HL Deb 01 February 1967 vol 279 cc1029-44

6.40 p.m.

Debate resumed.

EARL JELLICOE

My Lords, I feel that first of all I should thank my noble friend Lord Watkinson for introducing this debate to-day. He covered a great deal of ground at a cracking pace, and I personally found myself in considerable agreement with everything he said, not least with the temperate tone in which he couched his remarks. Like my colleagues on these Benches, if I were so minded I should say some harsh things about the present Government's failure in this field hitherto. What a contrast there is between the rather disabused wisdom in the speech of the noble Lord, Lord Shackleton, and all that brash dynamism—not his, of course—which we heard 28 months or so ago! But, like my noble friend, I feel that this is an occasion for looking forward rather than back, and I hope to couch my remarks, and to put a few proposals to noble Lords opposite, not in a spirit of postmortem, but in amore hopeful antenatal vein.

I should like to dwell, first of all, on where I feel there is a very considerable consensus. I found myself in very great agreement with what the noble Lord, Lord Campbell of Eskan, said about the purpose of growth. We all, or almost all of us, believe in growth these days. We need it, of course, for the material things; for the bricks and mortar objects of our society. But there is more to growth than materialism. I believe that growth and the need for it goes right to the roots of our society. Perhaps in a static economic age—in the 18th century, for example—when the average man had very little expectation of improvement in his material conditions, growth was not all that important. But now we all know that growth is within our capacity and that we can profit from its fruits, economic stagnation, therefore, is bound to lead to frustration, to sap our national spirit and to erode the quality and excellence of our national life, of which the noble Lord, Lord Sherfield, spoke.

If we stagnate we cannot contribute to our own security; we cannot remain a first-rate modern industrial nation of the medium rank, just below the two super States; we shall not count in Europe, if we get into Europe; and we cannot throw off that surplus of resources which will allow us to play our part in smoothing that often dangerous and almost invariably abrasive relationship between the developing and the developed world. For all those reasons, I believe that growth is central to our purposes as a nation and to our health as a society. By the same token, I think we would all agree that the clue to sustained growth has so far escaped us. We have not won expansion without inflation, and not secured growth without recurring balance-of-payments crises.

We have heard a lot to-day about our need to export more, and of course rightly so. Only if we export on a rising curve can we expand on a rising curve. I would go rather farther. Only if we are prepared to take risks over exports—"Export or die!", as I think the noble Lord, Lord Campbell of Eskan, has put it in a notable speech—can we expand with safety and live.

Let me, if I may, give credit where I believe credit is due. Certain of the Government's actions—their panic import surcharge and that absurd selective employment tax—have certainly made the lot of the British exporter no easier. Yet I believe that, for all their mistakes, the Government have managed to instil into the British people, into all of us—whether bankers, industrialists, managers or workers, or just plain Parliamentarians—and have managed to convey to all of us, to the man-in-the-street and to the man in the board-room, some faint glimmering of the extreme urgency of the national need to improve our export performance. I believe this has been in large measure achieved, That performance is by no means bad, but it is by no means good enough. The noble Lord, Lord Shackleton, gave us some rather reassuring figures showing that we had exported at a record level for the last two years. Very well. But I would remind noble Lords that that ill-fated National Plan called for an increase of 5½ per cent. per annum in our exports, and we have so far not hit more than 4 per cent.

I do not believe, any more than other speakers this afternoon have believed, that there is any simple solution to this problem. Improving our export performance naturally means improving our economic performance right across the board, and entails much more than economic considerations. It brings in all the political considerations which lie behind our approach to the European Economic Community, for example.

A number of suggestions have been made to-day, and I should like particularly to support one idea on what I might call the reverse side of the coin ventilated by my noble friend Lord Watkinson, and that is what could be done by import saving. I would remind your Lordships that in 1965 our importers received nearly £500 million worth of short-term credit, mainly from overseas suppliers. If they had to deposit, as the noble Lord suggested, the cost of imports in advance, this could very well slow down the volume of imports. Personally, I am all for the liberalisation of trade. But beggars cannot be choosers, and some time last summer I found it rather ridiculous that we were continuing to import luxuries such as caviar when we were needing international "tick" on a vast scale for some of the necessities of life, such as oil.

