Lords Sitting of 3 August 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 Southwark.

SIZE OF THE CIVIL SERVICE
2.36 p.m.
LORD ABERDARE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government how many civil servants were employed on 27th October, 1964, how many are employed to-day, and how many they expect to be employed in 12 months' time.]
THE MINISTER WITHOUT PORTFOLIO (LORD CHAMPION): My Lords, at the nearest available dates, the Civil Service, excluding the Post Office, numbered at October 1, 1964, 654,861; and on April 1, 1966, 661,986. The original Estimate for 1966–67 provided for an increase of just over 13,000 staff during the following twelve months. New policies which could not be reflected in those Estimates may bring this figure up to 17,000.
LORD ABERDARE: My Lords, I am grateful to the noble Lord for that revealing and interesting Answer. May I ask him two supplementary questions?—and I should like to make it quite clear that, in doing so, I am not in any way criticising members of the Civil Service. First, can I ask the noble Lord whether he thinks this considerable increase since the Government came to power, and the further increase that is foreshadowed, are really justified in present economic conditions? My second question is this. In the light of the selective employment tax, which is designed to compel more workers into productive industry, does the noble Lord think the Government are setting a good example?
LORD CHAMPION: My Lords, the Government always set a good example. The question is whether this can be justified in present economic conditions. We think so, otherwise we should not have made this provision. I must point out that the increase is partly due to an arbitration award in July, 1964, which cut the hours of parts of the Civil Service. For example, in the Inland Revenue there was an increase of 4,036 between October, 1964, and July last, of which nearly 41 per cent. was due to these cuts in hours. The selective employment tax is a matter which we shall be considering in close detail, I imagine, next week, and I am sure the points the noble Lord has made in this connection will be considered on that day and they will be considered by the Government.
LORD HARLECH: My Lords, surely the noble Lord realises that when other industries have to give shorter hours of work they ensure some improvement in the actual working, which absorbs this. This is constantly the cry of Her Majesty's Government. Cannot they do it themselves?
LORD CHAMPION: My Lords, this is something that is not really happening. Over the period June, 1964, to January, 1966, employment in the financial, professional and scientific services in the private sector went up by 145,000. This was slightly under 5 per cent. The figures I have given show that the Civil Service increase was slightly over 1 per cent. These two services which I am talking about are to some extent comparable, though not wholly so.
LORD STRATHCLYDE: My Lords, would the noble Lord not consider that the increase he has just mentioned is largely due to Government legislation?
LORD CHAMPION: My Lords, Government legislation often has this effect. Yesterday I rather think the noble Lord, and certainly his noble friends, went into the Division Lobby and supported two Amendments, both of which, if added finally to the Bill, will result in an increase to the Civil Service.
LORD LEATHERLAND: My Lords, is my noble friend aware that in the last four to five years of the Conservative Government there was a considerable increase in the number of civil servants?

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And is there not a considerable increase throughout industry generally, both distributive and productive, in the amount of paper work and the number of clerks?
LORD CHAMPION: My Lords, I agree with my noble friend. But, of course, I was not, fortunately, answering for the Conservative Governments of the past.

NOISE FROM SUPERSONIC AIRCRAFT
2.38 p.m.
THE EARL OF ALBEMARLE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government:

(1)whether they are aware of the Oklahoma Sound tests of 1964 in regard to the harmful effects of supersonic aircraft;

(2)what priority they will give to the interests of the sleep-needing millions in Southern England as against those of the relatively small number of airborne passengers who may travel in these noisy giants of the future;

(3)what protection from harmful effects to life and property (e.g., from fractured and falling glass) they will ensure, before they sign the Anglo-French contracts for the construction of the Concord aircraft;

(4)whether they will repeal the relevant sections of the Civil Aviation Act 1944 which exempt air line operators from liability to pay compensation for the damage done by their aircraft.]

THE MINISTER OF DEFENCE FOR THE ROYAL AIR FORCE (LORD SHACKLETON): My Lords, I will answer the noble Earl's Question in four parts. Reports on the sonic bang tests carried out by the Federal Aviation Agency in the Oklahoma City area in 1964 have been studied with great care. As the Federal Aviation Agency has pointed out in the final report, the results were largely inconclusive. Flights over this country at supersonic speed will be controlled in
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the interest of those below the flight path. There is as yet not enough information available about the sonic bang problem to enable reasonable decisions to be made about the regulation of these flights. Except possibly in the immediate vicinity of airports, engine noise will be less than that of present day jet aircraft because supersonic transport aircraft will fly at higher altitudes. The British and French Governments have already placed contracts with the airframe and engine manufacturers for the development and construction of the Concord aircraft. However, I can give an assurance that Her Majesty's Government are well aware of their responsibility to ensure that the Concord will be generally acceptable to the public. Finally, there is no such exemption as the noble Earl suggests in the fourth part of this Question, in respect of material loss or damage caused by aircraft.
THE EARL OF ALBEMARLE: My Lords, I thank the noble Lord for his Answer. May I take the last part first, that you cannot prosecute for compensation? I understood the noble Lord to say that that is not so. I read the relevant sections in that Act, and they definitely show that you cannot get at operators for any damage alleged to have been caused by them.
LORD SHACKLETON: My Lords, I think the noble Earl has probably looked at the wrong subsection. It is Section 40 of the Civil Aviation Act 1949. Subsection (2) of that section says that in respect of material loss or damage to persons or property on land or water by an aircraft in flight, taking off or landing, or by a person in such an aircraft or by an article or person falling from such an aircraft, unless the loss or damage was caused or contributed to by the negligence of the person by whom it was suffered—which clearly would not apply in this case—damages are recoverable from the owner of the aircraft without proof of negligence or intention or other cause of action. There are certain qualifying clauses. If the noble Earl looks at Section 40(2) again, he will find that there is rather more protection than in ordinary cases of damage.
THE EARL OF ALBEMARLE: My Lords, I am very much obliged to the noble Lord for that answer. It is an

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intricate subject. I read it, but I suppose I did not remember everything about it. With regard to the Oklahoma tests, they were inconclusive because some of those who were collecting information for the poll which appeared in the papers did not continue to collect information when the flights and the power of the engines in those flights began to be stepped up. Therefore, I do not think—
A NOBLE LORD: Question!
THE EARL OF ALBEMARLE: Is the Minister aware that since then we have had information showing that damage was done, not to property and not to certain aspects of family health—I am sorry, I cannot go on with that question now, because I have not been able to formulate it as I should wish. However, may I now come to the question of protection from harmful effects? Is it not a fact that the number of flights of jets has increased so much that in view of the capacity of the aerodrome, operators will soon need to try to obtain leave to fly during the hours of night? If that is so, it will mean that there will be further interruption to the rest of the people who live under those bangs, and also to the rest of the children. Can the noble Lord give any assurance that the earlier hours of the night will not be impinged upon in order to agree to foreign competitors trying to have more flying time in 24 hours?
LORD SHACKLETON: My Lords, I am sure the whole House shares the concern of the noble Earl about the disturbance that is caused by aircraft. The last point the noble Earl made, about the danger of a further increase of night flying, is certainly one that Her Majesty's Government will have to take into account, and they do regulate such matters. I assure the noble Lord that this will be considered. Of course, this does not arise purely from the supersonic nature of the aircraft, but from the number of flights of aircraft.
On the first point, I would say to the noble Earl that the position with regard to the effect of supersonic bangs is still very indeterminate. The Oklahoma Study itself, in its final words, comes to no conclusion other than that the study was of lasting interest. It does not come to any firm conclusion as to the effect. On the question of damage
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to houses, it is likely that over-pressures of even twice the amount that are expected—and it is the discontinuity in the pressure that causes the trouble—would not damage houses. So I can only say to your Lordships that we are very concerned about this matter, that very careful consideration will be given to it, and that there is no doubt that further testing will be necessary.
LORD MOYNE: My Lords, does the noble Lord not consider that it may be extremely difficult to identify aircraft in order to bring actions for damages, particularly as more kinds of these aircraft come into use?
LORD SHACKLETON: My Lords, I anticipate no difficulty whatever in identifying the aircraft. They will be identified in control on their flight path—that is, if they fly supersonically over this country at all, which is by no means certain.
BARONESS SUMMERSKILL: My Lords, as my noble friend said the Government regulate night flights, can he tell us the terms of the regulations?
LORD SHACKLETON: My Lords, I am afraid I cannot deal with this point: it does not arise directly from the Question.
LORD AMULREE: My Lords, can the Minister tell us whether any work has been done to ascertain whether it is possible to cut out some of the noise of these aircraft without detracting from their efficiency?
LORD SHACKLETON: My Lords, again that really is another question. The noble Lord is not bothered by supersonic aircraft at the moment because the Royal Air Force does all its supersonic flying over the sea, but a great deal of research is going on into reducing the noise.
LORD MERRIVALE: My Lords, when the noble Lord says it is proposed, quite rightly, that the Concord should be acceptable to the public, can he confirm a statement made by the Bristol Siddeley Aircraft Company to the effect that the noise level of the Concord at take-off will be within the limits laid down by airport authorities? Also, would he not agree that the results of tests on various forms of silencers have shown that considerable noise reduction

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can be achieved with a negligible loss of thrust, so that in the end the Concord may be quieter outside airport boundaries than some present-day jet aircraft? Of course, I am not referring to high altitude flying.
LORD SHACKLETON: My Lords, I thought I had more or less said that in my Answer. But, of course, the Concord will not be travelling at supersonic speed at take-off.
LORD BROCKWAY: My Lords, may I ask my noble friend whether Her Majesty's Government are giving any assistance to those who live within the area of the airport in providing soundproofing for their houses?
LORD SHACKLETON: My Lords, I suspect when the noble Lord was in his constituency he may have been just outside the range of the provisions that were made for soundproofing houses, the Act for which was passed through this House in the last Session.
LORD CONESFORD: My Lords, does the Minister accept that when the aircraft interest talk about the level of noise being acceptable, they mean it does not quite drive the listener to murder or suicide?
LORD SHACKLETON: My Lords, I fully accept that there are different views. A French farmer has contrived to prove that 850 of his chickens died as a result of a supersonic bang.

RHODESIA: UNIVERSITY COLLEGE, SALISBURY
2.53 p.m.
LORD WADE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they will institute an inquiry into the closure of University College, Salisbury, Rhodesia before the end of the term; and into the attempts to suppress freedom of expression of political opinion in the College.]
THE PARLIAMENTARY UNDERSECRETARY OF STATE FOR COMMONWEALTH AFFAIRS (LORD BESWICK): My Lords, the facts
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of the recent illegal arrest and detention of members of the staff of the College are now well known. The British Government deplores this illegal action and the possible consequences for the future of the College, but the question of an inquiry into the affairs of the University College in Salisbury is a matter for the University Council.
LORD WADE: My Lords, I am obliged for that Answer, so far as it goes, but as one of the imprisoned lecturers is personally known to me I have an additional reason for feeling concerned. Therefore may I ask for the latest news? Secondly, what do Her Majesty's Government propose to do to make it quite clear that Britain does not condone what has happened? Thirdly, what will they do to safeguard the other members of the staff who protest against the way in which the Rhodesian régime has attempted to destroy the academic liberty of the College?
LORD BESWICK: My Lords, as to the position of those who were detained, as the noble Lord will know, there is now an order of deportation against all of them. It is expected that they will be leaving to-day, some for Zambia and other for this country. I hope that their future will be cared for. As for the second question which the noble Lord asked, about the attitude of the British Government to the College, in so far as we have any influence on the College in the provision of financial assistance, I think I made it quite clear yesterday that we do not condone this type of behaviour, and of course the provision of further financial assistance will be dependent upon the College fulfilling the purposes for which it was established. As to the last part of the noble Lord's question, I think we must be careful that we do not, as a Government, interfere with an institution which is an independent body established under its own Royal Charter. If we are respecting academic freedom we should not indulge in any unnecessary Government intervention.
LORD BROCKWAY: My Lords, when my noble friend says that the inquiry is a matter for the University Council, will he bear in mind two matters: first, that the Acting Principal of the University and the whole of the academic board have protested against this interference, and,

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secondly, that the British Government are directly involved because they contribute £200,000 a year to this University, and that gives them some right to intervene in a matter of this kind?
LORD BESWICK: My Lords, I am sure the representations, which have been made by other members of the University College staff will be taken into account when the future of the College is considered by the University Council. As far as the second part of this question is concerned, I think I have already made it clear, both yesterday and in answer to the Question put by the noble Lord, Lord Wade, as to what we consider to be our position as far as intervention in this matter is concerned. I would only add that the British Government have one representative on the University Council and we can of course make known our views through him as well.
LORD SEGAL: My Lords, has my noble friend any information to give the House whether the resumption of the University's activities after the present vacation is over is likely to be any further delayed?
LORD BESWICK: My Lords, as I have said, the organisation of the college is a matter for the University Council, and that question is being considered by them.
LORD REAY: My Lords, when is the next payment due to be made by Her Majesty's Government? Secondly, could I ask them how they intend to apply the test of the conditions which they demand the University to follow before the payment is made, and whether they consider that the conditions are in fact being met at the moment?
LORD BESWICK: My Lords, I cannot say the date when the next annual payment of the three years' payments is to be made, although I will find out and will let the noble Lord know. As to the conditions under which it will be made, I thought I had made that abundantly clear.
LORD REAY: My Lords, while I thank the noble Lord for his answer, that does not seem to me to be the case. May I ask the noble Lord to answer the question which I put to him, which was what standards would they apply to determine whether or not conditions of academic freedom actually existed and, in any case,
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whether they considered they applied at the moment? That is my question.
LORD BESWICK: My Lords, when the noble Lords says "at the moment", if he means at this very moment the answer is no, because the University College is closed. We do, however, hope it will be reopened, and it will then be for us to judge the conditions under which that reopening takes place.

UNITED NATIONS SECRETARY-GENERAL
2.59 p.m.
LORD ROWLEY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they will co-operate with the United States and Soviet Governments in proposing that U Thant be reappointed Secretary-General of the United Nations for a further term of four years in view of his outstanding services as Secretary-General.]
LORD BESWICK: My Lords, Her Majesty's Government are wholeheartedly in favour of a further term for U Thant. We believe this view is shared by the other permanent representatives, and—just as important—by the general membership. However, the burdens and cares of the office of Secretary-General of the United Nations are such that it is quite understandable if U Thant should take his time before committing himself to a further term.
LORD ROWLEY: My Lords, is not the reluctance of U Thant to accept a further term as Secretary-General due to a deep sense of frustration at the failure of the member States of the United Nations to strengthen its peace-keeping organisation, and, secondly, to the failure of the United Nations to intervene in the conflict which is at present raging in Vietnam? May I ask my noble friend what steps Her Majesty's Government propose to take in co-operation with other Governments to strengthen or make the United Nations Organisation more effective in the carrying out of its responsibilities to maintain world peace, as provided in the Charter of the United Nations itself?
LORD BESWICK: My Lords, I think that many of us who heard U Thant speak recently in part of this Palace will realise the great feeling which the Secretary-General has for the future of United Nations, and he would be less than human if he did not have a certain feeling of disappointment that the united Nations has not been able to do more. At the same time, I think that it would be wrong of us to underestimate what has already been achieved. As I am sure my noble friend would agree, the United Nations peace-keeping forces have done remarkable well in different parts of the world. So far as any further initiative by this Government is concerned, I think the time is probably not opportune, but we should certainly support whole-heartedly any promising proposals which may emerge from the special Committee on Peace-keeping, which will be reporting to the general Assembly later this year.
LORD CARRINGTON: My Lords, would the noble Lord take note that we on this side of the House would warmly support any measures taken by Her Majesty's Government to secure the retention of U Thant as Secretary-General?
LORD BESWICK: I am much obliged.

REORGANISATION OF THE POST OFFICE
LORD CHAMPION: My Lords, at a suitable moment after 3.30 p.m. my noble friend Baroness Phillips will be making a Statement on the reorganisation of the Post Office.
LEEDS CORPORATION BILL
Read 3a, with the Amendments, and passed, and returned to the Commons.

STRENGTHENING OF MARRIAGE BILL [H.L.]
THE EARL OF BALFOUR: My Lords, I beg leave to introduce a Bill to enable a further marriage to be contracted by either spouse when a separation has existed for five years. I beg to move that this Bill be now read a first time.
Moved, that the Bill be now read 1a.—(The Earl of Balfour.)
On Question, Bill read 1a, and to be printed.

WELSH OFFICE PROVISIONAL ORDER (WESTERN VALLEYS (MONMOUTHSHIRE) SEWERAGE BOARD) BILL.
Returned from the Commons, with the Amendment agreed to.

PROTECTION OF BIRDS BILL [H.L.]
3.5 p.m.
Order of the Day for the Second Reading read.
LORD HURCOMB: My Lords, I beg to move that this Bill be read a second time. In doing so I would not propose to go through the clauses at length at this stage unless any of your Lordships desire more detail, because it is almost identically the same Bill as that which your Lordships were good enough to pass last year, after considerable debate and some amendment. The Bill started afresh in another place and reached its Second Reading unopposed, when its progress was halted by the Dissolution.
The first clause of the Bill withdraws the powers of the Secretaries of State to deprive the eggs of specified wild birds of the protection given them by the principal Act, and while leaving landowners free to take lapwings' eggs up to April 14 makes their commercial exploitation illegal. Clause 2 again incorporates the Bill prohibiting the sale of dead wild geese which the noble Earl, Lord Mansfield, piloted through your Lordships' House some three years ago. Clause 3 makes it an offence for any unauthorised person wilfully to disturb at their nests the fifty or so rare species specified in the first Schedule, but the discretion of the approving authority has been somewhat widened by a slight amendment so as to include conservation among the scientific purposes for which approval may be given.
Clauses 4 and 5 bring in much needed regulation of growing practices, which include ringing and netting in mist-nets and several other devices, while Clause 6 empowers the Secretaries of State to suspend the shooting of wild fowl for short periods of exceptionally severe weather. These clauses remain unaltered, as do the rest of the clauses of the

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Bill, with one particular exception to which I must refer. Your Lordships will recall that when the Bill was under discussion in Committee last year my noble friend Lord Tweedsmuir moved an Amendment giving powers of search to a constable who had reasonable ground for suspecting that an offence had been committed. This remedied a great weakness in the principal Act, but the Home Office spokesmen were not happy about it, and my noble friend Lord Bowles invited me to discuss the matter further with his Department. This I gladly agreed to do, and indeed I indicated at the time that the importance of the point was greatest in relation to the illegal taking of the eggs of the rare birds specified in the first Schedule.
I am glad to say that as a result of my discussion the present Clause 10 emerged, and I believe that the compromise I then suggested is now acceptable to the Ministers concerned, and I hope it will be so to the noble Lord, Lord Tweedsmuir. It will do much to deter offenders and to make enforceable one of the most important provisions of the present law. I am greatly indebted to the noble Lords, Lord Bowles and Lord Stonham, for the assistance which they and their Departments have given to me, and I am grateful to your Lordships for the sympathetic way in which these problems of safeguarding our natural environment are always considered in your Lordships' House. I beg to move.
Moved, That the Bill be now read 2a.—(Lord Hurcomb.)
3.8 p.m.
LORD SANDFORD: My Lords, I am sure we all welcome once again this Bill which is before us. I think we would agree that in the present economic situation into which the Government have got us we cannot really spare the time this afternoon to talk at any great length about lapwings or dead wild geese or black-headed gulls. But we ought just to pause and congratulate the noble Lord, Lord Hurcomb, on having got this Bill going again, and keep the rest of our counsel for a later stage another day.
THE EARL OF CRANBROOK: My Lords, while I entirely agree with the noble Lord who has just spoken on the
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need to keep the proceedings as short as possible, I would suggest that now and in the future when dealing with conservation Bills your Lordships should consider the underlying reasons for their introduction; whether or not, for instance, this Bill and other similar Bills are designed to secure the continuance in this country of rare birds which would otherwise become extinct or even more rare, or whether they are based on emotions and feeling that any interference with any bird per se is such an antisocial act that it should be made a crime. That, I think, is the yardstick which we should apply, and when I apply that yardstick to this Bill I find that most of it is scientifically justified and I would commend it to your Lordships.
However, I myself feel that Clause 1, at any rate, is fairly unjustified scientifically and is entirely based on emotion, and I hope we shall be able to deal with that and various other associated matters in Committee. I believe it important that this point should be made on Second Reading, and I hope your Lordships will excuse me for making it when you are only too anxious to get on with discussion of things other than birds which sit on the opposite side of this House.
3.10 p.m.
LORD BOWLES: My Lords, I am most grateful to noble Lords for keeping their remarks as short as they have done. I understand this was under an agreement of some kind which was reached. I am rather surprised that the noble Lord, Lord Sand ford, could not resist bringing a little Party politics into a completely non-Party matter, a Private Member's Bill.
As the noble Lord, Lord Hurcomb, said, the provisions of the Bill before us to-day are, with one major exception, the same as those your Lordships approved in Lord Hurcomb's former Bill. The only substantial change is in Clause 10, which he mentioned, which has been modified to confine the proposed extension of police powers to suspected offences relating to the eggs of very rare birds.
Your Lordships will recall that at the Report stage of the earlier Bill I said that the Government could not support Clause 10 as amended in Committee because it seemed to give unduly wide powers to the police. I undertook, however, that

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the Government would discuss the matter with Lord Hurcomb to see if a mutually acceptable solution could be found. The discussions took place as the noble Lord has said, and the new revised Clause 10 provides for search and arrest without warrant where a constable has reasonable grounds for suspecting that an offence has been committed against the eggs of specially protected birds. It makes no change, as regards the generality of offences against the Act, in the powers conferred on the police by Section 12(1) of the principal Act to stop and search any person "found committing" an offence against the Act.
The Government fully recognise the special problem of protecting rare species just as they appreciate the general issues that are involved in any suggestion for extending police powers. At this stage I cannot commit the Government in regard to this new clause. We shall be guided by the views expressed by the House in Committee and at other stages later. As regards the principles of the Bill as a whole, the Government's attitude remains one of benevolent neutrality. We shall, of course, be very ready to give the noble Lord, Lord Hurcomb, any assistance he may require to secure that the Bill's provisions are satisfactory in form and give workable effect to the intentions of the House. In the meantime, the Government support the Second Reading of this Bill.
3.13 p.m.
LORD HURCOMB: My Lords, I am obliged for the way in which your Lordships in various parts of the House have received this Bill. I do not think there is any reason why, now or at any future date, any substantial number of minutes should be taken in reviewing or discussing the details of the Bill, which was exhaustively debated last year and has been the subject of a great deal of discussion outside. I am not going to enter into argument with my noble friend Lord Cranbrook about the advisability of protecting all the species of birds which still exist in these Islands. The case is not a scientific one, as he well knows, on this particular point, but it is an attempt to make the law intelligible to those who have to bring up young people, and enforceable by the police who have to see that it is duly observed.
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It is quite impossible to go on saying, that while it is right for a small boy to take a skylark's egg he must not take a woodlark's egg, or to expect any constable to know whether one or the other has been taken. As I say, I am not going to take up time on this question now. I have argued it for many hours in other places with my noble friend, and no doubt shall continue to do so. I hope that your Lordships will speed this Bill on its way in its present form and, in the autumn, will put it through its remaining stages with but little loss of time.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

THE PRICES AND INCOMES POLICY
3.15 p.m.
LORD SHEPHERD LORD SHEPHERD rose to move, That this House takes note of the Prices and Incomes policy of Her Majesty's Government. The noble Lord said: My Lords, the House has before it a White Paper giving the contents of a Prices and Incomes Bill, and it contains the latest Amendments that the Government have in mind which were tabled last Friday. It was the hope that by having this debate this afternoon, we might when we receive the Bill from another place, be able to take the First and Second Readings formally, and then go into Committee. Therefore, the House might like to know what arrangements have been made to enable noble Lords, if they so wish, to put down Amendments for the Committee stage. The Table will be willing to receive Amendments against the White Paper and, just before the Committee Stage the necessary alterations to the Amendments will be made to bring them into line with the Bill. If noble Lords co-operate and put their Amendments in fairly early, it will give the House an opportunity to appreciate what will arise on Committee stage.
Last night, after the Committee stage of the Industrial Development Bill, I had to get down to prepare this speech and I tried to find a theme. My mind went back to a debate that took place in your Lordships' House on July 27, 1961, on the Motion of the Leader of the House at that time, the noble Viscount, Lord

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Hailsham, or, as he is now known the Right Honourable Quintin Hogg. I have read that debate with considerable fascination. Taking part were the giants of yesterday. From the Bench opposite we had the noble Lord, Lord Pethick-Lawrence, in his 90th year, making one of the fascinating speeches on the economic situation. The noble Lord, Lord Morrison of Lambeth, and the noble Earl, Lord Alexander of Hillsborough spoke. Also taking part was the noble Lord, Lord Brand, to whose speech I will refer later.
As I say, the occasion of the debate was the Motion of the then Leader of the House. The noble Lord, Lord Sand-ford, in a political point on a non-controversial Private Member's Bill, has given me the opening to make the one political point that I intended to make in this debate. I intend to do so, in view of the comments that were made on the economic debate, and no doubt will be made by noble Lords opposite. The debate to which I have referred took place a few days after the Finance Bill of 1961 had passed through your Lordships' House. Perhaps I might refresh your Lordships' memories by saying that the Budget of that year gave £83 million to the surtax payers. But it was a year in which our current deficit was £340 million, and our current and capital account deficit was £550 million. It was in a year in which incomes had increased by £1,450 million as opposed to a growth in our national production of £650 million—an excess of £800 million. We then had the July mini-Budget in which indirect taxes were increased by £210 million; the bank rate was increased by 2 per cent. to 7 per cent.; credit restrictions were tightened and Government expenditure cut.
That was the background to the Motion which was moved by the then Leader of the House. If I may, I will remind your Lordships of the terms of that Motion. It was, of course, a Motion which was passed by your Lordships' House. It was in these terms:
"That this House endorses the policy of Her Majesty's Government as outlined by the Chancellor of the Exchequer on July 25 for the purposes of upholding the strength of sterling, improving the balance of payments, and maintaining a sound basis for the continuing prosperity of the nation."
Three years later, in 1964, having stimulated the economy in the April Budget of
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1963, we found that there were increased pressures on wages, profits and dividends, and, as the House will know, there was a monstrous deficit of £756 million. I felt that the House should be reminded of the circumstances, and perhaps the noble Lord, Lord Erroll of Hale, will feel some gain by it, since he is leading today from the Bench opposite, and was at that time a very distinguished President of the Board of Trade.
The speech to which I want to refer is that of the noble Lord, Lord Brand, who quoted a Report of the O.E.E.C., one of the contributors to which was one of our new colleagues, the noble Lord, Lord Kahn. I should like to repeat that quotation, for I believe it has special significance today. It was that the Government
"must have a wages policy for dealing with the problem of wages just as they must have monetary or fiscal policies for dealing with the problem of demand. We are fully aware that to do so requires a decision at the highest political level and a political understanding of the need for it."—[OFFICIAL REPORT, Vol. 233, c. 1117; 27/7/61.]
One of the first things we did when we took office in 1964 was to seek to create an incomes policy. We recognised that, if we were to ask one section of the community to accept restraint, we should seek to see that similar restraints were applied throughout the nation. We felt that this was the only way in which we could get a prices and incomes policy. We set out to negotiate an agreement with the employers and the trade unions, but we did a great deal more. Ministers and industrial advisers at the Department of Economic Affairs, went the length and breadth of the country speaking at factory meetings, directors' meetings, and the like, trying to impress upon all not only that an incomes policy was vital and necessary to the nation, but that the vital interests of the workers were at stake.
I well remember the great debates that took place during 1965 at trade union conferences, and in particular at the Labour Party Conference at Blackpool. There the decisions were debated, and agonising decisions were taken; and it we are to be criticised, at least we can say that we as a Government faced our friends in this very difficult situation, that we demanded a vote, and that we got a majority. Do not let us underestimate the agony of decision of many of those who supported the Government view. At these meetings we said that price

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stability was as important as wage increases; that it was not possible to achieve price stability without a positive policy on incomes and productivity; and that it was not enough to rely on raising productivity or encouraging competition to keep prices down. The faster increase of productivity did not in itself prevent money incomes outstripping the rise in real output. This has been the experience of many countries. We also had to tell our workers, particularly those in the higher-productivity industries, that at the present stage they were not to demand their pound of flesh; that we needed a period of restraint so that the lower paid workers could catch up. We made it quite clear that, if we are to have an economy with the minimum of unemployment, there is no alternative to a policy seeking to influence directly the attitude and behaviour of those concerned with determining prices and incomes.
We reached an agreement on prices and incomes in three stages. The first stage was to agree with management and unions on our objectives. The Joint Statement of Intent on Productivity, Prices and Incomes, signed in December, 1964, set out the general objectives of the policy. Noble Lords will bear in mind that that was achieved within two months of our taking office. This, we can claim, was an achievement. The second stage was to agree on the machinery needed to achieve this policy. After discussion with "Neddy", an agreement was reached in February, 1965, and the results were set out in White Paper, Command 2577: first, that "Neddy" was to make regular reviews of prices and all money incomes; and, secondly, that a National Board for Prices and Incomes was to be set up to investigate individual cases. The third stage was to agree on the general criteria which in the national interest should guide everyone concerned with determining prices and incomes, and also the National Board for Prices and Incomes in investigating individual cases.
We reached agreement on criteria in April, 1965. These were set out in a White Paper, Command 2639. That Paper states that firms should never raise their prices except in certain defined circumstances. It also describes the circumstances in which they should be
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reduced. In terms of incomes, increases above the agreed norm are to be confined to cases where exceptional treatment can be shown to be justified on the grounds of direct contribution to the growth of productivity, better manpower distribution, unreasonable living standards and widely recognised anomalies. It follows that these increases should be balanced by some increases being smaller than the norm. The policy is not a short-term expedient, but a long-term voluntary policy to raise efficiency so as to keep incomes in step with output and to stabilise prices. We do not intend to displace the existing collective bargaining machinery, but it should be against the background of a policy agreed nationally with the T.U.C. and management.
The Government announced in September, 1965, that measures had to be taken to make the policy more effective if the targets in the National Plan were to be hit. One was to be a voluntary early warning system for prices and pay which would give the Government an opportunity to consider pay claims and agreements and proposed price increases before they were put into effect. The other measures the Government announced were to be embodied in legislation: first, to give the National Board for Prices and Incomes statutory power to collect all the information necessary: and, secondly, to give the Government power to require advance notification of pay claims and agreements and proposed price increases and, in appropriate cases. to require the proposed price or pay increase to be deferred pending examination by the National Board for Prices and Incomes. This power will be used only if need be; for instance, if the voluntary agreements should not work well enough,
The C.B.I. and T.U.C. have since been co-operating with the Government in a voluntary early warning arrangement; the T.U.C. is developing its own early warning system as well. Under this affiliated unions inform the General Council of all impending claims, and important claims can come before a special committee. The policy is undoubtedly having an impact; it has unquestionably had a restraining effect on the trend of prices. It was not expected that the policy could have much effect on the level of pay settlements in 1965–1966

