ADDRESS IN REPLY TO HER MAJESTY'S MOST GRACIOUS SPEECH

HL Deb 06 November 1968 vol 297 cc267-348

4.35 p.m.

Debate resumed.

LORD JACQUES

My Lords, the gracious Speech indicated that the Government have maintained their application for entry into the European Communities. This could give rise to substantial alterations in our fiscal system, and I want to refer to one aspect, that of indirect taxation. There is considerable merit in the United Kingdom purchase tax. First of all, it is levied at one level only—the wholesale level, where goods are sold in bulk; and it is therefore cheap to collect. In addition, there is very little evasion. But, above all, it is flexible and progressive. Food, solid fuel, certain household goods and children's wear, are entirely free of tax, and those goods which are charged to tax are charged at four different rates.

There was a strong case for extending the tax. At the present time, it deals only with goods. There was a strong case for extending it to services, which are at least as much a luxury as some goods that are taxed; but, instead, the Government preferred selective employment tax. This, although a tax upon labour, involves a tax on the consumer, and approximately 90 per cent of S.E.T. is actually paid by the consumer. It is paid not on a relatively few luxuries but over the whole field of consumer purchases. It is a retrogressive tax, with only one advantage: that it is cheap to collect. A mistaken use of the standard industrial classification has made S.E.T. perhaps the piece of fiscal legislation with more anomalies than any other. Furthermore, in some trades, S.E.T. is very easily evaded. If the worker is paid piece rates, and a suitable contract is entered into, the worker can be made self-employed and totally exempt; and this happens in many trades, particularly the building trade.

Presumably, both of these taxes would be absorbed in an added-value tax, either in preparation for membership of the Common Market or after entry into the Common Market. An added-value tax differs from purchase tax, in the first place, because it is collected not at one level but at every level, but only on the added value. That is to say, every business pays to the Revenue the tax that it has collected from its customers, less the tax which it has paid on the goods and services it has bought. The added-value tax has one merit—a theoretical merit, but nevertheless a merit: it is, in effect, a tax upon costs plus profit, and because it is a tax upon costs plus profit it could be an incentive to keep down costs. But it is extremely doubtful whether any tax which can be passed on to the customer can be an incentive to keep down anything.

If an added-value tax were substituted for purchase tax and S.E.T., and were carried right down to the retail level, it would have very serious disadvantages. First of all, the added-value tax carried right down to the retail level would have ten times as many collecting points as the present purchase tax. It would therefore be costly to collect; and, in addition, evasion would be more likely. But, worse than anything else, it would be likely to be a regressive tax. An added-value tax that is carried right down to the retail level is usually at a single rate because it is not practicable to analyse goods at the retail level so that some can be free of tax and others can be charged at several different rates. For that reason there is often a single rate of tax, and it is a regressive tax over the whole field of consumer expenditure. This, however, can be avoided by the simple expedient of charging the retailer of goods a higher rate on the cost than he would have been charged on the selling. For example, if the rate were 10 per cent., then he could be charged 12 per cent. on the cost, instead of 10 per cent. on the selling. That would mean that the retailer would be brought within the tax, but outside the administration of the tax.

This, my Lords, would have three fundamental advantages. First of all, the number of collecting points would be drastically reduced; secondly, there would be less evasion; and thirdly, and above all, there would be flexibility and progression if we wanted it. Because the tax finished at the wholesaler's invoice, it would mean that it would be possible, as it is now, to have a large range of goods, like food, solid fuel and children's wear, free of tax; and for those goods and services which were taxed, it would be possible to have a variety of rates.

It has been suggested that an added-value tax should absorb some of our corporation tax. In point of fact, there is not a very strong case for this. There has been a dramatic fall in company taxes in the last twenty years, and especially in the last ten years. In 1946, company taxes were 44 per cent. of trading profits. In 1956 they had fallen to 29 per cent., and by 1966 to 17 per cent. largely because of investment allowances. It would be unreasonable to reduce corporation taxes further by passing them on to the consumer in an added-value tax or in any other such tax.

In conclusion, my Lords, I would say two things. First of all, if we have to change to an added-value tax it is possible to have a progressive and flexible tax in accordance with the best traditions of British fiscal policy if we want it. Secondly, if in this brief maiden speech I have been too controversial for any part of the House, I apologise.

4.44 p.m.

LORD FRASER OF LONSDALE

My Lords, for my part, I found the speech of the noble Lord, Lord Jacques, on taxation and various forms of taxation fascinating, and I should like, if I may, personally, and I am sure on behalf of noble Lords on all sides of the House, to congratulate the noble Lord upon an admirable maiden speech. I, for one, remember with pleasure, in another place and in this House, the right honourable gentleman A.V. Alexander, later the noble Earl, Lord Alexander of Hillsborough. I thought that the co-operative societies were extraordinarily fortunate to have him to speak for them when necessary, and to bring his wisdom to both Houses. Now we welcome the noble Lord, Lord Jacques, who has spent most of his life in the Co-operative Movement. He was a brilliant youngster in that Movement, attaining high office at an early age, and ending up in its highest offices as chairman and president. It is a great advantage to the House that the noble Lord should have joined it, and I hope that we may have the pleasure of hearing him again as frequently as he feels that he can speak.

My Lords, I am going to advocate something similar, but slightly different, to the pleas made by my noble friend Lord Boothby. I am going to advocate a floating rate for the pound and, indeed, for the exchanges, and a floating price for gold. Before I deal with the merits of this matter, which I shall do as briefly as I can, I should like to say one or two things that touch upon the subject. First of all, I would say that I have many friends in South Africa, including Members of the Government, and I have interests there which I have often declared. But what I am about to say does not arise out of any contact with them. I have neither the right, nor even the wish, to represent either the view of South Africa or of the South African Government. If what I say is agreeable to some who live in South Africa, so much the better, but what I say is entirely ray own view.

There is one other general point. It is said that if you raise the price of gold you will benefit South Africa particularly, because 75 to 80 per cent. of all the gold in the free world comes out of South Africa; and it is said that you will benefit Russia, where a great deal of gold is mined, although nobody knows quite how much. Then it is said that it would be wrong to benefit these two countries because of their systems of government. Some dislike one, and some the other, and some dislike both.

I venture to think, my Lords, that political thought—I would almost call it an hysterical thought—is not something to which we should pay any attention. It is like admitting the doctrine that it is a good thing to cut off your nose to spite your face. Though there may be some noble Lords on the opposite side of the House, or even on this side, who believe that, I have not met them. On the economic side, I would argue that anything which can benefit the trade of the whole world, even if it particularly benefits one or two countries that you do not happen to like, must be acceptable because the trade of the world is, or at any rate should be, indivisible.

My Lords, I will now try to show that freeing the price of gold and freeing the exchanges will benefit the whole world. Before I do that, I should like to make one comment on a line that I read in The Times last Thursday (it is almost unbelievable) where we were told that UNO had again resolved that South Africa and Portugal should be boycotted—and this in spite of the wise advice given by the noble Lord, Lord Caradon, who said that you cannot boycott South Africa or Portugal unless you are able to mount a first-class universal war; and UNO cannot do that. This, therefore, is another example of the emotional attitude taken in regard to anything to do with South Africa, and in some quarters anything to do with Russia. I want to beg anyone who listens to me, or who reads what I say, to set aside these emotional considerations and to try to see the world as it really is.

Now it is said that if you do not have a fixed price for gold, and if you do not have a fixed rate of exchange between the various currencies, there is always instability. I argue exactly the opposite. It is when you have these fixed points that you must inevitably get instability because they are certain fixed points in economics in which all points are not fixed. If all points were fixed in a theoretically perfect Communist world, possibly even a Socialist one, you could imagine their sticking fast, and if they were well adjusted and well fixed they might stay there. But wages are not fixed. Even Mrs. Barbara Castle cannot fix them. Other items in our living expenditure are not fixed. Many aspects of our lives and our international trade are not fixed. Therefore, you cannot have a fixed price for exchanges or for gold without getting into a state of disequilibrium; and that is what has happened. It is what has happened to the world for very many years—as Lord Boothby told us, for 50 years. There I sympathise with him. I think we have all been more or less wrong for the last 45 or 50 years in this matter.

I would remind noble Lords that the idea of freedom among the exchanges and freedom for the price of gold is no invention of mine; it is no invention of the noble Lord, Lord Boothby. In the last hundred years, more than half of that century was spent under a free system of the price of gold and the exchange rates, and it is only in the last 40 or 45 years, when, as Lord Boothby told us, everything has gone wrong, that we have had these fixed points. Perhaps the most dramatic way to realise it is to call to mind that it was in 1934 that President Roosevelt fixed the price of gold at 35 dollars per ounce. That is 34 years ago. During the intervening time almost every other price in the world has risen three times, whether it is the price of labour, the price of metals, the price of manufactures or of agricultural products. How, then, can we expect there to be equilibrium if a part of the monetary system, and that part most trusted by the world generally, is held in this suspended condition in which its value is not realistic?

Why is gold so important? Why must we resist the American view, or the view of some Americans, that you can write gold off or demonetise it or use it only for jewellery and for filling teeth? My Lords, because gold has for centuries been regarded by mankind as a stable element which can be trusted—and men's minds do not change quickly; even over the centuries they do not change. Not only has it been trusted, but it still is, whereas paper money is not. It is difficult enough to trust your own Treasury.

LORD BOOTHBY

Impossible!

LORD FRASER OF LONSDALE

It is much more difficult to trust the Treasury of some other nation. Lord Boothby called attention to the paragraph in the gracious Speech, of which I too have a note, which ended up with the words that we hope to make these Special Drawing Rights work. That is what the Government hope to do. Well, if they do it in a decennium, I shall be surprised. If they do it ever, I shall be surprised. They certainly cannot do it in time to cure the ills of to-day. They are at the heels of the Americans, I am afraid, and we must use more influence in New York or Washington, or else go on our own and not be so afraid of ourselves.

My Lords, why does Britain, and why does the United States, refuse to let the price of gold rise or to let it go free? Why? I think Britain does it simply because it is following the United States, and also because it has followed a wrong monetary and currency policy for so long that it has become used to it. I think the United States does it because of its pride in the dollar: "the dollar is the dollar is the dollar", and any idea that anything else could be more important would hardly be acceptable to the ordinary American. But they will have to learn.

How, then, do the Americans try, hard as they are trying now, to maintain this false position?—and I think it is a false position. They do it by all kinds of expedients: by borrowing here, by borrowing there; by swopping here and swopping there; and even, I fear, by "cooking" the books and fiddling the figures, and by changing the loans from one form to another to make them look better to the voters. This system is not under the control of the voters; it is not even under the control of Congress, any more than the behaviour of our Treasury here is under the control of our Parliament. Clever men in the Treasuries, whom one must trust and who do their very best, have far too much power. In my opinion, it would be very much better if they were linked to gold at a free price, which would be a brake upon their freedom.

How would it be done? I hope in concert with the United States; but if not, then in concert with nobody, but on our own initiative. We would tell the Bank of England to buy or to sell as much gold as is forthcoming at the market price. The price would settle itself from day to day and the variation might be a cent here or a cent there, up or down, or a penny up or down, and we should not get this build-up of pressures leading to financial crisis. What are the two advantages? The advantage I have just described is one. I call it self-adjustment. The price would be self-adjusting. The other is that probably the price would rise, almost certainly it would rise soon; and that is not surprising in view of how very far it is behind.

I have very little else to say, my Lords, except that I am convinced that the financial and monetary crisis will arise again. I agree with the noble. Lord, Lord Boothby, that we cannot look to the future, not even to the next few years, perhaps not even the next year, without meeting another financial crisis. It will then have to be met by one or other of these expedients: borrowing, "freezing", "fiddling". How much better to face the fact that it is coming, and to give gold, which still plays a very important part in world liquidity, a chance of using itself more freely! If you doubled the price of gold you would double the effectiveness of all the gold in all the banks, as well as encourage the mining of more gold. This is not merely a traditional view, but a view which I urge upon the Government and, indeed, upon your Lordships. Ten years ago, when Lord Boothby and I, and one or two others, started talking about this, we were voices crying in the wilderness. Nobody listened. There almost seemed to be a conspiracy of silence in the financial papers and among the financial writers about mentioning gold or the price of gold. Now it is being discussed almost every day in the financial columns and in the weekly financial papers, both here and in the United States. This shows that this view is not a partial one, not a foolish one, and no longer, I think, a minority view. I can only hope that the Governments in Washington and here will learn in time that it is possible to avoid crises by organising to meet them.

5.0 p.m.

LORD FRANCIS-WILLIAMS

My Lords, it gives me very great pleasure to be the first Member of your Lordships' House on these Benches to congratulate my noble friend Lord Jacques on his maiden speech. It was, I thought, pertinent, factual, well-considered and short—all attributes to endear any speechmaker to your Lordships' House. I hope we shall hear him often, and I am convinced that we shall always gain from doing so.

Like the noble Lord, Lord Boothby, and the noble Lord, Lord Fraser of Lonsdale, I too wish to touch on monetary questions, which rank only a small, rather insignificant paragraph in the gracious Speech though they are among the most important subjects facing us in the world to-day. But I shall not do so in the swashbuckling style of the noble Lord, Lord Boothby, which I cannot hope to emulate, much as I admire it; nor shall I claim to have been right on quite so many occasions as he did—

LORD BOOTHBY

My Lords, I have always been right.

LORD FRANCIS-WILLIAMS

—though I like to think that from time to time we have been right together.

In the main, I want information. I hope very much that the noble Lord, Lord Beswick, when winding up, will be able to inform us when the Special Drawing Rights Scheme is likely to come into effect. I must say that I share some of the doubts of the noble Lord, Lord Boothby, and the noble Lord, Lord Fraser of Lonsdale, about this Scheme. But we have embarked upon it, and therefore it would be nice to know whether it is in fact proceeding according to plan or whether there have been any hitches; and, if it is proceeding according to plan, when we may expect to see it coming into effect.

I should also like to know, and very much more in a way, whether anything is now happening in regard to long-term discussions on the role of sterling as a reserve currency and of a method to replace it by some international system. Let me say at once that I do not share the faith in gold of either the noble Lord, Lord Boothby, or the noble Lord, Lord Fraser of Lonsdale. I really think it is about time we got rid of that particular totem pole.

LORD BOOTHBY

My Lords, would the noble Lord forgive me for a moment if I venture to suggest that it is not only a matter of my faith in gold, or of that of the noble Lord, Lord Fraser of Lonsdale; a lot of other people have faith in gold.

LORD FRANCIS-WILLIAMS

My Lords, there have always been a lot of people ready to believe in a lot of silly things in the world. I believe and hope that it is possible, at this stage in human development, to devise an international exchange scheme which will be more directly based on the real trading needs of the world and on our powers of production, and on our desires, if I may say so, of consumption.

Many such schemes have been proposed, but I see that although many held the view, when the 2,000 million international dollar credit arrangement was announced in September, that we were moving and making a first step in the direction of a more intelligent and viable international exchange system (indeed, The Times rightly called the arrangement for this dollar credit "epoch-making", simply for this reason), the White Paper, The Basle Facility and the Sterling Area, says that although there has been discussion on schemes for taking over some of the functions of sterling as a reserve currency no practical possibilities of this exist for the time being. The Paper calls the discussions "academic". This is a word the Treasury always uses to express its distaste for anything which might in any way shake it out of its complacency, although there are no "academics", in the worst sense of the word, worse than those who exist within the Treasury walls.

Of course, for the time being the 2,000 million dollar credit has strengthened sterling as a reserve currency, and I do not disagree with that. It is obvious that if we are going to see some new mode of international exchange we should try to do so from a position of strength; that we should, so far as possible, do so in a planned way and not simply because the existing international exchange units have gone down in collapse. I wish to know—and I hope that the noble Lord, Lord Beswick, will be able to throw some light on this—whether this 2,000 million dollar credit is regarded as providing a temporary means of strengthening the exchange function of sterling or whether we are thinking of it as bolstering up sterling until we can return again to a position in which we accept sterling as being, with the dollar, one of the two main exchange units in the world, subject—as we have seen over nearly the past half century—to the constant pressures upon our economy and upon our standards of living that arise from it.

