Lords Sitting of 10 April 1968

Preamble
The House met at half past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Truro.
The Marquess of Winchester—Sat first in Parliament after the death of his kinsman.

ROYAL ASSENT
2.37 p.m.
THE LORD CHANCELLOR (LORD GARDINER): My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts:

Education Act,

Consular Relations Act,

Brighton Marina Act,

Epping Forest (Waterworks Corner) Act.

KOREAN ARMISTICE VIOLATIONS
LORD BROCKWAY: 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 propose to the United Nations Security Council that a commission be appointed to investigate the charges made by the Governments of both North and South Korea that the terms of the Armistice Agreement of July, 1953, are being violated.]
THE MINISTER OF STATE FOR FOREIGN AFFAIRS (LORD CHALFONT): My Lords, in the Armistice Agreement of 1953, two bodies were set up for investigating alleged breaches of that Armistice. These were the Military Armistice Commission and the Neutral Nations Supervisory Commission. Neither has been able to fulfil its role effectively because
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North Korea has consistently refused to allow United Nations inspection of its territory. If North Korea were willing to allow complaints from both sides to be investigated, the existing bodies, specifically established for that purpose, would be fully adequate. In the circumstances, I see no purpose in Her Majesty's Government proposing the establishment of any new body.
LORD BROCKWAY: My Lords, while recognising what my noble friend has said, is it not the case that South Korea has submitted to the Security Council over one hundred instances of infiltration and that North Korea—and this is significant—has also submitted to the Security Council, through the Soviet Government, even more cases of infiltration? Does this not indicate that there would be some willingness on both sides for there to be an investigation of infiltration? And in view of the fact and the great danger that both Governments predict war by 1970—another Vietnam—is it not now urgent that some special steps should be taken by the United Nations to prevent this disaster?
LORD CHALFONT: My Lords, I think my noble friend will agree that his question was rather a long one, and I hope he will forgive me if I answer it shortly. The fact is that allegations and counter-allegations of this kind have been made but we see no sign so far of any change in the attitude of North Korea in denying the competence of the United Nations in any matter relating to North Korea. There are these two bodies and they would work together if the North Koreans would work with them. I see no purpose in setting up yet another body.
LORD ROWLEY: My Lords, would not my noble friend agree that the figures given by my noble friend Lord Brockway as to the situation on the border could very well be greatly improved if the Government of North Korea would agree to the deployment of United Nations Observers along the border?
LORD CHALFONT: My Lords, of course; but I am sure my noble friend will know that the Military Armistice Commission, to which I referred, in fact consists of officers from the United Nations command.

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They are mainly Americans and South Koreans, but there are other nationalities as well. And the simple fact is that the United Nations people are there but the North Koreans will allow no inspection of their territories.
LORD BROCKWAY: My Lords, is not one of the difficulties the fact that North Korea has not been made a member of the United Nations and that the activity in South Korea was United Nations activity? Further, would Her Majesty's Government seek to find some solution to this problem through the Soviet Union, who acted as the means of communication with the Security Council?
LORD CHALFONT: My Lords, of course Her Majesty's Government will seek every way they can to help in this matter, but I ask my noble friend to believe that, whatever may be the motives of the North Korean Government in this particular case, they do deny the competence of the United Nations.
LORD OGMORE: My Lords, in view of the last question by the noble Lord, Lord Brockway, may I ask: is it not a fact that the recent United Nations presence in Korea is due to the quite unjustified attack by North Korea on South Korea in 1950?
LORD CHALFONT: My Lords, I take note of what the noble Lord has said, but I think it would be unprofitable for me to comment on it at the moment.

I.M.F. CONFERENCE AND SPECIAL DRAWING RIGHTS
2.49 p.m.
THE EARL OF DUNDEE: 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 make a statement on the results of the International Monetary Conference held at Stockholm on the 29th and 30th March, indicating the total amount of Special Drawing Rights which could be made available to all the countries which have agreed to operate the plan; and whether the
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plan now agreed on differs in any way from that agreed on at Rio in September.]
LORD BESWICK: My Lords, the Finance Ministers and Central Bank Governors of the Group of Ten, with one country abstaining, reached agreement at Stockholm on the amendments to the Articles of the International Monetary Fund needed to establish a scheme for Special Drawing Rights. The proposed scheme is closely based on the outline plan adopted at the annual meeting of the Fund in Rio de Janeiro last September. I might add that I in end to go into this subject in rather more detail in the debate which is to follow.
THE EARL OF DUNDEE: My Lords, I should like to thank the noble Lord for his Answer. I am sorry that I cannot be here this evening to listen to the noble Lord's speech, but may I ask him whether there has been any final agreement on what majority of voting power in the I.M.F. will be needed to activate the Special Drawing Rights, and whether these Rights could be activated before the next annual meeting of the in September?
LORD BESWICK: My Lords, agreement on the amendments will require three-fifths majority of the members with four-fifths of the voting power. The scheme of the Drawing Rights should be activated by about the middle of 1969 but, of course, the final details are still to be settled.
LORD FRASER OF LONSDALE: My Lords, having regard to the relatively narrow margin whereby the free gold price varies from the official price, may I ask the noble Lord whether there is not a case for a really open-minded reconsideration of the advantages of a free gold price, which would seem to many to be a better way of curing the world's financial troubles than trying to rely on paper money?
LORD BESWICK: My Lords, I think there has been a very open-minded consideration of this problem, but as I shall try to show later on. I think the decision leads away from the conclusion which the noble Lord draws.

EUROPEAN CENTRE FOR TECHNOLOGY
2.48 p.m.
THE EARL OF BESSBOROUGH: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government what progress has been made in discussions regarding the formation of the proposed European Centre for Technology.]
LORD CHALFONT: My Lords, my right honourable friend the Minister of Technology has had informal discussions with other European Governments. In addition, the Confederation of British Industry, with which we are in close touch, has consulted corresponding institutions in Europe, where it has found interest in the idea of such a centre.
THE EARL OF BESSBOROUGH: My Lords, while thanking the noble Lord for that encouraging reply, which I think goes further than the Government have so far gone on this matter, may I ask him whether it is intended that this new body should be rather more industrial in character than governmental, that its members will be provided by the C.B.I. and possibly other industrial federations in other countries? And am I right in thinking it will be in line with the Benelux proposals earlier this year, and could include other European countries —the members of EFTA or others—and might perhaps leave out any country that was not anxious to co-operate?
LORD CHALFONT: My Lords, so far as the first part of the question is concerned, I think this is a case where there must clearly be participation both by Governments and by industry. In the initial stages the C.B.I. are conducting soundings. It is clear to me and to Her Majesty's Government that when this centre is set up it will have to be a matter for governmental action as well as industrial action. So far as the second part of the question is concerned, the noble Earl is right in supposing that we hope to continue this investigation in the framework of the Benelux proposals which, as he will know, place technology very high on their list of priorities. So
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far as participation is concerned, certainly the Benelux proposals envisage a wider area of consultation than simply between the Common Market and candidate countries, and I can assure the noble Earl that if there are some countries who do not wish to take part in this consultation it does not necessarily follow that we shall discontinue the idea or be discouraged from bringing it to fruition.
LORD MITCHISON: My Lords, are not the trade unions also concerned; and will they not be invited to become members of this conference?
LORD CHALFONT: My Lords, of course the trade unions are much concerned with this proposal. They have been consulted, and their views have been sought. We are not talking about a conference, but rather about the establishment of a permanent centre. It is difficult to say at this stage who will be members and how it will be constructed, but I can assure the noble Lord that the trade unions and the T.U.C. will be taken fully into consultation.
LORD MITCHISON: As fully, both as regards consultation and membership, as the C.B.I.?
LORD CHALFONT: Yes, of course. The C.B.I. are conducting the soundings at the moment, but we have kept the T.U.C. and the C.B.I. informed equally throughout the investigation so far.
THE EARL OF BESSBOROUGH: My Lords, might I ask also something about the objects of this centre? Am I right in thinking one of the objects will be to encourage mergers between firms in different countries in Europe, and also that it might assist in rationalising tax and patent laws? It would be very interesting to know more about the objects of the organisation.
LORD CHALFONT: My Lords, I think it might be unwise for me at the moment to go too deeply into the exact nature of this centre, because we are awaiting the reactions of our partners on the Continent. As the noble Earl will know, the Six are now engaged in considering the Benelux proposals, the Italian Memorandum and the Franco-German Declaration, all of which include proposals for technological co-operation. Therefore, I think it would be unwise for me to go

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too specifically into the exact nature of the centre. But I think I can say that one of its aims would be to undertake reviews of the whole scope of European industry and make forecasts about its development and the way in which its structure will emerge, and certainly I imagine that it would take into account the kind of mergers to which the noble Earl refers.
LORD SHERFIELD: My Lords, is the noble Lord aware that such a project is likely to be very wasteful of scarce human resources and material resources unless its objectives and purposes are very specifically and clearly defined, and that it will not really provide a substitute for direct contacts between laboratories and industries in the countries concerned?
LORD CHALFONT: My Lords, of course I take the noble Lord's point. Nothing can really take the place of this kind of direct co-operation, but I do believe that this centre will have an important role to play, and certainly our partners on the Continent seem to be persuaded of this. I agree with the noble Lord that it will not be fully effective unless its aims and objectives are clearly defined and set out; and that we shall aim to do before going any further in setting it up.

CERVICAL CANCER TESTS
2.50 p.m.
THE EARL OF BESSBOROUGH: My Lords, I beg leave to ask the second Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government what progress has been made in research in the use of lasers for the diagnosis of cervical cancer, and whether the N.R.D.C. are to make available the necessary funds to compare optical with laser methods.]
THE PARLIAMENTARY SECRETARY, MINISTRY OF HOUSING AND LOCAL GOVERNMENT (LORD KENNET): My Lords, early trials of the technique gave disappointing results. Further work has been carried out since then, the results of which are under consideration. It is possible that a fresh series of trials to compare the technique
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with accepted procedures will be it initiated. The Ministry of Health is in touch with the N.R.D.C. on this matter and the latter will consider whether any financial support is justified.
THE EARL OF BESSBOROUGH: My Lords, while thanking the noble Lord for that Answer, which is certainly more encouraging than the one he gave to my supplementary question last November, may I ask him if he can say whether the International Cancer Research Establishment at Lyons is now working on similar lines?
LORD KENNET: My Lords, I am sorry I have not that information at the moment, but if the noble Earl agrees I will send it to him shortly.
LORD IRONSIDE: My Lords, is the noble Lord aware that the Royal Victoria Infirmary, in conjunction with a firm in Newcastle, have examined 319 cases by using the Laser techniques, and cases he not think that the results of the correlation between the Laser technique method and the cytological examination under microscope promises well? Further, does not the noble Lord agree that further work should be done in this field?
LORD KENNET: My Lords, as I said, I am aware of those facts. We are comparing here an established technique with a new technique. The first run of tests to compare the two techniques suggested that the new technique had no advantage over the established technique. Another run of tests h is now been carried out elsewhere which suggests that it does. In order to resolve the apparent contradiction between the first two runs, the comparison test is being considered by the Ministry of Heath and the N.R.D.C.
THE EARL OF BESSBOROUGH: My Lords, can the noble Lord say when the result of this test will be known?
LORD KENNET: My Lords, it is not known when this test will be completed.
LORD IRONSIDE: My Lords, will the noble Lord ask his right hone arable friend the Minister of Health whether he will enter into discussion with the Royal Victoria Infirmary in Newcastle at an early date, to see how the programme of correlation between existing techniques and the new Laser techniques can

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be worked out, bearing in mind that the new Laser techniques need considerable co-operation with the firm in Newcastle which has been concerned with working with the Royal Victoria Infirmary?
LORD KENNET: My Lords, if there are to be further runs of experiments involving Government finance there will be many parties to be consulted.

BUSINESS
LORD BESWICK: My Lords, at a convenient moment after 3 p.m. my noble friend the Leader of the House will be making a Statement on Malta. Subsequently, my noble and learned friend the Lord Chancellor will be making a Statement on the Report of the Latey Committee on the Age of Majority. I would also inform your Lordships that dinner will be served this evening between quarter to seven and eight o'clock.
LANCASHIRE COUNTY COUNCIL (GENERAL POWERS) BILL [H.L.]
Read 3a, and passed, and sent to the Commons.

PROCEDURE OF THE HOUSE
2.45 p.m.
THE CHAIRMAN OF COMMITTEES (THE EARL OF LISTOWEL): My Lords, I beg to move that the First Report from the Committee on Procedure of the House be now considered.
Moved, accordingly, and, on Question, Motion agreed to.
The Committee's Report was as follows:
1. STARRED QUESTIONS
The Committee have considered the right of members of the House to ask Starred Questions and are of opinion that questions are asked by leave of the House. They, therefore, consider that the form of words at present in use, namely, "I beg leave to ask the question standing in my name on the Order Paper is appropriate and should be continued.
2. ARRANGEMENT OF BUSINESS: SPECIAL ORDERS
The Committee recommend that Standing Order 35 (Arrangement of the Order Paper) be amended so that Special Orders are given the same precedence on the Order Paper as Public Bills and Measures.
3. PROCEDURE IN COMMITTEE OF THE WHOLE HOUSE
The Committee have considered the procedure followed when several bills to which no amendment has been put down are consecutively to be considered in Committee, and are unlikely to be debated: and whether it is necessary for the House to be resumed after consideration of each bill. They consider that the rights of Peers to raise points in Committee would in no way be affected, if the bills in question were grouped and considered successively in Committee. The House would not be resumed until the last of the Bills had been considered in Committee, and on the resumption of the House each bill would be separately reported. The Committee regard this as a desirable simplification of present procedure and recommend that it be adopted.
THE CHAIRMAN OF COMMITTEES: My Lords, I beg to move that this Report be agreed to.
Moved, that the Report be agreed to. —(The Earl of Listowel.)
On Question, Motion agreed to.

THE ECONOMIC SITUATION
2.55 p.m.
LORD SHACKLETON LORD SHACKLETON rose to move, That this House takes note of recent developments in the economic situation. The noble Lord said: My Lords, in rising to move the Motion standing in my name on the Order Paper I can assure your Lordships that although my speech will be concerned with some of the subjects in the speech of my right honourable friend on the Budget, it will not be as long as his was on that occasion; nor, I fear, will it be anything like as brilliant as his was. But I shall attempt to continue further the debate which we had in this House in January. That was in the context of the public expenditure cuts announced by my right honourable friend the Prime Minister in another place on January 16.
We now debate the economic situation in the context of the Budget Statement of March 19. The sequence is a logical one, and in my speech I shall attempt to produce the framework of the decision which the Government have now taken. Although some of our critics have sought to throw doubt on the point of the logical order of events, the Government were clear at the time of devaluation that the measures then announced would not suffice to make a success of the operation, and that further measures would be needed to release resources. But given

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the relatively high level of unemployment then prevailing, and the inevitable uncertainty about the timing and magnitude of the response of exports and imports to the new parity, we did not wish to engineer this release before the additional demand for exports, and for import substitutes, had started to come through. Our intention was to act during the course of the ensuing months, first on public expenditure—since cut-backs in that field necessarily take time to become effective —and later on private consumption. We have seen the unfolding of that strategy with, as I indicated at the beginning, the public expenditure curbs of January 16, and then, three weeks ago, with the severe restraints on consumer spending embodied in the Budget.
The character of this strategy was, as I have indicated, expounded at great length and with great clarity by my right honourable friend the Chancellor of the Exchequer, and I would only wish to restate in rather summary form the economic basis of the Budget Statement. That Statement, I would emphasise, was formulated in fact before the momentous Washington Conference of Central Bank Governors that took place on the eve of the Budget, on March 16 and 17. My noble friend Lord Beswick will have something to say about this Conference, in the setting of the international situation, when he comes to wind up our debate this evening. I would merely observe here that although the shape of the Budget was decided, as I have said, before the Conference, it will, by fostering the strength of sterling, contribute powerfully to the task of restoring the stability of the international monetary system and guiding the development of that system along rational lines.
The purpose of the Budget is to help create conditions at home for the achievement, as soon as possible, of a balance of payments surplus of the order of £500 million a year. This surplus which must be sustained over a period of years, is required to enable us to repay heavy overseas debts, to rebuild the reserves and to provide a margin against temporary vicissitudes. We all know of the desperate consequences of even a temporary vicissitude on the international monetary situation. To achieve this surplus is a formidable undertaking, but it is not one by any means beyond our reach. Other countries in the recent
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past—France, Italy and Germany, are prominent examples—have successfully accomplished large adjustments in their external position when circumstances require it. What others have done we can, and must, ourselves do.
The prospect facing the Chancellor in contemplating his Budget was that the growth of one important component of demand on our national resources, namely, public expenditure, would show a sharp slowing-down in the coming twelve to eighteen months—this slowing-down reflecting the firm action taken by the Government in recent months to which I earlier referred. On the other hand, personal consumption—which is the dominant element in demand, accounting for more than half the total —would, on best estimates available to the Government, show an appreciable rise of about 1 per cent. a year in real terms between the second half of last year and the middle of next year. This late of increase, moreover, would have been accompanied by a pick-up in industrial investment and in stock-building. It was clear that the increase in demand from these sources taken together would not leave enough room in the economy for the required increase in production for export and for import-saving. Personal consumption would therefore have to be cut back sharply if we were not to face the prospect of a renewal of inflationary pressures and could not hope to secure an improvement on the necessary scale. The Chancellor's judgment was that it would in fact be necessary to impose a cut-back in consumption of about 2 per cent. a year—a cut-back from the rise of about 1 per cent. which would probably otherwise have taken place.
I will come in a moment to the tax measures by which this cut-back is to be implemented. Before doing so, however, I wish to emphasise that, notwithstanding the severity of these measures, the prospect is still for a considerably faster rate of growth in the economy over the period ahead than has been recorded in recent years, and much faster than otherwise would have been possible without devaluation. Let me admit that the Government are very disappointed that much of their pans has been dislocated by the failure to attain the increase in production on which we had counted and

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of which we had told the country. We now estimate that total output—the gross domestic product in real terms—will expand from the second half of 1967 to the first half of 1969 by at least 3 per cent. a year. This compares with a rate of expansion of no more than about 1 per cent. between the second half of 1966 and the second half of 1967. Moreover, if exports perform better than we have allowed—and the prospects for world trade are reasonably favourable and the competitive cost advantage gained by our exporters from devaluation is considerable —then we shall be in a position to achieve, and in a position to afford, a faster rate of growth in production.
I should like to answer briefly those who have argued—I do not think many of your Lordships are among them—that the Chancellor has been too severe, that, in the current jargon, he has been guilty of "overkill". (They have enough jargon in the military field—it is a bit much when it spills over into other fields.) Some of these critics rest their case on the belief that productivity is likely to be growing faster now and henceforth than in the past, partly because, for example, of the Government's own many-sided efforts—I stress this, and progress is being made—to re-structure the economy and lift efficiency all round. Indeed, this could be so, and we earnestly hope that productivity will grow faster. But an improvement in the rate of productivity advance is not something that should, in our present critical economic circumstances, be counted on in advance. The right approach is to proceed cautiously, but to be ready to take the advantages of higher productivity if this is achieved. But if we are to move into a phase of substantial balance-of-payments surplus, as we must, the proportion of national output devoted to private consumption has to be reduced whatever the rate of growth. In other words, even if we could have risked assuming a high rate of growth in productivity and output in 1967 and 1968, it would not have removed the need for a tough Budget aimed at reducing, for the time being, the share of the national income taken by the ordinary consumer.
Given that action had to be taken on the scale I have indicated, the Chan-
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cellor had to make a choice of the right mix of taxes. Of course, individual tax increases will always be criticised, but I suggest that the onus is on the critics to say what they would have done in the place of any of the proposals which they criticise. In advance of the Budget, many people, including the Confederation of British Industry, urged the Chancellor to direct his measures mainly towards taxes on spending; and that is what he did. The general reaction of the country to the Budget has indicated that most people endorse this policy.
When taxation is discussed, the point is often made that direct taxation is progressive and indirect taxation is regressive; indeed, this has been very much the case in the past. Like many of these generalisations, it may not be as true in the present as it has been in the past. This is not the whole truth to-day. Perhaps what has changed the situation more than anything else is the fact that as incomes have increased income tax is no longer a tax of which the impact is felt only by the few with high incomes. It now falls on those with only average incomes, and even on those with incomes below average. It is also the case that our system of indirect taxes can be used very flexibly and selectively, so that its effect can be minimised on items which are bought by poorer people. It is evident from an examination of the increases which the Chancellor made that this was very much in his mind. Taking the increases in purchase tax, for example, the lowest rate which falls on furniture, clothing and household utensils, is increased by only 1½ per cent.; and the rates correspondingly on other items go up according to the degree of their importance to the wider section of the community and according to the particular type of purchaser. Thus we find that the rate on items like jewellery, furs, et cetera, is increased by 22½ per cent. This selective approach is also shown by increasing the tax on wines and spirits and leaving the working man's beer alone.
While tobacco and betting are not items of expenditure confined to the wealthy, most people would agree that they are objects of expenditure from which more revenue could be drawn in our present circumstances. I remember the late Sir Stafford Cripps describing these as voluntary taxes, which is not

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perhaps an entirely satisfactory description but it helps to indicate—and the noble Viscount, Lord Chandos, will remember this matter and probably criticised it at the time in another place—that there is some justification for it. To take another example, the increased taxes on motoring may be criticised on the ground that a car is by no means a luxury, but it remains true that only half the households in the country possess one. It is also the case that many of the goods which have been taxed, such as cars and washing machines, are durable goods; they do not need to be purchased every week. Therefore, for many people the taxes result not so much in lower standards of living as in an incentive to increase savings.
Perhaps I may here make a brief reference to the proposal for a national lottery. Although the Chancellor emphasised that he was not looking to this to make a significant contribution to the solution of his budgetary problems, and I do not propose to discuss it now, I thought it right to point out to your Lordships that, since we do not have the opportunity to debate each provision of the Finance Bill in detail, the Government would be very willing to co-operate in providing an opportunity, so that your Lordships may, if you so wish, express an entirely free view on a subject which must be a matter of controversy. It may well be that if that is desired a special debate on a suitable Motion could be arranged.
I believe that most people would agree that the Chancellor got all he could from indirect taxes on spending, consistently with graduating the increases so as to minimise the burden on items bought by the less well-to-do. But that only spreads the burden on the higher income groups up to a point. No increase in indirect taxation can mean very much to the very rich, because they are sheltered by their wealth from marginal changes in the tax on particular goods and services. I am stating this as a fact without attaching any moral or political judgment to it. The Chancellor therefore decided to introduce, for one year only, the special charge on investment income. We shall not want in this general debate to go into the details of this charge, but some
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noble Lords may wish to discuss it. I believe, however, that most fair minded people would accept it as right in principle that people with large investment incomes and large amounts of capital from which they are derived should be asked to make a contribution in our present circumstances.
Finally, I come to S.E.T. I am well aware that S.E.T. is not a popular tax, and the noble Lord, Lord Conesford, kindly commiserated with me for having to defend it on an earlier occasion. I admit that I had in those early days certain doubts about it, but I am really rather encouraged by the development of S.E.T. and by what it has achieved. I would ask your Lordships who criticise it to consider what was the alternative. Having raised as much as he fairly could from indirect taxes, from those with very large investment incomes and from shutting loopholes, the Chancellor needed another £150 million a year. He could have raised this by increasing the standard rate of income tax by 6d., or he could have increased S.E.T. by 50 per cent.
Those who criticise the increase in S.E.T. should say what alternatives there are. I realise that the direct posing of questions is not always fair, but I think it is relevant in this case. Some of the arguments and criticisms against S.E.T. have been extravagant to the extent that they showed little regard to the real facts. One thing that has been repeatedly said is at the collection of the tax is expensive. In fact, the estimated cost compares very favourably with the cost of collection of other taxes.
Then it is often asserted that the tax has failed in its purpose of producing economies in the use of labour in service industries and thus freeing labour for manufacturing. I do not know what is the evidence of those who make those assertions. Indeed, the employment figures for June, 1966, to June, 1967, show that employment in distribution, construction and miscellaneous services, including hotels, hairdressers, laundries and so on, has fallen by relatively more than employment in manufacturing. The underlying causes of any change in employment trends are inevitably complex, and there-fore it might be premature to claim that this is entirely due to S.E.T. But these trends are quite unlike anything that we have know in the past six or seven years.