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because of the extensive forward commitments negotiated before the policy was inaugurated. But the eighteen Reports which the National Board for Prices and Incomes has so far contributed, showing how the White Paper criteria can be put into practice, have been generally welcomed. The policy has won a large measure of public approval while, to the best of my knowledge, in spite of much vocal criticism, no alternative solution has been put before us. But both prices and incomes are still rising faster than they should, and this is only perpetuating our old difficulties. There is no reason for going back on the Government's announcement of legislation to put new drive into the policy, and to impress a greater sense of urgency on all concerned.
The proposed Bill consists of three main Parts, and I will deal with them briefly. Part I of the White Paper is designed to reconstitute the National Board for Prices and Incomes, which is at present established as a Royal Commission, on a statutory basis. There are two reasons why this is desirable. First, the National Board for Incomes and Prices was set up, in agreement with both sides of industry, as a permanent institution, comparable with the Monopolies Commission, whereas a Royal Commission is really more appropriate to a body appointed for a limited period. Secondly, at present the Board has no legal power to call witnesses or to require them to give evidence. In practice, this has not been a great problem, since all but one of the various organisations concerned have been willing to co-operate with the Board on a voluntary basis. But in view of the importance of the Board's work in the future, it would be unfair to the rest of the community if any un-co-operative body were to hinder its proceedings. This Part of the White Paper would come into operation with the passing of the Bill.
I now turn to Part II dealing with the "early warning" system. This Part would give the Government reserve powers—and I would stress "reserve powers"—to require "early warning" of proposed increases of prices and charges, including fees, and of pay awards and settlements, thirty days before they were due to take effect. This "early warning" of proposals to increase prices or pay is
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an essential feature of the policy. It will usually be important to make a reference, if one is to be made, before the increase is put into effect—hence the need for advance notification—and it would be unsatisfactory for everyone concerned if the decision whether or not to make a reference were made in undue haste or without full knowledge of the facts.
Part II would also enable the Government to require that a price or charge referred to the Board should not be increased before the Board had reported; and that, similarly, a pay award or settlement should not be implemented while it was before the Board. The maximum length of any such temporary standstill would be three months under Clause 19, but it could be shorter if the Board were to report early. The idea of a temporary standstill is essential if the policy is to be effective. The policy would be seriously undermined if increases in prices or pay were to go ahead while they were under examination by the Board, so that its Report was nothing more than a post-mortem. No one wants the standstill to be a day longer than it need be, but it must be long enough to let the Board play its part effectively.
Part II would also enable the Government to require notification of increases in dividends and other types of company distributions. Such notifications would have to be made within seven days of the directors' decision, since to require them in advance would conflict with the precautions which are taken to prevent privileged advance information about dividend proposals being dishonestly used for personal gain. This is a new requirement. Notification of dividend proposals is a great help to the Government in deciding whether particular industries need careful watching, or whether there is need of a reference to the Board. It is also a reminder to those proposing dividend increases that they should take the national interest, and the White Paper criteria, into account.
Part II would also enable the Government to require notification of claims for increased pay or other improvements. "Early warning" and temporary standstills cannot be applied to claims, because that would mean prohibiting negotiations and preventing free collective bargaining. That is something which the Government have consistently refused to do. There

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is nothing in the Bill, or in the White Paper, which prevents claims being made, which in any way impedes free negotiations, or detracts from trade union activities in representing their members. The most that could happen if Part II were ever brought into force would be that there might be a limited delay before awards or settlements could be implemented, or prices or charges increased.
Part II of the White Paper is quite different in character from Part I. Part I will come into effect as soon as the Bill receives the Royal Assent, and will remain permanently in force. Part II, however, will remain inoperative after the Royal Assent, unless an Order in Council is made and approved by both Houses of Parliament. Even then, separate detailed Orders would need to be made, applying the provisions of Part II to any particular range of prices or pay. This means that when the Bill has become law, two further stages must be gone through, and there will, of course, be full opportunity for Parliamentary debate.
May I draw the attention of the House to three further features of this Part of the White Paper? Clause 6 lays down that, before any steps are taken to bring the provisions of Part II into force, the Government are to consult representative bodies on both sides of industry. That should be stressed. This is yet another safeguard against the Government of the day moving too hastily and without a substantial measure of public consent. If Part II were brought into force, its provisions would lapse unless Parliament renewed them at intervals of not more than one year. Thirdly, the provisions of Part II can be brought into force for pay only, or prices only, or both together.
It needs to be emphasised that once the Board had reported on a case referred to it, or once the "early warning" period had elapsed, the parties concerned would be free to act on their own judgment. There would be no greater compulsion on them than exists to-day to act in accordance with the Board's findings or with the wishes expressed by the Government. In other words, this is not a Bill for the statutory control, either of pay or of prices. There is nothing in the Bill which interferes with the essential voluntary principle on which the prices and incomes policy has been developed.
One feature of the Bill which may cause anxiety is the provisions in regard to fines. But it is an inescapable fact that, if Parliament creates legal obligations, it must provide penalties for those who break the law. The Bill includes a number of safeguards, and the House should be well aware of them. For instance, Clause 22(1) provides that no proceedings for an offence under Part II of the Bill may be instituted in England and Wales without the consent of the Attorney General. Secondly, Clause 16(4), which makes it an offence for workers or their representatives to try to induce an employer to break a temporary standstill on pay, provides them with express protection against liability for conspiracy which might otherwise arise, and against which the trade union Acts give no protection. Indeed, the chance of a situation arising in practice involving the possibility of prosecutions under this Bill is, we believe, remote. But we feel that these provisions need to be made. I would stress that there is no dictatorial power in that Part of the Bill. We are determined so long as possible to proceed on a voluntary basis.
My Lords, before turning to Part IV of the White Paper, I think I should say this. Through no lack of effort by my right honourable friend the Prime Minister, the Chief Secretary or the Chancellor of the Exchequer, incomes outstripped output during 1966, and this has created severe internal pressures on demand. Therefore, actions admittedly very radical for peace time have had to be considered. If I may say so, they are as repugnant to us, in our having to ask the House to accept them, as they are to those upon whom they may bear. Last week the noble Lord, Lord Carrington, I thought recognised the Government's desire for an early passage of this Bill, but he wanted to know why it was that this Bill, which was introduced some nine months ago, now needed such a rapid passage. There was a General Election, although it is true that there was a period between the result of that Election and the introduction of this Bill. But I have stressed the voluntary nature of this legislation, and a major factor of voluntary arrangements is that there should be the greatest possible consultation between the parties concerned.
Most of us can remember the failure and the bitterness of the pay-pause of Mr. Selwyn Lloyd, mainly due, not so much to the circumstances but to the manner in which it was imposed. We felt that it was right to take time to consult all the interested parties. But the circumstances have now changed, and action clearly needs to be taken. We have issued this White Paper, and we now have an opportunity to discuss it. May I say from the Government Bench that if we were to receive any representations through the usual channels for further discussion on this White Paper between now and when the Bill should come from the House of Commons, we should be very ready to assist in providing time? The Government recognise that the House should have sufficient time to consider this important legislation.
Now I come to Part IV of the Bill. This contains the amendments which were promised by the Prime Minister when he made his Statement on July 20. My right honourable friend said:
"Within the main field of collective bargaining we shall rely in the first instance on voluntary action. Nevertheless, in order to ensure that the selfish do not benefit at the expense of those who co-operate, it is our intention to strengthen the provisions of the Prices and Incomes Bill … Meanwhile the Government will not hesitate to act within the powers they enjoy, or may further seek, to deal with any actions involving increases outside and beyond this policy."—[OFFICIAL REPORT, Commons, Vol. 732 (No. 58), col. 636; 20/7/66.]
There are three points to make about Part IV right from the start. Part IV is designed to give statutory support to the prices and incomes standstill (described in the White Paper, Cmnd. 3073) if the need should arise—and, my Lords, I would stress those words, "if the need should arise". Like Part II, it is permissive and not mandatory. It seeks to enable the Government to enforce the standstill in any sector, industry or firm which threatens to break it; or to reduce a price or income which has been increased in defiance of the standstill call. It does not impose—and this I stress—a statutory standstill in cases where voluntary co-operation is forthcoming. Part IV would be brought into operation, if necessary, by an Order in Council subject to affirmative confirmation by both Houses of Parliament within 28 calendar days. Provision for this has been made
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in Clause 25. Part IV is strictly temporary: the new Clause25 limits it to one year from the passing of the Bill, and there is no provision for renewal. If the Government should feel that Part IV can be dispensed with earlier, there is power to discontinue it at any time.
The Prime Minister stressed in his Statement that the Government believe that voluntary co-operation is the best way of making the incomes and prices standstill work, and, if I may, I will repeat his words:
"It is not our intention to introduce elaborate statutory controls over incomes and prices. This is a situation in which the Government look with confidence to everyone concerned with these matters to act in accordance with the public interest …
"Within the main field of collective bargaining we shall rely in the first instance on voluntary action."
My Lords, the Government do not believe that legal action should be taken to enforce the working of the prices and incomes policy unless a few selfish individuals jeopardise the fairness and effectiveness of the policy by ignoring it.
This voluntary approach is the Government's attitude over Part II, where they intend to continue with the existing non-statutory "early warning" and temporary standstill arrangements, only replacing them where and when it is necessary with statutory arrangements under Part II of the Bill. The general approach on the prices and incomes standstill is exactly the same. The Government are explaining the need for the standstill, describing it in the White Paper and elsewhere in such a way that we can obtain the greatest voluntary co-operation in the national interest. Then, if anyone should jeopardise the success or the fairness of the standstill, the Government will not hesitate to use the powers of Part IV of the Bill once they become law.
Clauses 26 and 28 of the White Paper will give the Government power to make Orders (subject to Negative Resolution by either House of Parliament) directing that specified prices or charges, or specified rates of remuneration, shall not be increased from the date of the Order without Ministerial consent. A temporary standstill could therefore be imposed where necessary on both prices and charges and on the levels of remuneration, allowing for the effect of changes in normal working hours.
Clauses 27 and 29 in the White Paper will give power to reverse where necessary unjustified price or pay increases implemented since July 20, 1966. The appropriate Minister could direct that any specified price or charge should be reduced to a level not lower than that which was prevailing on the date of the Order; and any such price or charge could not subsequently be raised without Ministerial consent.
Before making such a direction, the Minister must give fourteen days' advance notice to the person affected by the direction, and must consider any representations made within that time. The direction could not be made retrospective. In the case of pay—that is, Clause 29—the Secretary of State could make an Order (subject to Negative Resolution by either House of Parliament) that, without permission, remuneration of a specified kind should be no higher than that paid by the employer for the same kind of work before July 20, 1966. The Secretary of State must give at least fourteen days' advance notice of the Order, and must consider any representations from those concerned.
The penalties for any breaches of Part IV will be exactly the same as those in Part II. Contrary to some Press reports, there will be the same penalties and protections for employees and unions as are provided in Clause 16 in Part II. Clause 28 provides for this clearly. Moreover, by virtue of subsection (6) of Clause 25 and the provision in Clause 22(1) the Attorney-General's consent is required for any proceedings which may need to be brought under Part II, and this applies to Part IV.
My Lords, I think that covers most of the Bill. I have stressed the voluntary nature of the Bill and the policy behind it. Manufacturers and management since 1965 have shown great restraint in the field of prices. But further efforts to maintain a standstill in prices during the next six months are vital and this should be followed by a further six months of severe restraint. These terms are similar to those required for Incomes. In the field of labour relations I hope we shall all recognise now the need for tact and leadership and for management to seek to create and make opportunities for new standards of labour relations. This is the
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task for management. But the task for the trade union leaders, from the top right through to the factory floor, is going to be infinitely greater. None of us should be blind to the immensity of our task or to the fact that the challenge to achieve a standstill will require all the skill and determination of the trades union leaders.
But even if we have success in this connection, I believe we shall have failed if we do not use this next twelve months to greater advantage. It would be a failure if we regarded it as an interlude before moving forward to demands for greater increases in wages. This is a period in which I think all of us—particularly those who are on the factory floor or in the board rooms—should devote all we have to raising productivity, sweeping away restrictive practices and raising efficiency throughout national life. If I may, I applaud the agreement made yesterday by the boilermakers within the shipbuilding industry. Those who have some idea of the shipbuilding industry and of their difficulties in the past will realise the very great achievement made yesterday.
Having said that, the Government have a right and a duty to see that those who co-operate in the national interest should not suffer by the activities of those who refuse to co-operate. That is why Part 1V is in the Bill. It is true that success will depend on the board room, the factory and the shop floor; but let none of us feel that we are absolved from responsibility. Those of us who are in political life have a special responsibility. May I hope we live up to it. I beg to move.
Moved, That this House takes note of the Prices and Incomes policy of Her Majesty's Government.—(Lord Shepherd.)

POST OFFICE REORGANISATION
3.54 p.m.
BARONESS PHILLIPS: My Lords, I should like to repeat a Statement which my right honourable friend the Postmaster General has just made in another place. His words were:
"In recent years the Post Office has developed into a complex of vast business enterprises. It now faces considerable problems of expansion,

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modernisation and reorganisation if it is to meet the growing demands of the economy.
"In considering whether or not the Civil Service context in which the Post Office functions is appropriate in present circumstances, the Government have recently carried out a fundamental survey of its management, structure and functions. After the most careful consideration it has been decided the time has now come to make a change, and that, instead of being a Department of State with a Minister at its head, the Post Office should become a public corporation, the members of which would be appointed by and responsible to a Minister.
"Within this corporation the management of the various services would have an opportunity to develop on more independent lines but always with a primary responsibility for the maintenance of comprehensive national services available to all citizens in all parts of the country.
"A final decision on the exact form of the reorganisation and of the internal management structure must await publication of the report of the Select Committee on Nationalised Industries, which is now examining the Post Office, and the fullest consultations with the representatives of the staff. These consultations will now be put in hand, and a White Paper will be presented to the House in due course setting out the Government's final proposals.
"The Government believe that this decision to modernise the status and management of the Post Office will make a considerable contribution to its efficiency, and the efficiency of Britain, in the years ahead."
EARL FERRERS: My Lords, the noble Lady has made a most important Statement on the future of the Post Office. We on this side welcome it as far as it goes. It leaves many points unanswered, and many questions will be asked, such as to whom the new corporation will be responsible and whether or not the post of Postmaster General will vanish. But these are only the roughest outlines. I wonder whether the noble Lady could tell us when the White Paper will be forthcoming so that we can study the
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details in full. Although we have had only the rough outlines, one thing that seems to emanate from them is the quaint whiff of denationalisation. It would appear that the Post Office is now going to be subject to slightly less centralised authority than before. Is this the recommendation of the firm of efficiency experts, Messrs. Kinsey, who are looking into the Post Office? I think it would be interesting if we could know that. Also, can the noble Lady say when this reorganisation is likely to take place? Is it a question of one, two or five years? Could she give us some indication?
3.57 p.m.
LORD REA: My Lords, may I join in thanking the noble Lord, Lady Phillips—I call her "noble Lord" deliberately, for she is a Lord of Parliament—for the Statement which she has just given us. It was most interesting. But I would suggest that there is no reason given in it why the change should take place. They say that it will be better and that the Post Office will have the opportunity to develop on more independent lines; but it is not made very clear why. It seems to me halfway towards private enterprise—which, of course, is a very good thing—rather than towards nationalisation. Could the noble Lord, Lady Phillips, say whether the Government are perhaps using this as an alibi against awkward questions in Parliament so they can get out of it—as they would have to get out of it—on questions such as those on the B.B.C. and other Departments. From these Benches we welcome the Statement in general, and wish her and it a good passage.
BARONESS PHILLIPS: My Lords, on the point about when we shall have the White Paper, my right honourable friend aims to issue this by next Spring. The aim is that the corporation will take over some time in 1969. In reply to the noble Lord's other point, speaking from the brief, the reasons for the change are these: first, the activities of the Post Office are far more akin to those of a nationalised industry than of a normal Government Department; second, the Board will have more continuity of direction and control and have less reason to centralise and so to slow up decision-making; and third, the Civil Service structure and organisation is designed

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mainly as a regulator and cannot be ideal for a basically commercial task.
To sum up, we feel that a system based on ministerial and Civil Service traditions and structures is not easily compatible with dynamic management and responsiveness to change increasingly required of a growth industry in these days. On the point about the Postmaster General, the Minister's accountability to the House will depend on the terms of the Act, and this is of course too early to say which Minister will in fact be responsible.
LORD BYERS: My Lords, may I ask the noble Lady this? In the event of the new corporation making a surplus, will it be allowed to use it or will that, as usual, be raided by the Treasury?
LORD GRIMSTON OF WESTBURY: My Lords, I do not know whether the noble Lady can answer this question, but ever since the Charter was originally granted by Charles II the Royal Mail has been known as such. May I venture to express the hope that that title will not be dropped, because in my experience it meant a great deal, particularly during the war?
BARONESS PHILLIPS: My Lords, the Postmaster General is well aware of this, and I cannot comment on it at this stage.
LORD CARRINGTON: My Lords, I wonder whether the noble Lady would tell us why it was necessary to make this Statement at this moment, as I understand there is not be a White Paper until next Spring? Will there not be a considerable period of uncertainty for everybody in the Post Office between now and the issue of the White Paper?
BARONESS PHILLIPS: My Lords, negotiations with the staff will naturally take place, but this is a constitutional decision, and this is merely a time stated here. It does not of necessity tie the Government; it may in fact be earlier.
LORD ABERDARE: My Lords, may I ask the noble Lady what effect this will have on the position of the B.B.C. and the I.T.A.?
BARONESS PHILLIPS: My Lords, I think I might say to the noble Lord, Lord Aberdare, that that is not relevant to this particular corporation as they are already separate corporations.
EARL ATTLEE: My Lords, may I ask the noble Lady whether the Post Office will retain its democratic basis as upheld by the Postmaster General and the Chief Engineer in my time?
BARONESS PHILLIPS: My Lords, I should like to reassure the noble Earl that the Postmaster General has these points very much in mind. In any case we shall have an opportunity to deal with these matters in the White Paper, and certainly when the Bill is before the House.
LORD MERRIVALE: My Lords, as the noble Lady referred to the question of efficiency as one of the reasons for setting up this corporation, could she ask her right honourable friend whether, between now and next year, or in the not too distant future, he would look into the question of the increasing number of wrong telephone numbers which are prevalent at the moment?

THE PRICES AND INCOMES POLICY
4.3 p.m.
Debate resumed.
LORD ERROLL OF HALE: My Lords, I am sure that noble Lords in all parts of the House would wish me to thank the noble Lord, Lord Shepherd, for the extremely lucid explanation of the "White Bill"—which, I think, is the only possible way to describe a White Paper which consists entirely of a Bill. The White Bill is somewhat premature in its appearance, but we are grateful to the noble Lord particularly for his explanation since, although it claims to be a Bill, there is unfortunately no Explanatory Memorandum such as normally accompanies Bills when they reach us from another place. The noble Lord made good that omission.
The noble Lord, Lord Shepherd, described the sequence of events since October, 1964, with a distinct bias towards his own Party, which is understandable. But we on these Benches see it in a somewhat different way. We remember the great claims made for the Declaration of Intent, now sadly discarded. Since then there have been no fewer than three White Papers devoted to the subject of prices and incomes policy. Then there was to be a Bill; indeed, the Prices and Incomes Bill was

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introduced on February 14, but apparently there was no need for haste on this subject because it was not re-introduced until July 4, and the Second Reading was held only on July 14. It was then in its more simple and voluntary form. Indeed, we had no reason to suppose that Part IV would be introduced, because we had it on the authority of no one less than the Deputy Prime Minister himself on July 4, 1966, that he could not be possibly contemplating a wage freeze. In a quote from The Times in answer to a question put by a journalist, Mr. Brown said:
"£ one course would be to halt all wage increases, but he did not think that was the way to do it."
That relates to July 4 of this year.
"Even if it could be made to work, with all the unfairness involved to the lower paid, the freeze could not go on for ever and the position would be worse when it came off. The Government would still have to find the answer to making the policy work in the longer term."
We can fully sympathise with Mr. Brown's difficulties in the days that followed when he had committed himself so categorically to an anti-freeze policy. Then, after the Second Reading, on July 14, which proceeded in another place we were within six days greeted by the Prime Minister's Statement on the economic situation, which I think was received with a degree of shock by the nation since they had not been led to expect this from the previous utterances of the Government. Although all responsible people in the country knew the situation was indeed a serious one, it seemed to us that it was only the Government who did not realise that fact.
By way of light relief, a day or two later we had what I would regard as being the most wonderful non-event of the month of July, when a Mr. Pryke resigned from his post in the Government. It is interesting to see the sort of talent the Government employs these days in the labyrinths of Whitehall when we learn that Mr. Pryke was a part-time economist working two days a week in Government service on an investigation of the housing problems. At the age of about 30 he is, of course, an expert and he felt impelled to resign from Whitehall because of the Prime Minister's Statement. Well, it gave us a good deal of fun at the time and Mr. Pryke certainly made the headlines in the newspapers. A
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few days later we were told that there was to be a series of drastic Amendments to the Prices and Incomes Bill; a whole new Part IV was tabled in another place, and there was a clumsy attempt on the part of the Government to introduce a procedural Motion to deny proper discussion of the new Part IV in the Committee of another place where the Bill had already reached.
LORD SHEPHERD: My Lords, I am not quite sure whether the noble Lord is within the Rules of the House in referring to what are the proceedings, or what goes on, in another place in the context in which he is making the reference.
LORD ERROLL OF HALE: My Lords, my understanding—and I am, of course, naturally very happy to be corrected if I am wrong—is that it is perfectly in order to refer to such proceedings, provided that one does not use a direct quotation. But if I am wrong I shall be glad to be corrected by the noble Earl the Leader of the House.
THE LORD PRIVY SEAL (THE EARL OF LONGFORD): My Lords, I think that the noble Lord, Lord Erroll of Hale, has raised a slightly different point. I do not think that my noble friend Lord Shepherd was referring to a question of quoting or not quoting, but to the question of whether it is in order to criticise the procedural activities in another place. It is not a matter on which I would care to express an opinion without proper consultation.
LORD ERROLL OF HALE: Well, my Lords, to use the phrase for the avoidance of doubt, I was certainly not criticising but merely commenting. I think it is important that noble Lords should understand how unusual the procedure in another place has been and continues to be; which in turn explains why we are discussing the White Bill this afternoon. It is particularly difficult for us to discuss the White Bill because we do not know in what form the Bill will reach this House until it has passed through all stages in another place. While we recognise the gallant efforts of the noble Lord, Lord Shepherd, to ease our task in this House, and I should like to acknowledge that fact, it does nevertheless remain highly unsatisfactory for us to be debating a White Paper and—if this

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debate is to take the form of a Second Reading debate—a Bill, the precise nature of which we shall not be clear about until, I understand, Wednesday evening of next week, when I believe it is proposed to take the Report and Third Reading of the Bill in another place.
Nevertheless, in the spirit of amiable co-operation, we will do our best this afternoon to comment on the Bill, on the strict understanding, as I hope the noble Lord will agree, that we reserve our position in the event of any substantial changes being made in the Bill in the form in which it eventually reaches us. We shall also do our best to co-operate with the Government in regard to Amendments. We appreciate the proposal of the noble Lord that we can table Amendments to the White Bill. They will of course in turn be liable to change, if the Bill is altered, but it will be rather difficult for us to table Amendments as early as we should wish, because we should naturally have to rely a good deal on studying the discussions on the Bill in another place before deciding exactly what points are of importance for further debate in your Lordships' House. I am glad to see the noble Lord, Lord Shepherd, nodding his head. From that, I take it that he agrees with what I have been saying.
In addition to this being a very odd Bill, and there being no Explanatory Memorandum, the contents of Schedule 2 are a remarkable feature which, I think, are unparalleled in any recent legislation. Schedule 2 is not part of the Bill, in the sense that it does not link up with any of the legislative provisions which the noble Lord described so lucidly. It is a kind of apologia for a policy, a kind of reprint of one of the three White Papers that have been issued—I am not quite sure which. But, surely, the Bill will have to be drastically amended, if not in another place, certainly when it comes to your Lordships' House.
Schedule 2 explains on the top of page 41 that:
"An important step will be to lay down a 'norm' indicating the average rate of annual increase of money incomes per head which is consistent with stability in the general level of prices. In present circumstances"—
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that means the circumstances of to-day when we are discussing this White Paper—
"the appropriate figure for this purpose is 3–3½ per cent."
I am sure that cannot be true. The appropriate figure is 0·0 per cent.—if I heard the noble Lord, Lord Shepherd, right—and I expect that there will be many other items in Schedule 2 which will require revision. I think it is unfortunate that this Schedule should be in the White Paper. Surely, it is not necessary to include such an apologia in the Bill, unless it is part of the process of law reform with which the noble and learned Lord the Lord Chancellor is so greatly concerned.
We have been told repeatedly by the Government how serious the situation has been during the month of July, particularly during the last fortnight, and those of us who were beginning to believe the Government had a severe shock when we learned yesterday afternoon that the reserves had fallen by £25 million in the month of July. Is the situation really serious, or only £25 million serious? I have to be very careful at this stage, because a few days ago the noble Lord, Lord Shepherd, chided me with suggesting that the Board of Trade "cooked" some of the figures in relation to Bridling ton. So I will not use any culinary phrase about £25 million, but rather I should suggest that perhaps the new Governor of the Bank of England has been employing a sort of international Barclaycard and incurring short-term debts abroad, which will come home to roost in the next two or three months, and that this figure of £25 million is a true figure, but there are other obligations which have been incurred, and about which we have not been informed.
The noble Lord, Lord Shepherd, appealed to us to display a national spirit. I cannot do better than to quote from his speech in the debate on the economic situation a day or two ago, when he said:
"Clearly we are in a serious position; yet if there were a period of restraint, of consistent application by all to the task, we could well come out of it. It is strange that in war the British people will willingly accept all forms of discipline, yet in peace we seem to resent it."—[OFFICIAL REPORT, Vol. 276 (No. 45). col. 921; 28/7/66.)
Of course we should, because we fought to gain freedom, freedom to do as we

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like in accordance with our multitudinous and varied desires and wishes, aims and ambitions. The noble Lord went on:
"I believe we need to create a form of national emotion. I do not know whether it is for the Government to do it, or whether the Government is in fact capable of doing it;…"—(Col. 921.)
I can reassure the noble Lord. The Government have certainly created a national emotion, but not exactly the emotion the noble Lord wants. It is an emotion of contemptuous anger towards this incompetent Government. If I may suggest it, the first task of the Government, when appealing to managers, trade unions and everybody else to put their shoulders to the wheel, and all the other clichés which the present Administration and the previous Administration have used, should be that if they want people to respond (and it is hard to see why they should, because the British people have been working as hard as usual and exports, shipping strike apart, have been continuing to expand) the least they can do is to show some sense of humility.
If the Government would just "come clean" and admit that they have made a gigantic miscalculation as a result of which we will all be worse off than we would otherwise have been, then I believe that a national emotion might be aroused. But lacking such an expression of humility, I find it hard to believe that the public, at whatever level the noble Lord wants to suggest, will respond to his appeal in the way he wants. I think that the Government could get a response if, for their part, they were prepared to forego some of their cherished policies and not expect the public to have to do all the foregoing. If the Government were to say that they, for their part, will abandon their cherished Socialist policy of the nationalisation of the steel industry as a gesture to that part of the country which does not believe in the present Government's policy, then I think it would be possible to secure the wholehearted co-operation of that part of the public which does not support the Labour Government. After all, on a purely practical level, if the Government can be so wrong about the nation's economy in the last few weeks, surely they might be equally wrong in saying that the nationalisation of the steel industry will increase its efficiency.
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We can have little confidence in the Government when they have already made mistakes on the economic front on such a widespread scale. Therefore, if the noble Lord and other Members of the Government are to make an emotional issue of this and appeal for national unity and all the rest of it—I will not burden your Lordships with further quotations from other Ministers, particularly the Prime Minister—I suggest they should show a little humility and more desire to see the country working on proper, efficient and non-doctrinaire lines.
Turning to the White Bill itself, I should like to make one or two comments, particularly regarding the policy which lies behind it. Although the Bill looks very fierce, the principles on which it is based rely for their success on voluntary co-operation with Her Majesty's Government. The noble Lord, Lord Shepherd, stressed that when taking us through Parts II and IV. It is clear from what he said that, unless there is wholehearted voluntary co-operation, the policy of the Government on prices and incomes can hardly be expected to succeed. Nevertheless, it is a strange form of voluntary co-operation, if one is to be kicked in the teeth if one does not cooperate. I should prefer the Government to be honest and call it a Bill for compulsory co-operation, because that is really what it amounts to.
It is still very much in the balance as to whether there will be this degree of voluntary co-operation. The Confederation of British Industry have made some very angry noises over the week-end, and I understand that they are meeting this afternoon to decide their final attitude towards the policy of the Government. We must wait and hear the outcome of their deliberations. Though the T.U.C. have given their reluctant agreement, we know that one of the country's largest trade unions, if not the largest, the Transport and General Workers' Union, has announced its implacable hostility to the Bill and to the principles which lie behind it.
I was interested to notice that, when the noble Lord, Lord Shepherd, was talking about the prices and incomes policy, he suddenly changed and called it the "incomes and prices policy". I

