PUBLIC SPENDING AND ECONOMIC POLICY

HL Deb 17 November 1970 vol 312 cc936-1097

3.12 p.m.

LORD BESWICK rose to move to resolve, That this House regrets that the measures outlined by the Chancellor of the Exchequer on October 27 run counter to the Government's declared intention to reduce prices; will widen the gap between rich and poor in our nation; will make more difficult the achievement of an acceptable prices and incomes policy; will tend to aggravate the problem of regional development, and generally will impede Britain's progress towards an economically sound and socially just society. The noble Lord said: My Lords, I beg to move the Motion standing in the name of my noble friend the Leader of the Opposition.

We must all have been pleased to see yesterday's published surplus on external trading account, even if there are cautionary qualifications. There is additional satisfaction to discover that the legacy which we left to the present Administration was even more favourable than that actually recorded. Nevertheless, it remains true that since this Motion was drafted some two to three weeks ago our national situation has basically worsened. It has worsened economically and psychologically. It has worsened economically because Her Majesty's Government have not done things which they ought to have done. It has worsened psychologically because they have done things which they ought not to have done. A large part of my case will be that a nation cannot be sound economically if it is not sound psychologically, socially and politically. A sense of social justice, my Lords, is a far better incentive than 6d. off the income tax.

I do not wish to make an old-time Party speech. I do not believe any Party in this country to-day has a monopoly of truth. But I recall the noble Lord who now sits on the Woolsack saying almost forty years ago that without controversy there was complacency. And heaven help Britain if we indulge in complacency to-day! So, my Lords, I suggest that we want controversy but not prejudice in our discussion. And it is not simply Party prejudice to say that the situation has worsened since the present Administration took over. Newspapers of all shades of thought, international organisations, authoritative public figures with no Party connections, say the same.

The Financial Times last week gave its biggest headline to an O.E.C.D. warning to the United Kingdom on inflation. The O.E.C.D. Report says that the mini-Budget had worsened the situation and forecasts more serious inflation in Britain than in "most industrial countries". The Times, in a leader on November 1, said: Neither the I.M.F. nor the O.E.C.D. nor the Governor of the Bank of England, nor anyone else, desires to dictate British economic policy to the Government. But they are all entitled, as are the British public, to an intelligible and firm account of what the Government propose to bring inflation under control.

The same thing was said at the other end of the Press spectrum The Daily Mirror, as it has done at other times of national crisis, put the position tersely, clearly and urgently. On the day after the Prime Minister's TV interview they said: Has Mr. Heath told us the truth, the whole truth and nothing but the truth? The answer is that he hasn't. The public has not the faintest idea of the crisis urgently facing the nation. … Unless we are mighty careful and urgently quick we will all be taking home our pay in suitcases …

Nothing that was said last night, my Lords, removed the fear then expressed in that article. Or, as The Times delicately put it this morning, the Prime Minister's "intellectual case was not made out." I am suggesting that it is not good enough to counter this criticism by calling attention to the Labour Government's sins of omission. We did at least claim that we were blown off course. But this Government actually boast that they have chosen the course which we are now pursuing; and all that the Prime Minister added in his Mansion House speech to his TV interview was to stress that they were satisfied with the course he has chosen. I hope we can at the very least get some indication from the noble Earl and his colleagues who are to speak that they are not quite so complacent as the Prime Minister sounds.

The first part of the Motion calls attention to rising prices. No one, presumably, will deny that the measures announced on October 27 are deliberately designed to increase prices. The defence, as I understand it, is that the increase will be only a little one: only 1 per cent. we are told. But even if it were true and the effect of the changes was an increase of only 1 per cent., it is applying an extra 1 per cent. at a time when other forces are working in the same direction, and when a movement is already gathering momentum. In such a case even 1 per cent. can have an enormously accumulative effect. Of course, the unions can be blamed and no one with a modicum of sense and objectivity can say that the current fever of wage claims does not inflate our currency. No one can deny either that wage claims won this year, with few exceptions, have been won by workers, not at the expense of a wicked capitalist but at the expense of the consumer; and that means other workers and the nation as a whole.

But extravagant wage claims are not now so much a cause as an effect of deeper seated problems. Up to October 27 the charge of organised selfishness could have been made against the unions, and it would have stuck. But to-day the Government have elevated selfishness into a social principle. I do not believe that Mr. Heath is a selfish man, but when he disdains Government or collective or co-operative action against inflation, and when he says that it is up to each one of us to act on our own, he is in fact preaching selfishness. When asked, in his television interview, how his "change of course" amounted to a cure for inflation, he is reported as answering, What it means is that people must face up to their own responsibilities, recognising what the change of course is and how they can benefit from it.

And that was spelt out last night. How can each benefit?—benefit himself. That is the old doctrine of "I'm all right Jack." And that doctrine, even wrapped up in fine phrases, is no recipe for national greatness.

This Motion also asserts that the course on which we are now set will widen the gap between rich and poor in our nation. Various figures have been bandied about by Government spokesmen in an attempt to show that the poor have benefited by the mini-Budget, and no doubt the noble Earl who is to follow will refer to that fig-leaf of a measure, the Family Income Supplements Bill. Given time, one could show that with increases of rent, fares and food, even the very poor are going to be worse off, certainly relatively and probably absolutely, than the very rich. The fact is, my Lords—and I do not think it is disputed—that the whole point of the recent economies was to make room for reductions in direct taxation, and this can only mean a shift in resources from the poorer to the better off sections of our society.

If the noble Earl or others insist on quoting figures from the Family Incomes Bill, let me ask them this question. Why is it considered inflationary to pay a low-paid worker 50s. extra on his low wage but something virtuous if he is given the same 50s. as a means-tested charity? Why did the Government lose their temper over Sir Jack Scamp's recommendations'? The families who benefited from that award are not going on an inflationary spending spree. I cannot believe that the noble Earl who is going to reply would prefer that they should have remained as potential recipients of the £3 a week charity.

The gap between rich and poor is not only a matter of a gap in income levels. Charity—not the charity of Christ but the charity of the Poor Law—is a divisive not a unifying factor in society. Self-respect comes into this, as well as money incomes. One great disappointment to me was that the Labour Government never were able to use the substantial trade balance surplus we achieved to do more, within an incomes policy, for the low-paid workers. So I beg the noble Earl not to try to counter this assertion about the widening gap between rich and poor by listing the free gifts of money and milk which one will be able to get by pleading poverty. A more sophisticated means test is not what our people deserve from a modern society of technological affluence.

The Motion also points to the aggravation of the problem of regional development. Other of my colleagues will no doubt go into this aspect in more detail, and no doubt Government spokesmen will stress the pros of depreciation allowances as against the cons of withdrawing investment grants. On balance, though, it seems fairly clear that, again, the better off will benefit more than the worse off; the highly profitable firm will benefit while the firm struggling to get established in a development area, having probably gone there under the impression that it was fulfilling a social duty, will on balance, do less well. I notice that Northern Ireland is very concerned about the loss of investment grants, and the Prime Minister's brother is asking in another place for special dispensation for Northern Ireland. Well, my Lords, there are other parts of the United Kingdom which have as good a claim as Northern Ireland. If adjustments and modifications to announced policy are to be made, I hope the noble Earl will be able to assure the House that all the regions will benefit similarly.

I began by saying that the psychological aspect of our present plight was as important as the economic. This is true in more senses than one. Those quotations I gave about the threat of inflation may be contested. It may be argued that they are exaggerated; but what is incontestably true is that when that sort of thing is said, and said so widely, it stimulates the very danger which it fears. It is the psychological climate—the social or political climate, if you like—that is all important. In a nation in which we have all the physical equipment, all the physical skills, it is only the psychological or the social purpose which can prevent us from earning a high and rising material standard of living. To-day, all the talk is of inflation, and if that talk continues, a long-term policy will be irrelevant, for the Government will have only months, not years, to stem the tide.

The question is, then, how we can secure the necessary change in the psychological climate. It can be done. British people still want to help Britain. Here in this House, the Opposition had originally intended this week to discuss a Motion in the name of my noble friend Lord Balogh. It read: To call attention to the prime importance of an incomes and prices policy in attaining accelerated economic expansion, while safeguarding relative stability of costs and prices and a surplus in our balance of payments sufficient to assure financial independence.

We had hoped on that Motion to have a more constructive discussion—a helpful discussion. I am convinced, and so are many, if not all, of my friends, that some form of prices and incomes policy, agreed by, initiated by and executed by the Government of the day, is essential. It may be said that we failed in this when we were in office. Well, we had some success and we had failure. Had we won the last Election, we should have tried again, and we should have tried, fortified by previous experience and by the improved room for manœuvre which our success in the balance-of-payments struggle had achieved. Only a fool would say that in a matter which deals so profoundly with human behaviour it would have been easy. But we would have tried.

The first charge against the Government, which I repeat again, is not simply that they do not try, but that they elevate not trying into a political philosophy. There has never been such a public renunciation of responsibility since Pontius Pilate washed his hands before the multitude.

The second charge I make is that, even if they did now try, since October 27 they have dissipated the prerequisite sense of social justice. I do not need to be persuaded of the value of self-help. One reason why I spent time and effort propagating the worth of co-operative organisation is because the co-operative form laid stress on individual effort and initiative. I am all for a free society. But we cannot have the free society or the individual freedom which the Prime Minister proclaims in a modern world. The type of freedom of which he speaks belongs to the days of Pitt the Younger. He is flying flat in the face of all technological progress when he tries to extract Government from such a wide area of economic decisions. We are to-day all dependent upon one another. All our efforts are integrated into the efforts of others—whether we like it or not. Our advice to the Government is that they had better like these facts, because they cannot escape from them. Let them show less complacency and more flexibility.

An article in The Times to-day by Mr. Corina says that so far the Prime Minister has only succeeded in putting Mr. Campbell Adamson and Mr. Victor Feather into a ring when they should be sitting round a table. It would be a good start if talks between those two were made possible and an attempt made to extract the fever from the present industrial situation. A prerequisite for any success, however, must be that regressive tax changes must be ended; food price rises must be checked; investment must be encouraged and not discouraged—in the public as well as in the private sector; there must be a genuine and agreed attempt to close, and not widen, the gap between different levels in our society. I hope that, by voting for this Motion, this House will encourage the Government along this course. I beg to move.

Moved to resolve, That this House regrets that the measures outlined by the Chancellor of the Exchequer on October 27 run counter to the Government's declared intention to reduce prices; will widen the gap between rich and poor in our nation; will make more difficult the achievement of an acceptable prices and incomes policy; will tend to aggravate the problem of regional development, and generally will impede Britain's progress towards an economically sound and socially just society.—(Lord Beswick.)

3.30 p.m.

LORD HENLEY

My Lords, the speech of the noble Lord, Lord Beswick, was deeply felt, and with a great deal of it we must all agree. I was particularly impressed with what he said about the psychological feelings in regard to these issues. This is as important as anything else. Inflation is something which is driven psychologically, and if you get that one wrong, you will get everything else wrong. I think the noble Lord gave us a warning that we must all take carefully. Before I come to the main theme of the debate, I should like to say how pleased we all are that the noble Baroness, Lady Lee of Asheridge, is making her maiden speech to-day—and what a great ornament she will be to your Lordship's House.

The charges against the Government are in five parts. The first is inflation; then comes social justice, prices and incomes, regional development (on which I do not propose to say anything) and a sort of omnibus charge at the bottom which allows us to say almost anything that we wish. I should like to start with the charge about social justice. It is suggested that the measures are socially unjust. I think that it would be a pity if critics—and here I address myself just as much to my noble friends as to the Labour Benches—got into the frame of mind in which they were unwilling to contemplate any reform of the social ser vices. The structure of the social services is based largely on what happened in 1909 under Lloyd George—and what is not 1909 is, to some extent, 1943 from Lord Beveridge. Obviously it would be ridiculous to suggest that a great deal of it is not in need of radical reform. Much of it is ineffective; much of it is wasteful; and a great deal of it goes into the wrong pockets. I think we could all agree about that.

Whether the measures are socially unjust or not, they still are more than a radical reform; they are a revolutionary change in intent. The noble Lord, Lord Beswick, and his noble friends suggest that it is a new version of the old Poor Law. I have yet to feel convinced on that score. It seems to me that it may well be right to put more of the cost on to the direct consumer. There certainly has been a slaughter of sacred cows, but a lot of them are pretty dried up old bags. But if sacred cows must be slaughtered, let us hope that they are slaughtered by humane killers. We are living in a revolution, and we must change with it. So far as these changes in the intent of how the social services should be managed are concerned, I should like to give them the benefit of the doubt, to see whether the social services cannot be made to work better along these lines.

The second charge is the question of whether the measures do have any effect on the inflationary situation. It has been suggested that they are political rather than economic. I agree that they are political; but whether they are economic or not, they are long-term measures. In the short term they are going to have no effect upon inflation; and they may even marginally make it worse. The Government claim that they will be neutral in their effect. This remains to be seen. The cure of inflation is the Government's mandate. They said in June that they would act immediately to steady prices. But they have not done anything yet. I admit that the Government do not pretend that the particular measures outlined on October 27 will cure inflation. Last night we heard of something coming; and we have almost been told by the noble Earl in answering a supplementary question on another issue that it is the Government's other policies which are in effect going to hold inflation down.

What are these other policies going to be? Are we going to have a free-for-all? I hope not. You cannot have a free-for-all when half the economy is of necessity tied up. There is, however, one thing that we do know is coming, and that is the Industrial Relations Bill. It seems to me that there is a great deal that is good in the Industrial Relations Bill. But, here again, it cannot do anything in the short term against inflation. The unions will have none of it, and if they will have none of it its chances of being successful, even in the long term, are not very bright. There appears to be a total breakdown in the relations between the Government and the unions. The last Government were prevented in Parliament from giving effect to their legislation on industrial relations, and this Government may be prevented outside Parliament from doing the same thing. It seems to me that no Industrial Relations Bill—at any rate, the one that the Government are proposing—will be effective, so far as inflation goes, until the present monopoly position of the trade unions is brought within the framework of the law in general, and in particular within the Restrictive Trade Practices Act 1956, which at present excludes trade unions from having to have their wage bargains approved by the Restrictive Practices Court like any other bargain. There is, so far as the trade unions are concerned, an unwillingness to co-operate on any reform or any suggestion that there should be reform.

I say this with humility, because I detect in myself when I am talking in your Lordships' House about my own interests, this same sort of attitude. Well, one must do one's best not to be like that. The present monopoly position which the trade unions enjoy is totally out of date. It stems from the Liberal Government of 1906, when the trade unions were emerging and when they were weak in relation to capital. The Liberal Government of those days put them outside the law— it was a reasonable thing to do at that time—and they have remained there ever since. I do not think that that is a state of affairs that can go on any longer. It is impossible for any organisation these days to be outside the law. The trade union privileges, like the privileges of the Ancien régime, offend, and like the earlier operators of Ancien régimes, they will assuredly bring their house down if they do not do something about it.

The third count is on the question of prices and incomes policy. The Government may be unwilling to take more part, but if the unions will not, and the employers will not, then the Government must. The Prime Minister said that his critics must define what they mean by an incomes policy; and Mr. Maurice Macmillan, a day or two ago, said that if you are asking for an incomes policy you are asking for compulsion. That is not so. The agricultural industry has had a statutory prices and incomes policy for 25 years. You may say that it has had to do so because it receives subsidies. But, again, this is not so. If you take that part of the subsidy which is not a consumer subsidy, the support which the agricultural industry receives is about the same as the motor car industry gets in the form of tariff.