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when the tendency has been for employment in the construction and distributive trades to increase at a much faster rate.
What is perhaps most remarkable is that the decline in employment in the construction industry has actually been associated with a very significant increase in output. In fact, productivity has risen by between 7 and 10 per cent. in the space of one year. One cannot say that S.E.T. is necessarily responsible for all of this, but I think it is fair to claim that productivity gains like this would not have been achieved without some stimulus.
Moreover, as your Lordships know, the Chancellor has invited Mr. Reddaway, the Director of the Department of Applied Economics at Cambridge, to conduct an inquiry into the working of S.E.T. The terms of reference have been published and I shall not weary the House with them now. In his Budget speech my right honourable friend said that the increases he had announced would not prevent any desirable recasting of the tax in the light of Mr. Reddaway's report and any other available evidence.
At the same time as the tax was increased my right honourable friend made further refinements. Not only has the effective rate payable in respect of part-time workers remained at the same level—12s. 6d. for a man and 6s. 3d. for a woman—but there is a new concession extending those part-time rates to all men and women over 65. This constitutes a positive incentive for employers to make use of part-timers and elderly people.
I now come to a matter which I know will be of concern to noble Lords, and particularly to the noble Lord, Lord Bannerman of Kildonan, and others who are interested in the Highlands and in development areas. My right honourable friend has decided to refund S.E.T. to hotels in certain rural parts of development areas. This should be a help in those places where tourism is a staple industry. Of course, devaluation increases the demands on this industry and it is right that it should be ready to meet those demands. The Government regard tourism as a very important foreign exchange-earning industry, and details of a scheme for helping hotel
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development will shortly be publishd in a White Paper.
Of course, this does not go as far as has been asked for by some people who want exemption for services which assist exports or invisible earnings. However, it has been recognised that a point comes when, if you make too many exceptions and exemptions, you endanger the structure of the tax as a whole. As I said, those who are not yet satisfied can bear in mind the willingness to reconsider this tax and how it is levied, in the light of Mr. Reddaway's report.
LORD BYERS: My Lords, before the noble Lord leaves that point, am I to take it from the tremendous defence which he has made of the tax that if Mr. Reddaway were to suggest the abolition of it the Government would not accept that recommendation?
LORD SHACKLETON: My Lords, I must admit that I was getting rather enthusiastic about the tax—more than I was on the last occasion. But I think I ought not to anticipate any decision of my right honourable friend. I should have thought that the report was unlikely to yield that result, and therefore, although the question was worth asking, it is not one that it is wise to answer.
I must apologise for dealing at some length with fiscal policy, and I must turn to the other side of the Government's Budget strategy; namely, the prices and incomes policy. This is perhaps one of the area that, for understandable reasons, arouses the most controversy and the most anxiety. Whether we are able to seize the opportunity for a more sustained and more secure economic growth depends not only on demand management but on our success in controlling costs. The two policies must be complementary. In our view, neither can succeed without the other. I hope that the majority of your Lordships, even if you may not agree with the methods, would accept this basic economic proposition, unless one moves to very different policies indeed.
Fiscal policy reduces demand and therefore the upward pull on wages. Prices and incomes policy both reduces demand—and the Chancellor took this into account when he was preparing his Budget—and restrains the upward push on costs. Moreover, if the opportunity

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to increase our exports afforded by devaluation is lost because rising wages put up labour costs, we shall face far worse consequences than restraint on incomes. The only alternative is still higher unemployment or a further economic crisis, with inevitable repercussions on world trade, the end result of which could be the threat of massive unemployment of a kind which was such a tragedy before the war and which mercifully we have not known since then.
Thus the primary purpose of prices and incomes policy is to maintain the competitiveness and economic growth of this country. The second purpose of this policy and the supporting reserve powers is to ensure the continuation of the fairness and equity which the Budget has so clearly sought to establish. As the Budget measures take effect, it would be wrong for those with superior bargaining power to be able to secure increases in spending power which the country as a whole cannot afford; and this would also add to the weight to be borne by those not able to protect themselves—for instance, old people and those on small, fixed incomes. It must be remembered that in the end the consumer pays for most wage increases, and we are all consumers.
My Lords, we considered very carefully whether the incomes policy we need could be fairly and effectively applied by wholly voluntary means or whether it would be enough to ask Parliament to renew the expiring parts of existing legislation in the summer. We have had to conclude that neither of these courses would be adequate in present circumstances, and we shall be bringing forward proposals for further legislation after the Recess. Noble Lords will have seen the White Paper. It remains the Government's firm intention to continue the development of the policy for productivity, prices and incomes to the fullest extent practicable on the voluntary basis, in consultation with the C.B.I. and the T.U.C., and all the statutory powers will be held in reserve and used only to the extent necessary when voluntary arrangements are not being properly observed.
Because of the need to secure restraint and because of the need for equity, the Government reject the idea of a "free-for-all" for incomes and prices. On the
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other hand, with prices rising as a result of devaluation and of the Budget measures it would be unrealistic to ask for another standstill, which in any case could not be maintained for more than a few months. A standstill would only cause unnecessary hardship to the low-paid workers, and would certainly not create—and I want to stress this—a favourable climate for increasing productivity, which is one of cur principal aims. The Government have taken the only rational choice in further developing the incomes policy.
My Lords, there are two points in the White Paper which deserve particular emphasis. The first and main point is productivity. The Government wish to encourage agreements which genuinely raise productivity and efficiency, thereby helping to stabilise or reduce prices. Genuine productivity agreements and major reorganisations of wage and salary structures which can be justified on productivity and efficiency grounds can be accepted, and indeed are to be encouraged. The appointment of my right honourable friend as First Secretary of State and Secretary of State for Employment and Productivity reflects the Government's concern to do everything possible to encourage the rapid increase in productivity which is so essential in the interests of exports and import saving. It will help once again to re-emphasise that this policy is one for productivity prices and incomes.
The policy is also intended to continue to give full weight to the interests of low-paid workers—those who genuinely are low-paid—but not of those workers who in the past have secured increases in pay through automatic preservation of traditional differentials when increases have been agreed for workers on the minimum rates. Low-paid workers will be able to benefit up to the ceiling where their claim satisfies the appropriate criterion, and there can be above-ceiling increases for them within a settlement which overall does not exceed the ceiling. I realise that this question of differentials is a difficult and delicate one, and I also realise that some of my noble friends in particular may feel that they would wish to explore the ideas rather more fully. But we shall have the opportunity to do that when the Bill comes before your Lordships' House;

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and I realise that I can give only the the briefest outline of the policy.
My Lords, as regards prices, there is bound to be a rise as a result of devaluation and flowing from the fiscal changes of the Budget. There will also be some other increases which will be justified under the criteria for price increases, which are contained in the new White Paper. But one of the objects of the Government's policy for prices is to prevent unjustifiable price increases, and the Government will exercise a rigorous scrutiny under the extensive early-warning arrangements of proposed price increases. These early-warning arrangements will be extended; and the Government will keep general watch over retail prices, also.
The prices and incomes policy is an important element in the Government's strategy for transforming the balance of payments from a deficit to a substantial surplus. It is not an easy policy to pursue, offending as it does many of the long-established notions of our industrial and commercial system. But the Government are not putting reliance on this or, indeed, on any other single aspect of policy. Prices and incomes and fiscal policies have to be made to work together and to complement each other. In fact, a background of fiscal restraint combined with equal sacrifice by all except the very poorest is by far the best environment for the effective operation of a prices and incomes policy.
I wonder from time to time what the Opposition would have done. I do not think they can deny that a shift from consumption to exports is needed, but we should like to know how they would have both achieved it and maintained it. They certainly did neither while they were in office, and we are still suffering as a result. They allowed public and private consumption to go uncontrolled in each Election year and our competitiveness to deteriorate in every year.
One alternative to the Budget measures well loved by some Members of the
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Opposition, but I think perhaps not all those on the Opposition Front Bench, is the idea of a sudden, massive and absolute cut in public expenditure. But while decrying the total of this expenditure they have opposed the majority of the detailed cuts we have already announced, and they have even added a lot of expenditure plans of their own, including a return to East of Suez. I now have the Liberals with me! The truth of the matter is that, as a proportion of national income, our public expenditure is not out of line with that of other advanced countries. Large-scale absolute cuts would simply mean a more niggardly provision of public services than most of our neighbours have, and sudden cuts would in the long run be downright wasteful. Another alternative put forward is that instead of a reliance on increased taxation there should be a reliance on increased savings. But this would have been a dangerous choice. We cannot predict the future course of savings with accuracy, especially when a cutback in the standard of living is necessary, and a heavy reliance upon this would not have measured up to the needs of the situation.
My Lords, I would suggest to your Lordships that the Budget fulfils our economic needs, but at the same time the increases in family allowances and the selective nature of the tax increases themselves should help to ensure that those of our citizens who are most vulnerable are affected least by the impact of the necessary increases in indirect taxation. We must face the fact that the measures contained in the Budget are essential, and it is our contention that they are fair as well. There are no alternatives if we are to contribute, as we must, to the overriding objectives of a surplus on our balance of payments which is the basis of our own prospects of a rise in the standards of living and a rise in our contribution to the alleviation of poverty in so much of the world. I beg to move.
Moved, That this House takes note of recent deevlopments in the economic situation.—(Lord Shackleton.)

MALTA DOCKYARD
3.30 p.m.
LORD SHACKLETON: My Lords, if I may at this point I should like to make a Statement on the Malta Dockyard. In my statement to the House on April 3 I undertook to give the House details of the additional financial help which we shall make available to the Malta Government as a result of our recent talks with the Prime Minister of Malta about the Malta Dockyard. The Malta Parliament in the early hours of this morning unanimously—and I stress the word "unanimously"—passed legislation bringing the Malta Dockyard into public ownership, thus ensuring its continued operation. It is the intention of the Malta Government to develop and diversify the Dockyard and to make it more competitive.
Under this legislation the Malta Government have acquired the shares of Bailey (Malta) Limited against payment of such compensation as may be determined by the Maltese courts, in accordance with Section 38 of the Malta Constitution. Provision is made by the legislation for the transfer to a newly established corporation of the assets of Bailey (Malta) Limited necessary for the running of the Dockyard and certain of its liabilities. The legislation also provides for the winding up of Bailey (Malta) Limited. The price for the assets so transferred, to be paid to the liquidator, will be established by the Maltese courts.
The responsibility for the Malta Dockyard now rests wholly with the Government of Malta. I am glad to say that we are able to make an important contribution towards meeting the cost to the Malta Government of putting their plans into effect. First, we intend to pay over to the Malta Government a sum not exceeding an amount equivalent to our receipts as creditors in the winding up of Bailey (Malta) Limited in respect of our loans to the Dockyard.
Secondly, in recognition of the importance of the future prosperity of the Dockyard, we are allocating for the Dockyard £3 million of the £51 million made available to the Malta Government under the Financial Agreement of September, 1964. The Malta Government will be able, if this should prove necessary, to draw on this £3 million for purposes related to the transfer of the
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Dockyard to Malta, the balance being devoted to the development and diversification of the Dockyard. At the end of the 10-year period—that is, the 10 years following the 1964 Agreement—covered by the Financial Agreement an additional £3 million of aid will be provided for development projects. This Money will be disbursed by March 31, 1976. In addition we intend to provide a feasibility study of the development and diversification of the Dockyard. The two Governments are already in contact over this, and we hope that arrangements for the study can be completed soon.
The result that we have achieved is that the Malta Government have been able to acquire the Dockyard undertaking and are in a position to develop it for the benefit of Malta. I am sure that your Lordships are as satisfied as I am that we have been able to bring to a successful conclusion a problem that has for so long created such difficulty to the Governments both of Malta and of the United Kingdom.
LORD CARRINGTON: My Lords, the House will be grateful to the noble Lord for having made that Statement and also for its contents. I think all noble Lords will share the Government's satisfaction at the end of this chapter. I am sure that everyone in the House will recognise the dependence which the economy of Malta still has upon the Dockyaid, and that the assurance of the Dockyard's future will make a great deal of difference to that economy. Incidentally, we ought also to recognise that it is a very good Dockyard; when it was a Royal Naval Dockyard it did excellent work. I think the House will recognise also that with the run-down in our defence commitments in Malta we had, to a very large degree, some duty to the people of Malta to safeguard their economy. In this connection, too, we must be pleased at the outcome of these talks. I wish to ask the noble Lord only one question because I am not qualified to judge whether this sum of money, which is very large, is adequate. Have the Government of Malta expressed satisfaction at the size of this grant?
LORD SHACKLETON: My Lords, I do not know whether arty Government ever really expresses satisfaction. I can only say that privately they have expressed the greatest satisfaction. I know

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that, after some pretty hard bargaining, the talks ended in an atmosphere of great good will, and I remarked before I left that I hoped I should not be in trouble when I got back to England. I think the noble Lord will appreciate from the Statement that no extra cost will be falling on the taxpayers in the next few years. There is a diversification of funds to produce a final total. I think myself that it is a very satisfactory agreement and that it is very satisfactory (and very remarkable) that this Bill was passed unanimously by the Malta Parliament.
LORD BYERS: My Lords, I, too, should like to welcome the Statement and to say once again how grateful we are for the work the noble Lord has done in this connection. If I may venture to express a personal opinion, I would say that the diversification of the Dockyard may perhaps be counted as the most important aspect of the Statement. I should like to ask the noble Lord whether he is in a position to say what organisation will be entrusted with this very important task—whether private enterprise in the United Kingdom will have the opportunity of helping in this diversification.
LORD SHACKLETON: My Lords, I regret that I cannot answer that question at the moment. These are very important matters, and they are primarily matters for the Malta Government. But in practice they will depend a great deal upon the results of the feasibility study which the British Government have offered to provide. I would not rule out any particular type of development—including British private enterprise. I would merely hope that some of it will be more successful than it has been in the past.
LORD WALSTON: My Lords, may I ask my noble friend whether he can tell us the total amount of money that has been given to the Malta Government since the Naval Dockyard was abandoned and how this compares with the actual cost to us during its period as a naval dockyard? I should like to say that I imply no criticism in any way of the arrangement, which I think is admirable and reflects credit on my noble friend personally.
LORD SHACKLETON: My Lords, first may I agree with the noble Lord, Lord Carrington, that it is a very fine
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dockyard indeed and well equipped. So far as my noble friend's question is concerned, I think I should be unwise to attempt to answer in detail such a clever question, which I am sure was put for information but which is beyond my limited capabilities. The British Government's loan to the Dockyard amounts to £8½ million, including accrued interest calculated on April 9, 1968. The sum is very considerable.
LORD CONESFORD: My Lords, may I ask a question about something which, I think, was in the Statement made by the noble Lord; but I am not certain whether I heard it aright. He said the value of the compensation was to be determined by the Maltese courts. Was the amount to be determined in accordance with legislation already on the Statute Book or with the legislation that was passed last night?
LORD SHACKLETON: I have not seen the legislation; but, as I understand it, it applies the provisions of Section 38 of the Malta Constitution as to compensation and it derives from that particular section. This provides that adequate compensation will be paid for the shares acquired; but that what is adequate will be determined by the Maltese courts in accordance with Section 38. Any claims which may be advanced against Bailey (Malta) Limited by C. H. Bailey Limited or the directors of Bailey (Malta)—I am talking about claims as creditors as opposed to shareholders—will be dealt with by the liquidator in the usual way in the winding-up of the company.

AGE OF MAJORITY: THE LATEY REPORT
3.40 p.m.
THE LORD CHANCELLOR: My Lords, with the permission of the House and of the noble Lord, Lord Aldington, may I intervene here to make a Statement on the age of majority?
As soon as Parliamentary time can be found, I hope to introduce legislation to implement most of the recommendations made by the Latey Committee on the Age of Majority, whose Report (Cmnd. 3342) was presented to Parliament in July, 1967.
The Committee considered the law relating to minors in England and Wales and unanimously recommended that most

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of the present limits on full capacity in civil law should be removed for persons between the ages of 18 and 21, and 9 out of 11 members of the Committee recommended that all such limits should be removed.
Having carefully considered the Committee's proposals as well as the debates in another place on November 20, 1967, and in your Lordships' House on November 22, 1967, the Government have decided that it would be right to reduce the age of majority to 18, and in general they propose to follow the recommendations of the majority of the Committee.
The legislation to be introduced will reduce from 21 to 18 the age at which a person has full powers to enter into a binding contract, to give a valid receipt and to hold and dispose of property. The minimum age for making a will, for acting as a trustee or personal representative, for acquiring an independent domicile and for consenting to giving of blood will also be 18. The need for parental or court consent to the marriage of a person between the ages of 18 and 21 will also be removed; and the powers of the courts to make adoption orders, to award custody of and access to children and to make them wards of court up to the age of 21 will be similarly curtailed. Certain other amendments to the law affecting minors will also be made, including a statutory power for a minor of 16 or over to consent to medical or dental treatment, including blood tests.
Certain of the recommendations of the Report will not be covered by this legislation: any changes in the law of taxation, for example, will have to be considered for a Finance Bill. Moreover, some of the more detailed recommendations are still being studied. The intended legislation will not affect the age of voting, which was outside the Committee's terms of reference and concerning which the Speaker's Conference on Electoral Law has recently reported.
Noble Lords may also wish to know that, in accordance with the recommendations of the Latey Committee, I have asked the Law Commission to consider the Committee's proposals for substantive changes in the law of infants' contracts and the structural changes in the courts which they suggested. These two topics fit conveniently into the Commission's first and second programmes.
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The Latey Committee's Inquiry was of course confined to England and Wales: in many respects minors in Scotland are already free from the restrictions which apply to young persons under English law. My right honourable friend the Secretary of State for Scotland is however at present considering whether legislation is required to amend the law of Scotland in relation to minors.
LORD BROOKE OF CUMNOR: My Lords, is the noble and learned Lord the Lord Chancellor aware that there will be a widespread welcome for that part of his announcement which relates to property matters, and also for his decision to refer to the Law Commission the Latey Committee's proposals regarding the law on infants' contracts? —though the debate in November showed that there was considerable divergence among your Lordships as to the appropriate minimum age for marriage without the consent of the parents or of the court. There are a number of pertinent questions which I suggest might more appropriately be asked when we see the Bill, rather than this afternoon, but may I ask the noble and learned Lord straight away whether the Government realise that it will be vital to overhaul and develop the curricula of schools if boys and girls in future are to be fitted to carry adult responsibilities in a wide range of matters so much sooner after leaving school than is the case under the law at present?
LORD BYERS: My Lords, I thank the noble and learned Lord the Lord Chancellor for making his Statement, which I generally welcome. But does not the noble and learned Lord feel that it is slightly, or completely, anomalous to carry through these proposed recommendations and still leave the age of voting where it is? Surely if someone can be a trustee at 18 he should be entrusted with a vote.
THE LORD CHANCELLOR: My Lords, I am grateful to the noble Lords, Lord Brooke of Cumnor Lind Lord Byers, for what they have said. I remember that in the debate we had the noble Lord, Lord Brooke of Cumnor, intimated that on the age of free marriage his own opinions would be more in line with those of the minority of two on the Committee,

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rather than with the others. But as he has said, we ought perhaps to debate that if and when the Bill is introduced.
No doubt my right honourable friend the Minister of Education and Science will bear in mind what the noble Lord has said about school curricula. I am not quite clear about this myself. I must not argue it this afternoon, but I have thought for a long time that we do not do enough in the schools to tell young people what marriage really means, emotionally and economically. But those aged 18, 19 and 20 have, after all, been out in the world earning their own living now for three, four and five years. But no doubt the point will be borne in mind.
With reference to the question raised by the noble Lord, Lord Byers, the age of majority is one thing and voting rights are another, partly because voting rights, by agreement with the Parties, have never been changed without being considered by a Speaker's Conference. It is therefore right and proper that the voting age should have been entirely excluded from the Latey Committee's terms of reference, and they did not deal with it. The Government have thought it right to deal with the recommendations of the Latey Committee on their merits. They will shortly be considering the many recommendations which have been made by the all-Party Speaker's Conference.
LORD BROCKWAY: My Lords, may I ask my noble and learned friend one question? He made no reference to minors in the Armed Forces. Is it the intention of Her Majesty's Government to reconsider this matter, in view of the recommendations of the Latey Committee.
THE LORD CHANCELLOR: My Lords, the position with regard to those, as my noble friend Lord Brockway may remember, is that there were three recommendations. The first was that all boy entrants should be entitled to be released as of right on application within six months, instead of three months, from the date of their entry. The noble Lord may remember that a Statement made in another place, and repeated here on February 5, said that that recommendation would be acted upon at once, because none of these needs legislation since there
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is existing legislation under which my right honourable friend the Secretary of State can carry them out by regulation. The second recommendation was that all boy entrants should be entitled to be released as of right on application within three months after their 18th birthday and I think that on the same occasion it was stated that the Government have decided to set up an Inter-Departmental Committee to consider more carefully than has yet been done what would be the precise effect on the Services if the recommendation was implemented. The third was that parental consent to enlistment under the age of 18 instead of 17½, should be required, and it was stated in the House on February 5 that if and when the age of majority was increased to 18, that would be implemented by administrative action.

THE ECONOMIC SITUATION
3.49 p.m.
Debate resumed.
LORD ALDINGTON: My Lords, I must first apologise to the House for being in this unusual position. I have been trying to persuade my noble Leader, whom we are all so glad to see here to-day, to relieve the House and myself of an ordeal, but I have failed. Nothing that I shall say will have either his authority or his charm. My speech will, as it were, be a poor thing but all mine own, and let no one try to pin upon him the responsibility for my thoughts or for my method of expressing them. Having made that disclaimer, I must admit that I hope he and my noble friends will agree with most of what I shall be saying, and that your Lordships will not take too unkindly the intervention at this stage of a banker and industrialist who has never lost his love for or interest in political affairs.
The noble Lord the Leader of the House has given us a lucid and concise account of Government policy as unfolded in the Budget Statement by the Chancellor of the Exchequer. He has dangled in front of me some baits and asked me some questions. I must tell him that I am not going to rise to those baits, however attractively they were put in front of me; but I hope that the House will find at the end of what I have to say that I have dealt with the points that the noble Lord raised.

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In this debate we are asked to take note of recent developments in the economic situation. In doing this I shall go slightly wider than the noble Lord. There has been among those developments the successful series of international discussions about gold and special drawing rights, about which we are going to hear later. All I would say on that subject is that I welcome those developments and congratulate the Government on the part they played in achieving them.
It is on the home developments that I am going to ask your Lordships to concentrate your attention. These developments have included the Budget, the White Paper on productivity, prices and incomes, and the reshuffle of the Cabinet—the creation of what is called the "Mark II" Wilson Cabinet, whatever that may mean. Perhaps one should add to these three developments the article written by the immediately past President of the Board of Trade calling for the abolition of the Department of Economic Affairs, and the illuminating series of articles and statements of the immediately past Foreign Secretary, combined with his adjuration, not, I think, addressed to this side of the House, that there must be an end to double talk.
These developments at home are the proof, if proof were needed, of the disastrous state into which our economy has been allowed to slide in these last three years. Some would say instead of "allowed to slide", "has been pushed". How most quickly our country's economy can be led back to good health is a question that must lie behind all the points that will be made by myself and others this afternoon. There will be, I think, others besides myself who, being convinced opponents of devaluation of sterling as a policy, had formed in their own minds a clearish idea of the dangers that would follow devaluation in the international field outside this country and of the damage that would be done inside this country to our standard of living. But few, I think, imagined—I certainly did not—that the bank rate would stay at 8 per cent. for four months (it has only just come down) and that the Chancellor of the Exchequer would have to add £923 million to the annual taxation bill. And few imagined—certainly the Prime Minister did not, judging from his statement
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—that the Government would deem it necessary to have statutory control of prices and incomes for a further eighteen months.
Of the Budget itself there hay been a wide measure of understanding and a good deal of support from intellectuals and those engaged, like myself, in business and in industry. The support has been for the Budget's general a ms and for a great part of the language in which the Chancellor of the Exchequer explained his proposals and purposes, and I join in the tribute that the noble Lord the Leader of the House paid to him for that. The £923 million of additional taxation was thought to be on the top side of what it would be right to do and was, I think, welcomed all the more for that reason.
The Chancellor of the Exchequer was also applauded for his decision not to add anything further to direct taxation on earnings and investment incomes under £3,000 a year. Those wise decisions outweighed some formidable objections that even the Chancellor of the Exchequer indicated that he had to the increase in the selective employment tax (though I notice that the noble Lord opposite defended that tax—I do not defend it); the objections that were justifiably felt to the Chancellor of the Exchequer's cavalier treatment of the, benefits hitherto derived by women and children under the Married Women's Property Act; the objections to the, retrospective effect of some of the proposals, particularly on death duty points, and the objections to the capital levy, for that is what it was, dressed up in the old clothes of a special charge on high investment incomes. Objection was also taken to the rather out-of-character, sneering language of the Chancellor of the Exchequer in explaining the need for this capital levy and the scarcely veiled threats of some other wealth tax later. I think one might ask: Does a capita I levy fit in with a Budget that has as its principal aim the reduction of consumer spending. The answer given has been the answer of fairness. But this really is a concession to the omnipotent doctrine of equal misery for all.
All these feelings, good and bad, I understand and share. But these swingeing increases in taxation would not be necessary if the Government could have

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controlled their own expenditure and kept it in these last two years within the rate of increase of the gross national product. Nor, I think, would they have been necessary in such degree if the Government had taken some fiscal action immediately after devaluation, action designed quite deliberately to show our people then that devaluation was a defeat for them as well as for the Government and that standards of living must drop for the time being. In the carefully calculated economic arguments to the contrary—and the noble Lord has reinforced them to-day with his explanation of the timing part of the strategy of the Government's policy—human reactions were forgotten, and this led to psychologically mistaken inaction.
I have no doubt that the Budget and the Chancellor's statement have gone some way to starting up again the seeds of confidence in the minds of our overseas friends; but let there be no mistake, that confidence is not going to be easy to restore fully. My banking interests have taken me probably to as many different overseas countries in these last four months as any of your Lordships. In every country I have been faced with the same questions and doubts, put forward not only by businessmen hut also by officials and Central Bank men. Shall we in Britain have to devalue again in 1968? That has been the universal question. And my universal reply has been, "Certainly not." I have followed that up by asking why they thought that we might have to devalue again. Various answers have been given to that question, but they have all contained this one same point. This is what they have said. "Britain had to devalue last November principally because your Government had been spending too much in recent years. You don't seem to have stopped that."
Sitting as I do on this side of the House, all my patriotism and a good deal of my imagination were challenged. The answer which I gave before January's announcement and the answer which I have given since have been the same: the Government will be forced by circumstances to put their house in order, and they have begun to do it. But here, not for the first time, I raise my small voice in condemnation of the policy that allows
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public spending to increase substantially faster than the rate of growth of the national product. In wiser days this Government themselves have taken approximately the same view. In their National Plan in 1965, actually at page 20 of it, they adopted a target of 4¼ per cent. per year for the growth in public spending in the five years 1964 to 1970. They adopted this target because they said that that was what the country could afford, and that was what the country could afford against the target of 25 per cent. economic growth for the nation between the years 1964 and 1970. That was an annual growth of about 3·8 per cent. In fact, as your Lordships know, at best it seems that we shall now achieve not 25 per cent. growth in those six years, but 17 per cent.
But what has happened to this carefully planned growth of public spending? We were told in a Statement made in another place by the Chief Secretary that public expenditure has not grown faster than was intended; that in fact we are precisely on the target, and that after the much slower increase in Government expenditure now decided upon over the next two years the average rate of increase, in real terms, over each of the five years between 1964 and 1970 will be 4¼ per cent., just as was originally planned. I must interpose here that I thought I detected from what the noble Lord the Leader of the House said a reference to a sharp slowing down in Government spending. I think what he meant was a sharp slowing down in the increase in Government spending. I do not call it a very sharp slowing down.
LORD SHACKLETON: Perhaps I may interrupt the noble Lord. If I did make an error, I hope your Lordships will allow me to make my correction to Hansard by this intervention.
LORD ALDINGTON: I thank the noble Lord. To return to the hard-pressed Chief Secretary. Since the National Plan was published there have been many announcements of cuts, and noble Lords opposite have joined in commending them to us. The most important were in July, 1966, July, 1967, November 20. 1967, and January 16, 1968. We are asked to believe that the National Plan, minus July, 1966, cuts, minus July, 1967, cuts, minus November, 1967, cuts, minus January, 1968, cuts,

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equals the National Plan. I must acknowledge that I am indebted to the former Chancellor of the Exchequer's son-in-law for this equation. The explanation of this curious mathematics would be interesting. I fear that either the cuts or the control over the planned expenditure—or both—were phoney. However that may be, the target claimed for this expenditure is the wrong target now. The fact is that the nation's output in 1970, on present plans, will be over £3,000 million less in 1964 money terms than the National Plan assumed.
The protagonists of high and increasing Government expenditure bring to their support, as did the noble Lord this afternoon, statisics showing that other countries spend as high a proportion of their gross national product through the Government as we do, or even a higher proportion. This, I must say, seems to me to be quite irrelevant to our present problems. We in Britain are struggling in a highly competitive world ourselves to be more competitive than others. We depend more, I think, than any other country on imports for our food, on imports for the raw materials for our industry, and, therefore, for employment.
Just as any industrial company struggling to improve its efficiency year by year has to watch its overhead expenditure which is not efficiently productive, so, in my submission, a great nation like ours must watch most carefully over the growth of its national overhead expenditure. Every bit of Government expenditure goes, in one way or another, on to our industrial costs, and a great deal of it takes away from productive working industry or commerce valuable trained men and women. Of course, some part of Government and public expenditure—for example, in the nationalised industries, in research and so on—is strictly relevant to industrial capacity and output; and a great deal of the rest also has a substantial economic value in the long run—for example, expenditure on education and health.
That there must be some limit to the increase in all these types of expenditure, however socially desirable, even the Government themselves have frequently admitted. But the question is what that limit should be. I am going to resist here the temptation to reply to the Gov-
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ernment's question: What do you propose? I do not think it is for the Government to say to a critic of its policy —and I hope a constructive critic—that that critic should do the Government's job for them. It is my task to establish in front of your Lordships the proposition that Government expenditure has risen too fast, ought to be better controlled and ought to be kept down. The Government disagree with that. Until they agree with it, I do not think it lies in them to ask me what to do. Let them do their job, and I will do mine.
LORD SHACKLETON: If I may again interrupt the noble Lord, I do not think the Government disagree in regard to the extent to which Government expenditure has risen. But I do not think the noble Lord should couch his total refusal to state his Party's policy by saying that he is resisting a temptation. What we are waiting to hear is what the other side would do, what cuts they would not have made; not their broad policy, but their detailed policy.
LORD ALDINGTON: We know this trick; some of us have done it before. I do not propose to detain your Lordships for too long, though if I am interrupted I shall be taxing your Lordships' patience. But I must refer the noble Lord to the many speeches made by Conservative leaders in the past three or four weeks. They have answered that question in some detail. I am coming later to adjure the Government not to do industry's job, but I am not going to fall into the trap of an industrialist standing here and doing the Government's job.
LORD SHACKLETON: I had the impression that the noble Lord was a politician, too.
LORD ALDINGTON: I want to add one further point upon Government expenditure. I must add to what I have said my belief that the Government will find it necessary further to prune their large estimates if they want to see taxes not going up again next year. For even if they are successful in keeping the totals for their expenditure for 1968, 1969 and 1970 to the figures of the January White Paper, it is not impossible that either exports may rise so sharply that resources will be under strain, or, as indicated in an article that I read in The Times to-day (I think it was by Professor Paish), balance

