§ 2.54 p.m.
§ Debate resumed on the Motion moved on Tuesday last by Baroness Gaitskell—namely, That an humble Address be presented to Her Majesty as follows:
§ "Most Gracious Sovereign—We. Your Majesty's most dutiful and loyal subjects, the Lords Spiritual and Temporal in Parliament assembled, beg leave to thank Your Majesty for the most gracious Speech which Your Majesty has addressed to both Houses of Parliament."
My Lords, this debate is taking place against a background of a marked improvement in our country's trading position. Last year, the background was a sombre one. Our export figures—I mean the statistics rather than the exporters—were responding sluggishly to the spur of devaluation. Imports remained stubbornly high. I am myself convinced that a reason for this slow response to devaluation was in large part due to a serious error of judgment made by the incoming Chancellor of the Exchequer in late 1967. That misjudgment was the failure to move in on the economy forthwith with a comprehensive package of measures following devaluation and to allow, as he did, the consumer spending spree which he had inherited from his predecessor to run on deep into 1968.
238 That, my Lords, is the past. The Chancellor is now looking forward with apparent confidence to attaining that surplus of £300 million in the current financial year. Let me say straight away from this Dispatch Box that we on these Benches welcome this news, so far as it goes. The imputation to the contrary—not made, I am glad to say, as yet, by noble Lords opposite, but made, I was not surprised to see, by the Prime Minister—I find really rather nauseating. Because, my Lords, it is quite obvious that those of us whose roots and future lie in this country—and this is the same for almost all of us: good little Tories bad little Socialists, Uncle Frank Byers (who is not here)—are all in this boat together, whatever we think of those at the helm. I personally rather regret the political overtones which now overhang our trading prospects, but it is not we on this side of the House who have stoked up the political furnace here.
No. I have just been reading the Labour Party's brochure, Agenda for a Generation, which was presented by their National Executive Committee to the Labour Party's Annual Conference at Brighton in October. And what do we read in that brochure? On the very first page we read thatBritain is now enjoying a balance of payments surplus …'",and then—this is underlined in the blackest of black type—… in political terms, this is the most significant development of the present period.Well, my Lords, whatever be the ambitions of the Labour Party's publicity merchants, I think it is more in our line in your Lordships' House to take a cool and perhaps a rather more dispassionate view of these matters. So I shall begin the good dispassionate work by making two things clear, so far as the disputed trade figures are concerned.
In the first place, it seems absolutely clear to me that at least some of our great newspapers were misled by the way in which the last two months' returns were presented. Secondly, having heard the Government's explanation in another place yesterday—I have not been able to read it, for reasons which we have all just heard—
I did not receive Hansard of another place to-day. I do not know whether the noble Lord, Lord Byers, did. Perhaps he has special access.
My Lords, mine did not arrive, but perhaps that was a hitch in the Post Office. Having heard the Government's explanation—and all I have heard is the Government's explanation in another place yesterday—I, for my part, accept that on the Government's part there was no dark or cleliberate intention to mislead. By the same token, I hope that noble Lords opposite and the Government will remember a number of really rather important facts about Britain's trade prospects.
In the first place, I should like to express the wish that the Government would get out of the habit of thinking or claiming that this is in some ways all their doing. I do not wish to deny the Chancellor his share of the credit—he is certainly the best Chancellor we shall get under a Labour Government. But the real credit for Britain's export performance this year must go where credit is really due; that is, to British industry: British industry with a small "i" and with a large "I", and to all those, from the shop floor to the board of directors, who have brought home this precious export bacon. Not least it must go to those invisible exports which are now playing such a decisive role in our present trade balance.
In our debate on invisible exports eleven months ago my noble friend Lord Aldington emphasised the key role of our invisible exports—earnings of over £3,000 million in 1967, compared with earnings of £5,000 million for our visible exports and re-exports. Now we learn that our favourable balance on invisibles is running at (I know that this is an estimated figure) something like £40 million a month. When, therefore, the Government pride themselves on our rising export tide they must recall that much of the push behind that tide comes from those same invisible exporters (and some of those "invisibles" are, I think, visible in your Lordships' House this afternoon) who are doing so much for our trade balance despite the buffeting—S.E.T., and all that 240 —which they have received from our present Administration.
My Lords, in two days' time another famous milestone in the literary saga of the Longford family will be reached. On Thursday, I think it is, the wife of the noble Earl, Lord Longford, is publishing the first volume of her great biography of the Duke of Wellington. By devious means I managed to acquire an advance copy of that fascinating book, and in it I have read with great pleasure of the Duke of Angouleme, the nephew of Louis XVIII, with whom the Iron Duke used to shoot when he was our Ambassador in Paris. Lady Longford recounts that the Duke of Angouleme, who was not a very good shot, was always accompanied by a keeper who fired his gun the moment his royal master took aim and cried, when he himself killed the stag, "Monsieur tire à merveille". My Lords, when the Government pat themselves on the back about our trade returns they must remember that it is they who are the not-so-sporting Duke and that it is our exporters, visible and invisible, who are the faithful keepers.
More seriously, my Lords, there are three further considerations which we should all do well to bear in mind when we survey with modest pleasure our present position. First, we must remember the time it has taken to bring the position into rough control. It has taken the best part of five years; and during those five years this Government have hung, like an albatross, some £3,000 million of new external debt around the neck of the British people. The second consideration is the price which we have all paid for the failure of the Government's economic policies hitherto. The alternation of "Stop" and "Squeeze" has brought with it a sharp slowdown in the growth of our economy, from a rate of 3.7 per cent, per annum, on average, in the last five years of Conservative Government—the five fat years, if I may so term them—to 2.1 per cent. per annum in the first five Labour years, the five lean years. That slowdown means that we are now losing annually an accretion of some £3,000 million a year to our gross domestic product. I have not done the calculations precisely, but I suppose that represents some £1,200 million in revenue, in taxation. Think what could 241 be done for the general weal with a sum of that amount—£1,200 million in tax revenue, £3,000 million per annum in increased national wealth.
Then there is the other record—that other record price which we have paid for the past mismanagement: the growth in our tax burden. There, again, there is the same figure of £3,000 million per annum, which seems to run like a seam through the story of the last five years. But that is not all. It is that repeated £3,000 million—£3,000 million in new overseas debt, £3,000 million a year in lost national wealth, £3,000 million a year in further taxation—it is that sad and sorry conjunction of £3,000 million which is the price of the failures of the past.
§ LORD SHACKLETON
My Lords, I wonder whether the noble Earl could help us? What does he mean by "£3,000 million per annum"? He has used the words "£3,000 million per annum" about six or seven times, I think. I wish he would explain it clearly.
I did not say "per annum" in relation to debt. That is the total amount of external national debt which has been incurred, as I understand it, grosso modo, in the course of the present Administration: and if my figure is wrong I hope very much that the noble Lord will be able to give me the correct figure. In fact, I think there is a great deal to be said for having these figures clearly laid before Parliament in some easily comprehensible way. We have not had that hitherto. But the other two figures which I have quoted are, of course, per annum figures: the increase in taxation per annum and, indeed, the increase which we should have had per annum by way of accretion to our gross domestic product but which we have not had.
§ LORD PARGITER
My Lords, I wonder whether the noble Earl would explain the figure of £3,000 million per annum which we have lost as a result of the failure of the present Government. Do I understand him to mean that this is a dead loss, or is it a loss in home consumption as a result of which we have imported less than we should otherwise have done and as a result of which our balance of payments is better?
My Lords, I do not want to go into a very long argument over this subject, but it is the gross accretion to our national wealth in terms of gross domestic product which we should have had if we had managed to attain and keep to the growth in g.d.p. which we had in the last six years of Conservative administration.
My Lords, that price has not been paid only in those impersonal figures: it has, of course, been paid in a more direct and a more personal sense by the British people. It has been paid in unemployment. We now have the highest unemployment figure for October that we have had since 1940. It is against that background that we read in the gracious Speech that it is the Government's intention to safeguard employment. I should like to note, in passing, that the little adjective "full" which used to precede "employment" appears to have been dropped. It is against that background that we read also of the Government's intention tofoster the fullest use of resources in all regions …I assume that that must mean and must include human resources, the resources of skill in those regions. But, my Lords, there are now fewer jobs in development areas than there were in 1964, and in the past three years unemployment has risen by something like 50 per cent. in Wales and something like 60 per cent. in Scotland. So much for unemployment.
What of prices and living standards—the area where the shoe pinches equally acutely for the average man and the average woman? Here we have the same sad story. Judging by the index of retail prices, prices in the last six years have risen annually by something like 4.6 per cent. This compares with a figure of 2.2 per cent.—precisely half—in the last six years of Conservative administration. I have looked at the statistics of the price rises in eight of the principal industrial countries in the free world since 1958. In those last six years of Conservative administration, 1958 to 1964, we were fifth on the list so far as rises in prices were concerned—behind Japan, which is always at the head, France, Italy and the Netherlands, and just ahead of Germany, Canada and the United States. During the first four Labour years we had risen 243 to third on that list, and last year we were second, with only Japan holding the rather invidious distinction of being ahead of us so far as price rises are concerned.
My Lords, those price rises have not only hurt in the market place; they have also hurt in another intensely personal area, and that is the area of the possibility of home ownership. Many of us remember the promises about housing which were given by our present rulers. I remember very well that the present Prime Minister told an audience some years ago—it was 1963—thatby intelligent monetary policies Labour will bring mortgages within the reach of young couples living on average incomes".My Lords, what has happened? In the last six years the average price of a new house has risen by well over £1,000, from just under £3,500 to nearly £4,800—and this, with higher mortgage interest, may well mean that perhaps only half of the people who could afford to buy a house in 1964 can buy one now in 1969.
But the price of failure properly to manage our economy has not only been paid at home; it has been paid, and paid with interest, abroad. We all know from repeated experience that when as a result of their mismanagement of the economy—their handling of the economy, to use a more neutral term—economies are called for under a Socialist Administration, their axe swings first on the tree of our defences, the tree of our national security. But that is not the area which I choose to illustrate the consequences of their economic failure abroad. I take rather the area of overseas aid where, so far as I know, there is no disagreement in principle between the major Parties, although there may be differences within the major Parties. I believe profoundly that theever widening gap between the rich mainly white nations, and the poor mainly coloured ones, is not only unpalatable to the conscience of us all. it constitutes the greatest single danger to peace and stability for the rest of this century unless it is bridged.I take those words from that great work Agenda for a Generation. I think they are true.
That is why we must all be glad to read in the Queen's Speech of the Government's determinationto assist the advancement of less developed countries.244 But when it comes to fact rather than aspirations, what do we find? We find that our aid to less developed countries as a percentage of our gross national product dropped from 0.98 per cent. (nearly 1 per cent.) in 1964 to 0.83 per cent. in 1968. In addition, its real value has been eroded since then by price rises and devaluation. I can therefore only agree with Mr. Prentice—
§ LORD SHACKLETON
My Lords, I hesitate to interrupt again. I am not trying to catch the noble Earl on a question, but how do you "erode a proportion"? The noble Lord said there was a decline in the proportion of the gross national product and that it had been eroded by price rises. I do not see how one can erode a proportion.
My Lords, it might be difficult to do so. What I said was that the value of our aid had been eroded as compared with 1964. I can therefore only agree with Mr. Prentice, a Minister for whom I have a respect similar to that I hold for the noble Earl, Lord Longford, because he has the courage of his convictions. Mr. Prentice wrote recently in the New Statesman:… for a long time the Labour Party has been saying the right things about fighting world povertyThat I agree with. But I must also, alas! agree with Mr. Prentice when he goes on to say:but the performance of Labour in office has simply not measured up to these aspirations".My Lords, you can say that again. And you can say that about the performance of this Labour Government in spheres other than overseas aid.
May I briefly summarise my argument hitherto? We on these Benches welcome the turn for the better which our trade balance has now taken, but we cannot fail to point out that the turn for the better has come very late and that the price which we have paid for it in curtailed expansion, in curtailed expectations and, worse still, in a certain curtailment in our national spirit and energies has been terribly high. But the real question now and the real question for the future is: will this improvement last? On past form, past Labour form, any cautious man must have a real doubt. We must remember that that bland and 245 optimistic muezzin in Number 10—the glad herald of the dawn—has heralded no fewer than three false economic dawns in the last three years: one just before the 1966 Election; another just before Mr. Callaghan's 1967 Budget, the "steady as she goes" Budget, and another in the immediate aftermath of devaluation. We should therefore clearly be cautious before rising from our beds rejoicing when we hear these new glad cries for the fourth time. We must remember that in the fourth quarter of 1966—just before the second false dawn—our surplus and current account was running at a rate of about £700 million a year, but that within a year the pound had been devalued. We must remember, too, that when under this Government we have had some growth, as we had in 1967 and in 1968, we have not had an improvement in the balance of payments; and when we have had an improvement in the balance of payments, as we had in 1968–69 we have had, as yet, little growth.
My Lords, I do not wish to play down the favourable factors. I know that many of our great engineering firms have bumper export books at the present time. I am glad that this is so. We must give credit to all those to whom it is due: to the exporters themselves, to those who make and those who steer, and also to those in Whitehall who have done their level best to help things along—and I must notably include the noble Lord, Lord Brown, among that number. We must remember, too, that business as a whole, to judge from the latest Financial Times monthly survey, is also more optimistic. On the other hand, it would be foolish for any of us—and foolish not least for the Government—to ignore the less favourable factors. It would be foolish to ignore the extreme pressure under which industry is soon likely to come on the wages front. We have seen very striking instances lately. very striking increases, ranging, from 10 per cent. for the miners, 16 per cent. for the London dustmen up to 18 per cent. for those engaged in the motor retail and repair trade. We know, too, that most major wage claims come in the winter. The auguries here are clearly not too good.
Again, I think a prudent Government cannot dismiss the possibility of renewed pressure on the import front. There may 246 well be some peaking of imports in the New Year, of imports delayed in expectation—and understandable expectation—that the import deposit scheme was to be lifted. More important. I think we must all doubt people's willingness to accept, and perhaps the desirability of maintaining, the present squeeze in all its rigour: and, once off, the relaxation is likely to be reflected in increased imports by the very import-intensive industries.
Finally, and most important, there is the fairly widespread assumption that we and all industrial countries may be faced in the coming year with a significant slowdown in the growth of world trade. Much turns on the attitude of the Nixon Administration and the impact on the American export market of measures by the United States Administration to tackle inflation. We shall listen with interest to what noble Lords opposite have to tell us about their expectations for world trade in the coming year. For my part, I confess to being guardedly bearish.
My Lords, it is of course right for us to take pride in our better figures and in our export performance, but we should be wise not to throw our caps in the air too soon. True, our exporters achieved a 32 per cent. increase in volume in British exports between 1962 and 1969—a very good effort. Nevertheless, that was only half of the increase achieved by some of our closest and fiercest trade competitors. This year we have seen an acceleration, and I welcome it. Nevertheless, we must recognise that that acceleration has been achieved as the result of a conjuncture of unusually favourable factors—an almost unprecented world demand, a rather torpid domestic economy and some incidentals like the retrieval of the under-recording of our exports. It is at least open to doubt whether all or any of these factors will recur in the coming months.
I have dealt at some length, perhaps at too great length, with the underlying position, the price we have paid for such progress as has been achieved and the possibilities for the future, since I believe that this is probably the heart of the matter. I suppose that I shall be taunted with not having said a word or two more directly about the Queen's Speech. Well, my Lords, I can only excuse myself by saying that I had no particular relish for what might be judged to be that part of my task, since, despite the advance 247 window dressing, I find most of what the Queen's Speech says on these matters of mic-macro-economics—to use that appalling jargon—to be pretty dry and pretty dusty. Of course, we have ail heard the words of moral encouragement from the noble Lord, Lord Shackletonthe—hard slog that still awaits us. We know that we shall be marched up the hill and marched down again, as we have been for the last six or more years, by our latter-day Duke of York. But as for milestones to mark the way, or sustenance, solid or liquid, to cheer us on our way, the Queen's Speech has but little to offer us.
My Lords, may I say this in conclusion? What I feel basically is this. I believe that as a country, over the last six years or so we could have done a great deal better than we have done. I also believe that we could do a great deal better in the next six years or the next six years thereafter. But, my Lords, candidly, I do not believe that we shall achieve that better performance, despite the present transitory promise, under our present management; and I believe that we could do better, as we have done in the past and as I am convinced that we can do in the future, under new and fresh management.
§ 3.22 p.m.
§ LORD BESWICK
My Lords, one of the interesting incidentals of this extended debate that we are having is the extent to which speakers from the Benches opposite qualify to join what my noble friend Lady Gaitskell called the "Decline and Fall squad". The noble Lord, Lord Brooke of Cumnor, with his gloomy account of the criminal tendencies of the British people, came near, I thought, to joining that squad. On the other hand, the noble Lord, Lord Carrington, with his absolutely refreshing, positive and constructive speech, was not even in that army. I waited with interest to see what posture the noble Earl, Lord Jellicoe, would adopt. I was glad to hear his initial recognition of the improvement in our affairs, but I am bound to tell the noble Earl that I have heard him make much better speeches when the going for the country was much worse than it is now.
I see that the noble Earl, Lord Cromer, is due to speak. I recognise readily the 248 very courteous way in which he told me of some of the constructive questions which he proposed to put but, on past performance, I would put the noble Earl not only in the "Decline and Fall squad" but as a recruiting sergeant for it. I propose to return a little later to the letter to The Times about, as he put it, this country's alleged refutation of our international obligations.
My Lords, a debate on the economy of this country is, of course, an ideal occasion for those who have a compulsive urge to cry stinking fish. Almost every figure in the picture can be interpreted in more than one way. Success or failure in these matters is, like beauty, in the eye of the beholder. I am bound to say, after listening to economic debates in one House of Parliament or the other for well over twenty years, that, despite the noble Earl's understandable desire for a truce on criticism, there seem to be some people who are completely incapable of seeing even a glimmer of success in our economic affairs, unless they or their family, or at any rate their Party, are in control of the national destiny.
There is one other general point that I should like to make. I am very pleased that the noble Earl himself made reference to it, because often it is disregarded. No Government of any complexion can claim credit for economic success. Conceivably a Government alone could ensure failure, but the net result comes from the combined contributions, positive or negative, of each individual in industry, trade, public service and the home; dockers, printers, dustmen, teachers and all. It may well be said that in recent years the contributions of some individuals have been more negative than positive, but the net result, looking at all the available evidence, is that we are now economically in better shape than for many years past.
This claim is not made on the basis only of trade figures, and certainly not on one or two monthly returns. I emphasise what others have said before me, that a short run of trade figures does not necessarily bear relation to the underlying trend. This has been said and should be said again, whether the most recent monthly trade returns are exceptionally good or particularly bad. In any one month, erratic factors can affect 249 the import and export figures by £30 million or £40 million either way, even after seasonal adjustment. If we are to take the evidence of trade returns, it is clearly better to take averages over, say, three months. These are still sensitive to special influences, but obviously much less so.