The agricultural industry can reach agreement round the table; but other industry says that it cannot. Why can it not? In the agricultural industry the Price Review and Agricultural Wages Board come to an agreement as to what the probable national growth rate will be and what national wage increase is possible from that. Couple that with rent properly payable against a background of security of tenure and rather slow rent increases, and you get the situation which I am saying industry ought to be able to achieve. It may well be said: "Look where you are in the agricultural industry; your wages are among the lowest in the country; your farmers are upset, your landowners are getting a return on their capital which no other owner of capital would accept". Nevertheless, it is the only industry which can hold its own in terms of growth with industry in America. Secondly, I do not believe it would be in the position that it thinks it is in—this is psychological to some extent, for it is not really in as bad a position as it thinks—if other industries had been in the same position and played their part round a table in the same way. If the Prime Minister wants a definition of the kind of incomes policy I think would work, then there it is. If that is compulsion, I am only too pleased to be compelled.

The kind of negotiation which I suggest has been carried out by the agricultural industry for twenty-five years may well be still in its infancy, but it has worked tolerably well, and I commend it to other industries to see whether they cannot make something of it. With regard to panaceas, I have merely mentioned two that I think are worth looking at: first, putting the trade unions within the Restrictive Practices Act; and, secondly, trying to make something of a prices and incomes policy on the same lines as the agricultural industry. With regard to other panaceas, there are some extremely able economists in your Lordships' House who will be following me this afternoon and who will, no doubt, be enlarging upon this subject. I rather like the suggestion in the Guardian the other day; "Why not try them all?" I dare say you cannot try them all at once because some of them are mutually exclusive, but there is no reason why you should not try to use rather more of them at once than we do. We should get away from any idea that there is only one panacea to be undertaken to combat inflation. I believe the more respectable name for this is the "Broad front".

This is, in effect, a Motion for a vote of no confidence. I find it very difficult to have any confidence in the Government's being able to do what they are setting out to do. Perhaps it would be unfair to vote against them for that reason alone when I had little confidence in the Labour Party's ability to do the same thing—certainly they were unable to do it in the six years that they were in office. This does not mean to say that I believe that the Liberal Party is in any special relationship to the truth—I do not. Nevertheless, on balance, the charges have been made out, and will be made out, with regard to inflation and the Government's failure to give any indication of how they are going to tackle it; and, secondly, with regard to making it more difficult to achieve a prices and incomes policy. With regard to the other charge, on the matter of social justice, I am not sure; as I have said, I should like to wait and see. For all that, I feel that at the end of the day I—and this applies to my noble friends—shall probably, in the light of the arguments deployed, join the Opposition in the Lobby against the Government.

3.45 p.m.

EARL JELLICOE

My Lords, the noble Lord, Lord Beswick, has opened this long debate with an agreeable speech. He said that he was not going to make a Party political speech and although there were some Party political strains in some of his remarks, he followed through with that promise. I hope that the succeeding twenty-seven speeches will be as agreeable as the first two to which we have listened. May I join with the noble Lord, Lord Henley, and say how much I am looking forward to the three maiden speeches which we are to hear very soon—not least that from the noble Baroness, Lady Lee of Asheridge.

The noble Lord, Lord Beswick, said that he was not complacent about the record of his Government. It seemed to me that implicit in his argument there was a rather curious fallacy. Listening to the noble Lord I felt that, somehow, he had persuaded himself that, right up until the moment the polling booths closed on the evening of June 18, all was for the best—or at least second best—in the best of all Wilsonian worlds; that the sun was shining, the economy was booming, and that inflation was without our doors. I do not propose to "bang on" about our inheritance. I became thoroughly bored, as I fancy even noble Lords opposite simetimes did, about the "thirteen wasted years", and about the deficit on current account—grossly inflated, of course, by Labour propaganda—bequeathed by Maudling to Callaghan. But, I will not "bang on" about that inheritance, I will readily grant that we inherited a balance-of-payments surplus. But I will grant that only if noble Lords opposite grant that we also inherited £1,500 million worth of external debt, a stagnant economy, more industrial disruption than this country has known for five decades, and rip-roaring inflation. If noble Lords opposite will grant that, they may also be fair-minded enough to concede that we have inherited the slowest growth rate in the industrialised world—

LORD SHACKLETON

You are "banging on" all right!

EARL JELLICOE

No, it is a short paragraph. I have talked about our failure to achieve a satisfactory growth before—a failure for which I do not hold the two last Labour Governments particularly to blame, although they came to power in 1964 basically on the claim that they had the magical key to the door of growth. And growth is, I believe the heart of the matter.

If we are to do the things within our society that we all wish to do, wherever we sit in this House; if our society is to have any real influence on other societies in this interdependent world; if our society is to be healthy and creative, rather than introspective, withdrawn and increasingly frustrated, then somehow we must get faster growth. The fact remains that, according to the O.E.C.D. Report, Outlook for Economic Growth, published this summer, the economy of the major O.E.C.D. countries grew nearly twice as fast as ours in the past decade. Those of Italy and France grew twice as rapidly, and that of Japan four times as fast, as ours. These figures, my Lords, imply a continuing and cumulative deterioration in the relative position of this country in the wider world.

And what of the future? The same Report shows what will happen if past experience is projected for another decade. Income per head in Japan will reach European levels, and the narrowing of the gap in income per head between Western Europe as a whole and the United States, which is already visible in the present time, will continue. But as the rest of Europe narrows the gap, this country will stay where she is, vis-à-vis the United States. We shall in fact be the odd man out in the industrialised world, the poor relation. We shall be dropping further and further behind in the convoy of progressive industrialised nations. I believe that we have a right to expect a better performance than this. Our management in this country is not inherently inferior to that abroad; the quality of our craftsmen can be just as good. In science and technology we have a great deal to contribute to Europe and indeed the whole world. Our industry is supported by a financial system more complete and sophisticated than is found anywhere else outside New York. Under these conditions we should not be dropping constantly further and further astern. But we are, my Lords—even in the best of all possible Wilsonian worlds.

I would grant, of course, that our failure to keep up with the industrial Joneses has not been for want of trying. I acquit the noble Lord and his Administration of that charge. They certainly tried. They set up a vast Department to plan faster growth. The noble Lord, Lord George-Brown, published a National Plan full of ambitious targets. There were long discussions with industry and the last Administration—infinitely fecund in matters of theory—gave birth to a whole multiplicity of bodies allowing them to intervene in the detailed affairs of industry. They opened up new channels for the flow of financial resources into industry. I would grant that this was their objective and that they thought they had created the instruments to achieve it. But, my Lords, faster growth was not achieved; slower growth was achieved.

The fallacy, if I may so put it, underlying, or implicit in, much that the noble Lord, Lord Beswick, said was that we should go on as we have been going on in the past. Because of this assumption, he has failed to see how the policy followed by the last Administration was misconceived. One does not achieve faster growth by merely talking about it. The belief that investment would be substantially increased as a result of the general belief in the possibility of further growth was not borne out. But what we did see in the last six years was that the spirit of competition and the freedom to make decisions, and personal incentive, were cabined and confined by more and more Government intervention and by more and more taxation. I do not believe in "the mixture as before", and I really do not see why noble Lords opposite should ask to believe in "the mixture as before", seeing where it has brought the patient. Why on earth they should expect a new Government, elected on a new mandate, to make no change in the policies which they inherited—policies which have been found sadly wanting—I cannot for the life of me imagine.

In any event, that is not our approach. That is why we have conducted a fullscale review right across the board. We have now reviewed, first, the whole structure and organisation of Government, which we debated at some length very recently, and, secondly, the whole range of Government activity and expenditure. Our aim has been to see what should be done by the Government, and how it can be done better; to see what is being done by the Government which could be done as well, or better, by private individuals or private firms; and to see what is being done by the Government which need not be done at all, or what is not worth the value of the money spent on it, taking into account the severely depressing and disincentive effects of taxation.

Having completed that review we are confirmed in our belief that what is needed for the British economy is a real change of course—important structural changes. We have come quite firmly to the conclusion that, if we are to achieve the faster rate of growth that we all want, we must reduce the burden of taxation which is borne by individuals and companies alike, and also the rate of growth in public expenditure programmes. Restoration of incentives to work and to save, the reduction of the disincentives of high, desperately high, marginal rates of taxation, and the restoration of freedom and responsibility are the kernel of our policies—and I make no apology for them. The current package, that embodied in the White Paper which your Lordships are now debating, is the first step along this road. These are the recurrent themes in the measures embodied in it.

This package is designed to achieve a reduction in public expenditure of some £1,600 million by as early as 1974–75. Given a reduction of a magnitude of this kind, it is absolutely right that your Lordships should examine carefully the broad measures. But it is also right, I submit, that you should not look so closely that you lose sight of the objectives which we have of transforming the country's prospects for the better. I say this because it would seem that there are some in your Lordships' House who are not looking beyond the specific measures themselves. The evidence for this is plain in the Motion before us this afternoon, which says, among other things, that the measures will widen the gap between rich and poor in our nation". It is that particular aspect of the Motion which I should like especially to examine this afternoon. My noble friend Lord Drumalbyn will be dealing more specifically with the industrial aspects, regional development and so on, and I hope that this will be for the convenience of your Lordships.

My Lords, who are the people for whom the immediate impact of the measures in the White Paper is most serious, the people whom the movers of this Motion presumably have in mind in this part of the Motion? Presumably it is those who are in misfortune: the families who cannot earn enough to provide properly for their children and themselves; the one-parent families; the old who need care; the sick and the mentally ill. But the measures in this package have been carefully and deliberately designed to preserve and improve upon the benefits available to precisely these people. Let me very briefly itemise—I will do it briefly because most of this is familiar ground.

The income levels below which families are entitled to free school meals and free welfare milk, and to refunds of charges for dental or eye treatment, will be raised so that more people will qualify. Nearly a quarter of a million more children will be entitled under the new arrangements to free school meals. Some 150,000 more mothers and children will be entitled to free welfare milk. Families up to and beyond the level entitling people to supplementary benefit will be exempt from, or will be entitled to have refunded, the charges for school meals, prescriptions and dental and ophthalmic services. The tests of income for these purposes will be precisely the same as they have been hitherto. People aged over 65, whatever their means, are also exempt from prescription charges.

In addition, rent rebates will be available for the first time to all council house tenants who need them and, also for the first time, to those tenants who need them in privately-rented unfurnished accommodation—some of them the poorest people, as we all know, in our community. In addition, half a million children will benefit from the new family incomes supplement, which will bring up to £150 a year to poor families who earn less than supplementary bene- fit would bring but who are prevented by the wage stop rule from receiving that benefit. And I would just remind your Lordships that, as a result of the decisions taken in July, those who were too old to join the present pension scheme in 1948 are for the first time receiving a pension, as are women widowed between the ages of 40 and 50. My Lords, these are not the measures of a Government which does not care for the less fortunate in our society.

However, that is only one side of the coin. There is also the more positive side. I would remind your Lordships that £110 million has been added to the programmes for hospital building and for local and welfare services, particularly for the old and mentally ill. For the children for whom the local primary school is an antiquated one—and we all know there are far too many of them—there is now the largest programme of primary school building that has ever been undertaken in our country. My Lords, these are not the measures of a Government unmindful of the need to underpin our social services.

I recognise that above the poorest families of whom I have just been speaking there come the great numbers of the producers, if I may so term them, of our nation: men and women, semi-skilled and skilled, at the bench, at the desk and in management. It is the deep conviction of this Government that their first obligation towards those millions of families is not, as it is for the poorest, to cushion them as far as possible and in all circumstances from any loss of net income, but rather to give them ground for confidence in the future—for themselves and their children—and the assured prospect of increasing their real earnings and their standard of living, without the fruits of their efforts being eroded by excessive taxation.

There is a real choice here, my Lords, and we must recognise it. Of course we could continue to present subsidies to industry and to the family budget. Of course we could let payments for services remain unchanged while costs rise and subsidy increases. Of course the public sector could be permitted to continue to do what may be useful but what is certainly not essential. But if we continue to walk down that path, taxation rates would not come down; they would almost certainly have to be increased. And if they did, it would be the bulk of those of whom I am speaking—the great majority of the real producers in this country—who would bear the extra burden.

But, my Lords, there is another path: the alternative path, which this Government have deliberately chosen. The noble Lord, Lord Beswick, was quite right about this: it is a path which this Government have quite deliberately chosen. The alternative is to look at the plans for public spending, to seek out those places where subsidy has been indiscriminate—the investment grants that are given whether investment is profitable or not, housing subsidies which are extended whether the tenant needs them or not, the regional employment premium given whether it creates employment or not, projects which are not essential or economically justified, the services which provide industry with what it could or should do better for itself, and the benefits which relieve families of paying the cost of the necessities of life, even where with advancing prosperity they have become well able to do so.

My Lords, by taking this alternative path the Government have certainly found the means of reducing the weight of public expenditure programmes. But I would claim that the Government have done more. The claim which I make is that this reduction has been achieved without impairing the effectiveness of those programmes in serving the needs of the people. Indeed, it has been achieved with an improvement in the effectiveness of those programmes where the needs really are—in help for the poorest, including the poorest one child families in this country, for the large and needy families, in the provision for creating new jobs in the regions, and in the provision for improved primary schools and for improved health and welfare services.

It is of course true that while the poorest will be helped, as they should be helped, many families will certainly pay higher charges from next year for many services which they now receive either free or cheaply. I recognise this straightaway. But, my Lords, the alternative is for those families to face in due course higher charges for those social services, as they have had to face them before, without any offsetting reduction of taxation; with indeed the prospect—nay the promise—of more taxation. I would remind your Lordships that the families of whom I am now talking are in the vast majority of cases not families with incomes that have been static and that will remain static. It is a central purpose of the economic strategy of this Government, the first stage of which is embodied in these measures, to create the conditions in which everyone in this country can earn more—more in teal terms.

But, my Lords, we must remember that Governments cannot do the earning. They can only try to create the conditions in which people can work, and will want to work, hard and well. There is no question, to my mind, of the ability of the people of this country. What is in question is whether there has been sufficient encouragement, sufficient prospect of reward, in the past. And my Lords, this is not selfishness erected into a philosophy. It is not selfishness for a man, or a woman, to work hard and well in order to earn more for himself or herself and his children, and to improve their quality of life. I do not hold that to be selfishness.

LORD BESWICK

My Lords, while the noble Earl is dealing with this point, will he try to answer the question that I put to him about the sewage workers and the other classes of workers on £14 and £15 a week, who did try to improve their earning capacity and were not exactly encouraged by the Prime Minister?

EARL JELLICOE

My Lords, I will leave my noble friend Lord Drumalbyn to answer the detailed points, but what I would point out is that £14 or £15 is the basic wage; in most cases, of course, it is not the take-home wage.

The question that I ask myself when I hear the complaint which is embodied in this Motion—that the measures which the Government have taken will widen the gap between rich and poor—is whether there has been sufficient encouragement or sufficient prospects of reward in the past. Of course, anything that enables people to make their way further ahead widens the gap, in a sense, between those who are capable of moving ahead and those who are not. This Government believe in helping those who, because of misfortune, cannot move ahead, and in encouraging those who can. If the country is to realise and to respond to a new prospect of a better life within its grasp—and it is within the grasp of all of us—then I believe this prospect must be proclaimed quite clearly and quite simply. The Government are saying to the country, "Carry your proper obligations and carry less burden—less burden in tax". The right tax to choose in order to proclaim this message and to bring about the response from the people which will turn the new and brighter prospect into reality is the tax that is generally foremost in everyone's mind when he looks at his earnings. That, my Lords, is income tax.

I would say that it is appropriate, too, for the same purpose, to reduce the tax in the way most widely understood, by reducing the standard rate. Of course this means that those who earn the most receive the most benefit from this change; but that is the essence of a policy to encourage the effort to earn. We have all seen the most elaborate calculations of losses and gains for families differently composed and in different situations—the papers have been full of them—as criticisms of the decision to reduce the standard rate. I do not accept the criticism, because those calculations assume that as the measures take effect nothing else in this country will be changing: that real incomes will not increase as families respond to the incentive of a better future. It would be a misunderstanding, if not a misrepresentation, of the measures which your Lordships are debating this afternoon to consider them as if they had been designed for a situation that will not otherwise change. They have been conceived rather as dynamic measures to operate in a dynamic situation, in which the whole nation as one nation—and here I am entirely with the noble Lord, Lord Beswick—will gain from the changes which they will help to bring about. As further studies of the public expenditure and of the taxation system proceed, the Government propose to bring forward further measures, each designed to play its part in achieving this central purpose.

