§ 3.28 p.m.
§ LORD BESWICK
My Lords, I beg to move that the Bill be now read a second time. First may I thank the noble Lords opposite for agreeing to the proposal that this Supply Bill should go through all its stages to-day. There are good administrative reasons for this and we are all grateful for the co-operation extended by the House. The Bill embodies the Import Deposits Scheme announced by my right honourable friend on November 22. It fulfils the outline he then gave of the coverage of the Scheme; the 50 per cent. rate of deposit, which may be reduced but not increased by Treasury order; the repayment period of 180 days; and the twelve months maximum life of the Scheme, which again may be reduced, but not increased, by Treasury order. The 310 Bill will have the immediate effect of contracting liquidity generally, and of importers particularly. It will also produce an immediate, if marginal, effect on the total of our imports. It is not suggested that this Bill of itself is an answer to the problems which beset us now, but together with the use of the regulator, and with the other measures taken, and in the context of the overall strategy which has been pursued since devaluation, it ought to enable us as a nation to get out of the red into the black and towards that £500 million surplus for which we are working.
I accept that there will be difficulties created by this Deposits Scheme—difficulties for individual companies, both here and overseas; and obviously there are certain problems which, given the preference, it would be much better to avoid in our relations with friendly countries elsewhere. But of course those difficulties and problems will be as nothing to the blight which will fall upon us, and others, if we do not pt our balance-of-payments position once and for all on a sound basis. Since we cannot amend the Bill, I do not think it would be profitable for me to go into great detail, although naturally my noble friend Lord Shackleton, who will wind up, will be glad to try to answer any specific question that is raised. What I think is the wish of the House is that we should examine, calmly and constructively, the wider economic background against which these measures have been brought forward. There has been a frantic effort elsewhere to make Party political capital out of recent events, and this House, I suggest, will be serving its own best traditions and the interests of the country, if we endeavour to identify and examine the truth, if any, in some of the charges that have been made. If we could agree on facts it would then be more profitable to face judgments and make proposals.
Let us look first at the charge that the steps taken by Her Majesty's Government have always been too little and usually too late. There are some who say this of devaluation itself, but I shall not waste time on that. The furore caused when we did take the step seems to me sufficient answer to the complaint that we should have taken the step sooner. To that primary action of devaluation 311 there were added supporting measures. There were many in this House, and notably I recall the noble Lord, Lord Byers, who said that we should have done more at the end of last year and the beginning of this to damp down consumer spending. I have been looking again at the answers I then gave him. Of course, with hindsight, one can always say that it would have been better to have done more in December and January 10 or 11 months ago.
But the arguments against that course, which led the Chancellor to wait until his Budget, are still valid. The spending then was on commodities which would never have gone into the export market. Much of the consumer durables came from development areas. There was slack to be taken up. And in any case there were major arguments in favour of waiting until action could be taken which manifestly would match the size of the problem which would face the Chancellor when export demand, as we hoped, would begin to put pressure on the economy. Action, when it came on Budget Day, was hailed on all sides as courageous. No responsible spokesman, to my knowledge, then argued that the £923 million taken out of the economy was inadequate. Indeed, many who give their advice so readily in newspaper columns were soon saying that we should reflate, and there were many anxious observers on both sides of this House, and in another place, who looked at the rising unemployment figures and argued that we were overdoing restraint; that the Chancellor was taking his responsibilities for sterling too conscientiously; and the word "overkill" was commonly heard.
A favourite line of criticism which developed through the year and was voiced again in our November debate was that the rate of saving was too low. There was this rush, so everyone said, from money to goods. But again the facts do not suggest that extreme criticism is called for. I gave some figures in savings in the November debate. There had been a fall at the beginning of this year but a subsequent increase in the second quarter of this year to the highest known saving percentage of disposable income that we had had. Taking the first three-quarters of this year there is 312 the basis for an argument that we should do more to provide an incentive to saving, but there is no argument for the charge that estimates have been wildly out or that private savings in present conditions are impossible. Increased spending, which there has been subsequently, has not come out of savings. There is more of a case, as I shall say later, for saying that it has come from increased earnings.
This charge about penalising private savings is usually made together with sweeping criticisms about the overwhelming burden of taxation. I have taken the trouble to get some facts which may be of interest to the House. They do not show that this country is staggering under a unique burden of taxation. The O.E.C.D. and National Statistical Office show in their examination that total current taxation and contributions—including, of course, all social service and insurance contributions—as a percentage of the gross national product at factor cost in 1966, were 46.9 per cent. in Sweden; 45.8 per cent. in France, 40.2 per cent. in Germany, where initiative presumably is so uninhibited; 39.5 per cent. in the Netherlands; whilst the United Kingdom, fifth in a list of ten, had 36.2 per cent. There is no case here for saying that initiative is stifled by taxation.
Incidentally, there are some who say that it is not the total of taxation but its imposition which ought to be changed. They argue that more should be collected indirectly as taxes on expenditure and less directly on income. Even here the argument is not supported by facts: 47.5 per cent. of our total tax and contributions is collected, not on income, but on expenditure. This admittedly surprised me when I was given the figures but I am advised that this is the case. In fact the United Kingdom raises more of its revenue in indirect taxation than any other country in the O.E.C.D. table, except Canada. One truth, therefore, we can establish is that up to the Summer Recess the charge of too little and too late just would not stick.
By the time we debated these matters in November on the Queen's Speech the situation was changing somewhat. Consumption was rising. Unemployment showed signs of falling. Unfilled vacancies were increasing. One feature worth 313 noting, incidentally, is that all these relevant margins were very narrow. Consumption, for example, has not fallen back in recent months below the level of the second half of last year, as was expected and intended at the time of the Budget, but instead has been moving at around the same level.
It was at this point that we had the trouble with the under-valued mark and the over-valued franc. The scene was set for the speculator. It was an ideal situation for those who neither toil nor spin but seem to do very well out of the difficulties of those who do the real work of the world. Britain, inevitably, suffered in the scramble across the exchanges. It is not a matter of making an excuse of an international monetary crisis for our national misfortunes. Nor is it fair or accurate to say that the crisis proved our policies to be muddled, incompetent or wildly wrong. The crisis showed not that we were sick, but that our recovery from sickness to complete fitness was not proceeding fast enough. The truth is that we are convalescing and any convalescent caught in a bleak wind is certain to suffer. This Bill and the other measures are intended to hasten recovery.
The occasion of this Bill and the other measures has been used not so much to attack the import deposits as such, but against policy generally. It is said that instead of hitting the poor consumer we should be cutting down on public expenditure. It is worth trying to get at the truth of this. First of all, is it true to say that we are "clobbering" the consumer? Are we really doing a service to the British people when we work upon their prejudices and whip up complaints about how harshly they are being treated? The figures I gave earlier about comparative rates of taxation and the present level of savings do not suggest that the consumer is being hit as hard as political Party or some Cross-Bench propaganda makes out. In any case, critics in the Party opposite contradict themselves on this point when they then go on to argue that the Chancellor's failing has been his inability to get down consumption below his forecast 2 per cent.
Of course there is poverty in this country, as the debate in this House yesterday showed only too clearly, and we need to 314 end it, but we shall make quicker progress in eliminating that poverty if these economic measures prove successful and if we stop whining every time an essential effort is called for. The steps taken in this Bill and in the regulator, and on the hire-purchase changes, and in the Chancellor's Budget, do not hit the really poor and do not justify the whining we have heard in the last few days. The figures show that consumption is running at the rate of £500 million more than at this time a year ago. That does not highlight a poverty-stricken consumer. The latest consumption figures show that since 1962 expenditure on motor cars and motor cycles has increased practically 70 per cent. by value and nearly 80 per cent. by volume. Expenditure on beer has gone up over 40 per cent. by value though, I am interested to note, only by something over 10 per cent. by volume. Consumption of wines and spirits has gone up by around 25 per cent. in volume. What deprived com timers we all are!
The current Opposition cry, and the unfailing Conservative cry down the ages, faithfully echoed one notes by the bankers, is that public expenditure should be cut. I am not sure that the bankers have been more successful than was the Leader of Her Majesty's loyal Opposition the other day in explaining precisely where the cuts in expenditure should be made. The official Conservative reply, the House will recall, is that public support for agriculture should be cut and that the consumer should pay the necessary increased prices.
What a comic proposal, in the context of the present argument, that the private consumer should be helped by deliberately putting up the price of rent and essential foodstuffs. Of course there are some consumers—one suspects more than at any time before—who could pay more for food. There are the consumers who could respond to that now quite famous advertisement in The Times the other day of the crocodile brief case, lined in pigskin, and retailing at £315. I noticed that just by was another advertisement for a personal electric shoe-polisher, now available from the better stores for £15 4s. 4d. What a wonderful world we are living in, when over 60 per cent. are living below the poverty 315 line, and almost every day we see newspaper photographs of starving children with distended bellies, whilst here in the Western World, the Free World, some of the cleverest engineering resources we have are devoted to the production of personal electric shoe-polishers at £15 4s. 4d. a time! That sum is as much as many human beings in Africa and Asia have to live on for the whole of one year. And this is the time when the Opposition are saying that we should cut public expenditure because the consumer is unable to "take it" any longer.
The level of public expenditure was fixed at the beginning of this year on the basis of the Chancellor's intended Budget policy. Expenditure is now running at the planned rate. To keep us to this planned rate economies have been made. Every time an essential cut has been announced we have had a howl of protest. It is always the same. Cuts are agreed in general but none in particular. Her Majesty's Government say that as a civilised nation the present allocation to public expenditure is about right. If it were not for the quite scandalously extravagant bases in the Far East, not built in our time, further economies would be possible, but though savings there are to be made, they cannot come this year.
My Lords, I want to say something about prices and incomes. The latest provisional figures show that to the year to the end of August earnings have risen by 8.1 per cent. and prices by 5.6 per cent. One of the quite fantastic elements in the whole economic and political controversy is that this present Government are criticised for increased prices at a time when some economists say our present problem is partly caused by prices failing to rise as much as calculated.
I go round, I suppose as much as anyone on my side of the House, to local Labour Parties and to trade union branches, and I always hear this continual cry about increased prices. Yet the truth here is that earnings have risen more than prices. One school of thought suggests that total demand could be curbed by allowing prices to rise. So it could, in theory at any rate, although higher prices would almost inevitably precipitate wage demands, would increase costs, and would damage our competitive position 316 in the export markets. One lesson which it seems to me still has to be learned, especially by some of my own friends, is that we can achieve maximum utilisation of our productive capacity, which is another way of saying full employment, only if we agree to a planned, effective and, of course, fair control on the expansion of incomes. But how much easier it would be to implement an effective prices and incomes policy if we could cut out some of the Party bickering and sectional selfishness and really try to understand the problem that has beset this nation since it did its best in two World Wars!
I am ready to admit that, as a Government, we have not adequately succeeded in getting understanding and acceptance of a planned incomes policy. To succeed in this would be something quite unique in a free society. Certainly I see absolutely no sign of Mr. Heath and his friends succeeding where we have yet to achieve success. Somehow, we have to create a climate of opinion in this free society, with the undoubted right of free people to withhold their labour, within which sectional interests do not grab more than their share of resources, at the expense of others in the short-run and at the expense of themselves in the longer run.
In our last debate I wound up by saying that one of the depressing features of our affairs was that every item of policy designed to redress our balance of payments, attracted automatic opposition. This time, in the Bill before us, we have a measure which, repeatedly, Opposition speakers have called for. Yet the reflex action of criticism still has been seen. I am glad to think that so far in this House, at any rate, I have been able to thank noble Lords opposite for their co-operation in seeing this Bill through in one day. My Lords, I beg to move.
§ Moved, That the Bill be now read 2ª.—(Lord Beswick.)
§ 3.49 p.m.
§ THE EARL OF DUNDEE
My Lords, I do not think that your Lordships would have wished to have a full discussion on this Bill if we had not agreed to use the occasion for a general review of the present economic position. The levying of a forced loan on certain classes of 317 imports is one of those plans which have always been kept in reserve by the Economic Departments as a possible corrective to an adverse trade balance. Whether it will reduce imports for the next six months may depend, I think, on whether the banks are able to advance money to the importers to cover their deposits which I think that they will probably contrive to do, but the bank overdraft interest will, of course, slightly increase the price. Since the plan is only for twelve months and the loan for six months I think that it is more likely to reduce imports about next autumn, because importers may then prefer to postpone purchases until the necessity for the deposit has expired. Then in the following winter there will quite possibly be a sudden large increase in imports, and this, together with the repayment of deposits, may perhaps trigger off our next economic crisis but two.
I am always anxious to respond to the kind of appeal which the noble Lord, Lord Beswick, made, that in this debate, as in others, we should avoid Party controversy—although I must also add that his speech rather appeared to me to be what I might call a "controversial defence" against the hypothetical "controversial attack" which he evidently expected to be made by somebody. In your Lordships' House I very strongly approve of the tradition that we do not always think it necessary to engage in Party polemics. We more often prefer counsel to controversy, and in our economic debates I have always tried, humbly but hopefully, to offer constructive advice to Her Majesty's Government, and although none of it has ever been accepted I shall still go on trying to be helpful.
§ LORD BOOTHBY
My Lords, may I interrupt the noble Earl for one moment to say that he is not alone in that fate?
§ THE EARL OF DUNDEE
My Lords, I hope the noble Lord will still keep on trying, as I shall. As the years roll on and as the Government's policy steadily unfolds and progresses from one "economic miracle" to another, it becomes 318 awfully difficult to conceal the fact that they have not done quite so well as they think they have. Last week the noble Lord, Lord Shepherd, was kind enough to tell me that I had a good memory, which, of course, is not the case. I am extremely forgetful and absent-minded, and until I looked it up this morning I had forgotten that three and a hall years ago we were still posting letters with 3d. stamps for delivery the next day. I do not want to go further back for the purpose of this debate than the last General Election, when we were told that there would be no increase in taxes and no compulsory wage control; and it is reasonable to keep these things in perspective and remember what was said at the time.
At the beginning of July, Mr. Callaghan said that no special measures were needed. A week or two later there was the emergency crisis Budget which took £500 million out of the economy, the Prices and Incomes Bill, and a six months' wage freeze, during which I think wages went up by more than they have ever done in any other six months—or at least in any other six months of freeze—and another six months of what was called "severe restraint". I remember when this period of severe restraint ended; that was on June 30 last year. The bank rate had already gone down from 7 per cent. to 5½ per cent. in May, and we thought the green light was at last shining. Then in October there was another "economic miracle"; bank rate went up to 6½ per cent. to protect the parity of the pound, which was never to be devalued. In November the pound was devalued. The Government promised the International Monetary Fund that they would deflate; the raising of the school-leaving age to 16 was postponed; the school building programme and the road construction programme were cut down; emergency measures were taken to shift £500 million from home consumption to export, and the new Chancellor announced that private consumpton—if I may use the word which was used by the noble Lord, Lord Beswick, just now, was going to be heavily "clobbered", but not until the Budget in March.
We on this side of the House most earnestly pressed the Government to apply the regulator at once, but the Chancellor insisted that he must wait four months because he thought there was too 319 much slack in the economy. In my view this was a grave miscalculation which severely diminished the benefits of devaluation. Then we had the March Budget, "clobbering" the taxpayer by £923 million, including what I think was a most immoral retrospective repeal of tax relief on life insurance policies which thousands of people had been induced to take out in the belief that Parliament would keep its word. Had that been done by a private individual it would have got him 14 years' penal servitude. As things are, the Government, of course, have a legal right to do it, if Parliament agrees, but it has greatly lowered the public confidence in the integrity of British finance and in the British financial system.
My Lords, the Budget was designed to reduce consumption by 2 per cent., but consumption went on rising. As for the balance-of-trade figures, the forecast of £575 million trading deficit for this year has now, I am told, been raised to £656 million, and according to the last month's review of the National Institute of Economic Research—I shall be very glad if the Government are able to give a different view on this—the £250 million surplus which was forecast for 1969 has now been reduced to zero. We all hope that this new estimate may turn out to be too low, and I would never blame the Government for being as optimistic as they always are if only they would make some rational plans a little further ahead than they ever do.
When I was in another place I remember I had a constituent, an old lady, whose pipes froze up one very hard winter. She sent for the plumber, who was a blunt old Scotsman and who told her that when the thaw came the pipes would probably burst. She asked what she was supposed to do about it in the meantime, and he shook his head and said, "You must hope for the best and prepare for the burst". The Government never seem able to combine these two virtues, the virtue of hope and the virtue of prudence, at the same time.
In the new economic measures announced after the Bonn meeting the Chancellor has added £250 million tax on a limited range of goods which are very heavily taxed already, including 320 Scotch whisky, which we do not import, which makes a total tax increase for this year, including the Budget "clobbering", of £1,173 million, and a total increase of about £2.250 million since the Government took office. Now the Chancellor has refused to reduce public expenditure because he says that it is running in accordance with his estimate. If that is so, we must congratulate him on getting at least one guess right. But he said that expenditure in the private sector has exceeded his estimate. I know from my own experience how trying it is to be told, "You must reduce expenditure in general", by opponents who at the same time object to some of the individual economies which you find you are able to propose; but I think that it is not expenditure in the private sector of our economy which is causing inflation and imbalance but public expenditure, which has risen from £12.000 million in four years to £19,000 million.
I will give my reason for thinking this. Most private individuals in Britain are living within their means—probably not most of your Lordships, but taking the country as a whole probably most of our fellow citizens are living within their means and, on the whole, are still saving. They are not saving so much as we should like them to do—we all regret the decline in national savings—and I think that the reason is that their confidence in the future is declining. But, as a whole, they are spending less than their income and saving a considerable part of it, whereas the public sector, whose expenditure ought to be covered by revenue plus money borrowed in the open market from those who are willing to lend their own money to the Government, is supplemented by further borrowing, not from real savings but from new credit money created by the Bank under Government authority for the Treasury borrowing requirement. However much you try to stop inflation by taking money away from the private sector, you will not succeed if at the same time you create a whole lot of new Government money and put it back into the economy where it has got to be spent by somebody. I do not think that we shall ever have stable growth until inflationary public borrowing either is stopped or is brought into a strict relationship to actual achieved economic growth.
321 When last Session we debated the National Loans Bill my noble friend Lord Aberdare gave figures which I do not think have been questioned. This is not a Party question since it covers the last six years, 1961 to 1966 inclusive. The figures show that in those six years there was a surplus of £3,813 million on income and expenditure account, but long-term loans of £5,653 million, which converted that surplus into a deficit of £1,840 million. This represented a greater infusion of new money into the economy than could be absorbed within inflation.
§ LORD BESWICK
My Lords, would the noble Earl allow me to interrupt for one moment? I know that he is very interested in this subject, as I am, and I made inquiries about this matter beforehand. I am told that although there was this infusion of new money at the beginning of the year, since July the reverse trend has set in, and now the amount of new money has increased almost exactly the same as the increase in the gross national product. Would the noble Earl bear that in mind, together with the fact that not all private spenders spend within their incomes and that there is at present an increasing amount, something over £1,000 million, in hire purchase instalments?
§ THE EARL OF DUNDEE
My Lords, I was just going to ask the noble Lord whether the National Loans Act, which we discussed last Session, had in his view made any difference to the situation. I had thought that perhaps the noble Lord the Leader of the House might manage to say something about it in his reply; I did not think that the noble Lord, Lord Beswick would be willing to reply immediately. But I should be glad to know whether that Act has made any difference.