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of payments considerations may make it desirable to divert more resources towards exports than have already been diverted. The Government will then be faced again next year, as they have been this year, with having to choose between a cut in Government expenditure or an increase in taxation. Some further pruning, therefore, of established programmes would, in my submission, be wise for the Government in order to give the necessary measure of flexibility.
To that I would add one more hope; namely, that the whole system of control of Government expenditure will be improved at once, so that the sharp deficiencies that we have seen recently between estimates and actual out-turn will not be repeated. In private industry we have a phrase, "cost consciousness", for the attitude that we seek to inspire throughout any good industrial firm. Has the Government machine lost its expenditure consciousness? Perhaps I can put the question another way: is it easy to instil in the Government machine real expenditure consciousness when Ministers, as well as Ministries, are seen to proliferate? Example flows from the top. Does the addition of 57,000 civil servants in three years or so help to get the right thinking?
But let us take a look at the number of Ministers in the main Economic Departments of State to-day. In 1956 when, so far as I recollect, we had a good growth in domestic output and a favourable balance of payments, there were three Treasury Ministers and three Board of Trade Ministers. Now there are four Treasury Ministers, three Department of Economic Affairs Ministers, plus the First Secretary of State who has moved into this field, the Chancellor of the Duchy of Lancaster, and goodness knows how many Board of Trade Ministers—I think it is five.
I must ask an important question: who does what among all these people? Do the recent changes mean anything or nothing in the economic sense? They clearly mean something in the political sense; I think we have all grasped that. Who is in charge of prices and incomes policy? Is it the Chancellor of the Exchequer or the First Secretary of State? I must say that I had never previously thought of these two Ministers as the
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perfect economic team. What is there for the Department of Economic Affairs to do now? And, whatever it is, does it work for the Chancellor of the Exchequer or for the Prime Minister? Mr. Douglas Jay, in the Financial Times of Thursday, April 4, wrote this:
"The best way to restore confidence in the Government's economic policy would be to abolish forthwith the present separate Department of Economic Affairs".
I do not see the noble Lord, Lord Brown, on the Front Bench, but I should like to know whether or not he agrees with his former chief. But, at any rate, I do, and here is one proposal for cutting Government expenditure. One has to ask those questions about top responsibility for the direction of economic policy, for one has every reason to fear that responsibility is not clear-cut, and where responsibility is not clear-cut thought as well as action will be muddled.
That brings me to the current Government philosophy of intervention in industry. There is nothing new about Governments' seeking to regulate in one way or another what goes on in industry, but there would be something very new in Ministers' seeking to intervene directly or indirectly in individual industrial decisions taken by individual industrial managements. I am not here inveighing against the Industrial Reorganisation Corporation which has developed in exactly the way I hoped it would when I gave it support at the time of the introduction of the Bill here. It has not become the weapon for interference in industry by Ministers that some feared; nor has it become a vehicle for backdoor nationalisation. Instead, there have been some useful proddings which have led to good reorganisations and amalgamations, sometimes helped with lending them money. I am referring here to something different: first, to the various fallacious theories about the value of Government intervention on a selective basis to increase industrial efficiency and help our way out of industrial stagnation. Whitehall knows best, it is thought. We shall no doubt be discussing those theories in due course on the Industrial Expansion Bill.
There is also the idea that it is very desirable for public money to be invested in something successful that will bring off a financial coup. Why, my Lords, should

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this be a function of Government? It really is not as if Government do not already take a very big whack of all the profits earned by industry, something indeed over 60 per cent. at the present rate of taxation, corporation tax and income tax. It is, of course, very flattering of Ministers to want to behave like tycoons, but it is I think a mistake. Through the public sales investment decisions and their own purchasers the Government have a vast power affecting industry. In using this power they can support the efforts of businessmen, or bewilder them. They can promote efficiency through their purchasing methods or pander to wastefulness and antiquated design and outlook. Where, I may ask, is the leader of the cost effectiveness drive that we all know is needed in the Government to save millions of pounds of money for the Government and add efficiency to industry?
In earlier days we used to talk about a partnership between Government and industry, and wax a bit sentimental about it. In fact, there are often very different responsibilities facing the Government and industry, and sharply conflicting interests which need a realistic analysis. The mass of committees, advisory bodies and panels which have grown up over the years do not provide the solution for a Government who genuinely wish their policies to support industry. It is for Ministers themselves to inquire and then decide on policy. One detects to-day in Whitehall and Westminster a somewhat "governessy" approach to industrial problems, and sometimes, I must say, I detect them now in industrial committees themselves. This is all wrong, and wasteful of time and temper. And yet, to be fair, one finds in Westminster and Whitehall plenty of people with active and vigorous minds full of ideas for improving industrial performance. Why do they fail in their aim? Is it that they do not really understand the differing responsibilities of Government and industrial managements, or is the problem perhaps bedevilled by a distrust which the friends of noble Lords opposite, and some noble Lords opposite themselves, have of the capitalist system?
I am sorry that the noble and learned Lord the Lord Chancellor is not present. In our last debate on this subject he himself displayed an extraordinary distrust
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and misunderstanding of this system in his reply. At column 414 he divested himself of this extraordinary sentence:
"What country would put up with an internal economic system under which no man could make a profit at the end of the year unless some other man made an equivalent loss?"—[OFFICIAL REPORT, 24/1/68.]
With great respect to the noble and learned Lord, that is the most awful nonsense. A profit in industry is the surplus made out of selling goods above their true cost. The more efficient you are, the bigger that surplus. And an inefficient firm will make no surplus at all. Even the Communists are reported to have found that the criterion of profit is the best criterion of efficiency in industry. In a competitive society such us ours seeks to be, market forces and profit provide a far better way of achieving efficiency than selective intervention by Ministers.
LORD MITCHISON: My Lords, before the noble Lord leaves that subject, which is, I understand, the capitalist system in this country, could he tell us whether it works?
LORD ALDINGTON: My Lords, my answer is that it can work if it is allowed to, and that is why our ancestors were able to build up such very substantial wealth and reserves for us, which in our generation we seem to have been easing down.
LORD CITRINE: My Lords, may I ask the noble Lord whether, in the pursuit of efficiency, it is a good thing to sack 5,000 men?
LORD ALDINGTON: My Lords, I do not think that the noble Lord, for whom I have great respect, would wish to carry on a discussion about individual industrial projects here. I do not think in fact he will find that the fears of hardship which he has—I know he has a warm heart—and which I can well understand his having, are justified.
LORD MESTON: My Lords, would the noble Lord tell me how he proposes to save £1,000 million a year, or even £500 million a year, by cuts in expenditure? I want the details; I do not want general observations. And is he in favour, in doing so, of reducing the great cost of defence forces, especially those overseas, the great cost of education and

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the great cost of the Health Service? May we have details, please, because I am Scotch, and I do not know.
LORD ALDINGTON: My Lords, if the noble Lord is Scotch he will not wish me to waste other people's time. I shall be glad to see him outside and explain all these things to him.
This process of selective and direct intervention which has been going on in industry is now to be carried by Statute once again into the field of prices and incomes. Why is this recommended to us? We have heard this afternoon that it is to prevent an excessively rapid rise of money incomes, which it is argued will take place if there is no such statutory control. Before making comments on this policy, I want to commend to noble Lords a very striking article entitled "How the economy works", by Professor Paish, in the current number of Lloyds Banks Review. There are many good points in it. I will not weary the House with more than one. Professor Paish explains with admirable lucidity that the annual rate of increase in employment income is closely related to the proportion of the nation's productive potential in use. He goes on to give this advice:
"It would seem that this country must face the fact that to check inflation permanently and to prevent the emergence of yet another balance of payments crisis, it must accept permanent unemployment of some 500,000, or rather over 2 per cent."
Am I right in assuming, from what I read in the Chancellor's Budget Statement, that he accepts this proposition?
Professor Paish's theories do not lead to stagnation. As he shows, efficiency will improve faster, and thus output will grow more quickly, if we follow his advice and keep in reserve a fair margin of productive potential. That, I believe, is the background against which to look at the incomes policy and is, in the words used by the noble Lord the Leader of the House, the "proper management of demand", and is, I understand, the same background that the Government have to their incomes policy.
The aim of any incomes policy ought to be to ensure that incomes do not rise faster than output and so increase costs. This can be achieved, we seem to be agreed, only if the Government properly
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manage demand in the economy as a whole. In the absence of that proper management no direct controls over incomes or prices can be effective. In 1966 there was not, in Professor Paish's terms, a sufficient margin of productive potential, and in those circumstances not even a statutory incomes policy could, over a period, prevent earnings from rising too fast. Between April, 1966, and October, 1967, earnings rose by 5½ cent., whereas in the absence of statutory control during Mr. Selwyn Lloyd's pay freeze they rose 4 per cent. during the 18 months from April, 1961, to October. 1962. That is an important series of statistics at which to look, as we study the new policy.
My position on incomes policy rules and guidances has been the same for some years and I believe the position of my noble and right honourable and honourable friends is similar. If the economy is managed properly, I see no need for formal rules about incomes or prices or dividends in the private sector. There may, however, be a need for understood guidelines for the public sector where the Government take the decisions and price competition is absent. But it will always be right for Government and industry—both sides—to consult together on what total increases in incomes the nation can afford, and to do what they can to ensure that everyone understands why. Flexibility is essential in industry and in incomes. Equal treatment is wrong; differences will be right.
Against that background let us look at the new White Paper. First, there is not even a pretence that incomes should not rise faster than output. Everyone may get 34 per cent. increase, and some may get much more. Output will go up by only 3 per cent. Secondly, productivity is rightly given more encouragement, but apparently only after vetting by the Government or by the Prices and Incomes Board. Is this a good way of encouraging responsibility in employers and trade unions for faster growth in efficiency? It is typical of Left-Wing thought to erect a great paraphernalia of control for fear of a few people "getting away with it".
Thirdly, I am bound to say that I dislike the whole machinery of statutory control of incomes and prices. I must ask, as The Times leading article of

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April 1 asked, will it work?—and all the other important questions that were mentioned. One fears that the system will not work as it was meant to work, and that even the new Minister, with her administrative competence, about which we know, and her manifest ability to get things done, will not be able to make it work properly. I am bound to say that I do not regard instructions by her to employers to pay higher wages to lower-paid workers as making an incomes policy work. This is what The Times says she is doing now.
Fourthly, to keep prices down while incomes rise is to defeat the main purpose of the Chancellor's Budget, and indeed to counter one of the logical consequences of devaluation—and it is a sop to sloppy thinking. Prices have never been kept down for long by control. Nor have incomes. Both remain steady if the economy is properly managed. The Government know all this very well.
I am now coming to the end of my speech. I am sure that the noble Lord, the Leader of the Liberal Party, who used to be a friend of mine, will forgive me if I have kept him too long. In these times economic debates are bound to be pretty sombre occasions. In many speeches made to-day there will be powerful criticism of the Government for the mistakes and failures of economic policy, felt all the more sharply because of the high but false hopes built up by the siren speeches and manifestoes of those earlier days. But none of us, I think—certainly not forget that much of British industry is technically and managerially up to the best in the world and competing successfully over the world. Rolls Royce have their counterparts, large and small, throughout British industry. Nor must we forget the steadily growing contribution made by the invisible earnings, particularly the banking, financial, insurance and other services, the credits for which have risen in the balance of payments by £150 million, or nearly 30 per cent., in the last five years.
In short, there is a strong base from which to develop further our invisible and visible earnings in the next two years. Much can be done despite the Government—despite any Government. Much more can be done if the Government do their job properly. But so much has
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to be done—so much more than most people appreciate, despite the widespread publicity of a very high order given in popular newspapers and on television, as well as in the serious Press, to our problems. Massive debts have to be repaid—how massive we do not know. The figure of £2,000 million or more I as been mentioned, up to the end of December, and one gathers that there has been a great increase since. Yet that sum is perhaps not surprising against the total balance-of-payments deficit for the last five years of £1,830 million.
There are some who doubt whether we can succeed in the gigantic task we have set ourselves. I am not one of those. We can succeed. But I say that failure would be disastrous, not just to the people of Britain but to the whole orderly life of the Western World, which perhaps has just had a glimpse of what a complete distrust of money might mean. Both Britain and the United States of America together were recently able, with their friends, to restore international order in the field of money. Our influence for good depends on our ability to run our own affairs—as does the confidence which we can command overseas. Thee can be no confidence from overseas unless there is confidence at home. It is for noble Lords opposite and for the Government to give the lead in recreating that confidence. Can they do this?
4.28 p.m.
LORD BYERS: My Lords, I am sorry if the noble Lord, Lord Aldington, thought I was in any way trying to hasten the end of his speech. I can assure him I was not. In fact, I still consider the noble Lord a friend, and I like listening to his speeches. I find them very soothing. Indeed, I fins this unchanging attitude of the Conservatives over the years to a world which is moving forward very fast, extremely soothing—provided they are in Opposition. But the Government invite the House to take note of the economic situation. I must say that in my view the House could hardly miss doing so. Over the last three-and-a-half years we have, after all, lived with economic crisis after economic crisis and with so many periods of "Stop-Go" that it is difficult to know whether one is coming or going. Despite the able and lucid statement—and indeed the enthusiastic statement—of the noble

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Lord, Lord Shackleton, the economic situation to-day must surely be regarded largely as the result of miscalculation and mismanagement by this Government since they took office. I know they inherited a tremendous balance-of-payments deficit, but that was three and a half years ago and our present situation must surely be regarded as of their own making.
However, it is not my intention to job back. The noble Lord, Lord Shackleton, put the case for the Government very well: that we have this large balance-of-payments deficit which must be turned into a surplus. He wisely stressed that it must be a surplus over a period of years if we are to keep out of debt and to keep the pound strong, and that having devalued we are to get the maximum advantage by increasing investment and reducing home consumer demand, thus releasing resources for export. A major feature of this policy is to keep incomes down, to reduce the pressure of consumer demand, and, as he rightly stressed, to keep costs down. This is part and parcel of the incomes policy. I believe there are two further features to which perhaps insufficient attention has been given. One is encouragement of savings and the other the perennial problem of better use of manpower.
I should like to comment on only a few aspects of the present situation. The balance-of-payments deficit can be eliminated by greater export promotion and by import saving. The former seems to be picking up quite well, and I wonder whether the noble Lord, Lord Beswick, when he comes to reply, could tell us what the increase has been since devaluation. If he cannot give us the increase, can he tell us what the trend looks like and to what extent we appear to be succeeding? On import saving my impression is that there is no coherent plan for this, and yet I believe there is remarkable scope for introducing import saving on a well planned basis. My experience has been that where proposals have been made for import saving a considerable time elapses before a decision is taken. I am not going to labour this matter, but I think it is a point to which my noble friend Lord Gladwyn and others may well turn in the debate we are to have on the structure of Government on April 24.
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I should like to ask what is being done positively to encourage import saving.
The next point is the reduction of home demand to reduce the pressure on potential export resources. I am not going into the details of the Budget, but I will say quite frankly that I believe the Chancellor of the Exchequer was extremely courageous in using indirect taxation as the main weapon in cutting demand. It was a brave decision, it was a right decision, and I believe that it should have a good effect; and I hope that this is an indication of a new philosophy by the Treasury and that we may see a shift of emphasis, as we have been suggesting for several years, in favour of a more simple tax system and one which reduces the direct taxes disincentives in favour of the less disincentive indirect ones. I was amazed at the tremendous defence which the noble Lord, Lord Shackleton, put up in favour of S.E.T. Towards the end of his remarks I wondered why Mr. Reddaway had been entrusted with this inquiry if everything was so satisfactory. No doubt we shall find out about it.
As to the alternative, I should like, at the expense of being guilty of repetition, to put in another plea for a fresh study of the added value tax system as a means of providing revenue with the least harm to the country. I am sure we are missing something here. I believe it could be a genuine alternative to S.E.T. and may be the foundation on which a simpler tax system could be created. At the same time, the country should recognise, as the noble Lord pointed out—and I think we must give constant emphasis to this—that as we shift towards indirect taxation we must keep under constant scrutiny the plight of the lower income groups, and particularly people on low fixed incomes.
It is in the field of the use of manpower, productivity and incomes policy, that we ought to be looking now for stable, longterm growth. Here I take a better view of the Government's intentions than of their past policies. At last, after a great deal of persuasion, they are, in my view, beginning to get the emphasis right. They have come a long way since those dreary days of 1966 when the exponents of Government policy did not seem to understand the importance of productivity. It is instructive to look back at the history of this subject. In the Declaration of Intent negotiated by Mr. George Brown

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before he was removed from the D.E.A. the references in all the documents, and certainly that document, were to incomes, prices and productivity—productivity at the end. After the chaos of July 20 the Government introduced their Bill to implement the prices and incomes policy, and again I pointed out that the emphasis was entirely wrong, because we were invited to deal with prices and incomes policy, not productivity. Productivity was tucked away in the form of an essay in one of the Schedules to the Bill. Many of us protested at the policy of freezing both wages and productivity agreements at that time. We said it was very short-sighted indeed. I got a pretty tart rebuke from the noble Earl, Lord Longford, who was at that time Leader of the House. He had a Government brief. I am looking forward to hearing the expression of a free citizen in the debate this afternoon. We protested on the question of emphasis.
Now, if I read the signs aright, the emphasis is becoming more realistic. The new White Paper restores productivity to the place we claimed for it. It is now known as the Productivity, Prices and Incomes Policy. In fact I put forward in the economic debate on February 9, 1966, a similar suggestion to get the emphasis right. It was still trying just to get emphasis right; it was not the policy but the emphasis. First, we suggested that the Prices and Incomes Board might be rechristened the Productivity Improvement and Related Incomes and Prices Board. I said productivity must be put first so that people may realise that they are not having just a wages freeze but are going to be able to justify higher wages by higher efficiency.
In the subsequent debate on August 3, 1966, on the Prices and Incomes Policy I returned to this subject, and in answer to an intervention by the noble Lord, Lord Shepherd, I pointed out that rather than come to the House for a wage freeze or standstill they should have demanded the maximum number of agreements which gave higher productivity and higher efficiency. Unfortunately, as we discovered in that debate, the Government intended to apply the standstill to productivity agreements. We are, in my view, still suffering from having lost that six months in which genuine productivity
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agreements could have been negotiated. Now there has been a welcome reverse of this thinking, and I believe that with the appointment of Mrs. Castle. in her new responsibility for employment and productivity we may well see a welcome change.
The acceptance of this idea by the Government tempts me to put forward again a number of other ideas, because I have found that with this Government you have to repeat things many times before you get them accepted or taken up. We still have the problem of how to keep inflation down in a high-wage economy and how to get the best use of manpower. I put forward in 1966 an idea, which has since been taken up by one or two writers in the economic press, for a freeze not on wages and incomes but on the total pay-roll itself, which would mean that if this principle were applied to companies and organisations it would encourage them to adjust their wage and salary scales as they wished, provided the total outlet in cash did not exceed what it had been in the previous period. I believe that if companies wanted to put wages up in those circumstances they would have to reduce manpower and introduce more efficient methods and productivity in it.
LORD ROBBINS: My Lords, may I ask the noble Lord to elucidate that thought in regard to the future of export industries in the near future?
LORD BYERS: My Lords, I am grateful to the noble Lord, because I was trying to condense what I said in that debate. I said that of course there would have to be exemptions for companies which had to expand and those which had to expand particularly for export purposes. I throw this out as an idea which I believe is worth further study and certainly could be applied to the nationalised industries. I think it quite wrong to have increased the Civil Service. I believe that if we had had this system working in 1964 we should not have had anything like an additional 57,000 civil servants; it would have beers inconceivable, because every time one would have had to say, "How do I save the money in order to get the increase I want". I merely throw this out as a suggestion for discussion. I believe there is something in it which would avoid inflation and avoid overmanning.
BARONESS PLUMMER: My Lords, I wonder whether the noble Lord has equated the number of increased civil servants with the increased population?
LORD BYERS: Yes, I think there will be an adjustment, but I cannot believe it is right that 57,000 additional people should be brought in, and I am sure that if there had been a discipline operating it might have been 25,000 or 26,000—something of that sort. I am merely pleading for some method of controlling it, and believe that that is what we ought to do.
The only other point on this matter is one that we have made on numerous occasions in the past, and I make it again because I think we may have a better opportunity under Mrs. Castle than we have had in the past. I refer to the emphasis which has been put in the past on nationally negotiated wage agreements, only for them to be followed by further agreements at local and plant level which have caused a serious incomes and wages drift in this country. I believe that during the period when wage restraint is required and when the emphasis ought to be on productivity, the Government should consider trying to put a brake on national agreements, and encourage plant bargaining on the basis of genuine productivity agreements at that level, because it is at the plant level that one can measure productivity and efficiency. But if we are to have national agreements and local agreements and plant agreements we shall never get anywhere near the 31½per cent. target which has been set by the Government. I think that these national agreements are a positive danger in that they create the wage drift which we want to avoid.
I conclude, therefore, by saying that, thank goodness! at last some light seems to be dawning; and the emphasis for which we have been working and asking for so long is now being shifted in the right direction. At least, I hope that this is what is happening. If the new Minister can be really tough with applications for national and central increases in wages and incomes, and can encourage schemes of high wages for high efficiency at the plant level of industry, I shall have a better chance of persuading my colleagues to support the provision of statutory powers which may be required as a last resort. But we certainly cannot accept that policy
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unless it is part and parcel of one which emphasises productivity, high wages, high efficiency and some form of restraint at national level.
What I find quite indefensible—I am sorry to have to say this to the noble Lord, Lord Aldington—is the apparent policy of the unofficial opposition in the Labour Party in its alliance with the official Opposition of the Conservative Party, who apparently prefer to avoid the challenge of framing a positive incomes policy and remain wedded to the old-fashioned system which has done so much to create the inflation that has undermined our prospects of achieving national growth. I find this an unholy alliance of Tories and troglodytes, and I think it rather pathetic. But what we must ensure is that we get the right incomes policy for the circumstances of to-day.
4.43 p.m.
VISCOUNT CHANDOS: My Lords, I fear that I have a number of rather disagreeable things to say, and although the genial atmosphere of your Lordships' House is a bad place to say them, they must be said. However, I can begin with something agreeable, and that is that I think the noble Lord the Leader of the House made a most charming speech. I had early determined that when I not into trouble of any kind and had a bad case I would try to enlist his sympathy to make a speech on my behalf. He even made S.E.T. almost a good joke, instead of a bad one. And that passage about the relief which the Highland hotels were going to get really brought tears to my eyes, as half a Scotsman, because you can imagine the little waiting room up there with this tremendous fiscal relief which they were going to get.
I have also been trying to find something agreeable to say about the Government. I do not find that difficult. I have no hesitation in saying that their outstanding virtue is their courage. I spent a good deal of my short span in war, and I learnt early in life on the battlefield that the most dangerous people to follow, and indeed the still more dangerous people to lead, are the people who are merely brave: who do not know where to go or when to go. And I am afraid that that is the posture of the present Government. The noble Lord the Leader of the House put forward the

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time-honoured question, "What would the Opposition do if they were in our place?". We all know that one. It is one of the oldest Parliamentary dodges. All it means is, "When we have got the economy into the most disastrous mess, how would you get us out of it?". Quite likely, we should have to get out of it the same way. But the answer is, of course, that we would never have got into it. The Government inherited a difficulty, and they have succeeded, in three and a half years, in turning it into a crisis—in fact, not a crisis, but a disaster.
I want to refer to a cliché which is now current, about personality assassination. I am entirely against personality assassination. It is against my nature. My advice to any Conservative who becomes most indignant and who is thinking about indulging in it is, "Don't touch it. Leave it to them. They will do it for you." On the subject of personalities, may I be allowed to express a deep and sincere regret that Mr. Ray Gunter has left the Ministry of Labour. My belief is that he has been an excellent Minister, and I think that his departure from the Ministry is a loss to the country, to industry and to labour.
This leads me to speak for a moment about the new cast which was announced last week. I am at this moment much connected with the theatre. I could not help being reminded that here was a touring company that had "got the bird" in the Midlands, where they used to get a few cheers, and were now coming to London. They were going to put on the same old cast, the same old stage army, all out of step with one another; tad they were going to play Julius Caesar, which they were to re-cast. I do not know quite who the Mark II Anthony is going to be, but I rather suspect that it will be either Mr. Jenkins or Mr. Crossman—probably Mr. Crossman; and before long he will make the speech
"I come to bury Caesar, not to praise him".
We shall see.
There are some unregenerated people who think that the Prime Minister's speeches at the General Election were no more than cynical vote-catching by a skilful politician. I absolutely reject such an idea. I am sure it was not so. It would not be the least serious if it were.
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But what is serious is that I believe he thought they were true. He believed them. This is the awful thing.
According to Mr. Wilson, as he then was, the present Government were to be elected on a programme of expansion—dynamic expansion, glamourously and eloquently put over. The Prime Minister said—and I believe he spoke from his heart: "We all remember the bitter experience of the 7 per cent. Bank Rate and the deliberate slamming on of the brakes." I think he meant it. The Government now say, quite courageously, "We will not only slam on the brakes, but deflate the tyres, increase the price of petrol and bop the driver one on his noggin." This is indeed an odd way of carrying out this dynamic expansion. I think that his reminiscences are going to be still more bitter.
My Lords, what has gone wrong? I will not speak about the rates for money: that would be too painful a subject. I remember also Mr. Douglas Houghton, an old Parliamentary colleague of mine in another place, a most respected Member. Indeed, he was brought up in the Inland Revenue and, if my memory serves me, was at one time Chairman of the Public Accounts Committee—not the sort of man who would indulge in flights of fancy or eloquence. What did he say in his Election Address in 1964?
"Labour will not be a spendthrift Government. It will not need to increase the general level of taxation to pay for its programme".
Knowing the man I am quite sure that he believed what he said. I tremble to think what the taxpayer would get if in a return to the Inland Revenue he got his income wrong on that sort of scale. Taxes actually went up sharply after the Election, and in the three and a half years since the present Government carne into power the burden of taxation has gone up by £2,000 million. If I were in a disagreeable mood I should say that in a period of four years the burden of taxation amounts to about the same figure as the Conservative Government succeeded in reducing it in thirteen years.
Many Ministers have lectured industry, and wagged a finger of reproach at certain inefficiencies. I think they should look at the beam in their own eye before they start teaching other people. They might, for instance, modernise their estimates. What has gone wrong? It is

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that Government spending goes up steadily when we are all told, candidly and courageously, by the agreeable Mr. Shore, for example, that spending in the private sector—which is a gentle expression for you and me—must be curtailed, and that our standard of life must be cut down.
What has gone wrong? Why is it that the bond of this country has been dishonoured by devaluation? We all know that devaluation, which is now represented as an enlightened act of policy, was in fact imposed upon us by the country's creditors lest the national cheque should "bounce". That is what has happened. What has gone wrong? Why is it that since this Government came in the Civil Service has bounded up by no fewer than 54,000 people, at a cost of about £75 million a year? The noble Lord asked for one item of detail. Here is one for £75 million. I suppose that he regards £75 million as peanuts. If one cuts that sort of thing, the general feeling of economy of that kind, then it will seep down through the organisation.
What has gone wrong? I will try to answer the question. Why is it that men who, by their eloquence and ability—I see many on the Benches opposite—have reached the highest positions in the State now see their policy in ruins? Have they been let down by private industry? There was a time when our exports paid for about 85 per cent. of our imports. That has now gone up; productivity has made its contribution, and it is now about 90 per cent. Why is it, then, that these able and patriotic men now see their policy in ruins? This is not meant to be a destructive question, because if we could find the answer to it we should begin to know what to do.
The general answer is plain. It is because we have seen a mixture of Socialism and irresponsibility—and sometimes, even worse, it is mixed with malice. The profound reason for most of our discontents is that the Socialist dilemma in a free society has never been faced. I think that Mr. Attlee (as he then was) put his finger on the spot in a book published in 1949, when he said:
"The plain fact is that a Socialist Party cannot hope to make a success of administering the capitalist system, because it does not believe in it."
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That was said by the most respected Labour leader in the country. Long ago I used to attack Sir Stafford Cripps in another place for what he was pleased to call the national plan, backed by the Socialist doctrine of the nationalisation of all the means of production, distribution and exchange. The inherent fallacy is that you cannot work a centrally-planned economy, in the sense that the word is used by Socialists, and at the same time give labour the right to sell its labour and its services where it wishes. Of course there is nothing in the pragmatic life of anyone that can be carried out without having a plan of some kind. You cannot build a bungalow, or buy a bed or a motor car without having a plan of some kind. But it is axiomatic that the principal instrument of production is labour.
How can you control production, distribution and exchange and not control labour? Sir Stafford Cripps used to evade the question—he was a nice man and a great friend of mine—by saying, "We are trying to do something which has never been done before". He might just as well have said, "We are trying to do something which is manifestly impossible." You cannot do it. You can collect the bricks and mortar and buy a site under a compulsory purchase order, and all the rest of it, but you will not have a house until you have the labour to build it. Unless you control labour, the national plan is the national sham. One cannot do this in a free society, and this is the dilemma which has never been faced. If you are prepared to become a Communist and get rid of all your liberties the thing will work, because if you are short of labour in the mines you order the medical students to go in and get the coal. But you cannot have this kind of attitude in a free society. It is not working in Russia because at this moment the Russians are busy restoring some of the discipline of the market place instead of the discipline of the State and the commissar.
We are trying to do the opposite and now, at long last, these things are coming home to roost. At long last, the present Government have to face the dilemma. Instead of talking about direction of labour they pose the question in a slightly different way: they pose it in terms of a prices and incomes policy. In a free society labour must have the right to sell its labour where it wishes and for what

