ink" entries in our balance of payments.
So it is no use our mesmerising ourselves into a state of mind where we think the world owes us a living. That Divine right has gone. In these days, we have to work hard and earn whatever we want to enjoy. I am not going to pretend that all the directors and managers of British industry have shouldered all their responsibilities, or shown all the enterprise that they should; nor am I suggesting that all the workers in Britain have rolled up their sleeves as heartily as they should. There is the machine tool industry which, at least until a year or two ago, failed to keep pace with the needs of Britain's industries generally. There is the shipbuilding industry, which has not been so enterprising as it might have been. There is the aircraft industry, which, despite periodical flashes of genius, for which we should be grateful, and despite the millions of taxpayers' money poured into the industry to keep it going, has been

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in a state of muddle for several years past; and there is the docks industry, which has just jogged along, to the detriment and disadvantage both of its workers and of our export trade.
I do not want to say any more about the shortcomings of these or of any other industries. I do not want to do them any more harm in the eyes of the world abroad. I want to look forward, and to look backward only in order to learn the lessons that the last twenty or thirty years can teach. I hope that the Government will lose no time at all in operating the very drastic reforms that are recommended by the independent investigators for these respective industries; because if they do not, then they will have failed the nation in the same way as the employers in those industries failed. It is true that over a very wide range of industries there have been striking advances. Many of these have been the results of mergers and amalgamations. I am not one of those people who shudder when they hear that one industry after another is being concentrated and centralised. I believe that often that is the best thing that can be done. Of course, we want a "watchdog" in those cases; and if it should be found necessary to strengthen the monopolies legislation I should be the first to support it.
But I do not want to speak to-day about the benefits that can flow from amalgamation. I do not want these smaller, moderately-sized companies and firms just to sit on their haunches and wait for some big whale to come along and gobble them up. I want to put my main emphasis on the steps that the firms can take to increase their productivity, to increase their profits and to increase the earnings of their workers. All these things should go together. The tools with which these benefits can be forged are already at hand. Whether we talk in technical terms about operational research or work study, or about organisation and methods, quality control, cybernetics, ergonomics or any other technical terms that are used in large-scale modern boardrooms, I think we can sum it all up in a simpler phrase by saying that we want more efficient and more effective management in industry.
I must confess that that is after my own heart, because before I felt the higher
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call, if I may so put it, of newspaper journalism, I was in charge of the costing system of a big department of the Birmingham Corporation. Incidentally, before I operated that system I had to devise and design it, so that I was robbed in advance of all excuses if anything went wrong. But there I learned that in most organisations there are a great many cobwebs which linger; a great many once-hallowed but now quite unnecessary processes that are still performed; a great many uneconomic methods which may have been all right in father's time but have simply been inherited and are kept in existence to-day.
Talking about that subject, I want to pay tribute to the work of the "Little Neddies"; and also to the British Productivity Council for the excellent work it has done, and is doing, in bringing our ideas up to date about production and administration. Last year, the British Productivity Council increased the number of its local committees by one-third, increased the number of its affiliated firms by one-third and conducted an expanded scheme of study, with seminars, classes and demonstrations, and gave technical advice to an increased number of firms. Your Lordships will be aware that the Government stand in as a subscriber to the extent that they meet any deficit there may be in the running expenses. Last year that deficit which the Treasury had to meet was a quarter of a million pounds. I think it was money well spent; I wish it could have been considerably more.
Let us look at a few of the results that the Productivity Council found, which had been achieved as a result of operational research and work study. There was a firm that increased its output by 30 per cent. with the same labour force, and gave higher earnings to its workers; there was an ironworks which increased output 2½times without any redundancy, and raised its workers' earnings by 30 per cent.; there was a wire factory which put up its productivity by 50 per cent. and its workers' earnings by 33 per cent.; there was a clothing factory where the output of the jacket department went up by 15 per cent., and that of the trouser department 28 per cent., and the earnings of the workers' rose by 20 per cent. There was the revision of a goods-handling scheme in

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another factory where productivity was increased 40 per cent., and the earnings of the workers by 33 per cent. All this was done in collaboration with the unions who are among the British Productivity Council's most enthusiastic supporters.