I think that it is worth quoting what Lord Cromer, as Governor of the Bank of England, said in May, 1966:We unfortunately have a system under which Exchequer finance can and does lead to the creation of money quasi-automatically to the extent that the requirements of the Exchequer are not met by genuine savings or taxation.When the Government say that public expenditure is in accordance with their estimates I should like it to be confirmed (perhaps the noble Lord has already 322 given all the answers that can be given) whether these estimates of public expenditure referred to by the Chancellor include a large proportion of new money which is not derived from tax or open-market borrowing. If they do, then all the good done by the regulator will be undone by inflationary public expenditure. If we want to reduce public expenditure to the limits imposed by revenue and real borrowing, it can be done. When we on this side propose that we should do what the Common Market does—that is, pay for agricultural support by levy instead of by subsidy—we are told that the people in this country will have to pay instead of the Government and that it therefore comes to the same thing. But even if that were true—and I believe that it is only partly true—it would not have the same effect on the value of the currency.
We also believe that a change of policy in non-contributory social services, with a greater emphasis on need, could reduce real hardship and save inflationary expenditure. If, in particular, we could reorganise our housing subsidies more in relation to need, and if we were to encourage local authorities to sell more houses to those who are willing to buy them, instead of forbidding them to do so, we should not only save public money but immensely encourage private saving, for there is no purpose for which most families are more willing to save and curb inessential expenditure of their own accord than becoming owners of their own homes.
My Lords, I should like to conclude with one word of non-criticism of the Government, because it is not a matter for which they are responsible. I should be grateful if the noble Lord who is to reply could say whether anything has happened yet about activating the Special Drawing Rights in the International Monetary Fund agreed to at Stockholm a few months ago. In our debate in July I gave some figures which I got from the International Financial Statistics published by the International Monetary Fund. This is the most boring subject but it is most important to all of us, especially to a great trading country like ours. Those figures show that in 1938 the total reserves out of which national trade would be financed—that is to say, international credit money 323 —were more than the total amount of world imports; whereas in 1964 they were only about 45 per cent.—something like 70,000 million dollars out of 160,000 million dollars of world imports. That is the reason for the continual monetary crises, not only in this country but in other countries as well—crises which hold back the economic growth of the Free World.
It would never have happened if Lord Keynes had got what he wanted to get at Bretton Woods. He described what he wanted as a quantum of international credit which was not determined by any unpredictable or irrelevant factor, like gold production; and the amount of the bancors which he wanted to establish then, when world trade was much less than it is now, was 25,000 million dollars. I have worked out—I may be wrong, and I shall be very glad if I am—that the amount of additional credit which we are to get out of these Special Drawing Rights for the whole world may not be more than 5,000 million or 6,000 million dollars. But in order to get to the amount of credit which modern international trade needs to carry on without these continual crises and troubles, it would now have to be something of the order of 50,000 million dollars of extra international credit.
There are many noble Lords who have other very good plans for solving the problem. Some want gold to be revalued. But the noble Lord, Lord Beswick, said in the debate on the Address that he thought it was stupid to spend a lot of time digging up gold out of one hole and then putting it into another. Most people would agree that it is, but if you cannot get anything more sensible, and if everybody else insists on using gold, why not make the best use of it you can by freeing it and letting it find its natural price? The most sensible course is to accept whatever instrument lies to hand, and if this Special Drawing Rights Agreement can be expanded into something better then let us go all out for that, and do not let us be modest or half-hearted about it. Let us be thoroughly tough with every other country, because I think you find that most international bankers are really very conservative and very short-sighted about this kind of thing.
324 If I may just say one word to the Government from the diplomatic angle, it is, in the words of Noel Coward's song during the war:Don't let's be beastly to the Germans.I think the Germans were wrong in not revaluing the Deutschmark, but they have been much more reasonable about most things than anybody else. They have not tried to upset the whole monetary system of the Free World, as General de Gaulle has done, and they have had more sense than was shown in some ways by Mr. Harry Dexter White, who defeated Lord Keynes's plans at Bretton Woods. I think it would have been better if we had not antagonised the Germans at the last conference at Bonn, if we had accepted what they wanted to do, even though we thought it was not so good as what we wanted them to do.
I hope the noble Lord, Lord Shackleton, will believe that I have made all these suggestions in good faith and with the best intentions. I honestly believe that if the Government were to accept them and act on them, they might just pull off the economic miracle by the end of 1970. If they do not, then I hope they will be replaced by someone who will.
§ LORD SHACKLETON
My Lords, before the noble Earl sits down, perhaps I may reply to one rather important point now so that it does not colour the rest of the debate. I entirely agree with his principle of,Don't let's be beastly to the Germans.But I must state categorically that there is no evidence that I have seen—and I have seen all the reports on this matter —that anybody was beastly to the Germans in the way that has been reported in the Press; indeed, there have now been denials from the German Ambassador to that effect.
§ 4.15 p.m.
§ LORD GLADWYN
My Lords, I believe, from what the noble Lord, Lord Beswick, said, that we are now in order in discussing the wider economic background to the measure under consideration, so I shall, with your Lordships' permission, make a very few remarks of a general nature which I trust will be found 325 at least partially relevant. In the circumstances in which we found ourselves a fortnight ago it is difficult to see how the Government could have acted, broadly speaking—and I repeat "broadly speaking"—in any other way than they did. It is obvious that the flight from the franc was largely induced by the excessive strength of the mark. It is clear that our own interests would best have been served if the German Government had agreed to increase the value of its currency and if the French had agreed not to devalue theirs—as they have.
There was no reason—and here I agree very much with what the noble Earl, Lord Dundee, said—why the German Government should have resented such suggestions on our part; all the more so since they were also vigorously pressed by the great majority of the Group of Ten. But it may be thought that sending for the German Ambassador in the middle of the night, and talking to him in what appeared to have been rather cryptic and admonitory terms, was hardly the best way to advance our cause. I have no doubt that this is a matter of internal politics, and possibly the German Government did not wish, for pretty evident reasons, to accuse the French or United States Governments of having brought any pressure to bear on them. They therefore, not unnaturally perhaps, proceeded to vent a certain amount of indignation on the easiest victim; namely, ourselves. But it is fortunate that they have agreed to take certain measures—the effect of which should not be minimised—to counter the effects of their vast favourable balance of payments. And it is satisfactory, subject, naturally, to the precise effect of the measures which are about to be taken by the French, that there will apparently be little adverse effect on our export trade with France, nor any increase in French competitiveness in world markets.
In any case, it was surely inevitable, given the dreadful British trade figures for October—which have not yet been mentioned in this debate—to say nothing of the general nervousness regarding the future of all currencies, save the French franc and the Deutschmark, that the Government should introduce further draconian measures to strengthen the position of the pound. What would the 326 Conservative Opposition have said if the Government had just let things rip, and there had been another devaluation involving, no doubt, heavy additional unemployment and general misery? If the Conservative Party had been in power a fortnight ago I suggest that their own reaction, by the very force of things, might not have been very dissimilar from that of the Government.
They can, of course, say—and I think they do say—that the present "spending spree", as it is called, might have gone merrily on, and that it would have been better to make the necessary economies in the public sphere. But what economies? They are committed to increasing, rather than reducing, military expenditure. Would they, therefore, have wrecked the road or housing programmes? Would they really have closed down hospitals, abolished free medicine, reduced grants for the universities and subsidies for education generally, changed over to a levy system of protection for our farmers and made the railways or the Post Office pay by introducing economic charges? And what would have been the consequential effect on our general efficiency as a nation, or on the prospects of holding wages and thus avoiding inflation, if they had done anything of the kind?
No doubt some sections of the Welfare State might be demobilised without undue pain. That is possible. Perhaps if we go on failing to pay our way some even should be. I will admit that. Indeed, it may quite legitimately be said that if we cannot balance our accounts the whole Welfare State will be endangered, more particularly, I suppose, housing and education. But, my Lords, these grim possibilities do not imply that we should be well advised to demobilise it now. If the Government tried to do it they would fall, and I think it very probable that a subsequent Tory Government would disappear also. Apart from this, some of the Government's latest measures can be disputed in detail, but hardly their necessity, taken as a whole. Thus, the tough measures which they have taken to reduce imports, which we are debating specifically to-day, regrettable Clough they are in themselves, as we must all acknowledge, are surely greatly preferable to any system of direct control of imports which would get us into terribly hot water in the foreign sphere. We have 327 already had, not unnaturally, some difficulty with our EFTA partners, but it seems that the formalities have been observed; and, in any case, I believe there were reasonable precedents for our action.
Having said that, what can be criticised—and what, anyhow, we criticise—is the general policy that the Government have pursued since 1964. I do not say that we were all right on this point, but it can now be seen, in the light of hindsight, that the original decision not to devalue in face of the frightening adverse balance of payments bequeathed to them by the Tory Government (which, after all, was the beginning of the trouble) was a mistake. If when they had come into power the Government had decided to cut our military commitments East of Suez; if they had reformed and simplified our fiscal system, notably by imposing an added value and a payroll tax, which they have not done yet; and if, as we continue to think, in spite of what the noble Lord, Lord Beswick, said, they had, by favouring even more indirect rather than direct taxation, arranged for some funding of part of the sterling balances; insisted, above all, upon T.U.C. reform; gone slow on some of their projects for increased welfare, and shortly then applied for membership of the Common Market on the basis of a strong currency, there is little doubt that our position to-day would have been far better than it is.
But, my Lords, all this is past history it is water over the dam. If the Conservative Party had been in power I do not believe that they for their part would have done many of these desirable things that I have read out, although, to do them justice, I think that probably they would have applied the regulator after the last devaluation—a failure on the part of the Government to do which can only be deplored. At any rate, the Labour Government, as we think, have done some good things. Let us therefore concentrate just for a moment on the position as it now is and consider whether there are any hopeful initiatives which might be taken by the Government, over and above the ones they have taken, with a view to the ultimate restoration of an increasingly menacing situation.
First, there is the scheme of Mr. Enoch Powell (that ever hopeful champion of causes condemned by his own Leader), 328 which again has not been mentioned up to now in this debate, for a floating pound. Liberals have always found some merit in this conception, and I think a number of experts are beginning to favour what is called a "crawling peg", which, although it has only recently come into prominence and fame, was originally advocated by the Liberals in 1966; namely, a very slight weekly increase or decrease in exchange rates over a period of time. But this is a system which I think I am right in saying could be introduced only with international agreement. And even if we just decided to let the pound float, even if it were simply left to find its own level from day to day, though no doubt it would have some advantages, how exactly should we be able to meet our present short-term debt of (what is it?) £3,000 million? That is not particularly evident. I suppose that if by any chance the pound floated to the level of the dollar, most of this debt would be repudiated. I know that Lord Keynes, whose great authority has been invoked to-day and will no doubt be invoked by other speakers in this debate, is supposed to have said that "civilisation progresses on a series of gigantic debt repudiations", but I am by no means sure, nor can any of us be sure, that this would be true of our present British civilisation.
Speaking, therefore, for my colleagues on these Benches I would say that while we would, in principle, favour such a solution as a "crawling peg", and should certainly hope that the present measures would in fact suffice to maintain the existing parity of the pound, we feel that much the most hopeful line would be to try to profit by the continuing crisis in order to make progress in the general creation of European unity. Everybody hopes that the severe measures imposed by the French Government will have a success equal to our own in maintaining the parity of their currency; but nobody can really hope for a definite solution of the difficulties which now confront ourselves, the French and, yes, the Germans and the Italians, too, unless we can devise some new machinery for arriving at common decisions on what are, after all, common problems. The necessity to create, if possible, some European monetary authority was recently advocated in the Press by no less a person than the noble Earl, Lord Cromer.
329 As we see it, events will demonstrate more and more conclusively the sheer necessity for the Western European democracies, if they are to avoid general misery and the possible emergence of (let us face it) semi-Fascist regimes, to combine to assert the voice of free Europe in the world. But if they are to do this, then they must all agree to accept some system which, after all the democratic procedures laid down have been followed, will not include the ultimate right of individual, national veto. We therefore sincerely hope that the Government are at least preparing concrete schemes for achieving these ends in all the spheres not covered by the Treaty of Rome, including the monetary sphere; and also that at what seems the right moment, and no doubt after suitable soundings have been made, they will produce these schemes and suggest that they and any others should be considered at a conference of all qualified European States that may be interested—perhaps next spring. We, for our part, retain our faith in a democratic European Community, and we are confident that the sheer absurdity of the present "nationalist" system will before very long result in the younger generation sweeping it away. Anyhow, Liberals of all ages will rally with enthusiasm behind any Government which has the firm and expressed intention to do so.
§ 4.28 p.m.
§ LORD CROWTHER
My Lords, I am told that a maiden speech should be both brief and uncontroversial. The former injunction I shall attempt to obey. As to the latter, I am not quite so sure because, having, through my own fault, neglected opportunities to break my silence on less weighty occasions, I now find myself addressing your Lordships' House on a subject on which it is hardly possible to say anything significant without its seeming to some of your Lordships to be contentious. If, therefore, I seem to be keeping only half my side of the bargain, I hope that I may nevertheless rely on a full measure of that indulgence which your Lordships' House traditionally extends to those who address it for the first time.
The Bill that is before the House at the moment is only the pinnacle of the iceberg that is visible above the sur 330 face; and underneath there is the grim, cold, enormous reality of a national economy that is not yet paying its way and is beginning to lose the confidence, not only of the outside world but of our own people. Of the tip of the iceberg that is visible, I have very little to say. I should like to dwell for just a moment on an aspect of the Bill which I do not think has been mentioned in this debate, nor, so far as my reading of the proceedings goes, in another place; that is, to regard the Bill, not as a piece of economic policy—which I can swallow without too much difficulty—but as a deplorable example of the relations between the State and its citizens.
Here you have a class of people, many of them, it is true, limited companies, but many of them also family businesses and personal traders, going about their legitimate business, doing nothing wrong. The Financial Secretary, in introducing this Bill in another place last week, went out of his way to repudiate the doctrine that there was anything wrong about importing—as well he might, since we live by it. Here are these people. The only complaint that can be made against them is not that their business is wrong, but that perhaps they have been doing a little too much of ii—and even so they have only been filling the orders of their customers. Then suddenly, without warning, with a minimum of discussion, without right of appeal or recourse, they have imposed upon them a gigantic fine. How large that fine may be is not perhaps immediately apparent to your Lordships or to the public. But if we assume that a trader normally makes a profit of, say, 10 per cent. on his turnover, then the amount of money he has to find and put down can easily be more than two years' profits. And he has to find this money at a time when it is almost impassible to borrow it from the banks.
My Lords, this is not the way in which the State should treat any of its innocent citizens who, without fault on their part, suddenly have these swingeing penalties imposed on them. The Constitution of the United States contains a provision against "cruel and unusual punishments". I could forgive any importer in this country regretting at the moment that he did not live under that jurisdiction, rather than under our own. We 331 are told that this is an inescapable necessity; and the Bill has been supported, or at least not opposed, by the representatives of the three Parties. Perhaps it is. But what a lurid light it sheds on the state that we have come to if the Government are compelled by necessity to do things of this kind to innocent classes of citizens! It is a desperate remedy and it is desperately unfair.
My primary concern, however, as with previous speakers in this debate, is with the great mass of the iceberg only just below the surface. I want to give expression to two convictions that have grown on me with more strength with each recurrence of this endemic crisis. The first of them is that a régime of fixed exchange rates is impossible in the world we live in; and the second is that the attempt to maintain it, like all attempts to maintain the impossible, has now reached the stage where it is doing far more harm than good. Your Lordships will observe that I am not arguing the theoretical case for stability or for fluctuation. I am perfectly ready to accept that, in an abstract way, stability may be greatly preferable to fluctuation. My point is that in the world we live in it will not work. Indeed, I have for many years—and I underline the words "many years" because I am not one of the new converts to flexibility whom I see appearing in such large numbers; in this matter I am a heretic of very long standing—I have been astonished that anybody could believe that fixity of exchange rates could occur in the world we live in.
We have a multiplicity of national economies, each of them managed by separate Governments (and in nothing are Governments more jealous of their independence than in their economic powers) each Government responding to different political pressures, each proceeding with greater or less skill, each using different methods, serving sometimes conflicting objectives and operating in widely varying conditions. In these circumstances, how could it be expected that stability of relationship would be possible between the values of the different national currencies? The theory, I know, is that if the values of currencies diverge then they can be brought back into accordance by various 332 methods of control—it being implicit in the argument that there are methods of adjustment that are both acceptable and effective. But, my Lords, we know perfectly well that it will not work.
We have had the spectacle, for several years past—not only in this country but in many others—of the most powerful Governments in the world, with the most sophisticated methods of economic control, doing everything they can think of to bring the real values of their currencies back to their stated parities—and failing. They have distorted trade in the effort; they have restricted the fruitful flow of international capital; they have interfered beyond a tolerable extent with one of the basic human freedoms—the freedom to come and go. And still it will not work! Not only can it not be done by an occasional "touch on the tiller"; even the most brutal yanks on the rudder do not seem to produce an adequate response.
My Lords, I think the real choice is not, as it is often presented, one between stability of exchange rates and fluctuation. The real choice is between two different methods of achieving fluctuation. On the one hand, under the moderating influence of official intervention, you can permit day-to-day fluctuation in the exchange rates without any commitment on the authorities to maintain any particular figure. Or, on the other hand, you can wait until the reserves are exhausted, until confidence is eroded, until the squeeze has been pushed until the pips squeak, and then, in some great international cataclysm, you can have a massive devaluation. That, I am convinced, is the real choice; and although I say this with regret, I doubt very much whether any of the compromise solutions that are now being so actively canvassed will work.
One of them was mentioned by the noble Lord, Lord Gladwyn. Special Drawing Rights are a means of buying more time without any assurance whatever that, in the bought time, the adjustment will be achieved; whereas the "floating peg", as it is now fashionable to call it, is at any one time a commitment on the monetary authorities to maintain a given rate of exchange which could just as easily be overwhelmed by the tidal flows of payments as the fixed 333 rates to which we have become accustomed.
No, my Lords: I think the real choice is between a daily fluctuation and periodic, cataclysmic, confidence-destroying devaluations. And if that is the choice, then I have no doubt that the former is the preferable. To repeat, I am not advocating this as being good in itself, only as being preferable, and I think by now obviously preferable to the alternative. I recognise that in the present circumstances of this country, in the state of poverty and weakness to which we have been reduced and with the enormous short-term debts expressed in other people's currencies, we may have to assume that it would be rash to be the first to cut our exchange rate free. Possibly we have no alternative but to stick it out. But we ought to be clear what it is we are waiting for and hoping for—and that is that the world will rapidly come (as I believe it will) to a realistic acceptance of the facts as they are and to a more flexible system of international exchange. There would, of course, be dangers in this. The chief of them is the familiar one that if you remove the fixity of exchange rates you also remove the main restraining influence on the profligacy of Governments. Indeed, if we do get to a more flexible system it will be more than ever necessary that we achieve realism in our economic policies at home.