No one may be certain that the improvement in the visible trade balance will continue, but, taking a running three-month average over the past six months—that is to say, the average of the current month and the preceding two months—the improvement has been unchecked: minus £60 million in April; minus £43 million in May; minus £32 million in June; minus £25 million in July; minus £7 million in August; plus £10 million in September.
There has been the same underlying improvement in the visible balance over a longer period, in fact since devaluation. Taking the seasonally adjusted figures, in the first half of 1968 there was a formidable deficit of £404 million, falling to £273 million in the second half; £208 million in the first half of 1969 and then from minus £132 million in the first quarter of 1969 to minus £76 million in the second quarter, and, the latest figure, plus £33 million in the third quarter.
As the noble Earl himself has said, one of the unfortunate reactions from Opposition politicians to this improvement has been the charge that the trade figures have been "cooked". I do not believe them, and I do not propose in this House to go into these charges in detail; especially as they were answered with such crushing completeness by my right honourable friend, the Chancellor of the Exchequer, yesterday. But if there are any questions about these admitted complexities, my noble friend Lord Brown, who lives with them day in and day out, and who has made a most significant and constructive contribution to their increasingly favourable character, will be glad to try to answer them.
The balance of invisible trade has benefited more obviously from devaluation than the visible trade. The improvement was reflected earlier. Net invisible earnings in sterling terms rose steeply in 1968 and reached a record level in the first half of £50 million a month. These results, incidentally, more than offset the deficit in the visible balance, even ex- 250 cluding any allowance for under-recording. It is possible that the surplus on invisibles in the second half of this year will be a little lower than in the first six months. Nevertheless, the Chancellor has forecast an increase for the year, over 1968, of £100 million and the actual out-turn may be an improvement on that forecast. I am advised that in 1970 they will probably rise by as much again, in large part due to the activities of the oil companies and to a further reduction of Government spending abroad.
No matter how the figures are adjusted or expressed, the trend is encouraging and the prospects for our £300 million surplus on current and long-term capital account in 1969–70 are bright. Indeed, the Chancellor of the Exchequer has now felt able to say that a higher figure is within our grasp. I am sure that the noble Earl, Lord Jellicoe, was right and that we all welcome this prospect. Yet, without exception, every step that has been taken towards this result has been criticised, usually bitterly, often offensively and most of the time inaccurately.
One of the absolutely essential ingredients of success has been the necessity to restrain home demand to make room for exports. For the first time, we are now getting to that desirable objective of an export-led boom. Over three-quarters of the increase in the gross domestic product in the two years between the second quarter of 1967 and the second quarter of 1969 has gone into the balance of trade. There has been growth before. There was even growth under the Conservative Administration, though not so great as the noble Earl makes out. They even had on occasions a favourable balance of payments. But they never secured—and this is what has eluded us all so far—both growth and a favourable balance of payments. And this is now what we are moving towards.
Does anyone seriously suggest that this result could have been achieved if consumption expenditure had not been held hack by the courageous and admittedly vote-losing measures taken by the Chancellor of the Exchequer? Of course, there has been vicious criticism of individual taxes and especially of S.E.T. Yet no one has put forward an alternative tax which would not have been equally or more objectionable. Some 251 say that it should have been public expenditure that should have been checked. That is said mostly by those who want to check the growth of public expenditure but at the same time demand more roads, an improved health service, a greater expansion of the police force and so on. In fact, the figure of public expenditure on goods and services actually fell over the two-year period by 3 per cent. Together consumer and public expenditure has risen by only about 1½ per cent. in the two-year period, when the volume of exports of goods and services grew by 16 per cent. Clearly, we are seeing a real shift in our resources and not until this shift is assured can we look with confidence to economic stability.
Then we get the cry that we are eating our own seed corn, that we are getting short-term advantage at the expense of long-term investment. Of course, I agree that any permanent improvement in our economic fortune must include a sustained expansion of private investment, but it is equally true that a surge in investment which led to a deterioration in our trade balance would be most unwise. The figures suggest that the advance is about right.
Comparison of the latest nine months' figures of manufacturing investment with the previous nine months shows an increase in volume of 8 per cent., or an annual growth rate of 11 per cent. Apart from the distorted figure for the last quarter of 1968—distorted because of the incidence of grants—the seasonally adjusted return for the second quarter of the year was higher than ever before. If we are talking about industrial production, I think that the noble Earl must have misled or looked the other way when the Chancellor of the Exchequer spoke about industrial growth and the fact that industrial production has gone up by 8½, per cent. since devaluation, one of the greatest increases that has taken place in the last twenty years.
The two most recent surveys, by the C.B.I. and the Board of Trade, did not indicate any large downward revisions in investment for the future, and the likelihood is of a substantial increase in the underlying level of investment this year and probably also in 1970. I know that the C.B.I. called attention to the danger of the credit squeeze and to the possibility that it could cause a curtail 252 ment of plans for expansion next year, especially among the smaller firms. This is certainly something which will have to be watched, but at the present time there is no hard evidence at all that this would take place.
Several other indicators tend to disprove the pessimists. For example, home engineering orders, contractors' new orders and i.d.c. approvals are all at a high level. Another factor which has helped, modestly, but it has helped, has been the limitation on holiday spending abroad. Of course, there are arguments against a foreign travel allowance, but they are not nearly so compelling as an argument against an adverse trade balance. This is a matter we could argue about. There are cases to be made on both sides, but surely we can argue these points among ourselves without using the strident language which the noble Earl, Lord Cromer, used in his letter to The Times the other day, when he spoke about a… calculated intent to continue to refute—as he put it—our international obligations".I understand that Mr. Heath, at Brighton, said that there was a greater danger than the loss of military power. It was, said Mr. Heath,the danger of losing the habit of thinking and behaving as a great people".I have no doubt that he had in mind the kind of words that were used by the noble Earl about his country or the words that were used by the unfortunate and unhappy Mr. Barber. In this respect, at any rate, I agree with Mr. Heath.
The facts about the travel allowance are that the rules of both I.M.F. and the O.E.C.D. allow countries in balance of payments difficulties to apply restrictions on current payments, subject to certain formalities. These formalities have been followed.
The noble Earl, Lord Cromer, and those who think and behave like him, should make up their minds as to which line of criticism they wish to pursue. Are we in balance of payments difficulties? In that case, what about all the arguments they have hurled across the Floor at us in recent debates? If we are in balance of payments difficulties, then we had the right to restrict foreign 253 travel expenditure in this way. The I.M.F. could have expressed an opinion if we were wrong, but in fact the opinion which they expressed to us was that they accepted the action which we have taken.
I spoke earlier of other grounds, wider and deeper than the trade figures, as giving us cause for encouragement. There are recent grounds for encouragement from the degree and expertise of international monetary co-operation. The noble Earl, Lord Jellicoe, seized upon the figure of £3,000 million, which he says is a debt hanging around our necks. If he so wishes, he can look upon it in that way. But the fact of the matter is that this country is not in debt. Our assets are greater than our liabilities. But we need liquid resources. That is what any country or any company needs, if trade is to continue. That money was lent to this country because it was in the interests of world trade that there should not be a contraction in world trade because of the limitation of international liquidity.
In this context. I call the attention of sceptics to the fact that since we last discussed these matters the formal decision has been taken by the I.M.F. to create and distribute the first S.D.R.s. A total of 91 billion dollars. about £4,000 million, will be distributed over the next three years. beginning on January 1, 1970. The amount cannot, of course, solve all liquidity problems in the Western World, but it is an historic step in which we have played our full part. For the first time we have an agreed method by which the supply of world liquidity can be regulated by collective decision rather than on irrational reliance on a particular metal.
There is another factor which gives cause for increasing hope. Those who took part in the debate in your Lordships' House last December on invisible exports will possibly recall the emphasis placed on the fact that the undoubted achievements of those who earned us foreign currency by services of one kind or another had been so largely nullified by Government expenditure abroad. It climbed from £61 million in 1952 to £457 million in 1966 and £464 million in 1967. The larger part of this expenditure was on military account. The quite 254 ludicrous swelling of overseas expenditure has now been checked. In the financial year 1968–69 net expenditure overseas was £12 million lower than in the previous year, reflecting cuts in military expenditure, and in real terms the reduction is greater.
Changes of this kind cannot be effected overnight, but there should be a further reduction in military expenditure for this year, and more significant savings for the future. This one item, military expenditure overseas, probably did more than any other single factor to bring us to the financial plight we inherited in 1964. The Government which follows this, be it Labour or Consrevative, will benefit enormously from the decisions which have been taken about overseas military commitments; and my view is that, despite anything which some politicians may say, the British public will not tolerate going back again to the grandiose overseas bases which were developed in the 1950's.
There is one other factor which is relevant to the developing longer-term improvement, and that is the changes that have taken place over the past few years in our economic structure. No doubt this theme will be developed in the debate to-morrow, and I content myself here with calling attention to the undoubted improvement in our competitive position because of the re-grouping and rationalising that has taken place, much of it with direct Government encouragement and in some cases with Government-provided finance.
My Lords, it is not my purpose to claim that the battle is won; but I do say that we are winning. The direction of our progress is right, and the pace is reasonable. Of course, as the noble Earl said, there are potential perils. A recession in world trade is not likely, but it is conceivable: and, that, of course, would set us back. But probably immediately more revelant is that theme with which I began. Economic success for Britain cannot be won on monetary and fiscal policy alone, however astute. It will be decided in the ultimate by the efforts of those who actually produce, sell and distribute goods and services. And at the centre of this factor we have cause to be conscious of industrial relations and the apparent readiness of some people to try 255 to put up their standard of living by downing tools.
This aspect of our affairs will no doubt be dealt with at greater length to-morrow. I content myself this afternoon by saying this—and I say it as one who grew up in the 'thirties in a mining family. Soup kitchens and the means test were the background of industrial stoppages in those days. To-day we have redundancy payments, social service benefits and a degree of independence for the workers which they have never known before. To that extent, as the two sides of industry are more evenly matched, the problem is more difficult of solution, and the atmosphere, the social climate in which negotiations take place, is all the more important. I say this with all sincerity. I cannot see that the Conservative appeal in their pre-Election propaganda to personal gain is going to improve that social climate. I am not saying that the Labour Government have yet come up with the complete answer, though none can say that we have not honestly tried. If we can make progress in that one sector, of personal incomes and social responsibility, then indeed we shall be able to say at the end of this Parliamentary term that we handed over the nation in better shape than when we assumed office. And in my view this progress will be possible only if we hand over to another Labour Administration.
§ 3.46 p.m.
§ VISCOUNT AMORY
My Lords, I am a little disturbed to find that I have been, as it were, called to the rostrum rather early in the debate, because I usually find that my speeches which are the least disagreeable to myself and the most tolerable to your Lordships (or should I say the least intolerable?) are those that I have made at a stage of the debate when I have been able to cross out three-quarters of what I was going to say, it having been said better by somebody else.
We have been advised on unimpeachable authority that we as a nation are back again in the black. This is most excellent news, at which I would say that every one of your Lordships will feel like rejoicing without any qualification whatsoever. But, lest this welcome diagnosis should precipitate any euphoria or ecstasy on our part, I suppose we ought to remind 256 ourselves that the black should be our normal and not exceptional state. The very first condition, which is an absolute prerequisite to the maintenance of our present standard of living, is that we should be in the black. So I think this welcome news should bring to us a sense of relief rather than one of elation. I very much agreed with my noble friend Lord Jellicoe when he paid special tribute to those responsible for our invisible exports. It really has been a most remarkable and satisfactory achievement. The disease that we have been suffering from is once again our old post-war enemy, inflation, or, perhaps slightly oversimplified, over-spending. Certainly until recently, and perhaps even now, it is public spending that has been the worst offender.
It is a truism, I suppose, that since the war every Government has had four aims in the economic field—full employment, a satisfactory balance of payments, a stable price level and expansion. Each Government has tried to pursue those four aims simultaneously, but never yet have they all been achieved, except for short periods. Which is the most important of those aims? I should have thought that in Britain's position a satisfactory balance of payments must, without any question. come first. Of course it is not feasible to pursue one without any consideration for the others. While I commend the Government, and the present Chancellor of the Exchequer, for having increasingly over the past two years given top priority to the balance of payments, and while at present there seems to he a reasonable degree of stability in the economic situation, there is one danger that might negative such improvement as has been achieved. and put us back again in jeopardy. I refer to the danger of excessive rises in wages, and consequential costs, which might completely destroy in quite a short time our export potentialities. As my noble friend Lord Jellicoe said, some of the settlements which have been made recently seem alarmingly out of tune with the 3½ per cent. which the Government have been advising us is the maximum increase that can be accepted in safety. I hope the noble Lord who is going to reply to this debate will give us his views on that point.
If it is true that we are experiencing a rather better degree of equilibrium, then 257 we must confess that we have had to pay a pretty high price for this relief: devaluation; increases in taxation running into thousands of millions of pounds; higher rates of unemployment; a squeeze in credit of grizzly bear-like proportions, and a formidable increase in the nation's overseas debt. Those add up to a pretty hefty price. On the overseas debt, to which the noble Lord has just referred it is true, as he says, that we are not bankrupt; that the total of our overseas investments exceeds the total of our overseas debts. But I should hope that they would; it would indeed be a tragic situation if it were otherwise. The danger of these overseas debts is that the proceeds have either been spent on current expenditure, or invested long-term, and there are great dangers in borrowing short to invest long. While I commend the Chancellor of the Exchequer for the tenacity he has shown in recent months in sticking to his guns, we really must feel that coming into the black after five years is not an achievement that merits much congratulation on the part of Her Majesty's present Administration.
The Chancellor of the Exchequer will, hope, forgive me for reminding your Lordships that those aspects of his policies which now seem to be bringing some results were anathema, one gathers, to the big majority of his Party. For some time the Prime Minister, the present Chancellor of the Exchequer and Mrs. Castle were fighting bravely for their prices and incomes policy, but finally they were beaten down by resistance in their Party. Today, sad to say, these policies, seem to be standing in ruins, leaving what would appear to be a yawning gap. Again it would be interesting if the noble Lord who is going to reply would tell us what he thinks about that.
More rapid and sustainable growth is the goal which still seems to recede and still lies ahead. Experience ought to have taught us one or two things. First, a reasonable degree of price stability is a precondition of maximum sustainable growth, at any rate for Britain: growth which is achieved in conditions of inflation is not likely in this country to prove sustainable growth. At the moment, as the noble Lord, Lord Beswick, said, there are some hopes that we are on the thresh-hold of an export-led expansion. That is just what we want above everything else, 258 One hopes that it is true. There are some signs—it is as yet too early to say—that it may be true. There is a saying that there are three things not worth running after: a bus, a woman and a new idea for painless economic growth, because if you wait a little there will be another one before long. Another lesson of our post-war experience that we ought to have learnt is that it is easier nowadays, and infinitely more agreeable, to apply stimulus than restraint. With one you are going with the current; with the other you are fighting against it.
The Deputy Governor of the Bank of Canada, in a paper the other day, suggested three reasons for this. The first is the psychological legacy from (lays of pre-war under-consumption and depression; the feeling that never again can we afford to risk a major slump. Then, secondly, although everyone accepts in theory that we cannot for long consume more than we produce, human nature being what it is, most people, being optimists in spite of all their experience, are apt to plump for "having a go" and seeing whether, nevertheless, with the aid of modern gimmicks, and one thing and another, we can do exactly that—overspend. The third reason is the acceptance of very difficult time lags: the lag before it is first possible to spot a change in the economic climate, the lag between that and the moment when the change actually occurs; the lag between the decision to take counter-action, and the taking of that counter-action, and the lag between that action itself and the remedial effects. The effect of all those lags, in practice, has led to restraint being applied too late; and this has certainly applied very much to the present Government's history. And when restraint has had to be applied it has had to be more violent than it need have been, and less effective for any degree of restraint. So the lesson is that the timing of these things is important.
I want to let your Lordships off lightly, but there are three other points I should like to mention very briefly. I am not one of those people who believe that there is a tremendous amount wrong, at our present stage of economic development, in the international credit system. One day, no doubt, we shall be able to devise something more sophisticated and more subtle, and less directly linked to national currencies. It is tempting to lay 259 the blame for our relatively poor performance on the international monetary system. However, I am sure that it would be wrong to do that. There will be improvements in the system but the time may not be ready for them yet. Meanwhile, I am certain that one essential of any satisfactory international monetary system must be a high degree of national discipline. Adequate international liquidity is not the same thing as unlimited "tick". When a country is in trouble through imbalance the first responsibility must lie on itself to put its own house in order.
While the credit squeeze in existing circumstances is unavoidable, it is important that we should remember the serious defects it has in distorting and blocking natural and constructive channels of business activity. It inflicts real hardship, and even risks of bankruptcy, on multitudes of small, efficient businesses. which could not possibly have expected or foreseen the present harsh rates of interest. Today, when one is planning expansion in a business, one has to be sure of earning more than 10 per cent. before one dare borrow long-term money, and few industrial enterprises can be sure of earning a return of more than that for a new investment from the start. So these very high current rates, which I believe are unavoidable at the present time, are undoubtedly going to hold back to some extent industrial investment, which is one of the things we do not want to hold back.
Again, I think it is evidence of the rather Alice Through the Looking Glassworld in which we live that the manager of a bank who is most commended by his superiors to-day is the one who succeeds in reducing most dramatically his lending to customers. The kindly bank manager who in the past has been a support and encouragement to responsible customers must he finding his role a very difficult one to-day. I remember my right honourable friend Mr. Harold Macmillan in another place telling the story of the man who said in his will that he wanted his pallbearers to be six hank managers. He said, "They have carried me all their life; they may as well carry me to the end!". Such distortions as I have referred to are bad things and are apt to become particularly dangerous when they become cumulative.
260 I was a little sorry because I do not seem to have read anywhere any tributes from the Chancellor of the Exchequer—this may be unfair to him, but I have not noticed them—to the clearing banks for the tremendous efforts they have made to hold down their aggregate borrowings in accordance with his wishes. I am not sure that he realises how difficult this is in practice for them, and the efforts they have made. I hope he does.
Those responsible for government ought never to cease to remind themselves—I think your Lordships will agree—that the art of good government is to devise ways in which the interests of ordinary, responsible citizens individually, and those of the body politic, can be made to coincide as much, and to conflict head on as little, as possible. That applies, I think, to the last point on which I want to say one word, which is taxation. The payment of taxes must generally conflict with the short-term interests of the taxpayers. I am afraid that that is something that even when I was at the Treasury I had reluctantly to acknowledge—with many, many qualifications, of course. But the art of good government, again—and I am not saying this is easy; it is extremely difficult—is to try to raise the necessary revenue in ways that least discourage personal initiatives and efforts which are of value to the nation at large. I think that this principle, if we accept it, is a really compelling argument for lowering the levels of taxation on personal incomes. The lesson must be clear: that it must be right to shift some substantial part of taxation by stages to taxation on expenditure, rather than taxation on earnings.