Look at some of the savings made by another of these efficiency techniques, the critical path analysis—a system, let it be said to their credit, invented and devised by one of the nationalised undertakings, the Central Electricity Generating Board. There was a factory erected in the North Midlands, planned, designed, erected and put into operation in four months, dead on time, which in these days was a most unusual performance. There was a big chemical factory in the North which saved 11 months of construction time on the normal construction period of 24 months. Another big chemical firm saved 30 per cent. on the man-hours involved in its annual maintenance tasks. This system has saved time and money and man-hours in office building, bridge building, road construction and, as I know from my own knowledge, it has enabled us to catch up and overtake some of the very serious constructional delays occurring in connection with a new university of which I have the honour to be treasurer.
There is another of these techniques known as "value analysis" which has enabled many firms to save scores of thousands of pounds while still maintaining the same quality and reliability. They have been able to use alternative materials in simpler designs which makes the manufacturing processes quicker and simpler. One example, a very small example, is, I think, indicative of what could be done. There was one big firm, a household name, which, without any loss of efficiency, substituted a rod costing one penny for a spindle costing 4s. 8d. There are some experts who say that savings to the extent of 7 per cent. are practicable as a result of the adoption of value analysis, and if that were extended over the industry of the whole country there could be a saving of hundreds of millions of pounds. If I may be topical, my Lords, I am sure that in the present state of the copper market we shall see more plastic materials put to use. That means there will be cheaper materials and cheaper processes of fabrication, and,
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the quality will be just as useful for the purpose for which it is intended.
There is another aspect of this efficiency drive. Local authorities, through their organisation and methods systems, are making enormous savings. One county council, after a review of its administration, started to save £100,000 a year; another one saved £70,000 a year, and another £50,000. This is cumulative, going on year after year. Another council saved £27,000 on its ambulance administration, not by making old men with broken legs walk to hospital, but on the administrative machinery of the ambulance service. Another council saved £3,700 on its typing costs. There is a town where, as a result of work study, they were able to reduce the cost of collecting house refuse by 6s. a ton. In another town the street cleansing transport costs were reduced by 80 per cent. The authority found itself able to sweep the streets three times as often at less than the previous cost. There are other towns where the councils, as a result of work study, have been able to increase the housing repair productivity by as much as 75 per cent., and to give an increase in earnings to the workers.
Apart from the very valuable work being done by the expert internal staffs of councils and of companies, I think there is a big and an increasing part to be played by consultants who specialise in operational research, work study and other money-saving and productivity increasing systems. There are 90 out of 100 of the biggest firms in this country which have already made use of the services of such consultants, including Shell, and Imperial Chemical Industries. So have thousands of small firms. There are a dozen Government Departments, including the Ministry of Defence, the Ministry of Labour, the Prices, Incomes and Productivity Board and the General Post Office, which have similarly availed themselves of the services of these expert consultants. Several of the nationalised industries have done the same, with outstanding benefit. There are a large number of local authorities which have done so with advantage to themselves, their employees and the ratepayers. I think that these consultants have an enormous contribution to increased efficiency and economy which they can render to industry and to the public service, and I think that their use ought to be

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encouraged. At the present moment many of them are taking their services abroad in order to carry out surveys for industrial organisations overseas. I think that we should use them in this country.
It is a fact, I think, that the senior managers and directors in industry are so closely engaged in the day-to-day running of their businesses that they have no time to stand back in order to distinguish the wood from the trees. To call in an investigator in this way is no more a confession of personal shortcomings than to take an abstruse and complicated legal problem to an eminent counsel or a case of coronary thrombosis to a Harley Street specialist. It can more often be a sign of wisdom.
There are some firms, of course, which have brought their plants and processes up to date in a very enterprising way, and they may feel satisfied with themselves. But in these days industry cannot stand still. Have these firms thought that they might be able to get higher profits and pay still higher earnings to their workers if they changed, let us say, their factory layout, or altered their system of handling goods and materials; or if they introduced alternative materials into their processes; or if they revised their marketing schemes or eliminated unnecessary paper work? Believe me, my Lords, in these days many councils and companies are submerged by floods of paper. There are some companies which are making comfortable profits at the present time and who may feel it unnecessary to call in the man with the microscope. They overlook the fact that he might be able to increase their prosperity still further, so that they and their employees could benefit. It might be possible to reduce prices to the consumer as well. There are other concerns which may not be doing so well, but feel that they cannot afford to bring in these experts. I hope they will beware; if they leave it too late there may not be anything to salve.