My Lords. I hope I have said enough to make it clear—

LORD SHEPHERD

My Lords, would the noble Earl forgive me for intervening? Since he is speaking about a dynamic policy and the rights and the anticipations of persons to increase their wealth and their incomes, can the noble Earl give any indication of what the Government have in mind as a fair and reasonable expectation for men to increase their wages year by year, particularly at the present moment?

EARL JELLICOE

My Lords, I am not going to give a guideline or norm, if that is what the noble Lord is asking for, because what the Government believe in is an increase in real wages. The sort of wage increases which we are faced with now just mount the spiral of inflation, and this does not mean an increase in real wages.

I hope I have said enough to make it clear that I believe that radical and structural changes in our economy are needed if we are to reverse the sad story of recent decades. It is also my belief that such changes can be made without damage to social justice. However, I think it would be wrong if I were to resume my seat without discussing our most pressing economic problem, namely, inflation. We should, I believe, avoid panic measures, and we must avoid talking ourselves into panic measures. The sort of talk and speculation which I have seen a good deal of in the Press recently, that we are on the brink of some Weimar precipice, is neurotic, unhealthy and nonsensical. Nevertheless the current rate of price advance is quite excessive. It strikes at social justice precisely because it strikes hardest at those least able to protect themselves, and it could also of course strike at our whole economic structure. If other countries can moderate their price increases and maintain higher productivity than we achieve, and it seems that they may be doing so, the continuation of the present trend here clearly poses a serious threat to our trading position in the world and indeed, in the longer term, to our balance of payments.

For both those reasons we are determined to rein in the wild horse of inflation. The key, of course, is the progressive reduction of the prevailing rate of settlements. We believe that responsibility for securing such a reduction rests with those directly concerned in the negotiations, not least the employers—a view consonant with our philosophy of restoring freedom and enterprise over a wide range. That is why Ministers have consistently stressed the need to resist unreasonable pay claims. In the private sector this undoubtedly means a determination to stand firm in the last analysis against strike action. In the public sector, by the same token, the Government will accept their responsibility to take a fair but firm line in negotiations with their employees, though this does not mean—and I should like to stress this—unfair descrimination against the public sector.

Another essential element in the fight against inflation is the right background of fiscal and monetary policy, about which, no doubt, the noble Lord, Lord Balogh, will shortly be addressing us. The measures of expenditure and taxation, taken together, are expected, as the Chancellor made clear, to be broadly neutral in their effects on demand. With a continuing increase in consumer spending and a rise in exports, supported also by some increase in public consumption and fixed investment, output over the next six months may grow broadly in line with capacity, and, given this prospect for demand and the present rate of inflation, my right honourable friend concluded, without prejudice to his Budget judgment next April, that it would be wrong to take steps likely to increase further the pressure of demand. It is because our objective is to prevent too rapid an expansion of domestic credit that the Bank of England made a further call for special deposits at the end of last month. I should make it clear that we shall continue to use the mechanism of special deposits as a means of influencing bank lending as and when required.

My Lords, I have emphasised our determination to do all we can to resist unreasonable wage claims, or to encourage others to do so, and our decision to pursue sensible fiscal and monetary policies. I must likewise emphasise my view that the present public expenditure cuts are not a once-for-all operation. We have already by the present cuts won some freedom of manœuvre; we need more. It is our intention, by all reasonable means within our disposal, to seek further cuts in public expenditure. That is one reason why we are carrying out a deep and searching review of the functions of Government.

The commentators are calling out in pretty contradictory voices for a policy for incomes. I would suggest that these monetary and fiscal policies, together with our approach to the question of wage settlements, coupled with our whole industrial relations policy and with our intention to create still more room for manœuvre, constitute in the broadest sense a policy for incomes.

LORD ROBBINS

My Lords, I am sorry to interrupt the noble Earl, and I do not want to put a loaded question. But he has opened up for us horizons, with which I am in deep sympathy, of a possible leap forward in productivity in this country so that we do not lose place in relation to others. Is it impertinent to ask him what he would regard as being the possible maximum leap forward in productivity in the next twelve months, having regard to the measures that have been decreed and are in contemplation? It is an important question, because if we are thinking of inflation we have to think of it in relation to the possible increase in the rate of growth.

EARL JELLICOE

My Lords, when the noble Lord, Lord Robbins, said he did not wish to put a loaded question to me I knew precisely that I was going to be faced with a heavily loaded one. I am afraid that I cannot quantify, and I think it would be very rash for me to do so in answer to the noble Lord. But I will certainly ask my noble friend Lord Drumalbyn, who will be winding up, whether he can help the noble Lord on this.

I know that there are noble Lords who are asking us to introduce an incomes policy in the narrower sense of the word. To them I would say only this. The experience of the statutory and detailed policy operated by the previous Administration does not suggest that it brought any lasting advantage. Indeed, it was during that term of office that the present inflation bloomed. It was from the breaking of the fragile dam which they created that stem our present difficulties. It is not enough just to repeat, parrotwise, that we need an incomes policy. As the Prime Minister said recently, its advocates must spell out precisely what their incomes policy would involve. If and when they do that openly and honestly, I believe their case will carry very much less conviction.

In any event, may I make one thing absolutely clear to your Lordships' House this afternoon? The Government are quite determined to win this fight against inflation. We do not kid ourselves about the seriousness of the present position. Nor do we propose to be panicked into panic measures. But we realise that not only our plans for the future but also the individual plans of every man, woman and child in these islands are bound up with success here. Success will not be easily won. It will not be quickly won. But success we intend to win.

My Lords, may I, in conclusion, come back to the Motion before your Lordships' House? Noble Lords who do not like the changes we have announced may seek to argue for a continuation of the mixture as before—the policies that have led to fumbling growth and which have sown the seed of this year's record crop of inflation. I am delighted if I am not able to carry them with us in this two-day debate.

But let me add just this. The Motion talks about the achievement of an acceptable prices and incomes policy. Under the previous Administration we saw the destruction of their statutory incomes policy and the emasculation of their voluntary incomes policy. The Motion talks about the problem of regional development. Under the previous Administration we saw record unemployment and a failure to create the new jobs which the regions required. The Motion talks about progress towards a socially just society. After six years of the previous Administration, the Child Poverty Action—no Tory body—stigmatised those policies as making the poor relatively poorer.

My Lords, the Motion also calls for an economically sound society. I would accept that as an objective. I would also accept as an objective a socially just society. But, my Lords, I reject the hair shirt society. I reject the concept of equality in misery. The truth of the matter, my Lords, is that we shall not be able adequately to discharge the social responsibilities which we as a society and as a Government owe to the weaker, the less fortunate, the younger, or the less lucky in our society unless and until we achieve a truly buoyant economy.

My Lords, I believe that the White Paper has signposted the way to achieve such an economy and to a society where social justice has real meaning. It is because of that that I ask your Lordships to reject the Motion in Lord Shackleton's name, if and when it comes to a Division to-morrow evening.

4.20 p.m.

LORD BALOGH

My Lords, it is usually difficult to follow the noble Earl. His urbane, civilised and practical empiricism is disarming, even if one does not agree with the case he puts forward. He promised us at the beginning of his speech that he was not going to "bang"; but, as with the Concorde, I should have said that both on taking off and landing the bangs were almost overwhelming. The situation that he wants to convey to us is that something completely new has originated in this country. We have a new policy. We have, obviously, a new Prime Minister. We have a new philosophy of problems. May I most humbly put to the noble Earl, with great respect, that there is a saying by a famous and clever old Jew called Ben Akiba that, "There is nothing new in the world".

I should like to invite the noble Earl to look at the 1952 Budget of R. A. Butler (now his noble friend Lord Butler), which opened remarkably with the same sort of sentiments as we heard to-day. Then, too, people were to be made free. The overloading of the sort of carrot-chewing Labour régime was to be ended, and we should land, so to speak, absolutely marvellously on an upward incline of steady growth. If I may "bank" a little, may I remind the noble Earl that, after all, between 1952 and 1964 our progress was not very good? As my friends in the other House always pointed out, much to the embarrassment of the then Government, we were at the bottom of the league. We were at the bottom of the league, and we stayed there. Mind you, it is not so terribly bad that we stayed there. An economist handling economic matters, obviously will never underestimate the importance of the supply of goods and services, because, he lives by them or rather by the explanation of why they do not come forward.

Nevertheless, growthmanship is not the ultimate goal in life. If I contemplate that after 25 years of hard slogging we might approach the United States of America in average output, I must say that this is not a goal which to me looks entrancing. This is a good country to live in, and it was to some extent a good country to live in, because we are tolerant of each other. I am not so sure whether these measures are not going to undermine that sort of cosiness—it may be that it was a slothful cosiness, but it was very cosy—both in our social system and in our absence of class war.

That Budget of 1952 was, of course, very successful. Why was it so successful? It was so successful because import prices fell dramatically and we were handed £1,400 million worth of national presents, mostly from poorer countries. Yet by 1955 we had exhausted this national present. Why did we exhaust it? It was because of the absence of control, the absence of reorganisation institutions: investment did not grow enough. I must remind the noble Earl that it was Montagu Norman—no Labour man, he—who had first intervened in a systematic way in reorganising British industry. Indeed, a very misguided colleague of mine (because he forgot at the moment the disastrous effect of going back to the gold standard and old parity) called Montagu Norman the saviour of British industry in the interwar period.

So I do not believe that this is such a new affair. It is not so very new, and it is not new inter-temporarily, as one might say. It is not so very new geographically, either, because we have an almost complete parallel in the United States of America. Mr. Nixon came in in order to smash the almost Fabian economic system which had been built up by Kennedy and which was also continued by Johnson. Where is he now? The rate of growth has decreased; unemployment has increased. Unemployment has increased especially in those parts of America which are non-privileged. It is the young, school-leaving Negro who is unemployed—25 per cent. of them. I hope very much that we are not going to follow that example. But the measures outlined have a frightening parallel to the American measures.

The noble Earl, I know does not wish ill, and has aims which probably are quite similar to our aims but I entreat him to think again when he thinks that the sort of measures which he has defended will lead us where he wants to go. May I also say that I was extremely surprised by the spokesman of the Liberal Peers? Their liberalism really seemed to be condescending in wanting penal measures—because obviously the injunction method of the Monopolies Commission would be used against the trade unions. I must say that this is a new thought, for Liberals at any rate, and I hope that some of my Liberal friends and enemies are going to repudiate it, as it should be repudiated, at once.

I do not want to discuss the various social measures, because I am sure that many other speakers are much more qualified than I am to discuss those themes. I should like to concentrate on what is, to my mind, the single basic problem, that of inflation and stability. I must confess that I was a little shocked the other day, when we discussed this problem in conjunction with the proposed Industrial Relations Bill, at what the "double" noble Lord, the noble and learned Lord, Lord Hailsham, said. In his personal capacity, as Lord Hailsham, and not in his capacity as the Lord High Chancellor, he always reminds me of a D'Oyly Carte opera, not Iolanthe but rather The Mikado. He said that not a single word was spoken from these Benches about inflation. As I spent eight minutes, the whole of my shortest speech, on this question, I felt a little aggrieved at this obvious displeasure on his part to listen to me.

For over thirty years now we have been fighting inflation. When we say "fighting inflation" of course we do not mean "fighting inflation", because one can fight inflation in many ways. The whole civilised word—Communist, anti-Communist, non-committed—was, and is, engaged in making full growth, full employment and price stability compatible. I should greatly like to call the attention of the noble Earl and of his friends to this fact: that we are not fighting inflation. What we want to do is to make full employment compatible with price stability. The noble Earl has outlined the conventional case, if I may say so, of why the sort of measures which he proposes would work. May I, therefore, humbly put just a few thoughts before him? I know that he is not going to absorb them, but at any rate I dish them out.

The noble Earl and his friends, and especially the Prime Minister, strike me as very good first-year students from an institution which does not accept me as an economist, and whose chairman and representative is among us. It is a sort of first-year Benham course; that is to say, you have a sovereign consumer, who sovereignly surveys the whole field of retail trade and wholesale trade and industry, and by his commands absolutely imposes his will upon the poor competing merchants and manufacturers. In this imaginary world there is no cartel; there is no oligopoly; there is no group of people colluding with one another, and colluding to each other's benefit; but there is a sort of beehive activity. Some time between 1840 and 1860 some semblance of this marvellous world perhaps existed. I am not on that, I must admit, a good enough economic historian, to assert that categorically, but there is a slight semblance of possibility that it may have existed. However, it now no longer exists at all.

One of the most interesting facts of life is that both the Keynesian and the monetary people, all the globalists—the "globalonians" as they would say in America—agreed to regard this world as the real world in existence with which we have to deal. I submit to the noble Earl that this is not so. At the moment there is no such competitive force. The balancing force of the early capitalist economy based on true competition exists nowadays only in agriculture in certain countries. Because it exists in agriculture, it was taken out of the competitive process. Why is there the Common Agricultural Policy in the E.E.C.? It is because the agriculturists had to compete; therefore they could not stand up, and so they had to be regulated. So I would submit that the manufacturers, at the moment, are not in the least in this position. If there is a demand inflation, it is because it originates in the cost inflation. That is to say, we are in a situation in which the entrepreneur's interest is no longer in keeping wages down, because he has everything to lose by a strike and nothing to gain by putting up his price, since the very fact that he puts up his price creates the inflationary pressure, and therefore validates the price.

This is the great problem, and it has not been dealt with. I submit to your Lordships that it will not be dealt with by this Government because, whether the noble Earl is right in his assessment of the social implications, or whether my noble friend Lord Beswick is right in his assessment of the implications of the measures proposed, what is certain is that a very large portion of the working class in this country feel that these measures are evil. They will not be persuaded otherwise by the noble Earl, because, after all, they will have it first hand in their own experience.

I fear that this very fact that we have ruptured such consensus as there was, that we have appealed to the competitive forces, will make a settlement without a struggle impossible. If that settlement comes after a struggle, I humbly submit to your Lordships, it will be a very bad settlement indeed, because it will depend on unemployment. Full employment has been the most precious gift of a devastating war, because full employment is not merely a means to higher production, it is an end in itself. It makes a man; it creates decency between humans; it ends the master /servant relationship. It is a precious gift given to us by the war, and we must keep it. I fear that the Prime Minister has embarked on a road which, by slippery steps, will lead down to very large unemployment in this country. That is why I support the Resolution of the noble Lord, Lord Beswick.

4.36 p.m.

VISCOUNT AMORY

My Lords, I am sure that we have all enjoyed the speeches of the noble Lords, Lord Beswick, Lord Henley, and Lord Balogh. There have been occasions when I have thought that the noble Lord, Lord Balogh, had introduced an unnecessary note of acerbity in his speeches, but that was not true to-day. If I may say so, his arguments were beautifully expressed. We enjoyed his speech, and I am sure that it lost nothing in force because it was so agreeably expressed. I always try to put the best construction I can on the speeches of the noble Lord, Lord Balogh, and I own I usually end rather like the student who, when his tutor said to him, "Are you now clear?"said," Well, I am afraid I am not clear, but I do feel confused at a higher intellectual level ".

The noble Lord, Lord Beswick, is not here now, but he told us that he and his colleagues had been blown off their course. It must have been a very prolonged gale indeed, because they were blown into a state of economic stagnation; they were blown into discarding their national plan; they were blown into devaluation; they were blown into enormously higher taxation; and they were blown into the start of the biggest wages explosion that has yet been experienced.