I was very glad the other day to read a report which seemed to indicate that the Chancellor of the Exchequer agreed with this view. The need for savings in order that we can increase our national investment is such that I think that must be the right policy. Added value tax is much discussed to-day, and it has at any rate one advantage, of bringing us more into line with general European practice. But I myself am more attracted by the much simpler and more straightforward retail turnover tax.
Finally, there is one bad lesson that I fear is being learnt by less responsible and generally unofficial sections of the trade unions, and that is that strike action 261 pays off, and by militant action they can achieve their short-term ends, at great expense to the nation. We must hope that such attitudes will not invalidate such progress as has been made to greater national solvency, and that moderation and a sense of responsibility to our fellow-citizens may prevail. Meanwhile, as a nation we can take encouragement and confidence from the recent improvement in our fortunes. Over recent years we appear, I think, to have been losing confidence in our capacities. I hope that this improving trend will remind us that when we feel confidence in ourselves and pride in our achievements—not our national achievements in days long past, but achievements won by British people of the generations still alive—then we are capable of giving an account of ourselves out of all proportion to the population of these small Islands.
Therefore, my Lords, with no feeling of complacency, let us welcome this improving trend, and determine that each one of us will do what he can to ensure that our generation, when the history of it comes to be written, gives an account of itself worthy of our nation and of those who came before us.
§ 4.7 p.m.
My Lords, yesterday in another place the Chancellor of the Exchequer made a very welcome announcement on the improvement of the trade figures. But is this enough? We have this vast increase in external debt; it really means that the figures are about half the interest charges. I have sat in this House for well over forty years, during which time I have never known any Government of any political Party reduce the National Debt, either internally or externally. Surely it is time we thought about doing so. As a Liberal, I should like to suggest a way of saving £1,000 million per year by the end of five years. We have had the agricultural "little Neddy" Report in which the figure has been whittled down from £220 million a year to £160 million. That is not good enough as regards both the whittling down and the amount aimed at. We do not want another Report; we want action—action through the machinery of the standard quantities allowed in agriculture in this country and to those countries exporting food to us, 262 and the agricultural Annual Price Review.
Denmark has already let us down on her first bacon quota. I believe that she is between 7,000 and 10,000 tons per month short on that quota. It would take the British farmer one year to raise the pig population to take over the Danish quota. Do not let the Government make long-term contracts for bacon elsewhere abroad—I have seen them looking desperately to find an alternative supply—but let them give the contract to the British farmer at an economic level for all parties. Let the Price Review fix prices and deficiency payments for British agriculture so that the farm labourer can have his wages raised to be equal with those of the industrial worker, the farmer being allowed a fair return. If this £1,000 million increase in home production is obtained, money will be circulating in England which now goes abroad, encouraging exports at an economic price level. We can reduce our overseas debts and our national debts. England will again be looked up to by the world.
§ 4.11 p.m.
§ VISCOUNT ECCLES
My Lords, like other noble Lords who have taken part in this debate, I am not one who thinks we can lay at the door of the Government all our discontents, especially now, when widely different groups of people in different parts of the country are telling us that they are dissatisfied with their environment, and in one way or the other are not perhaps doing their best. For one reason or another, in recent years the British people have become less easy to manage in their employment and less easy to govern as a nation. This is an awkward state of affairs, and it is highlighted by the evidence that certain habits of restraint, on which any Government in the past could count, are wearing thin. Obviously, the present Administration are not to blame for all of this. Much of the trouble has been slow to mature and has little connection with politics. Nevertheless, I agree with my noble friend Lord Amory, that it can be shown that the taxes which the Labour Government have imposed upon us, and certain aspects of their financial policy, are contributory causes of these frequent outbreaks of irresponsibility. Financial and fiscal measures are now prompting us, if not to be downright dishonest at 263 least to be unashamed of debt and of tax evasion; to be unco-operative and to be willing to spend a great deal of precious time thinking up ways of getting the better of the law.
I am not going to refer to the total weight of taxation, although I have not the least doubt that this is a serious damper on initiative and enterprise. The question I wish to put is what effect this present financial policy has upon the conduct of the individual citizen and, through individuals, on the vigour and spirit of the nation as a whole.
Let us first take a subject that has been mentioned by every speaker: debt. Debt has always been recognised as unfortunate and, very often, as demoralising. This Government have been putting the country into debt more deeply than ever before. We used to be a great creditor nation. We still have very large overseas investments, but in the last four years our public debts to foreigners have grown at a quite unprecedented rate, and for all one hears from Ministers one would think that these huge short-term obligations have no impact other than the strictly financial, and even this they do their best to conceal. All this money is not being borrowed because the British economy is desperately short of capital, as are the underdeveloped countries. It is borrowed because we have been overspending our income and frightening away our old friends who had long term confidence in sterling. Debts of this kind are always inconvenient. Usually they are worse: they affect the judgment, they curtail liberty of action, they embarrass one's friends and set a bad example to the other members of one's family. This is precisely what is happening to the country to-day, and I fear that the public are all too ready to be given this bad example.
Since the war the whole attitude to personal debt has changed. To overspend one's income and to borrow money used to be considered wrong. Now everyone is encouraged to buy every kind of thing on hire purchase, to borrow as much as he can and to live on capital. It is sad to see the Government setting the seal on a habit which is both the effect and a further cause of questionable standards of behaviour.
264 There is another point. Overseas loans have to be repaid in the currency of the lender, or in dollars. The more the Government borrow in this way the more important it is that they should maintain the value of sterling. It seems to me that they do not see—or perhaps they do not want to see—that every individual in Britain who owes pounds, shillings and pence has a built-in reason for turning a blind eye to inflation. Such a person's burden is eased if he can secure a rise in income, so that a debt which was equal to, say, three months' pay when he incurred it is equal only to two months' pay when he has to repay it. Therefore, the fact is that these personal debts, which are now spread across the population in a way they never were before the war, generate the opposite pressures to those which are essential when the Government are contracting debts in foreign currencies. It is this which Mr. Jenkins glossed over yesterday in his speech in another place. He has changed old sterling balances into much heavier short-term obligations expressed in dollars or gold, and this is all the more serious because there are plenty of signs that the Government are giving way on the wages front and that inflation will again increase its pace.
My Lords, it is sometimes said that we have suffered nothing worse than a creeping inflation, and that that does not do great harm. I believe that such a view is only possible for a short while. It takes time for good habits to be broken down and replaced by bad habits, and vice-versa. All the time that inflation has been going on the poison has been at work, and now it is emerging in such places as the market for antiques, land values, the prevalence of gambling, rising fares, rising prices of almost all household goods, and the shockingly low level of Government securities. We can all see that the process of disintegration—because that is the certain result of continuing inflation—has speeded up in the last four years. Now, because of the increasing damage done by inflation throughout the world, interest rates have had to be raised to exceptional heights. It is said that bankers like high interest rates. I rather doubt whether they do, but certainly no one else likes them. Householders with mortgages are cruelly 265 hit; so, as my noble friend Lord Amory said, are new and small businesses which are struggling to make good on borrowed money, and so is the building industry, which is bound both to raise the price of new houses and to build fewer of them.
In short, the present rates of interest hurt everyone, directly or indirectly, except perhaps the speculators, who thrive on inflation and on the rapid movement of prices. When I first sat in another place the Labour Party were loud in their condemnation of speculation. Never a week went by without some speech against the wicked speculators. Let them now reflect that in the last four years more has been done to encourage speculation in this country than in any comparable period in this century. We are not only teaching people to be speculators; we are teaching them to evade the law. An taxes tempt the citizen, but some taxes more than others. S.E.T. is an example very much in the news. The discrimination between one form of employment and another was bound to be considered unfair; it was bound to set those caught by the tax devising stratagems to avoid it. The gracious Speech promises legislation to stop building workers converting themselves from employees of a contractor into self-employed bricklayers, plasterers, carpenters and so on. If the legislation is successful, the costs of house building will rise further. The Government do not mind that; that was one of the crazy objectives of this crazy tax. But, my Lords, no fresh legislation will stop widespread attempts to circumvent a tax which will never be accepted as either sensible or fair. It is the cumulative effect of unconscionable measures which one should worry about. Every time a man breaks one provision of the law he is more easily persuaded to do it again in another direction.
That brings me to a point raised by the noble Lord, Lord Beswick, that of the foreign travel allowance, another temptation to the ordinary citizen. No one knows how much will be saved on the balance of payments by the Chancellor's refusal to raise the limit. When a Conservative Government were considering abolishing the allowances we were advised that the effect on the balance of payments would be very small, because 266 most of those who wanted to spend more than the £50, or whatever was then the limit, had already found ways and means to do so. I should have thought it was the same to-day, but one cannot be absolutely sure. What is certain is that whatever the direct saving in foreign exchange may be it is in some measure cancelled by the bad effect on our credit abroad, renewed month after month during the summer by the spectacle of thousands upon thousands of embarrassed British tourists. One could hardly expect a foreigner to want to hold a sterling bank account when Her Majesty's Government give him such plain evidence of their own lack of confidence in our currency.
Leaving aside the financial effects of the travel allowance, this is a measure which puts a quota on holidays, that is, on people's pleasure and relaxation, while at the same time no quotas are put on imported consumer goods. There are no quotas on motor cars, there are no quotas on clothing, there are no quotas on luxury foods and so on. It makes no difference that these goods are subject to an import duty. If a man has the sterling to pay the price asked, including the duty, he can buy a thousand cases of champagne or a dozen Mercedes cars, but he may not choose to spend the same money on a holiday for himself or his family. My Lords, these priorities are manifestly wrong. The Government persist in acting as though trade is more valuable than people. As things are now, thousands of respectable citizens are tempted to outwit the regulations, and the balance of payments is not strengthened to any significant degree.
§ LORD BALOGH
My Lords, if I may intervene, may I ask whether the noble Viscount is aware that he is contradicting himself? Either the quota is effective or the saving is not very great, but the noble Viscount cannot have it both ways.
§ VISCOUNT ECCLES
My Lords, I hope the noble Lord will forgive me, but I could not hear a word he said. It is probably my fault; I am a little deaf.
§ LORD BALOGH
My Lords, I was merely asking the noble Viscount whether he realised that his statement that not much is saved and his other statement that a grievous loss is inflicted on individuals are contradictory.
§ VISCOUNT ECCLES
My Lords, not much is saved, certainly, but I am sorry to tell the noble Lord that many embarrassed tourists do in fact find one way or another of receiving a gift abroad, and this is extremely invidious and ought to be stopped now.
§ LORD BESWICK
My Lords, I wonder whether the noble Viscount will allow me to put another apparent contradiction. He was preaching to us earlier about borrowing money to have an easier life. Does he really think we would be entitled to borrow money abroad in order to maintain unlimited spending for holiday travel abroad?
§ VISCOUNT ECCLES
My Lords, my point is quite different: that is, that we are spending enormous sums on imported goods. I am merely saying that if we care about people and about the quality of our society, in my opinion it would be better that money was allowed to people to educate themselves and take their children abroad and so on rather than that we should have every single luxury item that comes in.
§ LORD BESWICK
My Lords, the same point was put to me by the noble Lord, Lord Carrington, the other week. The noble Viscount is a former President of the Board of Trade. With that experience, is he saying that he would have preferred to have put an embargo or a quota on foreign cars or other foreign goods?
§ VISCOUNT ECCLES
My Lords, I would not, because I should have had the same good advice that we had when we were in office, that the actual saving on the balance of payments was under £5 million. Whatever the Chancellor said about £25 million, which he guessed, I feel confident that he must have had the same advice now as we had then.
I was going forward from what is happening now to hope that the next Government will review all the taxes with an eye to reducing to a minimum the temptations to break the law. I hope they will go further and take positive action to encourage responsible behaviour. Two large fields are worth considering: savings and subscriptions to voluntary associations which work for the better quality of life in our society. Various reliefs already exist for the encouragement of personal savings. These could no doubt be improved still further, 268 but I will not enlarge on that subject this afternoon.
In conclusion, however, I should like to persuade your Lordships that more should be done to stimulate interest in and financial help to bodies and associations which involve all kinds of people in working together for the good of the community. Why is this particularly important now? My Lords, because the achievements of technology tend to isolate the individual from the community. He has a car in which he can get away from the place where he lives. He has a television which keeps him bottled up in one room. In a large factory it is harder to achieve a sense of community than in a small factory. Churches, chapels, village halls are all being less used than they were. Undoubtedly such changes are largely due to technological advance which we must welcome in itself and accept as irreversible.
We could do much more than we are doing to encourage a parallel advance in those activities which involve working for and with one's neighbours. Young people, and people who are not well off, hesitate to sign seven-year covenants. It would be a great advantage to them if subscriptions up to a certain limit and to societies carefully defined, were allowable annually against income tax and also against local rates. There is lying dormant a large fund of local patriotism which could be aroused if suitable rate rebates were given by local authorities, who themselves are often reluctant to spend money on the arts or on other voluntary work. It would be much cheaper for the authorities, since a large part of the money would be put up by private individuals, and it would be much more effective if voluntary subscriptions assumed a larger role in local good works. In this way more people would become personally involved in improving the quality of life in their neighbourhood. My Lords, I do not wish to speak any more, and I think I can sum up all I had it in mind to put before the House in one sentence: let us stop leading ourselves into temptation, and instead let us encourage good habits in the people of this country.
§ 4.32 p.m.
§ THE EARL OF CROMER
My Lords, when I was preparing my notes for my speech to your Lordships this afternoon 269 I did not once include the phrase "exchange control" or a reference to travel allowances. But the noble Lord, Lord Beswick, has taken up this question and I think I should say a few words in reply from my point of view. It happened that I was Executive Director of the International Monetary Fund at the time when Article 8 (which is the Article that refers to freedom of account payments) was introduced, in December, 1958, and I think only those who were present can fully appreciate the great importance that was placed at that time, even emotionally if you like, on complete freedom of current payments which was then being initiated. The great difficulty was to evolve rules and regulations which in effect gave the degree of freedom that was being sought, a degree of freedom which was in line with the United Nations human rights, without opening a whole lot of other loopholes. It was against this background that, quite arbitrarily, various figures were selected as being, in effect, complete freedom. When the United Kingdom moved to Article 8 in December, 1958, of course we adopted this, and the freedom was removed in 1966 by the present Government. It is perfectly true, as the noble Lord, Lord Beswick, has said, that they consulted with the Fund; and equally, I have no doubt, with O.E.C.D. It brought us in O.E.C.D. on the same level as Greece, Turkey and Iceland. The rest of the O.E.C.D. countries are in a rather different category. So be it.
The practical objections to the arrangements at the moment are the really incredible degree of complication and paperwork involved: not so much by the holiday-maker who goes on his one holiday a year—he can easily cope, and his travel agent will look after him. But for the individual who is obliged to go abroad on business frequently, as I have cause to do, it is extraordinarily burdensome, in that every day you have to make a claim for whatever money you may require, limited normally to £20; and then, having spent £15 10s., on your return you have to hand in the balance, account for it on a form and the following week, if you go again, you have to do the same again. Nowadays. a great many people travel to the Continent two or three days a week in the normal course of trade, and they are put to this ridiculous rigmarole. I happened to look 270 through my own passport and found that since 1966 I have acquired eight new pages full of entries of claims for £20 and the repayment of £4, and that sort of thing. If this is really the only way in which the arrangements can be effectively policed, all I can say is that it is tremendously time-wasting, particularly to the businessman. So far as the richer tourist is concerned, I think he is just swept up in the wash in one way or another, but to differentiate against such people particularly seems wholly arbitrary.
I would also briefly refer to the point raised by the noble Lord, Lord Balogh, in connection with the speech of the noble Viscount, Lord Eccles. I think that what Lord Eccles was hinting was that there are individuals who make what are known as "private arrangements", and that, as a result of this, although the official tourist figures in the balance of payments statistics do come down by a figure, which is of course a guess (because no-one knows what these people would spend if they were allowed to) it may well be offset by an equivalent increase that cannot be accounted for in the balancing item. This, I think, was the point in that particular case.
§ LORD BESWICK
My Lords, I wonder whether the noble Earl would allow me to say that I was not disposed to controvert the fact that this limitation on spending abroad is inconvenient. I accept that. The point I was on was that the noble Earl used the words that the decision taken by the Chancellor was a calculated intent. He said that it would be correct to say that it was a calculated intent to continue to refute our international obligations. I put it to him, does he really think that we are "welshing" on our international obligations?
§ THE EARL OF CROMER
My Lords, I had intended to start on a rather more agreeable note than this. Perhaps I may continue by offering a wholly unqualified bouquet to the Chancellor of the Exchequer for introducing a most important new instrument into his tool-box of monetary control and measurement, what he calls the "thesis of domestic credit expansion". Of course that is no panacea or alternative to other monetary and fiscal policies. It does, however, introduce into the overall equation a factor which has been lacking ever since the end of the war. I think that the Chancellor of the Exchequer deserves full credit for his initiative for introducing this instrument. I should also like to take the opportunity of making a point that although the International Monetary Fund is in the position in which it passes judgment on the policies of countries indebted to it, the I.M.F. does not originate those policies; they are originated in the countries concerned. and are then approved—or possibly not approved—by the Fund. So wherever the initiative of thinking may be, the Chancellor certainly deserves the credit for this.
We are well pleased and satisfied by the marked improvement in the standing of sterling. This is welcome—some say overdue; but the fact is that it is here and it is real. Curiously enough, however, to-day the official statistics tend, if anything, to be unhelpful; and a degree of confusion, not intentional, has now arisen as a result of the manner in which statistics are widely used to-day, which is a matter of considerable concern to the objective followers of our affairs. I am not suggesting for one moment—I would make this point, in the light of the debate that took place in another place—that there is either any lack of integrity or any intention to mislead on the figures; but there is a great problem. If we take the monthly figures of the official gold and foreign exchange (the reserve figures, as they are called) in their present form, they are, as is widely recognised by the Government and everybody, meaningless. There is no possible attempt on anybody's part to mislead people in this respect. It is true also to say that this form of presentation was not initiated by this Government. When it was initiated it was intended to be a short-term tactical arrangement to see 272 sterling through a short-term period of instability. What was not foreseen was that it would be followed very soon by a major financial crisis which rumbled on for several years, with the result that what had been introduced as a perfectly proper tactical measure was something which has become an albatross around everybody's neck. The Government have, of course, a great difficulty in getting rid of this particular problem, but until we have true and accurate reserve figures published monthly the lack of this information will continue to act adversely on confidence in sterling.