I take the view which I saw expressed in the Financial Times in January, when the American dollar was under pressure and the American Government was forced to take various measures, including that of trying to stop the people of the richest country in the world from ever going abroad for their holidays—that is, that one cannot escape the thought that there is something extraordinary about a world system in which freedom of investment and freedom of trade have invariably to be sacrificed to the gods of currency stability, even at the expense of instability in everything else. I know very well that my noble friend Lord Beswick shares at least some of my views on this matter personally, because I well remember travelling on the "Queen Elizabeth" some twenty years ago and finding him a fellow passenger. We spent many happy hours drinking the excellent and cheap champagne cocktails and discussing this question of the need for a new form of international exchange, and I hope that he will be able to tell us whether not only history but Government and Treasury policy have shown, or are showing, any real practical signs of at last catching up with us.

All that I want to say beyond this is to express a certain feeling of apprehension and dislike for the latest hire purchase cutback. I know this is called "fine tuning" and is supposed to be one of those economic mechanisms which you operate when what is called a "touch on the tiller" is necessary. But it is a touch on the tiller which particularly affects certain groups of people, and especially the young people recently married knowing, more perhaps than ever these days, that they have an expectation of a reasonable regular income, of building up their houses and homes and having a car to go out a little at the weekend. When you employ this particular kind of regulator you hit them. You do not hit the group of people who can go out and buy a car or anything else they require out of the money in their pocket or in their bank, which group I suppose would include a great many in your Lordships' House who, either because we are older and have had a longer time to earn money or have been fortunate enough to inherit it, do not need to lean on hire purchase when we want to buy something. I always feel a little self-conscious when I applaud the value of measures which are unlikely to touch me.

There seems to be a growing feeling that to spend money for anything is somehow wrong. I noted particularly that the noble Earl, Lord Jellicoe, remarked, with rather a grimace of horror, that spending is habit forming, rather as if it were one of the hard drugs. And we are told that the Government decided upon these present measures of hire purchase because they suddenly realised that there was a danger of a spree in the High Street at Christmas time. Good heavens, how remote are they from ordinary life if they did not always expect that to take place! To spend money at Christmas is as natural as to fall in love in spring, and we ought to think in economic terms which take some account of human nature.

I remember that, with my wife, I was recently in the United States, and my wife, who is in that line of business, went to call upon a distinguished research psychologist, who explained to her at considerable length and with many illustrations a number of new intelligence and aptitude tests he had devised for children; and after listening she said to him, "How have you found that actual children get along with these?" He said, "Good God! don't talk to me about kids; I don't know anything about them". I sometimes feel that if one could penetrate into the recesses of the Treasury and ask the persons there what they thought some of their measures would mean to ordinary people, they, too, would reply, "Good God! sir, don't talk to us about people; we don't know anything about them".

There are occasions, and I think we have been through one, when it is necessary, in some measure, to adopt the methods of that old mythical bandit Procrustes who, as you know, used to lie those who fell into his power on a bed and if they spread over it in any direction cut them down to size. There seems to be developing in the Treasury and, to some extent, I am sorry to say, in the Government a sort of psychology that believes that whenever a toe twitches the thing to do is to cut it off. Let us, by all means, work hard and save what we can. But let us remember that it is natural and right that people should spend money as well as earn it, and that they always have done so. And let this Government, at least, refuse to allow Procrustes's bed to become a permanent piece of the furniture of the Treasury bedchamber.

5.15 p.m.

LORD GRANTCHESTER

My Lords, I find it difficult to separate entirely economic issues from political issues when Governments or governmental decisions are so often involved. So I hope I may be forgiven for referring briefly to a few issues arising out of the gracious Speech which I believe are of importance where both good political and good economic decisions are necessary to effect any worthwhile results. In order to be as brief as possible, I will confine myself to a few observations which raise questions, rather than engage in argument.

The first observation on reading in the gracious Speech of the setting up of a constitutional committee and of proposals for changes in the composition of your Lordships' House would be that, however interesting what is intended might be in other circumstances, they are red herrings at the present time to distract from the most pressing constitutional issue which we should be facing, namely, the rapidly increasing trend towards what I must call "absolutism" in government and the urgent need to consider a separation of the powers of the Executive from those of the Legislature. Parliamentary government was developed to provide the necessary checks upon the absolute power of the Executive. To-day the Executive has assumed virtually absolute power without any effective checks. The pressing need is to re-establish effective checks on the misuse of virtually absolute power with the corrupting influence which such power brings in public life.

If the noble Lord who seconded the reply to the gracious Speech really believes that all that is wrong in Government to-day is a failure to explain its policies, a breakdown of communications, I believe he should think again. I believe, and I find this feeling in many parts of the world I have visited recently, that people are really perturbed, often perhaps not able to define what is worrying them, but I believe this feeling originates from the current trend towards the absolutism to which I have referred, as a result of which the individual finds himself ignored and powerless. Faced to-day with proposals for wider groupings for economic benefit, the individual can only invoke a narrow nationalism in an attempt to avoid being further engulfed in what he feels will reduce his influence as an individual to even greater helpless- ness. If democracy is to survive, what is needed is an urgent study of the checks and the balances which are needed to limit the misuse of power at all levels of government so that the individual really counts for something.

To illustrate the point I am trying to make, may I mention a few examples? The noble Lord, Lord Francis-Williams, and others have referred to the international monetary system. No doubt it is true, as the noble Lord said, that it should be possible to devise a system more accurate, more perfect, than a system based on gold. But the point is that the economists who say this have not produced such a plan, or any plan which would command respect or confidence in the people who have to use it. I should like to quote again those words to which the noble Lord, Lord Boothby, referred, of the Governor of the Bank of England at the Lord Mayor's Banquet after his return from the annual general meeting in Washington of the International Monetary Fund. He referred to the recent onslaught—and I can only call it an onslaught—upon gold, launched and led by the Government of the United States. What is to be noted is that there was no such attack on gold until approximately two-thirds of the gold which had been accumulated during the war and dug down in Fort Knox had left the United States. The Governor referred also to the fact that he felt that this attack on gold had been overdone, and he gave the reason, as the noble Lord, Lord Boothby said, very frankly. The enthusiasm for getting rid of gold owes much to the fact that, in this inflationary age, currencies cannot stand comparison with gold or, for that matter, with any standard.

My Lords, I ask the question, was there ever a more significant charge of dishonesty against Governments—and this against the Governments of peoples who claim to be among the most instructed and enlightened? Does our own Chancellor of the Exchequer take a stand in opposition to the Washington view? His attitude was described by one report I read as loyally following a few paces behind the American Secretary of the Treasury". As your Lordships know, Bretton Woods recommended that, as a temporary measure, two currencies, the dollar and the pound, should be considered acceptable to supplement reserves which otherwise would have been held only in gold, subject to the maintenance of certain conditions as to their convertibility. The United States and, to a lesser extent, this country have played fast and loose with these convertibility conditions. I need only quote the arrangements with the Germans to hold half their reserves in dollars and not ask for it to be converted, and the arrangement made that practically all the reserves of the countries in the Far East are held in virtually inconvertible dollars. I wonder whether it is not the fear of losing face in the Far East on this question that is weighing very much with the authorities in Washington. It should not be forgotten that much of this money has been on deposit in New York for a long period and has earned interest which gold would not have earned. These reserves have been very much increased in dollar terms by the interest which has been paid. This has increased the deficit of the United States on their balance of payments. The same is true of our own payments of interest on pounds deposited in London, whereas no interest is paid on gold. In my view, one of the advantages of gold as a reserve currency is that it does not earn interest, because payment in gold is a final settlement of an international debt. unlike a payment in the debtor's currency.

Our present Government has now apparently abandoned the role of sterling as a reserve currency, or perhaps I should say, accepted the inevitable, for if people do not want to hold a particular currency as part of their reserves, it ceases to be a reserve currency. But this leaves the dollar in a unique role while among people everywhere there spreads an increasing distrust of all paper money issued by Governments which are unwilling to have it tested by any standard.

I know that the noble Lord who is to reply to this debate will say perhaps that he is looking for a rational system, and I know that he does not consider gold as an entirely rational system. But the world is not entirely rational, and the decisions of men are not entirely rational. If he is going to wait until he gets a completely rational system, I am afraid we shall never get an honest currency or any international monetary policy which the peoples will trust. We have only to think what would happen if this dishonesty were extended to the standard yard or to the shopkeeper's scales. Why should anyone be expected to maintain a fixed unit of measurement if the Government refuse to do so? Why should not the scale give a little less for a pound of goods every year, and a yard contract 5 or 6 per cent. every year, and so keep in line with Government policy in letting the value of its paper money slip 5 or 6 per cent. each year, not to mention two devaluations?

I suggest also to the noble Lord who seconded the Motion for the humble Address that what is disturbing people everywhere is not the breakdown of communications, but the fact that some glimmer of the truth is beginning to break through, thus threatening to hound Governments out of their complacency and attempts to confuse the issue. As a direct result of the failure of Governments to maintain reliable and honest currencies we have seen exchange controls imposed all round. When one examines this matter, one sees that it is nothing but a return to a form of serfdom, tying men and women to their places of domicile and ensuring that, on revolt, they can be deprived by their masters of their travel documents. Indeed, when they are allowed to travel they are subject to limits which advertise the bankruptcy of this country while the Government, in the gracious Speech, would have us believe that all is going well.

We are each month given balance-of-payments figures, but Government expenditure on certain armaments is excluded from those figures and we know that it is Government expenditure, rather than the failure of industry to export, which is the greater cause of our difficulties in our balance of payments. The gracious Speech says nothing about this. No mention is made of the vast sums which have been borrowed, and we should remember what some of us used to be taught that, "He who goes a-borrowing goes a-sorrowing". No reference is made to the fact that, even while the gracious Speech was being written, brokers on behalf of our creditors were engaged in urgent discussions with the Treasury as a result of which new curbs on spending and wage increases are being imposed.

No word is said about the Basle agreement. Perhaps the Government are not very proud of this agreement, but we know nothing about how much has been taken up under this facility. Some indication of the position of the country might have been given if the Government wished to show themselves a little frank with the people. I have no objection to Ministers changing their mind when they find their policies are mistaken, provided that they are frank with the people whom they have deceived. I should like to see reinstated the practice of donning sackcloth and ashes while apologies are proffered for mistakes. Mistakes would earn more respect if they could make that sort of confession.

Lastly, I am concerned about the way in which our policy East of Suez is being presented. At the time the papers in the Far East were carrying reports of Her Majesty's Government's intention to withdraw by 1971 there appeared in the same newspapers assurances, official or semi-official, that, if needed, the forces being withdrawn could reappear within 36 hours. In my view, under the prevailing conditions and in the light of the arrangements which Her Majesty's Government have at their disposal at the moment, all this talk is completely misleading. It is, in fact, double-talk.

This double-talk persists even in the gracious Speech. The continuing withdrawal to be completed by 1971 is referred to in one sentence, and then the gracious Speech continues: Furthermore"— the word "Furthermore" seems to me to be rather inappropriate to introduce the next sentence— my Ministers will maintain their efforts to promote conditions favourable to peace and security in the areas concerned. Surely, in order to avoid creating a void Ministers should first have tried to ensure conditions favourable to peace and security in the areas concerned, if they believe this to be possible. There never was a time when it was less possible to predict the conditions which will prevail even in one year's time from now. Who knows what will be the consequences of the new attitude of the American Administration in Vietnam? Who can be sure of continuing stability in Indonesia, or even in the Federation of Malaysia, of which there is some criticism in Sabah and Sarawak, or for that matter in regard to the future of Singapore?—although the people of Singapore are making a great attempt to cope with the situation in which we are leaving them.

Of course Britain cannot play the role she did, but if ever sound counsel was needed it is at this moment. With American prestige tattered and torn, the task is immensely more difficult, but I would venture to suggest that stability in this area of the Far East—which must be potentially one of the richest in the world, where the French have left a valuable cultural and linguistic heritage, and where we have a considerable private investment which has raised the standard of living of people in the area—depends upon Britain's being able to bring together the Government of Australia, in the South, and the Government of Japan, in the North, in co-operation with the much weaker States which lie between these two great Powers.

We contributed to this area a most impressive capital investment, before such institutions as the World Bank or the Asian Development Bank were established, and I still believe in the Liberal doctrine, that the less Governments are involved in these matters of trade and commerce the better, for the reason that every time a firm gets involved in a quarrel it is a matter of national prestige if the Government are involved; and if it is a difference between two firms in different countries it soon becomes almost a reason for war. All this has to be watched in looking at the work which the World Bank and the Asian Development Bank are doing.

I think the Asian Development Bank, in particular, is being careful and understands that it is necessary for the money that they lend to get to the people who are doing the job, which has not happened with a great deal of the money that has been spent in the past. But so far none of these inter-governmental institutions have been able to rival the work that was done by the British and, to some extent, by the French in private investment.

It would be a disaster indeed if, because of the difficulties arising out of political differences, the peoples of this area are denied the benefit of the great prosperity which could be theirs.

I suggest, my Lords, that in the circumstances in which we are placed we must try some new methods. This is not a question of armies and navies, but of meetings. I should like to see a series of meetings designed to promote friendship, to bring together countries which have contributed something of value to the area in the past and the Governments now established in the area—Australia, Indonesia, Singapore, Malaysia, Brunei, the Philippines, Japan and, perhaps at a later date, Vietnam, Cambodia and Thailand—to work out, under the chairmanship of Britain or, if you like, of Britain and France, greater security for the individuals in the area.

I do not pretend that this is an easy task. I know that deep suspicions of neighbours exist in this area. I have tried a little, unofficially, to get a number of people to talk together about their problems. But surely this is the best way by which we can contribute something to this area at the present time. It is what the individual and the family feel and enjoy that matters. If this is to become a credible policy, honesty is a prime requisite for trust. Greater security in the area, for which we must work, can come about only through friendship between the peoples. This has to be built up. It is the only firm basis of security for the future. My Lords, I suggest that to this task we should immediately set our minds.

5.45 p.m.

LORD BALOGH

My Lords, as a recent and somewhat unlikely maiden I should like, if I may, to add my congratulations to the noble Lord, Lord Jacques, for what was an exceptional performance in rather intimidating conditions. Turning to the debate, the noble Earl, Lord Jellicoe, opened it with a statesmanlike reference to the longstanding nature of Britain's problems. He then gave a most interesting list of admirable fields, especially for public spending. Unfortunately, immediately afterwards he turned his criticism to the problems of short-term management and averred the need for severe cuts in all sorts of expenditure, both public and private. I wondered which was the authentic voice. In the debate on the Finance Bill, the first debate in which I had the great privilege and honour of participating, I do not remember criticisms of the Budget for its particular leniency. But perhaps others as well as Ministers can also change their minds.

EARL JELLICOE

My Lords, I am sorry to interrupt the noble Lord so early in his speech, but I should like to point out to him that although I was not able to participate in the debate in this House on the Budget proposals, way back last January I was calling for some reining back on consumer expenditure. So there is no inconsistency at least on my part.

LORD BALOGH

My Lords, but between then and July, there was a Budget which could not have been called very lenient. It would be as untrue as it would be foolish not to admit that the development of the British economy since devaluation has not been up to the best hopes. A great deal has been accomplished, not least the agreements about sterling balances which have lifted a great deal of the burden of anxiety from our shoulders. But as the Prime Minister said, we have yet to regain the freedom of action which is needed to implement the tasks which the Government have set themselves.

The reasons for this are not difficult to find. Until July exports did not rise sufficiently to give the economy the much needed boost. It is not always realised that our share in world exports declined by some 10 per cent. in the first half of the year. Since then there has been some gain, but still not sufficient to meet the needs of imports and other burdens and to leave a surplus. From this point of view, it was certainly not helpful in the period immediately after devaluation, that some of the most powerful representatives of British management asserted, contrary to all reason and experience, that it was a hindrance to exports rather than a help. Consequently, the productive and sales effort did not immediately increase, and, also, the opportunity was missed to arrange for the increased shipping space which was bound to be required.

The second, and perhaps even more disturbing, feature is the steady increase in imports of manufactures—rather than of foodstuffs and cheeses—even after devaluation. This seems to be due to a shortage of adequate productive capacity. This can be clearly perceived in the chemical industry, and also in regard to machinery of all kinds.

Finally, it must be said that the export of capital, at a time when Britain can least afford it nationally, has attained a quite disturbing magnitude. The relief from a cut of Government commitments has yet to materialise. Altogether, the pattern of experiences of the past year was not dissimilar to that which lies at the bottom of our difficulties. Yet, in purely economic terms the quantitative problem of the balance of payments facing Britain seems relatively minor and manageable. It demands no more than the reallocation of a small fraction of the resources available (perhaps 2 per cent.) to exports and imports substitution. In addition, we would have to increase our domestic investments. This, again, would not absorb much more. The way would then be open to an accelerated expansion of our productive capacity, and with it the ebbing of the present need for restraint on incomes and consumption.