That leads me to the second conviction that I want to put before your Lordships. It is this. We shall not win back to a state of economic health internally in this country until there is a very sizeable reduction in the level of Government expenditure and taxes. Some of your Lordships may think that I have finally departed from the uncontroversial role in saying something that echoes so closely words that fell from the noble Earl, Lord Dundee, speaking for the Opposition. Even though I can hardly claim that what I have just said is not contentious, I would assert that it is intended to be non-partisan. Indeed, if the level of Government expenditure is too large, then the largest share of responsibility for that fact must rest with the Party that has enjoyed power for the greater period of the last two decades. I am not concerned with arguing the doctrinal thesis; 334 indeed, in the great argument of whether the State should do more or should do less I count myself in principle a neutral. Nor shall I follow the noble Lord, Lord Beswick, in the interesting ethical excursions he made into the crocodile or pigskin on which private individuals spend their money; or perhaps—as he might have mentioned—the "white elephants" that are more appropriate for the expenditure of Government Departments. I am concerned once again with the practical question as to what will work and what will not work.
My Lords, it is common form that we, as a nation, are spending more than we earn and that we must restrict our expenditure somehow. I have the growing conviction that we cannot go any further along the road of restricting expenditure in the private sector—not, at least, by methods that would be acceptable to Parliament or to public opinion. If you restriet—as we discover—expenditure in one area, it breaks out in another. If you intensify control of credit, the things that tend to suffer are the wrong ones, like productive capital investment and the growth of the increasing returns industries; while the two great politically untouchable categories of expenditure which have very large import content—food and clothing—tend positively to gain when expenditure in other directions is cut down. If you increase taxation, people simply take it out of their savings. There are, I suggest to your Lordships, distressing symptoms visible in the economy to-day of a flight from currency not only on the part of the sophisticated commercial classes, who pay enormous prices on the Stock Exchange for any security with a dollar content, but even among the ordinary working people of this country, who are increasingly showing a tendency to spend their money while they have it, rather than to try to save it.
I am totally unconvinced when the Chancellor of the Exchequer says that there is no need to cut public expenditure, because it is running according to plan. I think I can claim to be as familiar as the next man with the techniques of macro-economic planning by which these things are arrived at, with so many hunderd millions allowed for this and so many more hundred millions for that. I was in at the birth of that art and I have been a practitioner of it for more years 335 than I care to remember. But I have always thought that there is an invisible fourth dimension in even the most sophisticated numerical economic model, and that fourth dimension is confidence. When confidence is gone, all calculations come out wrong and all plans go awry.
That, to a distressing extent, is what is happening to us to-day. When calculations let you down, my Lords, judgment must take their place, and I can only express my conviction that we can go no further down the road of managing the economy by manipulating the private sector alone. That ship is no longer responding to the helm. If the whole economy is to be brought back under control, as it must be, then it must be done very largely in the public sector. I have great difficulty in believing that there is any noble Lord anywhere in the House who does not, in his heart, know that that is true.
§ 4.44 p.m.
§ LORD SAINSBURY
My Lords, it gives me very great pleasure to be the first in your Lordships' House to congratulate the noble Lord, Lord Crowther, on a very notable maiden speech. If he has strayed into contention, I am sure he will be forgiven. The pleasure that I have in congratulating him arises from my meeting him some 35 years ago. He will not remember that. I was asked by Sir Walter Layton to go to the Economist newspaper office, and there I met a young man who was known as Layton's brilliant assistant. Since those days the noble Lord, Lord Crowther, has achieved fame and success in many fields. Though I do not agree—I am not an expert, as he is—with what he says about public expenditure, I think that we can all agree that he will be a very distinguished addition to the Cross-Benches.
I rise to support the Customs (Import Deposits) Bill as a temporary but necessary measure to bring about an immediate impact on imports and bank liquidity. The need for Government action has been ably stated by my noble friend Lord Beswick. During the course of the debate eminent economists and international monetary experts will give us the benefit of their views. I shall not attempt to enter into the rarefied atmosphere occupied by those experts, but I wish to break away from the restraint 336 placed upon me on the last occasion when I addressed your Lordships' House and concentrate for a brief moment on the inconsistencies in the Opposition's case.
Never, in my view, have the Conservative Party shown themselves more negative in their attitude than by making public expenditure the dominant thing in their attacks on the Government. My Lords, I find this campaign against public expenditure cynical, irresponsible and irrelevant. It is cynical and irresponsible because it is aimed at conjuring up a vision of the taxpayers' money being squandered by thousands of unnecessary civil servants wasting their time—
§ LORD SAINSBURY
—when the truth is that public or communal spending is as much a part of the standard of living and wellbeing of the people of this country as private consumption. Do not the Tories realise that public expenditure is the hospital to which the mother goes when she is ill or having a baby? That it is the school which takes her children every morning? That it is the road on which her husband drives the family car? That it is the weights and measures inspector who protects the housewife against fraud? That it is the old-age pension? To suggest that private expenditure is the ultimate good and that public spending is the cause of all our difficulties is, in my opinion, absolute nonsense. It is another bogyman that the Tories and their friends in the City have conjured up to hide their lack of constructive proposals.
My Lords, I should like to refer to a speech made a few days ago by the present Governor of the Bank of England. He suggested that it was private consumption rather than public spending which had failed to meet the target. He said:It is only fair to say that since the Budget, public expenditure has been kept in close control and well in line with the target".The Tory campaign is also irrelevant because a cut in public expenditure could not be implemented from one day to another, and is not, therefore, a suitable instrument of policy where an immediate 337 impact is required. Surely the Opposition have not forgotten this. After all, five years ago they were still in office.
Take, for instance, that much publicised Tory plan that has already been referred to, to replace agricultural deficiency payments with import levies, a plan that has been repeatedly presented as one that could play a substantial part in solving our current problems. The truth is that, whatever its merits—and I believe it has many demerits—a system of import levies is irrelevant as a short-term solution.
LORD ST. OSWALD
My Lords, would the noble Lord suggest that it is irrelevant to our joining the Common Market?
§ LORD SAINSBURY
My Lords, I said as a short-term measure. I know that the noble Lord has had experience in the Ministry of Agriculture. It would involve prolonged and difficult negotiations, not only with the representatives of our own farmers and farm workers but also with our EFTA and Commonwealth partners.
To-day, the whole international monetary system is under great strain, and that, because we are still a major trading nation, is bound to make our own position more difficult. In such times we are entitled to expect constructive criticism from the Opposition. Instead, we get constant and inconsistent attacks on public spending and an equivocal attitude to the prices and incomes policy. If the task of a responsible Opposition is not only to oppose but also to offer constructive and realistic alternative policies, the Conservative Party, in my opinion, has failed dismally.
§ 4.54 p.m.
VISCOUNT COLVILLE OF CULROSS
My Lords, having listened to the speeches of the noble Lords, Lord Sainsbury and Lord Crowther, I am not altogether certain whether they were consistent in their approach to this matter. If not, I have a strong suspicion whose version I should prefer. I would join in congratulating the noble Lord, Lord Crowther, from these Benches on a remarkable contribution to this debate.
It is not on economics that I wish to talk this afternoon but upon the Bill. The noble Lord, Lord Beswick, invited us to put specific questions if we had 338 any. I apologise for boring your Lordships with a short speech on legal points but there is to be no Committee stage worth speaking of or any other stages, and if I do not raise these points now I shall not be able to raise them at all. I also apologise if this matter his been dealt with in another place, but since that part of the Bill with which I am concerned was not reached until after the OFFICIAL REPORT of another place stopped publication last night, I have no idea whatever of what was said there and whether the matter was explained. I regret having to deal with complicated technical matter in these circumstances, but there it is.
I have two questions to ask. Your Lordships will have observed Schedule I to the Bill and realise that it refers to the Customs Tariff 1959. This is a remarkable document. It consists of about 325 pages in the book of Statutory Instruments and about the same in the loose leaf version one gets from the Customs and Excise. It is by reference to certain of the descriptions in the headings of that tariff that the exemptions in Schedule I are set out.
It has already been said by the noble Lord, Lord Beswick, that under Clause 2(4) the Treasury may by Statutory Instrument change Schedule I by adding exemptions, but they may not take exemptions away. What I want to ask is this. The Customs Tariff is a document which is enacted by Statutory Instrument from time to time under the Import Duties Act 1958. It is not always the same one nor are the headings in it always the same. For instance, in tile 1966 version we have certain items which come out in the 1968 version (Statutory Instrument 679 of that year). The Explanatory Notes at the back tell us that certain of the sub-headings have been changed, that some have been amalgamated and that other changes in the text of the relevant part of the Tariff itself have been made. This is probably a silly illustration, but it so happens that under heading 13.02, whereas before there was no mention of the substance "gum euphorbium" after the reference to "gum asafetida" we now have that referred to, and as a result of that change made in May of this year that substance will be exempt whereas previously it would not.
339 If the Customs and Excise can change the tariff under the Import Duties Act 1958, what is the point of having subsection (4) of Clause 2, which says that there will be no alterations or additions to the headings of the Tariff, when it can be done by an entirely different method? So far as I can make out, it can be done in a way that would avoid the restriction on which the noble Lord relied. Are the Government prepared to guarantee that there will be no changes during the term of this Bill which will, by a side door, make alterations in these exceptions in the opposite direction from that in which the Bill is intended to operate? This seems to be an important point, which is not covered in any way in the substance of the Bill.
My second question is on interpretation. At the end of Schedule I there are two interpretative provisions. The first deals with the point I have just made and makes it abundantly clear that the references in the Schedule are to the Customs Tariff as it is for the time being in force, which indicates that it can be changed. The second deals with what one is to take account of when trying to understand which goods are exempted. The brief answer is that you do not take any account of what is on the right-hand side of the page, only of what is on the left; and so far as the Bill is concerned that is all there is.
But it is not all there is, because in the Brussels Nomenclature, from which the Customs Tariff is derived and which no doubt originally was in French, there are interpretative rules. These rules are reproduced in the Statutory Instrument which applies the Customs Tariff under the Import Duties Act 1958. No doubt these, too, can be altered, for all I know, without Parliament knowing anything about it. I should like to ask the noble Lord, Lord Beswick, whether the Government have considered whether these rules are suitable for this purpose. It is all very well to have interpretative rules—and perhaps it would be as well to put them in the Bill, if we are going to use them for the interpretation of an Act of Parliament—but if they are going to be used, they should be used consistently. What is being done in this case is to pick out certain headings in the Customs Tariff on a selective basis 340 to give exemption for a certain limited purpose.
This Bill has to be construed with the Customs and Excise Act 1952, and under that Act there are methods by which you can appeal against the decision of Customs and Excise. Under Section 260, for instance—and I think this is the one that would usually apply—you can go to the High Court to ask them for a declaration whether a duty is payable. Mind you, you have to pay your deposit first; but after that you can go to the High Court, and they may then order that the Customs and Excise should pay it back to you. They will be concerned, as I suspect, with the interpretation of our selective items in Schedule 1 of Statutory Instruments 1968 and the rules which apparently are to govern.
These are some of the rules. Rule 3 says:When for any reason, goods are, prima facie classifiable under two or more headings"—because, if I may put in one word of interpretation, the Brussels Nomenclature tries to set out the tariff in such a way that no goods can possibly appear in more than one place: this plainly will not always be successful—classification shall be effected as follows"—and your Lordships will, I think, be interested in this—
That, I should have thought, is a subject-matter for considerable argument if there is a dispute. But what about paragraph (c)?
- "(a) The heading which provides the most specific description shall be preferred to headings providing a more general description (sub-headings being disregarded).
- (b) Mixtures and composite goods which consist of different materials or are made up of different components and which cannot be classified by reference to (a) shall be classified as if they consisted of the material or component which gives the goods their essential character, in so far as this criterion is applicable."When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which involves the highest rate of duty.If that is the right way to discriminate for the purposes of exemption under this Bill when you are dealing with goods which may or may not fall within a heading that brings exemption, do you look 341 at the, entirely irrelevant for these purposes, duties that are otherwise payable, and say: "It so happens that this one is chargeable at 8½ per cent., but under the other heading it is 7½ per cent. It will, therefore, fall under the 8½ per cent., which by chance is not one of those covered in the Schedule"? Is that the right way, for the purposes of this sort of Bill, to classify goods so as to give them exemption?
Rule 4 then refers to the notes to the sections and the chapters. It is quite unnecessary, and I think impossible, for me to tell your Lordships what these are, because they are voluminous beyond description. They precede every chapter and they give instances of things that might at first sight appear to be in this chapter, or, indeed, in this section, but to that extent they are to appear somewhere else. Among these are some of the matters which are exempted in the Schedule; and among them, indeed, appear matters which are set out in the Schedule, but do not comprehend the whole list of items under some of the sub-headings. For instance, under reference 58.01 and 58.02, only some of the handmade knotted carpets, carpeting and rugs and coir mats and mattings are exempt. There are other things under those sub-headings in the Customs Tariff, and it is according to what is said in the heading, as interpreted by the notes on the Chapters and on the sections, that one sees whether or not the goods in fact are exempt.
Then here is the final classic—and this is what Parliament is saying is the right test in order to govern whether or not exemption shall be given under this Bill. Rule 5 says:Goods not falling within any heading of the Schedule shall be classified under the heading appropriate to the goods to which they are most akin.That is the rule of law to which we are committing ourselves and all the people who will be concerned with this Bill, if it is passed in the form that we have it this afternoon. I do not believe that the House knew that; I do not believe that many people in the country knew it. I believe that if these matters get to the courts we shall have precisely the same criticisms as the courts have already issued in dealing with the Selective Employment Payments Act. Exactly the same formula 342 was used there. Reference was made to some extraneous document which was found to have its own rules of interpretation which had never been before Parliament. The courts found the greatest difficulty in interpreting it, particularly as it was used on a selective basis. I do not claim too much, but I do say this: it was only a month ago that I asked the Government, in the speech that I made on the humble Address—never to do this again. They have done it in this Bill, and I condemn it roundly.
§ 5.5 p.m.
§ LORD SHAWCROSS
My Lords, I wish I could follow the noble Viscount who has just sat down in his comments on this further piece of slipshod legislation—which is typical of the legislation that we have seen in this country, not only in the last few years but during a great many years past, constantly infringing on the rights and liberties of the private subject. However, I intend on this occasion to forget altogether that I once practised the law, and to refer to what is the more general subject of your Lordships' debate to-day; that is, the state of our economy.
Before I commence on that task, I should like to join in the congratulations which have been offered to the noble Lord, Lord Crowther, on his exceedingly able maiden speech. With his great knowledge and experience he will be able to make contributions of the moss valuable kind to your Lordships' discussions, and I hope that he will do so on many occasions. I am the more glad to be able to congratulate the noble Lord on this occasion because in one respect, at least, I am intending to follow a theme which he himself developed.
In the last few days, while abroad, I have had the opportunity of talking about our economic position to quite a number of people of good will towards this country—people of experience in banking and industry, in the United States and on the Continent—and yesterday and the day before I was looking at things in the Midlands, the great centre of British industry. The more I see, and the more I talk about these matters, the more convinced I am that what this country needs most at this time is (if your Lordships will forgive the alliteration) confidence, capital and co-operation. I mean, of 343 course, confidence in the Government of the country, and confidence in the future of the country; capital to be invested in massive amounts in the re-equipment and modernisation of British industry (I believe the present position in regard to capital investment to be one of the most serious ills from which the country is suffering), and, finally, co-operation between both sides of industry in securing the full employment of the capital that is invested right round the clock, and in the efficient utilisation of not only our machinery but our labour, as well.
If these three things existed in this country at this time, I myself should expect that the measures which have recently been taken by Her Majesty's Government might have a reasonable chance of success, although I should be surprised if the surplus which may be achieved next year exceeds the considerable amount required to service the enormous foreign indebtedness which this country has incurred. Perhaps the noble Lord when he comes to reply will tell us what that amount is, in addition to the repayment of debt which has to take place next year out of whatever surplus may be earned.
§ LORD SHACKLETON
My Lords, may I ask the noble Lord, which particular bit of indebtedness? I am not trying to be funny, but is he referring to the credits over a recent period, or to what?
§ LORD SHAWCROSS
My Lords, I am referring to the total indebtedness which has to be serviced by the Government of this country out of any surplus which we may achieve; and it is a substantial amount. I venture to suggest that our surplus will not next year much exceed it: I hope it may.
My Lords, unfortunately these three things—confidence, capital investment and co-operation in industry—are very sadly lacking. I want to say something about each of them, and first I will refer to the lack of confidence, because I believe that our other troubles very largely flow from this. I want to say at once that, in commenting on these matters and on the state of our economy, I am not intending to criticise particular Ministers; least of all the Chancellor of the Exchequer, of whose ability and sincerity there is not the slightest doubt, or the Financial Secretary to the Treasury, to whose great 344 energy and success I warmly pay tribute. He is one of the very few members of Her Majesty's Government who have any knowledge or practical experience of the international monetary system and of the City. But the fact is that the Treasury Ministers are no longer in control of the economic policy of the country, and still less, of course, are they in control of the country's economy itself. The Governmental machinery for the control of our economy seems to me to have gone all wrong.
It is now quite a long time since the Prime Minister asserted a personal responsibility for the conduct of the economy over and above that which would normally come to him as Head of the Government. And the Prime Minister, who well knows the advantages of a smaller Cabinet (did he not himself suggest that the ideal number was 15?), has in fact, and for reasons which appear to be of a domestic, Party character, built up one of the largest Cabinets this country has ever had in time of peace. And not only that: he has set up a system of administration on the economic side which is of unexampled complication—I will not add "clumsiness". There are, of course, the Treasury and the Board of Trade. But then there is the Department of Economic Affairs, with functions of complete obscurity but a manifest accretion of staff; there is the Ministry of Technology, which does not perhaps do a great deal that could not have been done by other existing Ministries but which does it with a very noisy appearance of busying itself in other people's affairs. There is the Ministry of Employment and Productivity—a new "gimmick" name which causes hollow laughter among those who have to deal with the Ministry. There are half a dozen other minor Ministries poking meddlesome fingers into the economic pie. Then you add to that the Prices and Incomes Board, the N.E.D.C., the I.R.C., and "Uncle Tom Cobbleigh and all", and in the end you have set up for dealing with our economy a system which simply cannot get things done and does not get things done.
It is said that nothing succeeds like success, but it is also, I am afraid, bitterly true that nothing fails like failure. What has destroyed confidence in this Administration, which I venture to think came to office in 1964 with an immense amount 345 of good will from the country at large, has been the dismal cycle, the repeated, the constant assurance, that measures were being taken which would put things right, followed only a few months later by things going ever more wrong. The noble Lord, Lord Beswick, referred in his speech to the overall strategy. But the complaint is, of course, that while that is a favourite phrase constantly alluded to in Ministers' speeches and sounding grand, there is no appearance of any overall strategy in the measures which time and again the Government feel themselves forced to take.
I am not going at length into the history of all this, but one must remember the original measures taken in 1964, painful enough, but measures which we all hoped at that time would meet with the success which was promised for them. Then there was the euphoric programme put before the country in the Election in 1966, with the assurance that there would be no general increase in taxation, followed of course in these years by increases in taxation greater and more burdensome than had ever been imposed on this country before in time of peace. It really is no good the noble Lord, Lord Beswick, making tendentious references to selected statistics from certain other countries. A great deal of work has been done on this. He might have addressed your Lordships' House on the incidence of marginal rates. That is what is proving the great disincentive in this country at this time.
§ LORD BESWICK
My Lords, would the noble Lord be good enough to say in what particular those figures which I gave are inaccurate?
§ LORD SHAWCROSS
My Lords, I did not say that the figures were inaccurate. If the noble Lord listened to me he would know I said that it was no good his making tendentious references to selected figures from particular countries; that the important question is not the volume of taxation, not indeed, although the Chancellor of the Exchequer once rather suggested otherwise, whether it is direct taxation or indirect, but the marginal rates and where at particular levels of income those taxes fall.