One county council called in a firm of consultants and, as a result of the advice given, £34,000 was saved in the first year on its transport system. Another council received a report which, if adopted and put into operation, will enable the council to save £82,000 a year. Another council saved £36,000 in the first
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year, with prospects of more saving to come. Another council saved £20,000 in the first year and has an opportunity to save a further £40,000 later. A city which followed the advice of consultants saved £60,000 on refuse collection in the year, while the earnings of its workers in that department were increased by 33 per cent.
Industrial companies, of course, do not publicise their savings in the way in which local authorities do, but if we take an A B C look at some of the industries which have called in consultants and derived big benefits from their advice we see that they range from aircraft companies to aerosol manufacturers and agricultural firms. They include bleaching, bookbinding, building, clothing and carton manufacturers, down to shipbuilding and transport, watch-making and wholesale groceries. Quite recently there was a university investigation into the activities of management consultants. The subsequent report stated that a quarter of the increase in productivity in recent years was due to investigations which these consultants had conducted. The National Economic Development Committee is on record as saying that consultants can often increase output per worker by one-third or more. These activities are getting the support of trade unions which years ago were very suspicious, and even hostile, to such innovations. They see that improved productivity for the nation can be combined with increased earnings for their members. That is a very happy combination and is much better than thinking in terms of wage freezes and deflation.
So I suggest, my Lords, to the Government, who already subsidise some industries and a number of productivity councils, that one of the most productive things they could do would be to make grants to deserving industrial concerns to help them call in consultants, so that they can modernise their organisation and methods. This would mean that not only would the workers get increased earnings, but the Exchequer would be recouped over and over again, year after year, as the prosperity of these companies made progress, and there might also be reductions in prices for the consumers. Whether the Government should give this assistance by grant or by loan or by some form of tax remission I will not presume to say, but I believe that the principle could pay big

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dividends to the nation, especially at a time when we are suffering from a shortage of manpower and when there are prospects of a still graver shortage which is going to handicap the development and expansion of many of our industries. Whether we go into the Common Market or whether we stay out, we shall never get real prosperity unless we are more efficient than we are to-day. Therefore I hope that as the Government approach these problems that lie before them, they will try to give some consideration to the proposal which I have in mind.
6.31 p.m.
LORD CHAMPION: My Lords, at the beginning of to-day's debate I was afraid that the fact that it comes so closely on the heels of the economic debate we held in February would have a limiting effect, but in fact the debate has ranged widely, and, I would say, with some distinction, over the field of trade and economics. The debate has had the effect of bringing into our counsels a man who has made an outstanding maiden screech. The noble Lord, Lord Sieff, comes this House with the reputation of -class businessman and from a fir whose name I need not mention, because the quality of the goods it sells, like good wine, needs no bush—or advertisement from me.
In his speech to us the noble Lord used his firm's experience and, incidentally, did a little quiet advertising for that firm without actually mentioning its name. I used to listen to the noble Lord, Lord Marks, who preceded the noble Lord, Lord Sieff as Chairman of his firm, with the attention and respect which his acumen and experience deserved. I shall listen with no less respect to the noble Lord, Lord Sieff, who to-day held the attention of the House by his clear and pleasant voice. He certainly pleased me by his references to the importance of human relations in everything we do and in everything that is done in industry. I congratulate him upon his maiden speech. This debate has also enabled the noble Marquess, Lord Salisbury, to make an intervention on a subject which is greatly different from those upon which he has for a long time addressed us. I found his speech to-day a little more welcome to me than some of his speeches recently on certain other matters.