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appreciate that this was a slip of the tongue, but in fact it would be much better if we were to refer to an incomes and prices policy, because the emphasis hitherto has been far more on keeping down prices than on keeping down incomes—that is to say, the Government have been less unsuccessful in keeping down prices than they have been in keeping down incomes—whereas now the greater need is to keep down incomes rather than to keep down prices. It should be the incomes and prices policy now, rather than the prices and incomes policy, because the need is greater to help incomes than it is to help prices.
The Bill—or, rather, I prefer to say the policy behind the Bill—can, in my view, even granted a substantial measure of voluntary co-operation, be only partially successful at the best. Let me start with wages; I shall then say a word or two about salaries, and then come to prices. On the wages front, it will be possible, I think, to hold what I would call the big all-industry wage rises, of which there are a number in the pipeline, and which have been listed by responsible newspapers in the last few days, such as the cotton-spinning and weaving agreement, the doctors' agreement, engineering, electrical contracting, municipal busmen. It looks as if that will be held back. These, I think, can be held. But they are only the big ones which hit the headlines.
What your Lordships must remember is that there are all the small firms, employing less than a hundred people, who are outside the scope of the Bill—and very independently minded firms many of them are. They will be able to implement wage increases of one sort or another, perhaps surreptitiously. It will be impossible under Part IV of the Bill to bring them to book. Indeed, they will often have to do something to retain some of their workers in difficult times, and not to see them sucked away by other and more powerful employers. Then there is the equally difficult matter of small groups of key workers in the big key plants, where perhaps thirty or forty men are involved, but if they refuse to co-operate can jeopardise the working of the whole plant. It may be necessary to yield to their demands, because they are not prepared to play along, and it
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will not be possible to invoke Part IV effectively and speedily enough to deal with the situation.
On the salaries front, I should like to hear from the Government what their attitude is towards the practice, widely adopted in large organisations, of annual reviews of their salaried staff, where they have a system very often of grading, and they review the more senior and perhaps middle-ranging salaried staff to decide who deserves an increment and who does not deserve an increment. This is an annual exercise and all those who know they have worked reasonably well will be sure of a rise. It is not quite clear to me from the White Paper whether such an annual review is to be postponed or implemented, so far as review is concerned, with the actual award deferred, or whether these cases can go ahead as usual. If I were in the position of having to decide, I should follow the Government's decision in regard to Civil Service increments, because the Government always take care of their own, and the Civil Service are to get their increments without any hold-up at all. So perhaps the same attitude may be allowed to what I might call the industrial civil servants—namely, the salaried staffs of firms, large and small.
Then there are the individually negotiated rises with senior executives by chairmen of companies. Are these to be deferred, or are they to go forward, particularly if they have been on an annual basis or are currently expected? In any case, it is straining voluntary co-operation pretty far if these rises are to be forgone, more particularly when the granting of them need never be made known to anybody at all.
As regards prices, I think the situation here is also one of gradual slide. I expect that the price freeze will be fairly effective on standard items like bread, beer, petrol and so on; but a price freeze is quite hopeless for a wide variety of products, new products or products of improved design. Fashion goods will inevitably be difficult, because this autumn's fashions will be completely different from last autumn's fashions. Books clearly do not lend themselves to price freezing, except where they form part of a uniform series at a uniform price. A big loophole, if I might call it that, occurs in respect of

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components from firms of less than a hundred employees. Those firms making new products will, in deciding the price level, inevitably have to frame the prices for these new products in such a way as to offset the lower profit margins now put upon all their standard lines. They are being expected to absorb the selective employment tax, and many other tax increases, on their standard lines, and, therefore, the prices of those which are not standard must tend to rise more than they otherwise would. It is quite clear that by imposing a prices freeze certainly no prices will come down during the next twelve months, because nobody will risk lowering prices when profit margins are going to be squeezed in this way.
In the field of retail trade, it is still far from clear whether the 10 per cent. increase in purchase tax will be passed on. The White Paper says that increases arising from Government taxation will be a ground for increasing prices. Here is a clear case where retailers should certainly be allowed to pass on the increased taxation, because competition is already so severe that I do not see how they could absorb this increase. In the large field of retailing, temporary and variable discounts are popular—very often known as 3d. off Is it a contravention of the Government's policy if 3d. off becomes 2d. off? Has it always got to be 3d. off for the next twelve months, bearing in mind that these discounts in the retail trade change from week to week, both in size and from product to product? Here, indeed, is a field in which it will be impossible to enforce the price freeze, and very difficult for retailers who wish to co-operate with the Government to be able to do so, because their prices fluctuate between product and product as part of their selling campaign.
LORD SHEPHERD: The noble Lord speaks about a prices freeze. I understand it is a prices standstill. This represents the view that there will be these fluctuations, and we hope they will be minor. The word "freeze" is where it cannot be moved; but we recognise that there will be fluctuations, and we hope that one rise will be compensated by one loss.
LORD ERROLL OF HALE: I am grateful to the noble Lord for that ex-
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planation. It means that prices can stand nearly still, but not quite. But wages, on the other hand, are to be frozen. Then, I believe the prices standstill will have an adverse effect on our export earnings, because pricing policy for exports in present circumstances—indeed, in all circumstances—should be different from domestic pricing policy. What we should do is always to try to maximise our export earnings, and if prices in a European country are rising rapidly, then our export prices to that country should rise, too, so that we are still selling our product and earn more foreign currency from the same product. But it will be difficult to do this if prices are kept fixed at home. How can the salesman in the other country justify putting up the price to the countries abroad?
The machinery for applying for price increases is shown to be rather cumbersome and slow-moving, and the White Paper says that applications will be rigorously vetted. Presumably a long time will elapse before they are either conceded or refused. It is far from clear from the White Paper whether the action of the selective employment tax in raising overheads will be taken into account as a valid factor, except in so far as Government taxation is referred to in the White Paper. Indeed, many small firms, particularly—though possibly larger ones as well—will simply not be able to wait for a price increase decision while the full severity of the selective employment tax drains off their working capital, because it is during the next six months, the time of total standstill, that they will be paying up and not getting anything back. For them the choice will be bankruptcy or the possibility of a fine if the application goes against them. It will simply not be possible for them to co-operate in such circumstances.
There are a number of other problems with which I will only deal briefly in your Lordships' House. There is the problem of some wage increases which have already been approved, and which it will be manifestly unfair to postpone and this will cause a great deal of difficulty. The noble Lord referred to the great task which lies ahead for management and the unions to learn to co-operate. He might like to be reminded of what Mr. George Brown said no less than five years ago, at the time

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of the Conservative pay pause, because what he said then is equally relevant to what the noble Lord said just now. He said:
"What will all this achieve in the private sector? It will introduce friction between management and men where friction does not now exist. Even where industrial relations are good enough for management and workers to get on, because the Government have called upon the management to act differently and the management loyally does, friction will be produced in industrial relations where, hitherto, there has been none."—[OFFICIAL REPORT, Commons, Vol. 646, col. 620; 27/7/61.]
The noble Lord might like to study that, because it is one of the practical problems facing management, particularly where there are good relations and where the management would wish to co-operate also with the Government in a standstill.
Then there is the plight of the doctors, which will doubtless be debated on another occasion. There are such extraordinary situations as the decision made some time ago by the Birmingham Corporation that the raising of rents was to come into operation on Monday last to yield an extra £1½ million. They have been told not to do it, and the only alternative will be to put the burden, which will amount probably to an extra 7d. or 8d. in the rate poundage, on the ratepayers. At the same time in the White Paper the local authorities are being told not to increase their rates. It does not make sense to tell an authority the size of Birmingham that they must find £1½million in economies. What is to give? Do the Government want them to step in and economise in the social services? Do they want Birmingham Corporation to cut down on schools, to stop giving school meals, to retrench on the services for the old folks and the welfare services? There are very few fields of public expenditure in which retrenchment can be made, even in a city the size of Birmingham, to the extent of £l½million. Or is the increase to be passed on to the ratepayers despite what is said in the White Paper?
Then there are some difficulties over dividends. The increased dividends which have been announced, are they to be allowed to go through where the shares have been traded in at prices resulting from the increased dividend already announced? There is the posi-
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tion of investment trusts where if they fail to distribute all but 15 per cent. of their gross income they lose their status as investment trusts. If they do not disburse they lose the status; if they do disburse they keep the status. They are in a difficulty either way. Of course, the Government have no doubt about their attitude to close companies, because even in this moment of trial and tribulation for the Government they have to insist that close companies will be exempt from dividend limitation so that they can be taxed up to the hilt, as usual. Nothing has been said about the dividend distribution policy of wholly-owned subsidiaries. Are they free to distribute to their parent companies or are they to be frozen? Far worse than any of the objections I have mentioned so far is that this puts an end to productivity agreements, which were beginning to show some signs of being adopted on a wide scale. We shall certainly return to this subject on the Committee stage of this Bill and we shall hope to get some clear guidance from Her Majesty's Government.
I have tried to be severely practical this afternoon in showing some of the many difficulties facing the country as a result of the introduction of the Government's present policy. It was unfortunate that they did not see the situation which was facing them a month or two earlier, because then they could have foreseen some of the difficulties, worked out their policies more clearly, and saved me the necessity for making such a lone speech this afternoon.
4.33 p.m.
LORD BYERS: My Lords, I shall attempt to follow the noble Lord, Lord Erroll of Hale, but I hope not to detain your Lordships for too long. I should like to congratulate the noble Lord, Lord Shepherd, on a very persuasive speech and also on the very handsome apology for this measure which he has put forward, but I do not think it helps the House to remind us of the Selwyn Lloyd proposals of 1961. It is no use the Government claiming to-day that they are no worse than the Tories were five years ago, because ever since the Selwyn Lloyd proposals we have had nothing but "Stop—Go". The noble Lord, Lord Erroll of Hale, described this as a" White Bill": I consider it to be a very peculiar

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hotch-potch measure and I think it will go down in history as "Shepherd's Parliamentary Pie". After all, it is full of left-overs and afterthoughts and it has certainly had a few changes since it first came on to the menu. It has also inaugurated an entirely new form of Parliamentary procedure which I have never known before. I am delighted to have the opportunity of amending a White Paper, but I never thought we should get that chance under any Government.
I think we have a right to protest not only at "Shepherd's Pie" but also at the sauce with which it has been served. On these Benches we feel fully justified in opposing this measure and certainly—and this is more important—in exposing the fallacy of the thinking behind it. Despite any of the noble Lord's pleas that we should be patriotic—indeed we are—and that we should support the national effort—indeed we always do—this must not stop us from being severely critical when we feel there is something important in the way of principle in the balance.
In the first place the measure destroys, or at least pushes into the background, many of the things for which many of us, on all sides of the House, including the Government, have been working and trying to lead public opinion for many years. Suddenly all this is reversed by the stroke of a sledge-hammer wielded by a few "high-level nuts" Suddenly, on July 20, we got this complete reversal. The very title of the measure gives away the retreat of the Government from all the fundamentals which we believe we need to get the economy right. In the Declaration of Intent, which was referred to by the noble Lord, Lord Erroll of Hale—a declaration on which Mr. George Brown set great store, and I think he did a remarkably good job to get it through—the reference was to "incomes, prices and productivity". Gradually throughout the period we have lost sight of the word "productivity" and we now get just the incomes and prices. True, there is a neat little essay tacked on to Schedule 2, as the noble Lord, Lord Erroll of Hale, said. Heaven knows how it got there! It says what we have said about the need for productivity and efficiency; but it does not seem to have any proper part in the Bill itself.
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In considering these proposals to-day I think we should measure them against what I, for one, certainly thought was common ground until July 20. The common ground was this: first of all, that it was vital to eliminate the adverse balance-of-payments position at the earliest possible moment. Indeed, it is now recognised that it is no use just getting it into balance; we must have a credit balance in the near future, and next year at the latest, if we are to pay back the loans which our indebtedness is mounting up. We were going to do this by reducing overseas expenditure and increasing exports, largely through greater efficiency and greater competitiveness, and we believe a great deal more has to be done than has been proposed so far by the Government themselves in reducing their own expenditure overseas. I hope this is only the beginning of the suggestions that were made by the Prime Minister in his Statement.
It was also common ground, as the noble Lord said, that wages were rising at too high a rate compared with productivity, and we all said that this required better management and the abolition of restrictive practices, the establishment of more productivity agreements (to which my noble friend Lord Reay referred in the debate on Monday). Also we wanted a drastic increase in competition. We have talked about the necessity for a real shake-out in the over manned industries and firms, especially, we have said, in the manufacturing field, where over manning reduces our overseas competitiveness. This was the picture on which I thought we were all agreed and for which I thought we were all striving.
Some of us believed that a measure of deflation was essential in order to get labour to move from the non-essential to the essential industries, and we stressed that it was necessary to have adequate retraining facilities provided. We hold the view, and I think it is commonly shared now, that unemployment must not be created as a means of instilling insecurity into a man's mind so that he dare not assert his rights. If it is created, it must be as a genuine means of getting more productive full employment, mobility of labour, and retraining to a higher standard. This general attitude was in fact founded, I thought, on the belief that the sort of growth in the

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economy which would be most likely to command confidence both at home and abroad was one based on a high wage/high efficiency/low cost per unit system. Then, in a sudden panic, most, if not all, of this has been thrown overboard.
LORD SHEPHERD: My Lords, the noble Lord is speaking as though this is a permanent measure. It is not. What I should like to put to the noble Lord—I do not want to make a long intervention—is whether the noble Lord thinks that in the present situation the standstill in wages was demanded of the situation?
LORD BYERS: If the noble Lord will let me complete another seven minutes he will get a full answer, because this is the burden of my case. Let us take the wage freeze itself. There is certainly a case for denying an increase in wages where no obvious increase in efficiency or production is to result. There is a case not just for a standstill but for denying an increase in wages in those circumstances. But this is a completely negative attitude, and it is most likely to result in a deafening explosion when you sound the "All clear" at the end of the standstill. It is no use, in my view, just having a standstill. You must use this time and you must use it to good advantage. This is the danger of getting the emphasis wrong. During this period we have got to redouble our efforts to bring in a whole new range of agreements which will give higher efficiency in return for higher pay.
This is where I answer the noble Lord. It is a question of emphasis. He has come to this House challenging us, "Do you believe in a standstill'?", and what he should have done, what the Prime Minister should have done, was to have said, "Look; we have got to get out of this mess and get the maximum number of agreements which give higher productivity and higher efficiency". This is an entirely different attitude, an entirely different emphasis. I believe you must have this emphasis, and you should not regard these productivity agreements, these efficiency agreements, as being an unfortunate exception to the policy which has been laid down or something which ought to be tolerated; it is something which ought to be positively encouraged, and it ought to be put at No. 1 priority. And there will
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be exceptional cases where scarcity or added social responsibility, like the case of the doctors, will have to be regarded as something to be met as part of a proper incomes policy. You just cannot keep people like that down for six months or twelve months. But again it should be part of a positive policy and not part of a wage freeze.
I believe also that the Government ought to give companies and organisations encouragement to adjust their wage and salary scales as they wish to do, provided the present total cash outlay on the pay-roll as a whole over the next six months is not exceeded. If those companies want to put wages up, then the number of employees will have to be reduced or the higher salaried executives and directors will have to take a cut. This would have quite an important effect; and this ought to be an option, an alternative. I believe that is a positive policy against over-manning. There would have to be certificates from the Board of Trade for exemption in the case of exports or useful expansions. This could be done—the machinery is there—and it might have a much better effect than a straight wage freeze.
I should certainly like to see that sort of pay-roll freeze applied to the Civil Service. I believe a lot of over-manning would be shaken out if numbers had to be reduced before salaries could be increased. I must say I thought the Government's defence of the increase in the number of civil servants to-day was a very poor one indeed. The fact remains that more people have gone into the Civil Service, and you put the bill at several thousands of pounds, at a time when we all believe you must keep costs down. Of course you must have civil servants, but what is the point of a wage freeze if the Government put up the pay-roll cost for a start?
I think the major problem of any wage freeze is what you do about the lower paid workers and people who are quite obviously out of line. I think we must use the next year to have a really good look at those workers whom we know to be out of line, the people who are as far out of line as the seamen were. It was a complete shock to many of us to discover how badly they compared with overseas workers of a similar

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type. I should like to see the time used to make a proper study to find whether we cannot get these categories up to their rightful level compared with others. Unless there is this sort of positive approach to an incomes policy I believe we are merely wasting the opportunity we shall have over the next few months.
I am afraid (and this is again where I take issue with the Government) they are already undermining the long-term prospects of growth by their short-term policy—and this again answers the noble Lord. Their policy, unfortunately, is sterile; it is unimaginative. A standstill is no substitute for a policy. Unless we get an expansionist and not a restrictionist attitude to this whole question of incomes it is going to do more harm to the long term as a result of applying the short-term measures. This is what worries me. And I say this because the incomes policy is being applied against an entirely new background of unthoughtout measures at which the Government's theoretical armchair economists seem to excel.
The incomes policy has been canvassed for many months. We have all said we are in favour of an incomes policy, but since then we have had the ludicrous selective employment tax which has come right over the industrial scene like a smokescreen in time of war. It is going to cause a great deal of confusion, and in its wake it is bound to bring both unemployment and an incentive to manpower hoarding. It is going to bring this manpower hoarding into the manufacturing industries. Look at the crazy situation in the motor-car industry. As soon as these new measures were announced, the comment which I heard reported on the B.B.C. was that "at all costs we will hang on to our labour force". And they will. They will keep their labour force intact even if it means short-time working, and the Government are going to pay them a premium under S.E.T. to do so. This is ludicrous; it is mad.
On top of that we have the further measures, another £500 million taken out of the economy in the way of demand. Add to that the fact that our best statistics are five months out of date, and you have a series of blunt instruments giving the economy such heavy knocks that you cannot tell whether the unemployment is
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going to be half-a-million or one million next Spring. I believe there is a very great danger that we are overdoing all this, and it is in fact going to be nearer the one million than the half-a-million. At the same time we have about 12,000 places for retraining individuals every year, against the prospect of unemployment of between half-a-million and one million. This is what worries me—the attitude and the approach to this problem. It is a very serious problem and can be looked at only on an overall basis.
If you want to restore confidence in the pound—and that really means confidence in the Government and in the people—there must be a change of attitude in the Cabinet. The Prime Minister is a great believer in "keeping the options open". I am more interested in the options he abandoned on being elected in 1964. He insisted on "no devaluation" and on "full employment." Both of these are very laudable indeed; but full employment was confused with full productive employment. In our society today you could have ten men fully employed if nine of them were getting £20 a week as supervisors to make sure the tenth man worked. That would be a sort of full employment. It would be a statistical triumph, and it would not have been necessary for Mr. George Brown to resign for a few hours. But there is all the difference in the world between full employment and full productive employment, and this is where I believe the confusion has been made.
We must not, in my view, abandon the concept of growth and greater efficiency and lull ourselves into the false belief that a six months standstill is going to achieve very much. If we do, we are asking for something which we on these Benches do not want to see—devaluation. This is where the Prime Minister can be defeated by his own policy of not insisting that the emphasis must be on productive efficiency and all that sort of thing, rather than on encouraging the approach of the standstill and freeze. On the question of prices, I believe it is much more important that you should have much more effective competition, that you should have a much tougher anti-trust, anti-monopoly policy. This is the sort of thing that will keep prices down, not playing King Canute through this sort of "White Bill."

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I believe you have to root out and outlaw the more obvious restrictive practices of workers. It is fairly clear, from all the Inquiries that have been held—and I congratulate the Government on the number they have started and completed—that there are obvious, recognisable restrictive practices which ought to be outlawed; and these can be outlawed or bought out by means of productivity agreements. I am frightened that we are going to jeopardise the possibility of doing this.
I believe it is far more important to try to establish three-year contracts between unions, workers and management, to make sure that we have stable growth instead of the sudden upward inflationary leaps in wages which you get when a wage freeze comes to an end. My fear is that the special sanctions which have been imported into Part IV of the Bill will undermine the confidence of the worker and the unions in their chance of getting a fair deal. My fear also is that the combination of the various blunt instruments will result in major unemployment, which will put back for years any chance of trying to get rid of restrictive practices. This has been said time and time again from these benches.
My fear also is that this will be just another sterile standstill, with but little real benefit at the end. There are no short cuts in this game. There is no gimmick that will work. A six months' wage freeze will not cure our adverse balance-of-payments position. But over several years if we get agreements on growth and efficiency and high wages, high wages for high productivity, then I think we have a chance of transforming the economy. I implore the Government to recognise that the wage freeze will not produce everything they think they can get out of it. They must not, and dare not, abandon the only concept that matters, which is a growing economy based on high efficiency and a fair day's pay for a fair day's work.
4.53 p.m.
LORD CITRINE: My Lords, almost a year ago to-day we had one of our several debates on the economic situation. In the course of that debate, I expressed some surprise at the criticism
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which was directed against the Government, which had been nine months in office, for not carrying out a programme set forth in its Election pledges. Most of us who have really tried to think into this problem—I am not patronising myself, I hope, by that expression—realise that this is a long-range policy, which will have to be operated in stages. It is not something that a whole series of expedients, without an ultimate policy, can put right.
In that sense I agree entirely with what was said by the noble Lord, Lord Byers. He put forward quite a number of proposals. But from The Times of August 1, I gathered that in the case of the Leader of the Liberal Party it was necessary to do three things:
"(1) to drop 'our ludicrous pretentions of being an independent world Power' "
How that would redeem this economic situation, I do not quite know.
"(2) to make decisive cuts in non-productive Government expenditure 'instead of increasing the number of civil servants'(3) to direct works councils or their equivalent to meet at once and put forward schemes for increased productivity in return for higher rewards.' "
I think I can claim, without egotism, as much experience of the operation of works councils, and bodies of that description, as any Member of this House, and I say that it is utter futility, within a few months, to expect any policies which are basically sound, and which could be so widespread, to bear seriously on our present economic position. I do not want it to be thought that I am against that kind of consultation. I am merely indicating how difficult it is to secure concrete and widespread results.
In an address I gave when we were discussing this in August last year, I quoted a statement of the Organisation for Economic Co-operation and Development. At page 26 of their Report they said:
"The new prices and incomes policy needs to be aimed not only at moderating the rise in costs and prices, but in creating a situation in which they rise markedly less rapidly than in the other main manufacturing countries. For this to be achieved, and to have results on the trends of exports and imports, many years of continued effort may be needed."
To my mind, that puts the matter in proportion—many years, not many

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months. I am quite certain that, whatever Government had to face this problem, they would subscribe to that statement; that a whole series of measures and consecutive acts, not necessarily in Parliament, but in the realm of industry, would have to be employed to contribute effectively to restoring our economic prosperity.
I gather that it is assumed widely that this is a crisis of confidence. I heard last night, as many other noble Lords may have done, a Swiss banker being interrogated by a B.B.C. interviewer. It was as plain as it could be, if this man was representing his colleagues properly, that bankers who are associated with that consortium which meets in Switzerland were looking with vital interest to what was going to be done in the realm of prices and incomes. So we cannot just dismiss this as something of no real importance, having no ultimate bearing on the policies which will have to be worked out subsequently.
How do you create confidence? Do you create it by telling the world that you have no confidence in the Government of the day? I do not know whether I am in order in referring to this, but it is reported in the Press. Mr. Heath moved a Motion of No Confidence in the Government. According to The Times he was succeeded by Mr. Macleod, who said that the Government's policy was "lunacy and incoherent". Then, in a somewhat more moderate tone and with the more restrained language that we are accustomed to hearing from him, the noble Lord the Leader of the Opposition in this House took much the same line. He said that the Government were lacking in judgment and competence. He said that there was a lack of confidence to see their measures through. Think of that! The world has been told by a responsible Leader of the Opposition here that the Government lack the determination to see their measures through. If anything can create lack of confidence in the measures that are being taken, it is a sentence of that kind. I should doubt greatly whether that kind of thing increases confidence in any part of the world. In speeches of this kind, the world is being told, by informed people who are living in a British environment and who are familiar with its various aspects, "Do not trust this Government.
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We have no confidence in them, and we can hardly expect you to have any."
I cannot dismiss that sort of language as just Party poppycock. I know that politics is a curious game, and that a great deal of personal sincerity which exists between Members is vitiated when they get into the debating Chamber. I know that quite well. While in this country people who are familiar with the behaviour of Party politicians might dismiss it lightly, I am afraid that that is not the interpretation which is likely to be placed upon these statements in world circles.
LORD CONESFORD: My Lords, I wonder whether I might interrupt the noble Lord to say this. I listen, as I always do, with the greatest interest to what the noble Lord says, but, if we honestly believe that the Government are incompetent, does he seriously suggest that we should not say so? Let me give him one simple example. If the Conservative and Liberal Benches are convinced that the selective employment tax is preventing our recovery, are we not entitled to say that the Government are incompetent in putting that forward?
LORD CITRINE: I should say not. I should say that where there is a critical situation such as exists to-day, wise people would keep that kind of sentiment out of public consideration. Just think of the alternative. There is no likelihood, so far as I can foresee, of the present Government being replaced at an early date by any of the other Parties in this country.
LORD CONESFORD: But is there no prospect that they themselves may come to the conclusion that the selective employment tax negatives our recovery? After all, those arguments have been put forward as much by their own supporters as from the Liberal and Conservative Benches.
LORD CITRINE: We are not at the moment discussing the selective employment tax; that can be argued on its merits when it comes to this House. What I am trying to say is that there is no doubt whatever that this Government are in office and are responsible for the policies which they put forward, and they are unlikely to be succeeded by another

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Government within any short, foresee-able period. Therefore, it is wrong to seek to destroy confidence in the Government, as I say is being done. Criticism is a different matter, but to impute to the Government incompetence and to say that they have not the will-power to see through their policies and that sort of thing is highly dangerous. Many times in my trade union life I have kept silent in public and have not said the things I should have liked to say because of the broad issues that were involved. I thought Members of this House would at least be familiar with that kind of conduct.
A policy has been developing over the last twenty years which has sought to curb inflation, and to date we have failed. Certainly on occasions there have been attempts to capitalise, not on the inflation itself, but on the apparent and superficial results stemming from it. Some of us well remember a General Election in which we saw posters saying, "You never had it so good", at a time when the Government must have known that we were moving all the time into deeper inflation and that our serious economic position was becoming worse.
I remember in 1957 attending a meeting of the National Advisory Council on Productivity in Industry. We were then told by the Conservative Chancellor of the Exchequer, Mr. Thorne croft, who made a most thoughtful and complete analysis of our economic situation, that we were paying ourselves £900 million too much—in other words, more than we were earning. I say that that has been going on ever since. If I were seeking to make Party capital, I should ask the question, "What Government was then in power, and what policy did they put forward other than the expedience of the "Stop" and "Go" methods? I am not dissenting in any way from attempts which have been made in this respect, and I have all along expressed myself, both in this House and elsewhere, on the desirability of restraint in the matter of increased incomes. All of us hate compulsion, no matter what form it takes. But can we honestly believe that the voluntary method of dealing with the situation of prices and incomes has succeeded? Is there any evidence of that? I do not know it.
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In the trade union movement wage applications have gone in year by year, quite contrary to the normal process of collective bargaining which, in pre-war days and throughout my trade union life, meant a period of agreement between the parties that they would not change the conditions one way or the other either by depressing wages or by increasing them. It cannot be argued that a policy which year by year means that income is raised without any kind of regard being paid to external circumstances, whether it applies to the trade unions or anybody else, is correct. Nor can it be argued that such a policy can last. Can it be any contribution towards remedying our present situation? The trade unions had a very strong objection to being singled out, as they thought they were for treatment in respect of restraint in wage application. They said that it should be applied to the whole community. That is precisely what is proposed in the memorandum which we have before us. So, for the first time, we have something approaching equality of sacrifice in order to avoid excessive increases in incomes.
I want to apply myself mainly to Part IV of the measure which is before us, the standstill on prices and incomes. As I have said, the moral aspect of this matter has been met by extending similar treatment to all forms of income, and to prices as well. We are told that there is to be a six months' standstill, and that then for a further period of six months there will be severe restraint. What real hardship is that? If the cost of living rose steeply or something of that kind one could understand it, but there is no evidence that that is likely to take place. So I ask myself, what is wrong with all of us being a little patient and waiting so as to give the Government time for their measures to deal with this very critical situation to work out?
I know very well in the trade union movement the resistance to proposals for restraint. Probably its outstanding protagonist is Mr. Frank Cousins. I worked with Mr. Frank Cousins in a rather remote position and I know of his activities inside the trade union movement. He is a capable man who in many respects has great moral courage; but I am sorry to say that his actions in this sphere do not appear to me to be in the least consistent. He was a member of the