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it can get, not for what somebody in Whitehall thinks that it should get. If one looks at this dilemma, one will find it is at the root of the sort of objections which are raised by members of the Party opposite, particularly by Mr. Cousins. So if the policy works at all, it can only be at the expense of freedom and it can work for only a very short time.
Let me turn to another aspect of our problems. One of the means of expansion without inflation lies in savings. I thought that the noble Lord, the Leader of the House, was a little sketchy on this point. I think that what he said was very dangerous. It is dangerous under the present dispensation, because every disincentive is put upon savings. Savings take purchasing power out of our pockets. But how does this irreproachable sentiment harmonise with Government policy? Why is investment income over a certain figure singled out for penal taxation? If you believe in savings, why put special and peculiar taxes upon the proceeds of saving? Of course, among 50 million people there will be those who live upon their father's savings in an unworthy manner, people who might even be detected on a racecourse or in a night club. Is that any reason why the whole policy of savings should he damnified in this way? Why whip hundreds with scorpions in order to try to prevent one sinner from getting away with it? Why should the Government praise almost ad nauseam small savings and at the same time say that big savings are utterly disreputable? What kind of logic is this? It is not logical at all, but a piece of political malice.
One has the example of the very rich man—I hope he is thoroughly ashamed of being rich !—who had a small business which he built up into a great undertaking. He has now retired and still has about half the stock. It is a very big business and is a large employer. He is now being paid £20,000 dividends for the year, so he went to the company and said, "Don't pay me this. Please let me leave it with you". I do not know whether or not they consented, but if they had consented it would have saved the man £12,500 in taxation. It is a strange situation that by not receiving £20,000 one should get £12,500 bonus. These are the economics of bedlam under a
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Socialist Government. They would be funny if they were not so damning. This man will be obliged to accept his dividend by some provision in the Finance Bill—I think I see the Front Bench opposite thinking up a clause now—and a few dozen extra civil servants will be recruited to see that everybody takes what they do not want so that they do not have to pay the 28s. 6d. in the pound. Of course, I am not in this situation, but it is absolutely crazy. There will be rich men of whom noble Lords in all parts of the House will not approve because they pay only 19s. 3d. in the pound. Is that any reason for making ourselves look ridiculous?
Again, I have often pointed out that all the upper levels of surtax are not for revenue; they are for punishment: "I'll teach you to be a success", is what they say. Let me prove it. In 1967–58 the actual sum raised by taxation was £10,819 million, and it will be about £12,000 million in the next year. If we allowed surtax payers to keep a quarter of their earnings—that is to say 5s. in the pound—I am informed that in the case of mixed income it would cost the country about £4 million a year. My own calculations make it considerably higher. But can anyone claim that this £4 million, £10 million or £12 million when related to a taxation of £10,819 million is for revenue? Of course, it is not—it is simply for punishment. It is a piece of political malice.
Let me turn to the capital gains tax, and let me confess that I believe in profits; so, according to their statement, do the Government. Let me even concede, for the sake of argument, that capital gains should be taxed, notwithstanding that it is yet another blow at savings. But why should short-term profits be treated as if they were income? What logical justification can there be for taxing profits earned in, say, 11 months at the full rate—in some cases 19s. in the pound—and those earned in 12 months at 30 per cent., or 6s. in the pound? What kind of logic is there in that?
The making of some short-term profits is highly desirable in the interests of the country. There were times when issues of securities were underwritten by private individuals, and they thereby guaranteed the flow of savings into enterprise

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and into industry. But any individual who underwrites an issue now should see a doctor. It is absolute madness. I cannot see why there should be this distinction between short-term and long-term profits. I also believe—and I should like to have a statement from the Government—that the actual revenue from capital gains would be higher if it were levied on all capital gains at 30 per cent., whether the gains were earned in a week, a month or a year. The number of transactions would greatly increase.
At the present moment the capital gains tax distorts and impairs the capital market. Also, the tax is so complicated that it requires a host of civil servants to disentangle the detail. I have had to wind up two large estates, and six months or nine months pass before one can get an answer to a question. I do not want to reiterate what I have said so often to your Lordships, but the artificial stimulus to savings is one of the keys that will get us out of our present difficulties. By this means we can go some way towards having expansion without inflation.
I now turn for one moment to the international actions of the Government, though not those to which my noble friend was referring. Why, when we manifestly cannot manage our own affairs, is it sensible to tell other people how to manage theirs? What kind of sense is it to have a policy which allows you to trade only with countries of whose political opinions you approve? If we do not approve of South Africa, and curtail our trade with her, why do we trade with Franco and with Salazar? And why do we trade with the France of de Gaulle, if we disapprove of him? I suppose the principle of self-determination must be that countries determine for themselves the type of Government which they think appropriate to their position, provided in our case, it seems, that those other countries settle their political system in accordance with ours. We really cannot be the schoolma'ams or Mrs. Grundys of the whole world. That is absolute insanity.
My Lords, I conclude by saying that the burden of our criticism of the Government's economic policy, and indeed of the Budget, is that it is almost entirely negative. Can anyone be surprised that the economy is sluggish when
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manacles are put on the wrists, and balls and chains on the ankles, of anyone likely to make a profit? The Government have no money of their own; they get it from the profit earner. The future prosperity of the country depends upon the profit earner. The prospects of attaining equilibrium in our balance of payments depend upon the profit earner. The finance of the under-developed countries depends upon the profit earners in the fully-developed countries. Why regard profit earners as the enemies of the State?
The root causes of our discontents begin with muddled thinking and attempts to graft a number of Socialist doctrines—which are workable in a totalitarian State—on to a country which is still wedded to liberty and, for that matter, is still wedded to the idea of private enterprise. Until you allow our citizens a little more elbow room; until you are able to reduce Government expenditure absolutely and not comparatively, and until you can cut down the ever-mounting number of civil servants whose main function is to prevent things happening or to prevent people doing things, the longer will the economy drag its feet, and the longer will the natural genius of our people and the unique skill of our workmen be cribbed and confined. Finally, in a democracy Governments are supposed to govern with the consent of the governed, and receive a mandate from them to do so. Now that the electorate have unequivocally withdrawn their consent, is not the only democratic principle to give them a chance of choosing another Government? The present Government had a mandate to govern. They now have a mandate to go.
5.5 p.m.
BARONESS PLUMMER: My Lords, there has been a great deal of comment from noble Lords on individual proposals in this year's Budget, and I think I am right in saying that it has been generally considered to be a courageous one. What the Budget aims at is nothing less than a realignment of our economy to put us on the road to economic recovery. But I want to speak about an important aspect of that recovery—the contribution of agricultural and allied industries.
Because agriculture is the largest industry in this country, with a production currently valued at £1,850 million a year

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and a potential growth rate of 6 per cent., it is vital to take account of its contribution to the national economy. The 1968 Annual Review determinations have given the British farming industry £,52½ million, which some people say is not enough. Certainly, it required farmers to absorb a quarter of their rising costs, but we—and I am a farmer myself—still have about half of what we have gained from increasing productivity to provide the resources for further investment. And this investment must not necessarily be only inward-looking. We see slogans of "Buy British", but there is a better slogan "Sell British". The British agricultural industry can contribute as much to our export drive as to our import saving, and we must not lose sight of this valuable potential.
I want to quote an extract from the Barclay's Bank Report under the heading, "United Kingdom Farming and the Balance of Payments", which says:
"After devaluation, and the subsequent Letter of Intent to the International Monetary Fund containing an estimate of a balance of payments surplus in the second half of this year, exhortations on the one hand to export, and on the other to buy British, have become even more persistent, and farming has been quoted as prominent among the industries which could make a major contribution. Overseas sales of farm produce in 1967 amounted to some £125 million compared with £90 million in 1960. Farming also supplies the essential impetus for the agricultural machinery industry, where Britain is the world's leading exporter, selling over two-thirds of its output, and for agricultural chemicals such as pesticides, weed-killers and fertilisers."
I am sorry to go on about this, but this extract is very interesting. It continues:
"Long-term planning would mean a deliberate production of surpluses for export, in turn involving a radical change in policy. Nevertheless, some moves towards encouraging exporting have been made, including the formation of the British Agricultural Export Council early last year."
Besides performing very efficiently all the usual functions of an export council, such as specialist missions and fairs, the British Agricultural Export Council sells British agricultural expertise to foreign Governments. It is, of course, Governments who, in the agricultural fields all over the world, hold the key to agricultural investment. The B.A.E.C., under the stimulating chairmanship of Mr. Rudi Sternberg and the deputy chairmanship of Mr. C. M. Jarvis, has
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made great strides in the first year of its existence. I know it is stimulating leadership, because I sit on the B.A.E.C. main committee and myself have been considerably stimulated. Already this year the Council have sent outward missions to Portugal, Greece, the Lebanon, Iran, the Soviet Union and Pakistan. Each of these Governments has been persuaded, at the highest level, that they can benefit from British agricultural expertise in drawing up their investment plans. The B.A.E.C. will be the channel through which that expertise and the accompanying export of hardware will flow.
Now this presents us with a golden opportunity to move in on this worldwide drive for greater food production, whether in farm machinery, chemicals, buildings, irrigation, livestock, seed or even research and training. There is a huge and growing demand which we on the Council are highly qualified to meet, and as a trading nation we muse have our full share. But we are not without competition. Countries like France, Holland and Denmark also recognse the opportunities in nations with new oil wealth or who are in receipt of World Bank or other aid. With the progress of science and mechanisation, the old split between agriculture and industry has virtually disappeared, with large sections of industry supplying the huge inputs into food production as well as processing, preserving or manufacturing its end products. The fortunes of many great national companies are inextricably bound up with the processes of farming and horticulture.
The Council is also the instrument by which the industry can express itself with one voice in the export field, as in the case of the Rumanian irrigation project, sponsored by the B.A.E.C., where a number of major firms with diverse interests are working together under B.A.E.C. leadership. Joint marketing arrangements in Europe and further afield are becoming commonplace in order to cut down costs arid reduce overheads. The B.A.E.C. is used in such a porting an expensive performance can be assisted, not only in finding markets way. Many small firms who find ex-but in exploiting them. I have an extract

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here from a letter from an engineering firm sent to the B.A.E.C., which says:
"May I take this opportunity of thanking you and your Council for the progressive and forthright manner in which you are conducting your business. We, as agricultural engineers, feel that there has been a long-felt want for the type of guidance which your Council is offering to the smaller type of firm who wishes to know the kind of agriculture being conducted in various countries of the world, and where markets can be developed when this information is presented to them."
Finally, I have some figures of the amount of Government assistance given to similar bodies in the following countries. France is reputed to have a budget of £4½ million. The United States finance for export promotion is 0·2 of 1 per cent. of the total agricultural exports—and, my Lords, that can be a lot of money. Australia donates 0·8 per cent. of their total agricultural exports; New Zealand, 1·1 per cent. The United Kingdom spends £1 million per annum, through the Board of Trade, on export promotion, but only a fraction of this goes to agriculture—and none, if I may say so, as yet to the B.A.E.C. Here I come to my plea. The Council do not ask for a continuous subsidy, but some small, temporary financial aid. I realise that this presents a problem in the difficult economic climate of to-day, but even in such straitened circumstances one must not forgo the opportunities to make a really profitable investment. The foreign exchange earnings that the B.A.E.C. has shown it can bring to the country justify the provision of some pump-priming finance. Everyone accepts that in the long term the industry must pay for its own export council. All that we on the B.A.E.C. ask for is the opportunity to demonstrate to industry that we can provide a worthwhile and profitable service to them.
5.15 p.m.
VISCOUNT AMORY: My Lords, the noble Baroness who has just sat down will forgive me if I do not follow her in the arguments she has just brought forward. I should very much like to do so, because I found myself very largely in agreement with what she said about British agriculture. I think the record of achieved increasing efficiency of British agriculture over the past twenty years or so is a magnificent one—a record to which very few other industries, if any,
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can hold a candle. I think that that increasing efficiency fully justifies a substantial increase in the total volume of home food production which can now with advantage be produced in this country, as I think to the benefit of our balance of payments.
Out of general consideration for the welfare of your Lordships I propose to restrict myself to one point. It may sound a rather humdrum point, but I think it is an important one. In passing, I should like to refer to what my noble friend Lord Chandos said about courage. One detects a tendency for Ministers now to pay terrific tributes to their colleagues' courage. It reminds me sometimes of the soldier who wished to pay a tribute to another soldier, and who said, "He was the bravest man I ever knew—throughout the battle he never left my side". I should also like myself to pay a tremendous tribute to the excellent speech, I thought, of my noble friend Lord Aldington earlier in this debate. The point I am going to speak about for a few minutes is one which he touched on. In passing, I should like to say a word about the interesting suggestion made by the noble Lord, Lord Byers—that instead of restricting individual remuneration, the aggregate remuneration of a company, as I understood him to mean, might be restricted. It seems to me that, whether that would be good or bad, it would be inconceivably difficult to administer.
My Lords, there is a precept that in our present national situation money incomes cannot rise faster than productivity without the danger of inflation and balance of payments trouble; and that precept is widely accepted as a principle however imperfectly our national performance may have been in its relation to it. But another principle which is not yet as fully accepted—and though, as I said at the beginning, it may sound humdrum, I believe it may be almost as important—is this: that if output rises faster than potential capacity, the results are rising costs, falling exports, increased imports and balance of payments problems. If actual output rises faster than potential capacity, it can do so only at the expense of the margin of unused capacity. I believe there is much accumulating evidence to indicate that when that margin of unused capacity has fallen, owing to excessive demand, below

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about 5 or 6 per cent., then we have experienced the troubles I have mentioned, and that when actual output has been maintained at not more than about 94 or 95 per cent. of potential production, then our economy is operating on a relatively level keel.
I hasten to say that this sort of margin of 5 or 6 per cent. does not of course mean that, in terms of unemployment, the percentage would be anything like that. It seems to indicate a national average of unemployment somewhere of the order of 2 per cent., as Lord Aldington mentioned. This rule, if it is a rule, has been lucidly described by Professor Frank Paish, the economist who, I should like to repeat—I have mentioned it before to your Lordships—in my belief has proved far more accurate in his diagnoses and forecasts than any other. This concept may not at first sight seem particularly palatable to politicians anxious to get going on a more spectacular rate of expansion. But it may, in fact, indicate the route to the highest attainable and sustainable rate of expansion. If so, I suggest that it is a guiding principle of the highest importance and relevance.
I suggest, as the noble Lord, Lord Aldington, suggested, that noble Lords look at the article by Professor Paish in the current issue of Lloyds Bank Review. In that article, Professor Paish contests what he calls three widespread misconceptions. The first is that the long-term growth of our economy would have been faster had it not been for recurrent balance-of-payments crises. The second misconception, he alleges, is that even in extreme full-employment conditions it is possible to prevent excessive rises in money incomes by direct restrictions of increases in wage and salary rates either by law or, he claims, by voluntary co-operation. The third alleged misconception is that the best way of accelerating our growth and output is to run the economy with extreme full employment of our productive resources.
As to the first of these allegations, it is, I think, a commonly-held notion that but for our balance-of-payments difficulties we could have achieved a much more rapid rise in output and could have maintained it. It is true, of course, that the balance of payments is one of the limiting factors. But Professor Paish believes that it is not the primary one; that balance-of-payments difficulties are
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more the consequence and that the rate of increase in potential capacity is, in fact, the primary limiting factor. If output presses on the ceiling of capacity, then disaster follows. Looking back, it seems as if this is what has happcned on each occasion.
One difficulty is that it is not always easy to be sure when output is rising faster than capacity. Here I speak with some humility, because in 1958, I think, When I was at the Treasury, output appeared to be lagging and stagnant at the moment. Visible statistics took a long time to materialise, and in fact during the time when it appeared to be stagnant, output was beginning to rise and to rise faster than potential capacity. If I had realised this factor and tie importance of it then, the results achieved later on would have been even more beneficial than they were—if, indeed, it is possible to imagine such a thing.
One thing should be said in regard to the 2 per cent. national average unemployment postulated. No one in his senses wants any single person unavoidably unemployed. Fortunately, Professor Paish computes that the fluctuations in unemployment work out at little more than one-fifth of the changes in the margin of production. The more employment can be evened out between areas of high and low employment, the lower the average national figure can with safety become. Since an adequate margin of spare capacity means that workers can be absorbed more quickly in the sectors where demand is increasing, the average period of unemployment is likely to be shorter and more transitional. If the validity of that general argument is accepted, a very relevant consideration is: How can potential capacity be encouraged to grow faster? Encouragement of a high rate of industrial investment is clearly an important factor here. It requires for its realisation a reasonable expectation of future profits. Probably an even more important factor—and here I think the noble Lord who is to reply may agree—is the more efficient use of existing resources.
The two conclusions that seem emerge from this thesis are, first, that a rapid rise in output at the expense of a reduction in spare capacity can defeat its own object; it can inflict permanent competitive damage on our economy and has, in fact, done so. The second one is

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that preservation of a margin of potential capacity of the order of 5 per cent. or 6 per cent. (which is probably about what it is at present) may be the effective way towards overcoming the "Stop-Go" troubles that we have experienced for so long and towards attaining and sustaining an era of steadier and faster expansion with a sound balance of payments. It is important to be clear in regard to this thesis that it does not imply stagnation; and my noble friend Lord Aiding-ton mentioned that point.
I suppose that the best way of increasing productive potential is by increasing and improving manpower productivity. At present, I think our productivity is increasing at the rate of about 3 per cent. per annum. If it is true that an increase in money incomes beyond this is a danger, then Professor Paish's conclusion, that an increase in money incomes works out in inverse ratio to the margin of unused capacity, may be extremely relevant. Looking at the recent past, his calculation is that when the margin of potential was 2 per cent. only, the rise in employment incomes was 8 per cent.; when the margin of potential was 6 per cent., the rise in employment incomes was 3 per cent. Looking again at the recent past, between the years 1955 and 1967—and I am afraid that I am giving your Lordships a lot of statistics—the index of labour costs per unit of production rose over 50 per cent.—a measure of our lack of success nationally; or, in the fashionable term, of our non-achievement. But the result of this rise in cost was an increase in export prices of British manufacturers that was too little to render them profitable but too much to ensure them being competitive. I think that illustrates the danger that these unearned money incomes can cause.
I will not go into Professor Paish's arguments in further detail because I want to be very brief; but if his conclusions are right, these principles may provide the light at the end of the tunnel for which all of us have been so eagerly straining our eyes. The only point I wish to make on this occasion is this. I hope the Minister, when he comes to reply, will say that he will urge his right honourable colleagues to read Professor Paish's thesis and to give it careful and dispassionate consideration.
5.29 p.m.
THE EARL OF LONGFORD: My Lords, the noble Viscount, Lord Amory, will always be listened to with the closest attention on finance, whether he is quoting his Professor Paish or giving us (which would be just as welcome) his own unaided reflections. I feel emboldened by his benign personality to offer a few thoughts to-day; although I remember the advice given by the late Lord Attlee a good many years ago to Professor Laski—a friend of many of us, and particularly of Lord Robbins and myself—who ventured to give Lord Attlee, when he was Prime Minister, some sharp advice. Lord Attlee replied, "A period of silence on your part will be welcomed!" I shall try to follow that advice. I have not, in fact, troubled the House for three months but I felt that to-day it was only right to intervene for a few moments.
The noble Lord, Lord Byers, in his helpful speech—though I am no longer in a position to be allowed to distribute that kind of compliment—was kind enough to refer to me as being in these days a free citizen. That is true. No one is paying me to come here—I get the usual expenses I presume: one cannot lose everything at once—but I am perfectly free to come or to stay away; and I am coming and speaking only because I feel strongly that the Government's Budget should be supported.
I am not going to fall in the trap, though it is a rather tempting one, of trying to reply to the previous speeches. I leave that, happily, to the noble Lord, Lord Beswick, who I know will deal very effectively with these elder statesmen among whose company and to whose club I hope to be elected—if you can be an elder statesman without ever having been a statesman. At any rate, I hope that the noble Lord, Lord Beswick, will deal rather sharply with some of the rather partisan points which have been made. But, as I have said, I leave them, happily, to him. There is one aspect on that to which I would call the attention of the noble Lord, Lord Aldington. I had hoped to find him on some Back Bench, but as I go down he goes up. I am bound to say that I thought his speeches used to be rather better, to put it kindly, when he was higher up and further back. I

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thought he had been infected by the disease from which so many of us suffer—but that remark is intended, of course, in the most friendly way.
There is one other comment that I would make. The noble Lord, Lord Byers, quoted, very properly, from some of his earlier speeches, but he did not quote from a debate, a very interesting debate, which he initiated last year on the subject of public expenditure. Perhaps he will allow me to quote from what I said on that occasion, when I was briefed by the Treasury, so that it must have been right; and no one challenged it. I pointed out at that time that in the last three years of Conservative rule the increase of public expenditure had been 4.9 per cent. whereas in the three Labour years the increase had been less than 4 per cent. a year. I make that one point in reply to the noble Lord, Lord Aldington, who talked as though we had been so very prodigal, and expenditure had run away with us. But, as I say, I leave most of the replies to the noble Lord, Lord Beswick.
My Lords, I want to confine myself, almost as briefly, but I am afraid not quite so briefly, to one point, in the fashion widely adopted by the noble Viscount, Lord Amory. But before coming to the Budget, which I support firmly, I should like to ask one question and make one comment on a different aspect of policy. The question I should like to put to the noble Lord, Lord Beswick, is whether he can tell us anything about these very important developments (I gather that he will be able to do so) and what progress has been made recently towards a more rational international monetary system; because all of us, irrespective of Party—the noble Lord, Lord Aldington, the noble Viscount, Lord Chandos, and the noble Viscount, Lord Amory—agree that progress must be made on that front; and made quickly.
I should like to make one comment before I come to the Budget, and that is about ministerial changes. The Government have lost one of their best members in Mr. Gordon Walker, and that I heartily deplore. But there are signs in the other changes of a new approach to social policy which will give fresh heart to many Socialists, and to many outside the Labour Party: particularly, I think, to many who work in the social services.
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There will be a feeling that, for the first time, a radical social policy may be brought into line with a radical economic policy. I say that in passing, but I should not like to fail to mention a point which is very close to many of my activities and of very much interest to the House.
Now for the Budget and the reception thereof. I do not want to deal with details, which have been so well set out by the Leader of the House. I want to deal with the Budget in its historical and social setting. I can think of nothing in my own experience, or in my studies of the past, to compare with the reception accorded to this Budget. We wore told beforehand that only a miracle could enable the present Chancellor, Mr. Roy Jenkins, to make a success of his Budget. When he sat down—or the next morning —Mr. Francis Boyd, for example, the most learned of the Liberal commentators, suggested that a near-miracle had occurred. Certainly the members of the Labour Party, or the great majority of them, rose and waved their Order Papers and showed the utmost enthusiasm. You may say that has happened before, though I doubt whether any greater enthusiasm has ever been shown.
But what was much more striking, in the circumstances, was that the financial Press were also extremely cordial. In fairness to the noble Lord, Lord Aldington, I think that, taking the Budget as a whole and on its own, he was ready to pay quite a firm tribute. I must not do much quoting, but I will quote the Financial Times, which said:
"It is a Budget which fits the special needs of the situation remarkably well."
Much more was poured out to the same effect by other financial experts.
Well, my Lords, this is surely very remarkable and, as Gladstone once remarked when he received a telegram from the Queen, very significant. It is unique that a Budget like this should be applauded by the Labour Party members full of their Socialist ideals, and also by the financial Press, with all their very strict ideas of monetary policy. After all (and here is a point which I want to deal with for a moment, although I do not wish to talk too much from personal experience or for very long), we all know, if we have worked in the City—and I suppose that I am the only Socialist who,

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has ever been the Chairman of a Bank—and as the noble Lord, Lord Aldington, who has worked so long in the City, knows perfectly well, there has been, to put it mildly, a lack of understanding for many years between the City and the Labour Party. The fact is that there has been what can only be called antagonism.
During the eight years that I worked in the City I made such small efforts as were in my power to bridge the gulf. I cannot say that it made any difference to anybody, but at any rate I can go on record as having made the efforts. This tension, or misunderstanding, is serious for the country. It is not a question of personalities. Going back to the past, Lord Attlee and Sir Stafford Cripps were much respected in the City, so it is not a personal question in that sense. But there is felt to be a sharp conflict of ideas. In theory, of course, both sides, the Labour Party and the City, would agree that harmony should be possible. The financial leaders in the City would also agree, in principle, that whatever Government were in power should be served impartially. A Labour Government, for instance, should be given a fair run, as I am sure would be the intention of the leading people. On the Labour side, all the responsible leaders realised how important it was that the finances of our country should be run in a way that commanded a good degree of confidence. Yet, in spite of all that, suspicions have persisted, and, speaking broadly, still persist.
I would just say a word or two more, and speak carefully about the confidence factor, which was touched on by the noble Lord, Lord Aldington. I think his words were that there will be no confidence overseas unless there is confidence at home. I do not want to seem to be casting accusations against anybody, but let me start by pointing out that we are always told (and I was, of course, for three years in the Government and heard it from that end; but I look at it a little more dispassionately now) that we had dispelled a lot of confidence; that there was a great deal of good will which, by our own errors, we had somehow cast away. And certainly we are well aware of the fact that at certain moments a lack of confidence in the financial community in London might communicate itself to the financial world overseas. I
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will not say more, but there was always that situation, and I was very glad that the noble Lord, Lord Aldington (I know what a great patriot he is in peace and war) gave the firm answers which he told us that he had given. But answers of that kind have not always been given. Perhaps at times financial leaders in this country felt that they could not honestly give an answer of that kind.
If we look at it from a Labour point of view, there certainly has been no failure in recent years to recognise the need for preserving business and financial confidence. But the question has inevitably raised itself among people of our persuasion, both in high places and in low places: How high a price must a Labour Government pay to obtain and maintain this financial confidence? It is felt in many Labour circles that the price may be too high. There was a poet at the end of the nineteenth century called Crossland—no relation, so far as I know, to the President of the Board of Trade—who wrote a poem which runs as follows:
"I took the road to Hell,
But there were things I might have sold
And did not sell."
That is what Crossland, not the one who is President of the Board of Trade, said about his own life. What everyone has to realise is that if one is a Labour man by conviction one has to ask oneself whether it is possible to comply with the apparent requirements of the financial community or whether the time may come when some more drastic alternatives have to be adopted. I need not labour the point, but these are matters which are inevitably very much discussed amongst serious Labour people. I hope that there is a happy outcome and that the extreme difficulties which I have indicated will never occur.
Naturally I have been fully aware of these difficulties for many years. I am sure that the first step required is to avoid charges of ineptitude or worse against leaders on either side, and in this debate I think that they have been avoided. I do not think that the personal remarks of the noble Viscount, Lord Chandos, would offend anybody. I do not think that we could call them very pernicious, even though they were not very funny. At any rate, they did not do anybody any good and they did not do