The proposal which, incidentally, was put forward last July by Mr. Maudling, could be made selective. It could be made to bite on luxuries alone, and not on necessary imports. It is compatible with GATT, and was operated very successfully by the Italians when they ran into balance-of-payments difficulties in 1964 and 1965. Of course, if it were regarded as a permanent part of our defence mechanisms, I would agree with the noble Lord, Lord Campbell of Eskan, this is to be avoided, but if it is regarded as merely a short-term expedient—as a sort of stand-by regulator of our balance of payments—I should have thought it was a perfectly acceptable part of our armoury; and I hope that the Government, if they need this expedient, will not reject it.

Then there are the positive ways in which the Government could stimulate exports. I was glad to hear what was said by the noble Lord, Lord Harlech, and other noble Lords about the excellence these days of our commercial representation abroad, and about all the help given by the Board of Trade and the E.C.G.D. to exporters. I believe those tributes have been justly paid. Nevertheless, I feel there are still ways in which the partnership between Government and industry—and it must be a partnership in this matter of exports—could be improved. I believe that our commercial intelligence is first-rate these days, but the follow-up can be less than first-rate.

Take a case in point, of which I became aware when I was in the Far East recently—perhaps I should have been aware of it before. South Korea is at this moment on the verge of industrial take-off as a country. She is running a very considerable credit balance with this country of four-to-one in her favour. It is an ideal place for the British exporter. But I wonder whether this fact is appreciated in board rooms up and down the British Isles. I wonder how many managing directors in this country are busy learning Korean. They may be doing so, of course, because the British National Export Council and their Asia Committee (and I would echo the tribute that my noble friend Lord Watkinson paid to the work of the B.N.E.C.) are making it their business to get this kind of information around.

Take our performance with the really big contracts abroad, the sort of things of which the noble Lord, Lord Rhodes, spoke. We are losing too many big contracts these days to industrial nations of just the same rank and size and power in competition as ourselves. We are losing them to the French, to the Germans, to the Italians; and, not least, to the Japanese. In some cases our competitors seem to be better organised than we are to seize the big chance.

I believe that our arrangements as between Government and bankers and industry, and within industry itself, could bear looking at in this field. Our information about projects, I repeat, is usually very good, but on occasions we are rather less good in securing a well co-ordinated and selective follow-up, overcoming this problem of scale, to which the noble Lord, Lord Rhodes, referred. I agreed with what he said in this respect. We need a bigger approach to these bigger projects, such as the great generating schemes, the desalination projects, and vast projects like the trans-Sahara highway; and we need to organise ourselves better in this respect. We also need to pay more attention to the point to which he drew attention; namely, the question of getting consultants early in the field. This is an aspect of the matter on which E.C.G.D. could, with a little more flexibility, give some very considerable and significant help.

There are other measures which are available to us, of which I will mention only one. We should at least consider giving priority to successful exporters, favouring them by granting them scaled-up investment grants. This measure, of course, as the opponents to it would say, would be discriminatory. Never mind: I believe that we must discriminate in this field, and that is why I fully agree with what my noble friend Lord Harlech said about the value-added tax—the tax which it is proposed should be levied on the value which a firm adds to its products. Such a tax has many advantages, as my noble friend has suggested, and not least that it would replace both corporation tax and S.E.T.—and in the latter case, at least, that would be in itself a justification for it. I understand that the Government have been giving some consideration to this form of tax. It has been hinted that it is not without its attractions to Mr. Wilson, and I hope that when the noble Lord, Lord Beswick, replies he will be able to give us his views on this fiscal measure.

Successful exporting cannot take place in a vacuum. As my noble friend Lord Watkinson made clear, it must be based on a vigorous and expanding economy. It is a fallacy to suppose that a healthy export position can be won by artificially cabining and confining the home market. That is why I am so worried, like many of my noble friends (in fact like all noble Lords who have spoken in this House this afternoon), by the figures for production and, above all, by the figures for investment—the inescapable indicators for the future.

