HL Deb 06 November 1968 vol 297 cc227-61

2.46 p.m.

Debate resumed on the Motion moved on Wednesday last by Lord DelacourtSmith—namely, That an humble Address be presented to Her Majesty as follows:

"Most Gracious Sovereign—We, Your Majesty's most dutiful and loyal subjects, the Lords Spiritual and Temporal, in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament."


My Lords, I suspect that a number of your Lordships may have read that interesting publication, the Government's White Paper on House of Lords Reform. Those of you who have will know that on August 1, 1968, this House had 1,062 Members. That means that on any given issue, including, I suspect, the reform of your Lordships' House, there are likely to be no fewer than 1,062 differing opinions—probably more, because I believe it to be the case that some of your Lordships, like myself, sometimes have more than one contradictory opinion on an issue at one and the same time.

Nevertheless, I believe that there is unanimity—and certainly what I heard of yesterday's debate, though unfortunately I could not hear all of it, confirmed that belief—in our genuine desire that this country should continue to play a proud and worthy part in the affairs of this planet. I suspect that there is also unanimity on our inability to play that part unless, somehow, we can contrive to manage our economic affairs rather better than we have been able to manage them for the last fifty or sixty years. Let us not delude ourselves. We are not to-day concerned only with the last four wasted years of Labour mismanagement. We are not just jogging back to the 13 years of Conservative management. What we have to face up to, what we have to grapple with, is that in important respects the British economy in the last half century and more has been quite seriously out of joint.

I do not wish to be unduly depressing. We have a great deal to be proud of. I think that events abroad in this rather tragic and eventful year have only served to emphasise this pleasant truism. I doubt whether our transatlantic cousins will have a particularly attentive ear cocked for our debate this afternoon. Greatly daring, therefore, I venture to suggest that perhaps we handle the problems of poverty in this country—admittedly inadequately—certainly a great deal better than they do in the United States. Equally, I think we can claim to order things rather better in some respects, certainly so far as sweet political reasonableness and toleration are concerned, than some of our nearer neighbours across the Channel.

But, my Lords,—and it is a big "but"—there are great areas of our society crying out for urgent and rather expensive treatment. Vast tracts of our physical environment, especially the environment of our dark and sometimes dank Northern cities, is shoddy beyond belief. Much of our housing, although by no means poor by West European standards, is poor by any standard of human decency. Much of our communication system—our Victorian docks and railways, our Edwardian roads—is archaic. And, of course, we are reminded from time to time that our postal system has certain more modern defects. But in our irritation over that two-tier system, let us not forget the even more important fact, that our telephone system is to-day a national scandal and one which we must put right without delay if we as a nation intend to keep up with the economic hunt.

Let us not forget the more human factors. There are the not insignificant and all too intractable pockets of poverty in our country. There are undermanned and under-resourced social services—under-manned and under-resourced, of course, partly as a result of (if I may so term it) the self-inflicted wound of the promiscuous lack of selectivity. There are the glaring gaps in the structure of our education—the poor primary schools, the cuts in our university programme, and the tragic cut in the further year of education over which, to his great credit, the noble Earl, Lord Longford, took issue at the start of this year. Then there are all those enrichments—those not inexpensive dishes of culture and quality—which the noble Lord, Lord Goodman, serves up to the nation from time to time.

My Lords, I shall close this overlong catalogue with a bang, because all I really wish to do is to emphasise that our success as a nation, be it in the conduct of our external relations, or be it in the attainment of more quality in our domestic life, depends on consistent economic growth. And apart from that, there is, I believe here, an important psychological factor. We often say that growth by itself is unimportant; that the importance lies in the ends which that growth serves, and not in the means. With one exception, I accept that. The exception, my Lords, is that I believe that one of the factors which has served to depress our national morale in the last decade and a half is to find that in the race among the more advanced industrial nations we are the tortoise, and the others—be they "Yanks" or "Nips" or "Wops" or Huns "or" Frogs "—are the hares.

It is against this background, judged by these criteria, that I find the record of this Labour Administration these last few years so deplorable. It is deplorable that through bad management, and some bad luck, we as a nation stand to forfeit some £10,000 million in the gross national product as a result, if the Labour Administration runs its term, of the six or seven years of Labour rule. Last year when we discussed these matters it all seemed something of a bad dream. We were then confronted with a horrid and simultaneous conjunction of high unemployment, stagnant production, poor export performance and a sick pound. Above all, we were faced, as we had been faced in the previous three years of Labour rule—we were then, of course, getting fairly used to it—by the lack of any clear, consistent and coherent economic strategy.

Nothing made me sadder (I hope he will not mind my saying this in his absence; I gave him a good mark just now) than when our Good Fairy, the then Leader of the House, came before us and drew comfort from the fact that, in this really critical economic situation of twelve months ago, when the country was on the very fringe of devaluation, there were some signs of an incipient consumer-led boomlet. It was that sort of blithe optimism—optimism which should have been contradicted by every single economic indicator, and of which the then Chancellor, together with the present Prime Minister, were among the main purveyors—which brought us to the humiliation of a forced devaluation. I repeat, my Lords, "the humiliation of devaluation". But, of course, that devaluation, as I think we ail insisted from every part of your Lordships' House last November, was also an opportunity.

Since then a year has passed under a new economic stewardship, and this therefore affords a good opportunity of seeing where we now stand. 1 wish to be as fair as possible—and that is perhaps a political luxury which we can more easily afford than our neighbours in another place. So I should straightaway confess that I have at present mixed feelings about our mixed economy. In certain respects I think there are grounds for tempered optimism. I personally believe that our present economic steward has a better grip on the economy and on the economic facts of life than honest, but rather luckless, Jim. We can, and f think we should, take comfort from our buoyant export performance; and I hope that the noble Lord, Lord Brown, who we know has special responsibilities in that field and therefore deserves special congratulations—along with the directors and managers, the backroom boys and the workers on the shop floor, all of whom have responded so well to the stick and the carrot of devaluation—will he able to tell us more when he comes to speak about the export prospects.

But that said, my Lords, there are signs—and I think there are accumulating signs—that in important respects the Government's post-devaluation strategy may be going seriously awry. In the first place, consumer expenditure has gone on its way rejoicing, and in so doing it has made a monkey of the Chancellor's calculations. According to his Budget forecast, consumer expenditure was designed to fall by 2 per cent. in the first half of this year compared with the last half year of 1967. I think that is the precise position, but no doubt the noble Lord, Lord Brown, will correct me if my calculation is wrong. In any event, the forecasters now predict that consumer expenditure in the last half of this year, 1968, will be at least at the same level as in the last half of 1967; that is to say, no fall at all.

Secondly (I assume that the noble Lord will confirm this), the improvement in our balance of payments, on which so much —indeed, nearly everything—is staked, seems to have come through a good deal less rapidly than expected. True, our exports now seem to be pretty well on target, or even a little above target—and let us all rejoice that this is the position. But they seem to have climbed to that target a lot more slowly than the Government anticipated and led us to believe. It would seem—and I hope the noble Lord, Lord Brown, will be giving us his assessment of this—that the greater part of the improvement in the balance of payments in the first half of this year may have come from a rebound of exports following the docks strike, and that the real improvement, due to devaluation, is only now really beginning to emerge. Be that as it may, the main gap between fact and forecast seems to be that imports have levelled off at a disturbingly high level, and a great deal higher than anticipated.