It may be that we are in as serious an economic situation as any that we have been in since the war. For the moment, there is clearly no immediate risk on the balance-of-payments front, but let there be no doubt that unless we succeed in relieving the internal inflationary pressure on costs, our old enemy, the balance of payments, will before long be haunting us again. Unfortunately, economists who, I believe, have increasingly over the past decade been sorting out answers to demand inflation, seem far less sure, both in this country and others, as to the right solution for a cost push inflation such as we are suffering from now. The remedies that are right for one do not seem, in themselves, to be sufficient for the other. It is clear, therefore, that the Government have an extremely difficult task in deciding what actions should be taken in the short-term. We all want social justice, but we want it in conditions of social prosperity rather than in those of social misery.

I should like to say at the outset that I support entirely the courageous and, I believe, forward-looking economic aims and conceptions of the Government—a curtailment of the expansion of the cost of Government activities, a reduction in taxation on earnings, and an increasing concentration of subsidies and welfare payments on real need. I suppose that what is wrong, and what has been wrong for long, with our economy is a certain lethargy and too great a complacency in accepting other than first-rate performance. It may be true that ever since the war we have as a nation been giving ourselves, and taking, sedatives, when what we really needed were stimulants.

In passing, I should like to say that I also strongly support the main lines of the proposed industrial relations legislation. It looks as if it will provide a very fair framework within which sensible arrangements and agreements can be arrived at. I believe that if it is well explained and presented it will receive a very wide measure of public support. I cannot quite understand the policies of the Opposition, who seem to be against any rules whatever for industrial relations, but in favour of the most detailed statutory rules and regulations for every other aspect of the economy.

I believe that one of the best contributions to slowing down the rate of expansion of public expenditure would be if we could stop the rather silly rivalry which has grown up over recent decades between the Parties in power, to see who can carry on to the Statute Book the greatest number of new measures. I do not believe that that is the best measure of national welfare. There is one school of thought which believes that the way out is to treat the balance of payments as the flexible factor. Those who believe this would go for growth at any price; and if that price were further devaluation they would be prepared to accept that. About that, I would only offer this reminder: that one effect of an act of devaluation is not freedom from the necessity for internal restrictions, but, indeed, an accentuation of the need for them. Devaluation means more, not less, internal deflationary measures, and that is a lesson which many people—including, I think, many supporters of the last Government—discovered to their horror in 1967. An act of devaluation is, after all, a deliberate relative reduction of the national standard of living.

There seem to me to be three or four possible alternative policies. One is a really severe deflation, cutting back drastically on consumer spending power, credit and investment. If this were the only weapon, or the main weapon, I believe that it would involve a level of unemployment and waste of resources and a financial crisis that would indeed be counter-productive. I do not dissent at all from what the noble Lord, Lord Balogh, said, that full employment is an end in itself. It may be a slight oversimplification, but we all agree with the spirit of what he said. Full employment is a very precious thing indeed, and I hope that it will always remain one of our important objectives.

As one example of the difficulty of this out-and-out deflationary policy, a capital intensive company, even when faced with the risk of bankruptcy, may well choose as the lesser of two evils a big rise in wages and salaries, with a chance of passing on at any rate part of the cost, to the certainty of a crippling loss as a result of stopping a continuous-running plant. I think that that illustrates one of the difficulties of that course, which I do not personally favour.

The second alternative is a dash for expansion at any cost, and that would seem almost certain to lead to another balance-of-payments crisis and a further devaluation. A third policy would be a statutory incomes policy involving detailed control by the Government of wages and prices. In our debate last week. the noble Lord, Lord Brown, outlined a policy for controlling differentials—a very important aspect of the general problem. I am always interested in what Lord Brown says, because he speaks from first-hand experience of industry. But I am bound to say that I do not believe that the plan he outlined, if I understood it correctly, would be workable on a national scale. If he can convince me to the contrary I shall be delighted to have some conversations with him, but I feel that very strongly at present.

LORD BOOTHBY

My Lords, may I put one point to the noble Viscount? I think Mr. Marples agreed with him on that issue.

VISCOUNT AMORY

No, my Lords, I do not think so. I read only one sentence of what Mr. Marples said, but I would not commit him to agreeing. A temporary incomes freeze may or may not have a part to play in a critical situation, but experience so far has not been encouraging. In any case, it cannot of itself be a policy and I find it difficult to believe that the detailed fixing by Government of incomes and prices can in our complicated economy make any sense at all.

The fourth alternative is broadly the policy at present being pursued by the Government. If that is to succeed, as I hope and believe it will, I think the first requirement is that public opinion should be convinced, far more than it is at present in this country, that inflation is an unmitigated disaster, and that if it is allowed to continue it will wreck every hope and aspiration that every reasonable person has for the economic welfare of himself, of his family and of the nation. In Germany this, one gathers, is ingrained in public opinion as a result of bitter memories. But hitherto we in this country have suffered only inconveniences and not national disaster or destruction from inflation, and it will be a tragedy indeed if we have to learn the hard way, because it is surely unnecessary that we should have to do so.

Some, I know, say that we are getting dangerously close to the point where inflation takes hold and becomes self-generative. I agree with my noble friend the Leader of the House, that at present that is a panic view. We may be moving in that direction, but I am sure there is still time to pull back if we have the national will to do so. And that is the second requirement, that we should have the national will to avoid inflation. That means making short-term sacrifices to achieve long-term benefits; to escape from the present vicious sequence of rising money incomes, rising costs and rising prices. That the nation is capable of such an effort of will there is no doubt whatever. We have only to remember our war-time experiences.

I know the dangers of generalising from what a taxi driver says, but I thought one put his thoughts not badly to me the other day, when he said, "We know we cannot have all we want and we have to have some rules in the general interest. I myself cannot abide yellow parking lines and other abominable traffic restrictions, but I accept them because I know that to-day it would be chaos without them. Most people", he said, "are law-abiding and will accept rules if they can be persuaded of the need for them."He then went on to say that he wished they would teach his kids economics instead of poetry at school. We arrived at our destination at that critical point, so I did not have time to follow him into that interesting field of speculative thought. But if that taxi driver was right, the important question is: how as a nation can we be convinced of the right policies that the situation calls for? To whom will people really listen? I remember when I was a member of a Government which tried to use "the Three Wise Men"—and they really were technically at the top of the class. Nevertheless, the experiment failed, because in that case the trade unions would not accept or listen to their advice. Then we had the Prices and Incomes Board, and while I believe it did achieve something, it eventually lost most of its effectiveness because the late Government ran away from their own economic policies.

As regards the present Government's policies, they are, if I understand them aright, to continue to use monetary and fiscal measures as instruments of general control, but in negotiations over money incomes to limit their intervention to economic advice and attitudes consistent with such advice in cases where they are themselves the employer. My Lords, I myself own that I have grave doubts whether, in the very long term, completely unrestricted wage bargaining in existing conditions of national agreements and organisations which on both sides are getting bigger and bigger and more and more impersonal is going to prove feasible. Look at the way the General Motors strike has held back the economic recovery of a whole nation of over 200 million people. These huge-scale negotiations give too much power to the powerful organisation or to a small group who happen to hold in their grasp power over much larger numbers.

I believe the Government are quite right to invite those who ask for an incomes policy to spell out what they want; and my guess is that few are ready in present circumstances to do so. Most certainly I would not presume to do so at the present time. And unless and until this is done, then I am sure the Government are right to press on with their present policies. But I believe that, sooner or later, not only this country but all other developed industrial countries will have to devise income policies which will provide at least an accepted framework of what is economically feasible at the time, within which normal negotiations can be carried on.

My own guess is that such a policy will eventually have to contain within it a new conception of the principle of arbitration. Arbitration has of recent years failed—the Scamp example was a classic instance—and it has failed, in my opinion, because it has got itself hopelessly confused with conciliation. The two roles, arbitration and conciliation, are basically different. In the incomes field an essential prerequisite for the success of arbitration is that the arbitrator should carry out his task within a nationally accepted economic framework—and this brings us back to the need for the economic requirements of the time to be accepted by public opinion. Personally, I should have liked to see the Prices and Incomes Board kept on in a skeleton form (in the cupboard, if you like to put it that way) because I have a hunch that its experience could be used in different ways and is perhaps likely to be wanted at some time in the years ahead.

My Lords, when a ship is in danger a sensible crew does not proceed on the policy of "Every man for himself". As Clemenceau said: Liberty is the art of disciplining oneself so that one does not have to be disciplined by-others". It is a safe forecast that right policies will involve sacrifices in the short term for all of us. It is right that we should do what we can to see that burdens are fairly shared; and the lowest-paid workers should receive fair treatment, particularly those who have no powerful union to protect them. But, my Lords, what will be the effect on the poorer sections of the community if the Government's strategic policies succeed, as I hope and believe they will? If they do, then our country will be stronger, our standard of living will be more secure, employment will be more buoyant, the rate of growth faster, and the prospects for the least fortunate people in the country will be incomparably greater. Those, my Lords, are indeed aims for which it is worth while making sacrifices in the short term, and I hope that as a nation we are ready to do so.

4.56 p.m.

LORD HAMNETT

My Lords, on this the first occasion on which I address this House, I would ask for that indulgence which your Lordships customarily extend to maiden speakers. Unlike many of my noble friends who have recently made maiden speeches in your Lordships' House, I cannot even claim to have spoken in another place in this building. I thus ask forgiveness in advance for any solecisms I may commit in this plunge into the debating traditions of this House. I am very conscious of its great traditions and conventions, of so many of which I am still ignorant. I am aware, however, that by convention a maiden speech is expected to be non-controversial. My intervention, therefore, may I hope be regarded as non-controversial having regard to my own background and traditions, possibly in the sense that Humpty-Dumpty meant when he said: A word means exactly what I want it to mean—neither more nor less. On the question of tradition, it is also important that we build new, good traditions, as well as preserve valuable old ones. This should be true of the nation as well as of your Lordships' House. When, therefore, we are discussing the social services they should additionally be looked at in that light—of building great national traditions based on the importance of people rather than things. We should encourage a national philosophy which acknowledges that items on a balance sheet are not so important as humanistic endeavours to build up the health, welfare and happiness—morale, if one uses a more emotive word—for the sake of the nation, its people and its future.

All of us in this House, I think, acknowledge the difficult economic circumstances of the nation, and indeed the economic perils which confront it. What is not agreed, of course, is how these perils are to be confronted and, indeed, overcome. How they cannot be overcome, however, is by encouraging economic privilege and increasing economic non-privilege, or by withdrawing watch and ward over younger, older or weaker sections of the nation, to the ultimate detriment of the whole nation.

Many images have been painted in your Lordships' House this afternoon. May I paint a further one? In a mediœval besieged fortress, if one section took more than its share of water from the communal well or more than its share of food from the granary, that was the moment from which the psychological defeat of the fortress, and therefore its ultimate destruction, could be reckoned and ensured. In more up-to-date wars, the importance of this psycho-logical unity was recognised, and during them, particularly the last war, it was regarded, correctly, as just as important to plan for the aftermath, with intentions to carry these plans into effect, as it was physically to fight the war.

We in this nation are a beleaguered economic fortress: a very tight, embattled, economic fortress. In such circumstances, to give any impression of unfairness or inequality of contribution psychologically weakens the total efforts. For example, to take a case in point, to withdraw the supply of free milk to children over seven, or to make it more difficult for many families to obtain school meals by the expedient of raising the price, and simultaneously to cut the standard rate of income tax by 6d. is, apart from any question of the health of the nation and apart from inflationary economics, psychologically unsound in this economic fortress. It is far better to give all children free school milk, even if some parents could afford to pay, rather than that any child should go without. It is far better to give even free school meals than that any child, for any reason, should be without a meal.

Recently, the National Dairy Council commissioned Queen Elizabeth College of the University of London to carry out a nation-wide study into the feeding habits of school-children. This research was carried out by Dr. G. W. Lynch and Dr. S. de la Paz. An interim report on the results of the research was issued in September, 1970. It indicated that 18 per cent. of primary school children had been shown to be deficient in calcium; if school milk were withdrawn, this figure would jump to 34 per cent. In primary schools, the deficiency in riboflavine was 28 per cent.; if school milk were withdrawn this would jump to 39 per cent. In secondary schools, the calcium deficiency was 44 per cent. below the recommended allowance; one-third of a pint of milk a day would reduce this to 7 per cent. In secondary schools, the riboflavine deficiency was 67 per cent.; the reintroduction of school milk would cut this figure to 29 per cent. On the overall findings as a result of interviews with 4,382 children, the diet of only 32 per cent. was regarded as satisfactory, that of 57 per cent. as unsatisfactory and that of 11 per cent. as poor. What the Government's proposal means is an increase in those figures.

To mention another source, a National Union of Teachers' recent publication indicated that the price increase in school meals by 8d. next April, and by a further 5d., to 2s. l0d. in April, 1973, could mean that 500,000 children would not eat school meals when the increase takes effect. The reason: when meals went up by 6d., in 1968, the result was a 10 per cent. drop in the numbers of children eating them. When a 3d. increase was made last summer the D.E.S. estimated that this would result in a fall of 250,000 in the numbers taking school meals. What fall there would be with a further increase is a matter of extending the examples. The underlying psychology of these cuts is somewhat reminiscent of the two little girls, one the daughter of a poultry farmer, and the other her friend. The friend remarked to the poultry farmer's daughter, "My father keeps hens, too, but the difference is that your hens have to lay eggs; in the position of my father, our hens don't need to."

My Lords, this is not the atmosphere or the tradition that we ought to be building in this nation. I believe, as Ruskin wrote: There is no wealth but life, and that country is the richest which contains within itself the greatest number of happy, healthy and contented human beings. This, I am sure, is a sentiment that will be approved in all parts of your Lord-ships' House. This idea will not be achieved by such measures as the suggested cuts in the welfare services. It is therefore on this plea for a greater acceptance of the real meaning of wealth, the humanistic approach, that I conclude this first speech in your Lordships' House

5.3 p.m.

LORD PLATT

My Lords, I have the very great privilege on this occasion of congratulating the noble Lord, Lord Hamnett, on his maiden speech. It is, of course, the custom of our House that I should do so, but it happens to be one of the occasions when I could do so without having my tongue in my cheek in the slightest degree. I am quite sure that the noble Lord has convinced us all that he is a person who can hold our attention and who can talk sense, even if he has not obeyed absolutely strictly the custom of being completely non-controversial. But he has certainly obeyed the custom of being brief. His speech lasted seven minutes.

My Lords, I have read again and again the Statement on public spending and economic policy with a view to trying to understand its objectives. To some extent I think I have succeeded and to some extent I go a long way towards wishing that the cures of our economic ills could be found in the measures proposed. But I must say that in some respects it seems to me an ill-considered, rather hastily-put-together document, without sufficient consultation and consideration. There were parts of it which unquestionably, to use the words in the Motion which is being discussed this afternoon, would "widen the gap between rich and poor".

When the Statement was read before this House on October 27 I at once remarked on the possible grave effects of just lopping several million pounds off the grants to the Research Councils, and I should be prepared to discuss this subject in more detail if at some time it came up for detailed consideration. I was a little surprised that the noble Viscount, Lord Amory, who was for so many years the very greatly respected and splendid Chairman of the Medical Research Council, did not refer (as I am sure he would have felt he had to do a few years ago) to the fallacy of saving money in this sweeping way on the Research Councils. I also remarked on October 27 on the absurdity of trying to relate the cost of prescriptions to the cost of drugs, which can, so far as I can see, only slant patients towards taking the cheap and inefficient remedies, which for the most part they would be better off without, and avoiding the expensive antibiotics which can so easily shorten minor illnesses and thereby save a lot of money for the State and man-hours per day.