At this hour I do not wish to delve too deeply into questions affecting the domestic front. I believe, though, that the Government must take urgent measures to stimulate corporate investment. It is extraordinarily difficult in the present climate to take such measures in isolation; to be selective, as the noble Lord, Lord Shackleton, indicated the Government would like to be. But there are measures open to them. Psychologically, of course, nothing would do more good than if they were to scrap S.E.T. But I believe that, in any case, conscious and positive measures to stimulate national production and investment must be taken soon, and taken more vigorously than they have been so far. Not least I believe that the Government must be absolutely determined to pursue to its logical conclusion a policy of incentives for workers and management. I would endorse what my noble friend Lord Watkinson said about maintaining the differentials for the really skilled, high-grade worker in industry. This means that we must move increasingly towards a capital-intensive and labour-extensive economy. That means that we must stop employing three men when one man can do the job.

One of the most hopeful signs two or three years ago, as I saw it, was the move towards real productivity agreements in industry. We all know that there are bogus ones. One of the most distasteful aspects of the squeeze has been the freeze put upon those agreements. I hope that during the period of severe restraint the Government are examining how best to go about the active pursuit of real productivity agreements in the very near future.

Finally, we come to incentives, which have been spoken of a good deal this evening: incentives for what one might term the managerial class. I would accept what some noble Lords have said: that money is not the only, and in some cases not the main, motivation for medium and top management. Of course there are others: there is personal pride in the job; there is prestige; there is at the top level the feeling of pride, and the almost sensual pleasure in taking decisions, which we have heard referred to recently. But these pleasures are felt, on the whole, more often in the Civil Service than in business, although they are present in business. But, my Lords, we should not kid ourselves: for most young, and middle-aged, men and women—the drivers and thrusters whom we need in our boardrooms—a very real spur to greater effort is the chance to earn more money. There is nothing wrong in that.

If you are a young executive and can only afford a "mini", it is natural to want a Jaguar. If you are a little older, and you are married, the desire is natural and legitimate to make things easier for your wife and to provide wider and better horizons for your children. This is the sort of "carrot" which should be available to lure the £2,500 a year man into the £5,000 a year job, and the £5,000 a year man into the £10,000 a year job, to the benefit not only of themselves but also of their companies and of their country. I firmly believe that the Government must pay careful attention to this particular problem.

In this connection there are certain spheres at which I would suggest they should look. I would urge them to confirm that the surcharge is only a temporary measure. I would ask them to take another look at the question of stock options, which give a chance for young, bright executives, without capital and without the good fortune to have rich, or fairly well-off, parents, to take an equity stake in their companies, which is a good thing in itself. Finally—and I know this goes against the grain—I would ask the Government to have a good hard look at surtax levels as a whole. A great deal has been said on this point this afternoon, and I am not going to say any more. But having tried to listen dispassionately to what has been said, I believe that a very good case has been made for a further examination of this particular problem of incentives for the real "flyers" in our society.

I wish to conclude by saying this. With my noble friend, I believe that we must get this country and our economy moving again. I would repeat his plea; it is really essential that we should know more about the intentions of the Government. Of course, we cannot expect to know the details at this stage, but we wish to know, and the country wishes to know, more about their broad strategic approach. I must confess that, in this respect, although, as is habitual with him, what the noble Lord, Lord Shackleton, said was said pleasantly, and with all his usual competence, he gave me only a faint glimmering of what the Government may have in mind in this respect. But I found myself in considerable agreement with a great deal of what was said from the Benches opposite, and I hope that when he comes to reply in a moment the noble Lord, Lord Beswick, will be able to further enlighten us about the Government's intentions in this vastly important field.

7.2 p.m.

THE PARLIAMENTARY UNDERSECRETARY OF STATE FOR COMMONWEALTH AFFAIRS (LORD BESWICK)

My Lords, we have had some good, sound, constructive speeches to-day, not least that with which the noble Viscount, Lord Watkinson, introduced this debate. For all the noble Viscount's criticisms, it seemed to me that he, fundamentally, like other noble Lords was hopeful about the economic future of this country of ours. There have been of course some pessimistic speeches, notably the speeches from the noble Lord, Lord Sherfield, and my noble friend Lord Arwyn. I would only say this to the noble Lord, Lord Sherfield: in something like twenty years in Parliament I do not recall one year in which I have not heard someone prophesy the doom of this country because of high taxation. Having said that, I do not quarrel with what has been said by the noble Earl, Lord Jellicoe, about the need for dispassionate study of this question.