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The noble Lord, Lord Erroll of Hale, upon whom I have no intention of leaping, tiger-like, asked the Government to get the economy and the balance of payments into equilibrium. At the outset of the statement of our economic policy, the Government have rightly declared as their prime aim the restoration of equilibrium in the external balance of payments and the determination to maintain the strength of sterling. As your Lordships know, our balance-of-payments problem is deep-Seated. It is part of the long-term malaise which has afflicted this country for a long time; and every Government, certainly since the war, has been trying to solve this problem, so far without success.
In the short term, it might be easier to restore equilibrium and the balance of payments by the devaluation of sterling, but early in the first difficult days of the last Parliament we decided that such a course would be seriously injurious in the long run, and we firmly rejected it. I was glad to hear the noble Lord, Lord Hankey, support the Government's actions in this matter. We have reiterated our determination to maintain trength of sterling in the world's markets and I think that the world's markets as a whole have clearly recognised and accepted that pledge. The question inevitably arises: how are we getting on in our struggle towards that equilibrium? My noble friend Lord Shepherd has told the House of the very satisfactory progress made in reducing the large balance of payments deficit which the present Government inherited, and I need not rehearse the figures.
The main points made in this debate by the noble Lord, Lord Erroll of Hale, and by most speakers have been directed towards the domestic economy, upon which the solution of the balance-of-payments problem rests. A failure in this field, and neither international borrowing nor increased liquidity can save us from disaster. The main factors that point to some success here are, first, that exports are absorbing a comparatively larger share of our resources and consumer spending a comparatively smaller share. Between the fourth quarter of 1964 and the fourth quarter of 1965, exports of goods and services in real terms rose by nearly 6 per cent., while consumer spending, again in real terms, rose by under

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1 per cent. I think that to some extent this contradicts what the noble Lord. Lord Erroll of Hale, said about this matter.
I agree with my noble friend Lord Sainsbury that in this attempt to solve our balance-of-payments problem there are difficulties, arising from the fact that we are doing it by cutting our exports—I beg your Lordships' pardon, imports.
LORD ST. OSWALD: A Freudian slip.
LORD CHAMPION: It is a Freudian slip, if only I knew what a Freudian slip was. My noble friend Lord Sainsbury said that it was better to try to solve our balance-of-payments problem by increasing exports rather than by decreasing imports. Unfortunately, in our immediate difficulty we must try to do both, and this is what in fact we are now doing. But I agree with my noble friend that in the long run it would be much better if we could solve our problem by getting the world to accept all the exports we can possibly make, and that we should receive from them only ngs we badly need here. This is th of trade we hope to see some tim in the short run clearly this is impossible to attain.
The second favourable factor is that manufacturing investment since 1964 has been sustained at a higher level. In 1965, it was 9 per cent. higher than in 1964. This is good, provided that the investment is in the right industries. This, of course, is something we are trying to impose by our investment allowances scheme. We are trying to ensure that the investment allowances are well directed towards those parts of our industry that can really contribute to solving our balance-of-payments problem. To bring about some of the improvements that I have mentioned it has been necessary to realign some of the national resources, and the Government have not hesitated to use both money and fiscal restraints where this course appeared to help in this connection.
The noble Lord, Lord Erroll of Hale, has pointed to the fact that there has been a slackening in the rate of growth of the economy. This we admit. But we say that it is a temporary slackening. The rise in real gross domestic product during 1965 was about 2 per cent., which
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compares with about 4 per cent. in 1964, and over 5 per cent in 1963. This is because in 1963, and to a lesser extent in 1964, there was spare industrial capacity and a reserve of unemployed to draw upon—a result, I must add, of the sharp deflation in 1961. In 1965, by comparison, no slack remained to help to boost the growth rate.
The temporary slackening is also due in part to a redistribution of resources away from consumption towards exports. The labour market has remained very tight, with unemployment stable at around 1¼or 1½per cent. This we attribute to the normal lag in the adjustment of employment to output, coupled with a tendency of employers to hoard, rather than to dismiss, labour, for fear of being caught short if the expectations of long-run expansion of the economy are realised. In this connection, I believe that my noble friend Lord Williamson's points are germane. There is this tendency not to use to the best possible advantage the labour that is available. I am hoping that my noble friend's contribution, particularly in connection, will be carefully studie only by the Government, but a those people who are responsible use of the labour that we have available to us.