But to-day I want only to speak on the subject of school meals, and my one quarrel with the maiden speech to which we have just listened is that the noble Lord has taken out of my mouth so many things that I was going to say on this subject. But I shall deal with the matter from a slightly different aspect. I think that to raise the cost of school meals from Is. 9d. to 2s. l0d. is very doubtful economy and may lead to serious consequences, as the noble Lord, Lord Hamnett, has already told us. The first great virtue of school meals is that they are of direct benefit to the child; the money cannot be spent on cigarettes or bingo or anything else; it goes direct to the child. It ensures that the children get at least one adequate meal in the day. The second virtue, surely, is that it allows many mothers to go out to work who would otherwise have to be at home preparing the midday meal for the children, thereby "encouraging the effort to earn", if I may quote verbatim from the speech of the noble Earl.

But I want to point to the fallacy—I avoid the word "hypocrisy"—of trying to justify the increase in the price of school meals by taking sixpence off income tax. I will forbear from making too much of the fact that by the time this concession comes into law there will not be any sixpences to take off the income tax; but I assume that the Government are talking in terms of 2½p. The couple with two children of school age will pay approximately £23 for school meals when they go up to 2s. l0d. and, as the noble Lord, Lord Hamnett, said, many teachers reckon that as many as half a million schoolchildren may then go without school meals. To break even, you must have an income of £2.000 per annum. Noble Lords can work this out for themselves from the back page of these tables illustrating income tax payable. [Cmnd. 4517.] A married couple with two children not over 11 must have an income of £2,000 a year to break even. The married couple with only £1,500 a year lose £10 a year on the transaction; those with £1,200 a year lose £16; those with an income of £1,000 a year lose £20 on this transaction alone—that is, not taking into account increased prescription fees, dental fees and so forth. Whereas a couple with £2,500 will make a net gain of £32 and those with £5,000 a year will gain £84 on these two matters alone, the income tax and school meals.

Of course, as the noble Earl has pointed out, the very poor will be looked after, and we are all in favour of that. But it is not that income group of which I speak to-day. I am concerned with those many families with small incomes: respectable middle-class workers, tradesmen, skilled workers, semi-skilled workers and professional people like musicians and teachers, who are bringing up their children. I think it is time that their voices were heard, and I make a strong plea for them: that if they are to gain nothing at all from this policy, at least they should not be called on to contribute more to those richer than themselves.

5.11 p.m.

BARONESS LEEOF ASHERIDGE

My Lords, I hesitated a great deal before presuming to address you so soon after becoming a Member of your Lordships' House. In doing so to-day I have no intention of speaking over a very wide range of subjects. But I feel impelled to talk about a matter which is of very great importance, not only to me but also, I am quite sure, to every Member of this House. I should be very proud if, speaking as I am from the Opposition Benches, I could do Her Majesty's Government a service; and if in particular I could prevent the noble Viscount, Lord Eccles, who now has responsibility for the Arts, from being trapped into doing something which I believe he would have cause to regret and which all of us would regret.

I am very well aware that there are great experts on both sides of your Lordships' House who, in debates of this nature, have addressed themselves, and will continue to address themselves, to the basic issues of inflation, imports and exports. There are Members of your Lordships' House who can talk learnedly and with great experience about coal, steel, cotton, agriculture and the rest. But if we are considering our country's future, if we are considering our country's well-being, I hope we shall all agree that there are other factors besides those material factors.

My Lords, during the six years when I had the privilege of carrying some responsibility for the Arts I had all the time to contend with uninformed opinion which, apparently, thought that expenditure in the affairs of the writer, the scholar, the painter and the poet were a kind of superficial frippery which could be done without; that it was not a serious matter, but only a side issue. The noble Viscount, Lord Eccles, knows that I shall be delighted if he can continue to give priority to the Arts; indeed to improve the priorities given by the last Government. There is a very great deal to be done. We have only made a beginning. The tradition established in the last six years was that, to a very large extent the Arts would be exempt from the rougher hurly-burly of Party politics. I do not say I did not make sacrifices. But I had a job to do; and I did it with the encouragement of my Prime Minister and my colleagues, and I tried to do it in the spirit in which I thought that it should be done.

As you know, my Lords, there are barbarians in all Parties and there are civilised people in all Parties. The artist is vulnerable; he has not a great pressure lobby. But he is becoming less vulnerable because more and more, as we seek to broaden the basis of our society, as we seek to create a situation in which not just some children from some schools but all children from all schools are given a civilised education, we are creating a very important pressure lobby for the Arts. I was delighted to read Lord Eccles's statement of faith, Politics and the Quality of Life. I do not agree with it all—that would be going too far; but I certainly was delighted that he made this important point: Unlike many of their parents before them, children have been taught since the war to have confidence in their own creative powers. The noble Viscount went on: It is well to remember that one can hardly do more damage to a boy or girl than to begin, and then suddenly to stop, the adventure of finding themselves. In the new world in which we are living school is, or ought to be, no longer just a classroom, or contained within four walls. School is the totality of the environment. It embraces the art gallery and the library. More and more in this mass-media age the child seeks information, and receives entertainment and inspiration from all sources. Your Lord-ships may already have guessed why I have taken the liberty of addressing you to-day.

I do not expect a new, incoming Government, or indeed any Government, to be so persuaded by the arguments of their opponents as to say, "Let us change places, chaps; you are right and we are wrong". But I think it is a mark of an aware Government if they make a decision and then, after the fullest consideration of all its implications, think it wise to change it. I am wondering whether those who made the decision to impose admission charges to our museums and galleries really considered what the effect is going to be. I know that there are many who may consider this a rather trivial point, but it is fundamental. This decision is a flag in the wind. All of us pay lip service to the concept of "one nation", and we all know that civilisations seemingly much more solidly based than our own have vanished. This is not an original sentiment on my part. Lord Clark put it well in his series on civilisation. It is possible to have a civilisation which seems solid and indestructible; but if too few people believe in it, or are advantaged by it, that civilisation can vanish overnight. Therefore, my Lords, when we talk about the quality of life, as we all do, I do not consider it an irrelevant issue in a debate on the economy. I am deeply grieved about the decision the Government have made and beg them to look again at what they have done about admission charges to museums and galleries.

If they change their minds, they will not be the first Government who have done so, even about museums and galleries. Surely that is the purpose of debate. Surely we cannot make children pay an admission charge. I am assuming that school children will be exempt, and I hope that this exemption will apply to the children of the rich as well as to the children of the poor, and that there will be no means test imposed on our children. We shall have to exempt students—but which students? Art students only, or all students? Again I hope that it will be all students, irrespective of the incomes of their parents. We know how many people look forward to having more leisure when they reach the cool of the evening, and a greater opportunity to enjoy much that was denied them in their more strenuous years. Surely we are not going to make it impossible for our old-age pensioners to visit our museums and galleries.

And what is it all about? We are not talking in terms of £100 million or £1,000 million: the sum we have heard mentioned is only £1 million. I should be most grateful for any information on this matter from the noble Lord who is going to reply, or from any other noble Lord at any stage in the debate. And who are we going to exempt, over and above children and students? What about apprentices? Many of them have very small earnings, and they are our future craftsmen. Surely we want to encourage them in every way to have a civilised outlook on life. Then there are the least fortunate, those who leave school at 15 and go into the "dead end" jobs. Of course they have money in their pockets; but do we want to put obstacles in their way, instead of bringing them into a world where they would have first-rate instead of the third-rate, or even worse?

We are left with middle-class families for whom it might be a small matter to pay a charge of 2s., 3s. or 4s. The noble Viscount, Lord Eccles, put himself exactly in my position when he said: I have been lucky. I have been able to do my thinking in the British Museum where everything, books, manuscripts, works of art, and objects of historical interest, combine to teach one that at no period and in no place has man ever been content to live by bread alone. I agree with that and I, too, am one of the fortunate ones. Museums and galleries were always open to me. I had a highly civilised father and I had the Carnegie Trust in my pocket. The whole of Dunfermline was mine. Edinburgh was mine. I had my years of leisure as a student at Edinburgh University. Like the noble Viscount, Lord Eccles, I was one of the lucky ones. But have not those of us who are the lucky ones a responsibility to those who have not shared our good fortune? Should we not therefore be concerned to look again at the relatively small sum involved? It is going to cause much trouble for the noble Viscount, Lord Eccles. I want to save him trouble. I am his best friend.

The noble Viscount knows that when he was appointed I congratulated him on being given the best job in the Government—a job in which one can heal, do new things, try to raise the general standard of our people. Frankly, I do not want to see the Government exposed to the consequences which will follow from students if this suggestion goes through. This is not a money-maker, but a money loser. I have talked about students in the sense of those who are registered. But what about the 22 to 30-year olds; the young hopefuls who are earning their daily bread in some job or another but still have their dreams, the dreams that they are going to be great painters or sculptors one day? What is going to happen to them? Are they going to have to pay every time they go in? It is not like going to a theatre. Everyone seriously interested in seeing the treasures of the British Museum or any other museum or gallery needs free access in order to go again and again. There has been talk about what other countries do. Surely there ought to be fields in which we lead, not follow. This is one of them.

There has been a large and encouraging correspondence going on in all the papers, and I have been avidly filing letters, particularly the letters in favour of my view, from directors and trustees—those who know most about it, who are most dismayed at the effect of proposed charges. The Times, the Manchester Guardian and Daily Telegraph have done very well. I do not usually go to the Daily Express for arguments to support my views, but I certainly could not express what I feel better than is done by Barbara Griggs in her column, which she ends by saying: Until now, nobody in this country has been too poor to look at masterpieces of art. Let's not abandon such a great tradition without at least examining the alternatives. There are alternatives. I have discussed them. I do not want to embarrass the noble Viscount, Lord Eccles, too often, but we were in an honourable conspiracy for quite a bit of time because we both cared about our museums and art galleries. I know that he was as indignant as I was at many of the old-fashioned handicaps from which they suffer. The British Museum has schemes for raising money which I fully endorse. One is the sale of lithographs, postcards and pictures. We ought to bring all our museums up to the standards of the freest and the best. Most certainly there are other ways in which we can raise money.

Again, let us remember that over the last two years our income from the tourist trade has exceeded the expenditure of people who go abroad for holidays. The figures are remarkable. The Board of Trade returns for September of this year tell us that for 1969 £479 million was earned by the tourist trade, an increase of £100 million over the previous year. I am not saying, of course, that all tourists come here to visit our museums and galleries, but we know that 64 per cent. visit at least one museum, which is rather more than the 23 per cent. who go to the opera or concerts. But, of course, operas and concerts cost a lot of money.

People come to see Buckingham Palace, the Tower of London and our beautiful country, but we have had these for a long time. What are the new attractions? In recent years, at a time when we are all perplexed by great economic anxieties, we have been able to hold our heads high in the world as a centre of education and the Arts. Do not let us imagine that all the Americans who come to this country for a holiday are American millionaires. To most of them it is the trip of a lifetime. I think it is a gracious thing, whether it is for our own people or for our guests from overseas, to have all our treasures open for them. And we have to remember that many of the people who have made bequests to our museums and galleries have made those bequests because the galleries are free.

I hope you will forgive me, my Lords, if I have trespassed too much on your time, but I feel strongly on this matter, and it concerns all of us here, both sides of the House, Cross-Benches as well. I cannot resume my seat without saying what a debt of gratitude I owe to Members of every part of your Lordships' House for the help and encouragement they gave me for six years. It would have been impossible for me to have done a job which in a sense was a new kind of job if it had not been for this help. There was for instance, the noble Viscount, Lord Chandos. We were at opposite poles in another place, yet no one could have been more dedicated to the establishment of the National Theatre. There is the noble Earl, Lord Drogheda, always campaigning for his Covent Garden. I must not go on because there are so many, but I see the noble Lord, Lord Robbins, who gave me such great encouragement. I hope I am not compromising the Cross-Benches! Indeed, looking round this House, whose Members have so much experience of service to our museums and galleries, I am hopeful that we can combine to reverse the Government's decision. I do not even beiieve that any substantial money is going to be won by the Chancellor of the Exchequer, but if I am wrong there I hope that saving £1 million in such a pathetic way will not commend itself to noble Lords in any part of this House.

5.30 p.m.

LORD THORNEYCROFT

My Lords, it is always an honour to address your Lordships' House, and it is a particular pleasure to me to follow the noble Baroness, Lady Lee of Asheridge, who has just made her maiden speech. If I may say so, I almost greet her as an old friend, because for a few years we sat on opposite sides in the other place, where she represented a constituency which included my own home in Staffordshire. I remember hearing her make many a speech; and, if she will permit me to say so, I recall as a young man in the House of Commons listening to her husband, who, I suppose, on anybody's account, was one of the finest debaters that this nation has ever produced. The noble Baroness made a speech to-day which particularly delighted me. I agree with her that artists are most vulnerable people. I hope that the words which she spoke with great eloquence will carry weight with my noble friend Lord Eccles. He has quite a bit of competition, if one may use such a word in regard to the noble Baroness, to keep pace with the reputation which she established when she was in charge of that particular part of the Government's responsibilities. I therefore congratulate the noble Baroness; I compliment her on the eloquence of her speech, and I express, as I am sure your Lord-ships would wish, the hope that we may hear her in the same vein and on other subjects on many future occasions.

This has been a debate, even so far, in which a number of notable speeches have been made. I particularly enjoyed the speech of the noble Lord, Lord Beswick; and I enjoyed the contribution from the Liberal Benches—though I am sorry that the noble Lord, Lord Henley, at the end left himself in the position of opposing the Miss World Contest and supporting the Opposition. I thought that the logic of his arguments deserved a nobler conclusion than that. I was particularly delighted to hear my old friend Lord Amory, about whose speech I should like to make a few comments in the course of my own.

I have reached only one conclusion so far; that is, that really there is no conceivable course that could be urged by anybody which is not open to the most formidable attack. In a way, this sets the pattern of this, as of all debates on economic subjects. It is so fatally easy to tear holes in any proposition that is put forward by one's own opponents, and to gloss over the manifest weaknesses of one's own case, so that the public, and even I myself, I must admit, get a little bit confused as to where the truth lies. I think that a debate might become rather more coherent to the public if we defined, if it were possible, the problem which we were seeking to solve. I do not know whether I have got this right—I really am rather humble about defining problems of economics. I may have got it quite wrong; indeed, I hope that I have got it wrong; but I think I would put it like this. There are some people, at any rate, in this country who think that we are in the middle of a cost-inflation, exemplified by a series of wage demands of almost unexampled size, many of them being met at a rate quite out of touch with any reality of increased production that is actually taking place, and upon a scale which can be paid only in depreciated currency—currency depreciating already (and this is another way of putting inflation) inside this country, which, if pursued too far or too long will end probably in a further devaluation of the pound.

It may be that the problem is not as grave as that. I have not all the information available to the Government. Only Governments and men wiser than myself can say how grave or urgent the problem is. I can only say that to me it looks as though that may be the problem, and I feel that there are an increasing number of people in this country who are beginning, in some way or other, to share that view. If it be the problem, it seems to me that finding the solution of that problem is the first priority of Government. To my mind, that takes priority over anything that was said at the time of the General Election. I do not think the public are ever particularly concerned that everybody does exactly what he says in an Election; in fact, I think they sometimes prefer that people do not do what they say. So I am not very much concerned about that. Finding a solution to inflation, to my mind, takes priority over any statement that has ever been made or any position that has been taken up. It is far more important than the political dogmas on either side. All those things, in a sense, are rather irrelevant to the problem of the moment.

I do not mean that I am against discussions of political principles. I think it right that they should take place. I value the debate in this House to-day, and I want to say a few words about political principles, because I agree with the noble Lord, Lord Beswick, in saying that, unless these things are put out with some clarity on either side, you do not really get any clear concept of the background against which decisions are being taken. I certainly would value a really definitive, incisive, and even passionate, statement of a Socialist position. After all, there is, or was, a great thought behind the classless society: the maximum of equality in property and income; a world in which the necessities of life are provided by the State, and in which wages are less and less relevant. All these things I have heard argued all my life. But they are not argued very much to-day. They are thought of a little as typical of, say, the early kibbutzim, or an early Christian society. They are not applied very much to-day.