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anybody any harm. What we want is a major effort at mutual comprehension between the Labour Party and the City and business circles generally. Here I feel that the Government have made a notable contribution. This Budget has been enthusiastically received by the City, by the financial experts and by the Labour Party. Here may be the beginning of a better era.
Perhaps we might ask ourselves how this has come about. Is it some conjuring trick? is it, to use the jargon now employed by many politicians about their opponents, some gimmick'? This is not a superficial point. I believe that it is an important feature of this dawning of mutual comprehension. Bankers distrust all politicians. I do not know how the noble Lord, Lord Aldington, feels about that: in his banking capacity I am sure he distrusts himself in his political capacity. Banks distrust politicians because basically they regard all politicians as optimists; and bankers, whatever their qualities—and they have aptitudes which are not always apparent—are not optimists. They distrust Labour politicians the most because they regard them as the most optimistic of the lot. That is putting it shortly but not untruly.
LORD ROBBINS: My Lords, is there any possible autobiography in that, may I inquire?
THE EARL OF LONGFORD: My Lords, if I were distrusted, my bank was not distrusted in my periods of office. May I put it in that way. I am not accepting this point of view about the Labour Party being more optimistic than others, but speaking for myself and in a spirit which I am sure the noble Lord, Lord Byers, would applaud, if someone asks me what I would put as the first weakness of the present Government in the last three and a half years, I would have no difficulty at all in answering. I would say that we have been too optimistic. But before the Conservatives begin to applaud this statement—though I think they are too wary to do that because they will think it is not going to he left there—may I say that this over-optimism has been true of every Government since the war. Probably on that I can pray in aid the noble Lord, Lord Thorneycroft, in his maiden speech in January. Perhaps the noble Lord, Lord Byers, will think
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this a little unfair, but I can only assume that if the Liberals had been in power they would have suffered from tie same optimism. But we cannot demonstrate this.
If we are candid with ourselves, valuing our democracy, we must regard this as a kind of congenital weakness of politicians. This is particularly true at a time when public relations in all their aspects have been brought to suet a fine point that it is reckoned that if ou are going to obtain a lot of votes you are not going to get them by being like Cassandra. The person who is the most cheerful is likely to be the most popular. This is a danger which in a sense we have to live with, which we have to try to isolate and overcome. It is not question of honesty in the ordinary sense—a question of concealing the facts. If that were so, neither I nor anybody else would have stayed in the Government for five minutes.
We know that prediction is an impossible science, though it is worth trying because it is better than nothing. If prediction were possible, so great an economist as my noble friend Lord Robbins would make his fortune to-morrow. In truth, we do not know what is going to happen in the future, and therefore it is open to honest people to take either an optimistic or a more guarded view of the future. The leaders of all Parties—and as a member of an earlier Government I must take my share of responsibility—have taken the optimistic view whenever they have had the chance.
At last the Government have is truck a decisive blow for realism and prudence. The time has come when the sunshine stories had to stop. The Government have decided to stop them. I am proud to belong these days to the rank-and-file of a Party which has backed U.3 its leaders so well in taking up this new attitude, and proud to belong to a nation which I believe will increasingly give its approval. May I offer one word of friendly and respectful warning to the Government, which I would hope is unnecessary, because I do not want to seem to be moving too far towards an area which I inhabited in prehistoric times. Whatever may be said of its labours, a Labour Government which loses the appearance and still more the reality of

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moral striving would lose everything which justifies its existence. I hope that no one inside or outside the Labour Party will suppose that a Budget of this kind, called negative by some critics, carries us far towards the achievement of the social ideal of the Labour Party, but I support this Budget because for the first time it begins to make it possible for those ideals to be achieved. We are at the beginning of a new era, in which self-restraint and self-discipline will be more than ever essential if we are to succeed, as I believe we shall.
There will be many in this country, Conservative and Liberal oppositions and other critics, who in the next few years will disagree with many of the things the Government do. But if we have a Labour Government, we must expect to have a Labour Party line. We believe in the equality of all human beings in a sense which I do not think would be fully accepted by our Conservative friends and which possibly would be accepted in a different way, if at all, by the Liberals. But I would hope that in spite of these differences, from now on the whole country will feel that we are being led by a Cabinet which is not only facing the existing realities but is determined to take a candid view of the future—that is, to hope for the best but to be prepared for all sorts of trials and tribulations, some of which cannot be foreseen at the present time. In that way, I believe that we are retaining the strenuous argument and dialectic of democracy, and in that way we shall elicit a new strength and a new unity from our country. It is certainly desired by everyone in this House and by almost everyone outside.
5.46 p.m.
LORD ROBBINS: My Lords, when I met my dear friend the noble Earl who has just sat down, he informed me that he looked upon his prospective speech from these Benches as being in the nature of a maiden speech. If I may take it that way, I should like to ask the indulgence of your Lordships to say how pleasant it is to hear him in his new capacity, I will not say "all passion spent", but at any rate "fancy free". Although I had not intended to do this, may I take issue with him on one matter to which he referred
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in the course of his interesting speech, about the attitude of the City? It may be true that there are to be found in the Square Mile people who are dogmatically and unreflectingly opposed to all that is done by my noble friend's Party and all that has been thought in the past by the great Socialist thinkers, but I think it would convey a very false impression of the psychology of the City in the modern age if that attitude were to be regarded as representative.
Indeed, I myself, a comparatively recent accession to the inhabitants of the Square Mile, have been extremely surprised to discover with what benevolent feelings many of my colleagues in that area have in the past regarded the present Government. Being an ingrained Cross Bencher, with much cynicism with regard to the operations and intentions of most Governments, I was astonished to discover how many people in the City of London in 1964, when the present Government came into power, were going round saying, not in public but behind their hands, so to speak, at luncheon parties: "It is a good thing to have a change it was bad to have one Party in government so long. It is up to us to do what we can to help". If that attitude has diminished in recent years since 1964, if there is less spontaneous reaching out towards friendly contact with the Government, I dare say that there have been faults on both sides, but I am bound to say that I do not think it is only the fault of the City.
Having said that, I hasten to propitiate the noble Earl by saying that I am in substantial agreement with his general contention that, other things being equal, and at any rate from the purely technical point of view, the present prospects of our economy may be regarded as considerably more hopeful than they have been in the recent past. Whatever we may think of the responsibility for the events leading up to devaluation, without abating any right to criticise the Government on all sorts of long-term policies—and I adhere to the view that, at any rate from July, 1966, onwards, the Government had very bad luck in that respect—I suspect that we should all agree that the fact of devaluation is providing a useful stimulus to export. I know that appearances are somewhat deceptive. Because of the rise in the cost of certain

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imported materials and the abolition of export rebates, the magnitude of the advantage of devaluation is exaggerated by the percentage change in the rate. But when all account has been taken of the necessary subtractions, there still remains in many fields an advantage of perhaps between 8 and 9 per cent. And if the pressure of domestic demand is sufficiently restrained, this should surely prove a powerful influence to introducing a balance-of-payments surplus.
Now that the Budget has at last been produced, we have some assurance that the restraint on demand is going to happen. I still wish that some gesture of this sort—the immediate application of the regulator, for instance—could have taken place on the morrow of devaluation. The public would have taken anything in those weeks; and the position of the pound in the foreign exchanges would have been powerfully strengthened.
But in spite of its sins of retrospection—I agree with the noble Lord, Lord Aldington, in this respect—and his somewhat unworthy sneer at top managers who provide for retirement by saving, I should not wish to withhold great admiration from Mr. Jenkins' general conception. He certainly can claim that at least we have measures which do not err on the side of caution in imposing the necessary constraints. I do not go any of the way with those who argue that he could safely have done less, but I do not think that we should fail to render tribute to what, in spite of the jokes that have been made about the use of the words, I persist in regarding as an act of considerable political courage which, from the technical point of view, at any rate, meets the requirements of the situation. Needless to say, I do not doubt the desirability of further scrutiny of public expenditure, so powerfully urged by the noble Lord, Lord Aldington; but I suspect that this involves time and perhaps a radical reformulation of certain conceptions of public service. I think it would have been unreasonable to ask this of Mr. Jenkins in the short time in which he has occupied his important office.
Still concentrating on the purely domestic situation, I think it seems fairly clear that the main danger remaining is the danger of renewed inflation of costs by run-away increases of the wage and
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salary level. There is no doubt that this is well recognised by the Government, who, as we all know, are running into severe difficulties with some of the it supporters in providing safeguards against this contingency. Incidentally, I should like to express some admiration for Mr. Jenkins's candour in making it clear that this is a situation in which it is positively desirable that, for the time being, in order to restrain consumption, prices should rise faster than money incomes. But I hope very much that in seeking to deal with this matter the Government will not rely exclusively on any form of incomes policy. Even after the discussion that has taken place, I cannot help thinking that this is a matter on which a great deal of confusion still persists.
Let me guard myself against misunderstanding in this connection. I have no doubt at all that the Government must have an incomes policy in regard to the public sector. After all, the Government are the employer there and unless they have a policy on their demand for labour this important section of the economy must remain in sheer confusion. Nor should I wish to deny that policies of freeze or semi-freeze in the economy as a whole are necessarily ineffective in the very short run. I think experience shows that they are not easy to enforce and that the longer they are resorted to the more resistance they encounter. But I do not doubt, without in the least abdicating my position as a lover of freedom, that in periods of great emergency, if the cooperation of the trade unions and employers can be secured, such policies may have a useful stabilising influence. I do, however, doubt very much whether it is wise to rely on their effectiveness for any but a comparatively short period. They generate anomalies while they last: what is more, when they cease to operate they run the danger of leaving behind them banked-up demands which eventually bring about a situation not very different from that which they were set up to avoid. Indeed it is difficult to be sure that with a policy of freeze or semi-freeze limited to a year or eighteen months, the eventual rise in costs will be much less than it would have been if there had been no such policy.
Hence, my Lords, I submit that it is of paramount importance to make the main aim of policy not the control of incomes

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but the control of aggregate expenditure. And here I should like to emphasise the importance of not overlooking the part that can be played in this respect by proper regulation of the credit base. I know that there are those whose views deserve respect who consider that attention to the movements of the quantity of money is an obsolete preoccupation. I know that it is fashionable in some quarters to regard the fluctuation of the credit base as being necessarily and desirably passive to the needs of trade. But I very much doubt the wisdom of this attitude. I certainly should not wish to be understood to be arguing that monetary policy alone is capable of exercising a sufficient control of the volume of aggregate expenditure, and I know few at the present day who would maintain such a position. But I would urge that it would be unwise to leave that out or to ignore the very powerful assistance it can render.
In this connection I feel tempted to relate to your Lordships a true story. You will remember that in 1958 the noble Lord, Lord Thorneycroft, who was then Chancellor of the Exchequer, and two of his Ministerial companions, Mr. Birch and Mr. Powell, felt constrained to resign their posts on the matter of financial policy—a gesture, I must say, which I have always admired as typifying that regard for principle which keeps public life sweet. On the day on which their resignations were announced I was standing in a club reading on the tape that was to me this melancholy news. There was an economist of the younger generation standing within a yard or two, and when he saw me—whom no doubt he regarded as belonging to an utterly reactionary school of thought—he turned to his companion and said in a loud and somewhat aggressive voice, "This is the best news we have heard for many a long day. It is the death of the quantity theory of money."
Well, my Lords, I am far from contending that the quantity theory of money is the last word in wisdom in matters of this sort, but if we look at what is happening among some of the most advanced thinkers on these subjects in other parts of the world it must be said at least that it takes a very long time dying, and that sometimes it shows signs of reviving. And I would submit that
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if we look at what has been happening to the quantity of money in our own economy in recent years we may find some reason for thinking that you cannot omit to restrain its increase without running a risk of frustrating the effects of other very necessary measures. I hope very much that the present Chancellor of the Exchequer will not regard the homely wisdom of the quantity theory as being entirely beneath his attention in the anxious position in which he finds himself at the present day.
So much as regards domestic policy and its prospects, other things being equal. But now we are in a situation in which other things are not likely to be equal and domestic policy is not likely to be able to dominate the situation, however much it may seek to influence it. We are in the grip of tremendous events in the world at large, many of which are outside our power of control, and prediction in such circumstances is almost anybody's guess. But perhaps I may be allowed to make one or two general remarks—not predictions—which represent my own effort to see the position in some sort of perspective.
First of all, it seems to me important to realise that our troubles are not due to any lack of world liquidity in the recent past. Indeed, there has been no lack of such liquidity since the end of the war: look at what has happened to the value of money. Everywhere during this period there has been a most considerable rise of prices. In such circumstances it seems to me to be impossible reasonably to contend that there has been too little general liquidity in the world at large: rather I would urge that there has been too much. In the future, I agree the picture begins to appear different. A little way ahead we probably walk through the looking glass, so to speak, and find ourselves confronted with a real problem of this sort. That is, of course, the raison d'être for all the work which has been done recently by the Group of Ten and others, on the institution of Special Drawing Rights at the International Monetary Fund.
No, my Lords, the main cause of the recent gold crisis has been not the absence of general liquidity but the growing deficit in the United States balance of

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payments. Needless to say, the operation of this cause has been vastly reinforced by apprehensions and rumours of a possible change in the price of gold. But ultimately it is the United States deficit which is responsible. Doubtless it is true that this deficit does not spring from any very fundamental malaise in the United States' economy. The entire deficit is fractional in regard to the United States' gross national product. It has not been, as ours has been, a deficit on current account; it is essentially a deficit on capital account due to what, having regard to the United States' present external earning capacity, has been excessive investment abroad, foreign aid and war expenditure—causes much more susceptible to control than more deep-seated maladies. Nevertheless, this deficit on capital account has given rise to a shrinkage in the United States' gold reserve; and this shrinkage has been serious and growing.
Such a state of affairs inevitably arouses international apprehensions. It is true that these apprehensions have been heightened by propaganda emanating in certain high quarters in Continental Europe. But if there had been none of this the apprehensions would still have grown. There was, of course, a time in the early '50s when an increase in the dollar holding was positively preferred by many Continental Central Banks. But recently such increases have encountered more and more reluctance; and, it must be admitted, understandably so. After all, however much we may deplore the attitude of the French Government to Allies who once helped to deliver them from servitude under the Nazis, their analysis is logically correct when they argue that holding increasing amounts of dollars is, in effect, making loans to the United States. And it is clear that from their point of view this is not necessarily a desirable state of affairs.
Such a situation was surely bound to lead to trouble sooner or later; and it must be admitted that such trouble has been predicted in many quarters. Whatever we may think of his views with regard to the desirability of a rehabilitation of the old-fashioned gold standard, it must be put to the credit of Monsieur Rueff that, in season and out of season, he has pointed to the latent dangers in the present workings of the post-war gold
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exchange standard and the enormous volume of free dollar holdings abroad. I should like to add that, although in the end I do not support Monsieur Rueff's proposals for the reform of the international monetary system, I know from long personal acquaintance that he at least is not an enemy of the English-speaking world; and it can be cited as a proof of this that his plan for the adjustment of the price of gold carried with it a generous provision for easing the burden on the reserve centres concerned of the sterling and dollar balances.
Now, as I see things, this crisis is not one which can be cured by the mere institution of Special Drawing Rights at the International Monetary Fund. I hasten to say that I approve of this plan. I hope that it will be possible to bring it into being. But it is essentially a plan for easing the general liquidity situation in the future. Even if it could be brought into being immediately, its chances of survival would be small indeed if the United States balance of payments continued to be adverse. It might help for a time, but in the end people would no more be willing to accumulate paper claims on the International Monetary Fund than they would be to accumulate dollars.
But equally, in my judgment, the underlying situation is not to be cured by a change in the price of gold. I am not against such a change in all circumstances, although if it were to take place at present I should be extremely apprehensive of its inflationary potentialities. But, so far as the present unbalance is concerned, all that it could do would be to provide a further breathing space in which measures might be taken to alleviate the deficit on the United States balance of payments. If this deficit persists, then, even if there has I been a change in the price of gold, there will still eventually arrive an ultimate breakdown of the dollar exchange.
In the end, it seems to me, there are only two possible solutions. The first is some contraction of United States' expenditure, either at home or abroad, or both. I do not myself believe that this need be very severe, especially if, as might be hoped, it were accompanied by expansion on the part of countries at present in surplus. But I am afraid that.

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so far as we are concerned, it certainly will not make things easier. Failing this, however, the alternative is a total demonetisation of gold, at any rate for the time being, by the United States' authorities, and a freeing of restrictions on movements of the dollar in the exchange market. If one likes to put it that way one can describe this as letting the dollar float.
Such a solution has some attractions in pure theory; and, let us not deceive ourselves, there are now many high authorities in America who support it. But it seems to me that it is likely in practice to be attended by many unwished-for complications. In the first place, it is very unlikely that the financial authorities elsewhere would all be willing to see the dollar fluctuate in terms of their own money. They would therefore hitch on to the dollar in some way or other and maintain fixity of exchange rates therewith. It seems to me probable that we ourselves should feel impelled to do this, and I am sure that quite a number of other centres would do likewise.
In such a state of affairs the centres which continued to maintain the old parity with gold would be at an increasing disadvantage in markets in which their producers were in competition with members of the dollar group, as were members of the old gold bloc in the years following President Roosevelt's experiment with adjustable dollar rates. The probability is, therefore, that they would be tempted to devaluations in terms of gold, and this in turn would easily lead to further depreciation of the floating dollar and associated currencies. It might come out all right in the end, but it seems likely to me that it would give rise to a period of financial anarchy and confusion which would do good to very few of us.
At the moment, the position is that the central bankers have attempted to stave off ultimate decisions by setting un a two-tier system in which gold transfers among themselves take place at existing parities but the private gold market is free. And so far this system has been effective; the price of gold in the free market has fallen from the levels it attained at the height of the crisis. But one is bound to ask oneself: How long can this situation last?
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Doubtless if there is a real prospect of reduction in the United States deficit, then the free market price of gold will fall, the gap will be closed, and the necessity for these exceptional measures may disappear. But if there is no such prospect, then nothing can be more certain than a period of greater and greater strain. The temptation on the other central bankers to make a profit on their increasing gold holdings must eventually become very great indeed, and in the next crisis a two-tier system will no longer be available.
What will actually happen? Frankly, my Lords, I do not know. So much in the present situation depends on attitudes and policies whose occurrence and influence is anybody's guess. But of one thing I am certain: that for us the supreme need is to keep our own house in order and to support whatever measures are necessary to achieve this end. Any relaxation in such circumstances can only make the situation worse both for us and for the world at large.
6.20 p.m.
LORD CRAWSHAW: My Lords, I feel rather shy and almost impertinent at intervening in this debate this afternoon, after listening to so many powerful and effective speeches on high finance. I am aware that my experience of finance is mostly concerned with the brown envelopes that arrive on my breakfast table in the morning. I know that my speech will be on that sort of plane, in marked contrast to the fine speech to which your Lordships have just listened.
I am one of those who regrets the recent increases in taxation, which seem to me to be aimed primarily at reducing private spending rather than raising revenue. To my mind the increases kill incentive and are inflationary. I certainly would advocate a reduction in public expenditure on extra Ministries, the Civil Service, and so on, and I would say to the noble Earl, Lord Longford, who quoted Mr. Gladstone, that we should all remember his adage when he said:
"Let the money fructify in the pockets of the people".
Mr. Gladstone was Chancellor of the Exchequer for six years, during which time British trade rode high, and I for one would like to see a return to that sort of policy.

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I do not agree that to increase exports it is necessary to have higher taxation. I was in Wolverhampton only last night, speaking to members of the motor car industry, and they assured me that by damping down demand at home one did not necessarily increase exports of cars abroad. They said that by producing fewer numbers of cars one does not have the economies of scale if there is a good home market as well. If one has to accept (which I do not) that we need higher taxes in order to increase exports, then could we have more emphasis on reducing imports and less on increasing exports? The latter policy now appears to be linked with higher taxation. A large part of this country's imports are made up of food, fuel and raw materials, and this evening I want to advocate that we should make greater use of our own natural resources and of our import-saving industries. These industries, if flourishing, would in turn require more up-to-date machinery which would create employment.
Already this afternoon we have heard a little about the part that agriculture might play, and I want first to deal with food. In 1966, the imports of food and live animals totalled £1,600 million, of which £1,000 million was in respect of commodities which might be produced in this country. This £1,000 million made up 17 per cent. of our total imports. Aiming for the moment to reduce the £1,000 million by £250 million—and in any case we shall need £200 million worth more food by 1972—this could largely be achieved by an improvement in farm size structure, by speeding the move towards more intensive farming and higher management standards, rather than by large capital expenditure involving further imports. From 1952 to 1964, agricultural output increased by 30 per cent. while capital expenditure increased only by 18 per cent., most of this money being spent with the home manufacturers. A good deal of increased efficiency and output lies in the hands of the farmers themselves, some of whom will have to get rid of certain narrow and parochial thoughts and concepts. The Government and Parliament can also help enormously by winning the confidence of the farmers so that they can invest and plan ahead, and by encouraging an expansionist policy and also helping with finance for improv-
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ing farm structure and assisting with co-operation.
Half the United Kingdom's food imports are accounted for by cattle and sheep. These animals must therefore play a large part in an agricultural import saving programme, and I feel bound to say at this stage how much I regret that the farmers' confidence in producing more of these animals should recently have been undermined by the decision to readmit Argentine meat—for indeed what incentive and confidence can there be for increasing herds and flocks while farmers live with the lurking fear of foot-and-mouth disease and the holocaust that it brings? If confidence can be restored, it is reasonable to contend that by 1972–73 an increased milk production—2,550 million gallons to 3,000 million gallons—can save us £70 million worth of imports; and by eliminating the various factors which create the instability current in the fatstock market, the national beef herd can be increased so as to save the country £60 million worth of imports by 1972. Both beef and dairy cattle would be fed on home grown grain and grass, and there is scope for another I million acres of grain by 1972, making up to 10 million in all, which, along with higher yields, should result in an import saving of about £90 million worth of grain for animal feeding alone.
As I have said, Government and Parliament can help by restoring confidence and by calling deliberately for an expansionist policy. We should depend more on control of imports of some sort and forget restrictions such as the standard quantities for cereals, and price subsidies. Also, such features as depressed bulk milk prices and the unstable fatstock prices are not compatible with this policy.
Turning from agriculture to its sister industry of sylviculture, I should mention that one-tenth of this country's imports, and the third largest imported commodity, amounting to £500 million a year, is timber. In fact, we produce only 8½ per cent. of the wood that is used in this country. We buy substantial quantities from Russia, Canada, Sweden, Finland and so on, not one of whom buys anything like the same value of goods or services from us. There are many jobs for which there is no satisfactory substitute for timber. Therefore,

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if we are to reduce imports we must somehow increase the proportion of home grown timber used in this country from the minute figure of 8½ per cent. What are the prospects? Owing to devaluation, foreign timber will cost from 10 per cent. to 17 per cent. more, and this indeed should help the home trade. But how far can the home trade respond within its obvious physical limitations? If we cut down every tree in this country I believe that the timber would last us for only two and a half years. The Forestry Commission's Progress Report 1960–65 stated that one-eighth of Britain's land surface was under trees, two-fifths being under the control of the Forestry Commission and three-fifths being privately owned. There is good co-operation between the two sectors, and three-fifths of the whole is managed under forestry working plans made or approved by the Commission.
Although home grown timber takes care of 8½ per cent. of our consumption, the total annual acreage is in fact larger, at 11·8 per cent., and the total area of trees is increasing annually by 50,000 acres. More must be done. Marginal and waste land should be planted. Farmers should help themselves and the country by planting shelter belts and avoiding the sort of tragedies that they have had in East Anglia with the dust storms. More sawmills should be merged and rationalised. The Government and Parliament can help by not imposing various penal capital taxes on larger forestry units, and by including sylviculture when capital grants are being considered for agriculture.
A speech on this subject, I feel, would be incomplete without some reference to fuel, and, of course, one's thoughts immediately turn to coal. I have come up to-day from the East Midlands, which as your Lordships know is one of the main coal-producing areas in this country, and where there are now 72,000 miners at work. It is estimated that by 1980 there will be only 14,500 miners working there. Obviously there will be a large gap left behind. I hope that with this rundown of the coal industry, which I suppose is inevitable, we can make provision now, or start to make provision now, for other industries to be brought into these areas and so avoid the sort of calamity that is happening in Kentucky now. Even so, I believe, as a consumer who pays £5 4s.
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a ton for what we call washed singles, this fuel is extremely competitive and will remain the obvious fuel for most power stations, certainly in that part of the world, for a very long time to come. Therefore, I hope that the industry will not be run down at a galloping rate.
There are many other industries which can help to save on imports. I do not want to go through them all now, because it would take far too long. I have mentioned one or two of the major industries, and I hope I shall be assured by the noble Lord who is to reply for the Government that they can make certain moves along these lines to enable these industries to play a greater part in solving our economic position and reducing imports.
6.32 p.m.
LORD GRANVILLE OF EYE: My Lords, I listened with considerable interest to the speech of the noble Lord, Lord Crawshaw, and, if I may say so, it came as something rather like a breath of fresh air in an economic debate, which is often in terms of dry-as-dust economics and figures. I was glad to hear him raise this very important question of increasing the production of home grown food. I sometimes think that when we are speaking of these economic crises, when the newspapers print their headlines, what is often forgotten is the great part that increased food production can play in helping to solve these balance-of-payments difficulties which all Governments find themselves in from time to time. I think that this is in the Government's policy—this attempt to take the place of imports by encouraging production in this country. As the noble Lord, Lord Byers, said in his speech, it has to be looked at again, because it may very well be of far greater importance than we realise when it all comes to be worked out.
I was glad the noble Lord, Lord Crawshaw, also referred in his speech to the question of timber. Timber has become an enormous import item to all the various manufacturing industries which use it, either for convenience or because it is the fashionable hardwood, and it becomes simpler to import this material already cut and ready to go into the factories. Again, although it may be a long-term matter, I think it is not too soon for the Government to begin

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to look at its policy of afforestation. A number of our hardwoods can be used more extensively. Many of the furniture industries in this country grew up in the use of beech and birch and elm and ash. A vigorous policy of afforestation could save a very considerable import bill from those countries which do not take a great deal of our exports.
I noticed that in the speeches this afternoon there were many criticisms of what is normally referred to as Government spending—public spending in the public sector. I noticed, also, that not many speakers, if any at all, referred to the cuts that have already been made in the Government's policy and by the Chancellor in his statement of policy. Considerable defence cuts have been made. Some are long term, and some will begin to make themselves felt in the reasonable future. It is not very easy suddenly overnight to make a big cut in your defence expenditure. Both here and in the United States and in many other countries this is not a question of troops and ships; whole ranges of technical, scientific, engineering industries are geared to these Government programmes. In all large countries to-day, suddenly to turn round and say, "We must lop off here and make a cut there" is not feasible.
I always remember the period of 1933 when the rearmament programme began in this country. It was then in fact that our revival in the engineering industries began and when unemployment started to fall. We do not want to get into a deflationary period again by talking idly or too gloomily about these defence cuts. Running a nation is rather like running a business. You can reduce your national overheads with a stroke of the pen. You can cut the overheads in a business with a stroke of the pen, if you want to. But what matters in a national concern and in a business is the product you are producing, whether you are producing it properly in sufficient quantities and exporting it. With these discussions about the public sector, and the reduction in defence consistent with the Government's foreign policy programme, we shall get through these problems, when all the dust has died down, if we have the right product which is being produced at the right price and exported to the countries to which we wish to send it.
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In the debate to-day, in reply to the speech from the Leader of the House, there was constant reference to the number of civil servants and why it had not been cut. The number of civil servants, which is a broad term, has gone up in every large industrial country a through-out the world, and I should have thought that we would be better employed, instead of playing around with figures like 57,000, if we concentrated upon a national drive for efficiency, whether in Government Departments, Government administration, or wherever it may be.
We are asked to-day to take note of the recent developments in the economic situation, and I hope we shall not be too gloomy about it, listening to some of the speeches to-day; because there is no doubt, on an impartial assessment, that since the Budget proposals and since devaluation, and taking the Government's policies as a whole, which one must do, there is an improvement. I think the Budget proposals of my right honourable friend the Chancellor of the Exchequer are working. There is an improvement in the economy, and I think that will improve the balance of trade and also raise the level of world trade. That is important, too. There is a lot of talk about the balance of payments, but if we get too big a balance of payments we may make it difficult for some of our customers overseas to buy our goods; therefore the improvement in our balance of payments must be consistent with our efforts and the policy of this Government to help raise the general level of world trade.
I think it was the noble Lord, Lord Byers, who said that on this occasion in the White Paper productivity comes first before prices and incomes. I think this is the most important factor in the whole situation: increasing productivity, together, as noble Lords have said to-day, with confidence abroad and at home. On this question of confidence I am not a pessimist. I believe that if the Government measure work, as I think they will the Press will give more space to the success of that policy than to "knocking" the pound and constantly talking of a second devaluation and so-called political character assassinations. If this policy works, despite the fact that the national Press of this country in the majority support