I can well see the problem in reverting to the orthodox figures, the main stumbling block at the present time being the enormous overseas short-term debts. Curiously enough, the Financial Secretary to the Treasury rather took the lid off this particular box in a somewhat extraordinary speech he made in July to an audience which was largely composed of a number of foreign guests and in which he said:It is no use pretending that we have the money in our coffer at the moment to pay the short-term debts we are required to pay.First—the more trivial point—the use of the words "the short-term debts we are required to pay" was a curious choice of words, because if we are required to pay these debts it must surely mean that we have ourselves undertaken to repay them on whatever date they may be due. In negotiating debts of this sort, that is the normal practice. One must hope that the wording in the speech was ill-chosen and what in reality was meant was the totality of our obligations to central banks, the I.M.F. and the international institutions, if they were all added together—that we could not at one and the same time clear our books of debt. That would be an understandable state of affairs, but that, however, was not what he said I hope I am entitled to put this more charitable interpretation of what was meant, because otherwise both Parliament and the people of the country are under some delusion in this respect.
I do not need to remind noble Lords, because the noble Viscount, Lord Eccles, has already touched on it, that these debts were to a large extent used to meet withdrawals of funds from this country by those who previously, of their own free will, chose to keep their funds here. Moreover, the House is aware, because 273 there is a White Paper on the subject, that during the life of this Government we have given guarantees of the value of certain other sterling holdings in this country. Heaven help the people of this country if those guarantees ever have to be taken up! Those are the problems arising from the reserve figures.
The next basic set of figures are the trade figures. I am not commenting on the discussion that took place in another place yesterday; nevertheless, I think it was unfortunate that the Government brought the question of these figures into doubt in the way they did, and the particular reference to the cost of military aircraft from America seemed to me to give an illusion of precision to the figures which unfortunately in their nature they do not have. There is nothing new in our buying military supplies of substantial value from the United States, and the payment for them falls quite capriciously into one month or another. To exclude them from a particular month and then put them in the quarterly balance-of-payments figures seems to me unnecessarily confusing and to give undue importance to something that probably is not all that important.
§ THE MINISTER OF STATE, BOARD OF TRADE (LORD BROWN)
My Lords, I wonder whether I might ask the noble Lord about this reference to payments for the United States aircraft coming to this country. This method has been practised, to my knowledge, for four years, why does the noble Lord suggest that it is an unsatisfactory process at this stage? Does the noble Lord mean that this has always been the wrong way to treat it? I know he is not making a political point, but I cannot understand why he should refer to it as being unsatisfactory as though it were a recent change in practice which has been brought about. It is not; it has been going on for four years.
§ THE EARL OF CROMER
My Lords, I thank the noble Lord for his interjection. I do not see why aircraft should be sorted out for this particular treatment if other major military purchases, which the Navy and other Departments have made at one time or another, are not treated the same. I do not want to make any great issue of it, I just feel that these figures have now attracted 274 more importance than is really justified, because many of these imports are subject to the wind and tide as to the particular month in which the payment falls. That applies equally to our export figures.
§ LORD BROWN
My Lords, may I just say, to clear the point, that the imports of United States aircraft are exceptionally lumpy in their arrivals, and that is why they are treated in that way.
§ THE EARL OF CROMER
My Lords, I have, in my experience, met some other lumps of a similar character, and it just depends on one's definition of "lump".
There is another point about the trade figures which I think also is important, wholly apart from the present controversy, and that is that they do not really provide a sound basis on which to build balance-of-payments statistics. The trade figures are what they say they are: they are a record by value, by and large, of goods moving into and out of the country each month, but naturally they bear no relation to payments. Perhaps I may give a simple illustration. Let us say that we export major capital machinery—a generating plant, a steel works, or the like. Perhaps I should call them "lumpish exports". As the shipments are made, the items are perfectly properly recorded each month in the trade figures. But it happens more often than not that they will be paid for over a period of years. So although the trade figures take credit for the export, rightly, the balance-of-payments reflection will not occur for a period of years. There-for it is extremely difficult to use the trade figures in this particular way.
§ LORD BALOGH
My Lords, would the noble Lord not agree that the changes in these figures are very useful indeed in judging the trend of trade? It is true that the monthly figures may not correspond to the balance of payments, but in the long run, and as an average, the changes in those figures are perfectly valid indications of the trend of trade and payments.
§ THE EARL OF CROMER
My Lords, I thank the noble Lord for his intervention. He repeated what I said—that they are very valuable figures showing the trend of trade—and I would be the 275 first to agree with him. But I still maintain the point of view that they do not give a very useful indication on payments. What the particular answer to this is I find difficult to suggest. I think, however, that more dependence is placed now on the trade figures for balance-of-payments forecasts than was placed on them before, and the reason for this is perfectly simple: that the reserve figures cannot be used in the way they used to be used. But this is unhelpful.
Then we come to the balance-of-payments statistics themselves. They are, of course, extremely complicated and very important. They are subject to readjustment for anything up to two or three years after their original publication. None the less, being as important as they are, it is important that they should be understood; and here we have, deliberately or unintentionally—I think unintentionally—achieved a degree of almost complete obscurantism. At the time of devaluation of sterling we were told that if we as a nation were to meet our obligations of short-term debt and re-establish a degree of freedom of action in trade and foreign affairs, we should need to attain an overall surplus of £500 million per annum for several years. At the time, such a figure seemed to many people rather ambitious, and to that degree unrealistic. It would seem that possibly Mr. Jenkins subsequently shared this view, and he lowered the target, I think I am right in saying, first of all to £350 million and then to £300 million —somewhat lightheartedly disregarding the fact that we were told that £500 million was the minimum we could get away with and continue to work on.
Then, to add to the confusion, the Chancellor of the Exchequer changed the time base of his calculations from the calendar year 1969 to the fiscal year 1969–70. My Lords, I do not think this was any aberration between New Year's Day and April Fool's Day; nor, even, putting the kindest interpretation upon it, was this reversion to the medi[...]val calendar some mysterious method of achieving a finer cutting edge to the wheels in the new technological era. For other countries, with a disagreeably sharp competitive edge on us, have learned since 1582 to live with the Gregorian calendar, which is the calendar used internationally for balance-of-payments 276 comparisons. The reason why, I imagine, Mr. Jenkins chose to depart from convention was that the first quarter's figures this year happened to be not very favourable and, the first quarter normally being a reasonably favourable quarter, it might be better to get next year's first quarter into the comparison rather than this year's first quarter. Juggling with figures of this sort is nothing new; but it does not add to people's understanding of the situation.
Then another new introduction—at least, I think it is a new introduction; it is certainly American in origin—is the heavy reliance on statements made giving the figures on an annual rate basis, which I think people find most confusing. Certainly I think The Times does, and the B.B.C. did only this morning. The Times had a headline,Jenkins forecasts a surplus of £500 million ahead of target.In point of fact, this is not what he said. If one looks at Hansard, one sees that what he actually said was that he hoped fora surplus at the rate of £500 million in the second half of 1969."—[OFFICIAL REPORT, Commons, 3/ 11/69, col 689.]These are two quite different things. The ordinary reader of The Times headline is bound to assume that we are likely to achieve an actual surplus of £500 million. I wish this were so—we all do—but an annual rate basis does not mean this; for, obviously, if we take into account the figures for the first quarter of this year they are unlikely to produce an annual figure at the end of the year of £500 million. Now I would not suggest for a moment that the Chancellor meant to say anything other than he did say. But in point of fact his words have been used to say something quite different; and I should have thought, in view of the importance of the matter and the complication of the issue, that if there was any chance of mistake here the Treasury spokesman might have given some guidance to the Press generally to avoid this particular confusion.
We have of course to look at our balance-of-payments figures on a continuing basis, not just for one year by itself. I would ask the noble Lord who is to reply to the debate whether he would be kind enough to give me some information on one or two points which are worrying 277 people at the moment, largely through lack of knowledge, because it is felt that they might possibly distort the figures in a way that would not be desired. The first point is very simple. Under the present exchange control regulations a resident of this country selling non-sterling securities is required to surrender 25 per cent. of the proceeds at the official rate of exchange. The House is familiar with all this. Money so surrendered, of course, finds its way into the reserves, and in so far as the reserves are spent so, naturally, is the money spent. This is the famous "seed corn" which the noble Lord, Lord Beswick, does not like talking about; but it is in point of fact dissipation of capital. So I should be grateful if the noble Lord could give some indication on this figure.
There has been another new development which has also been causing a certain amount of concern, and that is the encouragement by the authorities of borrowing, both by nationalised industries and by other businesses in the private sector, in the European capital market, despite the fact that they are not businesses which, in the normal course of events, are going to earn one penny of foreign exchange. There are two things which strike people as exceptional in this state of affairs. One is that it provides a loophole in the effectiveness of the credit squeeze, and the other is that it brings in an entirely fortuitous windfall accretion of foreign exchange in the year in which they borrow, which has to be repaid, naturally, over the period of the loan. If the noble Lord could give some indication of the figures that have been authorised in this particular case, again I should be obliged.
Lastly, there has been, I understand, a new agreement signed with the Federal Republic of Germany about off-set payments for our troops in Germany. There has been an arrangement every year for some years now. There is a new arrangement which I believe is on a longer-term basis than the previous ones, and I should be most grateful to the noble Lord if he could give me an indication of the effect this may have on our foreign exchange reserves.
I have taken up a great deal of your Lordships' time on a rather dry subject, but I feel that if we are to see a continuing growth of confidence in sterling, 278 the growth that we want to see, we have to be extremely careful that we use such benefits as we get out of the improving situation in such a way that people call trust and believe in them, and so that they meaningfully contribute to the future improvement of the currency.
§ 4.58 p.m.
§ LORD BALOGH
My Lords, the noble Earl, Lord Jellicoe, opened the debate on a note quite different from that of his colleagues in another place. This was perhaps in accordance with the gentler traditions of your Lordships' House, but I believe that perhaps the forceful tutorial meted out by the Chancellor of the Exchequer yesterday had something to do with it, too. But, of course, even the noble Earl could not refrain from a sneer, which is absolutely obligatory to anybody on the other side of the House, at the Prime Minister. The most interesting feature of the speech of the noble Earl was, however, his complete amnesia so far as pre-1964 events are concerned. The shock of the 1964 defeat must have been very profound in his case. This concerns his statements so far as unemployment is concerned, and also the distribution of unemployment between the less privileged and the more privileged areas of the country from this point of view, which has been very much reduced by the regional employment premium which was so much attacked by the other side. He also repeated his performance of last year in which he gave us, first, a lesson in austerity and then produced four or five vast fields for new expenditure without specifying exactly where the expenditure would be covered and how the balance would be achieved.
§ LORD SHACKLETON
My Lord, may I intervene at this point? I apologise for doing so, but the noble Lord is out of order in standing in his present position. I realise that he is anxious to get under a microphone. This is a real difficulty but he will find that there is a Standing Order on this point. I think if other noble Lords move up so that the noble Lord may return to the Bench from whence he came—
§ LORD BALOGH
My Lords, I fear that noble Lords opposite have been protesting that I could not be heard. Perhaps the noble Lord would arrange 279 the microphones in such a way as not to tempt a man young in your Lordships' House.
My Lords, the noble Earl's speech, taken with the suggestion of the noble Viscount, Lord Amory, that we cut taxes on incomes and introduce a value-added tax should have a wonderful effect in producing a bout of inflation of not less than 14 per cent. and a horrible stimulus to social strife.
§ VISCOUNT AMORY
My Lords, the noble Lord accuses me. But how can he be sure of that until he knows how much personal taxation will be reduced and how much will be raised by indirect taxation. Surely, to produce a percentage and to say that that will be the effect cannot make sense without knowing the scale of the reductions and so on.
§ LORD BALOGH
My Lords, I fear that the noble Lord has said that he wanted to introduce this to harmonise with the Common Market; so I took the average Common Market figure.
§ VISCOUNT AMORY
My Lords, I did not say that. I said that it would bring us more into line if we use an added-value tax and I went on to express a personal preference for a different tax.
§ LORD BALOGH
I take the noble Lord's point. My Lords, we have been treated to an engagingly ingenuous speech by the noble Earl, Lord Cromer, who seems to be on the Cross Benches only because he is very cross with the Government. He always goes straight to the point; and the point is always connected with his interests in life. He wanted, recently, to hand over the economic management of this country to a number of central bankers. He would use the improvement of the balance of payments to abolish restrictions on capital exports and to cut expenditure. I wonder whether these measures would encourage people to act with greater restraint. I must also remind him that the figures on the reserves et cetera that he so fiercely criticised are exactly the same figures—they have not been changed since he was the Governor of the Bank of England. I do not recall that he at any time raised these points anywhere where they ought to have been raised (but not here) if he wanted to buttress the position of sterling.
§ THE EARL OF CROMER
My Lords, if the noble Lord will forgive my saying so, so far as I am aware he was never in a position to know what advice I tendered on that subject in the places where I should have offered it. I am not offering the advice to-day as a source of embarrassment. I have been worried about this situation for some time because I am very conscious of the difficulties that the Government face in trying to get things back to rights in this particular way.
§ LORD BALOGH
My Lords, the reserve figures in this country are in no way different from the American figures. They are, of course, taken after certain short-term or longer-term borrowings from other central banks have been accomplished; and they are perfectly reasonable figures. The noble Earl, Lord Jellicoe, also complained that it was the fault of my right honourable friend and pupil the Chancellor of the Exchequer that exports did not respond more easily and earlier to the stimulus of devaluation. I seem to remember that the Director-General of the C.B.I. was romping around at the time saying that devaluation made matters worse for the exporters. How in those circumstances we could have had a ready response of the entrepreneurs when their leaders have been spreading such impossible propaganda, I do not know!
My Lords, the debate on Her Majesty's Speech permits a yearly review of the economic scene. So far as I can make out the Opposition seems to wish to exhaust its ingenuity, which is not a very difficult matter, in proving that there was no improvement or that the improvement was bought at a cost which is completely out of proportion. This attempt reminds me of the endeavour of the Russian propaganda agency to show that the working class standard of life in this country and America has not risen since the war. This seems a surprising type of Marxist, or neo-Marxist, or pseudo-Marxist method of argument on the part of the Conservatives.
Of course we have had an improvement, as my right honourable friend the Chancellor of the Exchequer showed yesterday in great detail. But the improvement was also remarkable for a unique quality. Until recently, improveing balance of payments was invariably 281 accompanied by a slowing down of progress and increased unemployment and stagnating, if not falling, productivity. This time the situation is different. At long last, the measures of the Government are just beginning to pay off. The importance which the Government rightly attribute to the rationalisation and re-structuring of industry is well demonstrated by the virtual formation of a new Ministry of Industry into which the Ministry of Technology has been transformed. There can be no doubt that substantial and very welcome progress has been achieved after immense difficulties and frustration and the Government can and should take full credit for the purposiveness, steadfastness and unflappability in pursuing this basic aim.
If there is any point which needs emphasis and where perhaps a constructive Opposition could have offered valid advice, it is analysis of the nature of our discomfiture, and its causes, together with suggestions flowing from that analysis to prevent a repetition of our malaise. But we have had no such analysis from the Benches opposite. I shall try to offer some such analysis now. The first thing to note about our economic problem is that it is trivial. It is trivial both in terms of international economic relations and in internal economic policy. The redirection of resources required amounts to much less than 1 per cent. of the total world trade. And the redistribution of our effort at home is much less than 3 per cent. The second important conclusion to draw from the history of the past decade is its nigglingly and boringly repetitive character. It is all very well to point to the difficulties which this Government have faced; but every Government since the war have been faced with exactly the same difficulties and until recently we have had no solution of the problem. It always recurred; and it always recurred in the same form as the one before.
The third and final comment that I would make is that despite all the efforts there has been no success in suggesting a valid solution of the problem: although I think that this Government have gone very much further towards the goal—as my noble friend Lord Beswick said just now. Never has the exceptionally brilliant passage in Mr. Aneurin Bevan's last speech in the House of Commons 282 been so uncannily applicable as it is now:I would describe the central problem falling upon representative government in the Western world as how to persuade the people to forgo immediate satisfaction in order to build up the economic resources of the country. Let me put it another way. How can we persuade the ordinary men and women that it is worth while making sacrifices in their immediate standards, or forgoing substantial rising standards, to extend fixed capital equipment throughout the country? This is the problem and it has not been solved yet.The struggle between immediate enjoyment and the firm promise of a faster eventual prosperity, the fight for what is angrily, if not passionately, felt to be the due reward of one's contribution, and the resentment felt against those who are doing better as a class or as a group continues to menace the political and economic stability of the country, despite the present undoubted improvements. Mr. Bevan's dilemma has indeed not been solved.
For almost 30 years now, since the beginning of the Second World War, most of the Western world, and indeed the Soviets, have been struggling to combine internal stability and to sustain growth. Apart from Germany they failed time and again; and in Germany it was only the awful trauma of a repeated complete annihilation of money and savings through rampant inflation that has helped to maintain balance. Governments continued to fall elsewhere; either because the fight against rising prices caused such unemployment as was politically unacceptable, or because measures to mitigate unemployment resulted in such cost explosion as carried prices with it. At times—as under Eisenhower in the United States in 1956, and in this country in 1962–63—prices and unemployment rose together, thus confounding the experts in mechanical forecasting gimmicks.
In Britain, the brunt of the malaise mainly manifested itself in external economic relations. Our dependence on foreign trade made Britain vulnerable in this respect. The immediate cause of this malaise is age-old. We have been suffering from it drastically since the First World War and the remedy is slow to come. There is, unfortunately, still a dangerous whiff about of the conviction that undue increases in incomes can fully be offset by budgetary measures, and that a correct management of the 283 economy can finally be achieved by adherence to mechanical rules for credit management. The noble Earl, Lord Cromer, who is no longer in the Chamber, fell into this trap exactly when he passionately declared his adherence to the phoney criterion for credit policy—the so-called domestic credit expansion, which at this moment would give us an enormous increase in credit expansion—rather than the maintenance of the present restraint on which the Chancellor so wisely decided. I think that this shows that fashions in economics are even more dangerous than fashions in ladies' wear.
For the first time, as I said, the economy has been showing real signs of a favourable conjuncture. The balance of visible trade has shown a favourable trend, however much the noble Earl, Lord Cromer, may gainsay it, and that perennial threat has for the moment been lifted. This is a major achievement. Unemployment is falling and not increasing, as the noble Earl, Lord Jellicoe, implied. Nor was luck, that essential ingredient of statesmanship, lacking. Our competitiveness has received an uncovenanted strong boost by the revaluation of the mark, far greater than anybody ever expected, and by the continuing labour troubles in France and Italy. The torn desires of President Nixon to avoid both inflation and unemployment have so far failed to produce a depression in the United States. Prices and costs there are rising. If the modest but not insignificant reform of the international monetary system is insufficient to cope with any serious disturbances, it will, together with the proposed enlargement of the means of the Fund proper, help to maintain balance and permit the repayment of accumulated debts.
The Government, and more especially the Prime Minister—who was subjected to shameless abuse—and the Chancellor, can rightly claim credit for this very great achievement. Unlike some of their predecessors, they have refused to dis-mantle the buttresses and abandon the policies which have contributed to their achievement. Indeed, I hope that the period of strength for sterling which is in front of us will be fully utilised to reinforce and refine our policy, and to ward off recurrent foreign pressure.