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General Council of the T.U.C. when the Council gave a warning to trade unions generally that if the present policy were to continue without any restraint, with wages increasing year by year, the point would come when inflation would gain so greatly that the result would be serious unemployment. Immediately after that statement had been presented to he T.U.C. Mr. Cousins moved a resolution denouncing all restraint. I attended Congress and did not hear him dissent from the advice given by the T.U.C. to its individual unions—he may have dissented, but if he did I am not conscious of it. I am very conscious of his subsequent actions.
I cannot understand the policy which is involved in his alternative. He says that what we want is more production. Of course we do, as everybody would agree. But increased production does not come overnight; it takes time. It needs not only more initiative, perhaps more energy, on the part of working people and management, but also great amounts of capital equipment which cannot be obtained just off the hook. It takes time to do these things. And I should have thought, if Mr. Frank Cousins ties his doctrine to increased production, and if he really has faith that that production will come, that he should wait until the results have been achieved and then put in his claims for increased wages. What he is telling his members, of course, is not, "Work harder in the physical sense" but, perhaps, "Work more efficiently".
What of the meantime? I am speaking for myself, and I represent nobody but myself, but had I any part in the discussions of the trade union movement I should be strongly in favour of the standstill and the restraint provided in the measure which the Government have put before us. I quite understand the view of those people—the noble Lord, Lord Byers, for instance—who talk about marginal cases, and say that some cases of real hardship will be involved if agreements already concluded are not implemented within this standstill period. I understand, also, that there may be many cases where people are lowly paid, and that the standstill will bear more hardly upon them. But I would say this. It would not tax the ingenuity of trade union officials to discover that their members were all under-paid, and it would not be in the least difficult to carry on a series
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of discussions, inconclusive in character, not merely for six months but for a good deal longer than that. So far as I know, there has never been a definition of what is an under-paid worker. We can all have our own conceptions, and rightly so, but until some action is taken to define it, and to see, indeed, where the greatest hardship lies, there will be endless confusion unless the cut and the standstill are clean and general.
I do not like compulsion. "Compulsion" means, in substance, throwing overboard for a time all the voluntary methods that we built up in the trade union movement over a hundred years. The employers—I think, universally—dislike compulsion. They want free bargaining between the trade unions, just as the trade unions want to do it without governmental interference, and that is a hurdle which must be cleared. There is intense opposition to what is regarded as the thin end of the wedge, and the setting of precedents which might be employed on other occasions and without the same necessities by subsequent Governments. I can understand all that, and I was really touched when I read about the discussions in another place, and about how intensively, how sincerely, certain Members—non-Labour Members—of Standing Committee B were really staggered at the prospect of interfering with the freedom of collective bargaining. It may be a rather late conversion, but it is encouraging just the same.
Nobody knows—there is no statistician in the world who can tell us—how deep a period of severe deflation will go. That is what made the Conservative Government reluctant. If it started on deflation, it did not know how much it would have to back up that initial deflation by subsequent measures. But does anyone doubt, in our present circumstances, that deflation in some degree must be the antidote to over-full employment? I should like to hear it argued that that is not so.
I do not believe—and I am sincerely sorry to say this as I do not want to antagonise anybody, particularly my trade union colleagues—that the voluntary method could succeed, particularly in the realm of prices, and incomes other than wages and salaries. It is a very ticklish job, and if the law fails to do it I do not know what other

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methods are likely to succeed. I know that in the trade union movement it cannot be claimed that anything more than a small amount of restraint has been exercised in regard to wage advances, and the movement is now divided. In a month's time at the Trades Union Congress possibly a third or even a half of the delegates will be opposed to this policy which the Government are putting forward. It could easily lead to a split in the trade union movement, and a serious one, too.
The Government do not face that sort of thing—and they have intimate knowledge of the trade union movement—unless they are convinced that this kind of measure is unavoidable. I say that the Government have shown great courage in doing this—great courage indeed. It is common knowledge that the Labour Party derives by far the greatest proportion of its funds from the trade unions. Its membership, too, comes mainly from the trade unions. Are the Government going to throw away that support and risk that division—financial and otherwise—without being absolutely certain that they have no practical alternative which can take effect in any reasonable time? So I should have thought that the Opposition would at least have had the—I will not say decency, but the friendliness to congratulate the Government on their courage, however much they may have thought they lacked of that competence which the Opposition display so amply when they are in power. By the way, I was very interested in the speech of the noble Lord, Lord Erroll of Hale. If I heard him rightly, it was a good, argumentative speech, although there was some arrièrepensée in it.
I have always opposed compulsion, but I feel that this is a time when we must choose. Twice, once when I was Secretary of the T.U.C. and once prior to that—during the First World War and during the Second World War—the trade union movement refused absolutely to assent to restraint in wages applications. Remember that, my Lords. We were engaged in war. The movement reached those conclusions, and it left the war immensely strengthened in numbers and influence, despite what may have appeared to be not the right policy in
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regard to wages. They would not assent to a standstill.
We are now engaged in a different kind of struggle, one which does not appeal so dramatically as do wars between nations, but which in its results could be quite as serious for the country as a whole. I hope I am not putting it too strongly when I say I believe that the problems in front of us involve the economic survival of this country as a first-class Power. In my 56th year of membership of a trade union, I now have to say how, at long last, I am convinced that there is no workable alternative, which is likely to prove successful in our present situation, to the compulsion which is envisaged in this Paper. Your Lordships will never be able to understand the measure of regret in my heart at making this statement.
5.19 p.m.
BARONESS EMMET OF AMBERLEY: My Lords, I hope that there is a representative of the B.B.C. present who realises that I am speaking from a Conservative Bench in front of the microphones. I say that because, when I went home last weekend, I found to my consternation that the village and neighbourhood thought I had joined the Liberal Benches.
I have read through the Prices and Incomes Bill and the White Paper, and have also had the advantage of hearing the very clear explanation of the noble Lord, Lord Shepherd, even if it sounded a trifle apologetic and, I thought, sorrowful. But I think it would be a waste of time to bog oneself down with detail in the ten or twelve minutes during which I hope to keep your Lordships' attention.
I am sorry that I cannot follow the noble Lord, Lord Citrine, who has just sat down, and refrain from using the word "incompetent". To bring in a Bill or a White Paper of this sort during the last week before the Summer Recess, and to try and pass it through as a sort of panic measure, I think is itself a sign of in competency in the running of the business of this country. It might be more helpful if I spent the few minutes I shall detain your Lordships in trying to examine this Bill from the point of view of general principle, and in that way, perhaps, help the ordinary man and woman in the street to understand—and

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they want to understand—what is going on.
I am especially concerned for our women, who are, of course, the day-to-day spenders of the family income. The family income will now be frozen by this Bill, but the cost of living will inevitably continue to rise. You cannot put a further tax on petrol, impose tighter restrictions on hire-purchase, and introduce a selective employment tax, without sending up costs, and the women housekeepers will want to know why they have been placed in this difficulty. They might be told by the noble Lord, Lord Shepherd, that they are suffering from a new infectious disease called fluctuating instability—and I hope they will appreciate how dangerous a disease that is.
Why have we got new taxes and restrictions? Why has the country had to borrow such massive amounts of money from many different countries? Why are the Government to borrow from charities, through the selective employment tax, without paying any interest? Why have the wonderful time and the scientific age, which we were promised by the Socialist Government at the last Election, not arrived after two years, or are not even in sight? Why have we to go into a depressing refrigerator in the middle of summer for at least twelve months, and with very little hope of a thaw at the end of it? Why is there not even a glimmer of light at the end of the tunnel, and nothing for the young to look forward to—or, for that matter, the older generation, either? These, my Lords, are the simple, straightforward questions that ordinary folk will ask during the next few months and, without going through the intricacies of the Bill which the Government are trying to rush through, I should like to give the ordinary folk a straightforward and simple answer, although I am afraid it may not meet with the approval of the noble Lord, Lord Citrine.
The simple, straightforward answer is that the Government are incompetent to govern this country and to get us out of our present difficulties, and that we have a Prime Minister who appears neither to mean what he says nor to say what he means. Nobody knows whether the First Secretary, the Chancellor of the Exchequer or the Foreign Secretary are still in charge of their Departments, or
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whether it is the Prime Minister and, when he is away, a clutch of miscellaneous financial advisers. Is it not a farce—indeed, a humiliation—to read in the Press this morning (and I read five newspapers) that not one of them believes the truth of our gold reserve figures?
LORD COHEN OF BRIGHTON: They were Tory papers.
BARONESS EMMET OF AMBERLEY: I read five papers. I generally read three, but I bought two more this morning. I am sorry to be, perhaps, discourteous in this very courteous House, but the ordinary folk of this country will be hit very hard, and I think it is time that the Opposition spoke up for them in this House as well, which may be the last defence of the liberty of the individual. Now the leaders of the present Government have talked in a sneering way of thirteen wasted Conservative years.
SEVERAL NOBLE LORDS: Hear, hear!
BARONESS EMMET OF AMBERLEY: But wait a minute! I think that, by the end of 1966, the people of this country will look back on those years after the war, when the country pulled itself up by its own endeavours, as a time when they did "have it good", when the houses were going up, and when the pensions kept ahead of the cost of living. And I think this also needs to be said: either we believe in private enterprise, profit, progress and individual liberty to the maximum possible in our Island, or we believe in Socialism, central control and Government interference everywhere, all the time, leading to a form of communist regime. We cannot have it both ways. If we try to have it both ways, we end in total paralysis, which is what is happening in our country at the present moment.
At the moment, we have a Socialist Government imposing more and more restrictions and controls, an example of which is this Bill, which, moreover, is leading to a Ministerial dictatorship. We have a Socialist Government who have lost the confidence even of Socialist Governments abroad, and whose credit here at home is evaporating very fast. And, my Lords, credit, which is what we need, will not be restored by the Prices and Incomes Bill; it will be restored only when the Government get out. As everyone knows, credit goes to those who

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give proof of honesty of character and intention, because this inspires trust and hopefulness. A country like ours, as the noble Lord, Lord Shepherd, should know, lives on business and trade, and we are one of the world's bankers. If our credit goes, we will founder, and we shall no longer be either a trading or a banking nation. A Government who are out to restrict personal liberty, who abhor profit, and who like to run nationalised institutions at a loss, are no good to us: and, surely, it is clear as daylight that you can only run a business either at a profit or at a loss—even the Russians have discovered that. At the present moment, we are sliding down a slippery slope, without having learnt that lesson from them.
What is more, my Lords, there is no reason for it. I believe in the great genius of the British people, and from the Christian Science Monitor of July 19, I have evidence that other people do, too. This article says that the spark has not gone out of this country. It says:
"The first-ever display of Britain's new invention, the hovercraft, attracted 30,000 people—5,000 from overseas.…
"A revolution has taken place in the sheet-glass industry following a British firm's discovery in 1959 of the 'float' process.
"British designers have a world lead in vertical take-off aircraft. British blind-landing systems are used across the world.…
"Britain's atomic-power stations have so far generated more electricity than those of the rest of the world.…"
and so on, and so on. We have so much to be proud of; we have so much genius in this country. We have the brains that the Americans come and take away. What the country needs now is not restriction or freezing: what it needs is encouragement. It wants something to work and to fight for—and to win.
5.30 p.m.
LORD KAHN: My Lords, speaking in your Lordships' House in the debate on the Economic Situation last Thursday, the noble Lord the Leader of the Opposition said:
"There is still a considerable doubt about the Government's intention on the wage freeze,"
After referring to a report of what may have been said a few days earlier at a meeting in The Hague, the noble Lord
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went on to indicate that any suggestion that
"the financial measures, taken by themselves, without the wage freeze, were enough to rectify the position [was] going to puzzle, and indeed dismay, quite a number of people in this country as well as outside. One can hardly wonder at the doubts of some of our creditors."—[OFFICIAL REPORT, Vol. 276, No. 45, col. 927; 28/7/66.]
The view taken by the noble Lord the Leader of the Opposition is one which I should presume strongly to support. Although I did not touch on this subject in my own speech on Thursday, to some extent I shared the noble Lord's doubts about the firmness of purpose with which the Government would attack the problem of the standstill. I found myself in full agreement with the noble Lord about the importance attached by opinion abroad to the attack, and to its success in pressing home to the objective.
Since Thursday, my doubts about the seriousness of the Government's attack have been dispelled in spite of a passage in the speech made this afternoon by the noble Lord, Lord Shepherd, to which I will refer in one moment. Ambiguity of objective has been removed, and while the standstill must rely largely on voluntary response, the availability of statutory means of enforcement for use on suitable occasions to my mind will make all the difference to the success of the standstill policy.
But now I come to the noble Lord, Lord Shepherd, and to one point he made in the course of his extremely interesting and impressive speech. In referring to the proposed Bill, the noble Lord said that Part IV would come into force—if it is included in the Act when it gets on to the StatuteBook—if the need should arise. I should have thought that the need had already arisen. The Order bringing Part IV into operation calls for an affirmative confirmation by both Houses of Parliament within 28 days; and your Lordships are given to understand that Parliament is shortly about to go into a deep recess. I take it that it is not 28 days of Parliamentary time.
LORD SHEPHERD: My Lords, perhaps I could explain. There have been occasions, regrettably, when Parliament has been recalled. If it should become necessary, we will certainly recall Parliament to proceed with the Orders.
LORD KAHN: My Lords, I had that in mind; but I can think of nothing more calculated to disturb international confidence than the recall of Parliament for such a purpose—particularly if it indicated that once again a few weeks earlier the Government had failed to foresee a necessity which now led to the recall of Parliament. There is one other point. I think I must in passing draw attention to the question of the legal commitments of employers who have agreed, legally, to wage increases which, under the standstill, they are asked to postpone.
Much more important than this statutory question is the extent of the support which the Government are now to receive from Parliament, from the Trade Union Movement, from the Labour Party, from the employers' organisations and, most important of all, from the people of this country. In this connection, I would, with great respect and humility, pay my tribute to the notable contribution made a short time ago by the noble Lord, Lord Citrine. Coming back to the noble Lord the Leader of the Opposition, to be perfectly fair to him, in the quotations which I made from his speech he was, of course, referring to the wage freeze, and not to the prices freeze. But your Lordships do not need me to tell you that without a price standstill you cannot have a wages standstill.
If I may return for a moment to the question of overeas opinion, there is, of course, concern over the question of when this country will cease to be running a balance-of-payments deficit. Will it be by the middle of 1967, or perhaps later in 1967? But there is much more concern over the question to which the noble Lord, Lord Byers, referred: What happens after that? How rapidly will the country develop a substantial and reliable surplus on the balance of payments which will provide the basis for a progressive economic policy? That is why it is so important now to be thinking of what our competitive position is likely to be in one year or two years hence and thereafter. And it should be borne in mind in this connection, as has been indicated quite recently in this House, that in many competing countries wage costs are rising at the present time.
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I should like now to say a word on the subject of productivity agreements. Speaking in Monday's debate on the Economic Situation, some noble Lords expressed concern about the implications of a standstill for productivity agreements, and to-day the noble Lord, Lord Byers, spoke to the same effect. On Monday, the noble Earl, Lord Swinton, was particularly worried about this possible aspect of the standstill. This is not a subject on which it is wise to be dogmatic. But I cannot myself subscribe to the unqualified support of productivity agreements suggested by the noble Earl, Lord Swinton. My own view tends, perhaps, more towards that which may have been indicated in the same debate on Monday by the noble Lord, Lord Campbell of Eskan. I should make it clear that we are not discussing incentives to individual workers, or even incentives to teams of workers, to increase their output. What is here at issue is an agreement to raise wages for a whole group of workers, very often employed throughout an industry. This involves a certain danger of granting a wage increase, substantially in excess of the national norm, in consideration of an improvement which either would have come about anyway or, at least, should have come about anyway. We hear a great deal, quite rightly, about the evils of restrictive practices on the part of labour; but I feel myself some hesitation about the extent to which it is desirable to overcome them by this particular means. At the same time, I want to emphasise again that it is all a matter of degree, and I do not wish to appear to be dogmatic.
I should like to make one further point on this issue. If, in a particular occupation, such exceptional wage increases continue to be secured over any term of years, the wages paid in that occupation will rise completely out of line with wages paid in other comparable occupations. At some point there will arise an irresistible demand for a substantial rise of wages in those other comparable occupations, quite irrespective of the growth of productivity to which they may have contributed. This is the kind of thing which spells destruction to an incomes policy. Here I would refer to what the noble Lord, Lord Cooper of Stockton Heath, said about the wage situation in his most

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constructive speech in last Thursday's debate.
I am trying to confine myself to-day to questions arising from the proposed standstill, rather than discuss incomes policy at large. There is, however, the question whether the standstill in itself will naturally lead on to a more successful incomes policy thereafter. I would put this plea to the Government: that they should not assume that the standstill necessarily will—unless fruitful use is made of the breathing space to work out how incomes policy is to work in future. The standstill certainly will provide a useful base from which to make a new start. What we call the leapfrog effect, the competitive struggles of workers in each industry to keep up with workers in other industries, is perhaps the most important cause of the unduly rapid rise of wages in this country. It is bound up with the difficulty, indicated by the noble Lord, Lord Citrine, of defining what is meant by an underpaid worker. The break resulting from the standstill of the momentum of the leapfrog effect will certainly provide a wonderful opportunity for a fresh start.
Nevertheless, my professional colleague at the University of Bristol, Professor Tress, in the course of a personal statement issued on July 28 in his capacity as Chairman of the South Western Economic Planning Council, took the line that
"the wage freeze will make harder the establishment of the regular habits of an incomes policy".
I could not myself readily subscribe to that doctrine. But there is a great deal of sorting out of deferred wage claims which will have to be done in the second half of 1967, and I feel that a new look at incomes policy is called for.
My Lords, one factor to be taken more fully into account is the wage drift. The noble Lord, Lord Cooper of Stockton Heath, in his speech last Thursday stated that "the great mischief has been done by wage drift." [col. 1000]. I have informed your Lordships' House that I do not intend to pursue the general question of incomes policy to-day as opposed to the standstill; but the wage drift is bound to pull a little against the
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standstill as, in effect, the noble Lord, Lord Erroll of Hale, has pointed out.
The various factors which underlie the wage drift will respond to an easing of the labour market and to the change in the general climate of opinion which the standstill will engender. However, I have a feeling that the Government are inclined to overlook the extent to which wage increases take place otherwise than as a result of collective bargaining. Incomes policy has been bedevilled by the liberal use of cotton-wool in the drafting of policy statements. In the recent White Paper, Prices and Incomes Standstill, Cmnd. 3073, I detect only one clear use of cotton-wool. This occurs in paragraph 28. This paragraph is headed "Other forms of employment income", and it starts with the following words:
"Many individual salaries and other forms of remuneration, including that of company directors and executives, are fixed outside the normal process of collective bargaining; but it is intended that the same principles of standstill and restraint should apply to these as to other forms of income."
Then there is a suggestion that the new Companies Bill will provide for disclosure of the emoluments of directors and executives. I would suggest that the implication of that paragraph for wages would have been clearer if the word "wages" had been mentioned; and if indeed the implication for wages had been set out in a separate paragraph. In this respect I think that the Government's intentions would have been clarified and the chances of success somewhat improved.
This leads me on to warn the Government against stating their policy in a form which must inevitably result in some disappointment when the outcome is revealed in statistical form. There will be some drift during the standstill period: not perhaps very much. There are the wage increases of a considerable proportion of the labour force already negotiated which are to come into force in the first half of 1967. And there will be some further increases based on criteria about which discussions are still to take place during the standstill period. In the light of all this, I cannot help wondering in what sense it is stated in paragraph 25 of the White Paper, which I have just quoted, that
"for the time being the incomes norm must be regarded as zero".

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I see what the Government have in mind, but I think this clarity of purpose for which I am praising them would be more conspicuous if they were to relate that particular meaning of incomes norm to the meaning laid down in paragraph 11 of the White Paper on Prices and Incomes Policy issued in April, 1965—Cmnd. 2639.
My Lords, I have allowed myself to get bogged down on points of detail. It is, however, right to observe that whether it is incomes policy operating under normal conditions or whether it is a standstill, without attention to points of detail success is impossible. However, I wish in conclusion to reassert my belief that when a Government, faced with an emergency, have suddenly to decide on step which seem to be right, even though they are unpopular, and unpopular especially with their own supporters, such a Government, as the noble Lord, Lord Citrine, has so forcefully emphasised, deserve all the support that it may be possible to mobilise.
House adjourned during pleasure.
House resumed.

ROYAL COMMISSION
6.0 p.m.
The following Bills received the Royal Assent:
Finance,
Law Reform (Miscellaneous Provisions) (Scotland),
Ministry of Social Security,
Overseas Aid,
Malawi Republic,
Botswana Independence,
Lesotho Independence,
Post Office (Subway),
Ministry of Housing and Local Government Provisional Orders Confirmation (Cambridge, Reading and Walsall),
Ministry of Housing and Local Government Provisional Order Confirmation (West Kent Main Sewerage District),
Welsh Office Provisional Order Confirmation (Western Valleys (Monmouthshire) Sewerage Board),
Kent Quarter Sessions,
Bradford Cathedral and Churchyard,
Loughborough University of Technology,
University of Surrey,
Royal Albert Hall,
Mersey Docks and Harbour Board,
Scottish Union and National Insurance Company's,
British Waterways,
Huyton-with-Roby Urban District Council,
Exeter Corporation,
Barry Corporation,
British Railways,
Derby Churches (Saint Christopher's, Saint Peter's and Saint Paul's).
House adjourned during pleasure.
House resumed.

THE PRICES AND INCOMES POLICY
6.14 p.m.
Debate resumed.
THE EARL OF SELKIRK: My Lords, I hope your Lordships will not think it discourteous if I speak reasonably briefly this evening in view of the long list of speakers which we have. I listened with interest to the noble Lord, Lord Kahn. Indeed, it is the second time I have heard him in a week, and I feel sure we should all like to listen to him whenever he cares to talk to us. He has elicited an interesting fact from the Government, and that is we are likely to be recalled at some time, I take it, in September, in order to pass the resolutions under this White Paper. I hope we shall be told reasonably soon when that is likely to take place so that we may know.
I will not differ from the noble Lord, Lord Kahn—the Government have shown courage in producing this Bill. I only wish it had been preceded by a little more foresight, in which case so much

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courage would not have become necessary, and indeed if that had been the case we certainly should not have had this unprecedented form of dealing with legislation in which this important Bill will not be discussed on Second Reading in either House. It is perhaps a consolation to show the immense flexibility of our Constitution that we are able to do something of this character; it equally shows that it is possible to drive a horse and carriage through our Constitution if any Government wish to do so with a certain amount of resolution.
I came down to this House thinking we were in an extremely serious situation, but after listening to the noble Lord, Lord Shepherd, I really rather wondered where we stood. He never used the word "serious"; he rather spoke of this as a pretty routine piece of Socialist legislation and he assumed that it had a good deal of public support. I do not know whether this is true or not, but if it is there is really little else at the moment to be said. I noticed that the noble Lord, Lord Shepherd, spoke about the voluntary method, but the noble Lord, Lord Citrine, seems to have no doubt that compulsion is essential. I may be wrong in this, and I say it with hesitation, but I rather feel that a great number of people in this country are very mystified as to what is happening.
As most of us know, we have been under considerable economic difficulties for a couple of years and very few people have in fact felt the pressure at all. In a number of cases they are now going to feel a good deal of hardship, dependent on the circumstances. Many people have made arrangements resulting from adjustment of salaries, wages and other matters and they will feel this fairly keenly. I think a great many will feel that the Government could have made a bigger contribution themselves. The Chancellor of the Exchequer has at his disposal about £10,000 million and of that he is contributing, I believe, about 1·5 per cent.
I have a certain sympathy with what the noble Lord, Lord Citrine, said, that a good deal of the cut and thrust of debate, which of course is the commonplace and indeed the foundation on which Parliament conducts its affairs, does not really cut a great deal of ice outside this
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House, and I do not think much consolation is to be gained by mutual recrimination between Parties at the present time. I could wish the Government had a little more humility in what they are presenting. I am aware, of course, that it is extremely difficult to have humility when there is any form of Party political criticism.
I should like to ask one or two questions on how this Bill is expected to work. Frankly, I wish there was more evidence of acceptance of the importance of maintaining the value of money. I remember that many years ago the late Lord Beveridge called inflation "a highway robbery"; and we often hear thrown across the House comments on the dangers of cutting the social services. Of course, where you inflate the currency you do cut the social services. That is exactly what happens and it is no good pretending that anything else occurs. The noble Lord, Lord Kahn, mentioned the question of wages drift. As far as I can see, that is completely outside the scope of this Bill. I can see no way in which in fact this will be dealt with. Curiously enough, Mr. Cousins referred to it yesterday when he explained the extreme extent of wage drift and the great influence which it can have.
Can we be told, roughly, what the arrangements under this Bill will cost? Are we going to have price fixers all round the country? How many additional staff are going to be necessary in order to deal with this? Also, I am concerned with whether the Government may try to "pass the buck"(if I may use that expression) too much to the Prices and Incomes Board. I believe that Board has done a good job within its limits. I believe it can be a valuable adjuster but not a darn; it can be a weir to direct the water but not to stop it. If the Government try to pass too much to it I think it could destroy something which could be of very real value. I notice that apparently almost any Ministers can make a reference to the Prices and Incomes Board; in some cases they have to be associated with the Secretary of State. This suggests to me a tremendous number of possible sources of reference.
I would raise one further point. I have said something about the individual measures, and I have asked for information about how they will work. Can we have some assurance that this will not

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all happen again? Can we have some assurance that in point of fact we have reached a stage where we shall not go back on what has happened? I believe this is a watershed, and I believe things will never quite be the same as they were before July 20. I should like to have some recognition from the Government that that is so. I believe we suffer terribly in this country from an extraordinary insularity, thinking that we are the only country that suffers from economic problems. I have been in quite a number of countries, and hardly one is not suffering from some severe economic difficulty of one kind or another. We get so het up; we think the rest of the world is normal and we are the only abnormal one. We are not. Our problems are repeated all over the world.
A great deal of the language we are talking to-day about development of modern technology is very old. You can see these problems referred to by the Prince Consort; you can see them referred to by A. J. Balfour many years ago. This is a continuing process, and I believe we shall go on steadily until the end of the century.
I should like to know whether or not the Government believe we must have a balance in our affairs, a balance of money, a balance of material, a balance of manpower. I remember the first time I heard the words "full employment". At that time I was Commissioner for the Special Areas in Scotland. After finishing my annual report I went to Germany, and said, "You have no unemployment. Why haven't you?" I saw Dr. Schacht and I put that question to him. He said, "We have full employment", and I asked, "How?" He replied, "Because we have re-armed", and he went on to say, "If we go on re-arming we shall have inflation". That was the first time I had run into that problem. I believe that that, in a different way, is very much what we are suffering from now.
If I may take words used by the noble Earl, Lord Attlee, some sixteen years ago, he said very simply, "We are trying to do too much". I believe, with respect, that all Governments since the war have been trying to do too much. This is no sort of moral condemnation, because there are masses of things to do
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—housing, roads, schools, hospitals—and there will be many more things to do. But we cannot do more than we have the finance and materials and manpower to do, and if we try to do more we shall run into difficulties. In the debate last week the noble Earl, Lord Longford, said:
"There is no question of abandoning our conviction that you can plan constructive growth without destructive inflation."
I hope that does not mean that the noble Earl is going straight back to all the policies we have had in the last 21 months. I do really hope that in that time the noble Earl will have learned something of the problems which he had to face. I hope this sincerely, because I do not think we may have a chance of even getting out of the difficulties as we had during that period.
THE EARL OF LONGFORD: If I may interrupt the noble Earl, I do not know whether he heard the whole of my speech.
THE EARL OF SELKIRK: Yes I did.
THE EARL OF LONGFORD: I indicated that growth was no novelty. If we go back to Lord Balfour, I seem to remember he said, "The march of science should make a steady increase in the standard of life possible without any special ingenuity on the part of politicians"—something to that effect.
THE EARL OF SELKIRK: I am sure that is true. I made the point that there is nothing new, that this is a continuing process. What I am hoping is that the noble Earl will have learned something; the events of the last 21 months cannot be repeated and he has to learn something from that period. I was expressing the fear that when he said he was not abandoning his conviction he was merely going over the same ground again. I hope not. I believe many of us—not only on one side—will have to reassess our prejudices, our views, our desires. I hope the Government will be willing to listen to outsiders. The noble Earl spoke very warmly of Lord Robbin's speech last week. The noble Lord made a speech twelve months ago which was not very substantially different from the one he made last week. I did not notice that the Government took a great deal of notice of what he said then. I hope the Government will realise that the

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realities of economics cannot be disregarded.
We have in this country a quality of personnel and a quality of youth that is outstanding. What they want, if I may quote words frequently associated with the late President Kennedy, is a frontier to work to, an opportunity to show their quality. Quite frankly they show it in funny ways at the present time. I am afraid crime is one. But there is pop singing, association football; all these things are admirable, and they do them well. I think the young people of high quality we have to-day want an opening in which they can usefully and properly fulfil their ambitions and fulfil a useful service.
6.28 p.m.
BARONESS WOOTTON OF ABINGER: My Lords, I suppose it is inevitable that those of us who are sufficiently old to remember the crisis of 1931, and even perhaps the crisis of 1925, should be very strongly imbued with the feeling, "I have been here before". History never repeats itself exactly, but even if it does not repeat itself exactly there are, I think, still some lessons that we might learn from past experience. The first lesson that I should like to draw from the experience of those earlier crises is that subsequent comment on the measures that were taken to defeat them has on the whole been pretty critical subsequent comment on the measures of 1925 and of 1931 has, I think, done a great deal to induce a sense of proportion about the economic crises of those periods, which those who lived through them did not feel at the time.
Here I must express one great regret that I have, and that is that that distinguished economist the late Lord Keynes is not now living among us in the prime of life, for there is no one whose advice I would more gladly place at the disposal of Her Majesty's Government in present circumstances than that of the late Lord Keynes. But we hope that his mantel has descended on some of his successors. I say this because I think we need to keep a sense of proportion, and because, although there may be immediate great stresses, the underlying situation is not nearly as bad as it is painted. I think it is a little indicative of the state of mind of part of the Press, and perhaps
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to some extent the Party opposite, that unable to laugh off figures which are not too discouraging, they are reduced to saying the figures are not true.
I was greatly surprised to hear one of the speakers from the Benches opposite say, or imply, that belief in the Press came before belief in the official figures published by Her Majesty's Government. There is another lesson I think we can learn from the crisis of 1931. We have travelled a long way in thirty years. We are now making a tremendous hoo-ha and fuss because there is going to be a six months' freeze on incomes. In 1931 there was no question of a freeze on incomes; the only issue there was how much the cut which was made in incomes was to be. This is a most significant difference between the two situations. This situation, in which everybody now assumes that it is part of the order of nature that incomes should rise automatically year by year, come what may, is really quite a modern invention. I served in a university post for 17 years during which time I received one increment in salary. I do not know any contemporary lecturer who can say the same.
One consequence of this difference is, I think, most important. It is that because there are not any actual wage cuts and because there is not anything up to one million unemployed, it is extremely difficult to bring home to the ordinary people that any crisis exists at all. I beg Her Majesty's Government to give a great deal of thought to how they will present to the public the need to make the sacrifices which are now being demanded of them. It is not much use quoting balance-of-payments figures, because these have no meaning at all to the great bulk of the population. A much simpler and more direct exposition of what would happen if we do not take these measures is urgently called for. Nobody, I think, has ever tried to convey to the public at large what would be the consequences if these, or similar, measures were not enacted. I beg Her Majesty's Government to give a great deal more thought than has been given yet to the question of how this matter is to be presented to the ordinary public.
The noble Lord, Lord Erroll of Hale, will, I am sure, approve that I have got my priorities right, because I am going to address myself solely to the question