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the Opposition, I believe that they would give credit for, and publicity to, the achievements of the Government.
I have said that I believe this problem of productivity to be the kernel of the whole of the Government's economic proposals. But I would ask my noble friend the Leader of the House whether this is really being put over to management and work people at plant level. After all, we depend upon them. They will have to work these measures. My right honourable friend the First Secretary of State, who now has the responsibility for this task, has considerable flair, and I think that if, with all her ability and skill, she can set herself to put this over and win the approval of the people of this country and of those engaged in industry, in plant and management and so on, she will become the export darling of this country. A problem which any Government has to face is that of effective communication, conveying considered Government policy to all concerned with all the machinery of mass media, because without this response the final or maximum effort of any policy must be doubtful.
I would suggest to my right honourable friend the First Secretary of State, that she invites both Television and Press to co-operate with her and the T.U.C. in putting this over, to make productivity and productivity agreements understood by the man in the street, at plant level and at shop floor level. It is no good putting it over to them in the economic language of the balance of payments. At present, I have serious misgivings about this matter. I am not sure that this policy, and the rewards that productivity agreements can bring, with increased income to all concerned, is being satisfactorily put over at the present time at plant level to the man on the shop floor and to management and staff.
There is another salient point which I doubt is being put over to the people of this country; that is, whether or not they understand the choice that is before this country to-day. It is the choice between the old free-for-all, "Stop-go" and recurring economic crises and building a modern and prosperous industrial State able to compete with the rest of the world. Simplification it may be, but I believe that that is the choice which this
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country, whatever Government is in power, has to face.
For my part, I believe that big changes in this country are now inevitable. No one likes redundancies. These big changes that are taking place in industry and in the development areas involve redundancies. Nobody likes moving to some other part of the country which he does not know. Industrialists do not like moving factories. No one likes modernising a plant for the sake of modernisation. But the pace is increasing in mergers and the grouping together in larger units of industries like the motor car industry. Reference has been made in this respect to the mining industry. It is all going on apace.
The changes, applied in toto with the whole of the Government's policy, and not just its Budget proposals and devaluation, to the development areas, to retraining and so on, can in my view amount to an industrial and technological revolution in this country. There are areas in this country which, within a few years, when these changes have become effective, will never again be recognised as the same areas. This is not only the choice which this country has to make; it is the choice for this Government—indeed for any Government: whether to have the old "Stop-Go", out of the embers of the old free-for-all and pulling out the stops to get elected every four years, or to accept the short-term sacrifices which have to be made now in this industrial renaissance to build a modern industrial State able to compete with and face the world.
To their credit, I think that the Government have had the courage to choose the long-term policy. In the early stages it is going to be unpopular. I have not the slightest doubt that Party capital is going to be made out of this. It should have been started more than ten years ago. But I firmly believe that if it is carried through, as the Prime Minister said in another place and the Chancellor of the Exchequer said in his Budget speech, in two years we may see that it has been more than worth while and may have been the real basis of our economic recovery.
6.48 p.m.
LORD GRANTCHESTER: My Lords, if I may, I should like to inquire a little more than we have done so far to-day into the structures that have been created

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during roughly the past twenty years to safeguard from disaster or collapse the complicated economies of the highly industrialised and principal trading countries of the world. A few years ago I was discussing some of the dangers which threatened with a distinguished banker in New York, and he said: "We know much more than we did in the 'thirties about how things work. We cannot be sure that we can avoid trouble in the future, but we are hopeful that we can". He was more modest in his belief than many economists and some bankers today, who seem to regard the two principal organisations of inter-governmental co-operation, the O.E.C.D. and the so-called Committee of Ten of the I.M.F., as satisfactory custodians and directors of our monetary system.
May we examine this claim by testing what has happened in spite of the efforts of these two inter-governmental bodies? These are the disturbing words of a serious-minded economist, a lifelong Liberal, whom I greatly respect, written in the Sunday Times ten days ago. He says:
"I speculated on the good faith of government which, in my lifetime, has manifested itself as a liar, a thief and a cad. I hold savings certificates bought in 1953. The cost of living has nearly doubled since then. I hold some 2½ per cent. Dalton's brought out at a hundred on the assertion that no patriotic person could expect better terms. They now stand at 34, worth in real terms about 12."
It is terrible to read words like that written by an economist of repute.
On Friday last week, the B.B.C. broadcast a programme at 3 o'clock in the afternoon warning that one could no longer save in the simple way and expect the value of one's savings to remain constant. If savings were not to be eroded by inflation, investment was a business which every small saver now had to be able to cope with. This is a big deterrent to saving. The United States has done rather better than we have up to date, but since 1952 the dollar has lost 22 per cent. of its value; the consumer price index is up 19 per cent. over the last ten years and the runaway is picking up dangerous speed.
One recalls that all former checks and restraints which were devised to operate impartially and almost automatically in support of some monetary discipline have been thrown away. Governments have
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taken over the central banks and abolished for themselves the safeguards which they formerly imposed to ensure that the banks operated honestly in the issue of what were then called "bank notes". A former Leader of the Opposition, who was always very truthful, told me one day in this House: "Make no mistake about it, since we nationalised the Bank of England it is the Chancellor, not the Governor, who calls the tune". In the language of to-day, it is the Ministers of Finance who hold the Governors of their central banks as puppets on a string, although some puppets are more difficult to play with than others. But these can be changed, usually without causing much popular concern.
Under very strong pressure from the American Government an attempt is at present being made to diminish the role of gold in the monetary system to prevent a rise in its price over 35 dollars an ounce. Is this another sign that the kind of democracy we support is determined to rid itself of all self-discipline? Are we seeing before our eyes the triumph of the Marxist predictions? Are any rules, any disciplines, unacceptable as enslavement? I cannot bring myself to accept the cynical view, so often expressed to-day, that no Government will act honestly if it does not suit it. I am pressing this matter as I think that, bad as have been the economic decisions which the present Government have taken, it could not have been so bad had it not been for the general atmosphere of "anything goes". "If the rules get in the way, change the rules for we will not tolerate restraint upon the exercise of our powers" It could not go on, and surely when the Government had to submit to supervision, as they have had to do on behalf of their creditors, it was time for a Government with self-respect to quit.
What are we left with now? In effect, I suggest that we are left with two Governments: the one trying to placate the supervisors; the other denying any obligation to change course. In the political field there is the same schizophrenia. Disputes have been engendered very much because of the apparent belief of this Government in their own infallability, not only in respect of our own affairs but also of the affairs of other people. This delusion is probably the only unifying influence in the

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Party. We have a Government split in two parts which cannot tackle any problem because, whatever the outcome of negotiations, any settlement would raise more dissension between the two parts of the Government than achieving no solution at all, doing nothing.
I suggest that what we most need is a little enslavement to honesty. Altering the rules in the middle of the game would be quickly recognised as dishonest—that is, if it were a game. It is time that we spoke bluntly. In spite of the immediate, perhaps somewhat superficial, salutary effect of the Budget, there is a great deal of plain dishonesty in the Budget. The Government's Prices and Incomes policy is, in my view, an attempt to treat the symptoms rather than the disease. If there were a satisfactory monetary system, this control would be largely unnecessary. At best it can only slow down the inevitable, continuing inflation. I call it "incomes and prices policy". As for productivity, as my noble friend Lord Byers pointed out, this can best be settled between the trade unions and employers in each case without the complication of constant intervention. With all the talk of productivity, no one has pointed out that productivity must result in sales. Without sales, productivity would be quite useless. This is, therefore, a matter which can be settled only by the individual industry working together with the trade unions.
It is plain dishonesty to encourage people to believe that they will get an increase in earnings if the increase is to be more than taken away by allowing the value of the currency to slip. It is plain dishonesty to alter the rules applicable under the existing law relating to such matters as existing settlements and to policies taken out under the Married Women's Property Act. It is plain dishonesty to alter the rules under the existing laws for gifts inter vivos.
One can, without dishonesty, alter the rules for new transactions, but not for those which have been authorised under the law which was in force at the time. This Budget is unique in its provisions for the robbery of children, because the parent is the one person who has been deprived for many years of the incentive which he formerly had to work to set
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aside part of his income for the benefit of his children. We all know that the Communist philosophy treats honesty merely as a matter of convenience. But at least, one knows where one is. That has never been, and I am sure that the majority of our people do not wish it to become, the philosophy of this country. Either the Chancellor of the Exchequer does not know what he is proposing, or he is a party—let us be plain—to these dishonest actions. Further, in so far as the Budget is a Cabinet responsibility, do all the members of the Cabinet wish to be party to what is plain dishonesty? Since the noble Earl, Lord Longford, to his great credit, felt it desirable to resign, we have not heard of any other members of the Government resigning. Perhaps some may yet wish to think again.
Do the Government really believe that the country can, in the long run, prosper from dishonest policies, even if they are wrapped up in words which lawyers find it difficult to understand? They are only just beginning to try to explain some of these provisions. They cannot do that fully until next month, when the Finance Bill is printed. Even lawyers find it difficult to understand, and demagogy covers up by misleading expressions, such as "We will not be slaves to tradition"—or to bankers, to gold or to whatever the speaker at the moment thinks will rouse the audience which is being addressed.
I want to ask: What can be made of the latest series of inter-Governmental discussions which have been taking place, first in London, then in Rio, then in Washington and lately in Stockholm? I noticed that the noble Lord, Lord Aldington, seemed quite happy—I will not say about what was being done. because I understand that there is as yet no final draft of the proposals from the Stockholm meeting—and I wonder whether these proposals, if and when they are settled, will emerge as a major reform of our monetary system. The Americans are interested in how to get out of deficit. They now realise that there is no alternative. In the meantime, they hope that these proposals will put off a headlong flight from paper money, to which The Times recently drew attention. That was the cause of the trouble in the gold market.

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I should like to look at the proposals, so far as they can be called proposals, from the point of view of whether they are likely to make for greater honesty in the monetary system in future. The most reliable report which I can find from Stockholm contains these words:
"The great ingenuity of the S.R.D. formula"—
that is, the Special Drawing Rights formula—
"is that both sides have been able to claim that it meets their particular demands. The French have so far been quite happily able to describe S.R.Ds as credit while everyone else describes them as money."
I suggest that if acceptance of these proposals depends upon cunningly devised words which different parties will differently interpret, it is not a very happy augury for the practice of honesty in a reformed monetary system.
To me, it sounds as if the International Monetary Fund, with its talk of paper gold, is seeking to realise the dream of the alchemists of the Middle Ages. If what they produce is gold, every member of the Fund will want it, and there will not be sufficient. If what they produce is paper, who will want it? If the paper is tied to or backed by gold, what is the advantage over gold itself, except, perhaps, to secure a redistribution of reserves in favour of the countries which are in deficit? I see many formidable difficulties ahead if this is the purpose. I was very glad to hear what the noble Lord, Lord Robbins, said about our mutual friend Mr. Rueff.
My Lords, I conclude by suggesting for consideration some conditions which seem to me, and to others who have studied this problem, to be necessary for the establishment of a satisfactory monetary order. I should particularly welcome close consideration by the noble Lords who are, or have been, associated with the trade unions to the sort of ideas which I am putting forward for a variable bonus in the general wage structure. I may briefly run through these conditions for your Lordships' consideration. First, it is necessary, in the event of an unfavourable balance of payments, to secure a contraction of the money supply in the country concerned, and vice versa. The more automatic and inevitable this is, the more satisfactory will be the result. I do not think that that proposition would be disputed.
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Secondly, we need an agreed and common definition of "money supply" and of the elements to be included in the definition, because in different countries it is differently defined.
Thirdly, as soon as a sufficient supply of gold is available reserves should, in my view, be held in gold. In the meantime a convertible alternative should not carry interest. I think the effect on the balance of payments of the United States and ourselves of paying interest on convertible dollars and convertible pounds, instead of settling in gold at the time of payment, has not been sufficiently understood. These convertible dollars go back to New York on deposit on which interest is paid until gold is claimed or until it is available. Before the last negotiations there was an understanding with certain Governments that gold should not be asked for in exchange for these convertible dollars. So the basis of the gold exchange standard, which depended upon the free convertibility of the dollar and the pound, was undermined by these agreements. No doubt some Governments were willing to agree to this, because of the interest that was earned while they were not paid in gold.
Fourthly, in order to make more practicable the contraction and expansion of the money supply I suggest that the trade unions might study whether it would be practicable to negotiate all wage rates and salaries on the basis of a basic rate with a variable percentage element of bonus which would fluctuate with the balance of payments. A too rigid wage structure hampers the working of any system of contraction and expansion of the money supply. I think this idea worthy of study to see whether, if it was explained, it could be made satisfactory and acceptable.
Fifthly, with the renewed distrust of paper money following the devaluation of the pound sterling and the threat to the paper dollar, confidence in the integrity of democratic Governments is not likely to be restored while we have double standards—one law applicable to borrowing from the International Monetary Fund and another to borrowings by Governments from their own nationals. In my view, it is therefore undesirable that a citizen should be prevented from protecting himself against the dishonesty of his own Government

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in the over-printing of a paper currency, if for no other reason than that this prevents the Government from having a very useful early warning system which should cause them to look at their policies.
Sixthly, in order to increase the supply of gold consideration should be given immediately to a suitable rise in the price, without disturbing the existing parities of the exchange rates of the countries who are members of the O.E.C.D. Because of American objections this matter has not been discussed at all in any of the international organs of co-operation. I hope that some of these suggestions will make a small contribution to the current discussion of this important matter.
7.15 p.m.
VISCOUNT MASSEREENE AND FERRARD: My Lords, I should first like to apologise to the noble Lord, Lord Shackleton, for not being here when he started his speech. I heard only the last half of it, owing to an unforeseen event. Also, I should like to congratulate the noble Lord who has just sat down, on the amount of financial common sense in his speech. I feel it is a great pity that it could not have been made earlier, when more people could have heard it. However, I sincerely hope that some members of Her Majesty's Government may read it.
I should like to quote the first line of the Government White Paper, Productivity, Prices and Incomes Policy in 1968 and 1969. That says:
"We now have a real basis for putting our balance of payments into substantial surplus and paying off our debts abroad".
Perhaps that is rather optimistic. But, of course, I agree that a Budget which takes £900 million out of the economy, allied to devaluation, certainly gives a basis for putting our affairs in order. I have to differ with the noble Viscount, Lord Chandos, who said that it required great courage on the part of the Labour Government to produce such a Budget. I do not want to appear ungenerous in any way, but to my way of thinking the Labour Government producing this Budget are rather akin to a man being chased by a bull—the bull being the international creditors. If you are chased
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by a bull, as I have been twice, it helps you to make a superhuman effort in jumping a fence. Perhaps I am being ungenerous, but I wanted to make that point. Of course, it is true that the Budget gives us a basis, but we shall have to do a great deal more if we are to succeed.
Personally—although my personal opinion does not matter at all—I have never been too keen on an incomes policy. That does not mean to say that eventually it will not work. But, to my mind, by instituting an incomes policy you are controlling the economy; and once a Government starts to control the economy the standard of living of the people is lowered. Any Government can soon put their balance of payments right, for all they have to do, if they really want to go the whole hog, is to have import certificates and forbid certain imports. For instance, they can forbid the importation of champagne, Spanish tomatoes, tobacco, and so on, although they could not prevent the import of all tobacco because they would cause a riot. But a favourable balance could soon be created if the economy was placed in a straitjacket. I do not believe in doing that. We cannot have a closed economy, as there can be in some self-supporting countries, because we are a great world trading nation.
To my mind, the only way in which we can really put our affairs in order—I have said this so often before that it is hardly worth repeating—is to increase our earnings. But, of course, we cannot increase our earnings unless British industry produces more without an increase in production costs. It is easy to say that—it is easy to say it a thousand times—but if British industry cannot do that then the Budget and devaluation will really be of no avail. I personally doubt whether wage restraint is the way to achieve a higher rate of production per man hour. As I understood the noble Lord, Lord Robbins—and I have great respect for his views, because he is a famous economist—he is rather in favour of having an incomes policy in the public sector but not an incomes policy in the private sector. I agree with him there; but (I have also said this a hundred times; I could make this speech in my sleep, almost), if only we could do away with restrictive practices, and if only the

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Government could give more incentives to industry, particularly to talented men and women—not only the brains, but the skilled craftsmen—I feel sure that there would be a great improvement.
The giving of these incentives would require a complete change in taxation. After all, I believe British industry is the most heavily taxed in the world. It is true that the Government give grants and subsidies, but that is only robbing Peter to pay Paul. The giving of grants and subsidies to industry is extremely costly to the economy, because it requires thousands of civil servants to administer the schemes. These civil servants, who are all well educated, come pouring out of the universities, and they would be far better employed elsewhere. They would be far better employed in a productive capacity in industry. The trouble is Socialist thinking. It is a sort of creeping paralysis—a desire to get control of British industry. Once industry accepts a grant it is rather behoven to the Government, and it is rather a case of, "Slowly, slowly, catchee monkey".
The goose that lays the golden egg, the private sector, is already rather bedraggled. We are now going to have the Industrial Expansion Bill, the Transport Bill and these various other Bills, which are all going to encroach on the private sector. They are going to cost hundreds of millions of pounds. If the Government do not change their policies, I really cannot see the Budget doing the trick. The feathers of the golden goose will become more tarnished, and the laying record will eventually be completely destroyed. Fortunately for the nation, in my opinion the Government will not have time to kill completely the goose that lays the golden egg.
I should like to mention just one aspect of cutting down on home consumption. Economists say that if you cut down on home consumption it releases more goods for export. I have had some slight experience in light industry, and of course, it is true enough—that it does release more goods. The trouble is that there is no guarantee that you can export them, because you have to fight for these markets. The theoretical economists say this, but they do not have to get the export
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markets. You really have to fight for them. Just because you do not sell so many drawing pins, we will say, to the home market, that does not mean to say that you are going to export more drawing pins. You have to get the markets. The other danger is that if you depress your home market too much it is very difficult for companies to amass enough reserves to do research. You can go too far the other way.
I have always thought—it was the noble Lord, Lord Crawshaw, who mentioned this—that the Government never put sufficient emphasis on producing more goods here in order to save imports. I quite agree that we have all our trade agreements, but the agriculture industry, the most efficient industry in the country, could produce a great deal more food. We already produce two-thirds of the nation's food. The noble Lord gave the figures, and I will not repeat them; but agriculture could produce a tremendous saving in imports. The trouble is that we are largely an urban population, and if we do not import a great deal of food—food that we do not want—we cannot sell our tin buckets and so on. It is a very great problem. Only the other day we had 300,000 tons of French wheat dumped on us. It came up the Thames Estuary. The French Government, having bought it from their farmers at about £40 a ton, dump it in England at £20 a ton, and it spoils our wheat sales. It certainly spoilt mine, and it spoilt those of my friends in the area, too.
As other speakers have said, the greatest contribution that the Government can make to the recovery of our economy—and I am afraid I must add that they have also done a great deal to undermine our economy—is to cut their own expenditure. I have often harped on this subject before. The private sector of the economy and the public generally are being constantly exhorted to spend less. We are squeezed by the highest bank rate in the world. It is extremely difficult for employers. Remembering what Mr. George Brown said three years ago (what were we to have—mortgage rates of 2¾ per cent.?) it is quite incredible. The Government have set no good example at all by way of cutting their own expenditure. I pointed out in the last speech I made in this House

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on the public expenditure cuts that these 1968 cuts of £300 million-odd have all been swallowed up by extra expenditure; and the projected extra expenditure for 1969 has now exceeded double the amount of the cuts for that year. Really, it is an impossible situation.
Several noble Lords have referred to the great rise in the numbers of the Civil Service—57,000 since the Government took office three years ago. The noble Viscount, Lord Chandos, said that the cost of this was an extra £65 million. In fact, the noble Viscount's figure was incorrect: the correct figure is £92 million. That is the increased cost of the Civil Service; and it is largely due, as I have already said, to the system of grants to industry, instead of giving tax allowances, and to such crazy adventures as the Land Commission. And, of course, there is S.E.T.
Let us look at the Land Commission. It employs 1,400 civil servants at a total salary of nearly £2 million a year. In the first year, it has collected only £500,000 in betterment levies; and to collect this has cost £3,200,000. If you go on like that, of course, you will have this recurring high inflation—and you need to increase the Civil Service the whole time. And for what purpose? For absolutely no purpose at all. We are now told that the Department of Economic Affairs are to produce a new plan in the autumn; they are going to increase the work of the 23 "Little Neddies". But the only purpose that will serve will be to keep perhaps a hundred or so economists busy. If those economists produce a realistic plan—and they are quite capable of doing so; I do not despise economists; I am an amateur one myself—I will hazard a guess that Labour politicians will not accept it. It will be too embarrassing for them. What I am afraid will happen is that there will be a plan produced to have more and more Government expenditure. And so we shall continue on this "Rake's Progress".
My Lords, I began by saying that I agree that the Government Budget does give a basis on which to put our affairs in order. In this connection, I am anxious to ask the Government a serious question. By this Budget, the Government are taking, quite rightly, £900 million out of the economy, out of home consumption;
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they are easing the demand on the home market. But what I want to know is this. Can the Government be trusted not to spend this £900 million? For if they do that, the whole object of the operation is wasted. There will be no easing of the demand on the home market; the whole operation will be fruitless. Last July the Government took £500 million out of the economy. But where is it? They have spent it; it has gone back—in fact more than that has gone back, into the economy through Government expenditure.
I personally think that the only answer is to come to some agreement with the unions to honour contracts that are made with the employers and to have free bargaining between the unions and the employers. I am not saying that an incomes policy cannot be made to work; I believe that it can. But it needs a sophisticated society, and I do not think that in this country throughout all branches of industry and unions we are sophisticated enough to make this policy work. It may be possible in perhaps ten or twenty years time but I cannot see it working now. And if the Government try to force it by statutory powers then I am afraid (although perhaps I am an alarmist on this) that we may have civil strife. Fortunately, we rarely have that in this country—chiefly, I think, because of our climate. Fortunately, the rain usually comes along and saves the day.
My Lords, before I finish, I should like to say that I hope the Government will be able to make this policy work; but I doubt it. The trouble is that the present Government no longer have the full moral or political support of the people. That is the real trouble; I am afraid that the Government cannot claim to have that support. Therefore, I am very dubious whether the incomes policy will work. I can only hope it does work voluntarily; but, if it does not, then we must in the future ensure what I think is bound to happen eventually: that the unions and employers get together and have free bargaining which they will honour. As I say, I can only hope that the incomes policy will work; but I am afraid that it will not do the trick.
7.29 p.m.
LORD HANKEY: My Lords, I hope that it is not too late to be thoughtful about the present economic situation.

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Personally, I can only applaud the Government's incomes and prices policy. It is clearly essential if we are not to lose the advantages of devaluation—and they are not very great advantages—that we should make any rise in incomes and prices depend on increased productivity. If we do not do that, we shall suffer another bout of inflation, with the usual results that we have come to know so well. The Government prices and incomes policy seems to me to be incredibly courageous because it involves making real incomes more or less stationary. But what else can we expect, after devaluation, at a time when our economy is not expanding very much? I think that the Government must be prepared to face great unpopularity about this. I believe that in the long run we have to face the fact that incomes policies are likely to be acceptable only in an expanding economy.
Some doubt has been expressed as to whether incomes policies can be made to work at all. I should like to express warm agreement with what the noble Viscount, Lord Amory, said on this subject. We did a great deal of work on this at O.E.C.D., and there is no doubt that such policies can be made to work, provided that there is not too much pressure of demand. If there is too much pressure, it is incontestable that the policies cannot be made to work. If there is not enough pressure of demand, they are not necessary. But I believe that in between those two extremes there is a grey area in which both the control of incomes and, surprisingly (to judge by Austrian and other experience) the control of prices, can be made to render a valuable service and make possible a degree of expansion which would otherwise prove impossible to maintain.
The important point, my Lords, is that we should avoid letting our economy approach too close to ceilings of manpower and production. If the approach to the ceiling of any given sort of manpower, like special fitters, becomes too near in any one region, the wages of such fitters will go up. It is like dropping a stone in a pond; waves of cost inflation go out until they spread to John o' Groats and Land's End. That is what we have to foresee and to prevent from happening. This involves two things: great foresight about manpower requirements
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and also a larger investment, because one of our troubles in the past has been that we have not been investing enough and our productive capacity has not been expanding as it should.
Of the 21 member countries of O.E.C.D., spreading from Sweden across the whole of free Europe, the United States and Canada to Japan, the United Kingdom comes 18th in the percentage of gross national product invested. Our figure is 17·6 per cent. By comparison, Japan invests 31 per cent.; Germany, 25 per cent.; France, 21 per cent.; and Switzerland, 26 per cent. In terms of dollars invested per head of population, we compare almost equally badly. Sweden invests 630 dollars per annum; Switzerland, 660; Germany, 510; France, 450. The United Kingdom, my Lords, invests 340; and we are 14th on the list. Even a certain proportion of that is done by United States capital.
Our countrymen have made enormous and often very successful investments abroad. We have greatly added to the wealth of the world, but I wonder, quite seriously, whether the time is not coming for us to invest more at home. How else can we have the buoyant and up-to-date export industry we need? If we have not that industry and the exports, how can we afford to export capital? This exporting of capital may shortly come to a grinding halt. It is no good saying that it is a good thing and brings in a certain amount of income. Of course it does. But it does not bring in enough to justify the enormous risk we take in exporting such large quanities of capital. On the other hand, how can we expect a high investment rate at present rates of interest and with the credit squeeze here at home, even with the intelligent exceptions which we are making to the credit squeeze in favour of investments which help the balance of payments?
There are some favourable signs. The Rolls Royce contract to sell the newest jet engines in the United States is immensely encouraging and so are the new orders for ships. Both are spheres where, I should like here to note, the Government have taken action to improve the industrial structure. But we need much more success of that sort. I know that we have the technology and know how

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and the genius to do much better if we could only organise it.
My Lords, investment is only part of the story. Our industrial relations hardly encourage any industrialist to invest in factories here, as our people of every class and type so easily "go traditional" and refuse to accept new processes. How can you do anything the "traditional" way with technology changing all the time every few years? Industrial expansion and export growth depend on innovations. But we have built up a permissive society where almost anyone who objects to an innovation can delay or prevent its introduction altogether. Just look at the rows we had, to take only recent examples, about the use of freight liner terminals, the manning of diesel trains, and the introduction of a better system in the docks. Look at the notorious waste of manpower in printing and in many other industries.
I believe that management, especially junior management, is seriously demoralised by the chaos in our labour relations. This has undermined productivity and the quality of our products, and our ability to sell them in the right places at the right times. Some people complacently say that our industrial relations are not too bad, and they can produce some statistical justification for that statement, but I urge that we have to choose between bringing about an early improvement of our system of industrial relations or seeing our country continue to decline. I stress again that this sort of internal strife and corrupting inefficiency gravely affects our exports.
You cannot imagine, my Lords, the exasperation caused in countries that I have visited in the last six months, from Sweden to the west of Canada, by our failure last year to fulfil our delivery dates and also by the poor attention we are paying to quality. "Never buy a Monday car", they say in some countries—that is, a car made on Monday. Why? Because the workers are recovering from the week-end. "Never buy a Friday car". Why? Because the quality control people go home early. These are damaging jokes, but it is time we took them seriously. I would not repeat them otherwise.
Please do not forget that the Japanese and others are sitting on the sidelines,
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just waiting for a chance to snap into our markets. We have presented our valuable Rhodesian market on a plate to the Japanese. I think we cannot have better exports on a reliable basis until we have up-to-date industrial relations. I believe our excellent industrialists and our first-class trade union leaders deserve a better and a less archaic system to govern industrial relations; they need a system such as our main competitors have built up in the last thirty years. It will require legislation and we must tackle it as soon as we get the Report of the Royal Commission.
The seamen's strike of 1966 directly preceded the July crisis which led to many measures burdensome for our economy and to the total loss of our National Plan by which the Government set so much store. The closing of the ports of London and the Mersey for many weeks in 1967 directly preceded the devaluation of the pound. Of course other factors were involved—the Middle East war, the closure of the Suez Canal, the Vietnam war—but these internal industrial disturbances have done vast damage to our exports and to our reputation abroad. They leave nothing at all to spare for untoward events abroad, like war on the Suez Canal.
Then there is the question of capital movements, long term and short term. How can we expect people to keep their money in London, still less to invest it here, if we plainly seem to have become incapable of sorting out our troubles? Our friends overseas are very sorry for us, but they think that we must be crazy to let our exports suffer in the way we do.
It is excellent that agreement was reached at Stockholm about the Special Drawing Rights, and I agree entirely with what the noble Lord, Lord Robbins, said on that subject. But let us be under no illusions: if we do not soon take measures to set right the working of our own economy—and I do not here mean just industrial relations but the economy on a wide basis—there is no system of liquidity, no level of foreign exchange reserves nor, for that matter, any exchange rate which will give us security or stability.
We have to pay our way in the world and live within our means, and that goes for public expenditure also. Otherwise there is no limit to the foreign assets we