284 But, when all this is said, there remains a real snag—the problem of our costs and prices. This is no battle which may be won once and for all. It is a continuing battle, an unending adventure. But Britain, which has originated so much happy social engineering, may even achieve a solution of this most intractable problem of modern economic life. It is clear why the Opposition do not mention the real problem, while making wild accusations about the cause of industrial chaos. It is because they have no policy at all, but a bundle of contradictory twitchings. It is the inexorable problem of costs which has to be dealt with, and not the symptoms such as wild strikes. It is this bout of new cost increases which is disturbing, and if continued it might wipe out the advantages which have come to us from devaluation and from the restrictionist policy which followed it. If the abandonment of statutory powers further aggravates this tendency to cost inflation, we shall not escape further attacks of the old trouble.
If the Right-Wing critics of the Government have little to say about this fundamental problem and threat, the inanity of the conventional Left Wing wisdom is equal in parrot-like analytical failure. If the Government were disappointing in any respect, they were disappointing in not being able to convince their followers of the facts of modern life. It is in this context that I regret the dissolution of the Department of Economic Affairs. Among these is the need for restraint, so that an increase in social services and tax reform can deal with the problem of mitigating inequality and eliminating hardship. It is this failure of explanation which is responsible for much of the present discontent. But in contrast it is clear to me that the official Opposition line is quite incapable of producing internal stability, external balance and fast progress. Nor could Mr. Powell do much with his "Whigism", his free-for-all in the labour market and foreign exchanges. What he could do is to produce a catastrophe.
The threat of inflation to monetary stability, to savings, can no doubt be handled without a policy of self-restraint. The alternative, however, involves a weakening of the trade unions, either by mass unemployment or by legislative 285 means. The shrill cries against subsidising strikes through income tax repayments and supplementary benefits represent the authentic voice of reaction. Unless trade union leaders and members heed them betimes, we may well lose that serenity of life which is worth so much more than the material fruits of ruthless progress.
§ 5.20 p.m.
My Lords, until the last few minutes of the noble Lord's speech I thought that he was living in a state of considerable euphoria, but when he came to deal with the collapse of the prices and incomes policy and the threatening price rises which are in the pipeline, he spoke words of warning and of great wisdom. I am not going to follow the main economic trend of this debate, because I have another subject to talk about. But before I do so I would ask the Government spokesman whether he can let us in to the secret of why Her Majesty's Government accepted the recommendation of the Decimal Currency Board to produce this extraordinary coin, the 50p piece, which is so remarkably like the present coin of one-fifth of its value? No doubt noble Lords opposite have had many people asking that question and are prepared with the answers.
The subject with which I propose to deal was given little mention in the gracious Speech. I do not really know how the syndicate of great souls who came to compose that Speech could have left it out to such a degree. It has been alluded to by the noble Baroness. Lady Gaitskell, and by the noble Lord, Lord Ritchie-Calder. It is a subject that is causing more and more anxiety among the Christian Churches in this country and everywhere else in the world— that is to say, the growing disparity between the wealthier nations and the poor nations, between the so-called developed and underdeveloped countries. This gives rise to emotional feelings. Indeed, it is sometimes implied that the former colonial Powers, particularly ourselves, are responsible in some way for this mysterious state of affairs. This sort of irrational accusation, however absurd, is nevertheless unpleasant. It is uncomfortable to be completely maligned and misunderstood. I suppose that the only grain of truth in it lies in the fact that If these countries had not had the benefit of British rule, law and order, and of 286 Western medicine, their populations would have been a great deal smaller to-day and so there would have been fewer to share in the fruits of the soil. For whereas in developed countries an increase in population can lead to an increase in the national wealth, through there being more hands to man the machines, in underdeveloped countries only too often the reverse is true: the more the population, the more people there are to share the same jobs and the same amount of food.
These matters have of course stricken the consciences of the wealthier nations, and a very great deal has been done, and is being done, both through international and national agencies, the United States and France being particularly prominent in providing help. Our efforts have been considerable, but there is strong feeling among the Churches that we ought to do more. The difficulties are these. To give aid to Governments overseas involves, first of all, the actual raising of the money by taxation in this country and, secondly, the achieving of a balance of-payments surplus in order to pass it across the exchanges. What aid we have given up to date has in effect been accomplished by borrowing from abroad. Admittedly, some will come back in payment for British goods, but this is the equivalent of unrequited exports and any Treasury official would tell one that that is bad for the balance of payments. The noble Lord, Lord Ritchie-Calder, was making out that we gained by the policy of overseas aid, but I do not think he would get his arithmetic past a Treasury official. Moreover, I do not see any difference at all between the economics of overseas aid and the economics of overseas military expenditure. The Labour Party to a man have been advocating the cutting down of overseas military expenditure in order to save our balance of payments. They cannot have it both ways.
Were we to heed the Church's invitation to provide much more aid, it would conflict with our obligations to pay off our enormous debt, and it would obviously run up against the feeling in this country of people who object to paying more taxes to provide hand-outs to countries who, on the whole, have behaved disgracefully, particularly to us. In fact, the hand that feeds has too often been bitten. We have been embroiled 287 at the United Nations by their spiteful votes and India, a very old civilisation who ought to know better, has eagerly seized on any little mote in our eyes and given us a pious lecture on how we ought to behave while the monstrous beam of Kashmir has been stuck in her eye the whole time. In fact, an increase in overseas aid would meet a lot of resistance from the taxpayers. America, too, the most generous of all givers, is beginning to question the policy of handouts rewarded by insults and abuse. This is the natural reaction to the situation, though it is not a particularly Christian one, and does not help to solve the real problem. I think that we shall have to try to do this through the International Monetary Fund.
To start with, the present situation is ridiculous, if economically one cannot provide overseas aid unless one has a surplus on balance of payments. Countries are in surplus or in deficit in alternate periods, and the only people with a real permanent surplus seem to be Germany and Japan; and they are not great overseas aid givers. So I am sure that we must do it through the I.M.F.; and I believe that technically it could be done. It would mean creating a purchasing power which we put at the disposal of these people, and it would mean a slight watering of world money, which would encourage world liquidity. The advantages would be that it would meet the prejudice that already exists in this country, and is arising elsewhere, against this particular form of help, and that the money could be borrowed anywhere. The disadvantage would be that any little control which the giving countries now have over recipient countries would no longer exist. But what is this really worth anyway? The more we give, the more hatred and malice we generate in the modern world. Let the International Monetary Fund receive the obloquy. I advocate an international meeting of Civil Service experts, who could discuss this question and try to work out some sort of scheme which later on could be put to the politicians who, if they adopted it, would in due course seize all the credit. But it has to be discussed in a technical manner by people sitting behind closed doors.
288 In addition to what one might call the larger elements of international aid, there are other items. There is technical aid, at which we are extremely good. I have here half a page from The Times, advertising jobs for agronomists, econometricians and psychogeneticists (whatever that is) and so on. We, the taxpayers, will pay such experts salaries sufficient to attract them, and the host country will pay the local equivalent, which will be a great deal better. Those people are helping the overseas people to make their country a better place in which to live. That is highly desirable. The British taxpayer cannot cavil at it, and we should go on doing it on a large scale.
Then, of course, there is the charitable aid given largely by Churches or charitable societies. Undoubtedly this is a great help in meeting specific needs for some specific purpose. But to think that any charitable society, or the Church of England with the funds at their disposal, are going to make the slightest impact on the difference between the wealthy countries and the poor countries is just a pipe-dream. That aid will go on; it will give great help in a narrow field, and will satisfy the consciences of the generous people who wish to give to such societies.
Another Church demand is for price support schemes for commodities. I have always been an advocate of this. But one condition is absolutely essential; namely, that in the event of a surplus, after one has stockpiled a reasonable amount against a rainy day, one must be prepared to destroy the lot. The Brazilians destroyed their coffee a number of years ago; it was a model scheme, and the market was supported at a tolerable level. I know that it is a difficult subject, and one sees the tremendous stockpiles of butter et cetera in the Common Market, which can result from indiscriminate price floors without the concomitant that I think is so necessary; namely, to destroy the surplus when it arises.
In the gracious Speech mention is made of tariff preferences for the developing countries, and this is all right up to a point. But of great value would be a reduction in the huge taxes levied on coffee and chocolate by a number of European countries. Coffee, in particular, is a huge item in world trade, and is a 289 commodity that is grown by many of the poorer countries of the world. It is really quite absurd to see the consumption of coffee kept down by the imposition of tremendous taxes in some of the continental countries. I hope that when Her Majesty's Government are discussing this sort of thing they will keep that fact in mind.
I think that the whole question of rich and poor countries is ripe for consideration. The method that I have outlined is, I believe, the only practical one by which aid on the massive scale that is really necessary can be provided; and I believe that it could be controlled at such a level as to prevent too inflationary a situation arising. But, as I said before, we want a technical study by the civil servants, adopted, with credit, by the politicians, and that would probably satisfy the conscience of the Churches.
§ 5.35 p.m.
§ LORD BARNBY
My Lords, my noble friend who has just sat down referred at some length to a subject on which I was intending to speak, and I will come back to it later. He made a most interesting speech on the system of granting overseas aid. However, I was more intrigued with the surpluses he mentioned, and by how they would have to be destroyed in any commodity arrangements. I am glad that he referred to butter in the Common Market, because I have been greatly perplexed as to how that big mountain of butter (I think he said 500,000 tons) is going to be dealt with.
My purpose in speaking in this debate is to draw particular attention to one matter mentioned in the gracious Speech. But before I do that, I cannot suppress the inclination to make a few general observations on the financial situation. One should, of course, try to avoid repetition in speaking in this debate when so many excellent speeches have already been made. We all agree that taxation is heavy; and we on these Benches think it is too heavy. One is perplexed by a philosophy which demands that, when there is too much liquidity, spending power must be mopped up by putting on more taxation to avoid over-heating of the economy. These large amounts of cash are taken in, and there is then high spending in the public sector, which must 290 again put upward pressure on prices and defeat the original object.
Many people reason that employment can be controlled, and they believe that if it is taken out of home trade it will be diverted into production for export. This, of course, is the principle of the selective employment tax. That is a hated tax, and to my mind it is a glorious failure. Personally, I thought it was an ingenious way of trying to reduce imports, even though, as the noble Earl, Lord Cromer, has insinuated, it contravened our international undertakings.
As was emphasised by the noble Earl who spoke first from these Benches, our overseas indebtedness has increased. Certainly £3,000 million was the figure given in a reply that I had from the noble Lord, Lord Beswick, in the middle of the year. Whatever may be the right figure, one thing is certain; that it would have been better not to borrow so much and to have lessened expenditure at home. The noble Lord, Lord Beswick, said that, unquestionably, the country is in a stronger position than it has been for many years. But let us think of a household of modest means, accustomed to living frugally, which suddenly embarks upon a real orgy of spending, buying everything on the instalment system and getting into debt.
In the summer the noble Lord said that the figure of £1,240 million of service to outstanding debt was £320 million more than it had been in the 13 years of the Conservative Administration. The country may well be better off, but we have incurred a very high debt, like the householder. There is some surprise as to why we do not fund much of that longterm debt. The noble Lord, Lord Beswick, told me that figures of indebtedness could not be given; only the domestic maturities and other foreign borrowings, but not Bank indebtedness.
I deplore the frequent utterances by the supporters of the Government against overseas investment. They urge only investment in this country. Surely imports are too high. If we had less imports there would be a less adverse balance of payments. The Government have been passing too much legislation which has increased the cost of the Civil Service tremendously. I was impressed by the statement last week of the noble and learned Lord who sits on the Woolsack that there was a great dearth of 291 lawyers. One of the reasons why there are so many lawyers needed is that the Government have passed such an amount of legislation which is difficult to interpret. So I should have thought one solution would be to legislate less.
In many directions expenditure could be cut down; for instance, contributions to the United Nations. Our regular contribution is £3½ million a year. When one looks at this in detail, in reply to questions that I have put to the noble Lord, Lord Chalfont, I have been told that the supplementary headings under which we provide money to the United Nations amounts to £29½ million a year. Very few people have ever taken the trouble to look and see the headings under which this money, which in my judgment is squandered, is provided.
Overseas aid—which my noble friend Lord Hawke dealt with at such length—should be much more through civilian channels. There is currently a great debate as to whether there should be a larger subscription by the wealthier nations. My noble friend Lord Jellicoe emphasised the fact that the present Government are giving less of the gross national product than was being given formerly. It is not so much the amount that I want to debate as the method by which it is given. If it is given direct through Government to Government a great deal of it is squandered. If it was dealt with through civilian channels, such as in the past was done through merchant banking houses, it would be a better arrangement. To lend more money to repay interest on monies already borrowed is bad practice. In the Financial Times last week I read of £2¼ million of advances to Indonesia—a large part of it interest-free over 25 years. The same issue reported that there were 50,000 political prisoners in detention to-day in Indonesia. That seems in conflict with our denunciation of countries whose internal policies we dislike.
I return to the travel allowance which was dealt with so effectively by my noble friend Lord Eccles in his excellent speech. I found myself in complete agreement with the whole of the speech, and therefore I will avoid repetition. He denounced the present system. It practic- ally cuts off travel to North America, and therefore resembles Communist countries who put great difficulties on foreign 292 travel. The Government say that it saves £25 million. They could soon pick that up by cancelling some of the folly of not trading with Rhodesia or not selling arms to South Africa. It is such a paltry sum, as the noble Viscount, Lord Eccles, said. The noble Earl, Lord Cromer, also emphasised his criticism of the travel allowance. It seems a casuistic discrimination carried out by the Government in its priorities.
I refer now to the investment grants. I hope that I may have some comment on what I am about to say. I gave the noble Lord, Lord Brown, notice that I was intending to raise this point. Immense sums have been advanced to shipbuilding, doubtless because of some political justification that it would help politically. Large Government grants have been given for the erection of big new factories, for the purpose of saving imports. One place where investment allowances could with propriety have been given is the wool textile industry, which has just received a massive report by independent consultants who recommended investment grants for the industry. The Government alas! have turned down the recommendation. I have taken pains to show how a saving in many other directions could be made to permit a reasonable grant to this industry, because it is among the foremost five or six largest exporters, and therefore fully merits such support. It is on those grounds, my Lords, that I return to the gracious Speech and say that it should be—I repeat, it should be—among the Government's intentions tocontinue to develop policies for promoting the efficiency and competitiveness of industry.I hope that this question of investment grants for the wool textile industry may yet be reconsidered by the Government.
§ 5.50 p.m.
THE EARL OF DUNDONALD
My Lords, I am in the fortunate position that most of what I wish to say to your Lordships has already been covered, and in many cases much more ably than I could do so, in particular by the noble Viscount, Lord Amory. I should like, however, to make just a few remarks about trade, with particular reference to exporting. As an exporter, having read the gracious Speech I can find in it absolutely nothing 293 to encourage either the manufacturer or the exporter to export more. At the foot of page 2 we read:My Government will press forward their policies for attaining a substantial and continuing balance of payments surplus in order to meet our international obligations and rebuild our reserves, achieve a more rapid rate of economic growth, and safeguard employment. To this end they will continue to develop policies for promoting the efficiency and competitiveness of industry.Is that the outcome of the 100—or was it 180?—dynamic days of Socialism that we heard about a few years ago?
To turn now to a practical matter, most of our exporting business, certainly on the day-to-day basis, is done on terms of payment of up to 180 days. This is of course quite outside the scope of the medium-term financing which is available from the banks at 5½ per cent. The manufacturer or exporter on ordinary day-to-day business has to borrow at not less than 9 per cent., with the present bank rate at 8 per cent. Increased costs of transport to the docks as a result of increased labour costs, thanks to S.E.T., which also has augmented additional petrol prices, cannot fail to make our products less competitive. And when one adds to that what I believe to be the latest National Health Insurance stamp payment, I believe that the payment per employee will in a very short time to come be something like £4 per week. That again will add to the cost of getting the export abroad. Various expedients have been tried, including the export rebate scheme which did not work very well; in any event, it required a large number of additional civil servants to administer it.
I should like to make a proposal to the Government concerning exporting—a proposal which I hope is constructive. I think—I have been advised by various manufacturers —that it will require no new machinery, and therefore no additional civil servants. Why not give a corporation tax relief to the manufacturer on a percentage basis of his turnover for exports? For example, if a manufacturer exports, say, £10 million worth of goods a year, calculated on either an f.o.b. or a c.i.f. basis, why not allow him (I quote this figure as only an arbitrary figure which must be looked into) a 5 per cent. drawback on that turnover figure deductible from the company's corporation tax?
294 A manufacturer's accounts, like those of any other firm, are audited, and the export turnover figure is of course included in the ordinary audit. Therefore, so far as I can see, no additional paper work would be needed. Unfortunately, I have not had the opportunity of giving the noble Lord, Lord Brown, notice of this matter, as I would have wished to do. But could the noble Lord look into the matter and possibly let me know in due course whether this suggestion is feasible, with particular reference to whether it is workable in relation to our agreements under GATT?
§ 5.55 p.m.
§ THE EARL OF LAUDERDALE
My Lords, rather than embark on "the nicely calculated less or more" of the trading figures for our visible and invisible performance, I will, with your indulgence and, I hope, permission, refer to some geographical aspects of our trade policy, of which I have already given warning to the noble Lord, Lord Brown, who is going to reply. In reading the gracious Speech, I find an underlying note of apology and pessimism in the attitude to our relations with Europe; something I believe typical of that bafflement with their predicament of those who have for years been professionally and politically concerned with building dungeons in the air. There seems no hint of any new slant or really new approach or policy towards the European trading problem. We are simply to "maintain" a frustrated plea and play a "full" part in unnamed "other measures" for European unity. So barren a policy marks the skyline of our vision.
I believe we have only fallen this far by never showing our common sense. If we will but seize the opportunities that lie at our feet, we shall discover a theme both of British trade expansion and of a fresh pragmatic approach to Western association, and we shall learn to see the geography of these Islands in another perspective. The technical changes that are going on now in bulk transport are as drastic as when steam ousted sail; and it is those changes which point our way.
I will single out five. First, engineers are now deepening and widening the canal between the Rhine and the Danube to give us a tranquil waterway more than 2,000 miles long from the North Sea to 295 the Levant. With the Bradenburg Waterway and the Mittelland Canal this system will eventually link with that of the Oder, the Vistula, and Dnieper to take us with this trading route to the very heart of Russia.
Next, at this moment America's first Lash Ship, the "Arcadia Forest", is plying the Atlantic at 20 knots on her maiden voyage, laden with more than 70 barges, in turn towing 27,000 tons of cargo. This is something new and more is to follow. There are British designs for what is called a Flo-Con ship and a BoB ship which carry barges, in one case floating them in and out of the side of the ship through a hatch. All these as technical developments offer a way of carrying wealth, offloaded by deep sea bulk carriers, across the open North Sea into and up the quiet sheltered waterways of Europe.