The reason why this adjustment has not been accomplished is because of the reluctance to face the need for radical changes in institutions and attitudes. This reluctance has expressed itself in simple theories which explain deep-seated and complex socio-economic problems by reference to impersonal, quantifiable and easily manageable factors. Recently, for instance, some pundits (or should we call them "sub-gurus"?) re-discovered the more primitive forms of the theory which explains large movements in the balance of payments and in the national income by reference to the quantity of money.

The noble Lord, Lord Boothby, made a characteristically brilliant speech. I was delighted to hear that I have been promoted from a mere "goulash" to a "rhapsody". But perhaps the noble Lord overestimated the power of British Government to do mischief. They may not have reacted rightly, but the change came from the inevitable march of events in the wake of two wars. I also wonder whether he and the noble Lord, Lord Fraser of Lonsdale have considered the consequences of a downward fluctuating pound. So long as it fluctuates up and down, it is all right. Basically, however, this is not a case for monetary manipulation, but only for the productive effort which will restore British industry to its previous place. There are no easy options. We need a complex of policies which deal with the complex of problems which are really the accumulation of half a century of harsh change in Britain's international position in the world.

The crisis also orginates in the shift of domestic political power. This shift inevitably imposes constraint on the choice of policy weapons. Unemployment can no longer be used by any Government as a conscious tool to reach equilibrium. Nor can the helpless position of the worker serve to enforce discipline and low wages and so maintain competitive standards without excellence in management. Thus, strangely, the pleasanter and more humane society gets, the more difficult it seems to maintain its expansive momentum. It is the failure to invest, the failure to make the best and quickest use of innovation and to build up new industries, on the one hand, and the failure to postpone consumption until an increase in competitiveness permits us to do so, on the other, together with onerous international commitments, which is at the root of the country's difficulties. They are not of yesterday's making—not even of the 13 years' making.

The one signal hope is the unexpectedly sharp resilience in our productive effort and in productivity in a period of high unemployment. This may augur for better things to come. To emerge from this morass of well nigh half a century we must restore British industry to its freedom of competition, and thus obtain the means for domestic reform. The Conservative Party hoped and hopes to achieve this by increased incentives to "abrasive" competition. The result was an interesting deficit each time employment rose and a shrinking surplus as domestic conditions worsened. It is against this ground-swell of history that the policy which the present Government have pursued since their inception must be judged. This was to achieve the readjustment in Britain's industrial position through a combination of industrial restructuring and a restraint on incomes. While much was achieved, it was insufficient, as we know, to stave off devaluation. Devaluation, as it has become clear, it not an easy option, but it is far preferable to unemployment and stagnation. It does mean, if it is to work, a restraint on real income, though not necessarily an actual cut. And special measures are needed if social justice is to be safeguarded.

What is essential to recognise is that the broad economic strategy of the Government, aimed at avoiding devaluation, is the right and proper policy to make it work. It consisted, first of all, of direct measures to improve the balance of payments. In the second place—and, in the long run, far more positive and important—were the indirect measures aiming at increased productivity through increased investment. The third task the Government set themselves was to bring the increase in incomes in line with productivity, thus avoiding a spiral of wages and prices. This was and is an essential condition of Britain's industrial survival if a continuous weakness of the pound is to be avoided. Finally, there was the protection of the weak through social measures, including redundancy payments, earnings-related unemployment benefit, pensions, family allowances and so on. Here, again, the record is unmatched.

If Britain had ample time for manœuvre, the policy measures initiated after devaluation would give us ground for firm hope that the immediate crisis, which has been with us since at least the beginning of 1964, would be overcome. But we are not in that happy position. A greater sense of urgency is therefore needed in all directions if we are to succeed in time. Much the most immediate reinforcement must come in the field of incomes and prices policy—not, indeed, because it has social priority. No; it is urgent because it is the only way in which the cost advantage gained by devaluation can be preserved and time gained for the positive policy to work. No amount of tinkering with taxes, interest rates or credit controls can preserve Britain's competitive power. Taxes and credit manipulations can free resources needed for export and import substitution—and they are indispensable—once the export drive or import substitution has succeeded. But the success of export and import substitution will depend on prices and incomes; that is, on costs being kept in line with those abroad.

Modern social and political change has destroyed the self-balancing character of the economic system, and it is not easy to see how this will ever change back. The reason for this is that each wage increase justifies itself by providing the reason for the next price increase. This in turn gives the impulse for further wage increases. A prices and incomes policy is therefore not a temporary need to deal with an emergency; it is a permanent, structural need. No one with a sense of social justice can fail to sympathise with the leaders of the trade unions in their present position. They are under pressure to obtain greater equality in income distribution. Yet it is clear that present-day wage bargaining can lead only to a temporary gain of one group of workers against others, while imperilling the stability of the system. Moreover, if industrial action disrupted stability, if it imperilled recovery, in my humble opinion the whole future of the Labour movement would also be imperilled.

Clearly, we must look to the positive part of the policy package. As the noble Lord, Lord Brown, has emphasised, the more successful we are in increasing productivity, the less there is need to restrain incomes. There is no doubt—and his exposition was convincing—that this Government have done more to accelerate technical progress and change in British industry than any other. But the weight of the past is still with us. The lost export markets and the disproportionate growth of imports of sophisticated manufactures testifies that the adaptation of Britain from being a pioneer in industry producing textiles and standard machines, to supplying modern requirements, has not yet been accomplished. American enterprise in the advanced sectors of British industry is uncomfortably large. The profitability of American business at home and abroad outpaces that of the British in almost every industry where they compete. Basically, it has been the sluggish response of the private sector to new opportunities offered by technical progress and by the economic measures of the Government which is at the base of our difficulties. Again, a lack of professional labour management has aggravated the restiveness and the feeling of alienation of a large mass of workers.

I know that a number of your Lordships hope to achieve a transformation of attitudes all round, Hey presto!, by a cut in direct taxation. I have already pointed out the contradiction between the assumption of onerous obligations and the promise of reductions in taxation. Alternatively, if the idea is, as the more moderate pundits suggest, the substitution of a value-added tax, a monetary policy for direct taxation, let me add here only that the effects of an increase in the price level roughly three times as that caused by devaluation do not seem to have bothered the learned gentlemen who advocate this. In the same way, both the noble Earl and the noble Lord, Lord Byers, have extolled savings. But, surely, if we are to call in savings as a substitute for taxation, we ought to make a difference between savings earned, savings acquired and savings inherited. I have yet to see the machinery devised for the purpose.

My Lords, I come finally to the role of Government in restoring a basically sound, long-range industrial dynamism. Some say that the one decisive role the Government should play is that they should keep out. Historical experience does not support this view. Neither in the inter-war period nor in the post-war period was the do-nothing policy a success. Although in terms of the acceleration in the increase of productivity in the midst of very critical circumstances the record of the Labour Government is impressive, I believe that urgent reconsideration is needed of the methods by which the Executive has been accustomed to deal with industrial matters. This machinery is based on what are called sponsoring Departments. These have a double role. On the one hand, they are supposed to be the channel transmitting signals from the Government to industry; on the other, they receive representations from the industry under their wing. As Bismarck once remarked about his Ambassadors: When they are in one place for any length of time they become the other Governments' representatives in the Wilhelmstrasse rather than my representatives abroad. This is obviously one of the grave dangers.

When it comes to reform, self-policing is hardly ever effective. We have seen that recently in the City, which has above all always held that there is nothing that gentlemen could not settle among themselves. We have seen it in a different context in the failure of the chemical industry to implement vigorously the recommendations of its own E.D.C. to achieve increased import-substitution to the tune of at least £30 million per annum. In fact, imports are running at an annual rate of nearly £100 million above last year.

There is then the curious overhang of the Suez surcharge burdening the balance of payments by millions when the oil companies were never more prosperous. There is, to give a final example, the problem of the price for North Sea gas which is extracted by large-scale companies. This discovery was indeed a unique opportunity. Have we fully exploited it? Have the advantages of the discovery been secured to this country—either to the consumer or to the Exchequer? The law governing the discovery is far less effective in exacting royalties and participation in profits (and it is not a law that was passed by a Labour Government) than those not only of Canada but even of the smallest Sheikhdoms in the Persian Gulf. Nor has any provision been made to control the rate of profit on investment in exploration or exploitation such as governs the gas fields of the United States.

In the United States—not given to socialist experiments easily—there are established independent quasi-judicial bodies in all fields where abuse was experienced. Stock Exchange security issues, banking, power, oil, takeovers, natural gas, railways, mass communications, food standards and many other fields are subject to continuous supervision. We could do with a suitably adapted version of this system. Particularly, we need a continuous supervision in those fields of industry where tacit agreement exists not to disturb high-cost producers or where the largest firms studiously refrain from competing with smaller fry for fear of being denounced as monopolists. Official philosophy on monopolies needs radical overhaul and modification. Problems which can be solved by once-for-all structural change; "bust-trusts" are no longer the most important. We need a different approach when large-scale firms enjoy monopoly power because it is the inevitable consequence of productive efficiency. It is also urgently desirable to consider whether the formulation of industrial policy should be entrusted to a Department which has no specific industries to sponsor.

My Lords, I conclude. The country has been given an opportunity to escape from its age-old basic economic malaise. Negatively, it is essential to keep costs and prices steady; positively, a concentration of a widened investment capacity and reorganisation are essential on accelerated domestic rationalisation and reorganisation of industry. If this cannot be accomplished quickly enough through conventional policies, it would be wise to keep an open mind about changes. Success can be achieved; and in my opinion it can be achieved without sacrificing any of those great political and social accomplishments which make Britain by far the most agreeable country to live in. It will depend on its excellence in its sense of individual and group responsibility and moderation, whether Britain can regain its lead not now in the crude power game but in the subtle accomplishments of a mature community.

6.7 p.m.

VISCOUNT RIDLEY

My Lords, I should like first to add my humble congratulations to the noble Lord, Lord Jacques, on his maiden speech this afternoon. I possess very few qualifications which entitle me to address your Lordships on the matter of economics, but perhaps one of the smaller ones which I do possess is that many years ago for a short period I learned this subject under the noble Lord, Lord Balogh, at Oxford. I am sure that he does not remember me and I hope he will not think that I blame him if there are gaps in my economic knowledge. Nor do I hope that he will think that I agree with all that he said then or says now. But I am sure your Lordships will agree that we have just listened to a most distinguished speech from a great expert.

I should like tonight to concentrate on a rather narrow point in the gracious Speech where it uses the words: My Government will develop policies … to make fuller use of resources in the Regions. I should like to draw the attention of your Lordships very briefly to the economic troubles of one of these regions, the North of England. I define the North of England as in the Regional Economic Plan it is so defined, as, roughly speaking, the counties of Northumberland, Durham, Cumberland, Westmorland, and the North Riding of Yorkshire. I have no doubt that your Lordships will think that this part of the country has for far too long been a problem to this nation and has far too often complained about its economic situation over the years to the extent of becoming almost a bore about the subject, but I think the fact of the very persistence of the economic depression in the North of England demands the attention of this House. Indeed, I do not believe that the situation is vastly different from what it was when my father addressed your Lordships' House on the same subject in the same debate in 1937.

In this part of the world where I live, it is true to say that we are completely obsessed with unemployment. People still talk about the Jarrow march, and whole generations of people are affected in their thinking by this very unpleasant spectre hanging over them. I believe there is a danger of a form of regional paranoia, if I may use the word, which does no good to the region or the country. I do not wish to take up very much of your Lordships' time, but I should like to explain how and why I feel that we must do the best we can to tackle this criminal waste of human skill and effort and should refuse, if we can, to continue to live under this perpetual cloud. I do not need to expand on the tragedy which it means to those who are directly and personally involved. The figure of wholly unemployed men in the Northern Region in October, 1964, when this Government took office, was 28,850, or 3.4 per cent. At this moment the figure is 52,450 or 6.2 per cent. This means that the figure has nearly doubled in four years. I think it is true to add that we in the North can now say that we "know how Labour Government works". The noble Earl, Lord Jellicoe, said he did not wish to lacerate the Government with figures, but it is against the background of those two figures that I should like to speak briefly.

I would repeat at once that the situation we now face goes back a long time before 1964, as other speakers have said to-day. I hope it is clear that I do not wholly blame the Government for the creation of this situation, but I would ask whether they have done what they should have done to attempt to cure it. In this connection I think we should ask two questions: why the North is so vulnerable to this disease and, secondly, whether the measures which are in force are going to work. It is, I think, an accepted fact that the decline in the older basic industries, such as coal, steel and shipbuilding, which the 19th century brought to the North is responsible for our troubles. Though they do not lack problems, it could, I think, be said that some industries, such as shipbuilding, may have turned the corner by now. But in the coal industry, which has for so long been the backbone of the North, there have been very drastic changes which have not by any means finished yet. I am convinced that there has not been a proper appreciation in Government circles of the scale of the problem caused by the closure of collieries as the coal industry declines.

In the Northern Region to-day there are about 65,000 men wholly employed in coal mining in one way or another. In December, 1965, this figure was 87,000, so that over 22,000 have gone. The noble Lord, Lord Robens, has quoted the figure as being down to 6,500 men by 1980. This, of course, is a very rapid and tremendous rundown and I think these are the figures with which we are compelled to deal. It might be quite logical, and perhaps it is logical and correct in the context of our national fuel policy, that this should happen. I am not sure that I agree that it is, but it is not a subject about which I wish to argue tonight. What I am sure is that the nation has not yet faced the social consequences of this policy.

There is colossal cost, as your Lordships know, in inefficiency, in human misery and unemployment. There is also migration to the more prosperous parts of the country, and a steady stream of people are leaving the North at the present time. Again, that may be inevitable and even necessary, but I do not believe that any real attempt has ever been made to assess the cost of providing for the resultant congestion in the South-East or the Midlands. I suggest that we need a real study of these matters going beyond the sum of the plans made by the Regional Economic Planning Councils; because if you add these plans together, you find that they are all assuming a total growth far beyond the nation's capacity. Nor do I think that enough public credit has been given to the Coal Board for the way they have, so far, handled this tremendous rundown in their industry. But, as I have said, I believe that they face far greater problems in the future than they have tackled in the past.

The problem of what should be done remains as intractable as ever. The Government have been deeply concerned for many years with the problems; there has been much thought, and very much public money has been spent. I think we should examine whether this money is adequate and whether there are better methods of spending it. The unemployment situation became a national matter, I think, in about 1962 or 1963, and the noble Viscount, Lord Hailsham, as he then was, was despatched to the North-East to investigate the situation. He produced what I believe to have been a clever and a brilliant report which, in brief, concentrated Government assistance into what was called "growth zones". After 1964, when this Government took office, there was for some vital period no such dynamic leadership and no such concern in Whitehall over these particular matters. Now we have the Chancellor of the Duchy of Lancaster, who has done his best for us, as the Minister responsible for the North. I agree that he has done what he could, but we have had a lot of legislation as well which, in fact, merely boils down to replacing the growth zones with development areas and special development areas—what were known as "ad hoc regions"—and we have lost a great deal of time.

The core of the problem is the attraction of new industry to the development and depressed areas. New industry does not grow on trees; it has almost to be bribed to come to the North. There have been many successes and much new industry is coming, but the advent of new industries and the expansion of existing firms is just not keeping pace with the decline in the older ones; and though, as I have said, much has been done, not enough new jobs are being produced even to begin to compensate for those lost in the coal industry alone.

Are the Government doing everything possible or could the money be spent more wisely? Here we have to distinguish between direct subsidies—for example loans and grants to new firms and large factories—and all the other things which come under the Local Employment Act and other Acts. I believe that these are generous and probably go as far, or further, than it is prudent to go. I would qualify that by saying that there are a few points which could be improved upon. Perhaps they might be applied more selectively in the form of loans and grants, and that the recent decision to exclude help from the smaller service industries employing fewer than 50 persons was a very retrograde step. I think, further, that the extra assistance available in special development areas should be more readily available to those firms which are expanding within the area as well as to those who are newcomers.