Equally, I value the statement of another philosophy: and I think that if Mr. Powell did not exist it would be most unfortunate if we did not invent him, because it is essential that someone should put the case for the market mechanism. Whatever Lord Balogh may say about these things, thank heaven! there is somebody who can put with clarity, and in a manner which men can understand, that there is a method in which materials, products, and even money, can be made available by the market mechanisms, and at prices which vary with supply and demand.

Between these extreme positions, if you like, sit the two Front Benches, glancing, if I remember anything about Front Benches, a little more nervously behind them than at one another. I do not say that in any unkind spirit; I have sat there myself, and I know exactly what the feelings are. They have the difficulty that, one after another, they bear the responsibility for governing Great Britain. Looking at it from the outside, as I do, I get rather bored if I may say so to the noble Lord, Lord Shackleton, with the claims with regard to who thought of what first. What we want to know is what we are going to do now about the position, and this is what the country wants to know, too. There are sharp differences between the Front Benches to-day, sharper than I have known for some time. This is probably healthy, but it is something we ought to recognise.

The last Labour Government, I suppose, largely abandoned the Socialist approach—the attempt at equality. I do not blame them for it; they found themselves in some difficulty keeping in touch with the Socialist philosophies of their Party, but they tended to move further and further away from them. They were, in a sense, in a dilemma because in the attempt to pursue their policies they were finding greater and greater poverty at the bottom, and less and less incentive at the top, with a measure of taxation in the middle which was proving quite intolerable to the wage-earners themselves. This was an almost impossible position for a Government to find themselves in.

Now we have a new Government, and they have adopted a new policy; and no one can complain about that because it is the policy they said they would adopt. They have set out to try to relieve the poverty at the bottom and to provide rather more incentive at the top. Noble Lords could complain that the Government have not done it well enough or cleverly enough, or that some of the measures do not operate in the way they should. Nevertheless, if you look at that packet of measures there is no doubt that it represents a really important change of strategy. This is an important event in the political life of this country.

For my part, I am wholeheartedly behind Her Majesty's Government in this change of course. I believe it to be right; I believe that in time it will pay considerable dividends, but it will probably take quite a bit of time to work. The question is: "What do we do now?" As I understand it, the policy of the Government is to refuse to rely in any way upon an incomes policy as it has previously been defined. In a sense everybody has an incomes policy, but the Government's policy is to refuse to follow any Prices and Incomes Board as previously defined. They urge restraint on the public and the private sector; they are seeking to support the poorest, and to give some rewards to those who climb the ladder. They say they hope that, against this background, we shall come through our present difficulties—and I do, too. I am perhaps a little less certain than some. It is one matter to steer the right course. They are steering the right course, but if I may use a nautical metaphor to the noble Earl, Lord Jellicoe, I think the duty of a captain is to do rather more than steer the right course; he has to be prepared to encounter some of the hurricanes that may meet him on the way. I do not want him to go on saying that he will not batten down the hatches. I am not saying that he has to do it now, but I would rather that he left himself and his colleagues with a reasonable amount of room to manœuvre in a situation which may turn out to be rather worse than many of us suspect at this moment, although naturally we all hope that it will not happen.

The Government have had a reverse with the council workers. I do not know how important they regarded the dispute with the council workers. I do not think any of us want to overplay this matter. But if the Government were really keen to stop an increase being granted, there were some measures that were open to them. They give an enormous quantity of grant aid to local authorities and, therefore, they have rather more control, in my view, over what local authorities do than is sometimes supposed. There is one certain way to disaster with a dispute of that kind and that is to call in someone who is called a "veteran industrial) troubleshooter". I hope that this will be avoided in the future. I do not think it was the Government who called him in, but if they did it was a disaster.

EARL JELLICOE

My Lords, I am sorry to interrupt my noble friend, but I should like to assure him that he was not called in by Her Majesty's Government.

LORDTHORNEYCROFT

My Lords, I was going to say that I was sure that he was not called in by the Government. If ever they feel like calling him in, I hope that they will send for me, because although I do not know the answers, at least I know how to write that kind of report. Give me a situation in which the employers have made an inflationary offer of 45s., and the workers are claiming 55s., and I will provide the answer just as well as any veteran industrial troubleshooter. I do not need a computer to do it; I can do it right away, and I know paragraph by paragraph the words to write about, the inevitability of inflation, and the Government, having willed the end, having to will the means. I can do that in my sleep. There is no need to call in any veteran industrial troubleshooter. The noble Lord, Lord Shepherd, is locking very worried—

LORD SHEPHERD

My Lords, I am rather worried knowing the noble Lord's reputation for disasters. Would he not agree that the Scamp Report recommended an increase of 1 per cent. over what the Government thought was a tolerable and fair award? If that is the case, I do not understand how the noble Lord can say that 1 per cent. from 14 per cent. to 15 per cent., is a disaster, unless it is a disaster in the noble Lord's mind.

LORD THORNEYCROFT

Yes, my Lords; but I do not want to talk about disaster. I would only say to the noble Lord that I do not want to overplay this, and I am going to put this in context in a moment. The noble Lord's inability to understand the position in a sense illustrates the difficulty. I have seen this happen over and over again; the position arises where everybody has made an inflationary offer, and the Government are standing behind an inflationary policy before they know it. They then split the difference between that and an even more inflationary demand, and it is regarded as a brilliant piece of work. All I am saying is that it is not a brilliant piece of work. I say send for me, because I can do the job better, quicker and for no trouble at all.

Having said that about the council workers' dispute, do not let us exaggerate the matter. The importance is not that a number of council workers have an extra 50s. a week. The question is: "Where do we go from there?" There are other claims in the pipeline. The workers in the National Health Service are claiming up to 30 per cent. The teachers are claiming 37 per cent. There are railwaymen variously claiming from 25 per cent. to claims which are "substantial". There are a whole group of others marked "substantial". If their trade union leaders know their jobs, I doubt whether their claims are very much below the ones which I have quoted.

One has to consider what is the right approach to the situation in those terms. There is something which in business is called the "cash flow", which businessmen have to think about very seriously, and generally did so at least once a week. Now they have to think about it rather more often, and rather more seriously. Broadly, it is a determination as to whether the necessary cash is available to pay the wages or to do what you want to do in the immediate or medium term future. It applies to my mind to the art of government, particularly in the public sector. There is only one way in which the Government can control wage increases granted in the public sector, and that is by refusing to finance wage increases which they do not want. There is no other way of doing it. It is very rough; it is very unpopular—I have indeed had to do it myself. It means that you have to go to Sir Henry Johnson (or whoever it is) and the Railways Board and say to them, "My friends, no more money will be voted for these wage increases. You can keep the same number of men at the same wages, or you can reduce the number of men and pay a modest increase in wages. But you are not going to get the cash from the taxpayer and the Government for the increase."This is really talking about control in the public sector.

I feel bound to say to Her Majesty's Government (I am still dealing with the public sector) that if they wish to control wages in the public sector they must recognise that the cash flow to these great public organisations is something that matters. One sees many references in the papers as to whether Mr. John Davies, the right honourable gentleman who presides over the great Department of Industry, is going to accommodate himself or be acclimatised to the House of Commons. I am sure he will. He is a very able man, and one for whom I have great admiration. But I am far less interested in whether he acclimatises himself to the House of Commons than in whether he brings to the discussions in the Cabinet some understanding of realities that occur inside a business. In business the cash flow must be considered, and if this was really brought home in the Cabinet discussions I think we should have a much better chance of success in controlling the public sector.

What about monetary policy? I hope that the noble Lord, Lord Robbins, is going to participate in this debate tomorrow—I am glad to see him signify assent. I had rather hoped that he would participate before I spoke, because he has guided me for so long and I set such store by his comments on many aspects of the economic scene. However, I shall listen to him to-morrow, although I am rather nervous that he may answer me. What I say about the monetary policy applies rather more to the private sector than to the public sector. Although I have practised and suffered under it, I would ask people to consider carefully how far it can be pressed to-day. The strong use of monetary policy has of course a very immediate effect upon how businesses manage to finance their stock and work-in-progress. It has a very great effect upon what they may be going to do about their investment plans. But, as the noble Viscount, Lord Amory, observed, its effect on wages can be a little more remote and will depend on a whole complex of factors, including how capital intensive or labour intensive a particular industry may be. In many cases it may not be a very strong weapon with which to contain wage increases in the private sector, or they may be contained only after we have inflicted upon the private sector a considerable punishment of no advantage to ourselves.

The Motion refers to "an acceptable prices and incomes policy". There may be such a thing as a prices and incomes policy. There is certainly no such thing as an acceptable prices and incomes policy. So far as prices are concerned, if there was a policy the logical step at the moment would be to put them up. I suppose we are allowed to say that. This is undoubtedly what would happen if we were logical. At the present moment, if we are going to generate the necessary cash to maintain business in this country there are many prices that are too low and have not yet reflected the cost increases which either are arriving or are at this moment in the pipeline. It is very difficult to conceive a prices and incomes policy.

My Lords, I should like to summarise the situation in this way. We may be in a crisis, or facing a problem (I do not like the word "crisis"), more serious than seems yet to be realised. I do not say that at this moment there ought to be a wages freeze, but I am bound to say that I would rather nobody ruled it out of court altogether yet; I would rather watch a little and see what happens on these next few claims that are being put forward. Because I believe that if they started to follow the pattern of the council workers, and we began to see claim after claim settled at a rate which was out of all relation to what we are producing in this country, a number of unconventional actions by Her Majesty's Government might be called for. So far as the public sector is concerned, I would ask the noble Lord to weigh carefully what I have said about the cash supply to publicly financed sectors of the economy. There is really no other way of operating any restraint in wages in that sector. So far as monetary policy is concerned, I hope that we shall not wade through high-scale unemployment or numerous bankruptcies in an attempt to arrive at our conclusion in that way. Monetary policy will be used, but there is a limit to the extent to which it can be used with real effect.

With regard to prices, let us rely on competition; and if we think at any stage—and I do not say that that stage has yet been reached—that competition here is insufficient, I would far rather see price control operated through higher imports and, if necessary, by lower tariffs. There are weapons well within the range of a free economy which go outside the compulsory scales mentioned in some quarters. If we have a monetary policy, again I would much rather see it operated through interest rates than through methods of physical control or compulsion on bankers to choose, on an artificial basis, between one customer and another.

These are my views, my Lords. I do not say that they are right, and I do not ask the Government to answer them, because on balance I am not sure that it helps to press Government to give definitive answers on complex and difficult matters in a scene which cannot in the nature of things be absolutely clear to anyone. I know that, whatever brave words are spoken at the Dispatch Box, very hard work must be going on in Whitehall at this moment on a fall-back position and alternative lines of defence, and I believe that the words we speak in this House are listened to in those quarters, as I know they are listened to by my right honourable friend. I do not ask for an answer; I ask that my right honourable friend should ponder these thoughts from someone who has seen something of this problem and knows something of the difficulty.

6.0 p.m.

LORD AVEBURY

My Lords, it is customary for a maiden speaker to beg the indulgence of your Lordships for any shortcomings. In my case this indulgence is all the more necessary because, whereas most of the speakers who address your Lordships' House for the first time are already very experienced at speaking elsewhere, in my case this is only the third speech I have ever made in my life. When I was a new boy at school I was taught not to speak unless I had something to contribute. Whereas by some standards I am not exactly a new boy in your Lordships' House, my only previous contribution to its work was in 1936, when I sat on a Select Committee. We spent three weeks rubber-stamping decisions which had already been taken elsewhere as to who should suffer the misfortune of losing his front garden, or even his entire home, to make space for the extension of the Central Line eastwards from Liverpool Street. Your Lordships will doubtless be happy to know that I do not intend to take three weeks over my present contribution.

I know that it is a convention of your Lordships' House that a maiden speech should not be controversial, but the fact remains that wherever more than one opinion exists on a subject, any expression of opinion is bound to be considered controversial by holders of the other points of view, and I cannot believe, my Lords, that just because I sit on these Cross Benches your Lordships would wish me also to sit on the fence. My Lords, while I think there is unquestionable merit in the first phrase of the proposed Resolution, the remainder of it is such a hotchpotch of doctrinaire non sequiturs that I cannot support the Resolution as a whole. I am inescapably reminded of the old saying that a camel is a horse designed by a committee.

This Resolution looks to me like a shelter for sacred cows designed by a committee, and I commiserate with the noble Lord, Lord Beswick, on having been elected assistant cowman. I cannot escape the feeling that the chief cowman, the noble Lord, Lord Shackleton, having given further consideration to the wording of the Resolution, is now ashamed at having placed his name to it, and that it is for this reason that he delegated the job of proposing it.

The chief sacred cow here seems to reside in two phrases which, though separated in the text, are evidently intended to be read together; to wit, that the proposed measures—and I quote— will widen the gap between rich and poor … and generally will impede Britain's progress towards a socially just society. Now this premise is based on what is, to my mind, one of the most dangerous fallacies of modern times—the idea that equality and social justice are synonymous. This, my Lords, just is not true. I make no apology for quoting George Orwell, who spoke nothing but the truth when he wrote: All the animals are equal, but some are more equal than others. Where humanity is concerned there is no such thing as absolute equality. It is patently just as ridiculous to say that all men are born equal as to say that all women are born beautiful. All men are not even born with equal physiques or equal abilities, and it goes without saying that the master craftsman is worthy of greater reward than either the apprentice he is instructing or the labourer who carries his tools. Yet for decades these differentials have been steadily eroded as a deliberate matter of policy and in the unholy name of this false god called "Equality".

By now the process has reached the stage where the social injustice which it has created is far worse than that it was designed to alleviate, and I applaud the Chancellor of the Exchequer for taking a small step—however small—towards correcting this trend. But I do not believe that the present measures go nearly far enough. One of the side effects of this policy of "clobbering" the rich and the highly paid has been the almost total destruction of initiative and incentive. In an ideal society, of course, the general good of the society would be sufficient incentive for everybody to do his best at all times. But, my Lords, we live in a society composed of humans, with all their failings, and it is a sad fact that humans are selfish and that most of them require some tangible benefit to themselves personally before they can be persuaded to produce greater effort. In this respect the present measures, slightly favouring, as they do, those who are wealthier or whose efforts make them wealthier, will certainly not impede Britain's progress towards economic soundness, as suggested by the Resolution.

I do not accept the cooing noises currently being made by the Government in an attempt to assure us that there is no crisis, and I do not believe that the measures go far enough to do more than slow down the disastrous trend of recent years. It may be argued that to do more would be inflationary: but inflation is a relative thing. Although individuals like myself on more or less fixed incomes suffer as a result of inflation, the country as a whole is unaffected so long as the inflation is balanced by increased productivity and does not vary widely from that which is taking place elsewhere. But our great problem is that, whereas inflation is running wild, our productivity is virtually stationary. It seems to be generally agreed that two things are needed to increase our productivity—leadership and investment. Leadership can come only from the top, and it is my belief that ways must be found of ensuring that the top people retain a larger proportion of their earnings, whether these earnings arise from their employment or from their investments. Quite apart from the economic interest of the country, social justice demands this. These people, my Lords, are the new oppressed minority in this nation.

I think it is generally agreed that apart from the greater efforts required from individuals, the most serious shortcoming of recent years has been a lack of investment in new plant, or the modernisation of existing plant. It is perhaps arguable whether this has been a deliberate plank of Government policy or whether it has merely followed automatically from those policies. Whatever the reasons, however, this lack of investment remains a fact—and it is something which needs to be drastically changed before any great and permanent increase in production can be expected. There are only four sources from which investment money can come: from foreigners who have the money which Britons lack—a pretty forlorn hope in the present climate; from direct investment by Government, which was the policy of the last Administration—all too often misdirected and proved in general to be a failure; from individual savings—virtually non-existent under policies which are deliberately designed to prevent any individual from keeping sufficient of his own money to make any appreciable savings possible, and from business profits reinvested in modernisation and expansion.