Then there are new means of transshipment so exciting that double handling is not what it used to be. New gear included the chain conveyor, the bucket ladder, the slurry pipeline, air discharge, ways even of unloading iron ore so that it can be taken out of the hold of a ship at a rate of not less than 8,000 tons per hatch per hour. These devices carry an economy of their own.
Then, again, there are the bulk carriers themselves. The largest to date is of 312,000 tons. But I see that there is a fascinating study compiled by the National Ports Council, MINTEC, the Docks and Harbours Association and other bodies called A Study of the Ship-Shore Interface, 1980, and this authoritative document forecasts that the ships will get much bigger still.
Operational costs on the first 100,000 tons of a big carrier are something like 80 per cent. less per ton than those on the "tiddler" of 25,000 tons. Take the tonnage up to half a million, and the calculation is that the rate per ton in operational costs falls something like 90 per cent. The costs of construction are somewhere between one-third and one-quarter per ton on the bulk carrier, as compared with the "tiddler" of 25,000 or 40,000 tons that we used to know. Some 60 per cent. of the merchant shipping tonnage now being laid down or on order is in the mammoth class, and Esso 296 have made it known that they are now undertaking a feasibility study of a large tanker of the order, not of a quarter, not even of a half million tons, but of 800,000 tons.
Finally, as the fifth of this bracket of new technical devices, which are as dramatic as when steam ousted sail, there is the critical component, the deep water ocean terminal itself. It will from now on be in an industrial, conversion, or value-added economy what the coalfields used to be; this thing will be linked by a land bridge in a two-tier port system so that the big ship can have a fast turn around in deep water and get its goods away. The places that qualify for such a deep water terminal are few, and Europe simply cannot compete from now on. Oslo fjord and Gothenberg have the depth, but the wrong location; Wilhelms-haven must dredge at great cost to take 200,000 tons—and it is the customer who pays in the end. Hamburg and Bremen speak of a costly offshore island, in order to handle the very big ships of to-morrow. Once again it is the customer who pays. Neither Cherbourg nor Le Havre can take a ship of half a million tons fully laden, and it is not surprising that Cherbourg and Brest are themselves speaking of an expensive offshore platform for which, once again, the customer is bound to have to pay. Partial loading, which is much in vogue at the present time, is no lasting solution, for the optimum ship size varies directly as route length but inversely as turnaround time.
What, then, of Rotterdam, which today handles in volume as much trade as the whole of the British Isles, taking imports and exports added together? It is a formidable comparison. Rotterdam is saturated; the further reclamation that they need in order, as it were, to breathe, is costed straight away at £14,000 an acre and stage 2, if it is ever allowed, is costed at more than twice that. The Euro-channel which they are now proposing to dig, 90 feet deep, eight miles out to sea, to take ships of 250,000 tons will cost £90 million—and it is again the customer who pays. If they go for the ship of 500,000 tons they will have to go 11 miles out, and once again it is the customer who pays. No wonder that at Rotterdam harbour dues went up 30 per cent. in September, and that oil and 297 chemical companies are beginning to look elsewhere!
Moreover, my Lords, the European Continental ports suffer from one common disadvantage from which we may profit. It is a disadvantage that arises from their geography. The insurance on a mammoth ship carrying £8 million worth of cargo that takes two miles and 20 minutes to stop, amounts in many cases to some 50 per cent. of its operational costs. For those ships which are going to brave the hazards of the Dover Straits, the rates get higher still. So here is a financial incentive, added to that of safer navigation, which through the coming years will cause the really big ships of tomorrow to make the North Sea North about. In other words, more and more they will pass the deep-water threshold of this island of ours—the Bristol Channel, Milford Haven, the Clyde, the Highland sea lochs including Loch Eriboll, the North-East coast; and they are going to do that if they are to get into the North Sea at all. The answer is that Europe's deep-water ocean terminal of tomorrow is none other than the whole British Isles—an island stuffed with industrial infrastructure set across the delta of Europe's riverway, blessed with deep water inshore without need of dredging, and Europe's nearest viable land point to North America and the American North-West Passage.
The Clyde has 300 square miles of deep water. It can take not one but several ships of 500,000 tons at this moment, without one cubic metre of dredging. The gracious Speech refers to the proposed reorganisation of the ports and, with permission, I will quote the reaction to the White Paper on the same subject which came from Mr. Alasdair McCrae, Chairman of the Clyde Port Authority, in his annual report not many months ago. He welcomed the prospect in the White Paper (and we look forward to seeing it in the Bill) that Scotland can have a Ports Authority of her own, and to bring the Forth and Clyde together. He said:Co-ordinated development of a ports complex facing both West and East will give the best service".Here, my Lords, is the two-tier port concept. It would differentiate between the ocean terminal of the morrow and the shallow medium-water harbour that we all know, allotting a proper function to 298 each—the one to receive bulk cargo, the other to send it off, joined now by the new land bridge techniques of transhipment. My Lords, when transport accounts for 20 per cent. of the costs of the oil industry and 50 per cent. of the costs of the steel industry, Britain, through the deep-water facilities and the transshipment techniques that can now be offered, can offer something to her own economy and to that of Europe which will be of lasting and irrevocable benefit.
The document from which I quoted just now, A Study of the Ship-Shore Interface, 1980, coming from such a responsible quarter as a study group supported by the British Ship Research Association, the Docks and Harbour Authorities Association, MINTEC, the National Physical Laboratory and the National Ports Council, is not likely to be gainsaid; but it brings us good news, and its analysis forecasts that in the years to come goods will go to Europe across Britain. It even forecasts that they will go to the Middle East across Europe via Britain. Here, surely, is a vision of tomorrow. Could not this island barrage of ours, athwart the waterway avenue to mid-Europe, pioneer the deep-water handling of much of the grain, much of the coal, much of the iron ore? Could it not handle much of the oil and much of the phosphate; indeed, much of the bauxite and much of the cement—nay, much of all the raw riches of Ophir: from Asia, from Australia, and Australasia; from Africa and South America, then transship and dispatch these through a second-tier port system to the very heart of Eurasia? If we as a nation do not face this opportunity it will be one of the great refusals of history.
Such of course is the context of the project for a series of Maritime Industrial Development Areas proposed a year and more back by the National Ports Council for various of the estuaries of this island. And, in parenthesis, may we know, if not now then soon, when the sites for these MIDAS will be chosen? Can we know if the physical and economic studies relevant to them will be published? But all this means much more Than mere establishment of Maritime Industrial Development Areas on 5,000 acres of flat land beside deep water here and there. It means seeing our island geography in another perspective, away from the stale 19th century picture with 299 which we were brought up at school, of all good things flowing like a five-finger exercise out from London, the railway to Glasgow, the railway to Cardiff and the rest. It means looking at our island in terms of its East-West land bridge facilities. It means new priorities for our East-West communications. In parenthesis, the gracious Speech, while forecasting a number of White Papers on different subjects, does not mention whether we are to have a White Paper on roads for the future which, when the Green Paper of that name was published last year, we were told would come out by this Christmas. Perhaps it is to our advantage, for if its compilation is delayed then I plead with those involved to consider new priorities for our East-West communications.
In Scotland the concept means pushing ahead drastically and urgently as a priority with the M.8, from the Clyde to the Forth, and with improvements on the route to Grangemouth. I see the Scottish land bridge from the Clyde to the Forth matched by another from the Mersey to the Humber, its spine the M.62 trans-Pennine motorway at present under construction as far as the A.1. I urge that its extension onward and Eastward to Hull should be urgently pressed forward and given the priority proper to this new look at our geographical layout. I speak likewise of the A.47, Peterborough to Yarmouth improvements; we need them now. I say the same of the A.45 improvements, from St. Neots to Ipswich and Felixstowe; we need them now. I speak of the motorway or dual-carriageway, whichever it is to be, from the A.1 to Harwich: we need it now. The public inquiry is now proceeding into the M.27, past Southampton towards Brighton. That not only needs to be pushed ahead as a motorway, and not only, may I say in parenthesis, properly fed by the Ports-wood Link from Central Southampton, but should be extended as a dual-carriageway from Brighton to Hastings, so as to be ready for the Channel Tunnel so that Southampton and the Tunnel can communicate, as well they should.
In brief, my Lords, I plead for a new look at our geographical layout in these islands as offering an incredible opportunity in the coming years. I plead for it lest, stultified and stupefied still longer 300 by the valour of ignorance, we in this country still remain a prey to the pessimistic mathematics of mega-sloth and delay, and finally fall behind, so that a decade or more hence it may be that Europe, the Rhine-Danube-Vistula-Dnieper link complete, might look back in sadness at the full fantasy of a great maritime nation's lunging dismissal of a destiny that could be gay, glittering and golden.
§ 6.15 p.m.
§ LORD ERROLL OF HALE
My Lords, I am sure that noble Lords in all parts of the House will agree that we have had a most interesting debate this afternoon, and it is striking to note that the euphoria of Government Ministers over two good trading figures occurring in two consecutive months is unfortunately not sustained by their supporters on the Benches opposite, only one person supporting their Party having taken the trouble to speak in this debate and having immediately departed thereafter. On the other hand, from our Benches we have had a very wide range of speeches: from my noble friend Lord Amory, my noble friend Lord Eccles—I cannot mention them all, and they all made good speeches. I should like particularly, however, to refer to the last speaker, who gave us a most inspiring vision of the possible Britain of the future. The figures which were made much of by the noble Lord introducing the debate are perhaps the key to the very debate itself, and it was the noble Earl, Lord Cromer, who, as a Cross-Bencher, made one of the most distinguished contributions I have had the pleasure of listening to and who pointed out the growing tendency on the part of well-informed commentators, and I think indeed of Ministers, to confuse the trade figures with the balance-of payments figures. I will not elaborate the point he made, but I think it is worth underlining that trade figures are not the same as balance-of-payments figures.
§ LORD BROWN
My Lords, who has confused the trade figures with the balance-of-payments figures? Certainly not we on this side of the House.
§ LORD ERROLL OF HALE
My Lords, so few people have spoken on that side of the House that it has been very difficult to find out what their view is, but there is a tendency to think that 301 good trade figures are the same as good balance-of-payments figures. I paid the noble Lord, Lord Beswick, the compliment of listening to him without a stream of chatter, and perhaps he might care to return the compliment. If not in the minds of Ministers, certainly there is a tendency, in my view, to confuse good trade figures with good balance-of-payments figures.
§ LORD BESWICK
My Lords, I apologise for chattering, as the noble Lord so nicely describes my comment. It was simply to say that although the noble Lord was listening to what I said, he did not take a word of what I said.
§ LORD ERROLL OF HALE
My Lords, I must say noble Lords opposite are very touchy this afternoon. I am in a very good mood myself and I am surprised to find that they, who should be so pleased by the figures, should be so touchy before I have barely risen to my feet. I am sure they will be much more touchy before I have finished.
The noble Earl, Lord Cromer, also underlined that the monthly gold and convertible currency reserve figure bears little relation to the full reality of Britain's international financial position, and I think he did noble Lords a great service in explaining the historical background to the situation which has now arisen. It is always something of a mystery to me and to some of my noble friends that the trade figures seem to get better and better every month, but the gold and convertible currency reserve figure remains about the same month after month. That prompts me to think that by skilful and quite honourable management a good deal is taken out month after month to keep the figure about the same, somewhere between £1,017 million and £1,050 million. The noble Lord the Leader of the House says it is for paying back debts; but it is very hard to discover how much debt is paid back in any particular month. I read the Bank of England Quarterly Statement with great care, and it is difficult to discover from that Statement exactly what movements have taken place which have resulted in a virtually stationary figure of gold and convertible currency reserves for each month.
In talking of the improved figures for trade, and presumably of an improved 302 financial position backing that up, what the Government always fail to mention (and I think it is my duty to remind noble Lords of it) is the enormous number of measures which have been taken in the last five years to increase the inflow of foreign currency into this country and to decrease the outflow. This is probably impossible to quantify, but it is substantial and far and away exceeds any mess or, to use Lord Beswick's word "plight", which the present Government may have inherited in 1964. I know the figures approximately for one; namely, the repatriation of 25 per cent. of the proceeds of the sale of dollar securities, which the noble Earl, Lord Cromer, referred to as "selling off the seed corn". That works out at a yield of about £60 million a year, according to a Parliamentary Answer which I was given some time ago, and fluctuates a little from year to year; but over five years it amounts to something like £300 million more than the total capital outflow from the gold and dollar reserves in the year 1964.
Among the measures to restrain the outflow has been the really savage restriction on British private investment overseas. Not only is this restricted to non-Sterling Area countries but also to the so-called advanced Sterling Area countries, although that restriction is described as "voluntary"; but if you do not comply you will know what is going to come to you later. Indeed, the only places where one may remit capital quite freely is to Sterling Area underdeveloped countries—those, of course, where the financial risk is the greatest.
In addition to the major measures of restriction, there are some of what I would call the "funnies", which only serve to show how desperate the Government have been in their attempt to try to right a situation largely of their own creating. There was a slight leak in the gold reserves. Coin collectors had got into the habit of collecting gold coins, so a stop had to be put to that. Unfortunately, there were such creatures in this country as genuine coin collectors. So they have been compelled, if they wish to have more than four gold coins in their collections, to register. Here there is a nice little bit of bureaucracy. To date, no fewer than 6,199 persons have been given permission (I like that phrase) by 303 the Bank of England, of course acting only as an unwilling agent of the Government in this matter, to add gold coins minted after 1837 to their existing coin collections, up to the end of September, 1969. Of course, one might like to know who those 6,199 coin collectors are. That, noble Lords will be glad to learn, is covered by the Official Secrets Act; we are not allowed to know. I am quite certain, however, that the Inland Revenue have already been told who they are, so that they can be watched to ensure that they make proper declarations in regard to capital gains tax.
§ LORD STRABOLGI
My Lords, this matter was raised in another place. A Question was asked why the names of these collectors were not published; and the Government, I think quite rightly, said that it was for security reasons, because it was not fair to the coin collectors that their names and addresses should be known by potential burglars.
§ LORD ERROLL OF HALE
Well, that illustrates exactly the point made by my noble friend Lord Eccles, who spoke of the declining standards in this country—that it should be a risk for these names to be known. If a matter is not to be published, then I think my reading of the Official Secrets Act is correct: that it would be an offence under the Official Secrets Act for such information to be disclosed to an unauthorised person. That is the Act which governs all Government information which is classified in any shape or form. So I think I am right in that particular point.
The measures to increase the inflow and to restrict the outflow are too numerous for me to mention in detail to-night, but I have given one or two examples, some of an important nature, some of a more lighthearted nature; but as so many noble Lords to-day have spoken about the travel allowance, which is a measure to restrict the outflow, perhaps I may be allowed to add a brief comment of my own. While I agree very much with what has been said by my noble friends on this side of the House and by the noble Earl, Lord Cromer, particularly in what he had to say about the plight of businessmen whom I have seen being searched at London Airport in full view of foreigners to this country and everybody else, to see 304 whether they have had a few notes over the legal limit—and I congratulate the noble Earl, Lord Cromer, on his wisdom in managing to keep his passport so accurately up to date—nevertheless I think that the saving alleged by the Government to amount to £25 million fails to take into account the greatly increased expenditure on foreign travel in the Sterling Area.
It is no good differentiating between the non-Sterling Area and the Sterling Area in this particular context, because any purchase of facility in the Sterling Area ultimately has to be paid for by the export of goods or services from the United Kingdom, just as surely as if that facility, be it hotel service or not, is purchased in the South of France. Added to which the well-off people—I know that the Government are against the well-off people, but there are still a few in this country—are saying, that instead of having a £300 Easter holiday in the South of France they will have a £1,000 February holiday in South Africa. So the cost to Britain is in fact that much greater.
There is a further factor: that because of the restrictions the well-off people are increasingly purchasing properties in the more attractive parts of the Sterling Area, such as the Caribbean, Cyprus and Malta, all of which expenditure has to be offset against the export of goods and services from the United Kingdom. I have not heard this mentioned anywhere in the official figures of the saving, because I think that if this extra expenditure, whether on holidays or on investments in foreign facilities in the Sterling Area, was taken into account, the saving would be entirely minimal.
§ LORD ERROLL OF HALE
No, my Lords, I am not. I am advocating the removal of the £50 limit because it is entirely illogical. I did not want to go on about it because other noble Lords have already put the point, but I am advocating its abolition because, in my belief, the total cost to Britain of travel in the world, including the Sterling Area, would probably go down if there were no restriction. That is the point which Labour Ministers can never understand. They think that by putting a limit on something they reduce the amount that 305 is spent. They have only to look back to the time when we abolished the sweet ration. They said that we could not afford to do that, because we had not enough sugar. But when the sweet ration was abolished the consumption of sweets went down. In the days of rationing everybody took up his ration; but once he could buy the stuff when he wanted to, he bought it only when he felt in the mood for it. I think there is a great deal of expenditure on holidays in regard to which people say, We had better take the £50 this year to make sure of it", whereas if the limit were not there many people might say, "We won't bother to go abroad this year because we can go at any time we like". That is quite apart from the injustice to those people who do not want to go every year, but who may want to go every third year, yet are still allowed only the £50 for that particular year. That is the sort of thing which leads to the decline in morality to which my noble friend Lord Eccles referred; the great temptation to take up some travellers' cheques in one year and hoard them until the next year, and so on. All this for a virtually negligible saving. Therefore, I urge the noble Lord, Lord Beswick, to look at the many points that have been put by my noble friends.
We are not saying that we want the Government to borrow short-term in order to give us more holidays abroad. That is an argument which has been used, and if we stir the group up again they will probably use it again; but it is not our argument at all. We honestly believe that this is a restriction that is counter-productive and that if it could only be quantified the Government might well find that there would be less money spent on foreign travel throughout the world (and in that I include the Sterling Area) if the present restrictions were removed. Certainly there would be a substantial reduction in travel to the Sterling Area by people who say, "We are taking a jolly good holiday in South Africa or the Caribbean because we cannot go to Europe anti we cannot go to a winter sports centre, as we can only get £50 for it". I have spoken at greater length about the travel allowance than I meant to, but as so many noble Lords have spoken about it it was a point upon which I thought they might appreciate a few comments from me.
306 The noble Lord, Lord Beswick, made the astonishing statement that we are not in debt overseas because our assets exceed our liabilities. I think I quote him correctly. I always understood that a debt is a debt, regardless of what assets one may have. An asset may be used to pledge as security for a debt.
LORD ERROLL or HALE
The noble Lord, Lord Beswick, did not use the word "solvent" or "insolvent". The noble Lord has not had an opportunity of intervening in this debate except from a sitting position. Therefore, I think it would be more satisfactory if Her Majesty's Government would admit that these debts have been incurred. Of course, I am sure that a large part of this short-term debt has been negotiated because of the strength of our overseas assets. It is a pity, therefore, that Her Majesty's Ministers do not give more credit to those who have built up those assets overseas over the years. instead the Government have done much to denigrate those who believed, and still believe, in continuous and steady investment in all countries of the world where a good profit and a useful return can be earned.