In this connection we must realise that the system of a refusal of industrial development certificates in the South or the Midlands is one of the most important weapons at the disposal of the Government, and to abolish or relax this system of control would be totally disastrous. There is a considerable case for removing, so far as we can, certain doubts in the minds of people about the duration of these direct incentives, because I feel that the region will have to enjoy them for a long time to come if they are to be of any use.

On the other hand, we have the indirect subsidies. The major one about which I should like to speak is the Regional Employment Premium, which is now known as the "R.E.P.". At the moment the country is spending some £29 million a year on this in the Northern Region. It is this sum which I question as being wisely spent. I believe that the money could far better be spent on other things. I do not think that this bonus has had more than marginal effects on employers and I doubt wheher it has resulted in any significant increase in the numbers employed. Nor has it, as yet, lowered costs by any significant amount. There is indeed evidence that it is inflationary, in that the unions may demand that it should be passed on to some of their members or, as the C.B.I. says, "R.E.P. will leak into wages." However, one must admit that a good deal of it will be recovered in corporation tax in due course.

My Lords, if we are to have the selective employment tax mechanism, I should have thought it would be far simpler and cheaper, and in every way better, to reduce or to remove the selective employment tax completely in development areas. I do not think that we have any idea of the serious harm which this tax has done to the problem which I am discussing. What are the needs for which we could use this sum or an equivalent sum, were it available? I believe that, first, we should put improvement in the retraining facilities for the unemployed. There is still much more to be done and, incredible as this may seem, there are still very many vacancies for skilled men in the Northern Region in many industries. The C.B.I. said recently in their regional study that their members unanimously and constantly say that it is chiefly the shortage of skilled or trainable labour which deters firms from moving into a development area. I believe this to be a terrible indictment of our policy. We must ensure that the unions as well will more readily accept retrained labour after it has been retrained.

I was very interested to hear the noble Lord, Lord Brown, refer to the increase in retraining centres which the Government have provided recently. I would be the first to say that this has been a most effective and valuable contribution. But I believe also that the number of retraining centres may be less important in this connection than the present inadequacy of allowances which are paid to trainees while they are being retrained.

Secondly, referring again to this R.E.P. figure of £29 million, it is my opinion that this sort of money would be far better spent in providing new and improved roads, airports, ports, water supplies, et cetera. Again, I readily admit that a great deal is being done. The point here is that we must have much more public investment in capital improvements to what is fashionably called the "infrastructure" in order to make the Northern Region and any other development area more competitive, because until it is competitive, we shall never get a situation whereby industrial prosperity can become self-generating, as it must ultimately become. All this cannot be done until we have improved these facilities. I am certain that all firms who are considering expansion look most carefully at what the facilities are and often decide not to come to an area because the facilities are not yet good enough. It further means that, as a matter of policy, we must not give this aid indiscriminately, because obviously we cannot afford to do this. In practice, this means refusing this aid to some areas and having the courage to say so at the time.

I also do not think that it would be of any use making this extra capital investment available to local authorities, in the usual Whitehall way, as a percentage grant. Local authorities already bear a far higher proportion of these costs than they can manage at the moment, and in my opinion these major improvements must be a Central Government responsibility. It is no accident that the local rates are higher in the development areas than in any other part of the country. I suggest that even one year's ration of £29 million in R.E.P.s for the North would go a long way to break the back of this problem.

Thirdly, perhaps more generally, we ought to consider the type of incentive to new industry, which in all this has tended to be forgotten and which is based on the simple and inescapable fact that industry expands in order to increase its profits or to improve its return on investment. I believe that in our present policy we are in a little danger of forgetting this, and we can use our tax structure to bring this powerful motive more to the front. We used to have free depreciation. Unfortunately, this has been swept away. But I believe that we could harness much more effectively this incentive and at the same time reward the efficient firm more than the inefficient—a distinction which is one of the conspicuous lacks or failures of the R.E.P. system.

My Lords, I apologise for speaking so long on this particular and rather narrow point. I do so because I do not believe that we have really tackled the basic causes of this illness. In spite of expenditure, of one sort or another, of over £300 million per annum in the development areas by this Government and by previous Governments, unemployment rates persist, and even increase. I do not think that there is any room for complacency, which we see at once in Government circles at the slightest improvement in the statistics. If the national economy demands that the North must decline relative to other areas, then I think it is the duty of the Government to say so and to make other plans. But if we want to see the area prosper, then we must consider the cost and take more realistic and more urgent steps towards that end.

6.25 p.m.

LORD WYNNE-JONES

My Lords, after listening to the brilliant economic survey of my noble friend Lord Balogh, I am glad that I am not an economist, because I should hate to be addressing your Lordships' House in competition with him. Fortunately, I am in no sense an economist and the only reason I wish to take part in this debate is that there is one aspect of our economic life which I think is vital and to which sufficient attention is not always paid; namely, education. We have a somewhat ambivalent attitude towards education. Often we regard expenditure on education as ranking with consumption, as one of the frivolities of life, as something like buying another "fridge." But most education is really a form of capital investment and probably the most important form of capital investment which a nation can make.

As I am not an economist, I can only observe what others have done in examining this matter. In the United States, a considerable survey has been made of the economic side of education. There is a clear relation between the lower wages and lower standards of the Negro relative to the white worker and the amount of money spent on Negro education relative to the amount of money spent on white education. If one goes further, there is little doubt that this is going to be one of the greatest sources of trouble in places like South Africa and Rhodesia. If they do not spend enough money on the education of the negro, there is no doubt at all that the wages of the negro will always remain enormously depressed below those of the white worker. So that education is almost certainly the most profitable field of investment.

Because of that, it is essential that we in this country should treat education as a first priority, not simply, although this is important, because it improves the quality of the individual, but also because it increases his economic value to the community. Education is vital from this point of view. It is probable that every pound invested in education will earn at least as much as every pound put into buying new plant. Therefore I would urge the Government to do what I know they have always wanted to do; namely, to give first priority to education.

In his speech, my noble friend Lord Brown referred to unemployment in the development areas and mentioned, as has the noble Viscount, Lord Ridley, the training centres that have been set up. These are very important. They are a part of education. Another factor that we are overlooking is the raising of the school leaving age. Especially in the development areas, the raising of the school leaving age would contribute more towards solving the problem of unemployment than possibly any other single measure, and it would also be a capital investment for the future. Although this does not apply to Tyneside as a whole, Sunderland has over 7 per cent. unemployment at the moment, and there is considerable unemployment among school leavers. It is a tragedy that school leavers, for whom we are not providing facilities to stay on in school, have to go out and are then unemployed. I would urge my noble friend on the Front Bench to look carefully at this matter to see how quickly we can raise the school leaving age as a matter of social importance and of industrial importance in order to put our capital investment right.

When we go beyond the schools and come to higher education—again I am not blaming the Government for not doing more, because I think they have done quite well—I would urge the Government to look carefully at the position and see whether the programme which is now being followed is really a sensible investment programme. If you treat this as a consumption programme, you can set any figure you like, and you do not mind cutting it back. But as an investment programme, I think there is a logic that has to be followed. I believe that the logic of higher education over many years to come demands that there should be at least a 5 per cent. per annum increase of the numbers in higher education. To do this would probably mean an increase of expenditure on the places where you are providing higher education of something in the order of 10 or 12 per cent. per annum. At the present time this is not being done, and in consequence, in my opinion, we are not going ahead fast enough. In other words, we are cutting back on capital investment, and this is the last thing that we ought to do if there is any sort of crisis.

It is, of course, a difficult thing to decide exactly what is the requirement in higher education; that is to say, what is our manpower need. The normal way of doing it, which has been followed by Governments for many years past, is every now and again to say to industry: "Will you tell us what will be your requirement for chemists, physicists, engineers, or whatever it may be, over the next three years?" They then all get down to the guessing book, and they make an answer which depends entirely on their mood at the time. If they are feeling optimistic, and feel that trade is going to improve, they will say they need 20 per cent. more; but if they think things are going badly, they say they need no increase at all. My Lords, you cannot plan manpower requirements in that way. Therefore, the first and most important thing to do is to improve our census returns, and include much more in the way of educational requirements in those census returns in order to have the facts which, to a certain extent, they have in the United States, but which we in this country do not. We have not the proper facts to work on.

It is interesting that in 1955 the University Grants Committee, at the suggestion of the Government, told the universities that they should provide two-thirds of all their new places for students in science and technology. This figure of two-thirds was, I believe, arrived at from looking at the numbers who had been taking the science subjects in the G.C.E. at A level over the previous few years. But, unless you know what you are about, the situation changes as you examine it and the two-thirds figure which was fixed in 1955 was already out of date by 1959, because the trend had reversed by 1959 and fewer scientists were coming forward. The result is that we have the position to-day that throughout higher education there are vacant places in science and technology, which were planned by deliberate Government policy, and which are there because there was no means of assessing what was going to happen.

It is this sort of thing which is so serious when one is dealing with capital investment, which I am sure is so in education. It is highly important that better investigation be made of this. Incidentally—I have mentioned this before in your Lordships' House—I think it is an absolute scandal that in the training colleges of this country, where practically all our primary school teachers are trained, only 10 per cent. of them receive any science instruction. It is not very surprising that we end up with too few scientists and technologists at the university level if the school teachers in the primary schools know nothing at all of science. That is the present position. In other words, our planning has to go further back than it does at the present time.

My Lords, I should like to make one final comment, because I do not want to keep your Lordships any longer at this late hour. I would say that one of the most important things that education can do is to raise human capacities, and these capacities are the capacities to do work that puts ever-increasing demands upon man's needs. In other words, it is only education that will give us the driving force throughout our industry—and I am not referring to management only, but throughout our industry—to create and solve the problems of to-morrow.

6.36 p.m.

LORD HANKEY

My Lords, we have had an interesting and, I think, constructive debate. I agree warmly with very much of what was said on the subject of education by the noble Lord who has just sat down. There is no doubt that education adds enormously to the productivity of the economy. Unfortunately, it has to be paid for. Much has been said in our debate about the need to control demand and public consumption and to produce a more acceptable level of imports. But there must be a balance between demand and supply, and all of us, individually and collectively—and this goes for the Government, also—have shown a tendency, unfortunately, to spend and consume more than we in the United Kingdom are producing and earning.

The weakness of the supply side of our economy has really become a grave embarrassment. I believe that, by comparison, too much attention is being paid to demand at the present time, and that much more attention needs to be paid to the supply side of our economy, because it is obvious that we are failing to take advantage of the opportunities offered by devaluation. I agree entirely with what the noble Lord, Lord Balogh, said about that. We have had some success, but we have not had enough, and we are not making the grade quickly enough. The noble Lord, Lord Byers, and the noble Earl, Lord Jellicoe, made similar points.

My Lords, why is this? In the nine months to last September, according to an Answer given in another place on October 21, we lost 3,874,000 working days through industrial stoppages. This was nearly twice the figure for the whole of 1966, and well over twice the figure for the whole of 1967, both years marred by a large number of strikes. No wonder our exports are slow to expand! So long as this continues, the Government will clearly continue to have to impose unpopular incomes policies, a high bank rate and more taxation, with consequent higher prices. But these measures feed the very discontent which I have mentioned, and make the strike situation worse. So that we are in a vicious circle.

We must not underestimate the seriousness of the situation. We fail in our export delivery dates. According to the newspapers, we have recently had to send two ships away to be finished in Norway. We offend our foreign customers by inexcusable delays in deliveries. Our sterling area depositors are so concerned that we have had to get extra backing from our European creditors. I do not see anything to be pleased about in this. It is really due to the failure of the supply side of our economy. We have had to renounce or give up many desirable and necessary items of public expenditure, including a good deal on the education front, to which the noble Lord, Lord Wynne-Jones, referred, principally because we have failed to keep up with the times and we have not allowed the great genius of our industrialists and working people to assert itself. At the present time, any selfish small local group of workers can stop or hamper a whole great integrated industry. Such groups do so constantly, one after another, in different sectors. It really makes no sense.

This has a great effect also upon the capital movements side, because I am sure that our boards of directors hesitate to introduce new machines, new processes and new working methods when they are sure that they will not be able to control the resulting chaos; and it may lose them contracts which by sticking to old methods, out-of-date methods, they would still have been able to secure. So our factories, our shipping, our railways and our docks have been subjected to a form of unlicensed economic and social warfare, almost always in the form of unofficial strikes, "go-slows", working to rule, restrictive practices and so on, without any regard to the carrying out of works agreements and contracts, or to the interests of the industry, or to the interests of the other workers in industry; and, of course, still less to the public interest.

Personally, I think that our devalution last year would have been totally unnecessary if this situation had been tackled in time. But I quite understand that we had to wait for the Report of the Royal Commission on Trade Unions and Employers' Associations before anything could be done. We have paid a very high price for the delay in getting that Report out of the Royal Commission. So I make no excuse now for devoting myself to the Donovan Report. There is no other point, I believe, at which we can break into the vicious circle which I have mentioned, in which the Government's own measures to control demand are magnifying industrial discontent. We must radically improve the efficiency of our industry by reforming our archaic system, or lack of system, of industrial relations. I think that the Donovan Report shows up this situation very clearly in the opening chapters.

I wish to urge that our present troubles are due not to the fact that our trade unions are too strong, but, quite on the contrary, to the fact that they are, with a few exceptions, too weak, much too numerous and do not carry their proper responsibilities. This sounds a strong statement for a former member of the Diplomatic Service to make, but I have had ample opportunity, and, may I say, expert assistance, to study the trade union system in Sweden and other countries; and I was for years, at my own request, a Member of the Trade Union Liaison Committee of O.E.C.D. in Paris. I have been proud to know many leading British and foreign trade unionists and also industrialists, so I hope your Lordships will accept my entry into this field.

An employer can establish relations of cordiality and confidence with two or three trade unions, as I think is shown in many cases in this country and also abroad. But he cannot do so with 30 trade unions, as for instance in shipbuilding. The Confederation of Shipbuilding Unions unfortunately has no adequate status or power. I believe the situation is worse in the motor-car industry. There is a structural problem here, which the Royal Commission hope vaguely may slowly remedy itself over the years, though I personally think something more ought to be done about this. However, I shall not go into details about this to-day. I mention it only because it is an absolutely fundamental point in obtaining better industrial relations.

I am more concerned at the present time about the legal side. Fundamentally and historically our law has seemed to regard a trade union as basically a sort of conspiratorial organisation which must be legalised and excused for breaking the laws that all other citizens have to keep. But it is time that we, as legislators, swept away this idiotic and archaic inheritance from our past. An efficient trade union in each industry is an essential driving band for communication between the workers and the employers. It should work both ways, as driving bands do. It should operate effectively at works level and at industry level. It ought to include most of the workers in the industry. It should be responsible for seeing that collective bargains and agreements are not only acceptable but also carried out. The unions should be properly registered and officially recognised, as the Royal Commission propose, and I personally believe that the collective agreements should also be registered.

I cannot see any reason why works agreements, if they are properly made, as they should be, should not be made enforceable. They are enforceable in many countries. The trade unions and the employees do not there have immunity for breach of contract. I do not think anyone should be able to tear up or disregard a contract of employment with impunity: neither the employer nor the employee or the trade union. As Mr. Shonfield points out in his Note of Reservation, the more powerful the unions or, for that matter, the employers' organisations become, the more essential it is that they should be law-abiding. The law should therefore demand good faith by all concerned. I do not see how without good faith the best trade-union leaders in the world, or for that matter the best industrialists, can produce the kind of industrial relations that we really must have: industrial relations which recognise and promote the common interest of all in efficient, modern production and rising standards of living.

If agreements have to be interpreted and carried out, then I think there must be special labour courts, or other comparable institutions, with expert assessors from both sides of industry—because these questions are hideously complicated—to interpret the agreements and contracts. Foreign experience and Commonwealth experience does not indicate that there would in fact be much litigation. I agree with another point in Mr. Shonfield's Reservation: let us try to get the criminal aspect out of it. Until we can distinguish a justifiable strike from an unjustifiable or illegal one we shall never make sense of this situation. We can never abolish strikes, but we can insist that works agreements be valid for stated periods and that during the period, unless the agreements are broken, strikes and lockouts are not justified and are illegal. The right to strike or lock out should thus be canalised, like the right to carry firearms.