§ LORD BESWICK
My Lords, would the noble Lord be good enough to accept 346 that the figures were neither tendentious nor selective. I read them out from the list produced by the O.E.C.D.
§ LORD SHAWCROSS
My Lords, the noble Lord selected certain figures from the report by the O.E.C.D.; I regarded the selection as tendentious. What the noble Lord will, I think, not be able to deny or quibble about is that at the Election the country was promised that there would be no general increase in taxation, and in fact taxation has been increased to a level far higher than it has ever been before in time of peace. That is the point the noble Lord ought really to face up to in this matter.
Then we went on, after the euphoric Election, to the so-called package deal in July (I think it was) of 1966. That again was to put everything right. It was apparently hastily concocted. It was neither a package nor a deal. Then, we came on all too quickly to the measures that had to be taken in 1967, culminating in the devaluation. That was the time, of course, of that remarkable speech by the Prime Minister. I want to be fair about that speech, and I think that sometimes people have not been fair about it. I have so often said extremely foolish things in speeches myself, generally ex-improviso, and that speech was not that I would certainly not condemn that speech because it contained a phrase that the devaluation was not going to affect the pound in our pockets or in the banks, or whatever the phrase was. It is perfectly true that the Prime Minister went on to say that imports would cost more, as indeed was obvious, and that "this would mean that some prices would over a period go up." True that that was ten paragraphs later on. It was rather like the small print in an insurance policy, and of course devaluation was no insurance policy.
But the real criticism, the basic criticism, of the Government's policy and their presentation of their policy at that time, was in my view not possibly ill-considered words that may have been included in that speech—that can happen, perhaps, to any of us—but in the misleading of the public as to the causes and the consequences of the devaluation. Not once, but seven times in that short speech the Prime Minister referred to 347 "speculators"; five times he referred to a "wave or tide of speculators". My Lords, an alleged alibi does not become credible merely because of its constant reiteration, and later on the banking authorities had to make it clear that the wicked speculators were not the cause of the trouble. The cause was, of course, the basic imbalance on our earning abroad and our spending abroad.
As for the consequences, one must remember that this was the speech in which is was said that we were getting out of a straitjacket. Are we in it still? That was the speech in which it was said that it was a tremendous opportunity for us; that production would go up—it did not. That was the speech in which it was said that there would be more work—there was not. And finally the Prime Minister said, "We are out on our own now". Perhaps the noble Lord who is to reply will tell us how much we have borrowed from foreign bankers since that time when we were "out on our own".
Inflation continued, and then came the Budget measures, disagreeable enough, then more euphoria and then the Basle Agreement—a great success for the Government and the Financial Secretary and the Treasury who initiated it—
§ LORD SHAWCROSS
As the noble Lord says, perhaps rightly, for nobody else. What was it?—2,000 million dollars more to safeguard our reserves. But that agreement was followed by a governmental euphoria and self congratulation which led the Economist to observe that to rejoice over this transaction was like rejoicing when, in the middle of a fight to ward off a grave fever, one is able to secure a very expensive medicine to counter the revival of a persistent attack of arthritis.
Only a month ago the Prime Minister was referring—and not for the first time—to "miracles". This time it was to the miracle of British industry. My Lords, there has been no miracle of British industry. As one who is involved in some sections of industry I only wish there had been. What has happened is that there has been a tremendous expansion of world trade—it has nearly doubled since 1964—but the British share 348 of that world trade has sadly gone down during the period of the present Administration, and of course—
§ LORD BALOGH
My Lords, will the noble Lord perhaps quote the figures from 1951 onwards? Will he say how much our share in the world trade has gone down between 1951 and 1964, and then between 1964 and 1968?
§ LORD SHAWCROSS
My Lords, if the noble Lord is going to say that things were just as bad before, he may be right; but whether that makes—
§ LORD BALOGH
My Lords, I am not saying that; I merely thought that the noble Lord was protesting against the giving of selected statistics.
§ LORD SHAWCROSS
My Lords, I have the statistics here, and I will lend them to the noble Lord, if he does not have them in his mind, and he will no doubt be able to make the point he wishes to make. I am seeking to make the point that there has been no miracle in British industry; that exports to-day are little better, in dollar terms, than they were 24 months ago, and that in fact our percentage share of this vastly expanding world export trade market (which has been a great blessing to us) has in fact been going down. We have not even maintained our precentage.
§ LORD SHACKLETON
My Lords, may I interrupt the noble Lord? He made some quite serious accusations against my noble friend Lord Beswick, that he was being tendentious and selective. I really think he ought now to indicate to the House whether or not he has been selective in giving the figures for which my noble friend Lord Balogh asked. I feel he ought to be fair in this.
§ LORD SHAWCROSS
My Lords, perhaps the noble Lord will say in what respect it is unfair to give the figures relating to the period of this Administration and why he would like me to give the figures for an earlier period.
§ LORD SHACKLETON
My Lords, because I suspect that the noble Lord has in fact selected tendentiously, and indeed until he meets the challenge—
§ LORD SHACKLETON
The noble Lord has been accusing my noble friend of being tendentious, whereas now it is being suggested that he is selecting figures. It is no good the noble Lord's saying that he will give me the figures afterwards: let him prove that straight away.
§ LORD SHAWCROSS
My Lords, that is a curious form of advocacy and one in which I do not propose to follow the noble Lord. The figures are there; I am dealing with the reasons why confidence in this Government has gone. What happened under the previous Government I do not know. The country lost confidence in the previous Government, too, and I am not here to defend them.
There is no doubt that world trade has expanded—nearly doubled; there is no doubt that our share of it has gone down in these four years. There is nothing selective about that. It is a great misfortune.
§ LORD SHAWCROSS
My Lords, I am not going to give way again unless the noble Lord has something really significant to say. There is nothing really tendentious about this. I was merely saying—
§ LORD BESWICK
My Lords, I was merely going to give the noble Lord an opportunity of being a little more gracious and to say that I was merely giving figures which showed that we were not so badly off as others in matters of taxation.
§ LORD SHAWCROSS
My Lords, certainly I do not want to be thought to have said anything which was discourteous to the noble Lord. I do not want to have to go into the comparative taxation systems in this country and others. If one wanted to do that, one would have to look at the United States of America, would one not? Did the noble Lord? One would have to look much more carefully at marginal rates in Germany. Germany was quoted by the noble Lord but there was no mention of marginal rates. But if the noble Lord feels in the slightest degree offended by my suggestion that he had made a selection or was being tendentious, I gladly withdraw it. I merely say now that the figures he gave were not ones which would help 350 the House to decide whether taxation in this country was having a disincentive effect, as I suggest it is and as everybody who knows anything about the conduct of industry here knows that it is.
Let me go back to the four years of this Government—because that is what we are here to consider. This is a Government which, as the noble Lord has pointed out, has, by every fiscal and restrictive device, limited the increase in personal expenditure (and I am taking the figure, the estimated figure, given by Lord Sainsbury for this year and including it in the period from 1964) to an increase of 19 per cent. Of course that increase in personal expenditure, notwithstanding the restriction, is too high, although in volume it is less, because one must take into account that is a figure at constant prices and the purchasing power of the pound has come down in that period by— what is it?—just over 10 per cent. But I venture to suggest that it is not true that that increase in personal expenditure is not in part coming from money which ought to have go le into savings.
The noble Lord, Lord Beswick, should consult with the Chairman of the National Savings movement. I would venture to have a bet with the noble Lord that very soon we shall have a new National Savings scheme—and I hope we shall— which is designed to counter the serious situation that has been arising in National Savings recently, and to attract more money in that direction. One of the worrying things about the situation today, as the noble Lord, Lord Crowther, said, is that people are increasingly flying from money and putting their pounds into pictures, into shares, into consumer goods of one kind or another, aid not, as they should do if the economy of the country is to be helped, into savings.
I was a little surprised at the position which was taken up in regard to public expenditure by the noble Lord, Lord Sainsbury. I am, thank heavens! no economist, and the noble Lord said that he, too, was not an economist. I do not pretend to know much about these matters. But what surprised me in Lord Sainsbury's observations was that he did not appear to agree that the choice at this time is not really a choice between personal expenditure—private expenditure— and expenditure in the public 351 sector. I have always understood (I may be totally wrong about this) that both forms of expenditure, if they are excessive and greatly in excess of the gross domestic product, are inflationary; and that is what is happening in this country, whether it is caused by excessive personal expenditure or excessive public expenditure.
What do we see? Personal expenditure up by just under 20 per cent.; public expenditure, the expenditure which is directly controlled by the Government—this Government which was promising to cut public expenditure down, or at least restrict its growth—up by 50 per cent. in the same period. The unhappy fact—and it is an unhappy fact —is that the performance of this Government has led to a dangerous disillusion, not, I am afraid, with this Government only but with politics and politicians generally; to an uncertainty, an anxiety about the whole future of this country which has led many fine people to go abroad. The fact is that there is little confidence in the Government abroad and little trust in it at home.
My Lords, I pass from that to what I think is the immediate consequence of it and perhaps the most important single thing in our industrial situation to-day. One of the major factors in the great economic recovery in Germany, the great economic success of Germany, has been the fact that she was forced largely to re-equip her industry with new and modern and often automatic machinery. The worrying thing—I think the most worrying thing—about the situation here to-day has been the gravely depressed level of capital investment in private industry. Much of our industrial plant is obsolescent, inefficient. We are not keeping up in our equipment with Germany, with the United States or with Japan. But, my Lords, how can one expect industrial concerns to invest their shareholders' money in new equipment when no confidence exists in the Government's economic policy, and no assurance exists against the fresh imposts or restrictions or interferences that may take place? There is no knowing from day to day what new penal devices in taxation may be introduced. I believe that this lack of capital investment in industry is more important even than the 352 problem of labour relations, important though that is. If we could get capital investment right, this country might then be moving forward, not to an economic miracle but to real economic recovery.
I pass to that last factor, the question of co-operation in industry. One factor beyond that of capital investment in equipment which has led to a great many of the economic advances in Germany, the United States and Japan, has been their efficient use of labour. I do not mean that people in this country should work harder or longer—in fact, in Germany the working hours are as short as in this country. But in the hours that they do work in Germany—and I have seen this—everything is geared to high efficiency and productivity. How can we in this country expect costly capital investment in new plant when industry has no assurance that the plant will be used right round the clock, as expensive capital ought to be used, if it is to earn its keep, and no assurance against restrictive practices, against strikes, against freely negotiated agreements being broken?
My Lords, those are the reasons why, in my belief, the economy of this country is still in the gravely serious position it is to-day, and they are responsible for the fact that it still takes something like three men in this country to make what is produced by one man and modern machinery in the United States of America. While these conditions continue, this country will remain at the mercy of events, staggering from one disaster to another.
§ 5.36 p.m.
§ LORD BALOGH
My Lords, may I join the previous speakers in congratulating the noble Lord, Lord Crowther, on what was in more respects than one a notable maiden speech. I was expecting a most thoughtful and vigorously controversial contribution, for I have known the noble Lord for a long time, and in the more distant past, at any rate, our opinions sometimes coincided. Those days are, of course, past. In those days even the Economist was still edited by economists, indeed remarkable economists, and the noble Lord added his name to the illustrious role of people who passed that chair.
Turning to the topic of the debate today, I cannot believe that I am the only 353 one who feels somewhat a sense of anticlimax, despite the previous speakers' efforts. After the desperate battles of the night undertaken to prevent the slight stimulus to domestic industry and the slight check on imports which this Bill demands, we have not seen the great matadors of the City arranged in close phalanx to denounce the Government for their misdemeanors. That is apart from the noble Lord, Lord Shawcross. Of course, he makes up for numbers, for the convictions of the converted are almost always more stringently held than others, especially it buttressed by experience in that citadel of free enterprise, the Board of Trade. We have had very un-neutral speeches from the Cross Benches to-day, but I greet that. The noble Lord's contribution would read well in the gossip columns of the more popular Press, and I hope to read of him in those papers more than we have in the past, because it was most entertaining.
I think that my noble friend Lord Beswick has answered most if not all the arguments before they were uttered. I shall, therefore, concentrate on the needs of the future rather than the immediate past. I think I must say that in this particular debate the tender care, the solicitous anxiety of the Opposition, expressed with such urgency, for foreign exporters, and particularly EFTA, strikes me as somewhat peculiar. In the days when the present Leader of the Opposition was in charge of the Brussels negotiations his tone to the Commonwealth and EFTA was rather reminiscent of Disraeli's description of Peel's treatment of the Tory Party:The right honourable gentleman sends down his valet who says in the gentlest manner: We can have no whining here".The picture is correct, though I doubt whether even right honourable gentlemen now have valets.
It is perhaps in this debate the afternoon of the morning after. We have had from the noble Earl, Lord Dundee, a very interesting rehash of the non-facts and non-arguments displayed with so much ferocity in the other place. Unfortunately, it is difficult to perceive what exactly the Opposition is in favour of. They attacked the incomes policy and now complain that it does not work. They attacked the bad spending spree by the Government, when expenditure has 354 been on the whole curtailed. Most of the increase in spending has been from an increase in incomes and not, as they complain, from a decrease in savings. Indeed, for a time this year savings were running at a higher level than ever before.
This certainly does not support the wild charge that there is a complete loss of confidence such as even the noble Lord, Lord Crowther, has put so moderately. They have complained in the same breath that the import deposit will be wildly damaging to small firms and that it will not work. Even on the one item on which they have been consistent, their complaints about public spending, they have demanded an increase in expenditure abroad, which is of course most damaging to our balance of payments. It is also most futile, as it is in that part of the world in which we can no longer affect the balance of power—indeed, in which even the United States, with her vast outpourings of treasure and blood, has not been able to resolve it.
They complain bitterly of the high prices, and then not merely want to change the agricultural support policy which would put food prices up appreciably, by some 10 per cent., but also want to introduce a value added tax, which is not only difficult and costly to collect, but which would of course hit the poor families more and would increase costs by another 10 per cent. They are at one and the same time claiming that this would reduce imports and then claiming that the consumer would no longer tolerate any cuts in his expenditure.
The noble Earl, to boot, has been stumbling into the field of banking statistics which, had he had the pleasure of being my pupil at Balliol, which I am sorry he missed, he would have been aware of. Real savings cannot be distinguished in the market if the savings entering the market as a result of inflation are just as inflationary as the original bank credit. The bank credit is not inflationary if it has been compensated by contraction elsewhere. The noble Earl ought to remark that bank deposits have not changed in the past year.
The only thing which is interesting is that, fortunately, better sense prevailed abroad than here, and an attempt to get an intervention against the Government 355 by EFTA seems to have failed. Perhaps I may be permitted therefore to continue with a quotation, the same quotation of Disraeli:For me there remains this, as least, the opportunity of expressing publicly my belief that a Conservative Government is an organised hypocrisy.With the slight but significant emandation, putting "Opposition" rather than "Government", I incline to concur with Disraeli's opinion.
My Lords, the City has great traditions. It has played a splendid part in establishing the world economic system as we now know it. It financed almost everything from rubber plantations to copper mines, from roads to railways, from Timbuctoo to the Cape, and from Istanbul to Calcutta, or perhaps even Bangkok. The one thing which, at any rate until 1931, they did not finance is the development of new British industry. It is a great satisfaction that they have now begun to do so—none too soon; and even now there is no doubt that the establishment of the I.R.C., which has been so much criticised by the same people who have been now complaining about the Government's every intention, has done a great deal to expedite the business which ought to have been done and has been done by banks in America, and in Germany as well as in France, much earlier, not to mention Italy, where industrial reorganisation has been primarily accomplished by a State organisation which recently brought the best part of the chemical industry under public control without any disaster.
I think I have written more than most noble Lords opposite on the need to strengthen the British industrial system by increasing investment, and I am most surprised by the noble Lord, Lord Shaw-cross, not mentioning the fact that British business at the moment is a net lender to the State rather than a net borrower. They have not been able to use their savings in productive investment, not that they have not had money to invest. I think this is quite a significant fact which has also been omitted.
§ LORD SHAWCROSS
My Lords, I think the noble Lord misunderstood me. I did not say that British industry had not money to invest. What I said was that it had no confidence to invest its 356 shareholders' money because of the lack of any confidence in the policy of the Government of which the noble Lord was so long an adviser.
§ LORD BALOGH
My Lords, the noble Lord must remember that this was always the case, that British industry always held a financial surplus and never invested fully its own resources. It invested it in liquid finance, perhaps quite rightly so. Certainly there has been no change in the policy of the British corporations since this Government came into power. On the contrary, I think it is not unjust to claim that this Government have done more than any other Government to facilitate and stimulate investment in modern equipment and to reorganise industry into more competitive, large size units capable of undertaking the sort of modern research which has been so much neglected in this country in contrast to the excellent work done on theoretical questions.
I must say that I feel a sort of dry amusement at noble Lords opposite and their right honourable and honourable friends in another place standing up for EFTA when the French have just decreed yet another 4½ per cent. border tax. That holds, of course, for the noble Lord who mentioned the Rome Treaty in connection with our deposit scheme. It appears that the Rome Treaty, to which we are not signatories, should forbid us to do the things which the French who are signatories are doing. This is a sort of inverted Palmerstonian attitude which I am extremely surprised to hear coming from the Benches opposite. The import deposit scheme merely discriminates against credit to importers by making them provide cash. What less could we do in the situation that we are in? To stimulate foreigners to protest against this slight measure of stimulation of home industry is, to say the least, not a proof of patriotism; nor is the encouragement of foreigners to withdraw their capital. I suppose it is a case of, "It is prejudicial to the pound, but it makes sense". This is something which we heard in the Bank Rate Inquiry.
How do we stand after the recent crisis and the measures taken? The French measures, which imitate our much attacked S.E.T., together with their abatement of the turnover tax on exported goods, will reduce French export costs by probably 2½ to 3 per cent., possibly 357 somewhat more, it is certainly the most balatant compliment ever paid to the authors of S.E.T. in this country by a hard-bitten financial team which knows as well as anybody how to protect its export interests, and which ought to be taken note of by those in this country who are hoping to abolish S.E.T. which is one of the most interesting and flexible instruments of economic planning and policy, though of course it could be improved in administrative details. The shift in ambit of the actual or potential export industries from a wage tax to a turnover tax which is rebatable, the increase in the turnover tax and therefore in the border taxes, means a de facto devaluation of the franc for visible trade transactions of, roughly speaking, 3 to 4 per cent.
The operation of the increase in border taxes on German exports, which is the obverse operation practised in the Common Market, against, as I said, the Rome Treaties, and giving actual subsidy to those not liable to tariffs, represents, therefore, a 7 or 8 per cent. change in the relationship between France and Germany. This may not suffice to right the French/German imbalance, and it does not contribute much to righting the basic unbalance which besets the German mark, but it would have demanded superhuman wisdom and courage for a coalition government, having an early election to face, to have deliberately hurt German industry.
The real difference between the present British and French packages is on a different point: it is on the point of the evaluation of the role of incomes policy in this fiscal package. While a great deal of lip service is paid to the cardinal importance of their incomes and prices policy (and here I must declare an interest, as I have been advising the National Board for Prices and Incomes) there has been very little education drive in this country to make its real nature and function in a democratic policy for full employment understood by everybody. The present package still seems to be a reflection of the illusion that demand management can elastically deal with the matter. I sympathise with people who desperately hope that more detailed and drastically direct measures to control incomes can be avoided. An incomes policy, in the end, and dealing with rogue 358 elephants, is a disagreeable type o: intervention which might result in misguided but well-meaning people being punished.