The third difference between promise and performance is that the investment revival appears to have come more slowly than anticipated, although at long last it is now beginning to pick up. All this means that the gross domestic product, which was due to grow steadily at some 3 per cent. per annum, slumped in the early summer and has now rebounded. I would hazard a guess that it may now have accelerated to something of the order of 5 to 6 per cent. per annum. As I see it, this rising pressure of demand has clearly put the Chancellor's strategy at risk. In any event, it confronts the Government with severe problems of econo- mic management. We must remember, for example, that the present statutory prices and incomes policy is due to lapse next year, and that at the moment when there is mounting pressure for wage increases. Some of your Lordships may have read the careful and dispassionate survey of our economic prospects which was recently published under the aegis of the Brookings Institute. I shall quote just one short sentence from that survey. It reads: No evidence has emerged"— it is speaking of the United Kingdom—

that incomes policy grows in effectiveness the longer it is maintained in force". I do not know whether those words have caught Mrs. Castle's eye. In any event, I suggest that together she and Mr. Scanlon have managed to throw a pretty large spanner in the works of the incomes policy.

That is one flank on which the Chancellor's strategy, already undermined by the surge in consumer expenditure, is exposed. Another is the dangerous dependence of our export drive on the American market. I would hesitate, certainly in the presence of the noble Lord, Lord Brown, to be dogmatic here. Those who predicted an early American recession have been proved wrong. However, some of the more sensitive American indicators, such as, for example, the level of housing "starts", are not too bullish at present. But above all there is the disturbing and stubborn proclivity of the British economy to suck in imports. Here again I hesitate to dogmatise, but I wonder whether we are past the peak on this open flank. So far, most of the increase in stock-building which we have witnessed seems to have concentrated on finished goods. It has been the mirror of the surge in consumers' expenditure, the spending spree. To judge by the precedent of 1963-64, we have yet to witness the increase in the stock-building of raw materials—the true mirror of the rise in output which is now taking place. I fear, therefore—and perhaps I can he persuaded that I am being unduly pessimistic —that the import element in the balance of payments may still have some rather nasty shocks in store for us.

Given these future factors, given the way in which the Chancellor's forecasts have gone awry, given above all the continuance of the spending spree, I was not surprised that the Government decided once again to wield the weapon of hire-purchase controls. I must say (and it is all that I shall say on this score) I do not think that the way some of our Ministers went about this did them much credit. Be that as it may, the need for these new restrictions shows what a delicate plant the British economy is after four years of Labour Government. Even when the brakes are still on, it still shows a disturbing tendency to over-heat.

However, that is not all that I find disturbing about these new measures. In the first place, they coincide with heavy unemployment. I shall not lacerate noble Lords opposite with the figures, although, God knows! they would have lacerated us had they occurred under a Conservative Administration. But I would remind your Lordships that historically the level of unemployment is running at the present time, and has been running for many months, higher than it has been since 1940. Moreover, although they are tending to fall, these figures still remain obstinately high in the less affluent regions of this country. I should therefore like to put to noble Lords opposite the question posed by Mr. Macleod in another place yesterday: Should not the Government consider the injection into these regions of some emergency dose of labour-intensive projects?

Secondly—and here I must declare an interest, as a director of a firm in the motor components industry—there is the sad fact that some 50 per cent. of the weight of the new restrictions falls on the motor industry itself—the industry which accounts for no less than 17 per cent. of British exports. The noble Lord, Lord Brown, has I am certain studied closely the "little Neddy" Report on the industry. He may feel that it contains an element of special pleading. Perhaps it does. But would he not agree that the maintenance of "a large and stable home market" is essential if this capital-intensive industry, faced with the keenest possible international competition, is to bring home the export bacon? And would he not therefore agree with the words of the Report that alternative methods of short-term economic management should therefore be considered, which do not involve the selective use of the motor industry as a regulator for the economy as a whole?

Thirdly, these restrictions disturb me for the light which they have shed on the Government's economic husbandry, on their continuing habit of putting off the evil day in the hope that something will turn up. For, my Lords, it is now 10 months since we from these Benches were urging the Government, as part of their January package, to apply a salutary touch of the regulator. What response did we get? The noble Lord, Lord Shackleton, told us last November that Mr. Jenkins proposed to pursue (I am paraphrasing his words) a policy of masterly "wait and see", and in one of his less sensible statements that usually sensible man the Leader of the House told us that his personal information suggested a falling off in the Christmas spending spree. Now, of course, the Chancellor takes a more sophisticated line. He suggested in another place yesterday that the continuance of the spree was rather an act of masterly calculation on his part, designed to hold the slack in the economy until exports took over. His explanation would have been more convincing if we had not known from his own lips, as it were, that he was budgeting for a 2 per cent. fall in consumer expenditure, and got a rise instead. So much for that justification.

More seriously, I believe that the Government's toleration of this consumer spree has had two most serious effects. First, consumer expenditure is import-intensive; it begets imports. This heavy consumer expenditure has had, in my view, a lot to do with that obstinate import figure. Secondly, spending is habit forming, as I think most of your Lordships probably know. Quite seriously, I put it to noble Lords opposite that the continued tolerance of this spending spree, at a time when this nation has been literally fighting for its economic life. may have done a great deal to undermine the habits of thrift and of saving on which so much depends.

As I have said before, I only hope that we shall succeed in bringing our imports more into line. Perhaps we shall. In any event, I suggest that the Government would be wise to have a second line of defence ready to fall back on, if they need to fall back. I am not saying they will need to do so; I am only saying that another devaluation as a result of the balance of payments getting hopelessly out of balance would be a real disaster for this country. The second line of defence, I suggest, is the credit weapon of prior deposits. Clearly, this weapon should be used only if it is really needed. I hope, however, that the noble Lord can confirm that the Government have already examined, or are prepared to examine, its possible use. It has many advantages: it is flexible; it is, so far as I know, perfectly compatible with our international obligations. The Italians, by their use of this weapon in their balance-of-payments difficulties some years ago, have proved that it is successful. So much, my Lords, for the past and for the shorter-term future.

We are now somewhere near mid-term between Mr. Jenkin's first and second Budgets. I would suppose that a benevolent school teacher would report on "Young Jenkins" much as follows: Roy is a bright lad and shows promise, especially at English grammar. But he is rather weak at arithmetic. And the girls in his class tend to upset him rather easily". But, my Lords, it is not only the short-term with which we are concerned; it is the longer haul ahead; it is remedying the basic weaknesses of our economic structure, and here in this crucial area the Queen's Speech, which is pretty thin gruel in any event, has little on which we can bite. We learn that the Government look forward to the early consummation of the special drawing rights scheme, and we welcome its potential and much needed contribution to international liquidity.