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of incomes and not to the question of prices. We are now faced with a six months' standstill, freeze, pay pause, stop—similar measures have had all these names in the past. It is said that it is to be applicable to all incomes. One of the difficulties about an incomes policy, and one which I think has never received sufficiently explicit attention, is that while it is fairly easy to put a stop or a freeze on incomes that are negotiated, or incomes that are consciously fixed, it is much more difficult to control incomes that are residual, and profit incomes are residual and never consciously fixed. I think a great deal more thought has to be put into the ways in which a wage policy can really be extended, to be in the full sense of the word an incomes policy, so that it covers incomes from profits and other forms of capital as well as incomes that are earned.
Here I am a little concerned at the tone of the various snowflakes in the snowstorm of White Papers and White Bills with which we have been inundated. I notice that in what I should like to call the "skinny White Paper", the one about the standstill, the language is much more moderate in relation to the control of dividends than it is in relation to the control of wages. All that is said is that the Government's fiscal measures should prevent a growth in aggregate profits, and that it is not expected (as though this was an autonomous event) that there will be any general increase in dividends. No restraints are there mentioned and there is no reference to incomes other than earned incomes in Part IV of the White Bill.
I am also a little puzzled—I hope that when the noble Earl comes to reply he will be able to clarify this for me—by Clause 12(7) of the White Bill, which describes how the capital of a company is to be arrived at for the purpose of relating the amount of the dividend to the share capital of the company. One of the difficulties of trying to control profit incomes is that while you can stop increases in dividends, if a company is doing well the only result is that the dividends that are not paid out go into the reserves, and the capital of the company may shortly be increased by bonus issues. It is not clear to me from Clause 12(7) whether it will not be possible for a company, by increasing its capital by
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bonus issues, to increase the amount which it may distribute in dividend without taking part in the "early warning" system.
That relates to this extremely difficult problem, both short term and long term, of how you are going to bring unearned incomes into the picture along with earned incomes. Now may I turn to the problem of earned incomes. I think it is regrettable that we are going to move into an age of an incomes and a wages policy by way of a sudden crisis and standstill. I agree with the noble Lord, Lord Kahn, that this is not the happiest introduction to the establishment of an incomes policy; but that is part of the price which we pay for not having established our incomes policy at an earlier stage. The immediate standstill with which we are faced is, of course, a makeshift. I think we all frankly see that it is bound to be inequitable. Anything that freezes the immediate situation is bound to be inequitable, because there are always some injustices which were in process of being put right. This is the price that we pay for a sudden emergency. We can defend it only as an emergency measure; but I hope that, in spite of this rather inauspicious introduction, we are now coming to the stage where we have an incomes policy that has come to stay, and that this is going to be the long-term and valuable result of the agonising period through which we are now passing.
I have never understood—I hope my trade union friends will forgive me if I say this—how in an economy which is largely planned, which is controlled in a great many details, in an economy in which you cannot put up a garden shed or a garage without official approval, still this vital question of what everybody is to earn is left to what I can only call the process of smash and grab. I have sometimes thought that when we outgrew believing in the divine right of Kings, we came to believe instead in the divine right of collective bargaining, or, if not in the divine right of collective bargaining, in the divine rightness of every collective bargaining.
I hope that now we are getting to the point at which we may outgrow that rather childish belief as well, because in the determination of wages even arbitrators in the past have proceeded on lines

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quite different from those which are used for arbitrations in other contexts. In other contexts, arbitrations or judicial decisions consist in applying known principles to contested cases. In the case of the determination of wages there have never been any known principles, and arbitrators have had to go on the plan of trying to find out from the two sides what is, so to speak, the minimum level of agreement. I believe that this is the traditional Chinese way of settling disputes. But it is not the way in which disputes are settled in the law courts or any judicial decisions are made in this country. In the determination of wage questions, arbitrators have acted rather like judges would act if they were required to dispense justice without the benefit of Statute or Case Law.
We have been creeping recently towards an incomes and wages policy. Eleven years ago, when I published a book urging that these topics should be tossed into the arena of political discussion, and that the decisions which emerged should be the responsibility of Government, I was led to believe that, in referring to an incomes or wages policy, I was using dirty words. Therefore, it is a great satisfaction that these words have now been scrubbed so clean that they can be printed on the titles of White Papers, both by the Party opposite and by the present Government. We have come a long way. It is a great satisfaction to see that the shadowy form of the public interest, which has always been present at collective bargains, is at last being clothed with flesh and blood. But deciding to have a policy is not the same thing as deciding what that policy is to be.
The next phase, during what we hope will be a breathing pause, is to decide what that policy is to be. The White Paper does not take us very far. The White Paper says that the criteria which are to be applied are to be much more stringent than those in the earlier White Paper. It also says that the norm is to be zero, instead of 3 to 3½per cent. These more stringent criteria are not disclosed, and are to be discussed with the two sides of industry. Your Lordships may agree that the criteria which are contained in the White Paper cover practically all the exceptions we are likely
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to want to make in any agreed norm, whether a norm of zero, or 3 or 5 per cent., or whatever it may be. As your Lordships know, there are four criteria. The first relates to productivity; the second to directing labour, the distribution of labour, in the national interest; the third to cases where a wage or salary is too low for a reasonable standard of living; and the fourth to cases where there is widespread recognition that people are being paid much less than others for comparable work.
What will happen is not that we shall have new criteria, but that the emphasis given to each of these four will differ. Presumably, much greater emphasis is now likely to be laid upon the second, which is the criterion that where it is essential in the national interest to secure a change in the distribution of manpower, a pay increase would be both necessary and effective to this purpose. I would say that this is the most difficult of all to accomplish. It is not too difficult to know whether people are worse paid than others in comparable work; nor is it difficult to know whether they are paid so little that their standards are disgracefully low; nor is it difficult to measure whether they are or are not increasing productivity. But it is extremely difficult to know whether changes in wage rates will effectively re-distribute labour. I hope that a great deal of arduous work will be put into examining how that second criterion can be effectively applied. Presumably, this is the criterion which will be given the greatest emphasis, but which in existing negotiations and wage fixing usually gets the scantest attention, and in which the statistical work is the least advanced.
I hope that we are arriving at a situation when certain things will happen. First of all, that any decisions about wages and salaries, whether negotiated freely without interference by Government or whether subject to statutory control, will be stated explicitly in terms of explicitly formulated criteria, when we shall know what we are doing because we give reasons for it and relate it to criteria which will have been expressly formulated by Government. I think that the Prices and Incomes Board has taken us a long way in that direction, and deserves a great deal of praise. For the first time the Prices and Incomes Board

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has referred in its decisions to the criteria contained in the White Paper. Although it has not always made perfectly clear how its decisions are related to these criteria, it has at least given them a weight which no wage-fixing body has attained.
I hope, too, that we are coming to a period when the sanctity of relativities will be destroyed. One of the things which have bedevilled the fixing of wages and salaries in the community is the belief that everybody must always bear the same relationship to everybody else as he did last year or the year before. These relativities are not rational—and how well we know it! They are the legacy of history, and are formed largely by three different influences. First of all, they are formed by the pull of demand and supply as recognised by economists; secondly, they are the result of variations in the bargaining strength of different organisations; and, thirdly, they are the result of social valuations, often unexpressed, but implicit in our way of life. If anybody doubts the influence of these social valuations, let him ask himself whether, if the fear of death was less lively, and the expectation of immortality more widely accepted, the relative salaries of the medical profession and the clergy would be what they are. I see no reason why a civilised and intelligent community should not be able deliberately to match the growth of its incomes to the pace of its economic development; nor why it should not be able to shape the pattern of income distribution to suit social and economic priorities which it has openly and deliberately accepted. I should have thought that the hard history of the last fifty years makes it absolutely imperative that that task should be undertaken.
6.48 p.m.
VISCOUNT YOUNGER OF LECKIE: My Lords, I am glad to find that the noble Lord, Lord Byers, in his forceful manner, has already said much of what I had intended to say about incomes policy. He put his finger on a fundamental weakness in the standstill proposals of the Government which they should consider most seriously. The excessive increase in incomes which is referred to is not the only symptom of the comparative failure of successive in-
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comes policies. At least as important is the failure of productivity to rise as it was expected to do. I would maintain that this failure is partly a natural consequence of the way in which we have tried to apply our incomes policy.
As long ago as March, 1964, I expressed the opinion in this House that the use of what was then called the guiding-light as a yardstick for individual wage or price awards was entirely inappropriate. The guiding-light is an average figure, a suitable tool for planners, for economists, and for the Government, but it is entirely unsuitable as a starting point for individual wage negotiations, for the reason that it tends to preserve the complete rigidity of the pattern of prices and incomes, which is the last thing we want.
Let me put it this way. Let us suppose that in the last two years everybody had received an annual increase in income of 3½per cent.—neither more nor less. I suggest to your Lordships that we should still have had an inflationary situation, because we should have done nothing, or nothing effective, to transfer resources from the unproductive to the productive industries, by making the productive industries more attractive to capital and labour than the unproductive ones. So that, so far as I am concerned, the reduction of the "norm" from 3½ per cent. to zero leaves me unmoved, and I hope that we shall not have another "norm".
But your Lordships will see that paragraph 2 of the White Paper calls for
"a breathing space of twelve months in which productivity can catch up with the excessive increases in incomes which have been taking place.">
I think we should ask ourselves: what prospect is there of this catching up taking place, when all we have in fact done is to exchange a rigid "norm" of 31 per cent. for a rigid "norm" of zero? I suggest that the chances of productivity catching up during the standstill, as it is at present designed, are also zero.
The proposals in the White Paper are drastic and, of course, inevitably, unpopular. I agree with the noble Lord, Lord Byers, and others, that we must make use of this opportunity not only to solve the immediate problem, but to try to get our incomes policy on to a new line which has more prospects of success than those

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which we have been following. I think that the Government should make a virtue of necessity and should try to make absolutely sure that, however difficult or unpopular the new criteria may be, this is the time to bring them in, when unpopular measures are already in train. I think that so far as the present standstill is concerned, something ought to be put into this Bill to do more to encourage productivity agreements. Of course, productivity agreements are wide-ranging, of a tremendous variety, but I think we have some experience of them now. There are one or two individual cases which noble Lords know about; and, also, the decisions of the Prices and Incomes Board are very well worth studying, and many of the principles involved are very clearly stated there.
Is it not the case that if we are to get any increase in productivity during this standstill period we must try to give some incentive? I suggest that we want, as I think the noble Lord, Lord Byers, said, not merely to permit applications for income increases on grounds of productivity—that is to say, wage increases which can be absorbed by productivity and are therefore not inflationary—but actively to encourage them. If we do that, then I think that industries and firms which have a potential for expansion will be able to push ahead with their plans and will be able to attract the additional labour and other resources which they require. It is true, of course, that those firms and industries which cannot meet that criterion, cannot absorb their incomes increases, must put up with the standstill. But that is the only way that I can see by which we have a hope of getting increased productivity without inflation.
It should be remembered that so far as the individual is concerned, he has several different ways by which he can better his position. As I think the noble Baroness, Lady Wootton of Abinger, indicated, it is not altogether reasonable to expect to sit in the same job year after year, doing it neither worse nor better, and to get an annual wage increase year after year for doing it. If we are going to make a success of this, the man who wants to get on must be prepared either to qualify himself for promotion or to move to a better-paid job, or to take part in a productivity agreement. These productivity
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agreements can, of course, be initiated from either side of industry, and if they were sufficiently well-publicised as the only way of getting wages up I think it might be surprising how many proposals came forward from the shop floor, through the shop stewards, and so to agreement with the management. But so long as a standstill in the stagnant industries—as one might call them—or the contracting industries is accompanied by a similar standstill in the growth industries, I do not think we shall get any increase in productivity which is worth while.
Of course, there are many implications of trying to encourage these productivity agreements. One of them is that it is not likely, in my opinion, that national negotiations will very often be able to produce agreements of this sort, for the simple reason that except perhaps in certain very homogeneous industries they will be carrying a great many passengers in their productivity agreements who cannot live up to the productivity requirements. It must he a necessary consequence of any policy of this sort that productivity agreements may well be on a single there are very few firms in this country where some form of productivity agreement, however modest, is not a possible way of improving the earnings of their employees.
There are obvious exceptions to this procedure. One cannot cope with the Government service and with other industries and services where productivity is not an appropriate yardstick. But that, I suppose, is a feature of every incomes policy, and I imagine that that will have to be dealt with, so long as an incomes policy lasts, by a special section of the Prices and Incomes Board to try to keep them in step.
Another incidental implication of productivity agreements on a smaller scale is that they would, I hope, considerably reduce wage drift, because, although it probably has many causes, I think wage drift is quite often caused because nationally-negotiated agreements covering a huge mass of heterogeneous firms inevitably tend to be agreed on the capacity of the average firm, or even of the weakest firm. Therefore they fail to

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take advantage of the productivity in the most progressive firms, and those firms naturally make their own "side-bets" with their employees. If productivity agreements could be designed on this fairly narrow basis of homogeneous firms, I think some, at least, of that wage drift would be elimited.
So, my Lords, I would make a plea to the Government to put some urgency into this matter of productivity agreements. I do not think we should wait six month, or any particular number of months. I think that encouragement should be given to everyone in industry to start thinking about this now, and to bring forward their proposals just has soon as they can. It is quite true that they will have to be audited: one cannot have people just promising productivity and then failing to produce it, which has quite often happened. One might even go the lengths of having a trial period, during which the arrangements were put in force but the incomes increase was not. You must make sure you are going to get your productivity. But I think the experience of the Prices and Incomes Board has shown us what a lot can be done and what a lot of case law can be built up to help you in reaching suitable criteria for this kind of operation.
Another reason why I think it is urgent to get started on this line is that not only are these agreements needed in themselves, but I hope they will provide a powerful incentive, both to managements and to workers, to improve the efficiency of their firms and to accept the redeployment of labour. These incentives are at present, I think, sadly lacking, but if they are called for now, and are called for with enthusiasm, I am sure they will sweeten the pill which is offered to us at present, and which offers us little more than a prospect of unrelieved stagnation.
7.2 p.m.
LORD WILLIAMSON: My Lords, I think that in this debate we are rather at an advantage, in that only recently have we concluded a two-day debate on the economic situation, during which many noble Lords who spoke quite unavoidably made reference to this question of the prices and incomes policy. I was able to listen to many of the noble Lords
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who took part in that debate, and I have also had the opportunity of reading the contributions of those I was unable to hear. As a result, I have become more convinced of the necessity for a prices and incomes policy if we are to have any possibility at all of stemming the pressure of inflation and of emerging successfully from the grave difficulties which now confront us.
During the short time that I have been privileged to be a Member of your Lordships'House—some four years—I have listened to a number of economic debates and have taken part in some of them myself, and never has it been disputed during those debates that, as a nation, we have been, as we are now, living above our income, sustained by borrowed resources, and that sooner or later we should be called upon to discharge our creditors and pay them off. That time has now arrived. In fact, it arrived some time ago, but so far our friends have bailed us out from time to time. But I am not quite sure that our kind friends have been acting in our best interests. I am sure they have been doing it from very good motives, but at some time or other we have got to face up to it ourselves.
All this, my Lords, is very humiliating. It seems to me that we have been on our knees with the begging bowl long enough—too long—and that the time has now come to end it, or, at least, to make a serious attempt to do so. I believe that, whatever measures may be necessary, no matter how uncomfortable, they should be taken, and that so long as they are fair and binding equitably on all sections of the population the country will respond. What the country is crying out for is leadership, courageous leadership—and that is what it has not had until now. With all the hullabaloo now going on in some quarters, one would imagine that we had been saddled with heavy and weighty sacrifices. The fact is that we are not being asked to make any sacrifices at all. All that the Government's policy is demanding of us is to carry on for some six or twelve months at our present levels of income, with prices, dividends and other forms of income pegged also. What hardship is there in that? We are not being asked to accept any reduction in our standards at all. Reductions would probably be justified, having regard to

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the situation we are in, but we are not being asked to accept any reduction at all. We are simply being asked to help, as we all have the right and duty to do, in order to get the economy on an even keel, to repay our creditors and get the country out of pawn. What a wonderful thing it would be if, after all these years of mess and muddle, it succeeded!
My Lords, I fear there is a climate of opinion in this country that believes in these matters of economic and financial difficulties. It is the Government's responsibility, whichever Government they may be, to solve the problems without too much disturbance of the even tenor of our ways. We must, not be disturbed. What these proposals will certainly do—and rightly so—is bring home to people that they themselves have social responsibilities and must behave accordingly. Furthermore, they will help to foster a realisation and acceptance of the fact that we are all in this together. I cannot understand the mentality that would put the nation at risk of complete financial collapse for the sake of an extra few miserable shillings a week, whether it be wages, salaries or dividends. There is one caveat, however, that I would enter, and it is this. I plead for the case of those who are lowly paid, and who ought to be getting a better deal than they are getting now in the matter of wages. I trust that the Minister here will make it known in the proper quarters that these lowly-paid workers ought to be the first to be released from the standstill—and at the earliest possible date.
I am sorry that the noble Lord, Lord Citrine, is not here, but he said that he had never been able to find out what a lowly-paid worker was. I shall try to tell the House, quite briefly. A lowly-paid worker is one of those who, in certain industries, is doing a very good job indeed but who is held down to the ordinary basic wage of something like £11 or £12 a week, out of which he has to pay his insurances and meet his other stoppages; so that, in the case of a married man with a family, he will probably take home something like £9 10s. or so, without any possibility of working overtime or of earning a bonus. There are a lot of those, and those are what I call lower-paid workers.
LORD KAHN: My Lords, as the noble Lord, Lord Citrine, is not here, would the noble Lord permit me to interrupt? If I remember aright, he was talking about the difficulty of defining the underpaid worker and not the lower-paid worker.
LORD WILLIAMSON: I do not know how to define an underpaid worker: I imagine he is one who is not getting the wages to which he is entitled. The simple fact is that, apart from the precarious position of the lower-paid, no one will suffer at all in the limited period of this six months of pegged prices and incomes. Surely the exercise of patience is a very small price to pay when we consider the real dangers that beset us and which may be closer than we think. I consider myself a democrat. I have always preferred—and do now prefer—the voluntary method to the compulsory; I have said so many times outside and inside this House. But until such time as democratic society is peopled by angels, there must be certain compulsions to curb the activities of the anti-social, the greedy and selfish; and, in times of serious difficulty, as now, this doctrine is essential to ensure the will of democratic Government.
My Lords, the proposed compulsions on wages and salaries may be new in this country, but they are not new in other parts of the world. I would remind my vociferous Left-wing friends that while these proposals are for a limited period of standstill, the so-called peoples' democracies have been operating them for years—and with severe penalties for those who dare oppose them. No one likes the exercise of these disciplines, but if there must be a temporary standstill on incomes—and I believe there should be—and if it cannot be successfully operated by voluntary means, then the Government have no option but to apply pressure.
Again, I am sorry that the noble Lord, Lord Erroll of Hale, is not in the House. I was amazed to hear him say (and I made a note of it) in the first part of his speech, when he was taking up some point with my noble friend Lord Shepherd, that in peace we should have the freedom to do what we like in accordance with our wishes and ambitions. For people to go around doing precisely what

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they liked was, I thought, the way to lose freedom, not to retain it. This is the basis of the argument in this House today. We are asking people to accept, and act upon, these restraints with a sense of responsibility in all matters.
I have had some fifty years' experience of trade unionism as a member of one of our greatest trade unions, which I was privileged for some years to lead. I always found that the ordinary trade union member was not so ill-informed and unknowledgeable as he is sometimes made out to be. He is an intelligent person. He knows in his heart that he cannot go on receiving a substantial increase every year without providing the means for it by increased production and increased productivity. There is a simple choice to be made by every wage-earner and salaried employee, and, if it comes to that, by every professional person. It is: "Do I prefer to stay where I am on my present income for six or twelve months, as my contribution towards rectifying our national difficulty; or do I prefer that the policy should continue of every man for himself, with the weakest to the wall, and thus to risk disaster to all the magnificent standards built up over the years, to risk massive unemployment and all its social consequences?" We had better sound the warning strong and loud; because this could happen. It has been said often enough, and clearly enough, that the world does not owe us a living any more. In my view the policy of every man for himself would be playing into the hands of those who believe that a good stiff dose of unemployment is the only sure corrective.
I will not get into an argument with my noble friend Lady Wootton of Abinger; but it is not so bad as "smash and grab". We have a good system of relationship in our joint industrial councils and in other joint negotiating bodies; but, as I have already said, it may be that the system we have—and which has not worked badly until recently—may have to be amended or altered. But it is not very long ago, in the 1930s, when work-people waited for two, three or four years for an increase—and then all they got was a farthing, or a halfpenny, or, at best, a penny an hour. Of course, we know that the corrective in those days was the two
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million unemployed—the figure at one stage reached, I think, nearly three million. We do not want to see those days again; I say that to all noble Lords opposite.
Some of those who denounce the Government's proposals are submitting as an alternative solution reliance on increasing productivity: in other words, as I understand it, that every body should be allowed to carry on substantially increasing their incomes, and set about improving productivity to pay for it. This, to me, does not seem very realistic, especially at this time of crisis. The more sensible policy seems to be to strive for improvement in productivity and to adjust wages and salaries according to the rate of progress. In any case, to rely on improving productivity is to rely on a short-term solution to our present difficulties.
It should be borne in mind also that the need for increased productivity is not something new. This was realised immediately after the Second World War when, in 1948, noble Lords will remember there was formed the Anglo-American Joint Council, of which I had the privilege to be a member and which did great work at that time in interchange 'visits to the United States. And noble Lords will remember that we sent from this country to the United States 60 joint teams from different industries. They came back and wrote independent reports for circulation throughout their industries. On the termination of the Anglo-American Council in 1952 there was formed the British Productivity Council, of which I was President in its second year, 1953–54, and over which the late Lord Bennett of Edgbaston presided in the following year. Lord Byers has just left the Chamber. He mentioned this matter. It has been going on for fourteen years. I wanted to say to my noble friend Lord Byers—if I may address him so—that if the British Productivity Council has not been 100 per cent. successful, it was because a lot of employers and trade unions were paying lip service to productivity and not giving it the backing that they ought to have done.
My Lords, I come to my concluding remarks. We all agree that increased productivity is essential to our progressive prosperity in these Islands

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but, as the noble Lord, Lord Citrine, said, it is not something which can happen overnight. It is a long-term matter and depends on many necessary readjustments in our methods of working, not least the abandonment of out-dated and restrictive practices in management, in professions and on the factory floor which impede our prosperity.
The powers now being sought in the Prices and Incomes Bill are temporary, and this is made perfectly clear in the White Paper, Cmnd 3073. If the provisions of the Bill are brought into operation no one knows whether they will succeed fully or partially, or not at all. All I would say in conclusion is that what we do know is that failure could result in our paying a very heavy price.
7.21 p.m.
VISCOUNT SIMON: My Lords, we are discussing a very heavy matter against a sombre background, and I think that all your Lordships will agree this is not an occasion for carping criticism, nor, if I may say so, for Party polemics. I should like to ask one question of the noble Earl who is to reply, of a somewhat political nature. It is: Do the Government believe that the economic situation of the country to-day is worse than it was when they first came to power 22 months ago? The noble Earl will appreciate that by asking that question from these Benches I am not implying in the least that, if the answer is, "Yes", the Government are accepting the blame; for, in my view, the management of the economy in an industrial society such as ours is far too complex a matter for any Government by themselves to control; and, indeed, there are many other forces at work all the time.
Successive Oppositions of either Party are much too apt to blame Governments when the economic climate turns sour, just as Governments of every colour are accustomed to claim the credit for achievements which, very often, are achievements made in spite of Governments rather than with their help. It is only the Government which can really assess the seriousness of the position. I take the view, expressed so movingly by the noble Lord, Lord Citrine, that when a Government of this known philosophy find themselves compelled to introduce
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an incomes and prices standstill we must assume—I hope that the Government will be able to confirm this—that the situation is indeed very serious and that they believe this to be the right policy at the moment to see us through the next six or twelve months.
I agree with the noble Lord, Lord Byers, that of course this is not a permanent policy, and cannot be, and that the way back to prosperity is through expansion and increased productivity, about which many noble Lords have said some very sensible things. But at the moment I take it that our situation is such that it is essential—and I will accept the view of the Government on this that it is essential—to apply an incomes and prices standstill. If that is so, I am sure that your Lordships will agree it is essential that it should succeed.
I pass over the curious remarks attributed to the Chancellor of the Exchequer the other day because I cannot believe either that he said what was attributed to him or, if he did, that he meant it. The White Paper makes clear that the Government regard this as an essential step and it must succeed if we are to get out of our immediate difficulties. In that case I agree with the noble Lord, Lord Kahn, that the Government should not shrink from imposing compulsion right away. Obviously they fear that the line may be breached, because they are providing themselves with reserve powers; but once the line is breached in one or two places, will it be possible to hold it even with compulsory powers? I should have thought the Government would be well advised—this would be my plea to them—when they get a Bill of this nature on the Statute Book forthwith to seek Orders in Council to bring parts II and IV into operation so that, at any rate, the machinery is there.
There is one other aspect about this matter to which I should like to call attention, because it has not been mentioned before. I think that one noble Lord said it was a curious kind of voluntary plan which said, "You will voluntarily do this—or else". But I want to think of the position of the people responsible for industrial negotiations under these conditions; the trade union leaders at different levels, on the one hand, and management at different levels, on the other.