We know very well what spa of measures are planned on the opposite side to clothe this process of compulsion with a cloak of respectability, legality and impartiality before the law. Unfortunately, there is no solid relationship between demand management, unemployment, and the movement of wages. The wages movement depends not only on the level of unemployment but on the general political situation affecting the feeling about unemployment. Therefore it cannot be used to manage the economy. The enormously powerful large-scale organisations on the side of both labour and capital must consciously co-ordinate their policy and use of power if we are to have full employment and democratic control of our destiny.
In France, the General has no illusions about the need for an incomes policy. He decreed a wage standstill, and stated flatly that steps would be taken to implement it. In this case, also, there was no educative process, but on the basis of his immense majority in Parliament, achieved as a result of the fears aroused by a e disturbances last May, the General believes that he can implement such a policy by fear. We shall see. I, for one, do not believe that it is either possible or desirable to implement an incomes policy on that basis. It seems to me that voluntary consent by a large majority is the, only way by which our incomes policy can be instituted and implemented. There should be, however, no illusions on this point.
The world has, as a result of the process of trade liberalisation, become a very small place indeed. Not only has it become a very small place, but the rich countries have grown very much like each other. They have very similar industries. They buy and sell to each other very similar products. Whether this represents a real gain in satisfaction or a pseudo-gain, a gain in social status by purchasing a German car, however ugly it is, or a gain in gourmandise by buying Roquefort instead of Stilton, I must leave to the psychologists. The fact is that our imports and exports have become more similar than they were in the last century, a process which has escaped 359 the notice of a great many of my economist colleagues. Instead of importing tropical produce, or those raw materials which a bountiful Nature bestowed on other parts of the world, and exporting manufactures to the primary producers, the interdependence of the industrialised countries has become overwhelming.
From this it follows that if very much the same sort of policy is followed in all major countries disturbances will occur in the relationship of these countries to one another. If the German worker is able to produce more, and relative to his productivity demands less than the British worker, then there will be difficulties. These difficulties, I beg the noble Lord, Lord Crowther, to believe me, will not be eliminated; they will only take a different form if there is a fluctuating rate of exchange, or a crawling peg or a fixed exchange. Those of my colleagues who, with abandon, hope that equilibrium can now be established painlessly—a view expressed here tonight —would be badly undeceived if their advice were taken.
The British problem, then, is to win free consent, by an educative process, to the sort of measures which General de Gaulle has imposed by fiat. So far as our own problems are concerned, a happy solution depends first of all on the correct analysis of the causes of our present disabilities and, secondly, on the peaceful acceptance and consent of the various vested interests—especially industrial management and the trade unions—of the institutional and rather functional changes required, on the one hand, by the technological development and, on the other, by the change of our position in the world as such. Our present disabilities stem from the lack of acceptance that the profound changes in the economic system, the concentration of economic power on the side both of industrial management and of the trade unions needs to be matched by a change in institutional framework. We have not had a wild inflationary excess resulting from a loss of confidence. What we have had is a persistent and slow, but infintely more insidious, erosion of the value of money under all Governments.
Massive British capital exports, undertaken at the time when the balance of 360 payments was either barely balanced or showing an increasing deficit, created a situation of illiquidity which compromised our role as a reserve currency. It was the inept management of sterling as a reserve currency ever since the end of the war which created our present difficulties. The noble Lord, Lord Shawcross, asks how much the credits are which we hold. I do not know who is "we" in this particular instance. However, as it is asked, he should read the statistics of sterling balances which were inherited from the war and which have not changed very much in quantity since.
I now turn to the longer-term problem. Ever since 1952 at each peak of domestic employment and acceleration in the increase of output we had a heavier deficit in the balance of payments, and at each nadir of domestic activity, at each recession or retrenchment, whatever you want to call it, a smaller surplus than the previous one, or even a deficit. Ever since 1950 there has been a consistent and unvarying trend of loss in the share of world markets for manufacturers. A number of explanations have been put forward to excuse this dismal performance, but I think that this uncompetitiveness has been due partly to sluggish increase in productivity here, more sluggish than elsewhere, and partly to successful trade union pressures for higher wages, despite productivity failing to rise accordingly. While the Germans at times have surpassed the United States in the export of manufactures, and the Japanese have just caught up with us, the French and Italians have not lost their markets as we have. In no country, morever, is the relationship of imports to exports subject to so unfavourable a change as in Britain. Here, again, it is hardly possible to read a natural law into this loss. It is surely due to a complete failure to implement an incomes policy in due time and with common consent.
We must all sympathise with the trade unions in their predicament, but I must say I cannot comprehend the terms of Mr. Woodcock's recent wholly negative speech, if indeed he was correctly reported. If trade unions do not recognise that their rise to power also involves responsibility to the community if they are to meet truly their responsibility to their own members, and if, in consequence, the competitiveness of British industry is once 361 more undermined, we shall indubitably drift into yet another crisis. It is in that sort of crisis, a crisis which would involve a large part of the population's savings, that a situation could arise in which we might have extreme views accepted by an increasing number of people. In that atmosphere repressive legislation, cloaking impulsion into the sanctity of contracts, might well be passed. The rise of hostile public opinion should be a warning to trade unionists which they would do well to heed.
§ 6.0 p.m.
§ LORD BOOTHBY
My Lords, I should like to add my congratulations to the many which have been so deservedly showered upon the noble Lord, Lord Crowther, on his admirable maiden speech. It was quite clear from that speech that he ought to have been addressing us almost incessantly since he came into the House. He has remained silent until to-day, and I can only hope that his intervention this afternoon signifies a change of life on his part, because we could do with a great many more speeches of that character.
I am tempted to say for the last time "This is where I came in", because the Bill which we are now discussing is the direct and inescapable consequence of the international monetary crisis. That is the iceberg to which the noble Lord, Lord Crowther, referred. The Bretton Woods are burned down, and the international monetary system planted there in 1945 is no more than a charred and unsung relic. Why? Because, as I have said over and again to both Houses of Parliament, non-discriminatory multilateral trade, fixed exchanges, uncoordinated national monetary policies, and a gold price fixed in 1934 at a level which bears no relation at all to reality or to the price of any other commodity, cannot be made to mix or work. Fixed parities have proved to be no safeguard against the whole international system being infected by inflation or deflation from time to time.
With their obsession about freedom for international capital movements, the central bankers have intensified "hot" money activity over the last ten years, and above all in the last two years; and finally have been driven to the desperate expedient of speculating themselves 362 against the speculators. Disequilibrium has been allowed to grow until the run on a currency has become so great that the central bankers have been driven to band themselves together to buy that currency, thus forcing the county concerned into even deeper debt; and, as often as not, failing to prevent a severe devaluation. The Basle Agreements, of which the bankers pretended to be so proud, merely changed one debt for another and even heavier one, as the Governor of the Bank of England ruefully remarked. Instead of attempting to control the "hot" money flow, the I bankers have let it rip round the Free World until, in the last few weeks, they have been "as near as a toucher" to being overwhelmed by it.
The central bankers may not unjustifiably be compared to an international fire brigade that does not go into action until long after the alarm has sounded; and then, when it arrives, starts making conditions about the terms on which it will fight the fire. That is what happened in France the other day, and it is why President de Gaulle was quite right not to accept the conditions, and to refuse to devalue the franc. It could have led only to an aggravation of the crisis, driving us all further into devaluation and debt. As it is, he has forced the pace for a radical revision of the whole international monetary system, which is what he and his advisers want, and which has now become an imperative necessity.
If I may say so, as against what was said by the noble Lord, Lord Sham cross, I should like to congratulate the noble Lord, Lord Beswick, on an exceedingly able and convincing speech. I have no complaint to make about the Chancellor's recent curbs on consumer spending in this country, or about the deposit scheme on imports. I have long advocated a ceiling on unnecessary imports, unless and until we can get our balance of payments in surplus, if necessary by direct physical controls. This method may well be the better way. Obviously it has been carefully considered. But, despite what the noble Lord, Lord Beswick has said, I cannot help asking myself, why it was not put into operation when we devalued. That surely was the moment to do it; and had it been done we should have been in a better position 363 to-day. Further curbs on consumer spending and imports were inevitable so long as the monetary chaos persisted. Now we have to face them a little later than we might have done.
But, my Lords, how tragic it is that trade should be restricted and productive investment cut down, even temporarily, in the Western World simply because of the monetary chaos! It is a real tragedy, and my plea this afternoon is quite simple. It is that an International Monetary Conference should be held, as soon as possible after Mr. Nixon takes over in the United States, to devise an international monetary system that will meet the requirements of the modern world. I do not care where it is held—Washington, London, even Paris; but I think that Her Majesty's Government might well take the initiative, and take it now. In this alone lies the hope of an international system which will work, and which will be based on truth and not (as Enoch Powell correctly put it) on the systemisation of a lie—the lie that the relative values of gold and of respective paper and credit currencies are constant; because they are not. That is why I agree so much with the noble Lord, Lord Crowther, that these fixed exchange rates will never work, and must be got rid of.
What has to be done? I will not detain your Lordships for long, but I should like to say that perhaps the most important thing is to decide the future role and price of gold. There is a shortage of liquid reserves for the Free World, to which I drew the attention of your Lordships in a Motion which I moved in March, 1961. In the course of my speech I then advocated an International Monetary Conference. But such a conference has never been held. The attempt by Mr. Henry Fowler, the United States Secretary to the Treasury, first to discredit and then to demonetise gold, with a view to its ultimate replacement by an inconvertible dollar, foundered at Washington last September, in face of the implacable opposition of the Continental European countries; and a stern warning from Mr. Schweitzer, the head of the International Monetary Fund, with the clear implication that gold is a traditional means of net settlement and a point of reference for the values of all national currencies. Mr. 364 Schweitzer went on to point out that the proposal to introduce Special Drawing Rights as a means of increasing international liquidity was not intended to replace gold and foreign exchange but only to supplement them. The same applied to Keynes's proposal at the Bretton Woods Conference, for an international currency to be called "Bancor"—a proposal which was killed by Mr. Vinson and Mr. Harry Dexter White, not by the British Treasury.
The truth is, my Lords, that the world is not yet ready to abandon its faith in gold as the basic unit of international monetary reserves. There are inhibitions about it on both sides, psychological as well as political—there is the South African situation, for example. But the inhibitions in favour of gold far exceed those against it. The Special Drawing Rights scheme has not yet got off the ground. Why? Everybody praises it, but it has not got off the ground because it is still not clear that these rights are convertible into gold, on account of the American attempt to impose a solution on gold purchases which is contrary to the spirit and letter of the I.M.F. Charter. Faced with a choice between gold and drawing rights in their vaults, the countries of the Free World will choose gold; and we may as well face that fact.
If we accept the fact that the demonetisation of gold and its replacement by the dollar is a non-starter, an increase in the price of gold is the only practical method of increasing international liquidity without delay. That is why I put a realistic price for gold at the top of my list of the economic problems which demand a quick international solution. The present two-tier gold market is only a truce between South Africa and the United States. The future role of gold and the future price for monetary reserve gold remains to be agreed upon, and there is every indication that Mr. Nixon has an open mind on this question.
We have been through all this before. The years of industrial stagnation after the Franco-Prussian war were caused by the refusal of Britain to raise the sterling price of gold after Germany and other European countries had decided to adopt the gold standard. The years of industrial stagnation and massive unemployment after the First World War were 365 caused by the decision of Britain to return to the gold standard in 1925 at the pre-war parity of exchange. Those years culminated in the greatest economic crisis the world has ever known. From this President Roosevelt saved us all by raising the dollar price of gold, in the teeth of orthodox world economic opinion, in 1934. But it was then too late to prevent Hitler's rise to power on the backs of 6 million German unemployed.
I put next a basic realignment of currencies by general agreement, as a starting point. The reasons for this are obvious. Thirdly, I follow the noble Lord, Lord Crowther, and ask for a greater flexibility in exchange rates. This I have been advocating for over twenty years. I used to call it "wider margins". Now it has suddenly become fashionable to call it the "crawling peg". I think that mine is the prettier phrase. But I do not really care what it is called, provided that it is done. The main requirement of an international monetary system is that it should provide an effective means of adjustment between the different and varying competitive strengths of a number of national economies, without imposing intolerable deflationary stresses upon some of them.
I should have thought that a margin of 5 per cent. would be sufficient, provided that central banks of the various countries kept a sharp eye on any threatened disequilibrium and acted accordingly and at once—provided, in fact, that when they heard the alarm they rushed out immediately to deal with the fire. On the other hand, the noble Lord, Lord Crowther, may be right, that even a margin as wide as 5 per cent. would be insufficient to do the job. In that case, we should have to go back to a daily floating rate, such as we had before the war, supported by an Exchange Equalisation Fund. On this I do not want to dogmatise. I only say that greater flexibility of exchange rates, by one method or another, is not only essential but inevitable.
Finally, my Lords, I put the conversion of the international Monetary Fund into a World Central Bank, with hard assets supplied by the principal gold and exchange earning countries; in other words, a Central Bank for central banks, 366 equipped like them with Powers of credit creation or contraction; and with its own unit of account, free to accept deposit liabilities or to extend overdraft facilities to the central banks of member countries. What objectives have we got here? The automatic use of an increasing portion of persistent creditor balances for long-term investment in under-developed areas, and the transformation of the two Bretton Woods institutions into an effective force to stabilise economic growth in the non-Soviet orbit. Those words may have a familiar ring to the noble Lord, Lord Balogh, because they ate his; and I agree with all of them.
This will require, of course, a certain amount of "supra-nationalism", which will involve some surrender of national economic sovereignty. Why not? We need to internationalise the floating supply of liquid reserves on which both international investment and trade depend. We need an international banking system that can expand fast enough to finance an increasing volume of world production and trade, and bring to an end the old basis on which one country's deficit undoes every other country's accomplishment. We therefore need to put an expanded supply of monetary gold behind a World Central Bank. This seems to me to be the only solution. I see no other way.
My Lords, do not let us pretend any longer that all is well with the present international monetary system—or lack of it. Mr. Harold Lever is far too intelligent to believe what he seemed to be saying on television the other night: that everything in the monetary garden is fine and dandy; and that the central bankers of the world are the most intelligent people in it. I do not believe Mr. Lever thinks that, and I certainly do not think it. In his first message to the Congress, on February 6, 1961, President Kennedy said:Increasing international monetary reserves will he required to support the ever-growing volume of trade, services and capital movements among the countries of the Free World … We must now, in co-operation with other lending countries, begin to consider ways in which international monetary institutions—especially the International Monetary Fund—can be strengthened and more effectively utilised, both in furnishing needed increases in reserves, and in providing the flexibility required to support a healthy and growing world economy.367 Fine words, my Lords! Were they followed by any action? Not at all. And that was in 1961, since when things in this field have gone steadily from bad to worse.
The Prime Minister has, since that statement was made, called attention in no uncertain terms, and on more than one occasion, to the need for a reform of the international monetary system and for an international conference to achieve it. The Prime Minister knows what it is all about. Let him act now. The fate of his Government most certainly depends upon it—perhaps, also, the fate of this country and of the Free World as we know it to-day. There is not much time to lose. The thunder of the falls ahead of us is already in our ears. I ask Her Majesty's Government to take the lead in steering for the bank, in both senses of that term, before we all go over the falls.
§ 6.18 p.m.
My Lords, I count myself privileged to have heard the maiden speech of the noble Lord, Lord Crowther, and I shall later refer to something which he said with which I profoundly agree. Also, I should like from personal knowledge to endorse one aspect of the speech of the noble Lord, Lord Shawcross. He referred to the proliferation of Ministries and Government agencies in Whitehall. Twenty-two years ago, I made a maiden speech on that very subject, and if I remember aright the burden of it was that I had found from experience that the difficulty of business in Whitehall increases in geometrical proportion to the number of Ministries and agencies which have to be brought in on every matter. I believe that one of the things that has gone wrong in recent years, whereby the Government of this country appear to be at sixes and sevens, is this tremendous proliferation of Ministries.
I often find myself speaking immediately after the noble Lord, Lord Boothby, and I can always say that I agree with almost everything that he says. I think I have heard him make that speech before.
One is inured and resigned to errors of judgment and omission in trying to run the British economy, 368 which is an extremely difficult task, but one hopes that one can avoid the major blunders. This Government, in my opinion, have made three blunders of the first magnitude. The first and greatest was, on obtaining power, to run round crying "stinking fish" at the top of their voices. Now when banks come under new management, the one thing the new managers must not do is to run round and say how bad the old managers were, because every depositor then begins to think of the security of his deposit—and that is precisely what happened. I think the pound was doomed from the moment of that bout of irresponsibility.
Next, when the pound had to be devalued, there was much talk about the terrible taxes and restrictions that would have to be imposed, but for months nothing happened. The public, quite naturally, went ahead while the going was good and spent merrily, and in so doing, of course, they used up a great deal of our more cheaply-bought pre-devaluation stocks. Then, when the taxes and restrictions did appear, they were to my mind not wholly relevant to the situation. I know that the Press hailed Mr. Jenkins's Budget as a masterpiece of planning, but I am on record with my friends as saying that I thought it was "phoney". Assuming that the object of the exercise was to reduce consumption, and particularly imports, through a reduction in spending power, the first mistake was to rely so much on a heavy tax on capital to be paid nearly a year ahead, and particularly to include that in the calculation of how much would he taken out of the economy. Naturally, this led to further lack of confidence in money and a flight into other things.
Then S.E.T. was relied upon to produce a large cut in consumption. This could come about only if the tax was passed on to the consumer immediately, and this was obviously the intention of the Chancellor. In fact, he said so in so many words. But by aiming at a price rise created in this roundabout manner, he made it perfectly possible, and indeed plausible, through lack of co-ordination in Whitehall, for his colleagues to go round denouncing people for raising prices—in fact, doing precisely what he wanted them to do. That showed lack of co-ordination. The Chancellor's aim was obviously to put up prices immediately 369 and as quickly as possible to reduce consumption. What happened, of course, is that before long the general public had achieved salary and wage increases more than sufficient to set off the long-delayed rise in costs, and the only people who suffered a reduction in their consumption were those on fixed incomes.
My Lords, I think it is time we started to question the validity of some of the calculations of the economists. Once upon a time I believed in them, but for a number of years now, as a very amateur economist, I have been looking with increasing doubt at the pundits arguing to the nearest £50 million what was the precise amount that needed to be taken out of the economy to produce a given result—and this is an economy which is spending very nearly £30,000 million a year. If all our population were on the bread-line spending every penny they had, and with no reserves of savings or capital—what one is sometimes tempted to believe might be the economists' dream world—then it is possible that price rises created directly by taxes of the same amount would in fact create a reduction in spending power of precisely the same amount. But in our present situation psychology is much more important than arithmetic, and if people think prices are going up perpetually they will scratch the money together and buy, even if it is at the expense of capital and savings—and this was the point dealt with by the noble Lord, Lord Crowther, in a masterly manner. However, in the vast number of cases it was unnecessary for them to call on their savings as they found that their incomes rose to meet the prices.