We learn, too, that the Government will continue to promote the development of agriculture. I suppose every gracious Speech under whatever Governmental auspices has included words to that effect, but here I should like to put a question to the noble Lords opposite who will be replying. They are doubtless familiar with the Report on agriculture's import-saving role, produced recently by the agricultural "little Neddy". As some of your Lordships doubtless know, the programme of expansion for British agriculture elaborated in this extremely comprehensive and careful Report is designed to effect a net import saving of well over £200 million a year; and that important contribution to our balance of payments can, in the view of the authors, be brought about through a quite modest injection of fresh capital, and an equally modest expenditure on running investment. We heard a great deal about import saving in those first "dynamic far-off days. We hear rather less now. Can the noble Lord tell us what the views of the Government are on this important Report, and whether similar investigations are going on in other areas of the economy?

We have read in the gracious Speech that the Government will be laying before us proposals for action on the Report of the Royal Commission on Trade Unions and Employers' Associations. My noble friend Lord Erroll of Hale touched on the question of industrial relations in his speech last week, and therefore all I shall say is this: I personally found the Donovan Report a deeply disappointing document, and I do not think I am alone in that opinion. I wonder what the very guarded reference in the gracious Speech means, when it refers to laying before us "proposals for action". It looks to me as though the Government propose to play this long: that they propose to wander around in the foothills of Donovan and not even grasp those few nettles with which the Donovan Report managed to grapple. But this is one of the vital areas in our industrial life. The Conservative Party have put forward concrete proposals, and when we are returned to power we propose to carry out those proposals. I see no such determination on the part of our present rulers.

My Lords, there are 16 speakers and therefore, in conclusion, I shall be brief. We can at least be thankful for one omission from the gracious Speech. It does not include a commitment, so strongly pressed by the Left Wing of the Labour Party, to nationalise the docks. I can think of no more direct blow that the Government could aim at our export prospects than such a proposal. I can only express the earnest hope that it has now been permanently pigeon-holed.

I am less happy, however, about another omission. Nowhere in the gracious Speech is there even a passing reference to savings. And nowhere in the gracious Speech nor in the Chancellor's Speech in another place yesterday, was there any reference to the need to lift the burden of direct taxation from our people. I am an optimist at times, and therefore I hope that the Chancellor will, in this period of run-up to the Budget, give real attention to the whole question of incentives right through our society. I hope that he will reflect on the advantages of a decisive shift in the incidence of taxation from the direct to the indirect, and, along with this, will seriously examine the great merits of an added-value tax.

But, my Lords, I think I am also a realist. This Chancellor may, I suspect, manage to make some small dent in the ideological armour of some of his colleagues, but I do not think he will get very far with them. It is only when a Conservative Administration under Mr. Edward Heath is returned to power that we shall witness a really radical attack upon the roots of our economic difficulties. It is only then that we shall see the introduction of economic policies designed to liberate the great latent energies and skills of the British people.

3.15 p.m.


My Lords, I welcome the statement by the noble Earl, Lord Jellicoe, that the Conservative Party has now become radical. This will be something worth watching over the next few years. It may be argued that the gracious Speech is not the proper place for a detailed statement of economic policies. Nevertheless, I must follow the noble Earl and echo his disappointment at the thinness of the Speech and the lack of any careful plan put forward by the Government which would have kept us fully informed as to what exactly is happening on the economic front. I hope the noble Lord, Lord Brown, or the noble Lord, Lord Beswick, will put the view of the Government on this matter clearly before the House in the course of this debate.

At least the ill-fated National Plan had the merit that one could see some coherence in it. At least there were targets to be aimed at, even if they might not be achieved. But what is the plan to-day? May we be told what has to be achieved to get the balance of payments right? Mr. Edward Heath, speaking in another place last week, said that the country needed a surplus of trade of £40 million a month for at least 40 months if we are to meet our debt repayments by the due dates. I would ask the Government whether this is or is not true, and what further steps are envisaged to achieve a regular surplus on the balance of payments? What are the targets, and by how much are we failing to achieve them? I believe they would be easier to achieve if people were kept fully informed of what is required.

It seems to me that during the past year since devaluation the Government have been particularly lacking in a plan. If their policy is to mop up domestic consumer demand in order to drive goods on to the export market, is this in fact the right way to go about the problem? I was one of those who drew attention to the consumer boom which occurred in the last quarter of last year. I did it by way of a Question in this House. I was then told that the consumer boom did not exist. What was meant was that the boom had not shown up in the statistics. But everyone around us could see it happening. In fact, we now know that the consumer expenditure in the last quarter of 1967 was something like £400 million up on the last quarter of 1966. Then came the Budget, with the heaviest taxation ever and still the consumer boom went on. Now an attempt is being made to reduce it slightly by the old-fashioned remedy of monkeying around with the hire-purchase regulator.

If we accept that there is a case for mopping up excess consumer purchasing power, are the Government tackling it in the right way? The way they are tackling it is with this old-fashioned blunt instrument. In the first place, the use of this regulator must surely make planning in the motor car and other industries quite impossible. Secondly, it breeds a lack of confidence in many other industries which may be contemplating expansion, when a Government can suddenly remove over £100 million or more from the economy at a stroke of the pen. This confidence is further eroded when we know that all Governments have been pretty far out in their forecasts and their judgments in the past. The present effort is meant to affect consumer spending by about 1.5 per cent. How can we hope to be as accurate as that with an instrument as blunt as this?

Thirdly, there is no guarantee that while expenditure on hire-purchase items may go down, expenditure on other things will not go up. This is particularly true in the two months before Christmas. Two of the major items in the statistics of consumer expenditure are on what are called "other goods" and "other services". So far as I can see, these account for nearly one-third of the total expenditure. They include such things as betting shops and gambling, entertainment, travel and household goods. In fact, these will still go on, and in the second quarter of this year expenditure on them went up to some £300 million. Yet we are hoping through this regulator to get something like £100 million out of the economy in the next few months.

I believe we are tackling this question, trying to mop up excess purchasing power, from the wrong end. Instead of making it more difficult to buy goods, in my view we should be making it more attractive to save money than to spend it, and our policy should surely be to tackle this in a really dramatic way so that people are given genuine incentives to save money. The big snag which has to be overcome is the lack of confidence that people have in the ability of any Government to prevent constant inflation, but I believe this could be overcome if we tackled it in a radical enough way. The noble Earl, Lord Jellicoe, mentioned savings. I believe this is the time to take a fresh look at National Savings. If one looks at the statistics on National Savings, one finds that there appear to be quite identifiable increases at certain intervals of time. I do not not know why this happens; perhaps the Government do. These increases appear to have occurred in 1952, 1956, 1960 and 1961. The level of savings does not appear to fall back after this quite appreciable jump occurs. I think the time has come for another attempt to force the level up.

The National Savings Movement has a very difficult job indeed and I have nothing but praise for those who work away at it, many of them volunteers. But if a dramatic move forward in National Savings is to be achieved the Government will have to do something to make the savings more attractive. I wonder whether it is not possible to conceive something which would deal with inflation, by including in the National Savings Certificate some provision for an anti-inflation bonus geared to an index, so that people would know that by going in for National Savings they would not just break even, which is what it looks like at the moment, but would have the incentive of getting some slight growth in the capital.