I am fully aware that I am urging a totally new law about trade unions. No one can read the Donovan Report, or for that matter Mr. Gerald Abraham's excellent book on Trade Unions and the Law, without seeing that whatever the historical merits of the laws of 1871 and 1875, 1906 and so on (and undoubtedly there were merits at the time), they are now totally out of date. We should, I urge, now kill the "sacred cow" and make an altogether better system. The new Act should give to trade unions their proper place in industry and their proper responsibilities. I am not impressed by the argument that this cannot be done because they are voluntary organisations. They have to be made to carry their proper responsibilities now and to ensure that their members do so, too. I believe that nothing will make this more certain than making works agreements, and especially procedure agreements, enforceable. I think this will strengthen the unions and strengthen the hands of their leaders—and I do not think any country in the world has better trade union leaders than we have. It will make everyone more careful. It will greatly encourage proper consultation in industry. I was interested by a remark which the noble Lord, Lord Byers, made in favour of works councils. This system works in Germany, though the Donovan Report expressed some doubts about its real effect. But I believe that further consideration ought to be given to the desirability of encouraging the formation of works councils in a great many more factories than now have them. I know that the system already works well in a few.

The new law, in my opinion, should also make it clear, in a declaratory section which our judges can interpret in framing subsequent Case Law, that our workpeople have a right to work and to produce, and that they should not, so far as possible, be interfered with by irresponsible actions or unjustified stoppages. The public interest in this question ought to be clearly stated.

I have criticised the report of the Royal Commission for not bringing out adequately some fundamental principles which serve many other countries well. I should like now to express my warm admiration of their analysis of our troubles and my agreement with very much that they propose for strengthening collective bargaining and having it done at plant level. I believe that this is essential to raise productivity, on which the Government have already done so much. I also warmly support proposals for establishing an Industrial Relations Commission. But on this and other issues I wish to draw attention to the Reservations of the noble Lord, Lord Tangley, and Mr. Andrew Shonfield, because I believe that they are on the right lines. It is most regrettable that their views were not accepted by the other members of the Commission. I believe that illness on the part of some members had a certain amount to do with this. In my view, the Report, taken by itself, is much too weak to be effective.

There is one other essential point that I want to mention. So long as our trade unions are so scattered and divided, it is impossible for them to train branch secretaries and shop stewards to play a modern role in industrial relations. Some of our great unions do this, but it is done on a quite inadequate scale. This is every bit as necessary as the up-to-date training of management. I believe it is essential that we should now recognise the need for this and meet it, as is done in Sweden and some other countries. We can no longer afford ignorance and amateurism in this field. The universities could play a most useful part in this training programme, and I believe they ought to be mobilised to do this. I am afraid we must recognise that only large and strong trade unions can afford to do this training on an adequate scale. I wonder whether, in the future, it will make sense that only 10 million out of 24 million employees in our country are members of trade unions. I should like to see the proportion greatly increased, and I should like to see the unions fewer and larger, for the most part, able to employ adequate numbers of staff and to train them in modern industrial relations. I am glad to see that this need is recognised to some extent in the Report of the Royal Commission.

I am aware that many people, on both sides of industry, dislike the idea of legislation in regard to trade unions and industrial relations. Personally, I find this attitude fantastic. We have masses of legislation, the last Act having been passed only in 1965. All those laws are seen now to be out of date. The result is disgraceful chaos in large and important sectors of our industry which has brought our country into disrepute and has enabled other countries in Europe to overtake us. We have legislation about prices and incomes which, when combined with a perpetual squeeze, has made our Government extremely unpopular and is very much more controversial. Of course there must be legislation: it is unavoidable. In any case, it is the duty of the Government and of Parliament to protect the public interest, a duty which we have signally failed to carry out for the last four years. It really should not be put off any longer.

But I wish to say this to the Government, with all earnestness. They should not think they can deal adequately with these difficult and controversial questions by just tinkering with the law, a little bit here or a little bit there. The very minimum is to take the points outlined by Lord Tangley and Mr. Shonfield in their Reservations. I hope that the Government will also undertake the broad reform of the position of trade unions, which is what I believe is really required. If they tackle this in a radical way, I believe that they will succeed and earn public thanks; but a "tinkering" failure would discourage their own supporters, with inevitable political consequences. Such action might even make it much harder for anyone else to do better. This is a difficult problem for the Government, but it will be much better for them, in the end, to handle it firmly and radically. Their duty is to uphold the public interest and not to let it go by default. The voters will not fail to judge them on this.

6.56 p.m.

LORD ARWYN

My Lords, I should like to congratulate the noble Lord, Lord Hankey, on his speech, although it is a difficult speech to follow. I hope he will accept that as a compliment, and I shall look forward to reading it to-morrow.

The gracious Speech includes the following words, which I hope to refer to in relation to the subject matter of my speech. I refer to the statement to the effect that the Government will press forward to strengthen the economy, achieve balance of payment surplus, develop industry and safeguard employment. This debate provides all of us with an opportunity to call attention to any means whereby these objectives can be achieved. Among the Members of your Lordships' House there are experts in various fields with the experience of a lifetime in very specialised subjects, apart from politics and economics. It is the duty of each of us who is a specialist in any sphere affecting our future economy to make his contribution. As I happen to be a mining engineer, many of my speeches are devoted to the future of mining, particularly base metals, all of which have been ignored by the Departments concerned.

Following the observations of my noble friend Lord Wynne-Jones on higher education, there is an interesting paragraph in yesterday's The Times Diary. It refers to some alleged provocative comments by my noble friend Lord Bowden in an interview published in New Education. Apparently, one of the complications of his position as Minister overseeing higher education from 1964 to 1966 was that he found himself knowing more about the matters of detail than his civil servants, and telling them things that they should have told him. At the same time, he confessed that he had to ask them elementary questions about the political system which he should have been answering for them. It seems to me that if my noble friend Lord Bowden had been devoid of sufficient experience in the specialised field which was the concern of his Department, he would have had to rely on the advice of top civil servants, who were, to say the least (according to my noble friend's standards), very inadequate.

It is fair to ask how many chartered mining engineers there are in the hierarchy of the Treasury, the Board of Trade and the Department of Economic Affairs. Is there anyone who understands even the plain vocabulary of the mining engineer, let alone the "buzzwords"? We are dependent upon other countries for our base metals, and we have yet to make a thorough survey of our own. I think it is fair to ask another question in view of the seriousness of the position. Has any Department suggested to the Institute of Mining and Metallurgy that they recommend a panel of mining experts be available for consultation before important decisions affecting their industry are made?

Some twenty years ago we had a comprehensive report from the Westwood Committee, of which I was a member, on the need to have a detailed survey made of our mineral sources, especially in the West Country. Some seven years ago my right honourable friend the Prime Minister made a thorough analysis of the position, especially regarding tin, and his conclusions re-emphasised the need for an exhaustive survey and appraisal of our base metal resources. He made a speech on the subject in another place during the Committee stage of the Finance Bill on June 21, 1961, which I recommend the Ministers now responsible for strengthening the economy, in the Treasury, the Board of Trade and the D.E.A., to read carefully. The subject was again raised during the Report stage of the Finance Bill on July 3, 1961, in another place when Members on both sides joined in emphasising the need for a tax-free holiday for mining companies when developing new mines in order that they should recoup the costs of shaft sinking and underground development.

It is quite illogical for the Treasury to declare that it is impossible. Australia, Canada, South Africa and Eire have all managed to legislate and encourage this recouping of high risk investment. A mine shaft cannot be taken up to some other part of the country and sold; neither can development levels and exploratory workings. It takes a large sum of money to sink a shaft and pay for specialised machinery and underground development. A metalliferous mine is not a factory whose buildings can be sold for another purpose and the machinery transferred to another factory. If after shaft sinking and development and installing the plant the ore body peters out or is proved unprofitable, then the whole of the initial cost is lost. The Treasury and the other responsible Departments are much concerned with precedents. In this case it is either an inability to face facts or a slavish adherence to departmental philosophy.

My Lords, I feel very lonely in this matter as the one mining engineer in your Lordships' House, but once more I want to warn the Government that our dependence on base metals from overseas could, in view of the geographical position and possible political changes in the Governments of the supplying countries, lead to a crisis in supply with very little warning. Is it not, therefore, utter lunacy to neglect any inducement to develop our own? It is my intention to ask a series of questions in the near future and to pursue this matter even more vigorously. Ministers, Chancellors and Governments come and go, but it seems that a rigid departmental philosophy of this kind, framed by a succession of civil servants, is too sacred a cow to be challenged by Chancellors or Ministers.

My Lords, I have been in this fight to develop the minerals in Cornwall and West Devon for over thirty years. In 1937 a committee from the Cornish Institute of Mining Engineers, of which I was President that year, went to present our case to the late Sir Thomas Inskip. We had in mind the experience of the First World War when Cornish tin and tungsten was so essential that the guts had to be pulled out of each of the few remaining mines in order to keep supplies going. The consumption of tin in those days was not very far off what it is now, and the production was about the same, nearly 1,000 tons a year. We wanted a long-term plan developed to open up tin mines closed down when the sources of alluvial tin were ample and cheaper in Malaya and elsewhere. These alluvial sources are now diminishing very rapidly. Nigeria was not a big producer in those days. We were told by Sir Thomas Inskip that we had no need to worry; all our year's output could be supplied in one shipment from Nigeria. It was all too obvious that this advice had been given by the top civil servants in his Department. Only two years before the 1939 war started we were then rearming. Even from 1937 it would have taken five years to sink and develop the mines we needed.

We in the mining industry are entitled to ask how much of this attitude still exists. Each Department will go to much trouble to defend its philosophy and resulting policy. What I want to know is who are the mining engineers who are consulted, and if there is no mining engineer or geologist available, by what standards do we measure the suitability of top civil servants to assess this kind of problem? We are deeply concerned with strengthening the economy, achieving balance of payments by reducing our cost of importing raw materials especially. We want to develop the base metal mining industry in Cornwall and other parts of the country, not only to safeguard employment but to safeguard our economy. We use over 20,000 tons of tin a year and we produce only one-twentieth. If we produced one-quarter it would save us some £6 million a year on a key metal in industry.

My Lords, I have avoided most of the technical details of my previous speeches in order to emphasise the feeling of disgust in the mining industry, and especially in Cornwall, at the failure of our Treasury pundits to accept that which is part of a fundamental policy in other countries. Mining companies do not want the Government to pay for the shafts, the underground development and the special dressing plant. All they want is a tax holiday to recoup a high risk investment which, in the case of a factory, could not be deemed a high risk. The Treasury are not asked to lose money or invest. Neither is it a valid answer that allowances for tax relief in depressed areas and other allowances are adequate. All these concessions can be changed overnight. All we ask for is to be treated as well as mining organisations in Eire, Canada, Australia and South Africa—no more and no less. We cannot be expected to embark on a long-teem development programme otherwise. Tin is an extremely essential element in the alloys used in industry (I think my noble friend Lord Brown will agree with that, because at one time he was chairman of a big company), and while the target of £6 million additional production after five years of development does not seem a lot in terms of money and the quantity small in proportion to other metals used in manufacturing, this proportion, though small, is most vital. With a thorough geological survey and the co-operation of international mining companies, the initial target of £6 million could be achieved within or near five years and then another target set.

My Lords, I shall leave tin and base metals now, but before I sit down I should like to draw attention to another matter concerned with safeguarding employment, particularly in Cornwall. In the winter works programme for 1967–68 £27 million was allocated for the various development areas; the South-West, of which Cornwall is a part, received £2 million. This year, 1968–69, the total allocation is cut to £10 million, and the South-West has none. From October to May of last year, the winter, the South-West had the worst unemployment figures of any development area, and we received the £2 million to which I referred.

The figures so far this year indicate that unemployment will be worse and there is no allocation. The £10 million is divided between three development areas: the Northern area, £4 million; Scotland, £3 million; Wales, £3 million. The only justification claimed by the Government for excluding the South-West is that they must consider the effect of colliery closures. My Lords, pit closure is a long-standing problem, as everyone knows, and I cannot accept that answer as adequate. It seems illogical to use a winter works programme to solve a problem that is not seasonal, and at the same time completely ignore the needs of a development area that has the greatest seasonal variation. No dramatic change has taken place in the area in the last twelve months that justifies this complete omission. If the Treasury had declared a tax holiday for new mines in their Budget, even from 1961 onwards, there would have been great changes by now, and many ancillary industries would have been established in Cornwall and would have developed.

The people of the South-West, especially Cornwall. are geographically isolated, and by the behaviour of successive Governments they have reason to feel so. There is not sufficient sensitivity to the particular needs of isolated areas like Cornwall and the peripheral parts of some of the other development areas. Yet the near future might see important key industries considering moving down to areas like Cornwall where there are leisure amenities readily available to keep highly technical staff contented and happy. The quality of Cornish craftsmanship is far superior to that in some of the traditional industrial areas. I have spent over forty years down there and I should know.

Some real forward thinking is very necessary. For instance, if we are to improve and provide for industrial expansion in the South-West, whether it is in mining or in sophisticated industry, we need better educational facilities, especially in Cornwall where some 80 per cent. of primary schools were built before 1902. Yet in Cornwall capital building for next year has been cut to £23,000, which is microscopic—less than one-tenth of the smallest allocation for any other county in the South-West. Is there any wonder why the feeling of being ignored gives rise to deep resentment, and the Celts of Cornwall, like the Scots and the Welsh, are rebelling against the philosophies of Whitehall. My Lords, the wounds are deep and it will take a lot of time and patience and a completely new attitude before they heal.

7.14 p.m.

VISCOUNT MASSEREENE AND FERRARD

My Lords, the noble Lord, Lord Arwyn, need not feel alone if he is, as I understood him to say, the only mining engineer in the House. I quite agree that he is the only mining engineer here this evening because, so far as I can see, hardly anybody is in the House. I can assure him that there are quite a few Members of this House who are, I understand, mining engineers.

LORD ARWYN

My Lords, I apologise for my ignorance of that fact. No one has revealed himself as a mining engineer.

VISCOUNT MASSEREENE AND FERRARD

My Lords, I certainly did not want the noble Lord to apologise, because there is nothing for him to apologise for. Through the noble Lord, Lord Arwyn, I am going to give the Government the only bouquet they will get tonight from me, because I understand that the Government's efforts in the mining areas where there have been pit closures, with more to come in the future, are highly praiseworthy. I am also pleased that in these areas miners over the age of 55 will get 90 per cent. redundancy payment for three years. In my view, that is an excellent provision, because the pits have closed through no fault of the miners. For some middle-aged miners the decision to give them 90 per cent. redundancy pay is a perfectly just one, and I congratulate the Government on that. However, that is the only bouquet they are going to get from me to-night.

May I turn for a moment to the noble Lord, Lord Hankey? I agree completely with everything he said about the unions, for the simple reason that I have been saying it in this House for years. Now that the noble Lord has said it, perhaps somebody will listen. I quite agree that it is iniquitous that in the case of a power station a handful of men can turn a few knobs and can throw out of work half-a-million people. They can cut off all the power to the factories; they can even stop the trains. This is what I call the last link in the chain. There is far too much power in those few hands. I hope that we shall follow the example of other countries on the Continent and really put our trade union law in order: at present, it is completely out of date. The noble Lord has completely covered that aspect, so I shall not dwell on it any longer.

May I turn for a moment to the gracious Speech? I have heard it called "thin gruel", a "Woolton pie"; and I think it was also called a "hotch-potch". Personally, I call it a "mess of potage"—and a rather stale potage at that, because it really is an untidy Speech: there is no definite theme running through it. From my point of view, the only good thing about it is that the legislative programme for the coming Session is going to be manageable. The legislative programme that we had last Session was completely unmanageable; it was far too crowded for the length of the Session.

My Lords, may I bore you for a moment with some figures, for I have heard some figures quoted with which I do not quite agree? But first may I say that the only subject that I am going to talk about is the economic aspect of the gracious Speech. We have the same old recipe: My Government will press forward their policies for strengthening the economy". Last year, we had the same thing: The principal aim of My Government's policy is the achievement of a strong economy". Well, the two things are much the same.

If we take the statement in last year's gracious Speech, how has that been achieved? We have had devaluation, and we have had more taxation. I understand that since this Government came into being they have taken £2,000 million in extra taxation. We all know that we have debts of £3,000 million chiefly with the International Monetary Fund, and we tend rather to forget the standby credit of £800 million which the Government arranged when they announced the withdrawal by a certain date of our forces from the Far East and the Persian Gulf. They arranged this standby in case of heavy sterling withdrawals. We do not appear to have heard much about that lately.