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shall have to sell, give away or renounce in order to preserve a sort of stability. Every fresh renunciation will be swallowed up by another bout of inflation or by constantly increasing consumption or rising imports, as it has been for the last 25 years, unless we get our industry working properly under able, well-trained leaders, both of management and of labour, with proper chains of responsibility on both sides and the power to carry those responsibilities out. As it is, I never remember a period when we have abandoned so many assets built up over generations and got virtually nothing in return.
To sum up, the Government are being brave and courageous with their incomes and prices policy, but much, much more is needed. We must protect the right to work and to produce against wanton interference, against the social and economic Wars of the Roses in which we now are living.
I should like to come back to the question of exports. How are we to get extra exports? A surplus of £500 million per annum is really a formidable requirement. The increase in the volume of our exports per annum over the years 1961 to 1966 has been only 4·2 per cent., far lower than that of any other significant member country of O.E.C.D. Successive Presidents of the Board of Trade have worked hard on this and have often expressed a certain optimism, but they have achieved no revolutionary result.
Devaluation does not give very much long-term advantage in the circumstances of this country, where two-thirds of our raw materials and so much of our food have to be imported. I think that the Government are extremely foolish to abolish the export rebates. I cannot imagine why they are doing it—as if our present predicament does not give them ample material to answer criticisms at GATT or EFTA.
In order to obtain higher exports it is not enough to discourage home demand. By the time the managing director of a given company has discovered what is really happening at home and decided where to sell abroad, sent himself or his sales director there and discovered what can be sold, recovered from eating and drinking so many queer concoctions, got home and arranged to manufacture what is needed, got sales literature translated,
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printed and distributed abroad, found suitable agencies and customers and sold the stuff and got paid, we are usually in the next boom but one. Discouraging the home market may free resources for export, but few people who have had anything to do with export promotion on the spot would agree that such measures produce au effective expansion of export sales at short notice. We shall have to look to the longer future.
I believe that the Government need a wider approach. The expansion of exports cannot be achieved without much closer relations and co-operation between the Government and both sides of industry. I agree warmly with what has been said on this subject during this debate on both sides of the House. But if the mistrust between private industry and the Government goes on growing, I do not see how we are going to get the results we need. I suggest that the National Economic Development Council ought to be mobilised on this subject and all the "Little Neddies" as well. It should be possible to get a larger number of firms interested in exporting and to help them still more actively with common services. With all this a good start has already been made but much more activity will be required. Never let us be complacent or even optimistic again.
Japanese experience is very interesting. When the Japanese economy is doing badly their rate of expansion is just about 7 per cent. a year. When their rate of growth goes over 12 or 13 per cent. they begin to run into trouble. The last time that happened they took all the usual measures. They put up the rate of interest, restricted credit and so on, but they did one other significant thing. The Japanese Government are a large shareholder in most of the great firms, having supplied a good deal of the capital. They rang up the directors of these firms and told them they had to export more. They acted on that, and Japan came out of the red within about a year. Nobody had ever seen any great industrial country pull out of the red with the speed with which Japan did. Of course, that procedure is not applicable here, but perhaps we can learn from it.
I think that the Government should also press forward the measures they are taking to help industry form more efficient and larger units. The aircraft industry

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and shipbuilding are interesting in this connection. The Industrial Reconstruction Corporation, I believe, have begun to do most useful work, in spite of the fears which were expressed when it was originally formed. I daresay that that can be carried forward more actively.
I hope that there is a good basis of useful ideas in the Industrial Expansion Bill. Anyway, I appeal to the Opposition to make their criticisms forward-looking and constructive and avoid opposition based merely on the fact that it involves a Government interest. I am glad to hear that there is to be a new Plan. I believe it is essential to have a National Plan. Almost all member countries of O.E.C.D. have plans or programmes, or medium or long-term policies—there are all sorts of euphemisms but substantially they are all plans. I believe it is important that our Plan should be based on the actual plans and projects of the industries and regions. We should not aim at having a rigid plan, something which restricts what industrialists can do; it should be flexible and forward-looking. It should not deal just in terms of economic aggregates, not consist just of a lot of figures. It should deal with areas and industries and men, most especially with men. It is vital to foresee what sort of people our educational and vocational training systems must produce in order to provide for the needs in each area and to see that we do not run up against the sort of pressure against ceilings of manpower—trained manpower, specialist manpower—which will cause us to run into inflation. We should link this to a modern manpower policy in association with both sides of industry.
But no one has ever succeeded in planning exports effectively. I feel that the level of Government expenditure and our general economic policy must henceforth be made dependent on success in the export field. Let us not again be misled by short or even long-term capital inflows into thinking that we can relax.
In conclusion, we are still in a very serious pass. Devaluation perhaps gives us a chance to do better, but only if the Government develop much more forward-looking policies than they have dome hitherto, both at home and abroad, and in many fields. If we go on muddling through to another crisis, we can only
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expect another disaster, and that was emphatically not what our countrymen elected the Government for. Let the Government show even greater courage. To judge by the by-election results, they have nothing to lose by doing so, and perhaps they have everything to gain.
8.0 p.m.
LORD TREFGARNE: My Lords, in rising at this late hour to speak finally before the noble Lord, Lord Beswick, winds up, I am conscious of the high standard of this debate and perhaps of my inadequacy to make any useful contribution. However, I promise not to make up in quantity what I may lack in quality. I was, I confess, tempted to table an Amendment to the Motion, perhaps to sharpen it up somewhat; and indeed, if pressed, perhaps to force a Division. But wiser counsels prevailed, and anyway, perhaps nothing would have been achieved: judging by the attendance in the House I might not have carried the Motion.
The two principal objections to Government policy in the economic sphere must come under two headings: first, mismanagement; and, secondly, and more importantly, misrepresentation. To me, the most serious misrepresentation, and one which even the Prime Minister has repeated, on television and elsewhere, on numerous occasions, was that the present Government inherited from the Conservative Government a trade deficit of £800 million. The precise figure they put forward is, I think, £776 million; and this was the figure they bandied about when they came into power in October, 1964. The facts do not bear out that allegation. First of all, and most importantly, £374 million was overseas investment that had taken place during the year 1964, prior to the advent of the Labour Government; and, of course, capital investment of that nature is not, and should not be, added to the trade figures. If we added those figures to company accounts, we should be prosecuted and sent to prison, because it is literally against the rules.
It is perhaps useful to remember that during 1964 we received an income in this country from overseas investments of £409 million, which is substantially in excess of the overseas investment figure for that year. Of the remainder of the

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£776 million, the £402 million, it is true that this was principally on the trade account. However, as is now well known, the Conservative Chancellor of the day, Mr. Maudling, had taken a decision to increase temporarily the inflow of raw materials—he, of course, had taken that decision in conjunction with industry—and, therefore, up to October, 1964, we had substantially increased temporarily the inflow of raw materials, preparing for the leap forward in export subsequent to October, 1964, and into 1965.
It is true, also, that fear of the possible advent of a Labour Government during the latter stages of 1964 had accelerated this influx of raw materials and the corresponding outflow of money, because it was feared, rightly or wrongly—rightly, as it proved—that the advent of the Labour Government would result in a loss of confidence, a run on sterling, and in due course import controls. I am reminded of the simple parallel of a daughter of one of your Lordships who came to you and said that she wanted to get married. Suppose that you found that her suitor had an overdraft of £800 at the bank. Would you consider the young man a spendthrift? Indeed, if you found that, say, £400 had been spent on a deposit on a house, and £350 on stocking up the larder, you might praise the young gentleman and accept him as a prospective son-in-law. I submit, therefore, that this often-repeated allegation that the present Government inherited a deficit of £800 million is hardly accurate.
If we want to seek for examples of this misrepresentation we have only to listen again to some of the ministerial broadcasts that were so frequent until the last one in January, and remember some of the remarks that were made: for example, "The pound in your pocket has not been devalued." That, perhaps will go down in history as the classic misstatement or understatement of that time. The facts are that, as a result of devaluation, prices went up, the standard of living, at best, remained level—and to be more accurate will probably go down. Indeed, the former Minister of Labour, Mr. Gunter, in a televised speech only the other day, said he felt it desirable that the standard of living should go down. I wonder whether any previous Government has called upon the people
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to accept a reduction in their standard of living.
If we move now from misrepresentation to the other area that I mentioned, that of mismanagement, it is difficult to know where to start. We have the ludicrous selective employment tax. I was until recently in the transport industry, and we were in the ridiculous situation of paying this tax, to have it refunded in full, but without premium, subsequently. This meant, in effect, that we were making an interest-free loan to the Government. This is all very well, but it is hardly what the tax was meant to achieve. It is, of course, possible to get over difficulties of this sort by various devious but legal means, and I think that the Government will lose in the end. But it does seem incredible that the Government at this time, when they were attempting to cut back on expenditure in the public sector, should have imposed a tax which they were proposing to refund two months later.
There are many other anomalies in the Government's economic policy which have been pursued of late, and I will not dwell on them now. But to take the point made by the noble Lord, Lord Hankey, a moment ago, when he called for a further National Plan, we are reminded of the words of the then, I think, Minister of Economic Affairs, Mr. George Brown. He said:
"We shall run the economy as she has never been run before."
And what happened to the National Plan? Within a month it was in the wastepaper basket.
8.10 p.m.
LORD NUNBURNHOLME: My Lords, I had not intended to intervene in this debate, but I should like to ask the noble Lord, Lord Beswick one question. Since 1931 England has been off the gold standard, but we have always kept a large balance of gold in reserve—for what purpose I do not know. I presume it was so that, when most other countries had a reserve of gold, balance of payments could be made in gold. Now that America is reduced to a minimum, France is up to a maximum, what are we keeping this gold for? We have a tremendous foreign debt. Why do we not sell this gold, which

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I believe is vastly in excess of £1,000 million sterling, and pay off some of our external loans?
The Government are in a difficult position. They have this big debt hanging around their necks. They want to do what they can for this country, and this seems to me an ideal way of doing this. I do not want to be dishonest about this, so if we do it I think we should announce to the world that we are not going to buy back gold in any circumstances. Gold is not a valuable asset: its only value is for manufactured purposes. I leave it to the noble Lord to reply.
8.13 p.m.
LORD BESWICK: My Lords, we have had an interesting debate, and there have been some important speeches—some so important that I think I should not purport to answer them now. But I shall see that the points they have made are carefully studied. I know that my noble friend Lord Longford invited me to deal sharply with some of the industrialists, who have graced our debates especially when they made their chastening of the Government from this supra-political position, which they seem to think industry gives them, and claim they are being non-political about their interventions.
A NOBLE LORD: I did not claim that.
LORD BESWICK: I shall not accept the invitation of my noble friend Lord Longford, but I was rather reminded at times when the noble Lord, Lord Aiding-ton, and the noble Viscount, Lord Chandos, spoke of the absolutely delightful story in this morning's Times Business News, of the explanation by the chairman of G.K.N., of why he had given £34,651 from his company's till to the Conservative and Unionist Party. He said, "We are not concerned with politics. Our concern is business and the preservation of private enterprise."
LORD ALDINGTON: I never said that.
LORD BESWICK: I must say also that I think the noble Viscount, Lord Chandos, was carried away a little by his oratory when he chastised us for refusing, as he put it, to trade with South Africa because of our political convictions. The fact is, of course, that South Africa, with our exports to her of £257 million a year, is our second-best customer.
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The noble Lord, Lord Aldington, said that the Government had made psychological mistakes, and my noble friend Lord Granville of Eye spoke of the need to get a true understanding of our policy and purpose. May I say first I agree with the noble Lord that we have made psychological mistakes—not simply this Government but also their predecessor. We have, as a country, made psychological mistakes. This is an economic debate. But I believe that our national problem concerns psychology as much as economics. I believe that a national sense of purpose is as important as our balance of payments—indeed, the former may well govern the latter.
The noble Lord, Lord Robbins, said we are faced with truly tremendous events, events which he said we cannot control. I agree with him, though possibly not quite in the sense in which he rendered his remarks. We have talked so much in the last decade about "the wind of change" in Africa that we have quite ignored the profound social changes which are seeking to take shape in the more sophisticated and industrialised continents. The Tet offensive was a moment of truth, not only for the American people but for all who have taken for granted the superiority of Western values. And how could anyone watch in recent days the march of a hundred thousand people in American cities, and the great wave of emotion there that followed the killing of a Negro preacher, without realising how deep are the problems with which we in the Western World are now confronted? And not only in the American continent: Czechoslovakia and Poland are obvious examples of social change seeking to take place elsewhere. And part of my argument this evening is that we shall not get our own situation in order until we have recognised that interpreting our difficulties in any Party sense only obscures the problem and diminishes the effort.
Neither the world at large nor our people at home, in my view, have yet understood that the task we set ourselves after the war of winding up an Empire, an honourable task, honourably executed, has meant heavy, if temporary, economic burdens. Maybe I can return to that theme in a short time, but I must try to keep within the time which the Chief Whip has allocated to me.
SEVERAL NOBLE LORDS: You are the Chief Whip!
LORD BESWICK: The noble Lord, Lord Aldington, made some amusing comments about recent ministerial changes. Let me admit straight away that I agree that we have not up to date achieved the right set-up in the Government Departments to match the needs of the modern economy. What I do claim is that it would have been far worse to have left things as they were—on the Tory philosophy; and I further claim that the evolution taking place is bringing us nearer to the right set-up.
I am certain that the approach of my right honourable friend Mrs. Castle to an incomes policy is the right one. I am sure that it has to be presented as a positive policy; I am sure that the accent has to he on increased productivity. I believe that in her new post as Minister for Employment and Productivity she will he able to make a real contribution, through effective use and encouragement of manpower, to increasing the national product, and I am particularly delighted about all this when I hear this evening that we have, however inadvertently, adopted the suggestions put forward by the noble Lord, Lord Byers.
The noble Lord, Lord Aldington, had his doubts about a statutory control of prices and incomes. Of course a voluntary control would be better. If it did not lead to abuse by a minority, our emphasis would be on voluntary co-operation. But to ensure fair play all round, reserve powers are, I suggest, absolutely essential. The noble Lord, Lord Aldington, also has doubts about Government interventions in industry. We shall have opportunities to discuss this in the near future on the Industrial Expansion Bill, but in the meantime I cannot think that he really believes that all intervention is bad. Intervention in the aero-engine industry by way of development contracts and the recent Rolls Royce successes are, in part, a result.
LORD ALDINGTON: My Lords, I am sure the noble Lord would not wish to mislead the House as to what I said. I started what I had to say about intervention in industry by saying that of course we understand that, for example,
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the Government have regulated and intervened. I then went on to deal with various ways in which I thought they were doing wrong now, and various things I thought they ought to do right.
LORD BESWICK: My Lords, the, noble Lord seems to be bearing me out when I say I cannot believe that he regards all intervention as being bad. The noble Lord has found a way to intervene when it is on behalf of the Conservative Party. What I am saying is we have intervened in industrial matters, and in many cases with success. I would say the intervention by way of development subsidies in the aero-engine industry has led to the recent Rolls-Royce successes; intervention in shipbuilding seems to be paying off, and similarly with computers, and many other examples could be given.
The noble Lord, Lord Byers, asked whether profit investment in the expansion of industry, especially that geared to export or import saving, is increasing, and whether it has increased sufficiently. The noble Lord, Lord Hankey, was making the same point. I would first draw attention to the fact that, contrary to experience in some previous periods when we have had slow growth in the economy, industrial investment did not fall very sharply last year. Moreover, and more to the point, the Board of Trade investments intentions inquiry at the end of last year indicated that, even before devaluation, very substantial increases in industrial and commercial investment were being planned for this year. Our expectation is that this increase in investment, allied with the expansion of exports that we look forward to with the added advantage which devaluation gives to the manufacturing industry, will give rise to kind of investment which the noble Lord has in mind, and it will continue to rise quickly in 1969.
The noble Viscount, Lord Amory, and the noble Lord, Lord Aldington, and I believe others, urged the reading o Professor Paish's article. I must say that I have read it, and it obviously—it is almost temerity on my part to say so—repays study. The two noble Lords, and Lord Robbins, in a characteristically weighty speech, emphasised the importance of demand management. Where I think they were not quite clear was in not calling attention to what my right honourable friend the Chancellor of the

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Exchequer had said in his Budget speech. He really accepted the point which was being made, notwithstanding the severity of the Budget in cutting back private consumption. We admit that there is always a risk that overall demand on national resources will grow excessively. But the Chancellor of the Exchequer acknowledged this risk in his Budget speech. He noted that the cuts announced by the Prime Minister on January 16 last would involve a sharp slowing down in the growth of public expenditure in the period ahead. He went on to emphasise that the Government intended to ensure that the claims of the public sector were compatible with the total resources available as compared with the other calls upon them; and that the fulfilment of this objective would be the basic task of this year's review of public expenditure.
LORD ROBBINS: My Lords, I had no intention at all of criticising the Chancellor of the Exchequer in this connection. I only wished to strengthen him in praise.
LORD BESWICK: I am much obliged. I believe I am being unfair in this context. I had put the noble Lord's name together with that of Lord Aldington.
LORD ALDINGTON: I associate myself with what my noble friend said.
LORD BESWICK: My noble friend Lady Plummer advocated the opportunities presented by agriculture for import saving, and so did the noble Lord, Lord Crawshaw, in a speech which I regret I did not hear; but my noble friend the Leader of the House tells me it was a most interesting speech, and one with which he thought I should be greatly in agreement. I will certainly read what he had to say, and, as he knows, I am as keen as he is that there should be the maximum use of agriculture for import saving. The noble Baroness, Lady Plummer, went on to speak of the activities of the British Agriculture Export Council, of which she is a very active member, and she was suggesting that more could be done to help them to help us in this matter of import saving. I can say that the question of partial financial support to afford additional impetus to B.A.E.C.'s activities is being closely examined.
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The noble Lord, Lord Grantchester, emphasised the need for an honest monetary system. I agree with him completely, that if we are to reward properly those who labour by hand or brain, and if we are to give an adequate return to those who save a proportion of what they earn, then we need to have a currency which we can trust. But I think I have the support of the noble Earl, Lord Dundee, who questioned me earlier to-day, when I say that not only do we want an honest monetary system, but we want a rational system; and I think that this is the point Lord Nunburnholme was making before I rose.
The noble Earl, Lord Longford, and Lord Dundee, at Question Time, asked me about the efforts that were made at Washington and Stockholm to get nearer to a rational monetary system. At Washington the seven active participants in the former London Gold Pool agreed to the following propositions. They agreed to the so-called two-tier system, under which they no longer supply gold to any free market; they agreed that they should no longer feel it necessary to buy gold from the market, and they agreed that they do not in future sell gold to monetary authorities to replace gold sold by those authorities to the market. I hope this goes some way to satisfy the noble Lord, Lord Nunburnholme. The Washington Conference also supported United States Government policy of buying and selling gold at the existing price of 35 dollars an ounce in transactions with monetary authorities. The Chancellor of the Exchequer said on March 18 that he believed this two-tier system would restore stability, at least for a considerable time, and certainly events since then, including the price of gold in the free market, have justified his statement. But, of course, all this does not go far enough. At Stockholm the Finance Ministers and Central Bank Governors of the Group of Ten had as their main task to agree on the amendment to the articles of agreement of the I.M.F. which are needed to establish the scheme for Special Drawing Rights which was agreed to in outline at Rio de Janeiro last September. On this, of course, one country, France, abstained.
It might be useful if I spelt out a little more something of the nature of these Special Drawing Rights, or the S.D.R.s as they are coming to be called, rather

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awkwardly I think. They are a new kind of asset, and some misunderstanding exists about them. They will be created and distributed by the I.M.F. without any deposit of gold or currencies in a Central Pool. In this respect they contrast with existing I.M.F. drawing rights. When a country uses its S.D.R.s it will do so by transferring them in the books of the I.M.F. to another country, which will be obliged to supply its own or another currency in exchange. Despite their title, the S.D.R.s will assume a character of transferable assets. Although it will not be possible to touch them or see them or handle them, any more than the speculators see or touch the gold which they buy and sell, they nevertheless will be an identifiable and an additional part of the world's liquidity. The Special Drawing Rights will supplement gold and reserve currencies, and not supplant them, at any rate in the near future.
Final details of the proposed amendments to the articles are now being discussed in Washington. Then the Governors of the Fund will be asked to vote on them, and they must be accepted, as I said earlier this afternoon, by three-fifths of the members having four-fifths of the total voting power. This scheme, of course, cannot solve all the problems of international liquidity, but it offers a more rational and hopeful system subject to genuine international agreement and control. I cannot give the House any firm estimate when the first creation of liquidity under the scheme is likely to take place, but if conditions are right it will probably be some time in 1969. I am sure that we shall all hope that conditions will in fact be right.
The noble Viscount, Lord Chandos, asked—and I thought very reasonably—what has gone wrong with our economy? Why have we had this experience, so different from our hopes in 1964? I have tried myself honestly to identify the mistakes made by the Labour Government since we came to power in 1964. I agree with Lord Longford that there was one big mistake which we made as a Government and as a Party, but which we certainly shared with previous Governments and with other Parties of the State. I believe we over-estimated the economic resources available to us
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in the 'sixties and we under-estimated the economic consequences of winding up an Empire—and here I return to the theme with which I started. Of course there was that formidable deficit left to us by the previous Conservative Government, and of course they could and would have cut it down had an election not been impending, but in my view one major reason why that balance-of-payments problem still eludes us is that have never counted the cost of this exit from Imperialism. Catching up with our trade deficit meant material sacrifices which, up to now, no Government has called for.
I recall in 1946 arguing for the idea of a co-operative oil consortium for the Middle East. The officials argued back that the plan was all idealism. At that time our arrangements with the oil producing countries were mostly on a 70–30 basis, we taking the 70 per cent. Since then we have seen it change: 60–40, 50–50, 40–60, and since Abadan I believe we have lost some concessions altogether. The world is different since the Royal Navy used to rule the seas. It used to be said that colonies opened areas to economic exploitation by the imperialist masters. Whatever truth there is in that old political argument it does not apply to-day. We have, for example, invested large sums of money in Nigeria, to their ultimate benefit and ours I hope; but for the time being most of the benefits are denied to the Nigerians and to us. And the inter-tribal conflict again is part, temporary we hope and expect, of this transitional post-colonial period. On the other side of Africa, in Tanzania, British companies are nationalised and compensation has still for the most part to be settled. Further South in Africa is this confrontation in Rhodesia; whilst we cannot compromise on principle—and I have argued often across the Floor of this House—again we have to accept that the economic cost is considerable. The Suez Canal, always open in the days of British Imperialism, is again closed, with the inevitable ensuing expense. East of Suez our old trading patterns have been upset. Maybe we could have done more to keep up something nearer the old trading proportions if we had not, under successive Governments, concentrated so much on Europe, but certainly our old position has gone.

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I say all this not as an excuse but as an indication of the depth of the challenge. Under this Government we have seriously faced the job of making the necessary readjustments in our world position. Some military bases are closed and others due to be contracted. There will be savings; but this year and next the emphasis seems to be not on the economics but on the compensation payments.
Not only in our overseas relations have these basic readjustments to be made. We must face and we are facing the task of restructuring our economy at home. The action now being taken will pay off, but not always immediately. Greater efficiency in the docks is essential, but eventual automation inevitably creates immediate unrest. The move from coal to newer power sources will improve our position, but in the short term it means redundancy and compensation payments. Shipbuilding is being reorganised; large capital sums and some social dislocation preface the beneficial results. The merger between B.M.H. and Leyland, and between G.E.C. and A.E.I. are again part of this massive and potentially profitable restructuring. This important move towards more efficient units can be seen elsewhere, in the computer industry, in the banking and insurance worlds, and in the cotton and wool industries. Not all mergers are beneficial, and reorganisation of itself does not ensure efficiency, but basic restructuring of British industry is an essential condition of future competitiveness.
In the short run we tend not to see the economic benefits but only the protest marches, the complaints about actual or anticipated redundancies, and opportunities for political point making. So far as we are concerned there are also the disasters at by-elections. Still, we have to face these things and we have to go through with them. I am asking that the courage and resource which the present British Government are showing in these matters should be acknowledged. I believe that if we were to acknowledge that courage—acknowledge it frankly—we should get better support from our people and an earlier and better solution to the problems which face our nation.
LORD NUNBURNHOLME: My Lords, I do not think the noble Lord,
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Lord Beswick, quite answered my question. We have—
LORD SHACKLETON: My Lords, would the noble Lord give way? I understand that the noble Lord has spoken once and it is most unusual to start asking questions at this moment. The noble Lord had better frame it pretty neatly as a question or the House will not take it.
LORD NUNBURNHOLME: I apologise, my Lords. What I am trying to say is that we are paying double interest—interest on the money that is in gold in the Bank of England and in some foreign loans abroad. Why do we not pay off—
SEVERAL NOBLE LORDS: Order!
On Question, Motion agreed to.