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May I invite your Lordships to cast your minds back to the time of the last war and food rationing? At that time the common enemy was much easier to see than is the common enemy of our economic progress. The harsh necessity of having very little food was evident to all, yet no one would have thought of going to people and saying, "We are not going to introduce compulsion; your ration is two loaves of bread a week and that is all you are expected to eat". Yet, my Lords, that would have been much easier to put across than this, because not only was the objective much clearer in the minds of everyone, but people were asked only to restrict themselves. Here the great difficulty is that those who have to conduct these negotiations are conducting negotiations which will restrict the position of other people. I suggest that it is only a cynic who believes that it is easier to restrict someone else than to restrict oneself. So I feel, on those grounds also, that it would be far better were this policy made compulsory at an early date.
There is only one other matter to which I wish to refer. It is in the White Paper Prices and Incomes Standstill, paragraph 20. When a line is drawn, obviously there will be hard cases on each side, or rather, on the wrong side of it, and I think that all one can ask anybody to do is to draw the line in a logical position so that people in roughly the same circumstances receive roughly the same treatment. I am extremely doubtful about the wisdom—I would almost say the possibility—of a provision that agreements to increase pay which have been reached before July 20 and which are operative before July 20 are, nevertheless, to be subjected to the standstill if they have not in fact been implemented.
May I suggest a very simple case to your Lordships? Let us suppose that there is a firm which, quite properly, in the month of June negotiated with its staff and agreed to a 3 per cent. increase across the board for salaried and wages staffs operative from July. The wages staff will have received the increase for two weeks before July 20 and therefore they are in. But the salaried staff, because they do not get their increase until the end of July, will be out. My Lords, that seems to me utterly indefensible.
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There could be another case of two similar firms who have made what is perhaps a rather more complicated agreement and the details have to be worked out before the pay packets can be made up. One firm has a computer and is able to do this in two or three days and therefore the increases are made effective and actually paid from, let us say, July 5 or 6. The other firm, which does not possess a computer, has these things worked out by clerks, and two or three of the clerks are on holiday. The long and short of the matter is that the details have not been worked out, and so the increase has not been paid. Again, this seems to be an indefensible distinction and the line has been drawn in the wrong place.
I am not quite clear whether the Prices and Incomes Standstill Paper is not in itself embodied in what the noble Lord, Lord Erroll of Hale, called the White Bill, but if the principles are to be applied perhaps this will constitute Schedule 2. I suggest that the Government should look at this and see whether it is not making a tremendous amount of trouble for what I am sure will be a relatively small matter—though, if I am correctly informed, it affects doctors' pay. My Lords, I feel sure that these steps would not have been taken unless the Government had felt them to be necessary, and we all ought to try to stand behind them in making this an effective policy, but it would be easier if anomalies of this kind could first be undone.
7.31 p.m.
LORD WINDLESHAM: My Lords, the Command Paper on Prices and Incomes Standstill which was referred to by the Government Chief Whip and others is in fact the fourth to be introduced on the same subject in the last 18 months between February, 1965, and July, 1966. The decline and fall of the Government's hopes are rather poignantly recalled by the titles of these four White Papers. The first, your Lordships may recall, was published in February 1965, Machinery of Prices and Incomes Policy (Cmnd. 2577). This was concerned with the establishment of a Prices and Incomes Board. Then in April, 1965, there was Prices and Incomes Policy (Cmnd. 2639) which set out considerations for the guidance of employers, trade union leaders,

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manufacturers and also for the Prices and Incomes Board. That advice was based on the objectives contained in the Joint Statement of Intent on Prices, Productivity and Incomes. As the noble Lord, Lord Byers, remarked earlier in the debate, how far away that emphasis on productivity seems to-day! The third White Paper in November, 1965, showed a hardening—Prices and Incomes Policy: an "Early Warning" System (Cmnd. 2808). Then finally—desperately, last week came Prices and Incomes Standstill (Cmnd. 3073).
These four statements, all presented to Parliament by that unhappy figure, the First Secretary of State and Secretary of State for Economic Affairs, provide a sad commentary on the Government's economic management capabilities. As an example of snowballing of powers it is almost unique. I do not know whether it is more or less charitable to the Government to suggest that this was deliberate, or that there was no intention to escalate, but the situation just got out of their control.
Even if scrutiny is limited to prices and incomes, the Government's performance over the last three weeks has been extraordinary. Let me recap some of the highlights. On July 14, the Prime Minister announced that in addition to a rise in bank rate to 7 per cent., further measures would have to be taken, but he declined to say what those measures would be. On July 16 he went to Moscow, and The Times was surely right to comment, as it did in its leader on July 30:
"When the history of these summer days of 1966 comes to be written nothing will seem stranger than the fact that at a time of such acute domestic crisis the Prime Minister should have spent the better part of a week out of the country on irrelevant visits".
On July 19 Mr. Wilson returned, and the following day, July 20, he made his Statement on the economic crisis and the measures he proposed to meet it. What did he say in his Statement about prices and incomes, a Statement which was repeated in this House by the noble Earl, the Leader of the House? He said:
"The Government are now calling for a six-month standstill on wages, salaries and other types of income, followed by a further six months of severe restraint, and for a similar standstill on prices."—[OFFICIAL REPORT, Vol. 276 (No. 40), col. 453; 20/7/66.]
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Then followed two paragraphs dealing with definite commitments which had already been entered into and the implementation of which should be deferred for six months, and a reference to other types of money income, including dividends.
The Prime Minister went on to say:
"The Government similarly call for a twelve-month standstill on prices of all goods and services, except to the limited extent that increases are necessitated by increases in the cost of imported materials, by seasonal factors or by the action of the Government, for example, through increased taxation.
"It is not our intention to introduce elaborate statutory controls over incomes and prices. This is a situation in which the Government look with confidence to everyone concerned with these matters to act in accordance with the public interest."—[col. 454.]
What did this mean? Noble Lords might be forgiven for thinking that on an occasion of such importance the Prime Minister would have gone out of his way to make his policy clear, and would have had spokesmen standing by to clarify and explain, in reply to queries addressed to the Department of Economic Affairs, just what the Government had in mind. Not a tall. Even after the closest study of the oblique wording of the Statement, nobody could tell whether the price and income controls were to be voluntary or statutory. The Times reported on its news pages on July 21 that:
"Mr. Wilson's description of the incomes standstill. and the 12 month standstill on prices and services that will accompany it, raised more questions that it answered".
That was the comment of an experienced and impartial observer trying to understand and report what the Statement meant.
The most widely held view was that the wage and price freeze was to be voluntary. No less responsible a figure than Mr. George Woodcock, General Secretary of the T.U.C., when that same evening the following question was put to him:
"Did you get the impression that this is going to be an entirely voluntary wage freeze or is it going to be incorporated into some sort of Bill?"
replied:
"It must be voluntary. It can't he anything but voluntary. Indeed, not only must it be voluntary but to get off the ground at all, it must be very strongly supported by the

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trade union movement and indeed by everybody. You can't legislate in this field."
It is true there was a reference in the Prime Minister's Statement of July 20 to strengthening the provisions of the Prices and Incomes Bill, which at the start was confined to the early warning machinery, but that reference hardly suggested any sweeping new legislation, particularly in view of the Prime Minister's assurance, which the noble Earl the Leader of the House will recall as he read the Statement out in your Lordships' House, that:
"It is not our"—
the Government's—
"intention to introduce elaborate statutory controls over incomes and prices."—[OFFICIAL REPORT, Vol. 276 (No. 40), col. 454; 20/7/661
So, until last Friday, July 29, the Prime Minister having left the country once again in the intervening period, there was confusion as to what was intended.
Then came the fourth of the White Papers, the "Standstill" Paper, and it was found that, after all, despite what had been said in the Statement of July 20, the Government were taking powers which have been described as "sweeping and dictatorial". Some of your Lordships may wonder if the words "sweeping and dictatorial" are not too harsh, but they are chosen with care, not from those old bogeys, the Tory Press and the Tory commentators, but from what is—what shall I say?—the least hostile newspaper towards the Labour Party and the Labour Government. The Daily Mirror used those words on its front page on July 30. It seems to me that it is no exaggeration to use the word "dictatorial" of measures which override both the Common Law, for whatever reason, and set aside normal constitutional practice. These measures set aside contracts and other binding obligations; they require the shelving of wages arbitration awards and settlements; and they are incorporated in a new addition to a Bill that has already been given its Second Reading and is in Standing Committee in another place.
Who can doubt, who can seriously argue, that these measures do not go beyond what was contained in the Bill as debated on Second Reading in another place? In consequence, your Lordships are left debating, not a Bill (and the Government Chief Whip has not even suggested that it is a Bill), but a phoney Bill, a text, a constitutional oddity which
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has been issued by the Government so that the Members of your Lordships' House can have some idea of what it is that has been inserted into the Bill that is already in Standing Committee in another place. This devious and unorthodox procedure is treating Parliament with contempt. The Government are here, in both Houses, to answer for their actions and to explain their reasons.
THE EARL OF LONGFORD: My Lords, may I intervene at this point? The noble Lord is making an interesting speech from his own Front Bench. I understood that this procedure was agreed, although maybe reluctantly, through the usual channels. If it has been agreed through the usual channels, I hardly think it is right to say that this procedure treats the House with contempt.
LORD WINDLESHAM: The procedure seems extremely strange in the way in which it has been introduced.
THE EARL OF LONGFORD: The noble Lord used the word "contempt". I say that it is an agreed procedure. Perhaps the noble Lord the Leader of the Opposition will say whether it was agreed.
LORD CARRINGTON: My Lords, if I may intervene, indeed it was, because we had no option but to agree it. But the whole of the Government's management of their affairs in the last ten days has meant that this House has been treated with contempt.
LORD WINDLESHAM: The same point was made (and perhaps we could look at it now) in one of a series of leaders in The Times over the last few weeks, which have been thoughtful and profound. What The Times leader-writer said on August 1 was:
"The rights of the official Opposition and of private Members of Parliament are conferred for good reason: to protect the liberties of the people from arbitrary government and to allow the varied interests in the state to be heard. They are not less but more relevant when a Government is seeking exceptional powers in an atmosphere of crisis."
That was the comment, not of one of my noble friends in this House, or my honourable friends in another place, but of a Times leader. I should have thought it was an issue of principle, and one which might well be commented on in a leader of this sort.

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I have one final point which is at the root of all the Government's problems. It is something which I believe will destroy their prices and incomes policy and, in the end, destroy the Government itself. I refer to the Government's proven lack of ability to carry the people with them. There is not only, as some Labour supporters would like to imagine, a loss of confidence on the part of those mythical and much caricatured figures, the so-called capitalist bankers on the Continent of Europe. It is conscientious people in all Parties who have lost confidence in the Government. It is not just because of the incidence of the economic crisis, but because of its unnecessary severity, and, above all, the Government's admitted un-preparedness to meet it. And the Government have admitted this, or certain members of the Government have. For instance, Mr. Crossman. the Minister of Housing and Local Government, in a broadcast interview on July 20, said as follows:
"I think it is perfectly fair to say. as you always can after a crisis: 'Look: you should have seen this a long time earlier.' This did take us—let us be honest—by surprise in the last ten days."
The lack of ability to inspire confidence was demonstrated vividly after the Prime Minister's broadcast to the nation on July 20. He was immediately followed by a number of other public men, including the Leader of the Liberal Party, the General Secretary of the Trades Union Congress, the general secretary of a trade union, and a number of others. None of the three I have mentioned, Mr. Grimond, Mr. Woodcock or the trade union general secretary had any vested interest in opposing what the Prime Minister had asked for. I have left out the fact that there was also an Opposition spokesman present, because one might expect him to oppose what the Government had to say. But nevertheless all these three coming on immediately after the Prime Minister, expressed reservations, if not outright rejection: two out of the three expressed rejection, and one had severe reservations. Since then, we read that the TUC are unhappy about the incomes policy and that it may be defeated at the Trades Union Congress this autumn; and consequently, if it is, in all probability (such are the ways of the Labour Party Confer-
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ence) it is likely to be defeated by the Labour Party itself in October.
So, in conclusion, I would argue that this is hardly the stuff out of which calls for national unity are made. The plain fact is that the Government have not been able to command support. It is lack of confidence in the Government which has perpetuated the crisis, just as it was the Government's mishandling that deepened it. If this Government cannot gain the support and confidence of many more people and interests in the summer months, then it will soon be their duty to give way to a Government that can.
7.47 p.m.
BARONESS GAITSKELL: My Lords, I speak as a non-economist and with great diffidence on this subject, and I can only approach the measures set out in this Motion in a general way—not in the expert and brilliant way in which my noble friend Lady Wootton of Abinger approached it. The two-day economic debate was a curtain-raiser to this Motion. This standstill is the first step towards implementing measures to halt the recent steep economic dive in sterling, for reasons both beyond and within our control. The situation needed quick and urgent action and this is embodied in these measures.
Having a respect for your Lordships' House, I have been trying to learn what everybody wants to know about money. In recent weeks the welter of words that has poured out in the Press and in Hansard has been an education in itself, and has added up to a kind of "crammer" course, though the curricula in "crammer" establishments do not usually include as much sermonising as we have been subjected to. But I have found the quantity of information, opinion and advice instructive as well as confusing—but essential before considering this White Paper. Incidentally, I think I learned more from the brilliant speech of my noble friend Lady Wootton of Abinger than from anything else.
It seems that currency problems are as indivisible to-day as are many other things in this international world. For better or worse, the judgment of European bankers affects our lives. They are not always right, and we are not always wrong. Even in the overemotional climate of the last few weeks, this has been voiced. This thing called

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confidence is a wondrous thing—not purely scientific, not purely psychological, not even divinely inspired. We just have to play by the rules of Zurich. My noble friend Lord Snow, in his remarkable speech in the economic debate, stressed the financial handicap that a Socialist Government always encountered on taking office, whatever they do, and whatever measures they take. Conservatives always regard themselves, somehow, as the chosen people for managing money. I do not quite see why this is. They have not in this debate, nor even in the debate in the other place, done more than specify aims. We all want more production; we all want growth; we all want fewer restrictive practices. We really all do want these things. But I had not noticed, not even in the last speech by the noble Lord, Lord Windlesham, that any practical measures were put forward to achieve this. All these considerations of finance are highly complicated and difficult to communicate to the people, and I am in complete agreement with my noble friend Lady Wootton of Abinger when she says that not enough has been done about this, though as Alan Watkins, the political commentator in the Spectator, has said, putting our economic difficulties in excessively simple and pious terms is highly misleading.
It is against the backcloth of the dramatic events of the last few weeks that we are presented with the dramatic measures set out in this paper of amendments to the Prices and Incomes Bill. We have asked for a standstill and many noble Lords have spoken as if we were being asked to forfeit all our wages for a year. We are asked to make this standstill compulsory. I am not very clear how this is to be done. However, there are measures to make it statutory.
I should like briefly to consider the main arguments for putting the standstill into effect, and then the speed with which it was presented in Parliament and which has been an affront both to the other place and to this Chamber. Parliament is jealous of its constitutional rights, and the attacks on procedure by the Government are valid on political grounds but not on economic grounds at this moment. If the crisis is as severe as everyone makes out—and many noble Lords have spoken in this way—then something
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ought to be done immediately and quickly.
Imagine, my Lords, if these amendments took their leisurely course through Parliament, line by line, clause by clause, made more leisurely by the natural thirst of the Opposition for attack. Imagine if Members of Parliament had gone off on their holidays—is this the kind of behaviour that would impress the international banking community? Would this have helped to restore confidence in sterling? No, my Lords. Those bankers wanted a sign from us that we meant business. These amendments are urgent. They are more equitable than the measures taken by Mr. Selwyn Lloyd during his pay pause because they do not discriminate against employees in the public sector only; they are overall measures and they are temporary, for one year only, and the restrictions are there to help recovery and to achieve greater efficiency.
They have been attacked in our own Party because they will increase unemployment. I may say that any measures which proclaim this must always be abhorrent in the Labour Party, but we cannot have it both ways in our arguments. If, as many noble Lords have suggested, we have over-full employment, then I should hope that the real unemployment will not be as severe as the deflationary measures suggest. I have noticed that many of us talk, as I have said, as if we had been asked to forfeit our wages for a whole year, whereas in fact we are asked to stay as we are, and it is only the lower paid workers who have any excuse to grumble. Again, we cannot have it both ways in the argument. If we keep on telling ourselves that we are paying ourselves too much and living on borrowed money—and this has been the theme song throughout all the economic discussions—then a standstill for a year is not so great a sacrifice and is both salutary and necessary.
I believe we should not exaggerate the immediate sacrifice we are asked to make. Personally, I am slightly repelled by the comparison between our economic battles of 1966 and the hardships and sacrifices of 1940. I think this has an adverse effect on confidence. It is not "blood, sweat and tears" that are called for; only a bit more sweat.

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It is in this context that I was somewhat disappointed with the end of the speech of the noble Lord, Lord Reay, in the economic debate, and I am sorry he is not here at the moment. I followed his speeches with interest, particularly because he is young and he said he was speaking for youth. He said he expected two things to happen as a result of the way in which the Government were managing their economic affairs—from the mismanagement of our economic affairs, as he put it. I completely discount his suggestion that unconstitutional groups will begin to arise and flourish in this country as a result, but the noble Lord, Lord Reay, also threatened mass emigration by young skilled workers, young executives and technicians; men with capital and men without capital—a comprehensive list of the better paid people in this country.
Now, my Lords, I believe that one of the most precious freedoms in a democracy is the freedom to get out and leave the country, as I am never tired of telling my Soviet colleagues when I am at the United Nations. But this kind of threat of emigration uttered when things are not going too well in a country leads me to plagiarise a line from Lovelace, and I do not mean this in the least personally to the noble Lord, Lord Reay, himself:
"I could not love thee, dear so much, loved I not money more".
Finally, when those dazzling productivity figures are dangled before my eyes, showing Japan, the United States of America, West Germany, all ahead of us, I feel sad that we are bottom of the league among highly industrial nations. But, my Lords, there is a quality of life in this country which is unequalled and which will endure, so long as we can put our house in order and so long as the long-term financial difficulties are solved—a quality of life that is more tolerant and civilised than any in the world. For our size and capacity, we contribute more to the stability of the world than does any other country, even the United States of America.
We are very overstretched, and I commend to your Lordships the column in to-day's edition of the Guardian by Leonard Beaton on this subject. We need to look at our defence expenditure
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in depth, from every aspect, historic and economic. Meanwhile, these measures that we are discussing to-day, set out in the amendments to the Prices and Incomes Bill, though harsh and uncomfortable, can be borne with realism and stoicism. I believe that the prices and incomes policy is a right one, though it will take longer to be made to work properly than the Government at first envisaged. I think it is a really worthwhile measure, and the standstill completely relevant to our difficulties to-day.
7.59 p.m.
LORD REDMAYNE: My Lords, if I may say so, and with respect, I think that the noble Baroness, Lady Gaitskell, was over-modest in opening her speech. The one thing I quarrel with is that she used the phrase, "playing along with the rules of Zurich". It seems to me that all we play along with are the rules of a capitalist society, and so long as we remain a capitalist society we must abide by those rules. And the firstrule—and this applies both to nations and to people—is that we pay our way.
It has seemed to me that certain noble Lords to-night have been a little oversensitive about criticisms of a Government in trouble, perhaps notably the noble Lord, Lord Citrine (and I am sorry he is not in his place), who seemed to take great offence that members of the Opposition Party in another place should be so outspoken in their criticism. Certain noble Lords who were with me in another place in the last five years of Conservative Government will recollect that we were not without our troubles too, and will remember the fiendish glee with which the Opposition turned the knives in our wounds. But, if I may say so, for all the troubles that we had, we never at anytime sought so to bulldoze Parliament as this Government have done in these last few days in both Houses. What is interesting about this to me, as a student of politics, is that sooner or later in the life of any Government it becomes accident-prone. What is significant about the present situation is that this Government are suffering from that unhappy state, not after thirteen years, but after little more than thirteen months.
One point of detail about this White Paper is this. As I understand it,

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Schedule 2 to what is in fact the Bill reproduces (I think I am right in this) the White Paper, Cmnd. 2639 of April, 1965; and in fact that White Paper and Schedule 2 contain certain criteria as to price control, but make no reference at all to the fact that it has been said more recently that Government policy is that those who are in control of prices can take account of increases in taxation. So far as I can see, that does not appear in the White Paper in any place, and it seems to me that, when we come to our very abridged further stages of this Bill, this point must be attended to by the Government, and I hope very much that the noble Earl who is to wind up will to-night say there is no change in policy at all so far as that point is concerned.
LORD SHEPHERD: My Lords, if I may intervene, perhaps I might help the House. The statement the Prime Minister made was that, in regard to prices, increased costs that might arise from Government legislation and the like obviously would be a point to take into account where prices were raised.
LORD REDMAYNE: I thank the noble Lord. I am sure he will agree, if that is so—and I do not doubt that it is—we must have it written in, or at least we must not have something written in which does not say that, which is negative in its approach.
It seems to me, and I am very young in your Lordships' House, that these days, last week and this week and next week, the more we debate the more we debate the same thing, and I therefore do not apologise at all for referring back to the admirable speech of the noble Lord, Lord Beeching, on Monday. It was a speech of a man who had suffered much from these ills that beset us. In his previous appointment with the Railways Board he had sought to do a job which desperately needed to be done—and I hope there is really no argument about that anywhere—and it needed to be done not only in that field but in fact throughout the economy. I think he could not possibly have made that speech on Monday while he was still in that job. Therefore, we can be thankful—although I will not now go into the reason why this occurs—that he is free to make it. My only comment on it is that the noble Lord, possibly with great wisdom, because it
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might well have enabled him to get across his point more surely without criticism, pitched his norm on unemployment, which was 2 per cent., too low. I think he was probably wise to do it because he is a voice to whom people listen, but only will they listen if that voice is moderately spoken. I myself would say that possibly 2½ per cent., 2¾per cent., 3 per cent., is a more practicable figure.
He was careful to say, as any of us would say—I do ask the noble Lord to believe it—that he was just as well aware as anybody else of the horrors, and I mean horrors, of being unemployed for any great length of time. The noble Baroness, Lady Gaitskell, said that unemployment was abhorrent to the Labour Party. Of course it is to all of us, and I trust we shall not quarrel on that point. But the noble Lord, Lord Beeching, painted most vividly the much worse ills that follow from the debilitating effects of a permanent state of over-employment. As I say, I make no apology for referring back to that speech, because I believe it contained one of the greater wisdoms which everyone in this country, both individually and collectively, ought to take account of.
It is quite natural that this debate, as so many debates in this field, should centre on the strains and stresses of the economy as a whole, the need to get wages and production in balance as a whole in the economy. But I think it is wise to reflect, however, that this imbalance is not only a national matter; it is in fact precisely reflected in the personal habits of living of our people. Over-spending, or over-trading as it is called in commerce, has in fact become something of a national vice. If I may say so, this is shown very clearly by the experiences of those Londoners who have moved to overspill areas. In those areas they have no difficulty in finding work at wages comparable with the official London rates, but of course lessened by those premiums and bonuses over the official rates which have arisen from the extreme scarcity of labour in the London area itself. Let me say that those emigrés enjoy their surroundings and are particularly appreciative of the beneficial effect which those surroundings have on their children. But, nevertheless, coming from the London area, where take-home

1407
pay is very high indeed, they are used to a way of living which demands a minimum take-home pay of £20 a week.
I do not know whether your Lordships know this, but if you inquire into these matters in these overspill areas you will find that in countless cases men are working 50, 60, 70, even 90 hours a week to maintain the standards which they and their wives and their local Joneses demand. Yet, though they work these long hours—and in a funny sense, of course, they are sweated labour; sweated not by their employers but by their own ambitions—many will freely admit quietly if you talk to them that the pace at which they work during those hours would in fact be a disgrace in a better ordered society. There is no reflection in that on the men themselves.
I dislike people who say that the British working man is idle, but there are certain factors in our economic state to-day which make him idle. They are not of themselves lazy-minded men, but the fact is that the pressures of their social life, the way in which they must manage their own personal family economy, forces them into this habit of working over-long hours and of enduring those hours at the slowest pace which they can get away with, because that is what they are forced to do. The noble Lord, Lord Williamson, as I understand him, would say, "What hardship is there in that?" The hardships, of course, of the comparatively young in this particularly economic world are much more vital and vivid than the hardships of those of us who, fortunately, are old.
I heard my noble friend Lord Eccles make a most attractive plea the other day for a new radicalism. This was on the first day of the Economic Debate when, as I say, we were debating the same subject that we are to debate now for days. I would say only this, and again I make no apology for referring to that speech: without any question at all, that radicalism must infect all of us, through every level of our society, until we have learned to cut our coats more closely to the cloth of our productive capacity. Strangely enough, if only this was done as a national effort, I do not believe that the individual sacrifices
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need be so great, provided, as I say, the urge towards this new approach to the way in which we live was universal.
I wish to take up one point which was made by the noble Lord, Lord Shepherd, and reinforced by the noble Lord, Lord Williamson. Both noble Lords said that one of the advantages of this pay freeze would be that the lower paid worker would catch up. I think this is about the worst economic illusion with which we have been cursed in the last twenty years. It is vitally important, whether we have a wage freeze, or a stop, or a pause, or whether in due course, as one prays, the thing will open up again, that the differentials which skills command should still stay in the same proportion in the wage structure. What the lower paid need to catch up with, as, indeed, what the highly paid need to catch up with, are the inflated standards of life which have been forced on them. Whereas I, as a Conservative, am prepared to take some blame for that, I must say that this Government in two years is more blameworthy than was the Conservative Party in thirteen years.
The noble Lord, Lord Shepherd, made a peroration which was a clarion call to the nation. I am sorry that the noble Baroness, Lady Wootton of Abinger, is not in her place. She referred back to 1931, and said that the question then was not one of a standstill in earnings, but of how much the cut would be. I would say only this (and I think I should have said it as honestly if I had been on the Government side as I do now on the Opposition side), that in these circumstances, in this stringent situation, it is a great pity that Ministers did not set an example by accepting a cut in their own salaries. This is not a cheap point. Let us recollect that the salaries of Ministers and Members of Parliament are fixed only quite occasionally. When they are increased, they are increased quite generously at that point of time, because we who are in politics all know that it will be many years before they are increased again. Therefore, it is perfectly reasonable that, only two years after this increase, Ministers should have laid their heads on the block and accepted a cut as an example to the nation.
When this Government falls, and fall it will, I firmly believe—and this is not

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politics—that the solution to our problems lies in a striking reduction of direct taxation (or, shall I say, of taxation both central and local, because the local rate has just as big a part to play in this as direct taxation). I admit that, if we were going to do that, we should most certainly have to cut back some large parts of central and local expenditure.
In regard to this, I quarrel with my noble friend Lord Erroll of Hale, because it seemed to me that he was suggesting that such cuts could not be made. It is easy to say, "Well, we cannot cut Health, we cannot cut hospitals, we cannot cut schools, we cannot cut this or that". But it is better to cut them than to go even more swiftly downhill year by year. I believe that these cuts would not last long in those circumstances, for the increased production, the increased effort, and the increased zeal which would result from a policy of reduced taxation, would quickly restore the balance in terms of production.
As I understand it,the Chancellor of the Exchequer has admitted, in so many words, that he gambled in his Budget. This was a gamble in a losing battle. But reduction of direct taxation would be a gamble to win real reward in a new society, and it would win. I am quite sure that it would win if a Government have the courage to do it. The pity is that every fumbling day that passes by under this Administration will, in due course, make it harder to achieve.
The noble Lord, Lord Citrine, suggested that we thought the Government were incompetent. He was quite right in that. Also, with a shade of sarcasm which I thought was a little out of character in what was otherwise a most instructive and enjoyable speech, he suggested that at least we thought that they were not as competent as we were. The naked truth is that they are not as competent as we were; and the trouble, if I may say so without offence to noble Lords on the Front Bench opposite, is that everybody in Whitehall and elsewhere knows that this Government is not as competent as we were—that is, everyone except those who occupy the Front Benches of both Houses.
LORD SHEPHERD: My Lords, may I interrupt to say that I am really surprised
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at the noble Lord? He at least is one Chief Whip whose memory is remarkably short.
LORD REDMAYNE: My Lords, on the contrary. I have purposely stuck my neck out in this debate by saying things which, perhaps, in wisdom, I would not say. But what is the point of your Lordships' House if, having achieved the greater freedom of it, you cannot say these things? Since, as also on one previous occasion, I shall be quoted as saying that the Front Bench opposite have destroyed my peroration, I will conclude with only this: that the noble Baroness, Lady Emmet of Amberley, despaired that there was no glimmer at the end of the tunnel. What I am afraid of is that if this Government go on much longer, there will be no tunnel.
8.20 p.m.
LORD PARGITER: My Lords, having sat through the debate, and having listened with considerable care to the speeches that have been made, particularly by noble Lords on the other side of the House, what has struck me most about their speeches is the quite remarkable sterility of all they have said. I listened carefully for one glimmer of a suggestion of an alternative policy from the other side, something on the lines, "If we were in power, we would do this or that." I challenge the other side to say what they would do in the present circumstances other than what the Government are now doing. This is being presented to us at the moment as a crisis of confidence because of the incompetence of the present Government. Apparently, when the Tory Party went out of office with £800 million deficit on our visible balance of payments this was all right, there was no lack of confidence. It is possibly true that there was no lack of confidence at that point of time.
BARONESS EMMET OF AMBERLEY: The figure is £750 million, not £800 million.
LORD PARGITER: Well, there is not all that much between £750 million and £800 million; but I thank the noble Lady for that correction. At any rate, there was then apparently no crisis of confidence. We were then told that the position would be rectified by borrowing; and at that stage there was no difficulty about borrowing. I can understand why

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the crisis of confidence developed. The bankers of Britain and the international bankers have something in common. There is a bond of confidence between bankers as a body and, in the nature of things, bankers would have confidence in the Tory Party. I do not complain of this; I merely say that it is a factor to be recognised. However, must we always be bound by this sort of situation? Must we always be bound by the view that because the Tory Party enjoys the confidence of the bankers we must always have a Tory Government, and that if they are not the Government then we shall have an international crisis?
LORD REDMAYNE: My Lords, might I interrupt to say that the answer is that the Socialist Party should so conduct itself that it can create that same confidence. It is quite simple.
LORD PARGITER: That is not the answer. If that were the answer, then we should not have seen this Government immediately halving the deficit, as they did. But perhaps that was not good enough because it was a Labour Government that did it. Do not let us get carried up that particular lane, for it does not lead us very far.
LORD BYERS: My Lords, is this a private argument? Would the noble Lord not recall that there have been crises under both the other Parties over the past six years. This is what we are all fed up about.
LORD PARGITER: My Lords, if I might be permitted to develop my argument, I will deal with this question. The noble Lord was not in the House of Commons for the length of time which I spent there to see these crises developing over this period of time. It has been an interesting period to watch. During thirteen years of Tory rule we have had promises of "The sky's the limit" before the Election, and then afterwards have had restriction back again. This is a pretty general pattern of what has happened during those thirteen years. Again, the international bankers did not mind inflation and the attitude of "The sky's the limit" just before an Election, in the belief that the Tories would get back again and they were pretty certain they would continue their deflationary policy
1412
so as to enjoy the confidence of the bankers. I do not complain about it, but the other side must not come here in white sheets and talk about how good they are and how bad we are.
This crisis of confidence at present is not something which has happened suddenly. For very nearly half a century we have been living on our fat. During the latter half of the last century and continuing in this century we piled up enormous capital investments and were able to live on our fat. But sooner or later the chickens come home to roost. The fat does not last and you cannot keep on larding it on, although international financiers and monied interests in this country have hankered after the past. One of the causes of our troubles is that in trying to invest vast sums of money overseas in order to get some invisible return, that money has been lost to the productive capacity in this country. Had we paid more attention to the facts of life and set about putting our own productive capacity right in this country, so that we were able to pay our way through our visible exports, that return, in addition to our invisible trading, would have helped us to pay our debts. But we did not do that. As I have said, I have listened carefully for some alternative policy to be put up by the other side. The fact is that we are not going to get an alternative Government. In fact the Tories would not like to be in power at this particular point of time. They would like us to get out of trouble and will then talk about the wicked Socialists and how better they could run the country. They will highlight the difficulties without mentioning the achievements which will result from them.
I should like now to turn from the unhappy past to the future. I hope that in the future we shall see arising from the standstill a proper incomes and prices policy. If that does not happen then this period is utterly wasted. We must find some means of dealing with the situation for the future. It is no good damming the river and then releasing the flood: you are worse off than you were before. This is appreciated by the Government, and I hope that during this respite period we shall be able to lay down for the future precisely what is proposed to be done to get a more balanced idea of our economy.