The really worrying aspect is that this year Government expenditure, although we have not yet got the full figures, will certainly amount to £12,000 million. Since the Government took office in 1965, expenditure has risen from £9,310 million to £11,684 million in 1967. I agree that the rise this year is likely to be a great deal less, but it will probably amount to £400 million. I must not be completely destructive; I do not want to be too unkind to the noble Lord, Lord Beswick, because I realise that it is not his fault. But we must try to create conditions in this country which will enable us to build up this country's wealth. How otherwise can we have a foreign policy? How does Mr. Stewart, the Foreign Secretary, like going round the world with a load of debts on his shoulders amounting to £3,000 million? It must sometimes be very awkward for him. I am very pleased that in the last three months, as we heard from the noble Lord, Lord Brown, productivity has risen by over 6 per cent. as compared with the same period last year, and that over the same period exports have increased by 25 per cent. I think the noble Lord said that the actual increase in volume amounted to 14 per cent. The figure I have is one of 15 per cent., and I can give the noble Lord something there. The noble Lord's figures ought to be right, but I was sure that the figure was 15 per cent.

The noble Lord, Lord Brown, compared the figures with last year, which unfortunately happened to be a very bad year. If you are galloping a racehorse and want to see how good it is, you do not gallop it with one of your worst horses but with one of your best.

Last year the adverse visible balance was £636 million, and a most unfortunate rise in imports has offset any increase in exports for this year. The gross imports for the first nine months of this year have exceeded exports by £1,220 million. This, as noble Lords have said, has completely spoilt the improvement in exports with the aim of getting into surplus on the balance of payments. The noble Lord, Lord Brown, quite rightly pointed out that devaluation has helped exports to the extent of 8½ per cent. in value, but he did not point out (I certainly did not hear him say so) that devaluation has at the same time increased the cost of imports by 13 per cent. Unfortunately, that leaves a quite large gap. I am afraid that devalution has not been the boon for which some people were hoping. I agree that in August and September exports have done very well. If one includes invisible exports earned by the City of London in those two months we shall have broken even; but we are already £300 million "in the red" for this year.

My Lords, I am sorry to be such a Jonah, but these are the facts, and one has to look facts in the face. I am trying to find something cheerful to say, but I find it very difficult. The great trouble is that the public can have no idea of the gigantic task which faces this Government, as well as future Governments and the nation. Not only have we to find before 1975 the £3,000 million which is owed, mostly to the I.M.F., but we must also remedy an accumulated deficit of over £1,000 million on current account over the last two years. And if one works this out over six years, it means that we shall have to achieve an increase of nearly £700 million per year. If one takes the Chancellor at his word, as of course one must, he says that he is bargaining for an extra £250 million a year to build up our reserves. If one adds that figure to the £700 million, it means that one then has to find £950 million a year surplus. Is it possible? I very much doubt it. I always adhere to the Conservative policy that, in the long run, if one abandons Socialist dogma over the economy, if one teaches able-bodied people to stand on their own feet, and if one has a free economy, with plenty of incentives for brains and hard work—while at the same time always protecting the sick, the weak, and the unfortunate among us—the economy will get on its feet. There is in this country a great deal of good will.

Of course, it is a question of time, and that is why I do not quite agree with my Party over the prices and incomes policy. I am rather inclined to agree with the prices and incomes policy, provided that it is a temporary expedient. The noble Lord, Lord Balogh, wants it to be permanent, but he likes a closed economy. It is possible to have a closed economy in a country like Russia (although it will be a low standard of living), because it is a self-supporting nation, but in a great trading nation which has to trade with the world you cannot have a closed economy.

I quite agree that the Government are "on the spot", and of course the trouble is largely of their own making. The noble Lord, Lord Boothby, said that the Government had the most appalling financial legacy from the Conservative Government; and he rather implied that that fact was the chief cause of their troubles. But, of course, that is complete nonsense. If you deduct the amount of money which was used for stockpiling, the true deficit which the Labour Government inherited from the Conservatives was under £600 million. As I said, last year we had a deficit of £667 million, so the noble Lord, Lord Boothby, was exaggerating to a great extent.

To return to the prices and incomes policy, if it is to work properly wages must not be allowed to rise faster than prices. But wages have risen a lot faster than prices, and it is complete nonsense for the Left Wing of the present Government to talk of the great hardships on the workers of this country due to the prices and incomes policy. That policy has allowed the wages of the average industrial worker to rise by about £4 a week, while prices have not risen to the same extent. But the fact that prices have not risen to the same extent is part of the Government's trouble.

LORD WYNNE-JONES

My Lords, does the noble Viscount mean that real wages should always decrease?

VISCOUNT MASSEREENE AND FERRARD

No. my Lords, of course not. They should increase. But the point is that the object of the prices and incomes policy is that prices and wages should increase in unison. If you have prices soaring ahead, or wages soaring ahead, you will be in trouble. The Government have had to impose hire-purchase restrictions because wages have risen far more than prices, and they have had to take the heat out of the economy: there has been an excess of consumer expenditure because wages have risen more than prices. But hire-purchase restrictions are not a very satisfactory solution, because they affect various trades such as the motor industry.

I feel that if the prices of non-essential goods had been allowed to rise, a large amount of surplus consumer expenditure would have been taken out of the economy quite naturally. I agree that we do not want prices of essentials to rise, but prices of things like tobacco, beer and all sorts of luxuries could be allowed to rise, and that would take the heat out of the economy. That is an economic fact, and it is quite correct. The noble Lord looks rather mystified, but I can assure him that that is quite correct.

LORD WYNNE-JONES

My Lords, I think I have understood the noble Viscount.

VISCOUNT MASSEREENE AND FERRARD

My Lords, this is an enthralling subject, but I must not speak for too long. I have mentioned savings often in this House, and we have heard them mentioned a lot to-day. Savings are another means of taking the heat out of the economy. Because I thought the situation was desperate, I suggested two or three times in this House that we should have compulsory savings. Perhaps I was a little wrong there, but I am now pleased to see that my Party has suggested tax-free voluntary savings, which is an excellent idea. But for savings to be effective we must ensure that they cannot he withdrawn within too short a period. If they are to help the present position it should not be possible for them to be withdrawn for, say, two or three years, because if they can be withdrawn within three months you will be back where you started.

I should like to agree completely with the noble Lord, Lord Brown, and to disagree with the noble Lord, Lord Boothby, over the question of import controls. We were given some extremely effective figures about import control, and about how it had affected America before the war. But import control is a double-edged weapon, and I quite agree with the noble Lord, Lord Brown.

May I just say a word about tourism, which is mentioned in the gracious Speech and which I think comes under the heading of the economic situation. We have heard about the selective employment tax, and we know that in parts of Scotland the Government have helped certain hotels by relieving them of pay- ing the selective employment tax. I think that 30 per cent. of the expenditure of the hotel industry is absorbed by the labour force, and the selective employment tax is therefore a very great burden. So if the Government really want to encourage tourism they ought to do away completely with the selective employment tax in regard to hotels.

The other point which I should like to make in connection with tourism and hotels concerns the Catering Wages Act. That rather operates against small hotels, because they find it very difficult to have a double staff. The average Continental tourist does not like dining at 6.30 in the evening; he is used to dining at eight o'clock, half past eight or nine o'clock. I do not know what can be done about that, but the Catering Wages Act is a definite drawback to small hotels. Bin I am pleased to see that the Highland Development Board are helping with hotels in the Highlands. That is very satisfactory.

May I just turn for three minutes to agriculture, and I will then end. When the Prime Minister made his devaluation speech he promised to give agriculture the opportunity to replace imports. We have not yet had that opportunity. Of course, I realise that we have many trade agreements with other countries which have to be honoured; that they take our manufactured articles and we have to take their primary products. But, my Lords, surely such an event as happened last January is not necessary. Last January all the farmers in my area of the South-East of England were holding their wheat, as the Government encourage them to hold it, when up the Thames came sailing about 250,000 tons, I think it was, of French wheat. Of course, the result was that we could not sell our wheat very easily and we had to take a reduced price.

Surely there ought to be legislation to stop the recurrence of this. I know we have improved the anti-dumping laws, but why allow this French wheat in? It seems completely pointless. It has to be paid for in foreign currency. I have often thought that we take too much American and Canadian wheat, now that we have these very good varieties and can produce perfectly millable wheat in this country. I should like to ask the Government to give agriculture every opportunity in the next Price Review to save imports by letting them produce more foodstuffs—and we can produce far more food. We can also help by exporting agricultural produce. For instance, all my barley goes to the Continent; and I think it was last year that we in this country exported almost one million tons of barley to the Continent. This is a great achievement when one remembers that we have various tariff barriers to broach.

My Lords, I shall end on that note: that I hope that, from the point of view of saving imports and helping exports, the Government will give to agriculture in this country an added urge to produce more. But, of course, when all is said and done one of the greatest things that the Government can do to help the economy is to cut down on their own expenditure. I quite agree that they have been trying to do this of late. They have taken some steps in this direction, but I hope they will try to take far greater steps towards this aim. My Lords, I think I have said enough.

7.45 p.m.

LORD GRANVILLE OF EYE

My Lords, I am sorry that the noble Viscount found such difficulty in finding something cheerful to say about the Government's economic policy as outlined in the Queen's Speech, because in what has been a wide-ranging and very interesting debate on our economic affairs I thought that most speakers seemed to agree that there is an improvement in our economic affairs and in the balance of payments, and certainly in productivity, and that we hope there will be a surplus next year. But in all of the speeches, or in most of the speeches, the rider has been added that we still have a very long way to go. One of the problems we have to face is: how do we get that little bit extra, and how do we guard against the setbacks?

My noble friend the Minister of State, Lord Brown, made an interesting reference to the problem of exports as it concerns the smaller firms, and I think this is going to be very important in the future. This is one of the problems we have not yet solved. Some of the smaller firms which want to export feel that export profit margins are smaller than the home market margins. Some of these firms do not like co-operating with their rivals, and they are also suspicious of unknown overseas agents; and many of them feel that the main attraction of trying to export, whether it is capital or consumer goods, is, after the squeeze, the bank accommodation which is extended to exporters.

My noble friend also referred, as did the noble Earl who introduced this debate to-day for the Opposition, when dealing with import substitutes, to the importance of agriculture, and the noble Viscount, Lord Massereene and Ferrard, also referred to this. Frankly, I should have thought that this was one of the things about which the Government should make a special effort in order to try to increase the agricultural production in this country and deal with some of the imports that are coming from Scandinavia—and the noble Viscount also referred to Canada and cheap wheat. Manufacturers in this country are showing a great willingness to try to help solve the import problem by using home materials as substitutes, and I think that the Board of Trade should take a very careful look at this subject again.

Some manufacturers complain that they are not getting, or cannot get, the same credit facilities from home suppliers as the importers offer in ordinary trade. Others are complaining that deliveries of the products which they are using in the place of imported materials are uncertain—and to a manufacturer this is a problem. They also complain of the prices in many cases; they are having to pay more. But if, as the noble Lord has said, imports are going to be the crucial issue in the coming months, the problem of these substitutes for imports is going to become even more important than that of exports. I agreed with the noble Lord, Lord Boothby, when he said that there are still too many luxury consumer goods coming into this country. But, as the Minister of State said in his interruption, we are international traders, and if we stop imports from coming here, it may reduce our exports. The best chance we have of increasing our exports at the present juncture is in the buoyancy of world trade and in the rising standard of living abroad, especially in some of the developing countries, as the noble Lord suggested in his speech. This problem of dealing with imports and exports and of getting our balance of trade right next year is a marginal one and it has to be dealt with very carefully.

My Lords, I would say one thing to my noble friend. Frankly, I think we must do more thinking about S.E.T. I agree with the noble Earl who initiated this debate that, whoever invented it, it has not been the success that we thought it was going to be. It has been passed on to the consumers and has resulted in fresh wage demands. I hope very much that in the next Budget, if not sooner, the Chancellor of the Exchequer will think again on this subject. We realise the intention behind S.E.T., but the personnel of consumer goods shops and stores, who are the people affected, are quite unlikely to find jobs in export in the development areas.

If I may highlight the one thing that I think is important in giving us the last push to achieve our target of surplus in our balance of payments, it is incentives—incentives for manufacturers, incentives for producers of import substitutes and for those engaged in productivity. I feel that something novel is required here. Let us take the case of the young executives—these are the important people—the young technicians and research and production personnel. Many of these, upon whom we greatly depend to increase our productivity, are finding it difficult to make ends meet. When they set up home, because of the new hire purchase regulations (which were, in my view, unnecessary, to say the least) the furniture, which is a bare necessity, will be dearer. Many of their competitors abroad do not have these restrictions; there is no furniture tax in the United States. The incentives there are better and more clearly defined.

In my view this is one of the causes of the brain drain. I would emphasise that we need these young men—we trained them and brought them un here—in industry in this country. We need them in our own programme of productivity. The young executives, the young researchers and designers, cannot operate without a base for themselves and for their family. They need a home. You can never get good supervisors unless they have good homes to work from. The cost of houses and mortgages is soaring. If they move to a development area, to try to comply with Government policy, they often lose in the buying and selling of a house. This Government has many young Ministers. What is needed is a fresh study of the whole question of incentives so that imaginative schemes can be produced and put before industry with, I am sure, beneficial results to productivity, to revenue and to our balance of payments. Our competitors are doing it.

My Lords, I will refer briefly to one other matter. Whatever the content of the gracious Speech, whatever measures—and there are hundreds of them—that the Government of the day may pass to deal with our economy, what we must ask ourselves is this: are these measures, these schemes that the Government are putting over, getting through to the people? This is a problem of communications or what is called "the gap". I believe it is part of the frustration that many in the country feel. In my view, to get these measures over to the people concerned, upon whose co-operation we depend, is almost as important as the measures themselves. Of course, the main methods of communication are television and the Press. I am sure that television and the Press have not yet found the right way—certainly not television—of communicating these policies to the people of the country. I am sure it is not in the slip-shod parade of personalities or in putting up tripwires. That is all right for Private Eye, but it is not right for the most powerful projector in the world. I think that both Government and Opposition have a part to play in this question of a new approach, now that our economic survival is the main, absorbing problem. Perhaps this is showing first in your Lordships' House in these debates on economic affairs which, in the main, are instructive.

My Lords, in conclusion, in taking the gloomy view that the noble Viscount was taking, I do not think we should under-estimate the long-term effects of the new approach to international co-operation and in the world of international credit stability referred to to-day. If this new form of co-operation, as referred to by the noble Lord, Lord Boothby, is successful, it is my view that, internationally and nationally, acute financial crises could become things of the past. But, in any event, our credit in this international organisation will depend as always on our ability to earn our way. Also we must not underestimate the likely economic consequences of the result of the elections in the U.S.A. We must not underestimate the powerful part America has played in the economic stability of Europe and of the world. Whether or not we go into the Common Market, we have to hope that under the new President America will continue to play that part in the future. If not, the last Budget and the Queen's Speech may be painfully irrelevant.

7.58 p.m.

LORD VIVIAN

My Lords, I apologise for rising at this late hour to speak in this debate and for the fact that I am doing so without my name appearing on the list of speakers. I promise to keep the House for not more than two minutes in speaking on a subject which I do not believe has been touched upon during this interesting and informative debate. Noble Lords may have noticed that the Press to-day has given publicity to the fact that two supermarkets, numbering some 900 self-service stores, are considering a scheme to introduce credit card shopping to relieve what is termed "the Friday night shopping bulge".

In his well-balanced opening speech in this debate, the noble Earl, Lord Jellicoe, made reference to the necessity to curb the spending spree, and the noble Lord, Lord Boothby, in his brilliant and witty contribution, made reference to the prudent housewife (one of whom I have the good fortune to be married to) who, in so far as it is possible, works on the system of "pay as you go." It is my contention, my Lords, that a system of credit cards for supermarkets may be the cause of overspending in this sphere. When winding up your Lordships' debate perhaps the noble Lord, Lord Beswick, will tell us what are the Government's feelings in this connection. For on the information I have the deputy managing director of one of the groups involved has already been quoted as saying: Credit cards could increase impulse buying. I think this is the the great strength of the credit card system; people are inclined to overspend. My Lords, I do not mean to imply that all credit cards are dangerous, but I think this system could turn out to be a subtle invitation to an already overspent family to go further into the red.

8.1 p.m.