But National Savings are by no means the only method of saving. I believe we must change our whole attitude to savings in general. Above all, we must make so-called "unearned income" respectable. It seems to me crazy that we should be exhorting people to save for the future and then, when they get the income from their savings, we call this unearned income and tax it at an even higher rate than earned income. I am sure this is one of the radical approaches which must be examined very deeply indeed.

Another method of mopping up purchasing power through savings is to encourage people to put aside money from their weekly or monthly earnings to purchase shares, either in their own company or in a broadly based unit trust. In many countries to-day not only is this encouraged but the company matches the amount saved by the individual on a dollar-for-dollar or pound-for-pound basis, or some other ratio. Why should not such a contribution rank for tax relief by the company, to give them an incentive to go ahead with the plan? Why could not something similar be done for the Civil Service, and those working in other fields, like education? Why could we not have a broadly-based unit trust movement into which savings could automatically go, preferably with a contribution from the employer, whether it be the Civil Service, a private employer or anyone else? If something dramatic like this were announced I believe it would catch on and not only mop up savings but provide a higher standard for people when they retire. So much for the consumer boom. What I am saying is this: we must find a better way of encouraging non-spending than the twice-yearly attack on the motor trade and the furniture industry.

My Lords, what is being done, not merely to boost exports and get our balance of payments rectified? What is being done to encourage the economic growth of the country? I believe that we are beginning to see the results of the emphasis we have all placed on the need for greater productivity. This is a tremendous gain, and I must say I think some of the debates we have had in this House in the last two or three years have helped in some small way to enlighten the country on the need for productivity. The trade unions and the employers are to be congratulated on what has been achieved so far. We are getting genuine productivity agreements. There may be a few "phoney" ones still, but I think that where we do get genuine productivity agreements it is largely because they are negotiated at plant level, where productivity can really be measured.

Having said that, may I also say that in my experience there is in this field in industry to-day a lot of difficulty, on two scores. One is in the case of the company where productivity is already high and therefore there is not a great deal to give away; and the second is the leapfrogging effect of dealing with more than one union—usually a matter of dealing with l5 or 20 or more in one factory. Surely in the first case, where a company is relatively efficient, a move in the direction of co-ownership and profit sharing has a stimulating part to play. As I have said before, I should like to see the Government place at industry's disposal a team capable of helping industry to devise schemes suitable to the different circumstances of different firms.

So far as the multi-union problem, which is quite an important one, is concerned I would ask the Government how far they propose to go with the Donovan recommendations and how closely they intend to keep to the proposals. I agree with the noble. Earl, Lord Jellicoe; I think Donovan is certainly not as strong a Report as I should have wished to see. Are the Government prepared to go further than Donovan? I believe that if we can get much better industrial relations it will substantially improve our economic growth. This is where an imaginative industrial relations policy will be of tremendous use in the future for the economic growth of the country.

We on these Benches have said, and we firmly believe, that the problems of trade unions should be seen in the context of the whole framework of industrial affairs and industrial relations. The fact is that the machinery for collective bargaining is years out of date. There is much talk about making collective agreements into legal contracts, but there is totally inadequate machinery for arriving at agreements which could be regarded as legal contracts. The first task, surely, is to produce this machinery, rather than for us to be diverted into thinking that what we need is legal enforcement of contracts. We need machinery that will produce the contract which then can, or cannot, be enforced. In our view, this means putting the emphasis once again on bargaining at plant level rather than on a structure which negotiates agreements nationally. This means plant level bargaining on basic rates, which would be something fairly new, I should think; but if it is to be effective it must have as its focal point a formal works council on which the different unions are represented.

We have in this House a wealth of talent on this matter from the trade unions and industry generally, and I hope that we may go into these problems in more detail before we get the legislation. The improvement of industrial relations could do a great deal to improve the economic growth of this country and help to reduce the deficit on the balance of payments. I believe that what is needed now to solve our balance of payments is not a series of unrelated policies but a coherent and inter-related plan which the people of this country can understand.

3.30 p.m.


My Lords, I am grateful to the noble Earl and to the noble Lord for two speeches which I thought were most to the point and dealt with serious issues, and, thank goodness! avoided industrial polemics. I shall not be able to answer the very large number of questions raised in these speeches but I shall deal with some of them, and my noble friend Lord Beswick will deal with others in his reply.

Since I was privileged last July to take part in the annual debate on the Finance Bill I am pleased to say that no untoward events have occurred on our economic scene to cast doubt on the economic strategy which the Government are following. Indeed, the economic indications in recent months, and particularly the trade figures, have given some vindication of this strategy. On the international scene, too, the outlook is brighter than it appeared in June, although this is not to say that there are no clouds on the horizon.

I propose, as my contribution to this debate, to review some of the more important features of the economic scene. First of all, I should like to deal with consumer expenditure. At the time of the Budget it was expected that the level of consumer spending in the second half of this year would be lower than in the second half of last year. I did not rise when the noble Lord was on his feet, because I thought it would be better not to interrupt him; but, speaking subject to correction, I think that the Government's statement was that it would be 2 per cent. lower in the second half of this year rather than the first half, as he stated. I do not think it interfered in fact with his argument. The recent indications, however, were that the level would not be very different. Because it is so important that consumer spending be kept within limits which do not endanger the transfer of resources from production for home consumption into production for export the Government decided to take further measures to restrict home consumption.

The changes in the control of hire-purchase and rental contracts announced by my right honourable friend the President of the Board of Trade in another place on November 1 have aroused some controversy which, however, I regard as unjustified. For many years we have seen one Government after another take economic action which results in what the engineer calls "hunting". This is a phenomenon brought about by too infrequent application of control, each application being too great in its effect. The result is a tendency to swing from one side of the planned course to the other. In my view, Governments have to learn how to apply a lighter touch to the helm at more frequent intervals and to have the courage to do this at the early stages of a development of a trend. I am very pleased indeed that we have applied this touch.

The noble Earl has commented to the effect that we have selected the motor industry for our attentions. This is not true. It is calculated that something like 50 per cent. of the effects of this measure will apply to the motor trade: the rest will apply to other industries manufacturing consumer durables. There is also another facet to be remembered when considering the motor industry itself. First, there have been (and in saying this I do not want to denigrate an industry which is, in fact, doing extremely well in the export trade at the moment) some severe difficulties in meeting on time the demands of export markets in the export of vehicles; and I think we are all aware of this. The second point I would make is that the new registration of increased numbers of motor vehicles leads not only to expenditure on the cost of their manufacture but also, as we all know, to continuing expenditure of a high volume in fuels, lubricating oils, tyres, and the services which have to be provided to support facets of motoring. So it is a key industry from the point of view of consumption.

Let me now turn to another facet which has come in for a great deal of comment. Imports have certainly been higher than was expected. But a part of this reflects, in my opinion, a once-and-for-all boom in consumer spending which I think, particularly in view of the most recent measures, has now been checked. Of course it is difficult to be absolutely certain of these matters, but that is our view; and it is based on a reasonable investigation of the figures. Despite an increase in industrial stocks associated with the recovery in industrial output the level of imports in recent months has eased back perceptibly. Taking the four months, June to September, which tends to reduce distortions in the figures caused by transient factors, and comparing the monthly average with that of the previous four months, imports have eased back to £643 million, compared with £650 million per month. It is not a big movement, but it is a movement in the right direction.