As the noble Lord, Lord Erroll of Hale, told us to-day, and as the noble Viscount, Lord Amory, and the noble Lord, Lord Robbins, warned us in the February debate, this fact of the unemployment rate being so low has contributed to a strong and continuing expansion in wages. I must admit, as one who lived for a long period in the interwar years very close to a massive unemployment, that I do not want to see us solve our problem by increasing the amount of unemployment in this country. That is the last thing that I want to see. Nevertheless, if we cannot solve our problem without this, we shall have to resort to measures which will bring about a greater degree of unemployment. But I appeal to my friends in the trade union movement to recognise this and to work with the Government in attaining the policy for incomes and wages to which we have set our hands.
During 1965, hourly wage rates rose by about 7 per cent.—with a further appreciable rise in the opening months of this

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year; and hourly earnings rose faster. Part of this rise in wages was due to long-term agreements and other forward commitments outstanding at the beginning of the year (these account for about one half of the yearly rates in 1965), and to the cut in the normal working hours. These increasing wage costs have had their inevitable effect on prices, but we are strongly of the opinion that the Government's prices and incomes policy is beginning to bite. It has already shown results on prices, but I admit that it has yet to show any really striking results on wages. As I have warned the House on previous occasions when speaking on this matter, to obtain for this part of our policy a wide and general acceptance is a matter of time and education, and of persistence in presenting this fact to the people who matter. My noble friend Lord Citrine, I thought, made this point very well.
The noble Marquess, Lord Salisbury, made some references to the trade unions which were most acceptable to me, as a trade unionist of some 53 years standing. His was a balanced contribution, and, in my opinion, one worthy of study. I agree with the noble Marquess that the function of the trade union must now be mainly to combine with Government and with management to increase the size of what is so often called the "national cake". The trade union will always have to argue about its share of the cake, but I certainly think it is of infinitely more importance at this time that we should be assured of the cooperation of management and trade union with the Government to increase the size of the cake. The noble Marquess said that he asked the Royal Commission to consider the wide aspects that he put forward; and I hope that they will do so. But in this trade union connection, on some of the points made by the noble Marquess, I feel that my noble friend Lord Williamson, and certainly my noble friend Lord Citrine, put the matter in its true perspective. I am grateful to both my noble friends for their contributions.
The docks have received only a brief mention in this debate, and I welcome particularly the remarks of the noble Lord, Lord Hankey. I think he stressed, as we all understand, that this problem of the docks is partly a problem of
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human relations. Certain things can be done by Governments, but we have to try to secure an acceptance by all the people concerned of the policy which will emerge from the Devlin Report. This applies not only to workers, the trade unions, but to managements, as well. Employers have to come together; they must accept this fact. And on the trade union side there must be a lessening of restrictive practices and of the nonsense which seems to make our ports less efficient than those of some of our competitors.
The noble Lord, Lord Erroll of Hale, spoke about the over-heating of our economy. The Chancellor of the Exchequer has made it clear that if the economy continues to be over-stretched after the restrictions on hire-purchase, the maintenance of the restraint on credit (which has been part of this policy for a long time), and the deferment of public expenditure announced in February of this year—if he finds, upon a review of the position, that this has not had the necessary effect of lowering the heat in the economy, he will take the necessary steps to turn on the hose. But he rather thinks—and I agree with him—that it is a little too early to say whether the effects of the restrictions, and so on, that he put on earlier this year will have the desired effect.
I must say that I welcomed very much his statement that at this stage he did not foresee the need for severe increases in taxation. I certainly hope that he will not find it necessary in his forthcoming Budget to impose severe increases in taxation. But I am bound to say that, in his capacity as one who has to guide the economy of this country towards a sounder basis, if severe increases in taxation are necessary I hope he will not hesitate to make them, despite the fact that it will hit most of us in this House pretty hard.
The Chancellor of the Exchequer and the Bank of England in combination would, of course, keep under close review the position in relation to the restraint of credit. I feel sure that the new Governor will co-operate with the Government as closely as did Lord Cromer. I am confident that the House will join me in paying tribute to Lord Cromer's work over the past five years. Of course, there has not always been agreement. I have not

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always agreed with some of the things he said, but, nevertheless, he has done a fine job for this country in his governorship of that great institution.