LORD WINDLESHAM

My Lords, it is just as well that the procedure of your Lordships' House does not limit the boundaries of debate to discussion of those proposals which are actually contained in the gracious Speech. To-day's debate has gone very wide and covered an enormous amount of ground. It has ranged from that notable maiden speech by the noble Lord, Lord Jacques, on taxation, which has already been the subject of well deserved congratulation, to the strictures from the noble Lord, Lord Boothby, on the cleanliness of suburban railway trains. We have listened to speeches on the price of gold; on sterling as a reserve currency; import contols; industrial relations—even a speech on education and the school-leaving age. We have heard, too, of the duty-free champagne which was consumed by the noble Lords, Lord Francis-Williams, and Lord Beswick, as they steamed across the Atlantic twenty years ago.

What struck me about so many of the speeches to-day—more so, I think, than during some previous economic debates—was the consistent sense of vision that lay behind them. There may be some sort of natural order about this, because it is precisely this quality which is so lacking in the Government's own approach, both in the gracious Speech and in the new restrictions on spending announced on Friday by the President of the Board of Trade. The Government have not given much indication of being able to do anything more than respond to events. For an Administration which has talked so much about purposeful action and careful planning it is particularly ironic that there should be so little evidence in the gracious Address of specific proposals for strengthening the economy.

Of course we can all agree in general terms what is the overriding need: it is to build up the health of the economy and to maintain the value of the pound. We may talk in generalities of this kind, but the question which has to be put to the Government at the end of a debate like this is: How is it to be done? The collapse of the National Plan was only one recent example of the crucial gap between recognising and stating a problem, and taking action to influence events which may lead towards its solution. I believe that we have had in our debate this afternoon another example to which I shall refer in a few minutes.

What is needed so urgently in the management of our economic affairs is a policy, coherently stated and consistently adhered to, which has as its aim the creation of wealth. The arguments about sharing wealth must surely be secondary to this. Unless more wealth is generated in this country the social reasoning behind egalitarian policies will become increasingly arid, irrelevant and self-defeating. It was the noble Lord, Lord Boothby, who earlier in the debate, mentioned "penguins" in the Treasury. In a more literal sense, my Lords, without more wealth we shall resemble a colony of penguins scrambling for territory on an iceberg as it floats towards the Equator. In this context let us look at the increased restrictions on hire-purchase and rental contracts announced by Mr. Crosland on November 1—two days after the Queen's Speech, and one day after the Bassetlaw by-election.

These deflationary measures, incompetently handled as they were, so far as the motor industry was concerned—based on statistics which were not accepted by the motor industry and which still have not been clarified—were taken because consumer demand is running at a very high level. When he opened the debate this afternoon the noble Lord, Lord Brown, told us that spending in the second half of this year has been comparable with the same period last year; whereas it had been hoped that, following devaluation, there would have been a fall of about 2 per cent., but this did not materialise; and yesterday the Chancellor of the Exchequer, speaking in the Economic Debate in another place, accepted the inaccuracy of the Budget forecast. Yet if the benefits of devaluation are to be achieved and sterling is to become a more competitive and sought after currency, there must be a swing away from spending towards saving. For a few minutes I should like to follow the noble Lord, Lord Byers, and also my noble friend Lord Jellicoe, on a policy for personal savings.

There is no sign at present of reduced consumption: hence last week's restrictions. I do not believe that anyone who has taken part in this debate has challenged the need for that action to be taken. What has been questioned is the policy which led up to it. There must be a limit to the number of times that traditional measures such as these—restrictions on hire-purchase, and tighter bank credit—may be resorted to without losing their effectiveness. Instead of waiting, passive and apprehensive, until the problems caused by high consumption could not be contained any longer, would it not have been better to have evolved a policy which might have allowed a different course of action over a longer period of time? Was there any alternative to the old favourites? In my view, and in the view of my noble friends, there was an alternative, and there still is. If it is beyond the powers of the Government to devise a scheme to encourage personal saving, I am pleased to tell them that the spadework has been done for them already. One such scheme has been under consideration now for some months by a joint Working Party set up by the Treasury, the C.B.I. and the T.U.C. which is chaired by the Financial Secretary to the Treasury. This scheme was originally published by the C.B.I. in June, and I will say a little more about it later.

Who can doubt, if he gives himself time to think it out, that the moment has come to make a major and determined effort to change ways of reacting? The traditional measures are there and so are the traditional habits of thought; watching trends, trying to decide whether this is the right moment to apply the regulators, whether it should be later, whether action could be avoided altogether. It is not easy to make a major and determined effort to change course and evolve a policy for personal saving.

As things now stand, what incentive is there to the wage-earner to save? He has only to look about him to see how the value of money has declined over the last few years. Who can be surprised that higher wages have resulted in higher spending rather than in greater saving? It is salutary to remember that to-day in this country we save less per head of the population than almost any other developed country in the world; and, what is more, the trend is getting worse. No doubt the noble Lord, Lord Beswick, will have some statistics from the Treasury, but according to the figures I have, the savings ratio—that is to say, savings as a percentage of personal disposable income—has fallen consistently over the last three years.

In 1965, it was 8.1 per cent.; in 1966, 7.8 percent.; in 1967, 7.1 per cent., and in the last quarter of 1967, the last period for which statistics are available to me, it was down to 6.5 per cent. I mention these figures to underline the need to reexamine this matter. Several noble Lords speaking in the debate have said there is an urgent need for some measure or other, but these figures indicate that the time has come to treat this subject of personal savings urgently and seriously. It is not only important in that a rise in personal saving would help the economy in this country, but because it would also do much to influence our creditors overseas.

I should like to take up one or two points from the speech of the noble Lord, Lord Balogh, because they illustrate the general proposition I referred to earlier. The noble Lord's speech was so all-embracing that it was difficult to follow everything he said. Clearly, he did not allow himself time to develop all his points (he could not do so on such a wide canvas), and I hope I am not misrepresenting him when I say that he rather dismissed personal savings as an alternative to taxation. He doubted whether any administrative machinery could be devised which would distinguish between savings which were earned, acquired or inherited. Well, my Lords, is this not exactly what professional economists in the Government service should be concerning themselves with?

We heard from the noble Lord an analysis of Britain's economic problems and an extremely interesting and well-informed analysis it was. He said, for example, that the performance of some industries has been "sluggish"—the chemical industry was mentioned—and that in some instances managers were inadequately skilled. This may be so. But what is needed is to move from the position of analysis to the position of action. It is exactly here that the Government are so weak: not in telling us what is wrong in society, or in coming forward with proposals which may be interesting and imaginative, but in actually getting these into effect. If the problem is to evolve a workable method of personal saving, let them come forward with schemes to overcome these difficulties. If it is said that it cannot be done, I recall the remarks of Mr. Douglas Houghton, one of the founders of P.A.Y.E., when he pointed out that, though many people had declared the scheme to be unworkable, once it was instituted P.A.Y.E. had worked perfectly satisfactorily and has now been standard practice for many years.

Let us look briefly at some of the alternative proposals for personal savings schemes which have been suggested. Earlier this year the C.B.I. proposed a practical way of saving from earnings. This was based on an improvement in the rates of return and the establishment of administrative machinery to collect and handle funds in the most convenient way possible. The scheme was detailed in a C.B.I. paper on personal savings published in June of this year. This proposal is now being studied by the Working Party already referred to. In our own Party, on this side of the House, we have also published detailed proposals for a system of tax reliefs against blocked savings lodged in a special savings account. By this method a taxpayer on standard rate of income tax could obtain an effective rate of interest up to 14 per cent. per annum. This would be subject to a maximum limit on the amount of annual saving, and to a maximum income limit of £3,000 per annum for a man with three children.

These schemes may turn out to be faulty in some way or other, and it is no doubt for this reason that the Treasury are considering one of them so carefully. But surely there is a real need to concentrate on evolving some method whereby people can be encouraged to save rather than to spend? Apart from anything else this would help to shift the emphasis back to what used to be called thrift. It is rather an out-dated and stuffy word, but it has connotations of independence and initiative which are as topical to-day as they ever were. Every fashion comes round again, and perhaps this particular ideal is due for revival soon. My Lords, I do not want to go on too long about personal savings, because it has already been raised in this debate. But I would ask the noble Lord, when he comes to reply, whether he can tell us what progress has been made by Mr. Harold Lever's Committee, what action the Government will take to implement their findings, and whether we can expect to see a scheme not later than the time of the next Budget.

The final matter I should like to touch on before closing is the reference in the gracious Speech to making better use of the resources in the regions. In regional planning the dilemma I have already referred to, between the creation of wealth and the sharing of wealth, comes to a head. The location of industry policy rests on two propositions: that industrial development should be encouraged by means of investment grants, and that unemployment should be relieved by steering new industry towards the less prosperous areas of the country. We heard from my noble friend Lord Ridley in moving terms some of the problems of the Northern Region when he spoke earlier in the debate.

We have here an overlap between economic and social objectives—a theme of the speech of the noble Lord, Lord Balogh. A Committee under Sir Joseph Hunt is examining at present the "grey" areas—that is to say, those areas with serious economic and unemployment problems which do not qualify for the full range of benefits and incentives that are available in the development areas. I would say to noble Lords opposite that this seems to be another area of policy in which there is a need for the Government to initiate fresh action. The present policy of offering financial incentives to companies willing to expand in areas of high unemployment, backed up by the I.D.C. procedure, can continue to be used, although it might have the effect of limiting expansion in the more prosperous areas.

My noble friend Lord Ridley pointed out that this traditional, well-intentioned policy is now costing about £300 million a year. Yet some of the problems have actually grown somewhat worse—the unemployment figures (in the Northern Region), for example. So here again it is timely to re-examine the whole question of regional planning. The policy needs to be looked at in terms of the entire package of controls and incentives, what they are achieving, and measuring the cost that is involved. I understood that Mr. Peter Shore, the Secretary of State for Economic Affairs—there still is a Secretary of State for Economic Affairs—was to make a big public speech at the end of last month revealing the Government's thinking on regional planning. If he made it I cannot find any trace of it. So I ask the noble Lord who is to reply whether the Government are making a review of development area policy and, if so, when conclusions are likely to be announced.

My Lords, we have had a long debate and we now want to hear the Minister in reply. In the end, the economy will respond to the environment in which the individual citizen lives and works, pays taxes, spends and perhaps, with a little more initiative, can be encouraged to save. What Ministers say affects this environment. Appeals for greater effort can lose their impact, and are beginning to do so, because in a sense they are only half the solution to half a problem. Increased prosperity, alas!, does not result just because people work harder. It is also the consequence of greater efficiency and greater ingenuity in the way in which they work. All our hopes and expectations of a rising standard of living in the future depend to a large extent on those who have the enterprise to discover and introduce new products, new services and new methods of working. Such enterprise is not the monopoly of the scientist, the big businessman or the inventor; it exists at every level, from shop floor to shop counter. There are many opportunities for enterprise and innovation. The principal objective of economic policy in this broad sense should be to ensure that all these opportunities are taken; that incentives are introduced, and that rewards are seen to be within reach. My Lords, this is the job that is in front of the Government. Let us hope for all our sakes that they recognise it.

8.20 p.m.

LORD BESWICK

My Lords, we have come to the end of our debate on the humble Address. It has ranged widely, from Grosvenor Square on the first day to Chile and China on the second day, and to-day, as the noble Lord, Lord Windlesham, has just said, we have gone over the whole field of our agricultural, financial and economic affairs. I shall not be expected to reply to everything that has been said this evening. I hope it can be said, however, that after the three days' debate ideas have been clarified and maybe attitudes modified. Certainly to-day we have had a constructive and informed discussion, and it is exceedingly gratifying to think that we could have discussed all these controversial affairs without one word being uttered about "personal honour".

Like the noble Earl, Lord Jellicoe, and the noble Lord, Lord Windlesham, I refer to recent exchanges between Members in another place only in passing, and I make two brief points. Great as is my love for the other place, in which I had the privilege to serve for nearly 15 years, there are occasions—and yesterday was one of them when I feel that some Members there have a questionable right at all to consider themselves superior to this Assembly. Secondly, it seems to me ironic, to say the least, that allegations should be made that my right honourable friend Mrs. Castle, of all people, should have been afraid to tell the electorate the truth, when we have seen how courageously she has stood up in recent months and faced so many of her friends with the prices and incomes policy.

Having said that, my Lords, about events elsewhere. I immediately come back to this place to congratulate my noble friend Lord Jacques on his maiden speech. I expected from him a constructive, down to earth, well thought out and relevant speech on that part of the economy for which he is so well qualified to speak, and our highest expectations were realised. The noble Lord is chairman of the National Executive of the Co-operative Union. He was himself the chief executive of one of the most successful and progressive constituent societies of that union. He is now the prime mover in the campaign to get the great Co-operative Movement, with its £1,000 million a year annual retail sales, on a more efficient basis. If anybody in this House is qualified to speak on there matters, then it is my noble friend Lord Jacques. What he said to-day about taxation is worth studying carefully, and I shall do my best to see that it gets the study it deserves.

I should like to congratulate also the noble Lord, Lord Vivian, on the brevity with which he put his point. I think it may well be that some of us could follow him in the matter of brevity. I would say to him that a Government appointed Committee under the chairmanship of Sir Geoffrey Crowther is at present examining the subject of consumer credit, and no doubt the practices to which the noble Lord referred will be considered by that Committee.

LORD BYERS

He is Lord Crowther now.

LORD BESWICK

I am grateful to the noble Lord. He was Sir Geoffrey when he was appointed to the chairmanship. The noble Earl, Lord Jellicoe, my noble friend Lord Jacques, and other noble Lords, said something about the possibility of a shift in thinking towards indirect taxation. It is true that some of the earlier objections have diminished and attitudes are changing. There is a good deal of thought going on, and that is why I think that what my noble friend said will be of special value.

The noble Lords, Lord Jellicoe, Lord Byers, Lord Massereene and Lord Windlesham, asked about these twin subjects of personal savings and consumption. I agree with them that personal savings are important. Having, like my noble friend Lord Jacques, been actively concerned with one of the greatest savings institutions in the country, the Cooperative Movement, I could not think otherwise. But I have been asked to give figures, and I am glad to give them, because some of the figures given by the noble Lord, Lord Windlesham, were not, I think, quite up to date. It is true that personal savings were low in the first quarter of 1967 and the first quarter of 1968 when consumer expenditure was running at high levels, but subsequently, in the second quarter of this year, when consumer expenditure, on a seasonally-adjusted basis fell substantially, this fall was accompanied by a marked recovery in personal savings to the second highest quarterly figure ever known. This recovery was almost certainly maintained in the third quarter at a slightly lower level.

I know that the National Savings movement have had a great struggle to get their share of these total national savings, and I join with the noble Lord, Lord Byers, in paying tribute to the efforts of those noble people who serve the National Savings movement. They have their difficulties in the modern world. As the noble Lord, Lord Windlesham, said—and he seemed to be very well advised of Treasury matters in this regard—there is a Working Party now sitting under the chairmanship of the Financial Secretary considering what incentives can be given towards encouraging savings. There has been one particular scheme, to which the noble Lord made reference, but there are mechanical difficulties and there are certain difficulties about principle and the equity of the scheme. Nevertheless, it is being considered, with others. But I am not able to say anything at the moment as to what recommendations may be made by this Working Party.

My Lords, if one turns to the total money supply or personal consumption, which is the other side of the savings coin, again the figures are not nearly so depressing as the noble Lord, Lord Byers, seemed to suggest. The first six months of the current financial year have shown a significant reduction in the Central Government's borrowing requirement compared with 1966–67, despite the fact that three of the measures introduced in the Budget (the increased rates of S.E.T., the corporation tax and the introduction of the special charge on investment income) will have their effect predominantly in the final quarter of the financial year. The central Government is therefore likely to be in surplus in the second half of the financial year. Taken in conjunction with the restraint on bank advances, this surplus is likely to produce a very effective curb on the growth of the money supply. With that curb, and with the three taxes to which I have referred (the increased rates of S.E.T. and the corporation tax, and the introduction of the special charge on investment income) all biting after Christmas, and with the new hire purchase regulations that have been announced, it is reasonable to believe that effective demand will keep to that narrow path between wasteful deflation, on the one hand, and dangerous reflation, on the other. In other words, the figure suggests that as the result of the measures taken personal saving and personal consumption will be about at the level which the Chancellor is seeking to achieve.