It is to the last of these that I would especially like to draw the attention of the Government. The reduction of 2½ per cent. in corporation tax has been hailed as a step towards making more money available for reinvestment in those businesses in which the money was earned—the efficient ones. If that is so—and I believe it to be true—then it follows that corporation tax is of itself a barrier to the increased productivity which we need, and in the present circumstances I can see no justification for retaining it at all. If a reduction of 2½ per cent. is a good thing, then surely its total abolition must be an even better thing.

My Lords, despite the cooing noises I have mentioned, there is a crisis at the present time and drastic measures are needed to prevent its getting totally out of hand. Either inflation must be stopped or production must be increased. Nobody seems to have any idea how to stop inflation within the framework of a free society, so what I am suggesting as an alternative is a means of increasing production to match it.

One of the chief arguments against the line of action I have proposed will undoubtedly be that there is no acceptable alternative way in which the Exchequer could make up the loss of revenue which would result from the abolition of corporation tax. I suggest that this line of thought is not entirely valid. Whether we like it or not, this nation is at war—not a shooting war as in 1914 or 1939, but every bit as much a struggle for survival. In neither of the great shooting wars did we try to—or expect to—finance our armoury out of current revenue, and it is my belief that one of the first sacred cows which should be sacrificed is the idea that there is some inherent virtue in a Budget surplus. If we lose this war there soon will not be much point in worrying about Budgets at all. The noble Lord, Lord Beswick, referred to a means test as being a very bad thing. I should think every single one of us has to undergo a means test every year when we fill in our tax return, and what is so wrong about the recipients of the money which we provide having to undergo a means test when we, the donors of that money, also have to undergo a means test?

6.10 p.m.

LORD SHINWELL

My Lords, it is a distinction to follow the noble Lord. Lord Avebury. He bears an honoured name. His illustrious ancestor—correct me if I am wrong—was responsible for perhaps the most constructive achievement in the last 100 years. He opened the door to leisure which had never previously been experienced. The noble Lord's maiden speech was modest, and exhibited much charm; but I regret (I hope he will not mind my saying this) that the maiden's garments were a little old-fashioned. However, I am sure I represent the opinion of your Lordships' House in saying that we shall be delighted to receive further contributions from the noble Lord.

I observed that the noble Lord dislikes the Censure Motion which is to be voted on some time to-morrow. That is regrettable, but I am not altogether surprised, in view of the speech which we had to listen to—or at any rate, thought it desirable to listen to—which emerged last night from the Guildhall, and which has been repeated almost word for word this afternoon by the noble Earl, Lord Jellicoe. The language was familiar—the clichés; the platitudes, and all the assertions; and, above all, "pie in the sky". This policy is not for months; it is for years. What is going to happen in the course of years has not yet been clarified. If we are to rely upon experience—and I must say that mine happens to be almost coincident with the history of the century—then there is little hope for the future. I understand that the noble Earl is advising his colleagues on the Government Benches not to vote for the Censure Motion. That affords me great relief. Sometimes I am at logger-heads with my own side; sometimes I detect errors of judgment, an occasional erratic line of policy. But when I realise that the noble Lords opposite are going to vote against the Censure Motion, I am delighted to support it.

What have we heard this afternoon? There is one feature of this afternoon's debate that I have enjoyed immensely—fewer speeches read and more of the cut-and-thrust of debate. That is what we want. We had the remarkable speech from the noble Lord, Lord Thorneycroft. He had some notes in the offing—we are accustomed to that sort of thing; but for the most part he spoke "off the cuff". But I detected at the end that he was not convinced about the propriety or the Tightness of his own ideas. That is a great pity. When all is said and done, one ought to clarify one's own mind before seeking to clarify the minds of others, and in that respect the noble Lord, Lord Thorneycroft, completely failed.

He did in one observation make it quite clear that he was going to support the Government. That is a change for him. I know him; he and I were colleagues in the other place. He came years after me—that was not his fault, but was purely fortuitous. I can recall occasions, indeed historic occasions, which have now become the subject of memoirs by distinguished politicians and ex-premiers, which disclose controversies, difficulties, turbulence, amounting indeed to resignations from a Conservative Government. I am not quite clear what the noble Lord himself is driving at. What is it he wants? What does he regard as the objective? He talked about cash flow and all the rest of it.

Here I digress for a moment to extend congratulations in her absence—but I do not complain about that—to my noble friend Lady Lee of Asheridge, particularly on her references to the need for museums and art galleries in the United Kingdom. I was myself almost exclusively educated in the Kelvin Grove Art Gallery of Glasgow, where I studied, through glass cases, palœontology, osteology, biology and zoology, and was ambitious to want to become a scientist, instead of which I became a politician.

But I have one distinction; I am no economist. They clutter up the place; and, like members of the legal profession (I hope members of the legal profession who are present in your Lordships' House will not mind my saying this), differ so frequently and are so often at loggerheads on points of law and points of fact that they are hardly worth troubling with. What we want is a little common sense, and with characteristic modesty I venture to offer it to your Lordships' House.

Take this matter which seemed to occupy almost the whole of the speech of the noble Earl, Lord Jellicoe—as indeed it formed a significant part of the speech of the Prime Minister at the Guildhall last night. What I am about to say I say more in sorrow than in anger, both about the Prime Minister and the noble Earl. About the Prime Minister: he has a lot to learn—quite a lot to learn. In a sense, he has been pitchforked into this position. He did not expect it to happen; it was purely accidential; although to a large extent his emergence as Prime Minister was attributable to his declaration, profound declaration, about which there can be no misunderstanding, that if he happened to become Prime Minister he—his Government—would reduce prices. They have done the very opposite. That is a good start.

What did the noble Earl say on this subject? It was a remarkable exposition. He said, "Our anxiety is to help those on the lowest social and on the lowest economic level. So we are going to subsidise them: £150 a year: free milk, free this, free that"—in other words, State charity. How does that square with the philosophical conception of a united nation, of "one nation"? If this is to be the future of this country we are, first, to have, "for ever and ever, Amen", those on the highest level. I am not complaining about this. I do not complain about those who are fortunate—far from it!—either because of their skill and quality, or because of some hereditary position; not at all. We are going to have one sector of society on the peak, on the mountain tops, well clothed, well housed, well educated and secure, not seeking Government aid or charity. We are going to have another sector, amounting perhaps to a few millions in number, on the lowest level, relying on State aid. That is the picture that was presented this afternoon, and that is the essential feature of the Government's policy. Well, I reject it. There is a way out.

This brings me to the subject that causes a great deal of anxiety in the public mind. It is troubling the Government, as indeed it disturbed the previous Administration. It is this question of industrial relations. How are we to deal with this problem? Incidentally, I would observe that even in recent disputes which have led to a settlement, where the Government have refused to intervene of their own volition having made the declaration of "no intervention in industry disputes", the norm has been permitted to rise to a higher extent than was ever intended. The result is that the workers realise, whether it be right or wrong—and for the moment I do not express an opinion about the rights or wrongs of this matter—that there is no prospect of an improvement in their wage conditions unless they fight for it. That may be regarded as distasteful, even disastrous. How is it to be dealt with?

I propose to present a constructive point of view. It is easy enough to lambast the Government; it is like falling off a log. Particularly is it easy to lam-bast a Government of this character. It has been done by nearly all the Press commentators, anyhow. Therefore I shall not waste much time about that. I think that public opinion has come to the conclusion that they made a mistake at the last Election. But let that pass. How are we going to escape from this situation, particularly in relation to the matter of industrial relations, which concerns inflation, about which there can be no denial?

I venture to record a piece of history. Because of the Official Secrets Act I am unable to produce the Cabinet papers; I rely on my memory, which I hope produces no violation of the Official Secrets Act. But, inasmuch as those who have been responsible for recent memoirs have let their hair down, perhaps I may be permitted some modest opportunity of retailing what happened several years ago, during the period of the Attlee Government. In 1946, there was much tribulation and there were many official strikes, particularly among the miners. I know all about that! People were demanding more coal, and they thought I should go down and produce it. I had to remind them that I was incapable of digging for coal; that I was relying upon others, but the others would not respond. All the points in their charter—a five-day week and all the rest of it—were agreed, yet they would not respond favourably.

In the circumstances, I ventured to submit a policy the title of which was A National Wage Policy. What did it provide for? What did it embody? It suggested that there should be created an Economic Council, consisting of industrialists of repute, trade union leaders, accountants, even economists—I did not mind them. There were even to be members of the legal profession, some from the Judicial Bench. It was suggested that they themselves should be responsible for coming to a decision, which would not be final—it was a matter for the Government—but which would lead to a recommendation to the Government and provide for a minimum wage. I mention this because just recently there was a glimmer of common sense in the Government when Mr. Carr mentioned that the Government might have to consider a minimum wage. I was delighted to read that.

This Economic Council would probe into all the facts, would come to a decision as to what was a just and reasonable wage which would support a decent standard of living, and would recommend accordingly. At the same time, they would consider the matter of prices and price levels, and would make a recommendation on the stabilisation of prices—not over the whole field, because that is impossible or was regarded as impracticable, but in relation to food prices, subject to the difficulties that are associated with the import of foodstuffs, and coal, fuel, electricity, gas and the like.

This was submitted to the Government, but they rejected it. Why did they reject it? It was on the advice of two Members of the Government, both trade union leaders. Why did they oppose it? It was because they argued as they have so often argued, and also quite recently during the period of the Labour Government, that if the State intervenes in a matter of this kind it will impede trade union organisation, and would interfere with the principle of collective bargaining.

I offer another piece of history. The proposal that was made and rejected in 1946 was re-submitted in 1949, when Sir Stafford Cripps was Chancellor of the Exchequer, and again it was rejected. If the minimum wage policy had been adopted at that time we would have saved years and years of industrial strife.

What about differentials? I agree that differentials should not require legislation. Differentials could be argued between employers and trade unions. Matters relating to overtime, work that requires exceptional skill, work that is called dangerous work—experienced sometimes at the docks and primarily in the mining industry or in quarrying—should be negotiated. But there should be a definite decision about a minimum wage which would provide a reasonable standard of living.

Now I come to the illustration that I promised to give. Way back in the year 1909 the late Winston Churchill was President of the Board of Trade in the Liberal Government, and he introduced, on behalf of that Government, the Trade Boards Bill, which became an Act of Parliament in that year. The purpose of that Bill was to provide reasonable rates of pay for workers in what were then described as the "sweated trades": clothing, furniture, and a number of others where the conditions were appalling. It may surprise your Lordships to hear that when the Board was created Winston Churchill actually appointed me as the representative of the Scottish clothing workers, because I was then employed in the Scottish Co-operative Wholesale works in Glasgow. So I became a member of that Board. Instead of the minimum wage which was enacted in legislation—I repeat, enacted in legislation; there was nothing voluntary about it—impeding trade union organisation, or interfering in collective bargaining, it gave an impetus to trade union organisation. If it had not been for other controversies—the Taff Vale judgment and the Osborne judgment, with which I am sure the noble and learned Lord the Lord Chancellor is familiar (I am not sure that he was born at that time, but he must have read about them), largely inspired by the employers of the time, the trade unions would not have encountered any real difficulty.

I use these illustrations in order to fortify my contention that if we are to escape from this menace, it is not a matter of an incomes policy but a question of whether we can establish a reasonable wage which is not based on charity; a wage without any fringe benefits and which gives to a man or woman engaged in employment a feeling, if not of equality—and I do not want to enter into the philsophical argument of whether you can have absolute equality, because this is not the occasion for it—at any rate of security, and a sense of belonging to a community which understands his needs.

Why was there trouble in the last Labour Administration about industrial relations and legislation? The facts have never been fully exposed. The majority of Labour Members in the other place during the last few years were not opposed to an incomes policy, and were not opposed to industrial relations being associated with legislation, but they did object, and strongly, to the penal clauses. It was the penal clauses that were rejected by the majority of members of the Parliamentary Party. There is no question of penal clauses if we operate a minimum wage policy; none whatever. Indeed, I understand that the industrial relations policy of the present Government does not contain or embody any penal clauses, and there may be certain advantages in the rest of the proposals in the proposed legislation.

There is one other matter I want to refer to briefly. I want to ask for an assurance from the Government, which I hope they will give if not to-night at any rate to-morrow before the close of the debate. I am very concerned, as indeed most of us are, about the state of the shipbuilding and shipping industries. As a result of a decision by a Conservative Government when Mr. Marples was Minister of Transport, credits were provided for the shipbuilding industry. To begin with, the credit was £75 million, and then under the Shipbuilding Industry Bill, which became an Act of Parliament, the Shipbuilding Industry Board was created, and loans have been provided for the shipbuilding industry varying from £200 million to £400 million. Before the Election the previous Administration had taken a decision to increase the loan credit for the shipbuilding industry to £600 million. Unfortunately, we were not able to carry it through, but I understand the present Administration are giving the matter consideration.

I do not want to argue this matter at any length. I do not want to speak too long, but I want to say to the noble Lord, and to noble Lords on both sides of the House, that unless the shipbuilding industry of this country can be afforded credits at a low rate of interest, I doubt whether, in future years, it will survive. It is menaced by the most appalling competition from Japan, West Germany and some of the Scandinavian countries. In recent years it has managed to weather the storm, but there are dangers facing the industry. I very rarely like to quote, but I put in my pocket this morning an extract from the Journal of Commerce. If your Lordships will permit me, in order to fortify my request for an assurance on behalf of the shipbuilding industry—and I also should like to mention the shipping industry, because they are closely related—I will read an extract from it.

This was a speech by Mr. Douglas Souter, Chairman and Joint Managing Director of the Sheaf Steam Shipping Company of Newcastle, after a ship had been launched. Incidentally, there was recently a launch on Tees-side of a tanker, the largest ship built in the North-East, and I happened to be present at the launch. The ship was launched by the Duchess of Kent, and I was invited and glad to be there. The remarkable fact about that shipyard is that three years ago it was doomed for closure, but as a result of the Government loan credit scheme it was able to carry on, and only a few weeks ago launched the largest ship ever launched on Tees-side or in the North-East.

What does Mr. Souter say? A report of the occasion says: Pointing out that the 'Sheaf Field'"— that was the ship that was launched recently— was being built with the help of cheap loan facilities and a 20 per cent. investment grant, Mr. Souter said such facilities had been of considerable help in the field of international competition. I only want to add one further extract. He said that he wants this continued, even if it means the abolition of the investment grants, which meant cash on the nail which was very desirable for the shipbuilding industry. Even if it meant increased depreciation allowance, or something of the kind, or additional credits or credits in some form, it is desirable that such a scheme should be promoted. He says that otherwise: It will mean that British owners will lose many opportunities which will not recur. I consider that its discontinuance"— he means the investment grants— will lead to a slowing down in the re-equipment of the British shipbuilding industry, to the detriment of British shipbuilders. When the effects of this become apparent I hope the Government will think again. I am asking them to think again. I have offered a constructive suggestion to your Lordships' House. It is no use just dismissing it; sooner or later we shall come to that. After all, as the noble Lord, Lord Thorneycroft, rightly said, we have not yet defined what inflation means. What is the alternative to inflation? Deflation and unemployment, and charity, and at the end of it complete disaster. That is no policy for any Government, least of all for a Conservative Government that prides itself on love of our country and a great future, as indeed so do we all. I have not criticised ruthlessly, as one might do in the circumstances; I merely ask them to think again. And if they do it will benefit not only the workers of the country but the whole nation.

6.39 p.m.

LORD BOOTHBY

My Lords, may I assure the noble Lord, Lord Shinwell, that I too can speak without notes? I can speak "off the cuff". I have tried and succeeded, but there is an objection and a penalty; when I speak "off the cuff" I cannot speak for less than an hour. Therefore I hope, and I am sure, that your Lordships will forgive me if I have a few notes in my hand. I will try not to read them out, but they will keep me reasonably brief.