No, my Lords; I believe that in the situation to which we have been reduced to-day all these attempts to control the economy through curtailing the purchasing power of the public are "old hat". By the time taxes bite through price increases the public already have income increases to match; and, meanwhile, taxes do not have their full, intended effect owing both to the delay in bringing them in and to the popular demand that retailers' old stocks are, sold at the old prices. Meanwhile, the public have been given notice to buy while they can. Not very far from 370 where I am standing to-day there is a large department store, and in every window there is a notice saying,There will be no price increases so long as our stocks last.To my mind that is naturally what the general public want, but the Chancellor of the Exchequer must regard that as sabotaging his policy. He wants prices to go up, yet everybody is conspiring to keep them down.
I am afraid that the Government will have to resign themselves to the fact that the only expenditure which they can control is their own expenditure. I admit that the field here is limited if one wants to avoid long-term damage. This is not a debate on Government expenditure; otherwise, I could suggest some very useful ways to save a great many millions of pounds which would not cause long-term damage. I spoke of cutting down in order to reduce expenditure on imports, but there is another side. After all, there is nothing inherently wicked in importing. The world would be much the poorer if Britain had to cut down heavily on imports. Therefore, by far the most painless method of balancing our overseas accounts is to earn more by visible and invisible exports. I do not want to trespass on Lord Aldington's debate next week, which unfortunately I cannot attend, but let me give one small example. We are cramping the scope of some of the world's finest investment experts by insisting that any stock they sell in the United States should carry what is, in effect, a heavy tax of one-quarter of the dollar premium handed over to the Exchequer here.
§ LORD BALOGH
My Lords, would not the noble Lord agree that thi3 has now been dealt with by permitting investment trusts to borrow in America and to use that borrowing for adjusting their portfolio?
My Lords, I should have thought that that was a very limited extent. I am sorry; I should have liked to comment on what I am sure was the very brilliant speech of the noble Lord, but quite frankly I could hear only one quarter of each sentence.
I do not want to go in detail into how to increase our exports, because really that would be the subject of a debate in itself. I hope, however, that this House 371 will have a debate on that particular subject, for I feel sure that some new ideas will emerge. But perhaps I can put forward one idea of my own. I do not think that, as a nation, we are nearly professional enough in this idea of exporting, and one of the reasons is that, as a nation, we are very bad at languages compared with the Continentals, many of whom speak three or four languages. It would be so easy to ensure that we had more linguists among British youth—or young people with even a working knowledge of one or two foreign languages—if we were prepared to recast the syllabus of some of the honours degrees conferred in our universities. I would make a reasonable oral knowledge of a European language a qualification to go to the university on a public grant and to read for an arts degree. And I would make it necessary for the student, in order to get his honours degree, to offer a second, perhaps non-European, language, with an oral knowledge only. I would let off the scientists; they have to work so hard already.
If this came to pass we should have in a few years' time a number of young men and women with less knowledge of history, economics or English literature than they would have had—a knowledge that could be gained by the reading of books in their spare time—but, on the other hand, we should have a larger number qualified at least by languages to play some part in the exports field should they go into industry. That is only one way of getting our old ideas of life more geared to exports. There are others. It is vital that we should do more. If my thesis is correct—and I am borne out by what the noble Lord, Lord Crowther, said—now that the British people have rejected the idea of cutting down their standard of living in order to save imports, the only alternative to bankruptcy is to earn more overseas both on visibles and invisibles. That should be our task.
§ 6.32 p.m.
§ LORD HANKEY
My Lords, I should like to join those who have congratulated the noble Lord, Lord Crowther, on his most intersting speech. We have followed the noble Lord's career with great interest for many years and I think that we are extremely lucky to have the 372 value of his advice in this House. I hope that we shall hear him often.
I shall be glad to support the present Bill; but I think it lamentable that it should be necessary to discourage imports in this way twice in four years. I hope that the real effects of this highly original measure have been correctly calculated: for it seems to me quite difficult to calculate what those effects will be. It is true that this measure—if my memory serves me aright—has been applied both in Japan and in Italy; but the British economy is different from that of either of those countries and the reaction of our trading community should, I think, also be different.
This measure is a great disappointment to our partners in EFTA and in the Commonwealth. While there is no question but that we are obliged to do something drastic in the present state of our economy, I think it essential to realise that this can be only a temporary measure while we put our economy in better order—and in this I agree with the noble Lord, Lord Crowther. I think that the Government have been incredibly dilatory, staggering from one crisis to another, while one major export industry after another is disorganised by unofficial strikes and disorder regardless of the agreed procedures on terms and conditions—to say nothing of the trouble we have had on the railways and the docks and even in the shipping industry, all essential to our exports. Is it any wonder that we are losing out on devaluation? By the chaos that we have allowed to go on our industries have been prevented from taking their opportunities. We ought not to be in a position which necessitates this Bill. I know that the Government are going to take action about this situation, so I shall say no more.
The discouragement of imports involved by this Bill will increase the relative pressure of home demand, and in my opinion the Government had no alternative but to impose a further squeeze as they did. The proper solution would be the expansion of industry for the home markets and also for exports. But this is precisely what we have failed to do hitherto; so clearly we must take our medicine and face the squeeze—but I cannot see any sugar on the pill.
373 Equally, I agree that the Government had to restrict credit by measures such as those taken with the banks. We have to learn by what happened in 1964 and 1965. I was then the British delegate at O.E.C.D. We were constantly telling our partners, on instructions from London, that we had reduced home demand, first by about £260 million and then by £600 million. But in the following summer of 1965 it transpired that credit had in the same period been expanded by about £1,100 million. So even taking the larger figure, that had been more than negatived and credit had been expanded by almost the same amount in the opposite direction. So I agree that the Draconian credit restrictions and other measures taken by the Government are necessary in the present circumstances if we are not again to be in Queer Street.
My Lords, I agree with what has been said in this debate, that it is essential that the Government should show more discipline than they have done hitherto about public expenditure. What, I want to know, are the Government going to do with the money collected in extra taxes and in Customs deposits? Are they going to spend it? Every pound spent in this country, either by the Government or by anyone else, demands on average to be met by something like 30 per cent. of its value in imports. If the Government spend that money they will again upset the apple-cart, as they have done before during their term of office. We need a period of real economy in the public sector to balance the economies which we are imposing on the private sector. We need a time of iron restraint until well after—and I repeat "well after"—our economy has recovered. Make no mistake, in the way we are going now, that will be a very long, hard, strait and narrow road. In retrospect, and speaking strictly from these Benches, what a great Chancellor of the Exchequer the noble Lord, Lord Thorneycroft, is seen to have been! What a pity that his urgent and firm advice that we should not increase public expenditure by even £50 million was not followed at that time, and that he had to resign.
I agree that it is clearly necessary to have a firm incomes policy which will restrict the rise of incomes of all sorts to the rise in productivity. The Govern 374 ment have been most courageous in this; but I think they should explain the real need even more clearly and cogently than they do. If they showed even half the courage in knocking down the ridiculous, and sometimes scandalous, obstacles that prevent our economy from advancing and waste our skilled labour and capital resources, then I think we should not be where we are now—for it is there that we have to break the vicious circle.
I wish to urge on the Government that they may not have too much time in order to deal with these fundamental issues. Incomes policies are incredibly unpopular. People up and down the country are really fed up and fed that they are being mucked about too much. I have previously said that a severe incomes policy combined with a squeeze that discourages productivity from increasing may be good economics but that it is really very bad politics. The present squeeze, by raising prices, must increase wage demands and make all this more difficult.
My experience in O.E.C.D. has led me to think that we ought to study the experience of some of our partners there. I recall that the Dutch economy more or less exploded in September, 1963. The employers and the workers all greed suddenly that in spite of Government policy wages should rise by an average of well over 10 per cent. A good deal of this, naturally, had to be taken out in inflation, and the Dutch were lucky that other countries, too, had inflation at that time. The French economy also, after a prolonged squeeze, exploded last May, with wage rises of more like 16 per cent.; and frankly, we saw the result in last month's financial crisis.
I urge the Government to ponder over these sad precedents. A too prolonged and severe squeeze can turn out to be self-defeating. Of course, we have no alternative but to have a squeeze until we break out of our vicious circle, but in the end I believe it is far safer and certainly much more profitable, to use the steam in the economic boiler for industrial investment, and ultimately for expansion, rather than to sit too long on the safety valve. This would really necessitate early and effective legislation on industrial relations and the knocking away of the obstacles to progress which I have mentioned. Then the Government's 375 measures to encourage investment would be far more effective. Meanwhile, public investment, which has been referred to, must, I think, now be directed to what will give the biggest physical return, and public expenditure ought to be orientated in the same direction with a strict regard for cost effectiveness.
My Lords, insistence on cost effectiveness is unpleasantly earthy advice, and I realise that it is not easy for a Socialist Government to accept it. But I press the Government most urgently and sincerely to agree that this would be better than having the boiler blow up, as the French boiler did, or sinking the ship under the waves of inflation. The Government will not be forgiven if the pound is not maintained at its new parity, as I am convinced it can be if sensible and radical measures are taken in time, and if the enormous genius of our people is allowed to function properly.
Finally, my Lords, I wish to draw attention to the fact that following last month's financial crisis a concealed alteration of the conditions of trade, virtually equivalent to a change of exchange rate for current trade, has been achieved by France and Germany by altering their respective rates of value-added tax. The Germans have reduced this turnover tax —for that is what it is—and the associated import border tax. The German people are thus able to buy their imports more cheaply and are given cheaper goods generally at home. The tax rebate to exporters is of course also reduced. I apologise for repeating some of what was said by the noble Lord, Lord Balogh, but this is important to understand. This all tends to correct the tremendous export surplus and help to keep the Deutschmark down at its official parity. The effect is very like a change in the exchange rate, except that it does not affect capital movements, and thus the speculators derive no advantage from their frantic buying of marks before the crisis. Moreover, this is a flexible system which can easily be readjusted.
The French have, among other measures, done the opposite, by raising their value-added tax and damping down their over-heated economy, with exactly opposite effects. I think we should look again at this value-added tax, though I 376 quite see that the Department of Inland Revenue has enough on its hands. This value-added tax is a far more subtle and flexible system than our purchase tax. It definitely encourages exports, as exporters actually receive a rebate, whereas with our purchase tax it makes no great difference to the exporter whether he sells at home or abroad. If the home purchaser pays purchase tax, it is no business of the manufacturer. It seems to be commonly agreed that direct taxation here is running at a level that seriously discourages the initiative which we need so much in our economy. A switch to indirect taxation of this sort could, of course only be part of a major tax reform; and again I realise that it is not altogether easy for a Socialist Government to adopt it. But I venture to ask the Government to look again at the value-added tax because they are adopting the extremely unconventional measures contained in this Bill, and it is quite clear that they do not have absolutely set ideas.
My Lords, I have spoken mainly about the British economy because this is a British Bill, but I want, in conclusion, to mention briefly some of the major international questions that were touched on in the earlier parts of this debate. The capacity of the international monetary system to accommodate the enormous movement of short-term funds which are liable to take place if anything gets out of balance is really a matter of grave concern. The amount of these funds in circulation has been increasing enormously in recent years, as the world gets richer, and as more and more countries adopt the more or less full convertibility required by Article 8 of the I.M.F. Agreement. It is a sobering thought that the payments system broke down in the principal European centres the week before last and that payments essential to trade had to be suspended for several days.
I believe it is time to recognise that this a most dangerous disequilibriating tendency which is developing, which is bound to go on getting worse; and to which it is essential to find an early answer. I do not think that, in face of this danger, any member country of O.E.C.D. will feel it can safely introduce "crawling pegs" or any other form of floating exchange rates. In my capacity as Chairman of the Economic Policy Committee O.E.C.D., I have had a good deal to 377 do with central bankers of many countries, and their opinions and their fears on this particular subject are very real and very strong. I should however like to ask the Government whether the system of Special Drawing Rights, supplemented by central bank credits and swap facilities is likely to prove adequate in the foreseeable future and whether the Special Drawing Rights system might now perhaps, be extended with French co-operation, in view of the crisis which France has suffered.
My Lords, I do not agree with the noble Lord, Lord Boothby, that any solution is to be found by calling an early International Monetary Conference. In 1933 we saw the disastrous effects of calling a vast conference with inadequate preparation. That conference agreed upon nothing: it made the situation worse. Before anything like that is done, it is essential to get the competent officials together in bodies like O.E.C.D. and the I.M.F. to work out quietly and sensibly, and in a practical way, what is possible; to compare notes with the central bankers and the Bank of International Settlement and in other fora where they get together; and not to have any conference until agreement is in sight and it is certain that agreement will be reached at the conference. I should have thought that the difficulty we have had in agreeing on a system of Special Drawing Rights, which was opposed by very few countries, should have been a lesson to anybody who was thinking in terms of sudden conferences.
I also hope that, whatever is done, we shall not go back to a system based on gold. The noble Lord, Lord Boothby, spoke of a system whereby a World Central Bank would be able to increase liquidity as needed. A system based on gold is unable to do that. As soon as you say, "Gold", you fix the system, and therefore one barrel of Lord Boothby's proposal was inconsistent with the other barrel. Secondly, if we increase the price of gold, or if we have a sliding price for gold, we must realise that most countries will not want to be paid in anything else; because they will always hope that if they can sit on enough gold the price of gold will go up and their central bank will rake in some money. In fact, an increase in the price of gold is feared by many central bankers as likely to be 378 dynamite to the existing system. As it would not be very flexible, it might make things worse instead of better.
I urge that we regard these problems, in the light of past experience, with very great caution. On the other hand, I suggest that a careful inquiry should be started, either by the O.E.C.D. Working Party No. 3 or by the Group of Ten on behalf of the I.M.F., into the possibility of drawing some distinction between movements of funds in furtherance of current trade and payments and other short-term movements of a more speculative order. That would be quite an important distinction. It has always been said that this distinction was impossible to define, but the O.E.C.D. co le of capital movements already draws a number of distinctions, and I wonder f this problem should not be looked at again.
My Lords, fro n his experience, the noble Lord must know that this prohibition of capital movements already applies to an enormous number of countries, yet these capital movements seem to go on. Can we effectively stop capital movements?
§ LORD HANKEY
My Lords, this is exactly the question I am raising. I warmly agree with the noble Lord. I do not want to stop capital movements. I believe that they are essential for the proper financing of trade and payments. What I am suggesting is that it may even now be possible to draw some distinction between capital movements in furtherance of current trade and payments and capital movements which are of a more speculative order. It has been said that this is not possible, but I believe that the situation ought to be looked at again. If something like this is not done, I am afraid that we may ultimately be faced with another real breakdown of the system, with perhaps more lasting consequences than we had to face last week. What is needed is a sort of internationally accepted system of baffle plates, which would prevent all this money moving at once. It should not prevent it moving, but it might prevent it all moving at once.
To sum up, my Lords, I support this Bill, but strictly only as a temporary measure.
§ 6.53 p.m.
§ LORD GRANVILLE OF EYE
My Lords, I always listen to speeches of the noble Lord, Lord Hankey, with' the greatest interest. I agree with him in his criticism of the suggestion about calling together another international conference. As he said, the experience of the 1933 Conference, which was destroyed overnight by a telegram from President Roosevelt, makes Ministers hesitate to initiate such a conference at the present time. I do not agree with the noble Lord with regard to his value-added tax. This is a complicated and difficult problem. I notice that it is being studied carefully by Mr. Nixon's experts in the United States of America, but I doubt very much whether we can expect that sort of thing to happen in the next Budget in this country.
This Customs Bill has produced a wide-ranging economic debate, as would be expected, and I have listened to most of the speeches. I should particularly like to congratulate my noble friend Lord Beswick, who spoke from the Front Bench, on what I thought was a first-class speech, which brought a gust of fresh air into the study of the dull and musty subject of economics. It was a hard-hitting but a fair speech and my noble friend said many things that required to be said. I listened with great interest to the speech of my noble friend Lord Sainsbury, and I would join in the congratulations to my noble friend Lord Crowther for his maiden speech.
These measures were necessary. They had to be put into operation. Any return to the old "Stop-Go" policy of the previous Government was unthinkable. The only alternative I have heard advanced in this debate, in the Press and in week-end speeches is a reduction in Government spending or, more popularly, a general criticism of the Government's policy. But I think that the Bill has several anomalies. I gather from Press reports that foreign exporters are already giving extended credit to importers in this country, from six to nine months, and from a currency point of view this might help in the immediate future, but I gather that the Treasury and the Bank do not like postponing their commitments. In the long-term I do not think that these extended credits will materially help the situation. Devaluation has made imports 380 dearer to purchase under whatever terms of credit our importers are now being offered from the Continent and elsewhere.
The Schedule of exemptions in the Bill is a long one and I have no doubt that the Board of Trade will find that there are several anomalies. For instance, sawn timber is excluded but plywood is not. That is the sort of thing which can increase the cost of production to some manufacturers for export, and surely that is not what the Government are trying to do. I hope very much that my right honourable friend the President of the Board of Trade will be able to look again at the details of the Schedule. In considering the economic measures which were announced, I am not sure about the timing of the purchase tax increases. This certainly hits some essentials, which is not what the Government are particularly anxious to do. I believe that in the consumer trade the downward trend in many goods has already begum. Of course, as one noble Lord opposite said, the Christmas stocks were already in the shops, the shelves were already loaded. In all these measures, timing is an important factor and I think that this is a case in point.
My noble friend Lord Beswick dealt with criticism of the Government on their governmental or national expenditure. It is clear that by the very nature of world movements, all countries have had to increase their governmental or national expenditures. As I understand it, the First Secretary to the Treasury has a special responsibility for this subject. I hope he is going to function very much as a Minister for Economy and Minister for Efficiency, and that he will look at all these items of national expenditure r most carefully from the point of view of ' the efficiency of the national machine, as well as from others. We are, I believe, spending £515 million on research. This research may be important and vital to industry and the export trade, to armaments production and the rest, but we have to be sure that we are spending this very large sum of money on the things that are right for Government policy, right for industry and right for the export trade.
I think we must try to learn some lessons in this respect from the past. In too many cases a great deal of research 381 and technical development has gone on in this country only to see the end product of that research and technical development go abroad to the larger industrial countries. I hope that my right honourable friend the Chief Secretary to the Treasury will look carefully at items such as these, because they represent a very large expenditure. We must see that the results of this research, with all the power of the Government behind it, go to the right industries where they can help the export trade and the national economy.
As the noble Lord, Lord Boothby, said in his speech, we have had this balance of payments problem for twenty years. It is nothing new to this country. We have been living on a razor's edge. We are still not producing enough for export, and we are still importing too many of the wrong goods. As so many noble Lords have said to-day, we are still consuming more than we earn. I regret to say that the climate of public opinion for an all-out effort to try to get out of our difficulties is still sadly lacking in this country; and in the end this may be the real key to our recovery. This climate of public opinion to which I refer is certainly not a healthy market to which a successful appeal can be made by -Sir Miles Thomas on behalf of the National Savings Movement. This free-for-all bonanza is the child of the '50s. Of course, it is a very ready market for weekend speeches, on a so-called silent consumers' revolution, or for knocking the Government. But anyone who tells this bonanza, this section of public opinion, in weekend speeches and in headlines in the Press, that it can have what it wants in this country to-day irrespective of the priorities of the production effort and the export requirement is rendering a poor service to this country.
As my noble friend Lord Beswick said in his speech, as well as by implication, unfortunately the facts of the situation and the measures of the Government to deal with it are just not getting over to the public, to the so-called man in the street. I often think that in some ways what we need is an Economic Grand Committee of both Houses of Parliament, to meet and discuss these questions with the Ministers concerned; to listen to the facts and to ask questions. And if that were successful, perhaps later 382 it could be televised. This might get over the problem.