§ LORD BROWN
My Lords, I beg the noble Lord to tone it down a bit. He has just accused the Government of not admitting that they have incurred debts overseas. Of course they have admitted it dozens of times. He now proceeds to suggest that they have paid no credit to those who earn from our invisible exports overseas; or invest monies overseas. Credit has been paid repeatedly. These flimsy assertions which spice his speech—cannot he tone them down a little?
§ LORD ERROLL OF HALE
My Lords, perhaps I might ask my noble friends on this side of the House if they would prefer me to tone it down. I am very glad to learn that the Government do admit that we have incurred debts, but I regard the phrase that we are not in debt overseas because our assets exceed our liabilities as a remarkable statement, and I do not see any need to tone that clown. I am delighted to find that Her Majesty's Government are now giving some praise to those engaged in invisible exports. 307 There was a time when Her Majesty's Ministers more or less denied the value of invisible exports.
§ LORD ERROLL OF HALE
Yes Three years ago there were certainly efforts by an important City committee to provide the factual evidence, irrefutable evidence, to prove the value of invisible exports, and I am very glad that the Government now appreciate the value of these things. In view of this new praise, I would suggest that the Government should follow up that praise with one or two practical gestures. For example, a great deal of the work involved in overseas finance and in invisible exports is carried out in the City of London, where office rents have risen to unprecedented heights as a result of the severe restriction in the provision of office development permits. I have put this point in advance to the noble Lord, Lord Brown, so I hope he will be able to deal with it. One of the unexpected effects of the Government's restriction on office building was to cause enormous inflation of London rents. That is the sort of thing which happens when you start restricting things; it always goes differently from the way expected. The Government have incidentally put large profits in the hands of those people lucky enough to own office buildings in London.
For those who simply must remain in the centre of London—and I know there is a case for decanting office workers as far as possible to areas outside London —rents have reached an impossible level, entirely due to an artificial restriction by Her Majesty's Government. I suggest that the restriction has proved of value in decanting large numbers of office workers to, say, Crawley, Croydon, Brighton and elsewhere who might not otherwise have gone, but I submit that that phase has passed and now is the time to permit additional office building in London in order to, if not lower, at least prevent further rises in office rents in London.
Then there is the vexed question of the selective employment tax, a matter worthy of a whole day's debate itself. Here I would only plead for some consideration for those who are engaged in invisible exports and in export commerce, such as 308 the British export houses and the like, who have made a powerful plea that they, too, should get a selective employment tax refund in respect of their staffs. Perhaps I should declare an interest here as I am President of the British Export Houses Association and they have already made representations, but I am not speaking just on their behalf but on behalf of all those who are doing so much to bring invisible earnings back to Britain.
For those engaged in direct export I would invite Her Majesty's Government to consider making export finance a little easier than it is at present, because despite what is said to the contrary export finance is subject to the Government's ceiling on bank lending, with exceptions applying only in the case of what is called 5½ per cent. money. That is where the E.C.G.D. has given a guarantee and the hank lends at 5½ per cent. When the bank lends at 5½ per cent. under the E.C.G.D. guarantee, the 5½ per cent. rate applies only after the documentation has been received back from the recipient country. That may be between 8 and 16 weeks from the date of shipment, and until those documents have been received back the overdraft facilities have to be paid for at the higher rate and also come within the overall ceiling. There are many exports which are exported under terms for less than, say, two years, and are not eligible for what is called 5½ per cent. money. Those exports which do not enjoy the 5½ per cent. rate guaranteed by E.C.G.D. will come within the domestic ceiling throughout the period of repayment, and there are clear signs that such exports are being inhibited because of the difficulty of raising the necessary finance from the banks who are having to keep the loans within their ceiling. I hope that the Government will look at this matter and see whether some amelioration is possible.
Then I would urge Her Majesty's Government to have a self-denying moratorium on any new Government agencies and Departments. There have been many in the last few years, and it is quite bewildering for the average business man, whether engaged in exports or on domestic production, to keep pace with all the changes and the new Departments which are created from time to time. The Department of Economic Affairs started, 309 it is now deceased. The Department of Employment and Productivity and the Ministry of Technology—these are all new since Labour came into office—the Regional Planning Councils; the Regional Economic Boards; the Prices and Incomes Board; the Commission on Industrial Relations; the National Freight Corporation; the Freight Integration Council; the Industrial Reorganisation Corporation; the Central Training Council; the 26 Industry Training Boards; the Shipbuilding Industry Board; the Overseas Marketing Corporation; the Land Commission; the British Steel Corporation; the Post Office Corporation; the Civil Service Department; the British Airports Authority, and the Apple and Pear Development Council.
Some of the recent changes in White-hall affect the economic Departments. I should like to make some brief reference to these changes in so far as they affect the economic future of this country. MINTEC has now become "MAXTEC" and seems to have taken over everything. Without praising or denigrating the present holder of the office who, as a person, I like very much, I think it is beyond the capacity of any single man to handle the affairs of one Department which is so big. However brilliant a man may be—and I know the Minister gets up early in the morning and works late at night, and he has a very quick brain—it is not the speed of his brain that determines the amount of work he does; it is the speed of the brains of the people he is dealing with. They can absorb at only a certain rate, or explain to him at a certain rate, and there are too many matters at ministerial level which must go to him for him to be able to deal with them effectively in the ordinary working day.
And, of course (although this is primarily a matter for another place), what has not been mentioned very much, I think, in informed commentary on this subject is the fact that if you have an overlord, when there is a "blow-up" in the House of Commons the House of Commons will not take it from the deputy; they will want the overlord. if it is a hot political matter, like the future of the breathalyser test, then they will not be content with the Minister of Transport; they will insist on having the Minister in charge of the whole organisation itself. 310 So for a matter of two or three days he must familiarise himself with all aspects of the arguments for and against the breathalyser, prepare himself for a debate and give up a whole day's time for a debate in another place. And while he is doing that, all the other important matters in MAXTEC which require ministerial attention are put into suspense. Those of us who have been Ministers know this problem only too well; and I am pleased to see my noble friend Lord Eccles nodding in agreement. We have all suffered from this sort of problem.
§ LORD ERROLL OF HALE
It may be that I have it wrong, but I thought that the Minister of Technology was also responsible for transport.
§ LORD ERROLL OF HALE
I apologise to noble Lords if I have it wrong, but, it would apply equally well to the other man who has the responsibility. I try to follow these things, and it is very difficult for me, who takes a close interest in these matters, to know just where the various branches of the various Departments have gone. How much worse it must be for the ordinary businessman, who is trying to get on with his job! As a matter of fact, I know I am right on this one: MAXTEC now has responsibility for the issue of industrial development certificates. The town of Congleton had set up a new industrial estate with the express approval of the Board of Trade, whose responsibility it had previously been to issue development certificates. So along goes an industrialist and applies for an i.d.c., with the full welcome of Congleton, only to be told by a MAXTEC official that his application has been turned down. This is the sort of confusion which it is very difficult for businessmen to understand. They knew that the project, the industrial estate, had been approved by the Board of Trade, 311 they thought they knew the Board of Trade and that they would have a fair deal from the Board of Trade. But MAXTEC, a Department which is now spending a great deal of taxpayers' money on advertising the fact that it is now refusing industrial development certificates, instead of the Board of Trade, decided otherwise. And so we go on.
In all this, of course, I think we are entitled to ask, as we are fortunate enough to have a Board of Trade Minister winding up to-night, whatever has happened to the Board of Trade? It used to be one of the great Departments of State. With the Treasury, the Board of Trade decided economic policy; and the Board of Trade decided Britain's commercial policy around the world. Ever since the present Government came into office they have been stripping away the functions and the activities of the Board of Trade. This is no reflection on the noble Lord who is going to reply, for whose integrity and ability we all have a great respect, but it must be very disappointing to be near the centre of a Department in decline—a Department which now has virtually no industry left except printing and films, and one or two other oddments; a Department which no longer has any say in the regional development of industry, or where it should be; a Department which is not even to have monopolies and mergers any longer. If we read aright, these are to be merged with prices and incomes and go to MINPROD, another of the trendy new Ministries.
§ LORD ERROLL OF HALE
To MIN-PROD. If one can have MINTEC, why not MINPROD? This, I think, is a particularly unfortunate remove, because one of the important values of having monopolies and mergers within the purview of the Board of Trade was that it was a great help in assisting the Board of Trade in its planning of company legislation. In future the Board will no longer have the practical day-to-day rubbing of the problems of monopolies and mergers in order to guide it in its formulation of company policy. Here, I think I am entitled to mention that the proof of the down-grading of the Board of Trade, of course, is the fact that we 312 have no Companies Bill mentioned in the gracious Speech. The noble Lord, Lord Brown, will remember that when he was a new Minister one of his first tasks was to guide the Companies Bill through your Lordships' House, and there was a great debate on whether no par value shares should be dealt with in the Bill. The noble Viscount. Lord Eccles, may remember having led the debate on this matter, which he did with great skill, and that it was in the end agreed that the Government would include in their next Companies Bill, which was to be brought in during this Session, a clause to authorise no par value shares. But, of course, the President of the Board of Trade now has very little standing in the Cabinet when it comes to the auction of time for Bills. What chance does he have. beside all the big battalions, to get a second Companies Bill to justify the promise made in all sincerity by his own Minister of State three years previously?
But I think worst of all is the lack of authority overseas which the President of the Board of Trade will now be able to exert. It is true that he remains responsible for Britain's overseas commercial policy, but he has no contact with British industry, apart from one or two small exceptions. He spoke in the old days with considerable authority, because if he was tempted to give away something at a meeting of GATT he knew that he had to come back and face the music with the industry which he was sponsoring in this country. If he was tempted to make life too safe for a domestic industry, he knew that he had to go to an international conference and justify it from his own experience of dealing with that industry. Now he goes as a spokesman for other Departments, with a sheaf of briefs hurriedly read through in the Beau Rivage the night before the conference takes place. Worse still, his ministerial colleagues around the conference table will know that he speaks with no real authority, that he is only a spokesman having hurriedly read briefs from other Departments. This is a bad day for Britain, when we no longer have, relying on international commerce as much as we do, a really powerful spokesman abroad—powerful because he has direct and meaningful contact with British industry. This is no reflection on the new Minister, for whom I have a great 313 admiration. It is simply that in my belief the system is wrong and a retrograde step has been taken.
The noble Earl who introduced the debate referred to some of the optimistic quotations by the C.B.I. and other bodies concerning the level of investment by companies in the coming months. I hope that those estimates will be proved right; but the fact remains that the squeeze on overdrafts and the very high interest rates are having an adverse effect and companies are now beginning to say. "Is it worth investing in new plant? We could get as much money by putting it into a building society". A very high degree of profitability is required on a new project before it is commercially worth while to risk the capital involved in the investment.
There are two factors in this: there are the interest rates, which are high, and also the physical difficulty of laying your hands on the necessary money. Here is a way in which the Government, without, in my belief, really easing up very much on the squeeze or going against their principles, could help. They could for example, in regard to the payment of investment grants, reduce the delay from 12 months to 9 months at a cost of about £100 million a year. That would be a considerable help to those firms which are investing. They could also reduce the delay in the refund of selective employment tax, in the case of those firms which qualify for refund, from three months to two months. That would put into industry, in round figures, another £200 million in the course of a twelvemonth period. In that way, some £300 million could be channelled back into industry, at no great cost to the Government, without in any way infringing the principles of austerity which the Government have set themselves. It would be a help and a gesture towards industry, and would go some way towards meeting the optimistic claims proposed by the noble Lord who introduced the debate.
My Lords, I have spoken long enough. I should like only to offer the Government a recipe for 1970: try in every way to help industry and commerce, and stop petty interference. If the Government do that, they will be surprised and delighted with the results.
§ 6.49 p.m.
§ LORD BROWN
My Lords, as is customary on this occasion, the debate has been very interesting and, I think, fairly responsible, but extremely wide-ranging. My noble friend Lord Beswick sought to provide the House with as much information as possible for the purpose of the debate, arid I shall attempt to avoid repeating anything that he has said apart from certain points which may require emphasis. I think it is doubtful whether I shall be able to answer even the most important points that each speaker has made, but I will do my best. If I overlook some, then perhaps noble Lords will be good enough to forgive me.
Before making some comments on trade matters in general, I should like to draw the attention of the House to a very basic aspect of these matters. I have wanted to make this point ever since I became a Minister but I have been inhibited from doing so because had I made it while we were in trouble with the balance of payments I might have been accused of "passing the buck ". Now that things are looking somewhat better—although I assure the noble Lord, Lord Erroll of Hale, that the word "euphoria" is a long way from describing our attitude of mind—I want seriously and absolutely apolitically to suggest that the habit of Oppositions over the years, probably for the last thirty or forty years, of indulging in political comments and in blaming the existing Government for the state of affairs trade-wise in this country is a habit which enables the citizens of this country to "pass the buck" on to the Government; because if they are led to believe continuously that Governments hold the total solution to balance-of-payments problems, it is very dangerous. There is a danger in all unrealism. It is unrealistic for a man in the street to be allowed to assume that when our economy is going wrong he bears no responsibility for that turn of events. Political debate in Parliament, with each Party trying to lay total blame for any failure on the other, gives the man in the street his alibi. We will not attain a permanent solution to our 25 years of balance-of-payments problems until he shoulders his proper responsibility and displays a full understanding of it by his attitude to his daily work, whatever that work may be. In my view this has a special relevance to the 315 present troubled state of industry. I think that the noble Earl, Lord Jellicoe, may find himself in a great deal of agreement with that. In fact, it is a shadow of something that he said in opening his speech. I believe that if we became less political about these issues it would be very much better.
But let me move on to strike a happier note by saying that my job keeps me constantly in touch with industry. Whatever the noble Lord, Lord Erroll of Hale, feels, it will continue to do so even if the Board of Trade is not responsible for a great many industries. I meet hundreds of chief executives every year and I am convinced that there has been a dramatic increase in efficiency and sophistication in a high proportion of our industrial companies in recent years. I think it is well that we should recognise this. Over the last five or six years their attitude to exporting has changed, I think, dramatically; but it has not yet come to full fruition. The reason I am optimistic about exports in the years to come is because I think there is a great deal to come from efforts that may have started two, three, four or six years ago. This is the nature of investment in exporting activities.
I find it much more difficult to make cogent remarks about those who earn our invisible exports. I wish that we could change our terminology about this business. I find myself writing ghastly phrases like "invisible exporter" and then having to delete them and to start again. It would be much better if we began talking about those who earn money overseas by exporting services. That is what they do. Their affairs are infinitely complex. Prior to the setting up of the Clark Committee—which, may I point out to the noble Lord, Lord Erroll of Hale, was set up by this Government and not by the previous Administration—they had to some extent been shrouded in a good deal of mystery. I am not blaming anybody for that; it is a fact. But whatever one can say, they have put up a startlingly good performance in the last two years. We in the Board of Trade, now that we have been somewhat slimmed down and can concentrate more on what I regard as the very essential activities of earning foreign currency overseas and trade relations, are going to try to get closer 316 to these subjects, to understand them better and to try to give these exporters of services every encouragement which we can devise short of some of the beneficially differential treatments of tax for which they so frequently ask.
My Lords, before going further I must make a comment on the economic arguments put forward by the noble Earl, Lord Jellicoe. He referred to £3,000 million over-all increase of debt during the tenure of this Government's responsibility. He referred to the £3,000 million total increase in tax and the £3,000 million loss of growth. I will not go into the details of these figures. Some are a little suspect but they are not too far off target. But the noble Earl is comparing two periods: he is comparing the period of 1964–69 with the period of 1958–64. That is the sort of way in which we politicians tend to behave. He has not drawn attention to the difference between those two periods. Let me just point out that 1958 started at a period of very low activity indeed in this country's economic and commercial affairs and a fairly good balance of positive payments, £150 million. That period ended with a deficit on balance of payments of £750 million and a high rate of activity. This Government's period, from 1964 to 1969, started with a deficit of £750 million and a high rate of activity and has moved to what is likely to become a substantial surplus. If we were to go out of office in a year or two, a Conservative Government would inherit roughly the same position as in 1958; and history could repeat itself. But let me draw attention to the grave and substantial differences in the two situations. I believe that, as politicians discussing these matters, we ought to take account of all the circumstances when we make these comments rather than select our evidence and distort the situation for political ends. I am not accusing the noble Earl alone of doing this; I think it has been done by politicians for the past twenty or thirty years. I deplore it, and I think we should cease to do it. It does not help the country, it misleads the public and results in an irresponsible attitude on the part of the man in the street to his daily task.
My Lords, I heartily agree with what the noble Lord is saying, but would it not be fairer to leave out 317 the element of capital export in the £750 million deficit because they have turned the tap off now? I should have thought that the proper deficit was about £300 million to £400 million on pure trade.
§ LORD BROWN
My Lords, as I shall hope to show in a moment, the actual size of capital exports from the country during 1968 was considerably larger than in 1964. If one is going to talk about basic balance of payments one cannot deal with them without taking into account capital inflow and outflow. It is difficult to do so otherwise. But I take the noble Lord's point. It could be discussed in terms of current account alone. I do not have the figures readily available. He was not thinking in those terms when he spoke earlier in debate.
My Lords, may I turn to take a look at the future pattern of export of invisible earnings. I think it important that we peer into the future in this respect. If I think of the attitude prevalent before 1910, I wonder how many people at that time felt that we were going to go on earning a large proportion of our revenue from coal and textiles? The fact of the matter is, I am told, that in 1913 we exported 33 times the volume of textiles which we now export; and our tonnage of coal exported at that time exceeded by weight the total of all exports which were exported in 1968. I am giving these rather dramatic figures merely to illustrate the extent to which the pattern of trade can change over a relatively short period. And when we remember that as late as 1939 the Americans exported more motor cars than anybody else in the world and to-day they are well down the list of motor car exporters, it is worth considering what changes may be going to hit us in the future.
There is no doubt in my mind that in future our exports will have to contain a growing proportion of highly sophisticated products, either in the msthetic or the technological sense, or we shall find ourselves not prospering. To put it in another way, either the value per ton of our exports will rise rapidly or we shall be in trouble. I have not been able to obtain an average figure for the value per ton of aircraft, but I believe it to be in excess of £50,000. Machinery, I believe, 318 varies at somewhere between £1,000 and £10,000 per ton and motor vehicles between £500 and £1,000 per ton. These figures seem to me to highlight the direction in which we may be moving.
My Lords, there are some interesting indications that this is happening. For example, in the last decade the value of our total exports rose by 80 per cent., but exports of scientific instruments and similar products rose by 270 per cent. Exports of machinery this year will certainly be in excess of £2,000 million and aircraft components in excess of £300 million. These are good auguries—unfortunately not all the auguries are good. I am certain that progress in this direction requires a continuously increasing investment of resources, of manpower and of finance in organisations in industry to develop new products. In this connection it is important that last year the mechanical engineering E.D.C., the little "Neddy", pointed out that a good export record is incompatible with poor engineering design. It was with this consideration in mind that the Government have accepted in principle the recommendation by a working party of the Council of Engineering Institutions that a national design council should be set up to take over the existing responsibilities of the Council of Industrial Design and accord much greater emphasis to engineering design. A firm of management consultants are now considering how this Council may best be set up and develop its activities, and we expect their report shortly. I think that this may be a very important step which has been taken with regard to the future.