LORD SHERFIELD

If I may interrupt the noble Lord, I hope I was not a prophet of doom. I merely suggested that there might be a slow decline.

LORD BESWICK

I should have thought doom, at the end of a slow decline, is even worse than sudden death. For myself, I must say I found the robust faith shown by my noble friend Lord Cooper of Stockton Heath, and the broad vision of the noble Lord, Lord Campbell of Eskan, very much more to my taste than the emphasis upon reduction of tax rates on those more highly paid than others. One point at least I hope is clearly established as a result of this debate; namely, that the Government believe, as much now as at any time in the past, in the principle and practice of economic planning. It is also accepted, I trust, that the management of our economy cannot simply be achieved by controlling the level of demand. True, for balance-of-payments reasons, which it is not my intention to elaborate on now, the action taken to restrain demand has featured much more in recent public discussion; but action needs to be taken, and has been taken, on the supply side as well, and the techniques of positive and selective encouragement of production has been a major preoccupation of the Government.

The noble Viscount, Lord Watkinson, emphasised the need for co-operation between the three partners, the trade unions, employers and the Government, and the pattern of economic management and guidance that is now emerging more clearly takes account of the wisdom of what the noble Viscount has said. The N.E.D.C., E.D.C.s, the B.N.E.C., the I.R.C. as well as the creation of the Department of Economic Affairs and the Ministry of Technology, together with the reorganisation of other production departments all involve, for their effective working, consultation or discussion of one kind or another between the Government and their important partners.

It is our case that this action taken on the supply side of our economic affairs makes the current situation so very different from the "Stop-Go" policies of the past. If one had dealt with the balance of payments crisis only by holding back demand and production, the prospects for steady growth in the future would have been severely jeopardised. It was because, in our view—and, as the noble Lord, Lord Cooper of Stockton Heath, said, I do not here seek to make a Party case but simply to claim that as a nation we can learn from past experience—not enough was done in the past to deal with the underlying structural weaknesses of our economy that it was inevitable that the freezes and squeezes of 1961 and 1963 were followed by another crisis in 1964.

General reference has been made by my noble friend Lord Shackleton to the work of the "little Neddies", and he was rather chided by the noble Lord, Lord Harlech for not going into more detail. I therefore offer some details of the contribution towards this task of improving the supply side of our economy. Subjects which they have tackled, or are tackling, include standardisation and variety reduction; better methods of stock control; inter-firm and international productivity comparisons; the assessment of future manpower needs and action to help meet current or likely future shortages; the adequacy of existing industrial capacity; the improvement of Government and other statistics (about which the noble Lord, Lord Drumalbyn, had something to say in a recent debate); closer consultation between makers and users of equipment, and between manufacturers and retailers. For example, the Mechanical Engineering E.D.C. has initiated maker/user contacts in a number of sectors in order to ensure that users get a better idea of what is on offer and to enable manufacturers to ascertain the opinions, and the present and future likely needs, of the users of plant and machinery.

Discussions towards similar objectives have started in the fields of textile machinery, food processing, confectionery machinery, paper-making machinery and dock cranes, this latter especially in relation to container handling. Several maker/user groups are operating in textile machinery, and a census has been undertaken to establish the numbers and types of looms which are being imported. An important extension of this line of approach is a Working Party set up under the ægis of the N.E.D.C. last July to assess the future demand for process plant in the chemical, gas, petroleum and petrochemical industries. Its first report will be circulated very shortly. This Working Party has for the first time brought together figures of demand from the several industries using process plant, and its report will show that demand in 1967–68 is likely to be of the order of 20 to 30 per cent. above that of 1965–66—itself a year of high demand.

Equally usefully and constructively, the Distributive Trades E.D.C. has undertaken research in selected fields into the reasons why customers may prefer to buy imported consumer goods. It has also issued a useful manual of stock control methods for retailers entitled Gold in your hands and I understand that 22,000 copies of this manual have so far been sold. The Electrical Engineering E.D.C. has initiated an agreement between the Central Electricity Generating Board and the cable manufacturers to reduce the number of types of low and medium voltage transmission cables from around 280 to 30. Clearly, there will be advantages here to manufacturers in the way of longer runs and increased productivity. The Movement of Exports E.D.C., in its report Through Transport to Europe, spotlights the need for management to study transport arrangements just as carefully as production and marketing. It asks for the fuller use of pallets, containers and container ships, and roll-on/ roll-off vehicle and trailer services.