We are not complacent about imports, however. There are no doubt many goods which we could produce here if we set our minds to it, and these could be fully competitive with those at present imported. The Government are therefore actively encouraging import saving in production where this is practicable not only through the measures taken by the Government to improve the general efficiency of British industry but also through consultations in the Economic Development Councils and direct with industry. I could have given noble Lords a much more detailed account of the various measures being taken within Departments of the Government and in E.D.Cs., but, after due consideration, I felt that it would not convey very much because they are intensely detailed. To cover the whole spectrum would occupy a very long time, so I am not going into detail on this subject. I can assure your Lordships, however, that this is not just paying lip service to an objective. These discussions are going on extremely seriously, and I am familiar with those which are being conducted inside the Board of Trade.

There have been many Job's comforters about who have said that the answer to our import problem lies in import control, but may I remind those in our midst who press for such controls of the effects of the U.S.A. swing to protectionism in the 1930s? I was given these figures some time ago when I visited America, and I think they are worth quoting, although they are now very ancient figures. This swing to protectionism, coupled with other adverse factors, produced the result that between 1929 and 1932 American imports fell from 4.4 billion to 1.6 billion dollars, but in the same period American exports fell still more sharply from 5.2 billion to 1.6 billion dollars. The experience of other countries was not dissimilar. I believe that it is valuable to quote these figures to-day, because it would be so easy to start a landslide of protectionism which could develop into something as horrible as that which occurred in the 'thirties. The danger exists that the United States Administration might be forced to bow to the protectionist pressures which are being exerted on it by sections of American industry. It is therefore vitally important that we take no action which might start a landslide into international protectionism. This is one of the reasons why the Government have turned their back on import controls.

The noble Earl raised the issue of restrictions on credit for imports, and I think I will give him my reply to this now, rather than wait for it to come from the words of my noble friend Lord Beswick. The noble Earl referred to the Italian scheme, which has been commonly referred to as an import deposit scheme, but in fact what it required was that payment he made for imports within a certain period of importation. There was a shall, fall in Italian imports in 1964, but this was almost certainly due much more to the general measures taken at the same time to deflate internal demand than to the import credit regulations. This is clear, for example, from the fact that three-quarters of the drop in the value of imports (I am talking about the Italian imports) in the latter part of 1964 was accounted for by goods which were not covered by the import credit regulations in that year. During 1964 only a limited range of goods were covered.

The regulations were extended in January, 1965, to cover all goods, the period within which payment was required being extended at the same time from 30 to 90 days. This wider but later scheme remained in operation until March, 1965, and we doubt whether, in the absence of an intensification of the present credit squeeze—which would, of course, have effects far beyond imports—a scheme of this sort would in present circumstances have a substantial effect on the level of imports. Furthermore, whatever the effect on the level of imports, the immediate effect would be an accelerated payment for imports and thus in the short run an actual worsening in the balance of payments. I have gone into this matter in detail because I know that the arguments for such measures can look extremely persuasive, but they have been under consideration in the past and it is worth while setting out fully the arguments against them.

Fundamental improvement of out economy must be based on improved productivity, but for a long time now public attention has tended to focus on the negative side of the policy for productivity prices and income. That is not surprising, since the periods of standstill, severe restraint and then moderation have each had a direct and painful impact upon the community. It is therefore encouraging to examine the positive results of the policy. Since January, 1967, the Department of Employment and Productivity has approved over 1,700 proposals for productivity agreements covering nearly 1,500,000 employees. It would be an exaggeration to suggest that all of these agreements came about as a direct result of requirements of the Government's policy for productivity prices and incomes. Nevertheless, there can be little doubt that the priority given by the Government to productivity criteria coupled with the policy of price restraint has been an important instrument in requiring employers and trade unions to have regard to the effect of wage negotiations on the community, and of relating increases in pay to increases in productivity. Recent evidence points to an encouraging increase in productivity. New indices of output per head show that over the economy as a whole output per person employed has risen by 5 per cent. over the last year and stands at 21 per cent. above the level in 1960.

There is little doubt that if we could solve the unsatisfactory management/employee relations to which the noble Lord, Lord Byers, referred and which exist in some industries, though not in all, and the resultant strikes and loss of output, then national productivity would rise still further. The Government believe that one of the most important causes of these unsatisfactory relations is a desire by employees for increased participation. There is, however, a need to clarify the meaning of the word "participation". Some would maintain that it implies an active sharing by employees in the executive decisions of managers. But there are strong reasons for considering that this is not the most suitable starting point for extending participation. Chapter XV of the Donovan Report has some interesting things to say on the question of participation. Like the rest of the Report, this chapter is now the subject of consultation with the C.B.I, T.U.C. and nationalised industries, but there will surely be widespread agreement with the view that the reform and strengthening of our systems for the joint agreement of work policies is the first priority in industrial relations.

What is required is a fuller realisation that the management of an industrial concern should be carried out by managerial decisions taken within a framework of agreements on pay, productivity and other conditions of work which have been the subject of discussion and negotiation between management and the representatives of employees. The Government believe, moreover, that worker representation and participation are best ensured through trade union organisation. There is another facet to this question. The current state of industrial relations is in some industries depriving the decisions of many managers of that degree of authority which is the prerequisite of efficient production. We believe that it is possible to strengthen the collective negotiating system in a way which will ensure that managerial decisions, taken within the framework of procedure and substantive agreements with employees and their trade unions, will gain a degree of acceptance which is not otherwise obtainable.

Though there are encouraging signs that our economy is moving in the right direction, the fact remains that the current level of unemployment is distressing. May I briefly set out the position? During the first seven months of 1968 the total register of unemployed fell continuously at an average rate of 19,000 per month, from 631,000 in January to 515,000 in July. By the latest count, however, in October it had increased again to 549,000, some 12,000 lower than a year ago but still 113,000 higher than in October, 1966. This figure included some 7,000 school-leavers who had yet to take up their first jobs, but your Lordships will all be glad to note that in most areas this year's summer school-leavers seem to have found jobs without undue difficulty. By eliminating from the figures 11,000 temporarily stopped work and 7,000 school-leavers, the remaining figures can be seasonally adjusted and so give an indication of the underlying level of unemployment. On the basis of these seasonally adjusted figures, unemployment this year rose from 2.2 per cent. in February to 2.4 per cent. in October. This is the highest seasonally-adjusted October figure—I stress that it is for October—since the series started in 1950 and is definitely too high. However, the trend now appears to be turning downwards again and the seasonally-adjusted figures of unfilled vacancies for adults give cause for some optimism. Since June of this year adult vacancies have risen on average by 4,000 per month and now stand at 195,000, the highest figure since December, 1966.