Perhaps I may make just a brief reference to productivity. The position here is nothing like as bad as suggested by the noble Lord, Lord Erroll of Hale. Productivity is perhaps the key to the solution of our balance-of-payments problems, as my noble friend Lord Citrine so wisely said. The broad picture appears to be that production increased between the end of 1964 and the end of 1965 by 2 per cent. Employment rose by about 1 per cent., and working hours, so far as we can judge, fell by about 1½per cent. These figures imply an increase in output per man hour of about 2½per cent., and this is what we are striving to get—an increase in output per man hour. That means an increase in productivity. But on those figures I must warn the House that changes in productivity are always difficult to establish when the degree of capacity utilisation is changing, as it obviously did in some industries, such as steel, during the past 21 months. In this connection I again agree with the noble Lord, Lord Hankey. The statistics at present available to us are such that it is always a little difficult to establish the true facts. I hope and expect that my friends in Government who are responsible will study most carefully what the noble Lord said.
The Government are determined to use all their powers to increase industrial efficiency and to secure a more soundly based domestic economy. We have already introduced a number of measures aimed at this and at coping with the social consequences of change; and, as the gracious Speech states, further action will be taken to assist progress in this regard. We have the new system of investment allowances which, as I said previously, I regard as much less a blunt instrument than the instruments we have been using before for this purpose of stimulating investment.
We have in the gracious Speech mention of the Industrial Reorganisation Corporation. We debated this matter at some length in the February debate, and, of course, we have the intention clearly
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mentioned of strengthening the prices and incomes policy; and legislation on this last subject is forecast in the Queen's Speech. The noble Lord, Lord Williamson, asked for an assurance that if legislation is to come along it will not be implemented unless the voluntary system fails. I can give the House that assurance. We want this legislation. It will not be implemented unless we have to implement it in the interests of the wages and incomes policy. That assurance we give him and the House. We shall, as the noble Lord, Lord Citrine, advised, tread warily, for we are seeking the maximum of co-operation, and the last thing we want to do is to create hostility towards our policies on productivity, incomes and prices.
The noble Lord, Lord Erroll of Hale, also mentioned the possible effect of U.D.I. in Rhodesia. We regret that this has happened. We regret the fact that it is bound to have some effect on our economy. It is regrettable, but we simply have to face it, and face the consequences. I do not think we could have done anything else in the circumstances. We were wise; we were right. It was a moral duty upon us and we must, as I say, face the consequences of it.
The noble Lord also made some points upon the fact that we have curbed private investment overseas. This matter we debated at some length in the debate in February last. I clearly recognise that the forced contraction of private investment overseas is in the long run bad for our economy; but it is a short-term measure, and it is right that we should take it. As the noble Lord, Lord Robbins, said in his speech on the occasion of the debate to which I have referred, if we cannot manage to live in the short term, the long term will not matter very much to us. Perhaps he did not use those words, but they were very much like it.
LORD SHEPHERD: Good enough.
LORD CHAMPION: I do not know that there is much more that has been said to which I need reply. Some of the points that were raised by the noble Lord, Lord Erroll of Hale, were answered by my noble friend Lord Shepherd. The noble Lord, Lord Hawke, asked us to consider certain matters which were

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clearly budgetary matters, and I am sure he would not expect me to-day to talk about the Budget which is to be introduced in another place so soon. But I think some the points he made ought to be drawn to the attention of the Chancellor of the Exchequer before he makes his final decisions. I hope that the Chancellor will study his speech.
As I said at the outset, this has been a worthwhile debate, and certainly everything that has been said will be studied in the right places. Although not many remained to hear what was said, I hope I have replied reasonably to many of the points that have been raised, and I trust that the rest of our debate upon the gracious Speech will reach the level that some of the contributions have reached in this House to-day.
EARL ST. ALDWYN: My Lords, on behalf of my noble friend Lord Carrington, I beg to move that this debate be now adjourned.
Moved, That the debate be now adjourned.—(Earl St. Aldwyn.)
On Question, Motion agreed to, and debate adjourned accordingly.