The noble Lord, Lord Kings Norton, rightly drew the attention of the House to the need for defining restraint on export growth. I hope he will agree from what has been done, and what is being done, that the Government accept the wisdom of what he has said. A number of current difficulties in the way of the fullest use of these newer methods of transport which concern the United Kingdom and international Customs procedures are being pursued with Government and other bodies concerned.

If time permitted, my Lords, I could give other practical examples of constructive work that has been going on, although not always hitting the headlines. There are, for example, the questionnaires circulated by four different E.D.C.s on export performance within their respective industries—chemicals, food processing, mechanical engineering and paper and board—which are now being analysed. In the light of its manpower inquiries, the Mechanical Engineering E.D.C. has put forward proposals for a "crash" training programme for welders, which I understand is going ahead satisfactorily. I have mentioned all these reports and recommendations, but I quite accept what was said by the noble Lord, Lord Harlech, that they would be quite valueless unless we have the right kind of management material, and unless we put the right kind of emphasis upon management training.

In the field of management education, I understand that the courses at the London and Manchester business schools have been over-subscribed, and the evidence points to a strong top level business interest. In 1965, 26 universities and equivalent institutions produced some 19 undergraduate courses, 58 post-graduate courses and 66 short post-experience courses on management education. Additionally, there are now about 50,000 students in some 2,000 management courses at technical colleges, and I understand the number is growing. Furthermore, there have been efforts to expand the work on productivity at factory floor level, taken after the Prime Minister's National Conference on Productivity in September of last year, and this work is being followed up by a Working Party under the chairmanship "of Neddy's" Director General.

As against all this, I should have thought, helpful and hopeful work, I noted what was said by my noble friend Lord Arwyn in his field of tin mining. I am sorry to hear about the frustration he feels. I will certainly try to find out what has happened to the Report of which he spoke. The noble Lord, Lord Bowden, in a speech which I think held the House (although I should like to check some of the statements he made), referred, among other things, to the need for ensuring that a "Buy-British" policy was carried out in this country. In fact, the Government have recently undertaken a full review of their purchasing arrangements, and a report on the outcome is shortly to be considered by the National Economic Development Council.

The noble Viscount, Lord Watkinson, and my noble friend Lord Campbell of Eskan, dealt with the important and controversial question of overseas investment. Surely no one is against investment overseas if we have the money available to invest. But the Government accept the analysis of my noble friend Lord Campbell of Eskan, about the inescapable need in the next few years, at any rate, for curbing the rate of investment overseas. He put forward a most interesting proposal as to how this curbing could be exercised, but I would put to him that the Exchange Control and the voluntary programme at present in operation exercise a greater degree of control than we have had before. Of course, some would argue that it is already severe. As for the method, the idea of using an Advisory Committee, as was suggested by my noble friend, is attractive, but on the face of it, the Government feel that the present arrangements under which individual applications are considered on their merits against criteria which are laid down in advance, are to be preferred.

Much was said by the noble Viscount, Lord Watkinson, and others about the importance of personal and group incentives. Despite what has been said by the noble Earl, Lord Jellicoe, and by Lord Sherfield and others, about the advantage of reducing taxation, I do not propose to go into this point: and I know that the noble Viscount is far too experienced to expect me at this time of the year to speculate on what the Chancellor of the Exchequer may say in a few weeks' time.

I should, however, like to deal with one aspect of this matter of incentives upon which I hope I shall obtain some agreement. I am absolutely certain that, as has been said by others, including my noble friend Lord Campbell of Eskan, it is not enough simply to think in terms of individual financial incentives. If we are to get the maximum possible effort from our people, there must be a general sense of fairness, and a deep, if unexpressed, feeling that, broadly speaking, rewards are going to the right people. I believe—and I have some experience—that it was because the people of this country, particularly the young people, had over the past decade or so felt that this fairness was not being applied that they voted for Labour, rather than in the expectation of some immediate tax reduction.