The burden of unemployment falls heavily on our development areas, and a short résumé of the Government assistance in those areas would seem appropriate. The offers of assistance under the local employment Acts are continuing to run at a high rate and have averaged £46 million in the four years to March 31, 1968, as compared with £30 million in the previous four years. By the end of this financial year the total additional employment estimated to arise from all the projects which have been offered assistance will be 500,000 jobs. The development areas, with rather less than a quarter of the population, received over a third of industrial building as measured by the issue of industrial development certificates in the six months April to September, 1968; and in the quarter from July to September, 1968, the proportion was 40 per cent. I think it is well worth publicising the fact that within its 60 million square feet or so of factory space in development areas, the Board of Trade always has a certain amount of available empty space, mainly resulting from tenancy changes. In addition there are now about 24 new advance factories immediately available totalling about 600,000 square feet. This means that as our export drive advances the management of a company which finds itself in urgent need of additional production facilities can, by setting these up in a development area, obtain both additional factory premises and employees with a minimum of delay.

There is, however, one snag about that comment, and I refer of course to the shortage of trained labour in these areas, and indeed elsewhere. To help solve this problem we are, however, witnessing today an expansion of industrial training both in quantity and quality which has not been paralleled before in this country. In October, 1964, there were 25 Government training centres with nearly 4,000 training places. There are now 40 with over 8,600 places, capable of training over 15,000 people per year. By the end of the year there will be 42 Government training centres. In 1969 a further six training centres will be opened, and seven more will be opened in 1970. By the end of that year there will be 13,000 training places, and 22,000 people per year will be trained in these training centres—a more than threefold increase since October, 1964.

Perhaps even more important, however, is the effect of the Industrial Training Act introduced by the previous Government, and I should like to make full acknowledgment of the foresightedness of that legislation. Since that Act a network of 25 industrial training boards, covering some 16 million workers and spending something like £120 million per year on increasing the supply of trained employees, has been brought into being. As a result of that Act the pernicious situation whereby some forward-looking companies spent large sums on training, only to lose their trained employees to other companies who spent little or nothing, is being corrected. Now those who carry their training responsibilities properly recoup all or a major part of the cost from a central fund, and those who fail to do so simply pay a levy without recovery. This situation has resulted in a large number of companies properly turning much more attention to this vital subject.

I must now turn to the subject of exports. Comparing the third quarter of 1968 with the average of the second and third quarters of 1967, before the dock strikes and devaluation had affected exports, they were 25 per cent. higher by value. The noble Earl suggested that the major increase in exports had occurred in the third quarter of this year. He is quite right in one sense; the most dramatic part of the increase has come about in that third quarter. Vv e had some fear in the first quarter, or even in the early part of the second quarter, that although we were looking at an increase of exports which, measured by pre-devaluation standards was large, it was, in fact, the result of an overhang from the dock strike. But a look at the total figures month by month since January will indicate that the effect in the early months of the hangover from the dock strike was nothing like so great as was feared at the time, because the line of increase has been steadily upwards since January. Eight per cent. of the 25 per cent. increase in value is accounted for by a rise in sterling prices since last October, but there appears to have been an increase of over 14 per cent. in the volume of exports, and industry is to be heartily congratulated on this result.

The noble Earl asked me whether I can give any assurances about the future of exports in the months to come. I think he is asking me to be a prophet. I know as well as he knows that the efforts of the Government are complementary to the efforts of industry, and that in great measure we are in the hands of our exporters and their employees in regard to the growth of figures in the future. Devaluation has helped them and given them an edge on prices; and, incidentally, this should help both with profits and with future investment which will generate more exports in the years to come.

I was most interested to see a recent Report by the Mechanical Engineering Economic Development Council which noted, on the basis of an extensive survey, that the larger the proportion of its output which a firm exports the more nearly its export profit margins approximate to its home profit margins. This is indeed an important statement, coming from an industry which exports about £1,600 million-worth of goods each year. Our own researches in the Board of Trade indicate that this applies to other sectors as well as to the engineering sector of industry. Industry and commerce have done well this year, but the pace of international competition is intense and, if we are to beat the balance-of-payments problem by an increase in earnings overseas, rather than by a decrease in expenditure on imports, then we must look for a rate of exports next year in the region of £7,000 million per annum. That is what we must hope for. I do not care to prophesy that we will get it.

Since I have been in my present job at the Board of Trade, I have noted that many companies laid the export marketing plans on which they are now operating several years ago, but the nature of overseas business is that initial efforts often take years to come to full fruition. For this reason, I believe that there is a great deal of momentum in the export drive. I believe that when you see exports go up in one year, you are usually looking at the efforts made two or three years, or more, earlier, and that because of this and the effects of devaluation the higher total which we need will be reached, but one must add—barring an international down-turn of trade.

Finally, let me say this. We are told—and by no less a body than the C.B.I.—that there is an active assumption among many of the smaller companies and businesses in the country, that the Government are hostile to them. This is not so. We are well aware that big businesses started as little ones. We must have go-ahead people with ideas who can start businesses and make successes of them. We must also help to ensure that small companies are efficient. To this end, we launched in Glasgow and Bristol a pilot scheme to give them 50 per cent. grants to employ consultants of all types. So far, over 150 small firms have obtained grants worth over £250,000. We are now examining the possibility of extending the scheme nation-wide, although I would stress that it will be some time before this could begin to operate. We are aware that some vital small companies which ought to grow have difficulties in finding capital. We know that they are faced with administrative burdens with which larger companies, with their bigger and more flexible organisation, can more easily cope. We have discussed these problems in the National Economic Development Council in October, and since then separately with the C.B.I. We are now considering the possibility of setting up some inquiry to discover how best these small firms can fulfil their proper role in the economy.

We are beginning to emerge from grave economic trouble and are aware that, to continue current encouraging trends, we must harness the efforts of every section of our society. I hope that my comments have helped noble Lords to a clearer understanding of some of the economic policies being pursued by Government.

3.58 p.m.


My Lords, I propose to begin the remarks which I shall address to your Lordships, following the example of the noble Earl, Lord Jellicoe, with a glance at the record. It is a long story of continuous mismanagement by successive Governments, both Labour and Conservative. The noble Earl said that it was management by the Conservatives and mismanagement by Labour. I am afraid that that is not the case. It was mismanagement all round, and for forty-five years.

We returned to the gold standard, at the pre-war parity of exchange, in 1925. I opposed that. This led, inevitably, to a General Strike, a prolonged Coal Strike and massive unemployment for ten years. In 1931 we ran ourselves into the worst economic crisis the world had ever known. Lord Snowden's remedy for this was an Emergency Budget and an Economy Bill, described at the time by Keynes as "replete with folly and injustice". I opposed them both. Then President Roosevelt raised the dollar price of gold. Recovery at once began. The pound floated within margins held by the Exchange Equalisation Fund; and the international monetary system worked reasonably well for a few years until the war came.

After the war, what did we get? One might have hoped that the economists he d learnt a lesson. Not a bit of it! We got Bretton Woods, and the American Loan Agreement. I am proud to say that I moved the rejection of them both in another place. Why, my Lords?— because the theoretical price for fixed exchanges at Bretton Woods was adequate liquid reserves for the Free World, and they were not provided; and because, under these conditions, sterling convertibility was an impossibility, as in 1947 it proved to be. So much for Bretton Woods and the American loan.