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The catch phrase of the moment is greater productivity. When one asks people to define it so that it can be understood by the man on the factory floor, one finds that the majority of people in Parliament are remarkably ignorant about it. What we really want is a good, stable, basic wage, to come back to Lord Citrine's point about the underpaid person. On this point it will be difficult to have productivity agreements on a national basis, because of the unevenness of production and the unevenness of the whole process of manufacture. But what one can have on a national scale is productivity agreements to provide for increased wages and salaries within a particular factory or group of factories or even within an industry. One can calculate it and deal with the matter on that basis.
The important and fundamental point for the future is that productivity must precede increased wages and salaries. I am not thinking of the man on the shop floor. I am thinking of cases where we see directors' remuneration being increased in spite of a reduction in the earnings of the company. That sort of thing just will not do. All that is said about the worker promising to increase his productivity is not only applicable to the worker, but goes right through the scale. It is a hurdle which must be cleared and must be applicable at all levels. This is the advantage of a standstill.
I would echo some of the views which have already been expressed that the Government should now proceed with the necessary Orders, to ensure that the standstill will be effective, rather than to do so in a month or two and perhaps half way through the Recess bring Parliament back to approve those Orders. I consider that the effect of that procedure would be far worse than if the Orders were made now. The essential thing is for the Government to make the Orders so that they may have them in reserve. If the Orders were held in reserve, this would do nothing to undermine confidence, because the standstill would still be in operation. If the Orders are made, the chances are that they will not require to be used. In fact, the chances that they will require to be used may be less if the Orders are already made it might be in inverse ratio. I have taken up as much time as I propose to do, but I
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should like to hear from the other side some alternative constructive policy for the future of the country.
8.30 p.m.
LORD MILFORD: My Lords, I am absolutely against this Bill and, as a former speaker has said, I think this has been a game with both sides agreeing, and criticising one another purely on the surface. I am against the Bill because I am fairly certain that it will not solve the problem at all, because it is not even scratching at the cause of our problem. On the contrary, I am convinced that in the end it will make matters worse. It will create the danger of a major recession, and of mounting unemployment.
The Labour Government, which is based on the trade unions and the Labour Movement, have launched a campaign against the existing activities and practices of the trade unions, which is really the greatest attack since 1926, at the time of the General Strike under the Tories. But even then Baldwin did not dare to force cuts in real wages through legal action, which is what this White Paper means—because it will cut real wages and, as I believe, prices will go up. Certain things are bound to go up in price. We have heard already about the 100-odd groceries which are going up. Raw materials will go up, while the new taxes are bound to have an effect on prices. Some foods, affected by seasonal shortages, hire purchase, and some rents and rates will also go up. So, in fact, there will be an attack on real wages. No wonder that a large section of the trade unions and the Labour Movement is worried or in a ferment.
It is true that we have also been promised a dividend freeze, but I think that those of us who receive dividends can smile, because we know that we shall get our money in the end, if not next year. But that is not the case with the working class at all. Those who have had their wages frozen, and those who have legally, by agreement, won awards but are not to get them, will not see the whole six months' or a year's money ever again. There are the railway men, the bus drivers and the doctors. I know that something is happening about the doctors, but they will not receive the full amount that they were promised.
The trouble is that the Bill does not tackle the real causes, one of which is

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surely that we are over-spending abroad in our military expenditure. We are spending overseas £350 million to £400 million, and in another place last week, when I was listening to the Prime Minister's Statement on the causes of the crisis and the causes of our difficulties, I did not hear him mention this at all. It is true that we have been promised a cut of £100 million in overseas expenditure, but that is a mere fleabite; and I gather that there was to be a cut, anyway, before the crisis came. I feel, along with the Sunday Times, that in Washington the Prime Minister committed himself to foreign, defence and reserves policies far in excess of anything Britain has the economic strength to carry out. So that, whatever happens through this Bill, or the White Paper, in the next six months we are going to go on getting into the red the whole time.
By continuing our vast military obligations in Germany, the Middle East and East of Suez, all of which are militarily, morally and economically wrong, our economic freedom of action—which is the same as our political freedom—will always be very limited. We shall permanently be in deficit on our overseas account, always be exposed to violent fluctuations due to foreign financiers' doubts on how we are comporting ourselves. Unfortunately, because of these fluctuations and crises, we see again and again a Labour Government turning further and further away from Socialist ideas, which have been the dreams of so many of us in the past, and using classic Tory methods to try to solve their problems.
This Bill will not stop us from going in and out of crises. It is like plugging up a hole with very rotten material which will give way in the end. We all agree primarily on the importance of modernising industry and increasing economic efficiency and the last two Labour Governments were elected on this ticket. Yet we are having massive cuts to-day in our economic efficiency—roads, railways, airports and services, docks, gas, electricity, coal, the Post Office—just when we need real modernisation of these spheres. We are to have cuts amounting to £500 million on home productive enterprises financed by our own sterling, while only £100 million is to be saved on the
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non-productive sector of foreign commitments using mostly foreign currency. Surely, these proportions should at least be turned round the other way.
The other great factor which is the cause of all the difficulties at the moment, and on which this White Paper does not really touch, is the export of capital which is sorely needed to modernise our industries at home and to set up new enterprises. Unfortunately, British firms and financiers are investing abroad around £300 million which is urgently needed here, because they get greater profit from their investments abroad. This, along with our overseas military expenditure, amounts to the whole of the balance-of -payments gap. Surely, here is the answer. It is true that there is a tightening up—a wee one—on the export of capital, but it must be far more drastically curbed. It is becoming clearer and clearer, since the British Government are determined to base their policies, especially their foreign policy, alongside those of America, the Far East, Vietnam, NATO and all that, that these harsh measures in this Bill, and the speed with which they are being pushed through, derive from desires to please American big business and American financiers. This is why, when these measures have been put on the books so quickly, Mr. Wilson was able to get such tremendous praise in America a few days ago. Alas! these measures are the dream of every employer and businessman: "Cut real wages, freeze this, freeze that and your dividends will be all right." This Bill is a Bill which, first and foremost, hits the workers, the pensioners and the housewives. This is a Bill to create unemployment—admittedly so: unemployment, my Lords, with all its humiliation, degradation and demoralisation, in spite of what the noble Lord, Lord Beeching, said in this House last week. I am sorry that Lord Redmayne has gone.
Somebody referred to the slogan which the Tories used a few years back, "You've never had it so good". That could have been true if we had cut the image of ourselves as a huge world Power. Now the people of Britain are suffering cuts in real wages; they face a lower standard of living, and have colossal anxiety about the duration of their employment, with the horror that perhaps they will be out of work—and

1417
just because of a megalomaniac foreign policy, and kow-towing to foreign financiers. My Lords, what a madhouse! I do not happen to be an economist, but I have always been taught that to bring in a Bill to create unemployment in order to increase wealth and prosperity is absolute lunacy—out of Alice in Wonderland—and that is what we are doing.
The workers are slandered again and again, as they were by Members opposite just now, for not working hard enough; for not producing enough; for having too much money, et cetera; and the unions are under continued attack from the same sources. But it is not that side of industry which has got us in a mess, or which is at fault. Given modernised equipment and a modernised environment, the British workers would increase production enormously. But these proposals affecting home expenditure will impede all the modernisation that we need, and will make us less competitive in foreign markets.
Every one of us is concerned with the situation of this country, but there is a great volume of opinion which sees quite a different way of solving our problems. We plead that, first of all, we must slash our overseas military expenditure, not by a mere £100 million, but by £350 million or £400 million, which is now being poured down the drain. None of that expenditure is of any use to the British people here at all. Our whole foreign policy must be altered in the interests of the British people, not of the Americans. Secondly, we must stop British firms taking their money out of Britain for higher profits. That money is needed here now, and we should keep it here to modernise our industry. The wages freeze must be scrapped. Low purchasing power has always led to a slump. Instead of a wages freeze, keep up the purchasing power of the people, increase it by higher wages, and in this way spur on the introduction of improved production methods in industry.
8.44 p.m.
LORD COLLISON: My Lords, it is a matter of great regret to me that I have not been able to listen to the debate to-day. Your Lordships will be aware of my very great interest in this matter, and in the White Paper in particular. The
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hour is late, and one therefore has to be as brief as possible, but I should like to make it clear that, although as a member of the General Council of the T.U.C. I have been playing my part in the discussions which have been going on between ourselves and the First Secretary, and within the General Council itself, I am not attempting this evening, and should not wish to attempt, to represent the view of the T.U.C. Nor am I speaking as the general secretary of a trade union; I am speaking as a citizen, and the views I express are entirely my own. Unquestionably the nation is in dire straits. We face a crisis, and I think this crisis falls into two parts. The first is long-term, and it concerns us in the sense that we continue to pay ourselves more than we earn. This, of course, is incomes policy.
I think I should say that nearly two years ago I happened to be Chairman of the T.U.C., and I signed the Declaration of Intent on Productivity, Prices and Incomes. I want to assure this House that I did not have my tongue in my cheek when I signed that document. I was, of course, aware—and I have said this in many places—that one could not achieve an incomes policy overnight. Largely, I think it was a case of understanding and, if you like, of education. People have to learn that you cannot go on indefinitely paying yourself for more than you produce. People have to learn the simple economic fact that, to avoid inflation and inflationary pressure, you have to balance the gross national income against the gross national product. Therefore, I never expected a miracle overnight.
Nevertheless, I believe that the signing of that document, and its acceptance by the employers, the trade unions and the Government, marked an historic step in our economic and political thinking, because it showed for the first time—and this could not have happened two years ago, not even on the General Council—that people were beginning to think in more realistic terms, and it is the outcome of that thinking which, in the end, will produce the result that we want.
This is a matter of national concern. It is also a matter of individual concern to workpeople. I am a trade union secretary, and I have to negotiate wages on

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behalf of a large body of workpeople. My Lords, I am tired of going into my wages negotiating council knowing that, before I can make any real advance, I must get an increase in money terms which at least enables my people to catch up with the increased cost of living since we got our last settlement. I go in there knowing that if I get ten shillings its real worth is probably three shillings; and on occasions I come away with an award which I know does not mean a thing in terms of real improvement. No trade union leader wants that situation, and no worker, if he understands it, will want that situation either. It is this understanding, this very simple understanding, which will give power to this educational drive that we are making to get the idea of an incomes policy accepted. That is the first element in the situation. There is going to be no long-term solution of our problem until we get an incomes policy which is a practical thing, which is viable and which is really working.
But the immediate situation contains another element. Whether we like foreign bankers or foreign financiers or not, we are facing a crisis of confidence. Everybody admits that this is a fact, and in this situation we have to take measures which will restore confidence in the Government of this country and, indeed, in the people of this country. In this context I have no doubt whatever that the need to relieve the pressure on sterling and to deal with the balance of payments problem gave the Government no alternative but to take the decision and the determined action they have taken now. I personally also fully accept that the policy aims outlined by the Prime Minister—the need to make an impact, and an immediate impact, on our balance-of-payments problem, and to deal with the problem of internal demand, together with a drive for increased productivity—are the right ones.
If I may say this is passing, I do not quarrel with Mr. Frank Cousins when he says that one of the objects of policy should be to increase productivity. Of course he is right. But I do not understand why he imagines that this excludes the need also to deal with an incomes policy, because the two things, I think, run together. Of course we want more productivity; of course we want more
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wages; of course we want a higher standard of living. However, we can have these things only if we also tackle the incomes policy side of the problem and see that we give ourselves real and not fictitious increases.
My Lords, we are facing a really critical situation. I would not compare the situation with the war years when we were fighting for our lives, for democracy; but we are fighting for the economy and we are fighting for sterling. I believe that to a large degree this is a situation above politics. I would not attempt to prevent the Opposition from properly criticising the activities of this or any Government, but in a situation like this these criticisms ought to be kept down to the proper level and ought not to be put in such a way as to help destroy the confidence that we are seeking to restore. The point I want to make is that in a situation like this the Government have to make unpopular decisions. It is my belief that every responsible leader, be he the Prime Minister, a Cabinet Minister or even the secretary of a trade union, must at times—in the interests of his constituents in the case of a politician, in the interests of the people of the country in the case of the Prime Minister or in the interests of the members of his union in the case of the trade union secretary—where responsibility and duty demand unpopular policies to be evolved and unpopular decisions to be made, make those unpopular decisions.
I am one who believes firmly in telling the people—this is a question of communication—what is demanded of them and why it is demanded of them. I believe they will respond. I know it is quite common to hear the trade unions denigrated. Criticisms are made of the workpeople; but not so widely as some imagine. We also hear criticism of the other side of industry; and some of those criticisms unquestionably are justified. But I believe that in this situation the response from the workpeople themselves will be much more ready, much more zealous and understanding than many of us realise.
As I said at the beginning of my speech, I have been in these discussions. They have been heartbreaking; in some senses, agonising. It is not an easy thing to accept—"acquiese to" is the phrase

1421
we use—these policies of Government knowing that it would mean a complete standstill for all the workpeople for a period of at least six months. I submit to your Lordships that it is more difficult for those who have not got plans in the pipeline to take decisions they know will affect railway men, builders and others. But I must say again that we of the T.U.C. were distressed that these measures were announced by the Government before the T.U.C. was consulted. I think this was a mistake. I understand, of course, the pressure of events. But we should have been less than sensible men, less than responsible men, had we allowed our sense of pique to stop us from looking objectively and realistically at the plan put to us. I am glad that the General Council has, in fact, done this.
I should like to make one final remark. As I said just now, to a degree this is above politics. Criticisms have been and will be levelled at this Government; criticism can be levelled, I think, properly, at the Governments which preceded it; but there is an element in this situation which is very difficult and which is beyond our control. We have got international obligations. I believe, with others, that we should try to relieve ourselves of them where it is possible to do so, but we should not do so recklessly and without a sense of responsibility to the world. It is because we have these problems that some of these issues are forced upon us; that sterling, for instance, comes under strain. I believe, this being so, that it is right and proper that Governments abroad should understand that we are providing a service to the rest of mankind, and should show generosity and willingness to help when a situation of this kind occurs.
My final word is this. I believe we have two problems before us: the problem of an incomes policy and the problem of the allied prices policy and production. But essentially the long-term incomes policy is the only answer. I think the Government measures of deflation will help us immediately in this regard, to give us a platform from which we can later spring. But over and above that there is this immediate and urgent problem of confidence to which an answer has to be given. The Government must show, the people of this country must
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show, that they are prepared to accept proper demands made upon them because of the circumstances in which we find ourselves. I believe the Government have done a good job. I believe the people of this country will respond. I believe, with others, that after the next six months we shall still have much to do. But, having done the essential task at this point in time, I believe we have made for ourselves a platform from which we can make further advances in the interests of the people of this country in terms of a real improvement of the standard of living running into years to come.
The National Plan may have to be amended; but it certainly must not be dropped; the date may have to be put back a little but we must keep our Plan, the first we have had. I believe we shall achieve it in the end.
8.58 p.m.
LORD PEDDIE: My Lords, I am conscious of the lateness of the hour. In the course of my remarks I will endeavour to avoid any repetition of the arguments that have already been advanced. We have all an interest, indeed a personal interest, in the subject that is being debated this evening. My special interest as a member of the Prices and Incomes Board will cause me to refrain from any special advocacy based upon such membership. One can appreciate the measure of opposition to the proposals of the Government that is expressed by Members opposite, based presumably upon political considerations. One can understand it, but I was intrigued by a comment of the noble Lord, Lord Erroll of Hale, when he indicated his personal opinion that the proposals were likely to get emotional support from the nation as well as from his Party if the Government admitted to gigantic miscalculations. My personal view is that if there has been any miscalculation on the part of the Government it has been rather an underestimate of the erosion of the economy over the past years that has necessitated these measures.
I was particularly interested in the comments of the noble Lord, Lord Byers, especially in the light of the statement made by my noble friend Lord Pargiter. He said he had heard no alternative from the other side of the House. I share the view expressed by the noble Lord, Lord Pargiter, that we did not hear any

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reasonable alternative to the proposals that the Government are advancing.
LORD BYERS: My Lords, will the noble Lord recall one proposal that I put up was not a wages freeze, but a pay-roll freeze which is quite different and much more positive? I also expressed the view that we should have to regard the standstill very much as a last resort because it will play havoc with the productivity agreement. This is a positive approach to the problem, not a negative one.
LORD PEDDIE: My Lords, if the noble Lord, Lord Byers, had contained himself in patience he would have found that in the course of but a few seconds I should have arrived at that point. Indeed, I was going to pay the noble Lord the compliment of indicating that there was at least some measure of an alternative proposal emanating from the rumbustious speech of the noble Lord, Lord Byers. He indicated that he was against the incomes freeze but would give support, as he has now reiterated, to the fixing of an overall amount to be paid by companies. Very well, it is an alternative, and I refer to it because it deserves some attention. But, my Lords, I submit that such a proposal would indeed create a completely static economy and make for a greater inequity even than the present proposals. Furthermore—and this is of very considerable significance—it would make almost impossible the redeployment of labour which is absolutely essential if we are to secure the increased productivity which this nation needs.
LORD BYERS: It is just the opposite.
LORD PEDDIE: My Lords, I fail to see how it can be the opposite—
LORD BYERS: My Lords, may I interrupt the noble Lord? It is the opposite because it gives flexibility. If you want to attract people to your firm, you can do it not by increasing your payroll total but by making sacrifices to pay the incoming person more money to attract him.
LORD PEDDIE: My Lords, if there is a fixed amount, an overall amount fixed for a company, it makes it impossible to recruit further labour, and one of the
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factors needed to-day is the re-deployment of labour to developing industries. I would also indicate a further comment of the noble Lord, Lord Byers, on the question of prices. The noble Lord offered two, in a way, constructive criticisms. He opposed the present proposals regarding prices and said, "Let free competition do all that is necessary". But, I would ask the noble Lord, would he agree that all sectors of the economy have the free and full play of market forces? Indeed they have not, and it would be impossible to leave the determination of prices solely to competition.
LORD BYERS: My Lords, I am sorry to interrupt the noble Lord, but he is making a complete fallacy of my speech. I asked for much tougher measures, of anti-trust and anti-monopoly, in order to get real competition and real play of free market forces. The noble Lord must not be allowed to put that on the record as what I said.
LORD PEDDIE: Precisely, my Lords. The indication is that we wait until we have the full expression of anti-monopoly law till this can operate. We are dealing now with an emergency and therefore measures of this kind cannot be sidetracked until the proposals of the noble Lord, Lord Byers, are put into effect, because those proposals must precede any of the further suggestions which he makes with regard to the control of trusts and monopolies.
There has been an indication, too, of a question of lack of confidence, and it is true that there must be a measure of lack of confidence. But it is not born out of some incident or event within the last weeks or months. I believe that the economic difficulties which have made necessary the measures we are discussing to-day are not of recent origin. They are related to deep-seated deficiencies in the economy and are created by an inability or unwillingness on the part of both management and labour to adjust them-selves to change. This has expressed itself over past months, and indeed past years, in an imbalance between money incomes and productivity. In consequence, the Government launched their incomes policy and created the Incomes and Prices Board. I believe, as certain noble Lords have indicated, that there has been a

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measure of success, but it is slow and there is an imperative necessity to deal with the situation along the lines stated in the White Paper on Prices and Incomes Standstill. The White Paper states that the country needs a breathing space in which productivity can catch up the excessive increase in incomes. I would emphasise that this is but a temporary phase. The economic future will depend on the capacity to make good use of the time to pursue a constructive policy for productivity, prices and incomes and to make certain it grows in effectiveness. I think that is the whole kernel of the discussion to-night.
None of us could possibly like any freeze of incomes, or indeed of prices, if we are personally involved. We can look upon this only as giving a pause, giving an opportunity, temporary it may be, and it is up to the community and the Government to make sure that the time is exploited to the full. The measures we have under discussion do not provide a permanent remedy. That permanent remedy can lie only in increased productivity and I believe, as I think the noble Lord, Lord Pargiter, mentioned, that there is a great deal of misunderstanding about what productivity really means. When demand justifies, it is possible to see a violent increase in the through-put of factories regardless of the costs involved, if the management has no restriction upon the ability to increase the price. That is not increased productivity in actual terms. We have to consider increased productivity as ability to produce an article or a service at lower real costs than previously. The cost of production in terms of capital and labour is a vital factor in our productivity problem to-day.
The noble Lord, Lord Redmayne, who is not at present in the Chamber, referred to over-employment. He seemed to imply that full employment was, or had been, a restrictive factor in the development of this country; and there are some people who quite sincerely blame full employment as being responsible for industrial lethargy. Full employment needs accurate definition, and I believe it is a sad reflection on the intelligence of the community if we believe that an increase in the number of people rendered unemployed will add to our production. It may be true that labour has enjoyed reasonably full engagement,
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but the nation has not had the advantage of the full employment of its labour force. This has not been entirely the responsibility of labour itself. Labour does not hire itself. It is hired. One of the great difficulties in industry to-day is the hoarding of labour. That is one of the factors which makes for under-employment of people on the payroll.
I agree that there is need for a shakeout to achieve more effective deployment, but if unemployment is considered as a whip, I can assure your Lordships that it is an illusion. If there are any to-day who believe that the sight of people waiting at the factory gates will stimulate productivity they are making a great mistake. It can only add to the increasing reluctance on the part of labour to accept labour-saving equipment. This is something which has to be understood, because time and time again there is the implication that we can get ourselves out of this difficulty regarding increasing productivity by providing the weapon of a certain amount of unemployment that will cause people to have less sense of security.
The months ahead should be used in identifying and dealing with some of the long-term problems which have led to the present difficulties, and we have a chance of doing this during this period of six or twelve months. This is the greatest virtue, in myopinion, of this pause or standstill—call it what you will.
The noble Earl, Lord Selkirk, paid a tribute to the work of the Prices and Incomes Board and it has done good work in the short term. It has been limited by the field it has been able to cover, but its greatest contribution over past months has been the consideration of long-term problems that are fundamental to productivity. The Board has produced eighteen reports and these have exposed a number of obstacles to increased efficiency and have suggested remedies.
With the permission of the House, I will try for a few moments to describe a few of the basic problems which in my opinion require to be solved, otherwise this lack of productivity will be a constant difficulty. The tragedy is that somany people believe, when we ask for more productivity, that we merely have to get people to work harder. That is

1427
not the case at all. In some of our most inefficient establishments, we can see people working like beavers, but they are not making any great contribution towards industrial productivity. We have found deficiencies not only in private business but in nationalised industries, too, such as investment on the basis of faulty demand forecasts and without proper assessment of likely rate of return. We have seen a failure to make allowance for changes in competition and the proper availability of manpower. We have seen in industry after industry reluctance to use operational research and other modern managerial techniques. As time goes on such industries are completely unaware of the need for examining their own condition and for effecting improvement in their techniques.
We have seen, too, the maintenance of obsolete lines of demarcation by the trade unions and the failure on the part of employers to adjust manning practices to new techniques. Another serious obstacle to improving productivity is the archaic wage structures which have impeded the more effective use of men and capital assets and whose effect is to check the possibility of more work in fewer hours. A strange thing is that most of the wage bargaining in the past completely ignored the question of productivity.
I believe that progressively over past years comparability has been one of the most significant factors making for inflation. It does not bring about the equity that those who are advocating comparability would hope to secure. We have seen the disregard in some industries by management and unions of the consequences of negotiated pay rises on both prices of the commodity and the wages that are paid in other industries; and we have seen a complete disregard of public interest or the consumer. Yet I have recognised over the past few months, both on the part of the trade unions and employers, an increasing recognition of that significance, taking into account the national interest and the consumer. I believe such changes of mind and attitude have been stimulated by the incomes policy pursued by the Government over the past months. It is one of the most outstanding contributions that that policy has made.
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These deficiencies that I have attempted to express are but a few of many that have been exposed, and they have been exposed after a detailed inquiry into a relatively small area of British industry. But they give some idea of the size of the problem. These problems that have been discussed by the Board are real symptoms of the malady that besets British industry. I believe that the need to continue the investigation is not lessened by the standstill, but increased by the country's economic condition.
Above all, in conclusion, I would add that in the months and in the years that lie ahead there is need for a greater degree of co-operation within industry. In spite of some of the comments that have been made from the Benches opposite, I think there is going to be an increasing recognition, on the part of the general public and all involved in this squeeze, of the necessity for acceptance: and I am delighted to read on the tape to-night that the doctors have accepted the freeze. That I think is significant and indicative of the reaction of responsible people, trade unionists and management.
Let us make no mistake. No one on this side of the House, or anywhere else, refuses to recognise that there may be considerable hardship in the operation of this freeze, and that there may be inequity. But the alternative, in my opinion, would lead to far greater inequity, and, in addition to inequity, would lead to a rapid deterioration in our economic state. Therefore, although the circumstances that have created the need for the freeze are not of the character in which anyone finds satisfaction, no matter on what side of the House they may be, at least one can find consolation in the fact that there is to-day a recognition of the problem and the courage and the strength to tackle it.
9.18 p.m.
LORD DRUMALBYN: My Lords, this has been a debate conducted in an even temper and in most unusual circumstances. We are debating to-day a Motion to take note of the prices and incomes policy of Her Majesty's Government, and we are in effect debating what my noble friend Lord Erroll of Hale has described as a White Bill; that is, we are in effect giving a Second

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Reading to specific proposals being made by the Government. We are examining these proposals. When we do that there are three broad questions to be considered: what is the situation with which the proposals are intended to deal; what does the Bill mean; and how will it work?
May I in a few words to start with say what the situation with which we have to deal is? In my view, there is a national crisis, but not, I think, an international crisis, as there was in 1931. There has been a severe loss of confidence in the ability and will of Great Britain under its present leadership to put her finances and economy in order and to pay her way in the world. And why? First of all, there was the seamen's strike, the handling of the seamen's strike, and the resultant loss of export, together with fears abroad of further strikes from time to time in the future, with no means of stopping them. Secondly, there was the plain fact that not only was the norm for increases of money incomes—that is, the forecast of what the economy would bear by way of average increase of money incomes per head—fixed far too high; not only was it treated as a minimum instead of as an average; on occasion it was even regarded as derisory, with the result last year that earnings rose well over three times as fast as production and have continued to rise at a considerable pace, while the index of industrial production actually showed a decline in each of the last two months recorded in the Board of Trade Journal (April and May).
So the general picture is this: exports adversely affected by the seamen's strike; imports rising; earnings rising; prices rising; national savings last year well down below the 1965 level, and despite new offers, not doing very well; production falling and investment slackening. That, I think, is the situation with which we have to deal, and in those circumstances one can hardly blame our foreign creditors for having doubts about current British economic policy.
Something obviously must be done. Something has been done, and our creditors have audibly sighed a sigh of relief because of it. But what has been done? The Government have taken some financial and fiscal measures and they have
1430
produced a temporary incomes policy on top of a permanent one. Now we are told that the position into which the Government have got us is such that it is the duty of all of us to support this policy. That may be so. The noble Lord, Lord Collison, said in effect that the Opposition has the right to criticise but it must bear in mind the interest of the country, and I would not disagree at all with what he said. The noble Lord, Lord Citrine, did not quite share his view. But before we do support this policy at least we are entitled to ask what it means and whether or not it will work.
The noble Lord, Lord Shepherd, went into considerable detail—and we are much obliged to him—in explaining what the policy (that is to say, the two policies: the permanent policy and the temporary one) is intended to mean. If I may say so—and this is not a criticism—one had the feeling in listening to him that the speech about the permanent policy had been written before the speech on the temporary policy had been thought of.
LORD SHEPHERD: My Lords, I do not think the noble Lord is quite right. The noble Lord did not say that at least Part I is permanent; Part II will be a permanent feature of the Bill though it will not come into operation—therefore one speaks in those terms; Part IV is of a temporary nature—therefore one speaks in those terms. I think the noble Lord's criticism is quite unwarranted.
LORD DRUMALBYN: I am sorry to have got under the skin of the noble Lord, Lord Shepherd, so easily; he does not jump up quite so quickly as that in the ordinary way.
My Lords, first the Government have gone ahead with what must be regarded as their long-term policy as set out in the original Bill, and, secondly, the Government have called for a complete standstill on prices and incomes, but we are told by the Prime Minister (and this has been quoted by the noble Lord, Lord Wade, and indeed has been quoted twice) that it is not the Government's intention to introduce elaborate statutory controls over incomes and prices. Then later,
"within the main field of collective bargaining we shall in the first instance use only voluntary action."