The Government's prices and incomes policy has come to be regarded by some, and wilfully misrepresented by others, as only a negative attack on wage increases. Nothing could be further from the truth. It is intended as an expansionist policy, but expansion allied to social justice and economic common sense. Of course, at the outset, a standstill on both incomes and prices was essential to enable productivity to catch up with previous excessive increases in income.

I accept the virtue of what was said by the noble Viscount about the possibility of voluntary agreement. I think it was regrettable that statutory powers had to be used to restrain the selfish minority who would not accept the good Socialist principle of serving the greater good of the greatest number. The truth is that the general response to the Government's call for discipline in wage claims and price increases has been absolutely magnificent. I should like to take this opportunity again of paying tribute to what has been done in this matter by the noble Lord, Lord Cooper of Stockton Heath, and others. The vast majority of both unions and management recognise the need for a standstill, and the attitude of these two essential sides of industry augurs well for the economic future of Britain. To me, it is ironic that some of those in the trade union and Labour movements with Whom I have been glad to work in many good causes, as I see them, in the past, have justified their obstinate opposition to the incomes policy on grounds of political principle.

They say that they are not against an incomes policy as such; they say, indeed, that they would welcome such a policy, but only after we have achieved a full Socialist economy. It is rather like saying that they will accept the discipline of traffic lights, but only when we have a completely modernised road system. Meanwhile, they are prepared to try any device to enable them to over-shoot the red lights and gain some advantage; relying upon the restraint of decent motorists in order to avert tragedy. There are others who use sympathy for the lower paid workers to cast doubts about the incomes policy. But of course it is precisely the lower-paid worker, the weaker elements, or the less well-organised section of the community, who would be left even further behind if we were to return to the old free-for-all. This fact, I believe, is now being much more clearly recognised.

We are now in a period of severe restraint, and the Government have undertaken to produce further guidance for the period after June 30 when severe restraint ends. It will be necessary to develop the machinery, the methods and, I would add, the attitude and philosophy as well, which will ensure not only that the material results of increased productivity will be shared out between the employers and the workers, who immediately make the increase available, but also that there is a fair and adequate margin left for others in the community who cannot, for one reason or another, measure their contribution to our general welfare in terms of figures of output. The Government accept that a policy of stable growth cannot be made to operate without the active support of the great majority of those concerned. On the other hand, they also accept that they cannot abdicate their own responsibility for the good of the country as a whole.

So far, we can be proud of the progress which we have made. Who would have expected a few years ago that the T.U.C. would have accepted responsibility for vetting wage claims of their constituent unions? And when the case is being made out for tax reliefs, we ought to pay regard to the unselfish attitude of the trade unions and their sense of social responsibility in these matters. Of course, the First Secretary is consulting both the C.B.I. and the T.U.C. about the next steps in this decisive policy. The T.U.C. have convened a special conference for March 2, at which executives of constituent unions will hammer out the issues involved. The C.B.I. have set up a special working party for the same purpose. No one expects that we shall ever get a formula which automatically translates social policy into detailed wage rates, but I believe—and this is the belief of theGovernment—that the majority of those concerned do not want to go back to the old free-for-all. They want to go forward. They want an incomes policy which is compatible with a free, democratic society.

If we can succeed in this, my Lords, I believe that we shall be shown by history to have pioneered an advance in economic democracy which is just as significant as all that Britain has done in the field of Parliamentary democracy. I believe, too, that together with the other major efforts now being made to reconstruct the economic basis of our country, this policy on prices and incomes, on material rewards, will yet achieve the objective which has been set before us.

7.23 p.m.

VISCOUNT WATKINSON

My Lords, it only remains for me to say a very sincere word of gratitude to all noble Lords who have taken part in what has been a wide-ranging and very practical debate. If I might be allowed one final comment, it is that democracy would be a dull and flabby thing if we did not knock one another about sometimes. We have all "had a go" to-day, and I hope we shall "have a go" again. But, by contrast, there ought to be occasions when we seek to find some common ground, and where we can go forward in the national interest. I hope, having listened to the noble Lord, Lord Cooper of Stockton Heath, that we have found some common ground to-night. Let us hope that we can consolidate it and move forward, because we all sink or swim together. I beg leave to withdraw my Motion for Papers.

Motion for Papers by leave, withdrawn.