Since then, my Lords, what have we seen? What have we had to undergo? We have been buoyant under Lord Dalton; we have been austere under Sir Stafford Cripps; we have been rigorously controlled by Sir Stafford; we have been devalued by Sir Stafford; we have watched the Prime Minister's "bonfire" of controls when he was at the Board of Trade; we have seen the disastrous results of the premature removal of building controls; we have "dashed for freedom" with Lord Butler; we have "gone "with Mr. Macmillan and with Mr. Maudlin; we have "stopped" with Lord Thorneycroft and Mr. Selwyn Lloyd; we have both "gone" and "stopped" with Mr. Jenkins, and now we have been devalued by him once again. My Lords, even the Hungarian Rhapsody, about which some of us held such high hopes, has now ended on a rather discordant note. It is small wonder that all of us, whatever Party we may belong to, are feeling a bit dizzy.

Is this a good record? My Lords, it is a lousy record—I can use no other word—and it reflects on all Governments for the last half century. What one can truthfully say is that those who have most consistently opposed the Treasury policies during the past 45 years have been most consistently right; and I am very pleased to say that I am nearly at the top of this list. I think it was Mr. Lloyd George who described the bankers of the City and the economists of the Treasury as penguins. It is not an inapt description. There they sit with their searched collars and their white fronts waddling from time to time in the wrong direction.

My Lords, I come now to the gracious Speech itself. I read with amazement: My Government will work closely with other Governments to maintain the smooth working of the international monetary system". In so far as we have an international monetary system at all, it is certainly not working smoothly. I do not always, or indeed often, agree with Enoch Powell; but when he remarked the other day that all the bankers had succeeded in doing at Basle was to force this country into much heavier debt to foreign interests in order to defend an international monetary system which did not exist, he was not far off the target. We are not by any means through with all this Basle business, and the borrowing that we have been forced to make in order to defend what I regard, and shall always regard, as an almost indefensible system; and the reserve figures published the day before yesterday prove it. Certainly it is no time for the back-slapping in which the international bankers have seen fit to indulge during the last few week. They have nothing about which to slap each other on the back. All they have to do is to hang their heads in shame for past failures.

Then we read in Her Majesty's gracious Speech: They"— that is the Government— look forward to the early entry into force of the Special Drawing Rights Scheme". My Lords, this Scheme cannot be effective unless convertibility into gold is assured; and at present it is not assured. This brings me to the monetary policy, if any, of Her Majesty's Government. In Washington, the Chancellor was reported to have given full support to Mr. Henry Fowler in his efforts to bring about a fall in the price of gold. As Mr. Fowler's ultimate intention is the demonetisation of gold and its replacement as the basic unit of the world's liquid reserves by the dollar, this in itself was pretty sinister. That is at present the avowed intention of the U.S. Treasury—to bring about the demonetisation of gold and replace it by the dollar. But a few days later, after the Chancellor returned from Washington, we find the Governor of the Bank of England saying at the Mansion House: For my part, I find the tendency to attack the role of gold in the monetary system somewhat ironic, when it is not gold that is the root cause of the present uneasiness, but doubts about the alternative reserve assets. While admitting all the imperfections of gold as a monetary asset, the enthusiasm for getting rid of it owes much to the fact that in this inflationary age currencies cannot stand comparison with it". That is true enough. There is no reserve currency unit which, in the eyes of the world, is comparable to that of gold; and well might the City Editor of the Daily Express refer the other day to: this topsy-turvy world of paper money". But where do we stand now? That is what I really want to ask the Government. I think it was summed up very well by Sir Ralph Hawtrey, in a letter which he wrote this week to the Daily Telegraph: The policy of 'stop and go', of lighthearted expansion, alternating with brief spasms of contraction, was repudiated by the Labour Party in October, 1964, and again in March, 1966, but thereafter put confusedly into practice. In the past year it has been parodied: devaluation, an exaggerated form of expansion, has been followed by a crashing Budget, and the country is waiting for some-thing to happen next year". That is Sir Ralph Hawtrey's verdict; and anybody who has any knowledge or experience of Sir Ralph Hawtrey will not lightly disregard his views.

Looking back, my Lords, saddled as they were with the atrocious legacy bequeathed to them by the Tory Government (and I am perfectly prepared to hand that to Ministers, because I am strictly non-controversial in all the remarks I ever make, and I try to maintain an impartial view on every subject, particularly between the great Parties in the State), the Government, in retrospect, ought to have devalued at once and imposed, not a surcharge on imports, which was against the rules of GATT, but a control of imports, which was not. And why, being a so-called Socialist Government, they flinched from this I shall never be able to understand. Socialism surely stands for control over the national economy—dirigisme, as the French call it—but they ran from it like hares. I have said to your Lordships before that, judging from the language of Mr. Anthony Crosland, the President of the Board of Trade, you might think his name was Richard Cobden or John Bright. He is living about a century after his time. But the Government did not then impose, and still have not imposed, import controls, although I think that in the end they will have to impose some control on imports.

They did not devalue until it was a little too late and it was not so easy for them as it would have been had they devalued at once. They could then have made the splendid excuse that the Tory Party had handed them such a mess that they could not fail to do it—and if they had done so it would have been accepted by the country—instead of saying that they would never devalue and then doing it. That was bad politics. As I am quite sure the noble Lord, Lord Beswick, as a Whip, will realise, you cannot put this sort of thing over, at any rate not easily, in the modern political world.

My Lords, you will never get a balance of payments by successive and violent intensifications of the credit squeeze, or by an over-high bank rate which bears heavily on the national economy, and costs the Treasury and productive industry generally a great deal of money. Nor should it be assumed that cheapening the cost of money necessarily increases the supply of it—I am now referring to bank rate. The two things should not be confused. The supply of money, as has been said in this debate this afternoon, can be controlled by credit regulation through banking control; and by the restriction of consumer spending through indirect taxation and a tightening of hire-purchase facilities. I do not quarrel with the Chancellor over his latest curbs on hire-purchase. I do not even quarrel with Mrs. Castle, for that matter. But the curbs announced are not enough to close the gap, which is now running at £500 million ahead of Treasury forecasts. Imports for the first three-quarters of 1968, this year, were over 10 per cent. higher than for the equivalent period last year. That will not do. And that fact is not only primarily but solely responsible for our adverse balance of payments. It is therefore, to my mind, essential to have some kind of a ceiling on imports unless and until the balance of payments is rectified.

My Lords, your Lordships will be relieved to hear that I am drawing to a conclusion. But, looking forward for a moment, I still believe what I have said again and again to your Lordships and in another place: that fixed exchanges, unco-ordinated national monetary policies, non-discriminatory multilateral trade and free convertibility with a fixed price for gold simply cannot be made to mix. That is what Bretton Woods tried to do, and that is why it has failed. I have frequently referred—and have done so in this House on at least two occasions—to the Genoa currency resolutions of 1922 which advocated a monetary convention based on a bullion standard and a gold exchange standard, and the regulation of credit with a view to preventing undue fluctuations in the purchasing power of gold.