This Government has no Press at all. This Party, as the noble Lord, Lord Shawcross, knows from when he w as in office, has no Press, whereas the Opposition has all the Press. It is the headlines in the Press to-day which are quoted abroad at a time of economic crisis and when the pound is being knocked.
§ LORD SHAWCROSS
I am loth to interrupt the noble Lord, and I should not do so but for the fact that he appealed to me. I am connected with at least one national newspaper, The Times, and I do not think he can fairy say that the Opposition has The Times. I am surprised to hear him say that the sun is on the Opposition side. Is that what I understood?
§ LORD GRANVILLE OF EYE
I am saying that in general the whole weight of the Press of this country is on the side of the Opposition, and not on the side of the Government. It is one thing to govern this country in the present situation and to take measures which may be unpopular and unpalatable, but it is another thing to get it over to everybody concerned that without their co-operation and support no Government policy can succeed. This is one of the problems of our free democracy to-day. The Press, television and other means of communication owe a public duty to put these facts clearly, fairly and constructively, and to devote to them as much space and time as they can so that the people of this country can understand something more than the ordinary headlines that are to be read in the national Press to-day.
I think the Government measures are right and that they are deserving of support from all Members of your Lordships' House. I certainly support I hem. I think the Government have shown great courage in the present economic position of this country. I believe that they will have their reward and that these measures will be successful next year. I am sure that next year there is every chance that this 20-year-old balance-of-payments problem will be favourable to this country. It is up to everybody in what they say and do to try to give this Government the support they need to see that this is achieved.
§ 7.8 p.m.
§ LORD ERROLL OF HALE
My Lords, I should like to pay my tribute to the noble Lord, Lord Crowther, on a most admirable maiden speech which held us all entranced. The only comment I would add is that one noble Lord I met outside was sorry he had missed it, because he had heard so many tributes in the Lobbies and corridors about the excellence of the speech. There was a breath of common sense from an essentially non-Party organ, the Economist, of which the noble Lord, Lord Crowther, was a distinguished editor for many years.
In passing, I would refer to the remarks of the last speaker, the noble Lord, Lord Granville of Eye, who was, I thought, rather unfair about the Press. After all, the Press is interested in news, and I am glad to say, as a member of Her Majesty's Opposition, that I think the Government get far more space in newspapers than our weekend speeches. Indeed, when I spoke in your Lordships' House last week on the serious problems of the North-West, the report of the debate by the distinguished newspaper of which the noble Lord, Lord Shawcross, is a director, merely said: "Their Lordships discussed the North-West", and my brilliant speech went entirely unrecorded, at least in the London edition, though it may have been featured in the earlier North-West editions. Perhaps the noble Lord, Lord Granville of Eye, will recollect that the Daily Mirror is not normally considered to be on the side of the Conservative Party and normally gives the benefit of the doubt to the Government when it feels it conscientiously can do so.
My Lords, we have had a very interesting and instructive debate to-day, led off by the noble Lord, Lord Beswick, who made I would say a good, fighting, defensive speech. It was of course entirely statesmanlike and injected no element of Party controversy into the subject matter at all; and I thought he made a very good story out of an extremely bad case. I should like to congratulate him strictly on that basis. He also was brief, and therefore if I do not say all that I should like to say it is because I wish to maintain the standard of your Lordships' House this 384 afternoon in a number of speeches which were not so very long.
I should like to start with the subject matter of this debate, the Customs (Import Deposits) Bill. While I agree that we should not wish to involve ourselves in great detail, it is a very important measure and marks a very definite change in Britain's commercial policy. Although it is only a temporary Bill, the fact remains that it is a very embarrassing Bill for a large number of people. Here I should perhaps just mention to your Lordships my interest as chairman of a company which imports electrical engineering products from Sweden. So I was personally involved. But I have not come to this Dispatch Box to-night to plead for the interests of my particular company because, although we had a busy day on Monday, by the end of the day we had the whole thing sorted out, and everything is proceeding on the basis of a larger turnover in 1969 than we succeeded in having in 1968—because, of course, the British want these excellent Swedish products. Because of their technical superiority they usually sell above the general market price—though here I must be careful not to advertise in any way. But, for the reasons I have given, I have followed this new development with particularly close and very practical interest.
I should like to endorse therefore what the noble Lord, Lord Crowther, said, about the suddenness of the impact on a number of importers who were carrying on their business in a perfectly reasonable and honourable way and who learnt on Friday evening that all their plans would have to be reshaped. This does not do a lot of good in this island. It means that yet another section of the British industrial and commercial community are upset and distracted by an arbitrary Government action. I realise that by the very nature of the measure it would have been impossible to have much in the way of prior consultations, because the details would have leaked—although in fact there was a good deal of leaking into the Press in August and September, so it was quite clear that something of this sort was afoot. This is just one more measure which makes businessmen affected 385 say, "Ah! it is the Government again. They are not on our side."
But, of course, what is much more serious is the effect abroad. It is not just that some countries may say, "They are hitting at our exports", but the fact that we shall have shown the rest of the world that we have been able to create and put into operation a very important weapon to discriminate against imports. And as we are the world's largest exporter, we are far more vulnerable than any other country to retaliatory action. All we have really done by this temporary measure is to show the rest of the world how to do it on a more permanent basis, with possibly dangerous repercussions on the level of our exports. I think it is most important that we should get away from this idea that our exports are fine but any imports from other countries are wrong. The noble Lord, Lord Beswick, referred —not necessarily as an import—to a pigskin suitcase. Well, why should not somebody buy a pigskin suitcase if he wants to? I think that his personal electric shoe polisher was an import and not domestically manufactured.
§ LORD ERROLL OF HALE
Not Swedish in this particular case. But, as I was saying, we want to be very careful before we say rude things about imports, because one country's exports are another country's imports.
In the missions I have had the honour to lead for the London Chamber of Commerce we have always taken one or two importers, and not just a team of exporters, to show that Britain is interested in two-way trade. While I appreciate the current difficulties which face and beset Her Majesty's Government, I hope that we shall not get into a state of mind where we are always running down imports, because we shall only do our own trading position a great deal of harm in the long term.
§ LORD SAINSBURY
My Lords, I do not want to interrupt the noble Lord, but he no doubt, as a former Member of the other place, occasionally reads Hansard, and he will have noticed that Mr. Harold Lever laid particular stress on that point—using almost identical words—in saying that our long-term in 386 terest was in the freest possible movement of trade both ways.
§ LORD ERROLL OF HALE
My Lords, I am very glad that there is nothing between us on that matter. But the fact remains that our actions are looked at with an increasing degree of sour scepticism by our European friends ant those further afield. Indeed, it has been said to me many times—and here I am not speaking in connection with Sweden, but of other countries, and through my contacts with the London Chamber of Commerce—"Oh well, the Government say that it is only for a year, but they will do something else when the year is up". People remember the temporary surcharge on imports: it was to be only temporary, but it lasted a very long time. They say, "And now we have something else". This, to my mind, is one of the most damaging things to the British economy: that we are not really trusted in the same way as we were in the old days. People say, "Well, it is only for a year but—".
What is also bad on the domestic; side is that this measure is to be effective not just for a year, but for one year and eight days. I will give the Government credit for this being an honest slip, but it was announced to be for one year, yet the Bill, if we pass it to-night, will in fact be in operation for one year and eight days. Those final eight days, of course, will be very important days. There has been no publicity given to this, so far as I have been able to see. Obviously a number of people who are engaged in importing over a long term—or where the item concerned could be delivered in eleven or twelve months—are going to wait until the day after the Act ceases to have any operation in order to avoid the deposit. Many of them, however, are going to work it out on the basis of, "It came into operation on November 27, 1968, and it ceases on November 27, 1969". But it does not. If one reads the Bill, as I am sure noble Lords will have done, it will be seen that it is in force for one year from the date of the Royal Assent, which I understand it is the hope of the Government to obtain tonight.
It is, just those little things, little bits of carelessness—it may not be any more I than that—which all help to add to the 387 sense of sourness and distrust of the intentions of Her Majesty's Government. Those eight days, being the last eight days, are going to be very important, and a number of people may be caught unless the Government make it quite clear, not just nearer the time but now, if necessary, that this measure is running in fact for a year and eight days.
We have heard a good deal about confidence in the Government and also about people going on shopping sprees, whether it was to buy expensive pictures at Sotheby's or to buy domestic appliances for their own homes. Surely part of the reason for this is their knowledge that if they do not buy now it will be more expensive next year. This is one of the dilemmas for the Government: everything is always getting more expensive, so if one can possibly raise the money one buys a fridge, or a motor-car, or whatever the item may be, now, rather than next year. One of the difficulties experienced by the Conservative Administration of which I was a member was that people tended to hold off buying, certainly before a Budget. Because they confidently and rightly expected that there would be a reduction in taxation, they waited until after the Budget. Now the great thing is to beat the Budget; to go to that store which my noble friend Lord Hawke referred to where they are going to sell everything at old prices until new stocks come in. I must say that, although I admire that store, equally with my noble friend, I think they are pursuing a very foolish policy, because in fact they are giving away part of their working capital to the public and they will find themselves short of capital to finance their stocks at new, higher prices. But that is by the way.
The real thing is that the public no longer trusts the Government in their pronouncements. The Government have of course had an element of bad luck over the last four years. Governments do have periods of bad luck. But what is necessary for the Government is somehow to re-establish confidence. If they are going to say, "No more tax increases", then they really must not have any more tax increases. But the real danger is, as we all know, that there will be another round of tax increases of one sort or another. Moreover, while one 388 can argue a great deal about the level of taxation, the fact is that the tax on whisky and cigarettes, for example, has reached such a dangerously high level that a small degree of switching could have effects very different from those the Government expect, because the money so released would then be spent on goods which have a far higher import content than whisky and cigarettes. So the Government may well find that the import bill goes up because of a far greater importation of raw materials for, say, furniture and other articles which will be bought, in preference to cigarettes and whisky at their new absurdly high prices.
This Government still feel themselves to be a new Government, a Government of relatively new boys after those 13 terrible years of Tory misrule. But, as we all know, the Government have been in power for four years, and that small imbalance in 1964 about which they made so much fuss pales into insignificance when compared with what has been done in the last four years. The total increase in taxation since 1964 now runs at the rate of £2,280 million—an annual burden of tax over that in 1964 which is equivalent to nearly £3 a week for every family. The total increase in taxation on the British public for this year alone amounts, on a full year's yield, to £1,100 million—an equivalent of about 30s. a week for every family. While it is possible to have interesting debates as to whether France is more heavily taxed than Britain, or whether Sweden's arrangements are better or worse than ours, the fact is that the proportion of the gross national product taken up by total taxes, rates and contributions has risen by just over a quarter by this year compared with our last year in office: from 32 per cent. in 1964 to just over 40 per cent. in 1968. The figures I have given so far relate only to changes, but the actual yield has increased most remarkably. The total tax revenue has risen from £6,600 million in 1963–64 to approximately a little over £12,000 million in 1968–69, so the yield of taxation, in the short space of four years, has doubled.
What are the Government doing with all this money? Why was it necessary for them to raise so much? Is it unreasonable for noble Lords to urge, as so many of them have done when they 389 see these figures, that there should be some curb on Government expenditure? I think it was Professor Parkinson who said that expenditure always rises to meet income. That is very true in our own domestic affairs, as well as in the affairs of big companies. Will the Government have the willpower to put all this additional revenue which they claim they must take out of the economy this year into a stocking under the bed and avoid spending it for the next year? They say that as far as public expenditure is concerned they are on target. Yes, they are—the target contained in the National Plan of 1965, which postulated a 25 per cent. increase in national productivity over the ensuing six years. The Plan has been buried and the productivity increase has not been achieved because the economy is running steady and not increasing. We are on the spending target all right, without the increase in the national productivity to balance it.
We are lucky: we have two Cabinet Ministers in our Chamber to-night, and while they are a small minority of the present Cabinet because, as the noble Lord, Lord Shawcross, pointed out, we now have the biggest Cabinet in peacetime history, I would ask those two Cabinet Ministers to urge on their colleagues in the Cabinet, if they can get a few moments of their attention, our most serious and considered conclusion that it is the turn of the Government to do a bit of cutting down. It is no good going on any longer and cutting down on the private sector, whether it is the public or commerce or other forms of expenditure. It is the Government's turn now, and if only they can reduce their expenditure they may begin to restore some confidence. I urge them to do this.
So often I have found in these debates (and it is particularly noticeable in another place) that the Opposition of the day is told, "It is no use criticising the Government; what would you do?". As my noble friend Lord Dundee and my noble friend Lord Boothby both pointed out, they have given advice repeatedly and it has never been taken. A year ago I myself offered a five-point programme to the Government, not one item of which has been accepted. Yet again to-night I suppose I shall be told that my speech was full of windy criticism and contained no constructive suggestions. Why must 390 I, every six months, have to rethink the whole of the policy for the Government, for every scrape they get into? On this occasion I am in open revolt. I will offer no constructive alternatives to the Government except for the obvious advice which should be mentioned only in another place, namely, that it is time for a change of Government.
§ 7.26 p.m.
§ LORD SHACKLETON
My Lords, first, I should like again to express my gratitude to your Lordships in regard to the way in which this Bill has been handled and for the general co-operation of your Lordships, with which we are so happily familiar—and may it long continue. I should also like to say, right at the beginning, how much we all enjoyed the maiden speech of the noble Lord, Lord Crowther. I will say two things to him. First, his speech was entirely consistent with him as a man. It was eloquent, it was lucid and it was particularly consistent with what he has been saying for a long time. I am sure, too, that if he were in control of our economic affairs we should not have to suffer some of the more tedious forms of jargon which spatter the textbooks and even find their way into politicians' speeches; and I am sure that he would disown any responsibility for the "crawling peg", especially since he is in fact a fundamental "floater". However, I must say that I was a little surprised when he called the Import Deposits Bill a "cruel and unnatural punishment". I think this could be applied to all forms of taxation. In my view he was indulging in a little hyperbole, but none the less he added greatly to the vivacity and energy of a debate which has been marked quite exceptionally by the vitality of the speeches.
One of the most vital speeches came from the noble Lord, Lord Shawcross, with whom I disagreed the most and to whom I shall have to say some things which I hope he will not find to be unkind but which are, I think, merited as a result of some of his remarks. None the less this has been a debate of vitality, and also one in which there has been a large number of serious and constructive speeches. With perhaps one exception we have not descended to some of the Party slanging which has gone on in another place, and I should like to express my appreciation to the noble 391 Earl, Lord Dundee, and to the noble Lord, Lord Erroll of Hale, and to say to the latter that he should not be of so little faith. He should continue to advise the Government; there have even been occasional remarks of his which we have noted and even considered doing something about, and one day we might do something about them. I am also grateful for the speeches which have been made by my noble friend Lord Granville of Eye, my noble friend Lord Sainsbury, and others who have supported the Government. I shall deal with those speeches later on.
I should like to deal very quickly at the beginning with the one substantial point that was raised in relation to the Bill that is formally before us. This was raised by the noble Viscount, Lord Colville of Culross, who has expressed his apologies for not being here now and is, I must say, generally a very good attender and not somebody who runs out (like some Members of your Lordships' House) from the winding-up speeches. I cannot accept what the noble Viscount said, which was to the effect that the courts would be critical about the use of the Customs Tariffs in the Schedule. I think he himself said that the tariff is embodied in the Import Duties (General) (No. 4) Order 1968, and therefore it has a firm statutory basis. I would also say to him that there can be no fear that the tariff can be amended by administrative action. Amendments can be made only by another Order. The effect of any future such Order on the Import Deposits Scheme will of course be taken into account in drafting such Orders.
The noble Lord quoted from the Customs Tariff. It may have seemed esoteric to us, but it is not esoteric to those who have to deal with it; importers are well versed in its use, as it is used for the assessment of all duty charges already in existence. I can see that for the layman and amateur importers in the future it may be useful to render some of the language in it into allegorisms or something like that. But all this is part of the expertise which importers, those engaged in trade, particularly internationally, have to face, and it is only rarely, in about one case a year, that importers find they need to have recourse to the courts to settle a dispute about tariff classification.
392 So the courts have experience of the tariff, and it may not be unreasonable to suggest that when the Bill was discussed in another place the format of Schedule I was appreciated. Many Amendments of the Schedule were considered then, and most of those were phrased in the Customs Tariff classifications. By this means the items concerned were pinpointed so that those discussing it knew precisely the intended effect. I say to the noble Lord that we will study his speech in further detail when the OFFICIAL REPORT is available and will be prepared to get in touch with him on any outstanding points.
May I say straight away that I am grateful to the noble Earl, Lord Dundee, for his acceptance of my remark in reply to his statement about not being beastly to the Germans. I hope that unfortunate episode is over. I obviously do not wish to add to the difficulties by trying to apportion blame in this matter, but it is worth recalling that the German newspapers themselves have now carried a version, and Die Welt of November 27 under a headline specifically said that the midnight conversation contained no threat and the Prime Minister did not mention the Berlin question at all during his midnight conversation with the German Ambassador; nor was there any suggestion of changes in Great Britain's military presence in the Federal Republic. I would say, having gone into this subject closely again, that I am convinced that, however it came about, this was not in any way due to uncouthness—which was the unfortunate word used—on the part of the British. It has indeed been made clear that the atmosphere was friendly on that occasion and relations were friendly throughout the discussions.
Now I should like to turn seriously to the economic situation and the outlook. One noble Lord—I think it was the noble Earl, Lord Dundee—referred to the National Institute forecasts. May I attempt to restate what the Government's policy is? There is one central objective and, when we throw away the permissible Party political exchanges, this is an objective which I am sure all noble Lords share: it is to transform the balance of payments from the position of deficit in which it has been since as far back as 1963 into one of substantial and continuing surplus. The severe Budget of 393 last March was also coupled with a number of pretty unpalatable public expenditure decisions.
I find a certain inconsistency all the time in the attitude of the Opposition. They continue saying "Cut public expenditure", and continually object when we do it. They know this as well as I do. Some unpleasant things have been done. There has been the statutory policy on prices and incomes. These things have all been quite clearly designed, and, if I dare use the word "strategy", they do represent a strategy. It is in connection with certain of the tactical aspects that the strategy does not always follow through as well as we should like. But, none the less, the objective is to exploit the opportunities, on the side both of export earnings and of import savings, conferred by devaluation.
Let us not underestimate that some real progress has been made towards bringing the balance of payments round. Exports have done well, better even than we expected at the time of the Budget. They showed an increase in volume in the latest three months for which we have figures, August to October, of as much as 15 per cent. over the pre-devaluation average of the second and third quarters of last year. I think it is fair to put this on the record. Invisible earnings have also improved, helped partly by devaluation and partly by the buoyant growth in world trade, and I fully acknowledge that in this respect the increase in world trade and buoyant markets generally have been a help. Capital movements have also been more favourable in recent months, though this may partly reflect improved confidence in the wake of the Basle agreement on the sterling balances.