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That statement gives rise to certain questions, and to ensure that we get them answered (although some of them have been asked before) I shall put them again.
First of all, does this mean that the Government do not intend to bring into effect either Part II or Part IV of what is politely called a "Paper"—that is, the Prices and Incomes Bill as it is likely to reach this House—before the Recess? Secondly, do the Government intend to bring in during the Recess an Order under Clause 6 of the Paper enabling them to make Orders applying the requirements as to notification of increases and the limited standstill Orders under Part II? Thirdly, do the Government intend also to bring in during the Recess an Order under Clause 25 to enable them to make Orders restricting increases in prices or incomes under Part IV? I appreciate that the Government could not very well bring in an Order under Part II before the Recess, because an Order under Part II can be made only after the First Secretary has consulted with such organisations or bodies as he thinks fit. So I think that is out. But they might, of course, introduce Part IV. From the way in which the noble Lord, Lord Shepherd, phrased his last remark, I rather got the impression that this might be the intention of the Government. I think he said it was not intended to introduce the permanent policy at the present time but it was intended to introduce the temporary one. I may have misinterpreted him, but this is what he seemed to me to say then.
May I ask whether it is the intention of the Government to start such consultations immediately the Bill becomes law? If so, are we likely to see draft Orders under Parts II and IV laid in late September so that Parliament can approve them when they resume on October 18? The noble Viscount, Lord Simon, as I understood it, thought this would be the right course, that powers should be taken immediately under Clause 6 and under Clause 25 so that Orders could be made as and when necessary.
VISCOUNT SIMON: My Lords, if I may intervene, I think I went further. I agreed with the noble Lord, Lord Kahn, that the Orders ought to be made at once, not at the end of September.
LORD DRUMALBYN: I was pointing out that, as the Bill is at present drafted, that would not be possible, and therefore I had assumed, so far as Part II is concerned, that the Government did not intend to do that, because they would first have to consult both sides of industry after the Bill became law.
May I also ask whether my noble friend Lord Windlesham was right in drawing attention to the difference between the wording as regards prices and collective bargaining? He pointed out that it was only within the main field of collective bargaining that the Prime Minister said that we shall in the first instance use voluntary action, and this leaves it to be deduced that they shall, or may, introduce an Order to deal with prices. I must ask, therefore, what significance are we to attach to the fact that the Prime Minister confined his intention to rely on voluntary action in the first instance to the main field of collective bargaining? Perhaps I should also ask: What about the rest of the field?
I come then to the second broad set of questions. Will the incomes policy work? This is something about which a great many of your Lordships have spoken to-day. It is quite clear that the policy as pursued so far has not been effective in keeping prices, still less earnings, in line with increases in production. To start with the Government have been proved wrong, as my noble friend Lord Erroll of Hale pointed out, in the choice of norm, 3 to 3½ per cent. Now the norm is to be zero. As my noble friend said, Schedule 2 will accordingly need some attention in Committee. That in itself, I would point out, involves a change in the definition of "norm" coming in paragraph 11 of Schedule 2:
"the average rate of anual increase in money incomes consistent with stability in the general level of prices".
If there were to be any increase at all in incomes there would have to be some compensating decrease for the norm so defined to be maintained at nought. That could come, for example, from less overtime or more unemployment, if the quantum that is to give the average is to be maintained at zero.
The White Paper admits that some incomes will increase automatically, for example, where workers on piece-work produce more, where salesmen sell more

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on commission, where overtime is unavoidable, where there are profit-sharing schemes and, in spite of all the efforts of the Government to prevent it, the firm makes an actual profit; but there of course the extra profits are to be shared by the employees but not, as I understand it, by the shareholders in extra dividends. It is a matter for consideration whether that is fair or not.
What, may I ask, is to happen about those wages which are tied to the cost-of-living index or some other index? I hope the noble Earl will be able to answer that. If they are tied by custom or agreement, what happens? Are those increases also overridden, and, if so, what happens at the end of the period? Are they allowed to catch up? Of course, the question may answer itself, because the cost of living may not go up, and no doubt that is one of the objects of the Government; but, on the other hand, one cannot be sure of that. That is not entirely within the control of the Government.
Secondly, a great deal has been said in this debate about productivity agreements. Will productivity agreements resulting in extra earnings be allowed? Will people be allowed to profit from them? It is not only a question of their being negotiated but will people be allowed to profit from them during the period? What is the Government's attitude to that? I am surprised that the White Paper does not make it clear one way or the other whether such extra earnings will also not only be accepted but encouraged. I wonder whether they are frightened that, if someone gets more for higher productivity, someone else may demand more to keep even with him without higher production. Possibly the Government intend to turn a blind eye to that. I think this is a most important question upon which the Government must give an answer today.
The Government have now gone all selective—selective employment tax, selective investment grant, selective orders telling people or industries or localities not to increase prices or incomes. What is the use of offering encouragements to modernise, to invest in new plant and equipment and apply new methods, if there is to be no incentive to make reductions in manpower that the investments should render possible?
Something has been said about existing contracts. I hope the Government do not
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underestimate the effect, in these days when contracts are all too little observed—there has been a change in the attitude to contracts—of the Government overriding contracts. One must always point this out to the Government. We know that on occasions there is an overriding public interest, but I think we should always think most carefully before allowing a contract to be overriden. The Government may claim that they may permit increases in incomes resulting from productivity agreements. I was most interested to hear the speech of the noble Viscount, Lord Younger of Leckie, as well as the speech of the noble Lord, Lord Byers, both of which made a great impression on the House. But the Government's failure, as I say, to make this clear in the White Paper is really an indication of their outlook. Whenever things go wrong when they are in power they try to blow a clarion call, "Backs to the wall; equal misery for all". They really do sound the wrong note—and they sound the wrong note wrong, which is worse.
It is not tenseness and self-imposed misery the British people want when we are in a jam. We do not want to punish ourselves; we want to extricate ourselves. It was not tenseness and self-imposed misery that enabled us to win the last war. We laughed and we sang ourselves to victory because we had confidence in ourselves and faith in our leaders. At the moment we have lost the first because we have lost the second. It cannot be right to call for extra effort without rewarding those who make it. This is the prescription to induce listlessness, lack of effort—"Leave it to you, Bill".
I am not saying that an incomes policy is not required. There is a large measure of agreement in all Parties on the need for one. As Mr. Harold Macmillan said on July 26, 1962, in perhaps what is the most classic exposition on this matter:
"If the nation as a whole pays itself in increased wanes, salaries and dividends more than is justified by increasing production"—
I heard an echo of that from the noble Lord, Lord Collison—
"it is surely accepted that costs will rise and exports fall …An incomes policy is therefore necessary as a permanent feature of our economic life."—[OFIICIAL REPORT, Commons, Vol. 663, col. 1756.]

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But he went on to say, in col. 1758:
"In a free society an incomes policy cannot, in my view at any rate, be imposed; and if it is to be a permanent feature and not a temporary thing in a difficult crisis, as I believe it must be if we are to achieve our four objectives"—
that is, full employment, steady prices, a strong currency and growth—
"then it must be regarded both as necessary and as fair.…A temporary measure must necessarily be somewhat rigid and somewhat unfair."
In other words, an incomes policy can work only in the right framework of law and economic policy.
The first thing was to set up a body which would give
"an impartial and authoritative view on the more important or difficult pay questions".
That was the National Incomes Commission. The Labour Opposition at that time thought that it was wrong for it to limit the scope of such a body to incomes. "Incomes" was a very wide connotation, including dividends, but the Labour Party thought that it should also consider prices. Of course, there is no reason why such a body should not also look at prices and spotlight what seems to it to be unjustified increases, provided always that it is understood and accepted that prices and incomes are different, must be treated differently, and need not always march in step.
We have to-day had the benefit of the advice of the noble Lord, Lord Peddie, who is a member of the Prices and Incomes Board; and I would pay tribute to the work that they have been doing. But surely one of the great fallacies of our time is that a nation has a right to a given standard of living, or even to a continuously rising standard of living. It has no such right unless it earns it. But it should be able to earn it if the economy is properly managed. The noble Lord, Lord Williamson, in an excellent speech, thought we should be thankful that we were not getting a cut; that we should be quite content with that. I think we must recognise, in the ups and downs of life, that there may be times when our standard of living is not advancing, although on the whole it will go gradually forward. I was glad that the noble Lord, Lord Shepherd, in his
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speech last Thursday [col. 920] recognised that
"similarity of treatment for incomes and prices is impossible".
And the White Paper acknowledges in paragraph 4 that even in a period of standstill, some prices may have to be raised
"because of marked increases which cannot be absorbed in costs of imported materials, or which arise from changes in supply for seasonal or other reasons or which are due to action by the Government, such as increased taxation".
Apart from this, incomes and prices are treated almost identically. Can this be right? Of course restraint should be exercised over prices, but the proper way to deal with prices is for the Government to ensure that what people have got to spend and what is there to buy are kept in balance. Leaving out of account excessive Government spending abroad, it is precisely because people have more to spend than there is to buy that there is inflation, which has got worse because what people have to spend is growing faster than what there is to buy. A ban on increases in incomes will halt the continuing growth in the gap, but will not close it. Nor are the comparatively small fiscal and hire-purchase restraints which have been imposed of themselves likely to close it. Equally, a ban on justifiable increases in prices merely maintains the gap.
That is why the provisions in the Bill are wrong in principle. If a supplier feels he must increase prices, then once an order affecting them is made he will have to give notice of his intention to the Minister. Under Part II the Minister would have thirty days in which either to consent or refer the case to the Prices and Incomes Board, in which case the supplier would have to wait another period—I am not certain whether it would be two or three months. Under Part IV he could not increase his prices until the Minister gave his consent. All this time he would be losing money. The Minister might not give his consent, even though he was losing money. He might decide that it was in the public interest that the prices should be increased all the same. Surely it cannot be in the public interest that firms or undertakings should not be able to pay their way, any more than that the nation

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as a whole should not be able to pay its way. In my view, there should be a positive duty laid on the Minister to give his consent to ensure that efficient firms should be enabled to pay their way, and certainly should not be forced to operate at a loss or even forced out of business in the alleged public interest.
LORD SHEPHERD: My Lords, may I ask the noble Lord this question? I gather he agrees that incomes should be investigated by some Board. Am I to take it, however, that he does not think this should apply to prices? Is that what he means?
LORD DRUMALBYN: What I have said is that I think it is perfectly right that cases of this kind should be referred to the Board and that the Board should have an opportunity of examining them. What I am questioning at the present time is whether prices should be treated in exactly the same way as incomes, so far as the delay and the permanent policy are concerned. The delay of three or four months may be very damaging indeed to a business; whereas, of course, to an employee or a wage-earner it is merely a postponement of higher earnings.
LORD SHEPHERD: But the noble Lord would agree that the period required under the Bill for an inquiry is three months. I should have thought he would agree, with his experience of business, that most firms would certainly know at that stage that an increase in their prices had become necessary.
LORD DRUMALBYN: I am not quite sure what the noble Lord means. The point is that the firm has to make up its mind that an increase in price cannot be postponed any longer, but at that point it has to refer the question to the Government and it has to be postponed longer. That is the point at issue.
The feeblest part of the White Paper is in the passages dealing with rents and rates. If rents of local authority houses are held at their present level, rates are bound to increase, if only because some housessubsidised by rates are still being completed and let at subsidised rents. Is it really right that the increased rent bill should fall, in part at least, on those who are not occupying subsidised houses? Is this not a much greater
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hardship and far more unjust in a period of standstill on incomes—a period in which many of the incomes of the self-employed will be reduced—than that people with ample means who have been paying too little should pay more? After all, it is partly because a large section of the public are paying too little for rents that there is excess spending power and that our costs of production, burdened by rent subsidies, are higher than they otherwise need be.
It will be said that if prices go up, the pressure to increase wages will become irresistible. No pressure is irresistible if there is the will to resist. Realism and common sense demand that we as a nation must learn that while, normally, incomes should rise faster than prices and so make us better off, at other times prices may rise faster than incomes so that we are temporarily worse off. The brute fact is that there is more spending power than there are resources, if we are to restore our balance of payments. The ways to deal with this are either to reduce the spending power, to increase the supplies, or both.
The point I am trying to make is that by simply freezing the spending power you will not restore the balance; nor will you restore it at all unless production and investment increase. Is it likely that production will increase if you freeze spending power? Is it likely that investment will increase if you freeze prices? Surely the right answer is to reduce the great mass of spending power so as to bring it in balance with supply, and then to give the maximum encouragement to increased production and investment. I quite see that, as incomes have outrun production, a pause may be necessary for action to be taken to prevent them from doing so again—and this is a point which the noble Viscount, Lord Simon,made—but I should feel much happier if the Government gave some indication that they proposed to use the period of standstill in this way: more productivity agreements, as the noble Lord, Lord Byers, said; and plans to ensure that in future incomes are kept in line with productivity.
The noble Lord, Lord Shepherd, himself mentioned negotiating further productivity agreements. How are you going to do that, unless you can give increased results in the form of a pay packet?

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What evidence is thereof any intention on the part of the Government to do these things? Admittedly, the Government intend that one result of their measures will be what they call a "shake-out of labour"; that is, more movement of labour, and certainly more transitional unemployment. That should reduce wage drift and make it easier for employers to resist wage demands which are not
"consistent with stability in the general level of prices."
My Lords, all Parties are committed to the principle of free negotiation on terms and conditions of employment; but how often have we heard the Party opposite in the past lamenting that negotiation is not free if the parties are not on equal terms? At present, employers and the trade unions are not on equal terms: usually the trade unions are in a position of monopoly. Moreover, the agreements they enter into are not enforceable by either side. If the employers do not carry out their side, labour is withdrawn: if the employees do not carry out theirs, there is nothing the employers can do about it. I say urgently to the Government that no incomes policy can possibly succeed until that is put right.
The temporary policy which the Government have announced is bound to operate unfairly. I think we should all accept that, as Mr. Harold Macmillan indicated, if we are driven by Government mismanagement to resort to a temporary, as opposed to a continuing, incomes policy, it is bound to be unfair, because it is bound to be too rigid. The sole justification of such a policy would be that, by the time it was lifted, steps would have been taken to prevent or at least reduce the chances of running into the same situation again, as the noble Earl, Lord Selkirk, said. There is no indication at all that that is likely to happen. Part II of the Bill is likely, in these circumstances, merely to be an irritant, and not a solution. My Lords, our objection to this policy is that at a time when production is stagnating it is likely to intensify that stagnation. If that happens, we shall be driven further and further down the road of restriction, compulsion and national degradation.
9.47 p.m.
THE EARL OF LONGFORD: My Lords, we have listened to over a score
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of highly interesting speeches, from the fine initial exposition of the noble Lord, Lord Shepherd, to the thoughtful and friendly questionnaire and commentary of the noble Lord who has just sat down. At one moment the noble Lord opposite adopted a slightly gayer note, and urged us to laugh and sing our way to victory. I gather it is the noble Lord's birthday. We congratulate him, and we are ready to laugh and sing with him as long as he does not expect me, at a quarter to ten, to speak for too long, to answer all his points, or to try to answer them and, in addition, to answer most of the points raised by the other twenty speakers. In other words, we shall presumably come back to this subject in some detail next week, and no doubt some of the more intricate points will be dealt with then.
I realise that I may be accused of bias—I hope not, perhaps, on this occasion—but I suggest (it is the accident of the day) that we happen to have to-day listened to some speeches from this side of the House which have helped to maintain the reputation of the House of Lords as a remarkable debating Chamber. I am not going to try to reply in detail to, or to comment in detail on, a speech like that of the noble Lord, Lord Peddie, who has gone, or on the speeches of the noble Lord, Lord Williamson, the noble Lord, Lord Collison, or the noble Lord, Lord Citrine, two of whom have remained; but I think noble Lords opposite will agree that we have been very strongly represented—shall I say?—on this side of the House in this particular debate. I am only sorry to have missed one or two speeches from the other side which I was told were interesting, including one from the noble Baroness, Lady Emmet of Amberley, which I understand was rather barbed. The noble Lady herself told me that she had spoken very frankly, so I gather that it was a fairly sharp oration. I am sorry not to have heard it. I am also sorry I missed the speech of the noble Lord, Lord Redmayne, although I may be able to refer to a point he raised. I am also sorry there was a suggestion made at one time that we—and I suppose that means me particularly—had treated the House with some measure of contempt in bringing forward Business in this way. There may be elements of misunderstanding somewhere there. I hope that no noble Lord would seriously suppose

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that I or my noble friend Lord Shepherd would ever treat the House with contempt. I do not propose to say any more on that. I prefer to think that the words used were used in misapprehension of the position.
On the other hand, the word "contempt" figured in more speeches than one amongnoble Lords opposite. There was a moment when the noble Lord, Lord Erroll of Hale—though he did it in a charming way and one hardly took in what he said—announced that our measures had earned us the contemptuous indignation of everybody, of practically the whole world. According to him, we had aroused the contemptuous indignation of the whole world. We do not seem to have earned the contempt of President Johnson. I did say "President Johnson"—the noble Lord makes a sort of whistling movement of the face. I can only assure him that President Johnson is the most powerful friend that this country has and we ought to be pleased that President Johnson is so happy about our measures and our leadership. And then the Finance Ministers at the Hague expressed great confidence in what we are doing; so this "contemptuous indignation" does not spread to these eminent foreigners.
However, it may be said that we are hated by our own countrymen. I cannot see any sign of that. The excellent C.B.I. this afternoon came out in support of the standstill on the basis that they would bend every effort to make it work, and work properly. There are qualifications which, no doubt, we must examine carefully; but they are certainly co-operating; and so, of course, are the T.U.C. Now we hear the same thing of the doctors. I am afraid that the "contemptuous indignation" is simply a fabrication of the noble Lord, Lord Erroll of Hale. As a man who is, I think, incapable of feeling that emotion himself, someone must have put him up to it. I do not know who that could be.
Speaking for myself, I should not feel contempt for noble Lords opposite; I feel just pity. I feel pity for them, for their lack of intellectual fibre. We have listened to a great deal of discussion on these matters in two days of debate, on the economic situation and now a long day on this. If anybody asked me after-wards what was the attitude of noble
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Lords opposite to the standstill proposal I should not know. I defy anyone coming into this House, any neutral observer, to have any idea of what their position may be. Are they in favour of even a suggestion of a standstill, a kind of exhortation to a standstill? Is that their position? They do not seem inclined to answer. That might be their position. Even that is not clear. I gather—but not beyond all doubt, because they have quibbled away so merrily for so many hours—that they are opposed to the compulsory element in the standstill. I gather that that would seem to be the position.
Therefore we are bound to ask, what would be their alternative? I am not going to pursue them in detail; but broadly what would be the alternative? I hardly think that they would consider exhortation enough. I hesitate to suggest that they would consider a substantial dose of unemployment as a suggested alternative to a statutory incomes policy. This is where I must apologise to the noble Lord, Lord Redmayne, for not hearing his speech. I understand that he argued that a degree of unemployment somewhat larger than that suggested by the noble Lord, Lord Beeching, would be tolerable. If I am mistaken then I will apologise. He was firmly corrected on that point, at any rate, by the noble Lord, Lord Pargiter. I will not pursue it now, except to say that I do not believe that at this day and hour the Conservative Party are prepared to come forward and say that there is no point in a standstill because they could do the job better by means of a heavy dose of unemployment. Therefore we are in the dark about their position, and they have in fact not had the daring, the fibre, to come out in the open and tell us where they stand. So I say I feel pity for the 'wretchedness of their intellectual situation.
LORD REDMAYNE: My Lords, would the noble Earl, if he does not accept what I say (which is of very small importance) say on behalf of the Government that he is willing to accept the truth and wisdom of the speech of the noble Lord, Lord Beeching?
THE EARL OF LONGFORD: The noble Lord, Lord Beeching, made a very interesting speech, but he is not Moses;

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he is not handing down the tablets, and if the noble Lord, Lord Redmayne, asks me whether I am bound to accept what Lord Beeching says on this or any other matter, the answer is" No". I do not expect him to agree with me and I also do not agree with him, and so the answer to the noble Lord, Lord Redmayne is, "No", in spite of the fact that the noble Lord, Lord Beeching made a most interesting speech.
My Lords, it is when we take this great question before us as various speakers have said—as the noble Lord, Lord Drumalbyn, recognised and so did many, or all, of the speakers in different ways—we realise that here is undoubtedly a grave decision before the country. I do not accept the grossly exaggerated account of our economic miseries produced by the noble Lord, Lord Drumalbyn, but let us agree that this is an economic crisis and that large, and it may be controversial, steps have to be taken by any Government worth its salt. What was of special interest to me, and I think would be of interest to our hypothetical neutral observer, is the fact that the great trade union leaders among us were those who came forward to-day and so very clearly said that the standstill on the broad lines of Government policy was right. It is after all—without wishing to annoy noble Lords—these trade union leaders who probably know the working masses of this country better than I do and better than at any rate most noble Lords opposite—I will not say all. That they should be the people who should come out so strongly, knowing what it would actually mean, what the effort of restraint would mean, struck me as a remarkable and memorable feature of to-day.
I am afraid that I missed the speech of the noble Lord, Lord Milford, with whom I was associated when we belonged to the same party. It was not the Communist Party then, and it was not the Conservative Party either; but it was in the old days, before the war, in Oxford shire. I gather that the noble Lord announced that the Government was attacking the trade unions, or words to that effect. Without wishing to be impertinent, may I say that the noble Lord has much the same background as I, and if it came to asking for an opinion about
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an attack on the trade unions from me, or from the noble Lord, or the noble Lord, Lord Collison, or the noble Lord, Lord Williamson, I should not choose the noble Lord—or myself.
LORD MILFORD: My Lords, I was putting a brake on the practices of the trade unions.
THE EARL OF LONGFORD: My Lords, I must apologise to the noble Lord, Lord Milford. I was not in the Chamber when he spoke, but I gather that he was pretty sharp in his criticisms. I must leave him to be replied to by the great trade union leaders.
There were a number of detailed points, very many detailed points, asked at some length, and some will have to be dealt with next week—
LORD DRUMALBYN: My Lords, would the noble Earl forgive me for a moment? Will he bear in mind that we are to-day asked to "take note"? We are not asked to make a decision on either side to-day, and it is not for us to say absolutely definitely at this stage what we think, either one way or the other. We have asked the noble Earl a great many questions. If he is not able to answer those questions, he cannot complain if we cannot make up our minds.
THE EARL OF LONGFORD: My Lords, I am bound to say that I think that is an extraordinarily feeble intervention, for this reason: that the noble Lord has had plenty of opportunity to make up his mind. There has been a great deal of discussion on this subject already. The questions which he raised were detailed questions. In the last resort, whether we have a standstill policy of this kind or not does not depend on detailed answers to those points, and the noble Lord is perfectly well aware of that, if I may say so. I apologise if I spoke too sharply, but it has been" dished out" to us to a certain amount during the long hours since lunch—
NOBLE LORDS: No!
THE EARL OF LONGFORD: Oh yes it has, and I must be allowed to reply, to equalise the score in that emotional language that was referred to earlier by one noble Lord. There are some detailed points and I am just coming to one or

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two, so I hope the noble Lord, Lord Drumalbyn, is not going to stop me. A question was raised by the noble Lord, Lord Erroll of Hale: and here I am bound to say that I think he has a debating point. I think that after seven or eight hours in the Chamber one must allow that one debating point should be conceded to the noble Lord. I think that his discovery, so to speak, in Schedule 2 of this reference to the 3½ per cent. is something of a score for the noble Lord. It is not final, because we shall find that it is laid down that the Schedule can be adjusted if the figures have to be adjusted. But I am ready to agree with the noble Lord. I myself—speaking entirely for myself—thought that that was something of a dialectic hit for the noble Lord, Lord Erroll of Hale.
The noble Baroness, Lady Wootton of Abinger, made a speech of exceptional penetration. I do not know whether anyone in the House is aware that she has written what I suppose is the best book on wages policy which has appeared in our time. Those who listened to her will feel that her speech was hardly "off the cuff", shall we say?—if ladies wear cuffs. It was, of course, a notable contribution, and I think she will feel that we are, as it were, moving on towards the position which she assumed in her book.
The noble Baroness raised one or two very detailed points, which, with her permission, I will take up with her in correspondence. But I certainly agree with her that if you look at the wages problem as a whole, the issues are much vaster than are involved in a temporary standstill. I think we ought to go back and read her book. Short of that, I would remind the House that Lady Wootton of Abinger was one of those who helped Lord Beveridge write his book Full Employment in a Free Society at the end of the war, at a time when I was holding Lord Beveridge's coat and making his tea. If anyone reads that book, they will realise that Lord Beveridge at the end of the war foresaw many of these problems. He saw that when you had full employment, the question of how you could secure income restraint was quite different.
LORD REDMAYNE: My Lords, may I—
THE EARL OF LONGFORD: May I finish the sentence for the sake of Hansard, and not for my own purpose? If you had full employment, then the problem of an incomes policy had to be tackled in a different way from anything we had seen in the past.
LORD REDMAYNE: My Lords, if the noble Earl is so high in praise of Lord Beveridge, why does he quarrel with the figure of the noble Lord, Lord Beeching, of 2 per cent., or even my figure of 2½ 2¾ or 3 per cent.? It seems to me to be wholly inconsistent.
THE EARL OF LONGFORD: No, I do not think so. We saw Lord Beveridge for many happy years in this House, and I do not think that one would argue that what was said exactly at the end of the war by Lord Beveridge in his book is necessarily Holy Writ any more than the pronouncements of Lord Beeching to-day. I was trying to indicate that the philosophy worked out by Lord Beveridge, and given a much sharper point by the noble Baroness, Lady Wootton of Abinger, is something we shall have to spend a great deal of time in studying as the years go on.
The noble Lord, Lord Reay, asked questions the other day which were raised in one form or another by other noble Lords—the noble Lord, Lord Byers, of course, and the noble Earl, Lord Swinton, and, from a different angle, by the noble Lord, Lord Kahn. I am referring now to the question of productivity agreements. Here, I thought the noble Lord, Lord Citrine, and later the noble Lord, Lord Williamson, put the whole matter in perspective. Nobody seriously supposes—I am sure noble Lords opposite do not; and they know industry well—that we would cure our present ills and rectify the balance of payments in the next year by new productivity agreements. They are going to take time. I think that was brought out clearly by the noble Lords, Lord Citrine and Lord Williamson. That does not mean that they are not valuable. But if we are taking measures in this rather extreme emergency, one cannot argue that productivity agreements are going to tilt the balance one way or the other.
I was rather melancholy as I listened to the noble Lord, Lord Byers. He seemed to have misunderstood the development of our policy in a way I had not

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expected of him, because I always feel that he is so acute in these discussions. He seemed to feel that we had almost lost our interest in productivity. If that was his feeling—and it was the gist of what he said—it is wildly remote from the truth. I am sure that there was never a Government which made greater conscious efforts to promote productivity than this one; and I am sure that they are being intensified at this moment. My noble friend Lord Shepherd assists at the D.E.A. in a number of ways, and I am sure that he would confirm this. There is no question of our slackening our interest in productivity. So the whole contrast which the noble Lord, Lord Byers, seemed to be drawing between our former interest in productivity and now this negative approach was a complete fantasy to me.
LORD BYERS: My Lords, can the noble Earl say how he expects to get increased productivity, quite apart from agreements, while he has a wage freeze? If he will tell me how you can do that, I shall be delighted. Will he also say whether productivity agreements entered into now will have full effect, or whether they have to wait the six-months period? This is a worrying point.
TI1E EARL OF LONGFORD: It is, shall I say, a complex point. I do not accept that this standstill will reduce productivity. I am not going to accept that there is this clash between the standstill and productivity. It is a matter of opinion, but I will not accept that from the noble Lord or from anybody else. With regard to productivity agreements, I have been taking some trouble to obtain an official comment on this. The noble Lord may feel that it is all too guarded, but he will not convict me of failing to take the trouble to secure an answer. It is recognised that here is a complex issue—partly for the reason mentioned by the noble Lord, Lord Kahn, that some of these productivity agreements are not as valuable as others. In some cases, as the noble Lord, Lord Kahn. said, the increase in productivity would have taken place anyway, or should have taken place. We certainly are here facing a complex issue. The existing ones will be caught. But the question then arises: what will be the extent of the
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postponement? They will be postponed for six months. That will be the nature of the postponement if they have not come into force already.
LORD BYERS: My Lords, is the noble Earl saying that at a time of economic crisis we can postpone the benefits of efficiency for six months? I cannot believe it.
THE EARL OF LONGFORD: The noble Lord is assuming that there will be benefits. I was trying to explain to the noble Lord that the benefits will not occur within six months. That is the short answer to the noble Lord. Perhaps I might pursue this a little further.
VISCOUNT SIMON: This puzzles me, my Lords. The noble Earl just said, I think, that productivity agreements would have to be stayed. I must say that I have read paragraph 18(2) as including most kinds of productivity agreements, because "resulting directly from increased output" I assume to mean increased output per head; and surely the object of productivity is that you do the same amount of work with fewer people or a greater amount of work with the same number of people. Is it not covered by paragraph 18(2) of the White Paper?
THE EARL OF LONGFORD: I am informed that they would be stayed for a period of six months. That is according to my information. Then, of course, there follows the period of severe restraint in 1967, and the new criteria will be introduced. But there would be this postponement of these agreements, unless they are in force already, for the period of six months.
However, I want to emphasise that we must face this question with all its many difficulties. The noble Lord, Lord Erroll of Hale, pointed to a number of difficulties, which I have no doubt will be explored when we come to the Bill. Of course there are difficulties. If it were an easy policy we should have adopted it some months ago, it has been adopted in the face of an emergency. It is not a policy we should have opted for originally with enthusiasm. But the question I repeat to the noble Lords is this: if we consider that the growth of incomes must be checked, what is the alternative?

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We may say it should be some sort of purely voluntary arrangement, without statutory reserve powers, whether in the case of the long-term plan or in the case of this temporary arrangement which lasts for one year. We could argue for that. But, having gone into that carefully—and here we had the support this afternoon of the trade union leaders—we are convinced it would not work. It would be a sham and would be misleading the country, not to mention our international creditors, to come down and talk about an agreed standstill when we knew it might not work. I would not say that it could not work—that would be a false use of words, because there is a chance that it might work; and therefore I repeat that I hope we shall not have to use the statutory powers.
The noble Viscount, Lord Simon, a great employer, would like to see these powers introduced as quickly as possible, and so would the noble Lord, Lord Kahn; other noble Lords, I suppose, hope they will never be introduced and regret the fact that they are included in the Bill. Ours is the middle position: we hope they will not need to be introduced, but if necessity arises we will not hesitate to introduce them, and I hope nobody will mistake the clearness of our purpose. We were criticised on an earlier occasion—and I hope I shall never come down to this House and complain of criticism—for speaking with two voices. We were told that if only we would speak firmly and clearly to the nation, the nation would respond. Well, I hope we are speaking firmly and clearly now. We are coming forward on the one hand with these far-reaching plans which will produce a far better atmosphere over the whole industrial field in years to come; but—if I may just get the attention of the noble Lord—
LORD ERROLL OF HALE: The noble Earl is getting it.
THE EARL OF LONGFORD: Well, part of it, and it seems to me not the best part of it at the moment, but I do not need the permission of the noble Lord to proceed. If I required permission I should ask for it elsewhere, but I was saying to the noble Lord before he began that little bit of patter that we are determined to make this absolutely clear. We are coming for-
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ward with a standstill which will be indispensable in the interests of the balance of payments and, therefore, the survival of our economy. I cannot say too often that we hope we shall not have to use these statutory powers, but if we do use them we shall use them with a clear conscience; and we hope, and I venture to think, that in the end the country, including noble Lords opposite, will be glad that we have done so.
On Question, Motion agreed to.

SEA FISHERIES REGULATION BILL [H.L.]
Reported from the Joint Committee on Consolidation Bills with Amendments, and recommitted to a Committee of the Whole House.
MINISTRY OF HOUSING AND LOCAL GOVERNMENT PROVISIONAL ORDER (CITY OF OXFORD) BILL
Reported, without amendment, and recommitted to a Committee of the Whole House.
PIER AND HARBOUR PROVISIONAL ORDER (BLACKPOOL PIER AND GREAT YARMOUTH NEW BRITANNIA PIER) BILL
Reported, with Amendments, and recommitted to a Committee of the Whole House.
MERSEY DOCKS AND HARBOUR BOARD (SEAFORTH WORKS) BILL [H.L.]
Returned from the Commons, agreed to, with Amendments.
SAINT MARY, EALING BILL
Returned from the Commons, with the Amendment agreed to.
OLDHAM CORPORATION BILL
Returned from the Commons, with the Amendments agreed to.