Sir Ralph Hawtrey, in a letter to the Daily Telegraph—the same one—says that the position of gold as the basic unit of the world's liquid reserves requires the free interchangeability of money and gold at a fixed parity, and that it is inconsistent with flexible exchanges. With profound respect, I disagree with Sir Ralph on this. By "flexible exchanges" I do not mean completely free exchange rates; I mean wider margins than those imposed at Bretton Woods. At present and this affects everyone—all economic pressures, and particularly those relating to the balance of payments, which might otherwise be corrected by minor variations in the exchange rate have to be met either by difficult methods, such as drastic curbs on wage increases which the Government are now imposing; or, as in 1926, by impossible methods (as we found out) involving all-round reductions of wages right across the field. We cannot do that. The Government are having sufficient difficulty in curbing wage increases.

This is the dilemma they are in, and it is because they do not possess the reserves necessary to fulfil the role they are trying to play. We resolved it for a few years between 1933 and the outbreak of the war by the method I have already mentioned; and I believe we could so resolve it again. The workers should not be expected to take upon their shoulders all the strain of an adverse balance of payments by accepting curbs and restrictions on wage increases or, in some cases, wage reductions. I prefer, as the noble Lord, Lord Brown, said, to avoid "hunting", and to achieve results by lighter and more frequent touches on the tiller, which a rather more flexible exchange rate could do. It is not so very much. We did it with the help of the Exchange Equalisation Fund before the war. Why should we not do it again?

Therefore, my Lords, I come, in conclusion, to the "Boothby remedies" for world economic problems. They can be summed up under five headings First of all, a rise in the price of gold. If this is applied to all currencies it could by no stretch of the imagination be described as devaluation of one currency. Second, the regulation of the flow of money by means of credit policy. This was advocated at Genoa and advocated on and off ever since; but never yet applied. Third, the remodelling of the International Monetary Fund into what I might call a "central bank for central banks", with similar powers of credit creation and contraction. You would thus have to use a popular phrase of the moment, a two-tier check on inflation, a fivepenny and a fourpenny. The fourpenny would be the national regulation of credit; the fivepenny, the international regulation of credit combined with every incentive for increased production and productivity.

Fourth, I would recommend a series of substantial gold loans to the under-developed countries of the world. This can be done only if the price of gold is raised. Personally I should like to double it—with strict controls against inflation. These controls could be imposed by the international monetary authorities, which are the Fund and the Bank in Washington. My Lords, we are gradually closing—nobody denies it—the gap between the "haves" and the "have-nots" within the prosperous Western World, the industrial Western world. But the gap between the prosperous countries of the Western world and the developing countries of Asia and Africa is widening every day. The position is getting worse. Looking ten years ahead, it is the most urgent world problem confronting us. Unless we are in a position to make adequate loans to these under-developed countries (which we could if we were brave and courageous enough to raise the price of gold generally) that gap will become steadily worse. And it is a gap that should be haunting all of us at the present time—especially those who have visited Asia or Africa within recent years.

Make no mistake, my Lords, we are not at the end of the argument about gold—not by a long chalk. The price simply must be raised if the economy and monetary system of the Free World are to survive for any length of time. As Sir Frederick Leith-Ross said nearly ten years ago, the dollar of 1960 was not then the dollar of 1934; and by maintaining an artificial price for gold you reduced by a colossal amount the volume of international liquidity. Still less is the dollar of 1968 the dollar of 1934.

As my last point, I say, that in my view, until we get our balance of payments right, import controls are absolutely essential. Do we really need a thousand cheeses? We have Stilton, we have Cheddar, we have Cheshire, we have Double Gloucester; they are all quite good. But go into the shops, go to Fortnum and Mason, look around and see what is on show. It is really bewildering—a lot of luxury nonsense. It is due to this incredible Cobden and Bright attitude on the part of the Board of Trade. If we were to impose some restrictions on unnecessary manufactured goods and on unnecessary luxury goods, we should not be going against GATT. We were when we imposed a surcharge; but we are not when we impose import controls when in balance-of-payments difficulties. I do not believe that we should have any retaliation at all. The French have had very little. As I have said, excessive imports are entirely responsible for our adverse balance of payments. Let the Government show some sense. Let the Chancellor show some sense and behave like a prudent housewife—


My Lords, may I interrupt the noble Lord? I have listened to an extremely interesting speech, but I think that the noble Lord is now, at the end of it, commenting in a way that puzzles me. We have these luxury goods coming into this country, I agree; but what is he to do about all the luxury goods we are exporting to other countries? If other countries retaliate against what they regard as luxuries from the United Kingdom, then, on balance, we should be no better off.


My Lords, all I am saying is that when a prudent housewife finds that she is spending too much in the shops, she spends less. By some means or other I think Her Majesty's Government will have to find a method—if it is not import controls I cannot think of one; but they may find another—of spending less on manufactured goods which we can equally well make for ourselves, and on luxury goods imported from abroad, until our balance of payments is rectified. For that is what is doing the damage at the present time. I am quite sure that my noble friend would agree with that. It is excessive imports that are at the root of the trouble at this moment.

My Lords, there is Europe as well. We have sometimes to think of that. They will never accept the dollar, and, with it, American economic domination, as an alternative to gold. If we persist in abject subservience to the United States Treasury just because we are so heavily in debt to them, we may as well "chuck" altogether our application to join the Common Market.

My Lords, before I sit down I must apologise for having kept your Lordships for so long, but I have not spoken for a long time; and I will not speak again for years. I should just like to say that I read with some amusement the passage in the gracious Speech which says that: Legislation will be introduced to help the development of tourism in Great Britain". I do not know what legislation can be introduced to help the development of tourism, but I can suggest one small clause or two in the Finance Bill when the Chancellor comes to introduce his next Budget. It would provide for the remission of the selective employment tax, which is doing more damage to our tourist industry at the moment than any other single thing. I am not asking for the complete repeal of the tax; that would be too much. It was the brainchild of some of the most brilliant economists of the Treasury, and one could not ask them to accept the fact that it has been a failure. That would be asking too much. But I think it is a child that should be modified. Some children ought to be modified; and some more often than others. I beg the noble Lord who is going to reply to give us some assurance that between now and the Budget the Chancellor will have a pretty hard look at S.E.T. and see what measures should be taken to benefit certain sections of industry; and certainly the hotel industry is one upon which it presses very heavily.

My Lords, if I may make one final suggestion in connection with tourism it is on the question of trains. It may sound odd, but many foreign visitors have commented on this point to me. I think that we have the filthiest trains in Europe. I am not talking about the smart inter-city expresses; I am talking about the ordinary humdrum trains which we all have to take from time to time, and particularly the suburban trains. My Lords, you have only to take the Underground Railway—and that in itself is not a very pleasing sight—and move in either direction, to Victoria on the one hand or to Liverpool Street on the other, and look at the suburban trains standing in either of those two stations. You will see that they have not been touched with a cloth or a brush for about 22 years. I suggest, quite humbly, that if Her Majesty's Government are really out to boost the tourist trade they might drop a cautious hint to the Railways Board that perhaps somebody might, just once a fortnight, put a washer on the windows of those trains and clean the carriages, because at the present time one flinches before one gets into them.