The difficulty—we all recognise this—has been the rise in imports. There is no doubt that they did exceed our expectations. There is no doubt that in this respect the Government's forecasting —or the forecasting of its advisers, but it is the Government's responsibility—has not turned out as we expected. There has perhaps been some upward shift in the general propensity to import. But, whatever the reasons, it would obviously be too simple-minded to attribute a major share of responsibility directly to the excessive growth of personal consumption. I assure noble Lords that I am trying to 394 put the situation as fairly as I cart. The effect has been to defer the improvement in the balance of payments so that it has not improved at the rate we hoped. We recorded a deficit in the first half of this year of the order of £500 million, and it is clear that while the position did improve in the third quarter, the balance on current account, which is what fundamentally matters, is still in considerable deficit.
The truth is that before the measures of November 22 it was unlikely that we should be earning a surplus on the balance of payments until well into next year. We must have a substantial surplus in 1969 if we are not to risk another collapse of international confidence in sterling and if we are to meet the heavy debt obligations to which noble Lords have referred and which will fall Sue in 1969. Therefore we have had accelerate the progress sharply. This is the underlying reason, the rationale of these further measures.
I would also say that it is quite wrong to assume that but for the international currency crisis, centring on the mark and the franc, we should not have needed to take strong action. That crisis served to make the action much more t urgent, and demanded much quicker action, and therefore created rather more of an atmosphere of crisis, because one was confronted with an international monetary crisis. I would not have suggested that the package demonstrated the failure of the existing policies. I shall come on to monetary matters in a moment. 'These policies were the only practical and realistic ones, and what has gone wrong is that they have not worked as fast as we hoped and intended, and, in particular, personal consumption has remained high instead of falling back sharply, as we forecast at the time of the Budget, by some 2 per cent.
It is not surprising when one is talking in such small percentages that error is possible. This 2 per cent. was between the second half of last year and the second half of this year. There is no doubt that noble Lords advised the Government to do something about this matter of the consumer boom last spring. There were reasons why the Government, in their best judgment, decided not to do so, on the grounds that there were unused resources and that doing so would 395 not at that moment have led to a reduction of imports.
The recent high level of imports has been linked to the fact that the economy has been expanding strongly recently, at a rate at least equal to that foreseen in the Budget. Indicators suggest that demand has been pressing hard on the labour market, and there has been a marked change in unemployment. All this emphasises the delicacy and the difficulty in steering the economy against a background where there is always this threat, this precipice on one side which is inherent in the international monetary situation. It is so easy to veer to one side or the other, and therefore tugs on the rudder are obviously much more dangerous that a mere touch on the tiller —if I may switch my metaphor from walking along a precipice. There is a real danger.
I remember so well during the summer the arguments which were being put forward that the time had come, with the indicators of unemployment, when we should reflate again. Then there was this swing, and one suddenly saw the unemployment figures beginning to go down. The industrial survey conducted by the C.B.I. in October painted a picture of growing buoyancy in the economy and suggested that output was being limited to an increasing extent by shortage of capacity. The Government's judgment was that this rapid build-up in demand would have to be moderated if we were to speed up the necessary move into balance-of-payments surplus. We expect that the new measures will bring about an early and substantial improvement in the balance of payments and will bring it into surplus within a short time; and the regulator tax increases will reduce the amount in imports and also free resources for export production.
The import deposit scheme should result in a considerable additional saving in imports. At least, despite the skills of the noble Lord—I wish him luck in his Swedish business—there is a hope that there will be some reduction, because, after all, people will have to pay for the credit they get (I do not know what arrangements he will have made) and this will take a certain amount of credit 396 out of the economy. I cannot put a figure on how much the saving will be. It may not be as much as we hope. But in any case, it contributes generally to the management of demand. As to the effect on home activity, we expect the measures to reduce the level of total output in 1969 by about one half of 1 per cent. below what it would otherwise have been; and since the economy was already on an expansionary course, even allowing for the recent hire-purchase restrictions, total output should show a significant rate of expansion over the coming year.
I would just say one word about the opinions of the National Institute of Economic and Social Research expressed in the Economic Review on November 28. It is not customary for Ministers or for the Government to comment substantively on forecasts of the many kinds which are made by many independent bodies or individuals, but there are two points I would make about the Institute's latest estimates. First of all, even before allowing for the Government's measures on November 22, the balance of payments Was, in their opinion, expected to be no more than in balance in 1969; whereas, in their immediately preceding forecast in August, the Institute was looking for a surplus next year of £250 million. But the Institute estimates that the measuresshould work unambiguously to improve the the balance of payments by at least £100 million, and perhaps by as much as £250 million, next year".I do not think I should go further than that.
I should like to say something more about the timing. It has been suggested that the Government acted to adjust demand in November when they should not really have done so, since they had already done so on a massive scale in the Budget last March, and that this is somehow reprehensible—a sign of failure and incompetence. We can all use these words. We all know perfectly well the difficulties involved in managing the economy. The economy is in a constant state of change, and those who make these criticisms are really rather naive. It must be, I suspect, that those who make these criticisms have no understanding of the true nature of demand management. If any noble Lord wishes to brush up on this, I would recommend 397 him to read Sir William Armstrong's extremely interesting lecture the other day on the history of demand management. The economy is always in a constant state of change, however much we may demand stability. The areas of change may seem small statistically and in terms of macro-economics (if I may dare use the phrase), but on the micro scale can be tedious indeed unless all firms have the skill of the managers of the Swedish firm with which the noble Lord is concerned.
My Lords, before the noble Lord, leaves demand management, may I ask him whether he is prepared to do one thing? If he is prepared to make a Government pronouncement that taxes will be reduced in the next Budget, demand will fall. I will guarantee that.
§ LORD SHACKLETON
My Lords, I am fascinated with the noble Lord's idea, but I cannot anticipate my right honourable friend's Budget. We try to foresee the changes and to make the appropriate policy adjustments. I do not think it is really to be expected that the need for adjustment should arise only once a year, at the time when by tradition we happen to have a Budget. The economy needs to be managed and adjusted continuously. This has been recognised and acted upon by all Governments in this country since the war. Even in 1944 the White Paper on Employment Policy referred to that fact. It is quite fascinating that during the war people were already looking forward towards this problem of demand management. Given the fixity of the annual Budget and consequently of the timing of income tax changes they referred to the possibility of varying National Insurance contributions as a means of assisting in what, in present-day jargon, we now call "fine tuning". For all sorts of reasons, that really was not a runner.
Another criticism is that the Government demonstrated their loss of control over the situation by first initiating hire-purchase restrictions on November 1, and then only three weeks later coming forward in a panic against the background of the international monetary crisis with a full scale economic package, including of course the regulator.
I hope that what I have said has shown how these changes came about. The tightening of hire-purchase was an 398 interim adjustment made necessary by the rebound of consumer spending in recent months after the post-Budget squeeze. There is no doubt that there were those in the Treasury and in the Government, and indeed outside the Government, who thought that further restriction was necessary. But the Government had not at that time—and I stress this point—come to a definite view. Certainly I was unaware of any specific proposals. The new measures are the outcome of a comprehensive review of the economic situation and prospects, both at home and abroad, and take account of the Treasury's newly completed autumn forecast. I would only say that the particular crisis with which we were confronted over the franc and the mark served to underline the urgent need for action to get our balance of payments into surplus promptly and decisively. I think it was the noble Lord, Lord Boothby, who said that it was not only the fate of the Government that was at stake, but that it was of profound importance to this country.
The noble Earl, Lord Dundee, referred to the figures of increased public expenditure given recently in another place, and he asked how far the increase has been, or will be, financed in an inflationary manner—that is, by the creation of new money, instead of from tax revenues or from the genuine saving of investors. I can assure the noble Earl that it is the Government's policy to reduce the so-called borrowing requirement. Indeed, I can tell him that we have been very successful so far in the current financial year while at the same time seeking to increase, to maximise, the sales of securities to the public, and thus lessen the Exchequer's dependence on the banking system.
My Lords, I could talk—though I will not do so at this time and hour—at some length on the subject of public expenditure. There is no doubt that public expenditure, like private consumption, is a very important factor, and if there is one thing I can say from my own experience as a member of the Government it is that, painful as it has been (and I am sure that the noble Lord, Lord Erroll of Hale, as a former President: of the Board of Trade will have had experience of arguing with Chief Secretaries and Chancellors) the Government really have taken 399 a very strong line. And although it is fair to say that public expenditure might perhaps be cut back further, the fact is that there has been an increase, in real terms, of less than one per cent. This represents, I think, a very painful but necessary economy in this field.
By contrast—and I have made this point already—private consumption has continued to prove extremely resilient, and it is even now running at 2 per cent. above the level which the Government had expected following the Budget measures. I take the point, and I shall say a word at the end about the proposals of the noble Earl, Lord Dundee, who put forward certain suggestions. The noble Lord, Lord Erroll of Hale, on this occasion had the wisdom not to do so. In this connection, the noble Lord, Lord Hankey, asked what the Government propose to do with the money raised by the import deposit scheme, the new taxes. I can tell him this. It will not go in a trunk under the Chancellor of the Exchequer's bed; nor need he fear that it will in this sense be spent. The tax increases will, in fact, raise some £65 million in the remainder of the present financial year, and £250 million in a full year. Payments under the import deposit scheme will build up to around £600 million. This money will not just be spent (I am rather surprised that the noble Lord, Lord Hankey asked this, since he has been active in the economic world): it will be handled like any other form of funds and will be kept under very tight control. The figures of public expenditure are not necessarily affected in any way by the increased revenue. The Government's purpose has been to try to take some of the spending power out of the economy, and of course if it were merely used to increase public expenditure all the benefits that come from it would be lost.
Now may I turn to the international monetary question? I remember that the noble Lord, Lord Boothby, when he was in another place (I think it was in the summer of 1949, but it may have been 1950), almost alone but with one or two friends, proceeded to advise the House and to press the Government on the dangers of the economic situation. It was the time when Sir Stafford Cripps 400 was Chancellor of the Exchequer. I must say to the noble Lord that he was right then. His concern and interest in the international monetary question has continued for a very long time. I have also had a personal interest in this matter, and I have for a long time regarded it as a matter of profound importance. A few years ago I was at a dance. I found myself dancing with a very beautiful girl, and her opening remarks to me were, to my surprise, "What do you think about international liquidity?". I said, "It is the most important thing in the world" —although I could qualify that. We have remained close friends ever since, on a purely academic basis. The noble Lord, Lord Boothby, is absolutely right to pursue this matter, but equally there is no easy solution. It is like having an international conference on poverty or peace; it is still necessary for the nations to agree.
Those who followed the sequence of events surrounding the currency crisis and the Group of Ten I think could reasonably say that there must be something badly wrong with the present international monetary set-up, and they may have noticed the recent remarks of the Chancellor of the Exchequer when he said that the time may be coming for a re-examination of the objectives and institutions of the present system. I think it was the noble Lord, Lord Hankey, who said that just to plunge into a conference at this moment would not achieve very much. I could not entirely accept that the recent crisis was due purely to a technical malfunctioning of the system and that the only issue now to be settled was the date of the next Bretton Woods Conference, when a schedule of the necessary repairs would be carried out.
The recent crisis has not changed the nature of the problem, and it has done nothing to remove the need for an early improvement in our own balance-of-payments situation. No international monetary system, however long and successfully it has proved its worth in practice, can be expected to last for ever. That is one awkward truth. Another is that the preparation of any top level international monetary conference is likely to be a slow and delicate operation, and a development such as the noble Lord, Lord Boothby, and others 401 wish can come about only by a consensus among the many countries involved, all of whom are acutely and rightly conscious of the disruption which an unproductive meeting could cause.
§ LORD BOOTHBY
My Lords, may I ask my noble friend one question? Will he give an assurance that at least preparations will now be begun as quickly as possible?
§ LORD SHACKLETON
My Lords, this is not, in my personal opinion, a particularly favourable moment, and, without being drawn into details, I think one wants to wait for the new United States Administration to come into office. However, I entirely agree that there is really no difference between us, and it may well be that the Governments of the world will have to show more courage in this matter, although when one looks at some of the areas of disagreement at Bonn—and I must choose my words carefully—it does not suggest that it is going to be a pushover to reach agreement in the future. But I would say to the noble Lord who is asking about the Special Drawing Rights from the that the indications are—and I hope this answers the noble Earl, Lord Dundee—that ratification will he completed early in the New Year. The Special Drawing Rights Scheme is an important step forward, and it will provide the world for the first time with a means of adding very considerably, in a controlled and orderly fashion, to liquidity.
§ THE EARL OF DUNDEE
My Lords, has the noble Lord any estimate of the amount of additional liquidity which will be created by the activation?
§ LORD SHACKLETON
My Lords, I ought to know that, and perhaps before I have finished I can give the figures, if they are available. If they are not, I will give them to the noble Earl afterwards. It might be that my noble friend Lord Beswick knows the answer.
There are so many important points with which I should have liked to deal. The noble Lord, Lord Hankey, spoke about the value-added tax, in which I have always been interested. He obviously knows the Richardson Report as well as I do, which came down strongly against it. I think he will also know that a N.E.D.C. Committee, including 402 representatives of the C.B.I. aid the T.U.C., is now reconsidering the Richardson Report; the views of industry have been taken, and the Government are awaiting their Report. There are arguments on both sides of the question, and I certainly should not like to make up my mind. On the specialised subjects I usually tend to be influenced by the last Report I have read.
The noble Lord, Lord Shawcross, asked me to state the total of our overseas indebtedness arising from the accumulated balance-of-payments deficit in recent years. I am not quite sure what he meant, but I am rather surprised that a noble Lord of his experience should believe that this is a figure which the Government could possibly give. Part of the debt arises from transactions between central banks and, as noble Lords with experience in these matters will know, such transactions are confidential. The noble Lord, Lord Shawcross, worried me, for I admire him as a man of tremendous talents. I still remember his great speech in the House of Commons on the Trade Disputes Act, when he said, "We are the masters now". The noble Lord, Lord Erroll, will remember this as a particular millstone around the neck of the Labour Party. I am sorry that Lord Shawcross does not lend his enormous talents to something more constructive. One of the things which is noticeable about speeches from noble Lords, even allowing for Lord Crowther's "cruel and unnatural punishment", has been an attempt to analyse the problem and to recognise that, in the last resort, we have all got to get together. The noble Lord, Lord Shawcross, referred to capital, confidence and co-operation. On the subject of confidence, he certainly does not add to the national feeling of confidence by his remarks. In regard to co-operation, I must say that this Government, however much we may at certain times have irritated certain sections of industry, have co-operated more closely with industry and with business, and have attempted a greater degree of open exchange of information and of seeking advice than have any previous Government. I am not trying to make a point against the previous Governments. They may have been a bit stuffier: but we have really tried.
§ LORD SHAWCROSS My Lords, I am tempted to point out to the noble Lord 403 that, although it is a very amusing method of argument, and one that I enjoy particularly, to put up cockshies which have not been raised and knock them down, I did not suggest that there was no cooperation between the Government and industry. If he had done me the honour to listen to what I said, he would know that I said that what was most important was to secure co-operation between both sides of industry in the use of modern equipment. As for the question of the debt, what I asked the noble Lord to say, and he has carefully avoided saying, while attacking me for something that I did not say, was whether he could tell us how much had been borrowed publicly since the Prime Minister said, "We are out on our own now" and what was the amount which we should have to find in addition to repayment of loans for servicing. These are public figures.
§ LORD SHACKLETON
My Lords, the noble Lord is taking advantage of the tolerance of this House, if he wants to ask me a question. No one is a better advocate than he is, and I do not wish to compete with him in advocacy, because I think that these talents can on occasion be misused. I was about to go on to say, both on the subject of confidence and co-operation, that I knew perfectly well that in relation to cooperation he was talking about the two sides of industry. I listened very carefully. I was only going to say that there was another side of co-operation which is progressing extremely well.
I do not know what lesson he drew. He pointed to the superiorities in Germany. He was very careful in this respect, since he did not put the blame on industry, management or trade union. I do not know which he was blaming. I agree that there is a need for their closer co-operation. But we shall not succeed in getting this co-operation anywhere in this country if we use the sort of language used by the noble Lord. Lord Shawcross. He referred to my noble friend Lord Beswick as producing selective and tendentious figures. I notice that he used the word "euphoric" on a large number of occasions. These are substitutes for thoughts. It was not fair of him to use figures, as he did, without giving the 404 full facts which my noble friend Lord Balogh tried to extract from him.
The noble Lord spoke about the decline in the country's share of world trade since 1964. If this is the form of debate preferred by the noble Lord, I must give it to him. He could have gone on to make three further points. First, that our relative performance in world export markets has improved over the past year, thanks to the very strong efforts of our exporters, helped by devaluation. Second, that our share of world trade had been falling steadily throughout the 1950s and early 1960s. The noble Lord might also have recalled that our share of the world's markets has been on the decline from the beginning of this century—and, indeed, earlier. To this extent, for him to talk in the way he did in relation to the figures given by my noble friend about comparative rates of taxation meant that he was more guilty of tendentious arguing than was my noble friend.
§ LORD SHAWCROSS
My Lords, I am loth to interrupt the noble Lord again; but he must be not only fair but accurate. I do not mind his being unfair, but at the moment he is being quite inaccurate. The noble Lord failed to observe the point I made. I was saying that there had been no miracle in British industry, that in fact our share of world trade was falling, which is a misfortune. When the noble Lord, Lord Balogh, interrupted me and asked me to give the figures from 1951 onwards, I asked him why: was it merely to say that the previous situation was bad as well? Of course it was—it is all bad. As for the increase which the noble Lord says has taken place in the last year, the figures were 14.2 per cent. on a quarterly basis in 1964; this year, for the three quarters, they are 11.3, 11.1 and 11.2 per cent. So they are going up in the last two quarters, but they are still far too bad.
§ LORD SHACKLETON
My Lords, the noble Lord might have acknowledged that they were going up. It was he who picked the date 1964 in the context of his other remarks. I felt bound to say this to the noble Lord because I wish that he would join in and help in these matters. The Government—any Government—can be criticised, and noble Lords generally have done so. But there have 405 been constructive speeches. Indeed, the noble Lord, Lord Gladwyn, made some very interesting remarks on which I should like to comment. There has, however, been a tendency on the part of the Opposition—not so marked to-day—just to criticise the Government's policy in a destructive manner.
§ LORD GLADWYN
My Lords, may I ask the noble Lord whether he could possibly make any remarks about the proposals put forward respectively by the noble Lord, Lord Crowther, and myself about a floating pound or a "crawling peg"? They were meant to be constructive suggestions.
§ LORD SHACKLETON
My Lords, I rather thought I had slipped neatly off them. One of the things which I find so fascinating in this subject is the degree of disagreement that exists. We know that the "crawling peg" has its advocates, and we know that there are a number of those who think that the pound should float. I can only say that there are a number of other people who do not think like that. But although their contributions add to the sum total of the very interesting controversy and discussion that goes on on this subject, I am certainly in no position at the moment to arbitrate on behalf of the Government. However, we have noted what noble Lords have said. It would be a mistake for me to end up on a note of too great optimism, but the degree of understanding which your Lordships have shown and the freedom from controversy that we have had in this House at least represents some encouragement.
§ On Question, Bill read 2a: Committee negatived.
§ Then, Standing Order No. 41 having been dispensed with (pursuant to Resolution), Bill read 3a, and passed.
§ LORD BESWICK
My Lords, the Customs (Import Deposits) Bill which we have been debating this afternoon is now ready for the Royal Assent. In order that certain formalities may be completed before the Royal Assent can be notified to the House, I beg to move that the House do now adjourn until 8.20 p.m.
§ Moved accordingly and, on Question, Motion agreed to.
§ House adjourned during pleasure.
§ House resumed.