We shall have to increase our visible earnings particularly with respect to royalties and licensing agreements and other means of exporting technology. I am sure that this is a growth area. In 1968 receipts from abroad in these respects earned this country £146 million which was 50 per cent. more than in 1964. In the Board of Trade we are exploring the idea that we might be able to set up some services which would be helpful to firms which have the potentiality of earning money by the export of technology in this way. At present it is not easy to see how best we can help them, but we shall explore vigorously. Finally, in relation to this matter of the export of technological 319 goods it is clear that many firms operating in this field have been earning very low margins of profits overseas. Their major competitor in these goods has been Germany, and it may well prove that one of their major difficulties has been competition with German exports based on an undervalued currency. If this is correct, the recent revaluation of the mark should be of substantial assistance to such firms in the ensuing years and should thus further encourage their greater export efforts.
I have a note on my papers—I do not know whether it is in the proper sequence — concerning the comments made by the noble Viscount, Lord Amory, on this question of rising wages. The noble Viscount, Lord Eccles, also commented on this, and I will interrupt the thread of my discourse to say something about it. It is my personal view that this is the modern problem of all the Western economies, including the United States of America. It is a problem which I do not believe is yet in clear focus in the minds of Government and people. I think that it is an immense problem. I believe that it is going to take very great social changes to get it right. In every developed country in Europe we are faced with the realisation on the part of people who have not had much power in society in the past that to-day they have power. These power groups exist in countries which are extremely materially minded as a result of the growth of industry and all the rest of it; and they are simply going to work in the entrepreneurial spirit and using this power. The problem is how to mediate the use of this power in society. I believe that that is an enormous problem. Frankly, short-term solutions will have to be cooked up to deal with it. I do not believe that this can be solved in the long-run with anything except some very basic re-thinking. No doubt this matter will come up during the debate to-morrow, but I wanted to make that comment; I have wanted to make it for a very long time.
The noble Viscount, Lord Eccles, made a comment on our existing high bank rates and their evils. Yesterday in another place I listened to the Chancellor making a comment which I think is worth repeating. He pointed out that bank rates were 320 at very high levels in this country as they were at this moment in every country in Europe, and in America. The singular thing about the high bank rates at this stage is that they are accompanied by almost record levels of high bank rates in the other developed countries of the world; whereas in previous years when the bank rate has been high in this country—at 6 per cent. or for a short period 7 per cent.—the bank rate in other countries has often been at very low levels; so that although the present high cost and value of money is damaging socially, as the noble Viscount commented, and worrying to business, we share our misery with others. This is another world problem and not something which can be put to the discredit of this Government.
I thought that the noble Earl, Lord Cromer, made an attempt to be helpful this afternoon. He talked at length about the reserve and the reserve figures, and the difficulties facing the Government because these were not perhaps as statistically useful as they might be. I thought that the noble Lord, Lord Erroll, completely misunderstood what Lord Cromer was saying. The trouble is that any Government, and not this Government alone, who attempt to change the basis of their figures get accused by the Opposition of juggling. That is what I was referring to. This is always the temptation when we make these matters a subject of political debate. It may be that change is needed: I do not know; I am not an expert. But no doubt members of the Bank of England and the Treasury will read the comments of the noble Earl with interest. I hope that they do, but the difficulty remains that until we stop making everything a matter of politics, change will be extremely difficult.
The noble Earl, Lord Cromer, asked a number of quite specific questions and I will try briefly to give him the answers. He asked about the figure of loan by the German Government as a result of the agreement to offset the cost of the British Army of Occupation on the Rhine. This is a loan of £52 million at 31 per cent. which was made to the British Government in August, 1969, and it will be included in the third quarter financial figures when they come out in December. It may be questioned whether one should put this all in one lump sum, but here again, this is the sort of difficulty with 321 which one is faced. It arose in August and must go into the respective quarter and not be spread over the quarters in which it continues.
The noble Earl, Lord Cromer, asked about accruals from the 25 per cent. surrender scheme on the sale of overseas holdings, which was also mentioned by the noble Lord, Lord Erroll of Hale. I hope I have the terminology right. In the first full year up to April, 1966, the yield was £70 million. In the ensuing years it has been about £100 million— perhaps marginally over that figure. The noble Earl also asked for figures relating to public borrowings by nationalised industries and public authorities. The figure is £68 million for the year. There is a further figure of £22 million being negotiated, which is outstanding, and is not included in that figure.
§ LORD BROWN
My Lords, it is for both public authorities and nationalised industries. I was delighted to be supported in this debate by my noble friend Lord Balogh. I think I may say that he had as much difficulty with the microphones as he had ease in analysing the situation with which he was dealing. He displayed a wealth of knowledge and made a great contribution to our debate by at times bringing a sense of proportion into our discussion.
In his opening remarks, the noble Earl, Lord Dundonald, suggested that we were not giving enough support to exporters. I was a little surprised at that remark. Admittedly there is no reference in the gracious Speech to further measures of this sort, but the services which the Board of Trade provide to help exporters are the subject of continual expansion, both in terms of quantity and range of service. The feedback we get back from exporters about these services is becoming extremely encouraging. I am disappointed that the noble Earl should have said this, because I do not think that his comments are consistent with the consensus of opinion among exporters themselves. I received from the noble Lord, Lord Barnby, notice of a question which he did not ask. He bowled me a "googly" in the debate by asking a question, on which I have not armed myself, on the help which is to be given 322 to the wool industry. I take it that he is basing this question on the sort of help already given to the cotton textile industry. All I can say is that I shall take note of the issue and see whether I can write him a sensible letter. If I cannot foresee any change in the help being given, I shall not write to him.
I now come to the comments made by the noble Lord, Lord Erroll of Hale. I am not going to be too critical of him because I do not know whether the House fully appreciates that he has greatly helped exports. Continuously over the last two or three years he has led parties to various parts of the world and in terms of his help to our export drive I have christened him, "the redoubtable Lord Erroll". I cannot be quite so complimentary about his contribution to the debate. It was a mixture of humour, of trivialities and of serious stuff. I will take one or two of the more serious questions which he put and try to give him a quick answer. With regard to the no par value shares question, he said that I promised in this House that this would be dealt with in any new Companies Bill, but I did not promise that a Bill would be brought in. The noble Lord knows that a junior Minister cannot commit a Government to their future legislative programme. May I remind him that if he thinks that the Government have failed in not introducing a second Companies Bill in their term of office, the last occasion on which the Conservative Party introduced a Companies Bill was in 1928.
On the question of office development, I cannot give the noble Lord a square answer. The question of its continuance is always under review. The inflation of office rents in London is deplorable but at the same time it is achieving the objective. We always knew that if we limited office building in London, it was bound to push up rents and, if it had not, we could not possibly have forced firms to move their offices into areas where they need more office work, particularly for young people. This is the price we have to bear for achieving something that is well worth while. But I join the noble Lord in deploring some of the rents now being paid for office space in London, which are quite ghastly.
On the question of export finance, as a Minister totally immersed in exports (if I can put it in that way), I should 323 greatly welcome a Treasury decision that the lending of money for servicing export debtors was to be outside the bank lending limit. In fairness to the Treasury, however, one has to face the fact that credit is not divisible into packets. One cannot lend a firm additional money on bank overdraft or something like that with the assurance that this will be used only on financing exports. It cannot be done. What we are doing, if we take it outside the limits, is to open the floodgate of letting more credit loose on society than we feel is safe at the moment. We have to acknowledge that, cruel as the limits on banks are and unpleasant as the peripheral consequences are, it is beginning to achieve the results it was set up to achieve—that is, a surplus in our balance of payments. We have to take the rough with the smooth in this matter.
The noble Lord talked at length about the changes in the Board of Trade. Of course, as a member of the Board of Trade for the last four year they came as a bit of a shock to me; but let us not be too gloomy. The noble Lord must know a good deal more about this than I, because he has been President of the Board of Trade and I have not. But I have observed three Presidents at work during my term of office and I know, as must the noble Lord, that the width of operations of the Board have been such as to mean that the degree of concentration on trade relations and export matters is less than I think is proper in a situation where the balance of payments is in great danger. I believe that it will turn out to be a good thing that the President is able to concentrate more of his attention on vital matters affecting the balance of payments than he would have been able to do had the Board of Trade remained responsible for a large slice of industry and other functions. When the noble Lord talked about the lack of contact of the President or of Ministers like myself with industry, I think that that was unrealistic. The main contacts I have had with industry have been by visiting and listening to industrialists, not by contact with Departments within the Board of Trade which were responsible for various industries. I think that we may benefit from the reorganisation, but we will have to wait and see.
324 The last major point raised by the noble Lord was the question of monopolies and mergers being taken out of the hands of the Board of Trade and placed within the ambit of the Department of Employment and Productivity. There has been substantial overlapping of recent years between the work of the Prices and Incomes Board and the Monopolies Commission. Both have been shifting their original different emphasis of work, rightly in my view, towards looking more generally at industry, its efficiency and its impact on society. Thus the need to have them both in the same Department. Interaction between the Companies Act and the Monopolies Commission is much easier to deal with as between separate Departments than inter-action between the Prices and Incomes Board and the Monopolies Commission. They both tend to drift in a certain direction in which their functions will overlap more and more. I believe that the decision was the right one, much as I regret it, in one sense, from the point of view of the Board of Trade.
I listened with the greatest possible interest to the noble Earl, Lord Lauderdale. I just thought, as he continued his speech, that it was first-class stuff. I take it, in the light of his remarks, that he agrees that nationalisation of the port authorities is a good thing, because without this the National Ports Council would continue to have responsibility without the necessary authority.
§ THE EARL OF LAUDERDALE
My Lords, since the noble Lord has been kind enough to put his point in an interrogatory fashion, may I set his mind at rest. If he will refer to the debate that we had on the ports some time ago he will see that I expressed the view that it is well that there should be some system of reconciling the investment needs of the many ports. That is one thing. I did not say a word about nationalisation: I used the word of the gracious Speech "reorganisation", and hoped that that was what it would be.
§ LORD BROWN
I am reading between the lines, but I think we have a supporter. However, I will not raise the point in an interrogatory fashion again. I am not going to address myself to the noble Earl's comments. I thought they 325 sounded wise words, and I will see to it that his comments are read: they were inspiring. I cannot comment on them technically, because I do not know enough about them. All I can say is that I was interested to notice that Jarrow consultants have produced the sort of ship he was talking about—or, at least, the designs are ready. Freight liners on our railways have really been very encouraging, and some of our shipbuilders have gone a long way in this direction. This country is beginning to set itself in the direction that the noble Earl wants. I do not think we have anything to be ashamed of, and I do not think the noble Lord was suggesting that we have.
My Lords, may I ask the noble Lord a question? I am sure that many of us were struck by the remarks of my noble friend Lord Lauderdale. But, apart from his longer-range vision of the future, he raised a number of shorter-range issues of great importance, such as the importance of better motorway and road communications to some of our major ports and the great importance of making progress with what I think he termed the MIDAS schemes. If the noble Lord is unable to pursue this matter now, I wonder whether in our resumed debate to-morrow we may get a further indication of the attitude of the Government from noble Lords opposite. These are important matters.
§ LORD BROWN
I would assume that the subject was important enough for a quite separate debate; but perhaps that is to be determined by the House.
I listened with great interest to the noble Lord, Lord Nunburnholme. I am trying to cut short my comments, and he will excuse me if I do not reply in full to his points. Last year the Government re-examined the 1965 selective expansion programme for agriculture in the light of the technical possibilities and taking into account the likely consequences of the use of resources, supporting costs and our international obligations. We have to take those into account. The Government decided that the main objectives of the 1965 selective expansion programme in agriculture were generally right, and they announced in November, 1968, that the programme was to be rolled forward with the aim of achieving 326 £160 million a year additional import saving by 1972–73. As before, wheat, barley, beef and pigs are the priority commodities. I know that a figure of £160 million does not reach anywhere near the figure which the noble Lord quoted of, I believe, £1,000 million, or even more, but we are perhaps, to some extent, thinking along the same lines.
I had intended to give the House five or ten minutes on the export activities of the Board of Trade.
§ LORD BROWN
I am prompted to go on, but I will cut it short because I think I have spoken long enough.
§ LORD BROWN
Nearly a year ago we came to the conclusion that rapid expansion of our support activities, both at the centre and in the regional offices of the Board of Trade, had resulted in operations outrunning the form of organisation within which they were being conducted. We asked Professor Elliot Jacques of Brunel University to carry out an analysis of the organisation by conducting discussions with a wide selection of the officials involved from the top to the bottom of the service. This has been done, and in this he was joined by Sir Hector McNeil of B.N.E.C. and Mr. Nicoll of the Board of Trade. We have just received their Report and are hoping to implement their conclusions very rapidly. They have already received wide approval among officials who, generally speaking, know what was in the Report because of the methods by which it was carried out. The results will be redistribution of work, a sharpening of individual responsibilities, a shortening of lines of command, a strengthening of the work of our overseas desks who are responsible for trade relations and contact with commercial officers engaged on export work overseas, a strengthening of our regional offices, the clarification of the responsibilities of officials working in the regions and the granting of more clear-cut responsibility to high-level officials for the development of new services to help exporters. This analysis of organisation has been in progress for the last six months, running parallel with the Duncan Report. I believe that with 327 the implementation of the Duncan Report, with its main effect on our overseas posts and the improvement of the efficiency of our organisation within the Board of Trade we shall be taking a substantial step forward in assisting British exporters: I hope so, at any rate.
I have a passage here referring to the rate of increase of demand on the Board of Trade services. These are really quite spectacular. Over the last four years they have increased anything from three to ten times. I will not give your Lordships all the figures. This is some evidence of the fact that they must be helping people. Of course, the extent of the help that the Government can give to exporters is, as we all know, peripheral. Nevertheless, it may be an important variable in their success. We so regard it, and we shall push en with these support activities.
New activities in 1970 brings me to something that is very dear to my heart and that we have been planning for the last three years: it is the computerisation of the flow of inquiries that come from overseas buyers to our posts, from the posts into the Board of Trade and from the Board of Trade out to individual suppliers in this country. We are going to ask industry very soon to register in the memory of a computer those products which they manufacture and which they wish to export. We shall subsequently bring this fully into operation in the summer of 1970. When it is working efficiently we shall arrange for posts overseas to advertise the existence of this service, so that a much larger range of buyers overseas can use it as a means of getting in touch with British sources of supply—something that is not always easy to do for small firms overseas who do not know the ropes. I expect this to stimulate a great flood of inquiries through the posts, and it will go out to British industry as unit inquiries, instead of going out, as at present, in a very fat bulletin, through which they have to search for those which are of interest to them.
I have mentioned that particular service because I think it is a rather dramatic one. I will not mention the other services of which I have particulars here, because I do not want to talk for too long. I cannot close, however, without making reference to the work of the Export Credits Guarantee Department. 328 I want to draw attention to something that is important. The House knows that they are making much greater use of buyer credits and lines of credit than they used to do two or three years ago. I will not give the figures because we have had too many figures here to-day. This is a very important development. It is almost a resuscitation of what used to happen in the late 19th century, and the early part of this century, when the British financial institutions were, so to speak, establishing or selling credit all over the world, and opening up paths for British exporters which other nations could not emulate. In the war years, and the aftermath of the war, I think this habit of British financial institutions being so vigorous in the sale of credit seems to have gone into some degree of recess. What is perhaps deplorable is the fact that other nations have been selling buyer credit on a greater scale than we have. We are trying to put this right. It is extremely important, and it involves pre-empting hundreds of millions of pounds worth of exports overseas. It means putting British exporters of capital equipment and industrial machinery, and so on, into a position where, instead of having to negotiate terms of credit and then getting insurance individually on their individual contracts, they can instead, if a line of credit has been issued, go out to the country, sell their goods, get cash for them, leaving all the multifarious negotiations about that credit to be performed centrally by E.C.G.D., in combination with a bank or group of British banks and the central banks of the Government overseas concerned. This is extremely important to exports and one of the major ways in which Government can help exporting.
The one brake on this is the availability of the highly skilled staff who are available to work out these lines of credit. I include within these remarks not only lines of credit, but the establishment of general buyer credit. This is a very important initiative, and we are doing all we can in the Board of Trade to see that the decks are cleared so that E.C.G.D. can follow this course as vigorously and in as widespread a manner as possible.
My Lords, before the noble Lord leaves that particular point, may I ask how this very vigorous drive 329 to give credit to buyers overseas is treated in the balance of payments? Presumably the goods go into the export figures as exports, but when do we take credit for the actual cash paid for them?
§ LORD BROWN
My Lords, I may have given the impression that this business of selling buyer credit overseas, will result in more money being invested in credit than would otherwise be the case. This is not so. In fact, if one does not undertake these operations then British firms, individually, will have to give credit on the goods they sell, and the total credit given by individual firms will probably be as high for a given volume of exports as by arranging these central lines of credit. The difference between the two methods is that one is much easier than the other. To answer the noble Lord's point, the balance of trade takes into account shipment of goods, not payments. The balance of payment takes into account money flowing into the country. So the long term balance of current account and capital that one sees at the end of the year has taken account of the actual money that has come into the country. The monthly figures take account of the shipment of goods out of the country, ignoring the date when payment arises.
§ LORD BROWN
My Lords, these are the competitive terms of trade, and you choose between selling them on the normal terms of credit, five years or seven years, whatever it may be, or you go without the exports. My Lords, the picture which I have described is one of great progress in the past few years. The achievement of industry and commerce in strengthening the balance of payments has been very substantial and I think they deserve great credit. I should also add a word of thanks in recognition of what the noble Viscount, Lord Amory, said to the banks for the part they have played in providing 5½per cent. credit, 330 and in taking part in the operations to which I have referred.
The trend of export sales is strongly upward, and I have every expectation that it will continue upwards. Growth of this sort does not come from nowhere: it is the fruit of much effort; and, as I have already said, I know that not all the fruits of past efforts have yet ripened. And these efforts are not being relaxed. In concrete terms, investment is still rising, and if we compare the last three quarters for which figures are available—up to the middle of 1969–with the preceding three quarters, we see that the volume of investment in manufacturing industry rose by 8 per cent.
The great need, as I see it, if we are to maintain the momentum of exports now achieved, is to continue the high rate of investment in manufacturing capacity and commercial endeavour, in order that we may avoid a situation arising when the opportunities are there but the goods are not. We must not prejudice our future success achieved by so much effort by any lack of confidence or foresight in laying the necessary foundations for growth.
§ Moved, That the debate be now adjourned until to-morrow.—(The Earl of Dundee.)
§ On Question, Motion agreed to, and debate adjourned accordingly.>