THEFT BILL [H.L.]
8.37 p.m.
THE MINISTER OF STATE, HOME OFFICE (LORD STONHAM): My Lords, I beg to move that this Bill be now read a third time.
Moved, That the Bill be now read 3a.—(Lord Stonham.)
LORD AIREDALE: My Lords, on the Motion, That this Bill be now read a third time, notwithstanding that these Benches are not at this moment at the pinnacle of popularity in the House, I should like to say a word in addition to what was said yesterday. As was said yesterday, it is less than 48 hours since the Report stage of this Bill was concluded in this House, and we are now asked to take the Third Reading. The Government must have been aware at 11 o'clock last Monday evening that they had it in mind to put down the Third Reading for this evening. The Clerk of the Parliaments must have been informed of this, for it was put down on the Order Paper which appeared yesterday morning that it was proposed to take the Third Reading this evening. Why was the House not told on Monday evening that within 48 hours of the Report stage it was to be asked to take the Third Reading? Why was the House not informed that in accordance with Standing Order No. 43 any Amendments on Third Reading would have to be put down

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within 24 hours?—because, of course, Amendments in manuscript are not allowed on Third Reading and 24 hours notice has to be given. Whether this was an act of discourtesy to the House on the part of Her Majesty's Government I do not propose to discuss, because I think it is a matter perhaps more serious than discourtesy.
I am suggesting that the House was treated by Her Majesty's Government with something less than frankness in not being informed 48 hours ago that it was proposed to take the Third Reading this evening. In the exchange yesterday afternoon on future business between the noble Lord, the Leader of the House, and the noble Lord, Lord Carrington, the Leader of the House concluded with the following sentence:
"We are following this procedure not merely for the convenience of another place but for the convenience of Parliament as a whole."—[OFFICIAL REPORT, col. 172, 9/4/68.]
I am all in favour of the convenience of Parliament, but I am even more strongly in favour of considering the convenience of people outside Parliament, and I think that if Parliament considered their convenience rather more than we sometimes do we should stand higher in the estimation of the people outside. Surely one of the purposes of spacing out the stages of Bills is that experts outside Parliament in the particular field shall have a proper opportunity of watching the progress of the Bill at each successive stage in Parliament and coming forward with their advice as to how the Bill can be improved upon stage by stage.
I should have thought that the advice of lawyers outside Parliament, and, in particular, the academic lawyers in the universities, was to be welcomed and they were to be encouraged to watch the progress, stage by stage, of a Bill like this Theft Bill. But what happened? Because Her Majesty's Government had not even arranged for the complete official report of the Report stage of last Monday to appear in the Hansard of that day, and because part of it did not appear until the Hansard had arrived at the Printed Paper Office this morning, those persons who receive their Hansard by post will receive the complete report of last Monday's Report stage to-morrow morning. What help is that to them if they were to have ideas for the Third Reading
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debate, to find, as they will when they read that Hansard, that the Third Reading debate is all over?
I believe that the convenience of people outside Parliament demands that this Motion be withdrawn this evening and that the Third Reading of this Bill be taken one Parliamentary day late, on the day when we return after the Easter Recess. If that arrangement cannot be taken in its stride by another place, then I do not know another place as well as I thought I did. This would, at any rate, encourage experts outside Parliament to feel that their following of Parliamentary proceedings was worth while, and that they were not being ignored by some steamroller operated purely for Parliamentary convenience. I urge Her Majesty's Government this evening to say that they will withdraw this Motion for Third Reading and will put forward the Motion for the Third Reading on the day we return after the Recess.
On Question, Bill read 3a.
Clause 10 [Removal of articles from places open to the public]:
VISCOUNT DILHORNE VISCOUNT DILHORNE moved, in subsection (2), to leave out all words after "mentioned in that subsection". The noble and learned Viscount said: My Lords, I beg to move this Amendment to Clause 10. We discussed this particular point on Report stage. It is in relation to the new clause dealing with the removal of articles from places open to the public. On Report I moved an Amendment to draw attention to the fact that the protection given to houses open to the public was really vitiated by the requirement that there could be no successful prosecution under this clause without its being proved that the removal of an article from that house (a prosecution which might have taken place six months later after someone had visited it) was by reason of "the use of some opportunity or information obtained by visiting the building as a member of the public admitted for the purpose". As the Bill stood, if something was taken from a country house open to the public a conviction could not be obtained for the offence created by this clause unless it could be proved that the thing was removed in consequence of

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the use of some opportunity or information obtained by visiting the building, and to my mind that completely vitiates the clause.
The noble Lord, Lord Stonham, indicated that he was a little troubled about making this clause too wide, applying to too many houses, and getting too near the case for which I have argued, the removal of the word "permanently". If I may suggest it to him, I suggest that he might look at the conditions which are laid down in relation to opening of country houses. I think that under some regulations they have to be open a certain number of times in the course of the year, and I would suggest to the noble Lord for consideration—I do not want an answer now—that that might be a much better test than imposing this burden on the prosecution, which the prosecution would not, I think, be able to discharge.
I should like to say one further thing about this Amendment. I raised this question on Report. I was shocked and staggered to hear my noble friend Lord Conesford claim the credit for this Amendment in the course of our discussion yesterday. I always like to give my noble friend the utmost possible credit; I always have since we were in Chambers together. But I thought yesterday that his claim was a bit much. I think it is a bit much now. If he wants the credit of it, by all means let him have it. I beg to move.
Amendment moved—
Page 5, line 27, leave out from ("subsection") to end of line 34.—(Viscount Dilhorne.)
LORD CONESFORD: My Lords, I had no idea that my noble and learned friend was going to say this, but I thought it prudent to be here to watch him. I would remind my noble and learned friend, whose diligence throughout the proceedings on this Bill I very much admire, that when he had moved his Amendment on Report stage my noble friend Lord Colville of Culross pointed out that the acceptance of his Amendment would make the clause in every respect more useless than it was already. I thereupon suggested that, while my noble friend had been quite right in proposing to strike out what he proposed to strike out, he did not propose to strike out nearly enough, and I
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thought that the correct Amendment was the one which he has now moved. I most gratefully acknowledge everything that my noble and learned friend has done in the course of this Bill, but this particular Amendment happens to be mine and not his.
LORD AIREDALE: My Lords, since this Amendment, if accepted, will, I think, be the 35th Amendment to this Bill which Her Majesty's Government will either have moved or will have accepted, I hope this finally disposes of the proposition that was put forward to us at the beginning of the Committee stage, not once but over and over again, that because 17 lawyers of such distinction had sat upon this matter for so long it was unlikely that Parliament would be able to come forward with any worthwhile Amendments to it.
As to the Amendment, may I say this. I hope that if this clause is being looked at again the opportunity will be taken to make the quite small drafting Amendment necessary to ensure that if something is taken from the garden or the grounds of a building, that is to say, if a statue is taken from a garden, the protection of that statue under this clause will not depend, as it does now, in the way that the clause is drafted, upon whether the public have access to the building as well as to the garden. In my submission, it would be absurd to have that arrangement whereby the garden is protected provided that the public have access to the house, but that if they have access only to the garden, as in many cases they do, then the garden is not protected under the clause. It needs only a small drafting Amendment to achieve this purpose, and I hope that the opportunity will be taken to achieve it.
LORD STONHAM: My Lords, your Lordships will not expect me to intervene in the dispute between the noble Lord, Lord Conesford, and his noble and learned friend, Lord Dilhorne, as to the authorship of this particular Amendment. It may be that there is a dispute as to who should draw the commission on it—I do not know. I can only say that I personally forgo any claim. But it is on record that the noble Lord, Lord Cones-ford, drafting on his feet, did in fact suggest what we are now proposing to insert.

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I think that there is general agreement that the clause in its present form is a substantial improvement both on the clause in the original Bill and on the truncated clause which we were considering at the Report stage. But I realise and accept that, unless the article is taken from a permanent exhibition, the clause as it now stands depends on proof that the temporary taking was done by the use of some opportunity or information obtained by visiting the building as a member of the public, and that many noble Lords still feel that this requirement is unsatisfactory and will greatly reduce the value of the provision. The Amendment moved by the noble and learned Viscount, Lord Dilhorne, would remove the requirement.
As I explained at the Report stage, the requirement in paragraph (a) of subsection (2) of the clause was included to try to set some limit to the circumstances in which a place which was only occasionally or periodically open to the public was protected. But, my Lords, the Government intend thoroughly to examine the whole clause to see if we can find a way to remove or relax the requirement in paragraph (a) while at the same time not opening up the clause too widely; and since we intend to do that, I am prepared to advise the House to accept the noble and learned Viscount's Amendment. I want to make it clear that we do not think that the clause as then amended would necessarily be right. I think it would probably go too far. I think there is general agreement on that.
We may be able to do it in several ways, and I will certainly consider the suggestion which the noble and learned Viscount has made. That is one way. I would not comment on it now, except to say that it may be thought by some to be too restrictive. There may be more than one way, and we shall explore them all. But it may be, in the last analysis, that we shall fail to find any more satisfactory form for the clause than the form in which it now stands. It may be that we shall be obliged in another place to seek to reverse the Amendment which the noble and learned Viscount would now make and which I now advise your Lordships to accept. If that should happen, the Amendment we now hope to make would at least ensure your Lordships an
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opportunity to consider the whole clause again at a later stage. I am, in short, prepared to accept the Amendment as an earnest of our good intentions—indeed a guarantee of them, if such be needed—recognising that more work will have to be done on the clause in another place before we get it right.
The noble Lord, Lord Airedale, asked me to make sure, when we look at the clause again, that it covers the case where something is taken from the grounds of a building it the grounds are open to the public and the building is not. Having regard to what he said on the Motion, That the Bill be now read a third time, I would make this comment. When he was in my office at the Home Office yesterday afternoon, and we discussed the Bill, I understood that this was the only point outstanding. I did not know then that he was proposing to raise the objections which he has raised to-night. I give the noble Lord the assurance which I then gave him, that we will certainly consider the point about the gardens and try to meet it—again subject to the need, as we see it, not to make the clause unnecessarily and undesirably wide. I hope that with what I have said your Lordships will agree that the Amendment which has been moved by the noble and learned Viscount will meet the present position and that the House will accept it.
VISCOUNT DILHORNE: My Lords, with the leave of the House may I thank the noble Lord, Lord Stonham, for so gracefully accepting the last Amendment that I have to move on this Bill, and for what he has said about it. I quite understand that he will look for other solutions of the problem, and I shall understand, but regret it, if the result of that investigation means that he tries to reinstate these words. I hope that he will find a better solution. But I am grateful to him, and entirely understand the basis on which he accepts it.
May I conclude by thanking my noble-friend Lord Conesford for so satisfactorily drafting the last Amendment that I moved. May I say that I hope in future, whether on his feet or sitting down, he will undertake to draft other Amendments for me equally satisfactorily?
On Question, Amendment agreed to.
8.57 p.m.
LORD STONHAM: My Lords, I beg to move that the Bill do now pass. I think we were all agreed about two things when we began our consideration of this Bill on February 15: first, that it raised nothing which could, in any sense, be regarded as a Party matter; and second, that our common concern was to see that it left this House as good a Bill as we could make it. Let me say at once that if we have been able to make some improvements in it, nothing that we have done can detract from the splendid foundation laid for us by the Criminal Law Revision Committee in their painstaking and thorough inquiry, and in presenting us with a draft Bill.
It would be idle to suppose that any Committee could produce a Bill on a subject such as this—or, indeed, on any subject—with all of which everyone would agree. To me, therefore, it is less remarkable that we have made some changes in the Bill which the Committee produced than that the essentials of it—in particular, its new concept of theft—have stood up so well to the searching scrutiny which the House has given them. I know that the Chairman of the Committee, Sir Frederic Sellers, has come here many times in person to follow our debates, and I think that we should all wish to pay to him and his colleagues a tribute for the giant stride in the improvement of the criminal law which their endeavours have made possible.
We have spent many hours on the Bill, but I do not think a minute has been wasted. The Government have at all times been open to suggestions and many helpful ones have been made. As a result, in some places, such as what is now Clause 14, we have made quite substantial alterations and in the new Clause 15 have what will be found, I believe, to be a useful provision. In other cases, the Government have, I believe rightly, dug in their toes, and on one or two occasions I may even have been able to persuade noble Lords that I was right and they were wrong. I have been anxious at all times to serve the House, and will not now do it the disservice of speaking at length. But I should like to perform the best last service I can do for the House before the Bill goes to another place by surveying briefly the
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issues on it which are outstanding when it leaves us.
First, the Government will have to consider the position created by the deletion from the Bill at the Report stage of what was then Clause 6. When, at the Report stage, I moved some Manuscript Amendments which were consequential on that deletion the noble and learned Viscount, Lord Dilhorne, said:
"I understand this means that the noble Lord will not seek at a later stage to reintroduce Clause 6 in the form which has now been excised. Does that also mean—I hope it does not—that he is not giving consideration to an entirely different wording to carry out the intentions which he said lay behind Clause 6? "—[OFFICIAL REPORT, 8/4/68; col. 114].
As I explained then, the immediate purpose of the consequential Amendments was simply to clean up the Bill. Your Lordships would not have wished the Bill to go forward with a reference in it to a clause which no longer existed. But I was interested to learn from the noble and learned Viscount's remarks, if I understood them correctly, that he saw a need at least to consider whether the Bill should contain something to meet the intentions, as I had explained them, of the clause, even though he so greatly disliked the clause in the form in which we put it forward.
Certainly we shall be taking stock of the situation created by the deletion of Clause 6 and considering what, if anything, we ought to propose in another place to fill the gap. As I explained at the Report stage, it would not be easy to give effect to our intentions in any different form, but we shall consider most carefully what can be done. I cannot to-night be more specific than that. Then there is Clause 10, the Goya Clause, which we have already discussed on the Amendment moved by the noble and learned Viscount, Lord Dilhorne. I repeat the assurance I gave then that we shall most carefully consider all that has been said about the clause, including the point raised by the noble Lord, Lord Airedale.
One of the most important clauses in the Bill is Clause 20—Blackmail—to which my noble and learned friend Lord Stow Hill eloquently moved an Amendment proposing that the test of the reasonableness of using a threat should be an objective test. My noble and learned friend the Lord Chancellor

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explained why, as at present advised, the Government found that approach unacceptable but he added (col. 135):
"However, in view of the cogent argument which has been put forward by my noble friend Lord Stow Hill I will see that exactly what he has said is considered.…"
He went on to say, specifically, that he would seek the views of the noble and learned Lord, the Lord Chief Justice. I am glad to repeat that undertaking.
Finally, may I refer very briefly to some of the more detailed points raised at the Report stage? The noble and learned Viscount, Lord Dilhorne, moved Amendments to delete from subsections (2) and (4) of Clause 5 words dealing with what is "an intention to deprive" which he thought to be out of place in a clause dealing with the meaning of "belonging to another"; and my noble and learned friend the Lord Chancellor undertook to consider again whether it would be more appropriate to have those provisions in some other place in the Bill. That will be done. On Clause 8—Burglary—I will, as I said, look carefully to see whether, as the noble and learned Viscount, Lord Dilhorne, suggested, there is a gap which we could fill, without making the offence too wide, in cases where a person trespasses in a building and commits malicious damage there although it is not his intent to do so when he enters. The noble Lord, Lord Airedale, also had a drafting point about the words which were added to subsection (3) of the clause—he thought that the reference should he to "any person having a habitation", not to "the person"—and I shall be looking at that, too.
Last, but not least, may I repeat the assurance which I gave to the noble Viscount, Lord Colville of Culross, that we shall look closely into all the repeals proposed by the Bill, having regard to the changes made to it—in particular, to the original Clause 15—Criminal deception—which is now Clause 14, to make sure that the repeals are still desirable and that we shall not, by making them, leave any undesirable gaps in the law. Finally, may I thank noble Lords in all parts of the House for their constant kindness to me and their cooperation whilst I have endeavoured to discharge an exacting, absorbing, task
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which I count myself privileged to have been asked to carry out. I beg to move.
Moved, That the Bill do now pass.—(Lord Stonham.)
9.6 p.m.
VISCOUNT DILHORNE: My Lords, even though I may have spoken for over four hours on this Bill—and I do not know who spent the time adding it all up—I hope the House will forgive me if I spend a few minutes on the final stage of this Bill. It would not be right to treat this stage as a mere formality. It is a very important Bill, and the long and detailed consideration which we have given to it has, I believe, been fully justified; and I gather from what a e noble Lord, Lord Stonham, has said that he entirely agrees.
My mind goes back to the second day of Committee so long ago as March 7, when the noble and learned Lord, the Lord Chancellor, thought he would have a little fun at my expense or be rather sarcastic about me. He then said, if I may remind hint, in column 1496:
"Here I must say that 1 admire very much the courage of the noble and learned Viscount in putting down 25 Amendments to this Bill."
He then went on to say something which I am sure none of us who have taken part in the debates on this Bill will ever forget:
"The Bill was drafted by 17 of the best-known judges and academic lawyers … They spent nine years on this subject."
The noble and learned Lord then went on to say:
"… I should have thought it is a brave thing to say that on 25 different Amendments: 'I know better than they'. They thought about every word."
What the noble and learned Lord the Lord Chancellor really meant was that it was an infernal cheek on my part to think of tabling Amendments to a Bill sponsored by such eminent persons. But what in fact has happened? I tabled only 25 Amendments in Committee and drew upon myself that rebuke. The Government on Report have tabled no fewer than 35 Amendments to meet points raised in Committee. The noble and learned Lord, Lord Parker of Waddington, who also rebuked me on the same lines, found it necessary to table three Amendments, all of which the Government have accepted. To adopt

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the words of the noble and learned Lord the Lord Chancellor, I am glad that the Government have had the courage and been brave enough to make these Amendments, despite the parentage of the Bill. I am glad, too, that our efforts convinced them that this Bill was capable of improvement.
There is a phrase I well recollect which was constantly used by the late Lord Winterton in another place, when something rather harsh or sarcastic was said. He used to say, "They were very wounding words". If he had been in this House at this time, I think he would have said the same about what was said on the second day of the Committee. But I am not asking for an apology. To use words which I can adapt from this Bill, I am no sensitive plant, wild or otherwise. But I hope that the noble and learned Lord will recognise and admit that our discussions have not been wasteful, but fruitful; and that they have resulted, as I think they have, in really major improvements to this Bill.
Although our discussions have been long, I am sure that from this side of the House there has been no attempt to filibuster. The points have been many and difficult. I think it was the Leader of the House who drew attention to the fact that there had been disagreement among lawyers on many of the provisions. That is a mere indication of the difficulty of some of the points involved. I must confess that I wish the Government had had the courage—perhaps I had better not use that word again—to go a little further.
I regret that the word "permanently" was re-inserted in the definition of "theft", by a small majority on a Division at a very late hour. I do not propose to debate that again now, but I believe that the time will come when it will be recognised that to make dishonest appropriation of another's property a criminal offence is a desirable change in the law. It would certainly simplify it. You could, if you wished, keep the definition of "theft" as it is, and make dishonest appropriation a separate offence as the Romans did. I was not impressed by the argument so frequently advanced that trivial cases would be covered, for they are covered by the present definition of "theft". The youth who steals a few
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apples from an orchard will be liable to conviction for that offence.
I believe that one of the major difficulties in relation to this Bill—it is not the fault of the Criminal Law Revision Committee; I do not criticise them about this—is the fact that they were not asked to consider forgery at the same time as they considered larceny. With the benefit of hindsight—and I do not criticise the Government about this—I think a much better job would have been done if they had been asked to do so. If they had the law relating to forgery, to theft and the other offences created in this Bill, under consideration at the same time, I am sure they would have fitted them all together, and that there would be no gaps and discrepancies. Now I rather fear that there are likely to be discrepancies between the law as it will be in this Bill and the law relating to forgery.
One question which I should like to ask even at this late hour, and I should be very grateful if I could get the answer to it, is this. Who is going to tackle the reform of the law relating to forgery? Is it going to be the Criminal Law Revision Committee or the Law Commission? If it is going to be the latter, I ask this: Has the Law Commission at any time been asked for their views on this Bill? If not, should they not be asked? I hope there is no reluctance on the part of the Home Office to consult the Law Commission. I am sure there is none on the part of the Lord Chancellor.
As the noble Lord, Lord Stonham, has indicated, there are a number of points which the Government have promised to consider; a number of questions on which there is doubt and disagreement even among lawyers about what is the right answer. I suggest in all seriousness: would it not be worth while getting the views of the Law Commission on these points, and getting their views before the Bill is finally enacted? Take, for example, the blackmail clause. Very real concern is felt about that clause, and there was a great division of opinion. Your Lordships will remember an eloquent speech by my noble and learned friend Lord Morris of Borth-y-Gest, to the effect that if a person believed that the means he used to enforce his demands were proper he should not be convicted of that offence, even though

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everyone else thought that they were grossly improper. The noble and learned Lord the Lord Chancellor supported that view. I of course, had no opportunity then of saying anything about it. But the logical conclusion of that argument would seem to me to be that no one should be convicted of dangerous driving, if he himself believed that he was driving safely. I hope that the noble and learned Lord will say that he will consult the Law Commission about this matter.
If it is the case that the Law Commission are going to deal with the law of forgery, may I even now ask one further question? Will they be free to recommend changes in this Bill so as to make the law of theft and the law of forgery fit into one coherent whole, or will they have to base their recommendations as to forgery on the assumption that no changes can be made in the law as expressed in this Bill? That, I think, is an important question and a serious one, and I hope that the noble Lord will be able to give me an answer.
By the very nature of our procedure our debates on a Bill are not taken up in pointing out its merits and the good things that it does, but in drawing attention to its defects. I should not like it to be thought that I do not recognise that this Bill has many good points. It has; but I must confess that I cannot share the view of the noble Lord, Lord Stonham, that it is a great stride forward in the improvement of our law. I must confess that when I first read the Bill I was very disappointed. I thought that a great chance to simplify and clarify our criminal law had been missed. I have done my best to draw attention to what I think are its defects. I have not attempted to redraft the whole Bill, although I know an attempt has been made to do so in order to get more clarity and simplicity.
My Lords, I have spoken a great deal. I did not realise, as I say, that it was over four hours, but I hope I did not weary your Lordships unduly. I think everyone will agree that it is a better Bill now. As the noble Lord, Lord Stonham, has indicated, there are still matters under consideration, and I would say that the Bill is still capable of improvement. The noble Lord, Lord Stonham, made particular reference to Clause 6. It seemed to me that there was a wide
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gap between what he said were the intentions of that clause and the language used to carry them out. I think he will find it very difficult to carry out his intentions in such a way that the clause is not so wide as to include a lot of other matters which he does not want included. That, no doubt, will be looked at. When he is looking at that, perhaps 1 e would also look at something which I did not raise on Report. It concerns the definition of "gain". In Clause 33 it says:
"'gain' includes a gain by keeping what one has …".
That may be entirely appropriate when one is having dealings with the inland Revenue, but I doubt whether it is really an accurate description of what is meant by a "gain".
My Lords, I feel that if we had had more time, and if there had been more time between the different stages, we should possibly have been able to effect even greater improvements. The noble Lord, Lord Airedale, referred a little earlier to a steamroller. I feel rather rolled upon. After all, we have had very little interval between the various stages. It was a short interval between the end of the Committee Stage and Report; our days on Report followed in quick succession, as did our days at Committee; and now here we are seeing the final stage. Perhaps, even at this late hour, I may remind your Lordships of an eloquent speech made by the noble Lord, Lord Chorley, on March 5. He said that this Bill,
"which affects the liberties of such a very large section of the community ought not to be pushed forward in this hurried way … a great deal of damage can be dane in the very last stages if, in an understandable anxiety to get the Bill on to the Statute Book, … too much urgency is shown and the work which ought to be done very carefully and, I think, with a measure of slowness is pushed through late in the evening on a number of rather latish sittings".—[OFFICIAL REPORT, 5/3/68, col. 1294.]
We have certainly had those. The noble Lord, Lord Stonham, said that if more time was needed then more would be provided. I think that if we had been given more time it might in the end have led to less time being occupied in debate. As I have said before, no one has tried to hold up this Bill.
In conclusion, I should like to express my congratulations to the noble Lord, Lord Stonham, who has borne the burden

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on the Government Front Bench, on piloting this Bill through this House, and my thanks to him and to the noble and learned Lord the Lord Chancellor for the careful consideration that they have jointly and severally given to the various points that I have raised—and I thank them most sincerely for meeting so many of them. This Bill leaves the House a better Bill. I do not think our time has been wasted; I do not think we have wasted time. I hope that it will be further improved in another place.
9.20 p.m.
VISCOUNT COLVILLE OF CULROSS: I wish to add just a word or two to what my noble and learned friend Lord Dilhorne has said. Despite the improvements made in this Bill, I think that it may be some time in July before we see it back from another place; and, while I join in the congratulations expressed by my noble and learned friend to the noble Lord, Lord Stonham, and, indeed, to the noble and learned Lord the Lord Chancellor, I hope they will not allow the details of it to slip from their minds; for I fancy that we shall have further discussion on it then.
I am glad to have heard the catalogue of matters still for discussion, and particularly the points about repeal. This is particularly important. I have stressed this on several occasions—chiefly I think on the Committee stage—and, of course, it ties up closely with what my noble and learned friend said about forgery; because there is in fact a great correlation between the type of crime dealt with in this Bill and forgery, which is not. There is the added complication that since the Criminal Law Revision Committee started to consider what "defraud" was meant to mean, in terms of the old Acts in relation to theft and allied offences, that term has undergone a complete change in the realm of forgery. Furthermore, it has a different meaning in "conspiracy to defraud".
There was a great deal of virtue in what my noble friend said about coordination in the consideration of this Bill and in the consideration which is to come about the next part of the code, if it is the next part of the code, on forgery.
LORD STONHAM: My Lords, may I interrupt the noble Viscount to tell him—and this is in answer to the noble and learned Viscount's question—that the Law Commission will examine the law of forgery?
VISCOUNT COLVILLE OF CULROSS: I think that that will, perhaps, be the next Bill that we have before your Lordships' House. If this is the first part of the code, I hope that Her Majesty's Government will not be put off by the reception it has had. There have been criticisms, but of course I agree with what the noble and learned Lord, Lord Stonham, said about the virtue of the Report produced by the Criminal Law Revision Committee. I have no doubt that the Law Commission will be equally virtuous in making their Report. There is a relative difficulty about how comprehensive one should be, about how far one should go. This is not only applied, as it were, geographically, so far as the criminal law is concerned: but also in terms of how far one should go in making changes of substance. I think it is here that there have been a number of disagreements, as much as about the geographical territory covered.
There is one last thing that I should like to say: it relates to something which fell from the noble Lord, Lord Airedale. I, certainly, have been assisted by people outside this House who have taken the trouble to study this matter in considerable detail and have put forward substantial and most helpful comments to assist me. Clause 15, as it used to be (it is now Clause 14), the criminal deception clause, was considered by a number of those expert in criminal law to represent a very substantial and very important change. The present form of Clauses 14 and 15 really only emerged last week. I do not think there has yet been an opportunity for people outside this House to study them, and I hope the Government will bear that fact in mind.
Those clauses—particularly Clause 15, (as it now is) dealing with pecuniary advantage—I regard as being the most important step forward. My opinion is by no means infallible on this; there may be others who think the clause has failings which ought to be put right. I hope that when the Bill goes to another place, and these new clauses between Clauses 10

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and 15 are considered the Government will remain as open to constructive criticism as they have been on other matters. I hope they will not necessarily stick to the words at present in the Bill. I believe that there will be an opportunity for further improvement of this Bill, and that, of course, is what everybody is engaged upon doing. With those words I join in speeding this Bill to another place until the next time when we see an old friend.
9.25 p.m.
LORD AIREDALE: My Lords, may I say a word or two? First, I am grateful to the noble Lord, Lord Stonham, for having mentioned a small Amendment which I had suggested on Report stage and for saying that this may have sympathetic consideration; particularly because this was an Amendment which I forgot to put down and so I threw the substance of it at the unfortunate noble Lord without notice. I do not think I really deserved to have this further consideration and I am all the more grateful, therefore, that it is going to be considered.
May I explain to the noble Lord, Lord Stonham, that although I did not inform him of my intention to say what I said a little time ago on the Motion for the Third Reading I did inform the Government Chief Whip and the noble Lord the Leader of the House, who was kind enough to have a discussion with me about it before the business was called. I know how busy Ministers are, and this was a matter purely about the arrangement of Government business. I felt sure that it was not a matter that the noble Lord, Lord Stonham, himself was concerned with. That was the reason I did not badger him with it as well. I meant no discourtesy to him; indeed, I have been filled with admiration for the courtesy and industry and patience shown by both Ministers who have borne the burden of piloting this Bill through your Lordships' House. In conclusion, may I say to the noble and learned Lord, the Lord Chancellor, that I hope that the 17 very distinguished lawyers may think the Bill has been improved, now that it has been put through the mill by your Lordships.
9.27 p.m.
LORD SHACKLETON: My Lords, I intervene only because earlier the noble Lord suggested that there had been a lack
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of candour on the part of the Government. Now that compliments are flowing, rightly, to my noble friend Lord Stonham, I am not sure that his barbs are not aimed at me. I will not follow the noble and learned Viscount, Lord Dilhorne, in a further statistical investigation as to the number of hours he speaks in your Lordships' House; he has certainly put up the general performance of Law Lords or ex-Law Lords in a special statistical study which I have shown him. We have appreciated this work and the work that his noble friend Lord Conesford gives in support of him.
I must make clear, my Lords, that it was blindingly obvious to me that the Government wished to have this Bill, in the general interest, as I said, of Parliament and of ensuring that it got off to a good start in another place. By passing it now we save ten days in another place. I can only conclude that what is blindingly obvious to most of us somehow escapes the Liberal Benches. I know that the noble Lord, Lord Airedale, will say that the noble Lord the Leader of the Opposition was unaware of it, but he was, unfortunately, away sick at the time; and certainly I think that the noble and learned Viscount, Lord Dilhorne, and the noble Viscount, Lord Colville of Culross, had no doubts of the Government's intention. I do not wish to pursue this—
VISCOUNT DILHORNE: My Lords—
LORD SHACKLETON: My Lords, before the noble and learned Viscount speaks—and I know he said that he was trampled into the ground, and I see that he is rising with difficulty—I can only say that if there is an apology due I would give it absolutely freely, because we do depend on a clear understanding among ourselves in this House. We do not normally announce in the House what business is, and if there is a misunderstanding I can only regret it. But certainly, and I am sure that the noble Lord will accept this, there was no deliberate absence of candour.
VISCOUNT DILHORNE: My Lords, the noble Lord, Lord Shackleton, if I may put this to him, trailed his coat in the hope that I should trample on it. I first knew about this proposal at a late hour towards the conclusion of the

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Report stage, and I was horrified. But I do not think there is any point in pursuing it.
On Question, Bill passed and sent to the Commons.

COUNTRYSIDE BILL
Brought from the Commons, read 1a; and to be printed.

INTERNATIONAL ORGANISATIONS BILL [H.L.]
9.29 p.m.
THE MINISTER OF STATE FOR COMMONWEALTH AFFAIRS (LORD SHEPHERD): My Lords, I beg leave to introduce a Bill to make new provision (in substitution for the International Organisations (Immunities and Privileges) Act 1950 and the European Coal and Steel Community Act 1955) as to privileges and immunities and facilities to be accorded in respect of certain international organisations and in respect of persons connected with such organisations and other persons; and for purposes connected with the matters aforesaid. I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read 1a.—(Lord Shepherd.)
On Question, Bill read 1a, and to be printed.

SAINT MARY, HORNSEY BILL
Brought from the Commons; read 1a, and referred to the Examiners.