LORD WINDLESHAM

My Lords, I am sorry to interrupt the noble Lord, but if he has come to the end of that point, may 1 say that it may be the level which the Chancellor is seeking to achieve, and it may be that the performance in 1968, for which the noble Lord has more up-to-date figures, is an improvement on the last quarter of 1967, but does he challenge the figures that I gave, that for the last three years, 1965, 1966 and 1967, the savings ratio has fallen from 8.1 to 7.8 to 7.1?

LORD BESWICK

No; I am not challenging those figures at all. In fact, the noble Lord was absolutely accurate, except that he did not project his figures further into this year. The truth is that in the first quarter of 1968 they went lower still. As I have said, in the second quarter the figure went back to 9.3 per cent., which is the highest percentage of personal savings we have known. Also I stated that the trend, appears to be somewhere around that figure.

I was asked by the noble Lord, Lord Granville, and other noble Lords, about incentives; and the noble Viscount, Lord Massereene, and the noble Lord, Lord Granville, asked about what they described as excessive taxation. I am bound to say that a good deal of the psychological frustration which undoubtedly some of these younger executives and others fee] is there, but it is largely self-induced. They work themselves up into a self-pity which really is not justified by the facts. I have taken some trouble to get the comparative figures of taxation in order to see just how our executives compare with those overseas. I am sorry I cannot publish all the figures, because they make interesting reading, but the Chancellor is aware of the necessity for maintaining incentives for this category of people. He was at some trouble not to increase income tax or surtax on that bracket of income. The fact is that no surtax to-day is due, because of reliefs, on earned income until it exceeds £5,000.

Comparing it with other countries, I find that on a gross salary of £1,200 a year, disposable income of £1,059 certainly is lower than in most other industrial countries of the West. We do in fact come ninth out of ten; the Netherlands is lower than ourselves. But the other nations are not all that much better off. In the German executive's pocket £1,084 remains; £1,103 in New Zealand, and £1,147 in the United States. When we come to this £5,000 figure, we find that the United Kingdom is sixth in the list of ten. At a salary of £5,000 we have a disposable income remaining of £3,590. We are really not so far behind the United States, second in the list, with a disposable income of £4,112. France, with £4,411, is top of the list. But if we take into account exchange rates, the cost of living there, and indirect taxation, the comparison is by no means as unfavourable to the United Kingdom as certain noble Lords would have us believe.

LORD BYERS

My Lords, is it not a fact that many other benefits are available, for instance, to American executives? With something like fifteen thousand a year, they have far more. They have these savings systems, stock options; they have many things of that kind. I do not think that that was a completely fair comparison.

LORD BESWICK

My Lords, I have no doubt that there are all sorts of other "fringe" benefits one could bring in, and certainly when one gets up to £15,000 or £20,000 a year—

LORD BYERS

Dollars.

LORD BESWICK

—there are other considerations. But the range we were talking about was that of young executives. The figures that I have mentioned—

LORD BYERS

My Lords, may I say to the noble Lord that the range we are talking about in terms of America is 15,000 to 20,000 dollars. This is about the right conversion rate for a £5,000-a-year man here.

LORD BESWICK

My Lords, the noble Lord believes he has a point. I have myself spoken in recent weeks to two American families, both of whom had members needing to have medical attention. Reckon up how much it costs to have medical care in the United States as compared with what one pays in this country. Then, I would ask the noble Lord if he would adjust the prejudice which he has against the situation in this country.

I was greatly interested in what the noble Lord, Lord Fraser of Lonsdale, and the noble Lord, Lord Boothby, had to say about the price of gold. I must say that Lord Boothby was always rather a hero of mine in monetary matters ever since I heard him say in 1946 (I think it was) that he was going to vote with the Labour Government in favour of the nationalisation of the Bank of England. I thought he was very rational in these matters. But I just cannot understand why he is so enthusiastic about this metal which they dig up in one part of the world in order to bury it in another. Both noble Lords argued forcibly that the best way of increasing international liquidity would be to raise the monetary price of gold. I was glad to have the support of my noble friend Lord Francis-Williams and my noble friend Lord Balogh against their point of view.

It is certainly true that this would be a quick way of increasing total liquidity. But there are disadvantages. It would be most uneven in its effects. The major beneficiaries would be the gold-producing countries and the big gold holders. When I say that, I assure the noble Lord. Lord Fraser of Lonsdale, that I do not say it because of any prejudice against apartheid. That does not enter into it. It would be to the disadvantage of many of the less developed countries, which on the whole have very little gold. It would have inflationary effects in many countries, both because of the sudden very large increases in reserves and because of the amount of "dishoarding" which would take place. It would also have a disruptive effect in the international monetary system. especially since any increase in the official price of gold, to be stable and safe from speculation, would have to be large. It would be a backward step, a retreat from the more rational ways of dealing with the world's liquidity problems.

LORD FRASER OF LONSDALE

My Lords, will the noble Lord forgive me for putting an extremely short question? How could it hurt any country if the world were richer?

LORD BESWICK

If the world is richer? But if that wealth is concentrated in one country as compared with another, if the rich countries have a sudden accretion of wealth, it does not help the poorer countries whose wealth is not increased at the same time.

LORD BOOTHBY

My Lords, if the noble Lord will forgive me for interrupting, I said in the course of my remarks that a corollary of raising the price of gold would he substantial loans, gold loans, to the underdeveloped countries.

LORD BESWICK

My Lords, that is quite true. The noble Lord, so far as this one disadvantage is concerned, would meet my point, though of course we have no guarantee that those countries who would benefit to that extent would take this enlightened action. I was saying that in my view, and in the view of Her Majesty's Government, it would be a backward step, a retreat, from the more rational ways of dealing with the problem, ways which include the Special Drawing Rights Scheme. Our view, therefore, is that the main requirement in the interests of general stability in the monetary system is to reaffirm the official position, the official gold price of 35 dollars an ounce. I am only sorry that my personal regard for the noble Lord, Lord Fraser, and the noble Lord, Lord Boothby, does not justify me in being forthcoming on this point.

I was extremely gratified to hear my noble friend Lord Francis-Williams recall our horizon-sweeping talks which we had on the first voyage of the "Queen Elizabeth". It was many years ago and I am glad to think that, although the ship has retired, both he and I contrive to carry on. I agree with him that we have gone some way towards realising some of the early hopes that we expressed on that occasion. The Special Drawing Rights Scheme will be a breakthrough in international monetary arrangements. The Scheme will require amendments to the Articles of Agreement of the I.M.F. which must be accepted by three-fifths of the members having four-fifths of the total voting power before they can come into force.

I was asked what progress had been made. Acceptance is taking longer than we had hoped, although it is still conceivable that the necessary percentage of acceptances to the amendments will be reached by the end of 1968. I state, my Lords, that this new asset will not of itself, of course, put right our balance-of-payments situation, but it will help to give us that extra international, stability in which we can continue to put our house in order. For the first time the nations of the world have agreed to take a new international paper money different from national currencies and different from gold. It will take its place as a full supplement to existing reserve assets and we can expect the importance of its world role to grow.

LORD BOOTHBY

It never will.

LORD BESWICK

My Lords, the noble Lord, Lord Windlesham, asked about regional policies and he referred especially to the speech of the noble Viscount, Lord Ridley. The noble Viscount, Lord Ridley, thought that he had possibly been a little overlong in putting his case for the North-East. Let me say at once that I, for one, do not believe that we should be allowed to forget for one moment that there are still too many unemployed in his part of the country. Let me also, if I may, pay a compliment to the noble Lord for the contribution he is making in the North-East, both on the Planning Council and on the county council.

In this context I was also impressed by what my noble friend Lord Wynne-Jones said about the relevance of raising the school-leaving age in these areas. One can see how many people would be taken out of the labour market, and one has a vision of occupying these presently unemployed people for the purpose of giving them extra education. I was greatly moved by what the noble Lord, Lord Wynne-Jones said. Indeed, I was interested in what he said generally about educational policy, and I shall read his remarks with interest to-morrow.

To return to the North-East, as the noble Viscount, Lord Ridley, said, the problem there is bedevilled by the inescapable run-down of the coal-mining industry. I am told that since December, 1965, in the North-East alone there are 27.500 fewer men earning their living at the pits. Nevertheless, I am sure that the noble Lord would wish to be fair, and I am glad he paid a tribute to the National Coal Board for the humane way in which they have tried to handle this contraction in their industry. It is fair to stress that there is a world of difference between their attitude and the attitude in the Jarrow days to which he referred. However, the point is what is being done now. The noble Lord emphasised the importance of public investment and what is called the "infrastructure".

Last winter the Government authorised a programme of minor public works to be carried out in order to provide additional employment at a time of year when unemployment is at its height. A similar programme has now been advanced for the winter of 1968–69. The Northern Regional share will be £4 million. In answer to the noble Earl, Lord Jellicoe, the total for this kind of "ambulance" work in all areas will be £10 million. The public investment in the North region on new construction work rose from £83 million in 1965–66 to a provisional £140 million in 1967–68, an increase of nearly 69 per cent., and by far the fastest rate of increase for any region in the United Kingdom. Local authorities are cooperating with the Planning Council in a three-year programme for the reclamation of derelicted land. In a ten-year period (and the three-year programme will be rolled forward) some 15,000 acres will be reclaimed.

Government outlay, calculated to stimulate new industry in the region, and the expansion of existing industry, is now running at the unprecedented level of £100 million a year. Some of these inducements were introduced comparatively recently and need time to make their full impact. Even so, so far this year approvals for new factory space for the Northern Region have already exceeded the figure for the whole of 1967 by almost 3 million square feet. Some 18,200 jobs, including 12,500 for males, are expected to result from this year's I.D.C. approvals. Altogether there are over 37,000 manufacturing jobs in prospect for the region over the next four years.

On top of this, a large number of male jobs will be provided by the construction of the Alcan aluminium smelter at, Lynemouth and the nuclear power station at Seaton Carew. Moreover, hundreds of existing jobs on Tees-side, as the noble Lord himself indicated, have been safeguarded by Government action through the Shipbuilding Industry Board, to keep the Furness shipyard open. The county council, of which the noble Lord is a member, has been pressing for help from the Government towards the development of Cramlington New Town, and the Treasury has agreed that some extra assistance should be made available and the necessary discussions are now in train.

Something, therefore, is being done, and despite what the noble Lord, Lord Windlesham, said about the figures still going up, the fact is that unemployment in the Northern region fell slightly—very slightly, admittedly—between September and October. Nevertheless the trend must surely be welcome. The noble Viscount, Lord Ridley, asked whether some of these considerable sums could be spent more wisely. One cannot be dogmatic about this, of course, and the Hunt Committee was commissioned to go into this matter. I cannot say what recommendations that Committee is going to make.

The noble Earl, Lord Jellicoe, and the noble Viscount, Lord Massereene and Ferrard, spoke about the importance of agriculture as an import saver. The Government agree that the selective expansion scheme has yielded real results. No industry has done better than agriculture so far as productivity is concerned. The noble Earl, Lord Jellicoe, asked about the Agricultural "Neddy" Report. My right honourable friend the Minister has had vigorous discussions about this Report, and I anticipate that he will be in a position to make a statement about the intentions of the Government one day next week.

The noble Lord, Lord Hankey, suggested that our problems would be eased if instead of damping down consumption we stepped up production. Of course this is so obvious that there must be a snag in it somewhere. The main snag, surely, is that there need be no limit at all on production if sufficient of the product could be exported. We just cannot afford at the present time to produce too much for home consumption when we cannot pay the cost of the imported raw materials of which the product is made.

There was a good deal of talk in another place yesterday about the superior growth rate in the 13 years of Tory rule. Of course the growth rate of production was then higher, but the seriousness of our situation in 1964 stemmed largely from that very fact. We were producing goods at a faster rate, enjoying their consumption at home; we "never had it so good," but we were not earning enough to pay for the import bills. Our policy is certainly to encourage production, but within a strategy which ensures that we can export enough of our products to give our economy a sound basis.

Devaluation did much to give our exports a competitive edge, but increased efficiency in the longer term, as the noble Lord, Lord Balogh, emphasised, will be more important than this initial financial shot in the arm. I have a good many notes indicating the extent to which we had tried to get an efficient restructured industry, but I am sure noble Lords will not want me to go right through them.

LORD BOOTHBY

My Lords, before the noble Lord sits down, can he say whether before the next Budget the Government will look into the effects of S.E.T. on the tourist industry?

Loan HANKEY

My Lords, will the noble Lord also kindly consider whether all these strikes do not in fact affect our exports? That is exactly the point I am trying to make.

LORD BESWICK

My Lords, I regret to tell both noble Lords that I was in fact not sitting down. I was simply saying that I was not going into more detail in regard to the undoubted improvements in industrial efficiency. I was going to answer one or two other questions, including something about the Donovan Report. I was asked about a number of points by the noble Lord, Lord Grantchester. I have a full note of what he said, and I shall read his comments with interest to-morrow. I only say this about the situation in the Far East, and I say it in the context of the debate we have been having. It is difficult to envisage any other single step under the direct control of the Government which could have made a comparable impact on the balance of payments problem which lies close to the heart of this country's economic difficulties.

LORD GRANTCHESTER

My Lords, would not the noble Lord consider our investments? They are worth millions to our balance of payments. I think they are worth considering.

LORD BESWICK

My Lords, possibly I misunderstood what the noble Lord said and, as I say, I will read his remarks in the morning. If he was asking us to reconsider our withdrawal from South-East Asia—

LORD GRANCHESTER

My Lords, no, I was not suggesting any such thing. I was asking for meetings under our chairmanship or the chairmanship of Britain and France to bring together the countries from Australia in the South to Japan in the North in greater friendship for co-operative development.

LORD BESWICK

Having just come back from that part of the world and having discussed many of these matters with some of the political leaders there, I agree with the general proposition, but I should like to study in more detail what the noble Lord said.

I was asked by my noble friend Lord Arwyn about the possibility of a tax holiday for mining. It is not the Government's policy to give a tax holiday, although we have shifted investment incentives towards direct cash assistance in the form of investment grants. There again I will take up with my right honourable friend the proposition which the noble Lord has put forward.

The noble Earl, Lord Jellicoe, the noble Lords, Lord Byers and Lord Hankey, and the noble Viscount, Lord Massereene and Ferrard asked about the trade unions and the Donovan Report. There is little of value that I can add to what my noble friend Lord Brown said on the Donovan Report, except that my right honourable friend the First Secretary has now received the comments of the C.B.I. and the T.U.C. Those comments are being studied; there will be further discussion and the Government hope to present a White Paper on their reactions to the Report around the end of the present year.

The noble Lord, Lord Boothby, asked about S.E.T. and so also did the noble Viscount, Lord Massereene and Ferrard, and others. As the noble Lord knows, we have yet another study, under Professor Reddaway, looking at the whole consequences and implications of S.E.T. The question of the value-added tax again is a matter which is the subject of very detailed consideration and I am afraid I cannot go beyond that; but what the noble Lord and others said clearly must be a matter for consideration.

My noble friend Lord Balogh, who apologised for the fact that he had to go, made some relevant remarks, I thought, about group responsibility. He said that as we move into a more humane society the more difficult does it become to get social discipline. He might also have said that the more inter-dependent we get one upon the other, or one group upon the other, again the more difficult it is to get unselfish co-ordinated action, although at the same time the more important it is that we get that co-ordinated action. This goes for both sides of society. To the noble Viscount, Lord Massereene and Ferrard, I would say how extraordinary it is that almost all of us—and he, I think, no less than any of us—feel that the solution lies in further sacrifice from the other fellow. This surely is a basic reason why so far since the war we have not solved our problems. All are agreed about the prime objective, but one section or one group or another always oppose any proposal which affects their own consumption. We have seen attacks on the hire-purchase restrictions. I had from the Leader of the Opposition and others the other day bitter complaints about the temporary limit to the foreign travel allowance. There is continual complaint of Government action to restrain the investment of capital overseas. We have seen the reaction of vested interests to the curb on third-party sterling credits, and we have had the dogged resistance from some trade unions to any attempt to plan wage increases on a rational and equitable basis. Nevertheless, it can be said, I hope, that this Government have tried to do what they think is right, despite the unpopularity which has been created in one section after another. It is my own view, although my view possibly carries little weight compared with others, that we have made progress, and given the kind of group responsibility to which my noble friend referred there is no reason why that progress should not be maintained until we do achieve the balance of payments which we all require.

On Question, Motion agreed to, nemine dissentiente: the said Address to be presented to Her Majesty by the Lords with White Staves.