Shortly before the Summer Recess, I made a speech to your Lordships in which I besought the Government to bring forward a policy designed primarily to achieve an expasion of economic growth and productivity, which is, in the long run and in the final analysis, the only way to beat a cost-push inflation. This of course requires a much higher rate of investment in industry; and I therefore drew attention, as I always do, to the weight of taxation bearing upon industry—particularly corporation profits tax—to the shortage of liquidity, both domestic and international; and to the present high level of interest rates. It was an optimistic speech; it was a joyous speech. I enjoyed it, and I think your Lordships enjoyed it. I really thought that the Government meant to do it. Alas! this package deal is the reverse of the policy that I then advocated. I do not despair. I think the Government will come round to it again. But I cannot say that I am not disappointed.

Before I come to the economic issues, I want to deal quite briefly with the welfare proposals, particularly those relating to milk. Here let me at once declare a personal interest. In the summer of 1940, I was Parliamentary Secretary to the Ministry of Food, and my Minister, Lord Woolton, asked me to take a hand in drafting a national milk scheme, which I subsequently had the honour and privilege of announcing and commending to the House of Commons. It was a simple scheme. It guaranteed a pint of milk a day to every expectant and nursing mother, and every child under school age, at the price of 2d.; and, in the case of families with incomes below a certain level, it was free. Subsequently, as part of Lord Woolton's general nutrition policy, the scheme was expanded to cover children at school and school meals. No one can say that the position of this country in 1940 was not more desperate than it is to-day. The Germans were at our throats, poised for invasion. The Battle of Britain had not yet begun. But we did it with acclamation in another place, and with the warm approval of your Lordships.

Now what? It is proposed that most children under five shall not get welfare milk, and that they shall then get it at school for only two years until they are seven. Dairy farmers estimate that they will lose 100 million gallons a year, at a cost of £13 million. On top of this, the price of school meals is to be sharply increased. On balance, meals at home or sandwich meals are no substitute for school meals, as every educational and nutritional authority, as well as the noble Baroness, Lady Summerskill, will agree. I say that these proposals cut the ground from the whole nutrition policy laid down during the war. The National Dairy Council has said that the Government's proposals on school and welfare milk are an extremely retrograde step, which will result in nearly 3 million school children being deprived of regular school milk, and a great reduction in the consumption of milk by nursing mothers and young children. What is beyond dispute is that, as a result of these proposals, a great deal less milk is going to be drunk by a great many more children in this country. Nobody can tell me that that will be a good thing for the rising generation. Lord Woolton must be turning in his grave.

Still on welfare, I must regret that family allowances have not been raised to bring us more into line with the countries of Western Europe. On June 1, the Prime Minister wrote to the Child Poverty Action Group a letter in which he said: We accept that, as Mr. Macleod said in his Budget speech, the only way of tackling poverty in the short term is to increase family allowances and operate the claw-back principle. What Mr. Macleod had said was that the Government—that was the Labour Government—should in the Budget have raised family allowances by 10s. a child. The Family Income Supplements Bill is no answer to this. The lower-middle income families will be the hardest hit because they will get the worst of both worlds. They will not earn enough to get significant benefit from the cut in income tax, but they will earn too much to be exempt from the increased charges or to qualify for family income supplement. I could give figures (I worked them out in my room), but I will spare your Lordships. They are easily available.

Next, I object most strongly to the savage increase in dentistry charges. No one goes to the dentist for fun. Far too many people stay away until they are in pain. These new charges will encourage them to stay away. They mean, as a leading London dentist has said, the end of dentistry and back to butchery. Finally. I regret the closing down, at a trivial saving to the Exchequer, of the Consumer Council, because free markets cannot function properly unless the consumer is in possession of at least some reliable information. I use this argument and say these words not in anger, but with a sigh of regret. I am sorry that in large measure the great nutritional work done upon which I think the present standard of health of this country is largely based, and which was inaugurated by Lord Woolton should have been to this degree dismantled. I simply say that I regret it.

I now turn from the welfare to the economic front, and first to the international side I have said to your Lord-ships more than once that the world is suffering from a grave shortage of international liquidity. In fact, the liquid reserves of the Free World are now about one-third of what they were at the time of the Bretton Woods Agreement. Why? Because, in Enoch Powell's immortal phrase, the so-called international monetary system is based on the "systemisation" of a lie—the lie that the relative values of gold and of respective paper and credit currencies are constant. My Lords, they are not.

I was therefore disappointed when the Chancellor of the Exchequer, at Copenhagen, set his face firmly against any move in the direction of greater flexibility in exchange rates. If he sticks to the present rigidity, he is faced in the long run, it seems to me, with three alternatives: unacceptable inflation, unacceptable deflation, or a further devaluation of the pound—enforced and overnight, which is the very worst way of doing it. For my part I would let the pound float, with the support of an Exchange Equalisation Fund. It worked well enough for us in the 1930s. One day we may get a real European Monetary Union, with a single currency which itself would have to float against the dollar. But that time is not yet; and meanwhile, to let the pound float is one of the basic answers to our problem.

Secondly, I come to the domestic side. Here we are suffering, by common consent, from industrial stagnation caused, again, by a shortage of liquidity; and by galloping inflation, as the noble Lord, Lord Shinwell, and others have pointed out. It seems to me that this package deal makes no serious attempt to deal with either. In the final analysis, as the noble Earl, Lord Jellicoe, said, economic growth is the only answer to both, because, as the Sunday Times said recently, persistent waste of resources, whether human or capital, is a specific evil, and is absolutely intolerable.

What does this package deal do to promote economic growth? My Lords, very little. The cut in corporation profits tax is derisory. As the noble Lord, Lord Shinwell, pointed out, it will not offset the change from investment grants to depreciation allowances. Here, I should like to congratulate the noble Lord, Lord Avebury, most sincerely, not only upon a most admirable maiden speech but upon his attack on the corporation profits tax as a tax. He said—and I agree with him—that it should be abolished altogether. There is no reason to suppose that a 6d. reduction in income tax across the board will have the slightest effect on productivity or economic growth. The higher-paid executives—a number of whom, I am happy to say, occupy places in your Lordships' House—do not need £1,000 off their income tax; and, to do them justice, do not want it and have never asked for it. The inheritors of great wealth do not need it, either. The lower-middle income families, again, will not benefit. It would have been far better to abolish income tax altogether on all incomes of less than £20 a week. That would not have cost very much more, and would have given a real incentive to the workers to go flat out and work harder.

My Lords, on a Tuesday the Chancellor announced his package deal and Government disengagement from industry. Two days later the renewed restriction of bank credit was announced. Then came £40 million for Rolls Royce and the offer of another £10 million to Liverpool docks. It simply does not add up, this story of disengagement followed in a few days by an offer of over £40 million to, admittedly, a major industrial corporation in this country. We still have a costly and inflationary surplus on budget account. We still have high interest rates, which are themselves inflationary because the cost of money is itself the basic factor in costs—and that is what we have got to get into our heads.

In fact, my Lords, I agree with Professor John Vaizey when he suggested, in a brilliant article in the Sunday Telegraph the other day, that the abandonment of cheap money may have been the main, ultimate cause of inflation throughout the world. I think there is a great deal to be said for that. To get interest rates down may well require action at international level; but there is no sign that the Government intend to take any action at all.

In fact, as both Professor Vaizey and Sir Ralph Hawtrey have pointed out, high interest rates are also inflationary because they reflect people's views of the future. Ten per cent. cost on money shows that most people are anticipating a 6 per cent. rise in prices. Fifteen per cent. on money shows that they expect prices to rise by at least 10 per cent. It therefore has no deterrent effect on traders' borrowing.

Finally, the Government have turned their face against an incomes policy. I think this is a tragedy. The Governor of the Bank of England has repeatedly made it clear that he regards an incomes policy as essential to support monetary policy. The Government intend, apparently, to leave the employers, whether public or private, to fight it out on their own with the trade unions, and to sit on the sidelines. This, as recent events have proved, is a prescription for inflation. How can you settle the thorny problem of wage and salary differentials, as raised this afternoon by the noble Lord, Lord Shinwell, by the crude methods of power bargaining, without a sound "guiding light" policy to control the total level of increases? The noble Lord, Lord Thorneycroft, said that the cash flow must be brought under control in both the public and the private sectors. I agree with him entirely. It is absolutely essential, and the Government should set an example. But the question is how to do it, and before I sit down in a few minutes' time I shall come to that, because I agree entirely with what the noble Lord, Lord Shinwell, has said on this question.

Meanwhile, the Government have abolished the Prices and Incomes Board and the Industrial Reorganisation Corporation, and the Governor of the Bank of England has said: We shall feel the lack of some organisation that can keep a general eye on British industry, and help it to use its resources for the benefit of us all". Upon this I have only one comment to make. For a Government who have at their disposal the advice and the counsel of men of the calibre of Sir Joseph Lockwood, Mr. Charles Villiers, Lord Kearton, Mr. Michael Clapham, Lord Stokes and Sir Maurice Bridgeman, to throw it all into the dustbin is, to say the least of it, an act of remarkable complacency. They go. Who takes their-place? Nobody and nothing.

The Prime Minister has asked, reasonably, what in fact the advocates of a combined monetary, fiscal and incomes policy propose. My Lords, I will give an answer—my answer. The noble Lord, Lord Thorneycroft, hesitated; but I have got a very clear answer. I say, first, a reduction of interest rates. Second, a substantial cut—1 will not go so far as to say its abolition, but a substantial cut—in corporation profits tax and capital gains tax, as a stimulus to the investment of risk capital. Both these taxes are vicious. Both were rejected by the last Royal Commission on the Taxation of Profits and Incomes, presided over by Lord Radcliffe. Judging by the performance of the market over the last two years the total abolition of the capital gains tax would not cost the Revenue a single penny. Third—and here I come to what the noble Lord, Lord Shinwell, said—a direct agreement between the two sides of industry and the Government on a prices and incomes policy, particularly with regard to wage differentials, which can achieve some kind of stability. This involves Government intervention over the whole field—and this brings me to my conclusion, my Lords.

What is the basic philosophy that now animates the new Government, and underlies this package deal? Is it, as it would appear, and as appeared to some journals of the Press, a return to the Whig and Liberal doctrines of laissez-faire which prevailed before the First World War? Do they want to go back to Asquith? My Lords, I started my political career as one of Mr. Baldwin's private secretaries. I well remember a journey I took with him to Edinburgh in the year 1923, where he was going to make a speech. He looked out of the carriage window at the smokeless towns and said: "There is only one hope for industry in this country—protection, in the widest sense of that term". Then he added: "The main ambition of my life is to prevent the class war from becoming a reality"—and in this, my Lords, to a remarkable extent, he succeeded.

Justice has seldom been done to this very remarkable man. Nor is the extent to which he shaped the philosophy of the modern Party Party in the present-day world generally realised. Few of your Lordships are old enough to remember his speech on the Trade Disputes Bill. Fewer still can have heard it, though I have no doubt that the noble Lord, Lord Shinwell, did. I heard it; and no one who heard it can ever forget it. It was not the speech of a man who believed in laissez-faire. I think that the speech of the Secretary for Trade and Industry in another place the other day (whether intentional or not, I do not know) was the direct antithesis of Baldwin's speech on the Trade Disputes Bill. Acute sensitivity was replaced by an almost brutal insensitivity. It was not, I think, deliberately intended; but in fact it was there. The Baldwin economic philosophy was carried on, after the war, by Mr. Macmillan and Mr. Butler. Now, with all the talk of "lame ducks" and "disengagement" by the Government, it seems to have been snuffed out.

My Lords, it will not work. It is impossible to put the clock back half-a-century. For better or worse, the Government, industrial management, the trade unions and the City of London are enmeshed in the modern world, and you cannot undo that mesh, ever, however hard you try. The Government occupy the driver's seat, and they cannot take their hands off the steering wheel as they now seem anxious to do. If they do, freedom as they define it can mean only inflation and a crash, because they simply do not know where they are going. The great industrial corporations and the trade unions are Estates of the Realm and should be so treated. They should be brought within the framework of the law (I agree with that on industrial relations) but with statutory rights of their own.

After the last war Sir Winston Churchill went so far as to suggest an economic Parliament. In a speech to the summer school in management studies at the University of St. Andrews, eleven years ago, I said I thought this had to be rejected because in a true democracy there could be only one sovereign Parliament to which all other Estates must be subjected in certain cardinal respects. But I went on to say there should certainly be—and here I echo the words of Lord Shinwell—a National Economic Council consisting of representatives of the Government, managers and trade unions, to give a purposive strategic direction to our economic policy and to make plans for the growth of the national economy, including a minimum wage policy, on the basis of adequate statistical information for submission to Parliament. That is what I mean by an incomes and prices policy, and that is what I should like to see done now—and I believe it may not be too late—because laissez-faire is not going to be the answer. And if the Government do not realise it now, they very soon will.

My Lords, with the best will in the world—and I have a lot of good will—I cannot support the Government in the Division Lobby to-morrow night. But I find myself on familiar ground. I have been making this kind of speech, on and off—more on than off—for just on half a century. No one has ever paid the faintest attention; but I remain an invincible optimist. As I said, I have spoken not in anger but in sorrow. And I still hope that one day before I die somebody in some Government will listen to what I have to say. All is not yet lost.

7.3 p.m.

BARONESS SUMMERSKILL

My Lords, may I, in the first place, congratulate my noble friend Lady Lee of Asheridge upon the excellent maiden contribution she made to your Lordships' House. I am quite sure that what she said must find an echo in the heart and mind of the noble Viscount, Lord Eccles. I would say to the noble Lord, Lord Boothby, in case he wants to go—

LORD BOOTHBY

I do not.

BARONESS SUMMERSKILL

—that it is curious that I should follow him to-day, as I followed him in the Ministry of Food; and so I shall hope shortly to dot his i's and cross his t's. I will say this. In certain quarters, this House is criticised because of its high average age as compared with another place. But, of course, in debates of this kind I think this becomes a tremendous advantage. In fact, I have found in all debates on social affairs that noble Lords on both sides of the House are receptive—they may not agree but they are receptive—to speeches which criticise, very often, certain measures calculated to effect great social changes. The proposals of the Government will do just that. They will effect changes and I feel that noble Lords here whose lives have spanned most of the century are in a position to evaluate just what may happen if these measures are followed up.

I feel that it is only in order to keep faith with a few of their supporters that the Government are to cut 6d. off income tax. I contend that this will prove to be a high price for the country to pay in terms of welfare and health, and I was delighted to-day (without in the first place consulting the noble Lord, Lord Platt) to see such an eminent physician rise in his place on the Cross Benches to criticise the Government proposals on the question of drugs. I was delighted, too, to hear the noble Lord, Lord Boothby, with his knowledge of the Ministry of Food (and I also gained much there from the expert advisers we had on nutrition), realising that the Government are about to introduce legislation which will prove to be disastrous.

My Lords, just think of the cost. Some £88 million will come from stopping cheap welfare milk and increasing the charges for prescriptions, and for dental and ophthalmic services. And it is no use noble Lords' telling us how many poor people will still be exempt; there will be hundreds and thousands of families who will suffer as a result of these charges. A further £20 million will be obtained from increased charges for school meals and by ending the supply of free milk to schoolchildren over seven years of age. Milk is going to be given only up to the age of seven. We all know the vulnerable condition of small children in the overcrowded schools. It seems, although the Chancellor was not explicit about this, that he proposed to relate prescription charges to the cost pet item. The Government cannot say to us: "Well, you started charges on prescriptions". I want to point out to them that this is the first time financial considerations will influence the type of treatment that some patients will obtain under the Health Service. The noble Lord, Lord Platt, gave details of this.

Now, when a doctor is prescribing, if the patient says, "Don't make it too expensive, doctor; I can't get the prescription", the doctor, if perhaps he feels that he must give a placebo, will write down something that the patient can afford. To charge sick people by the item on the prescription is reactionary indeed. Prescription charges were never the answer to over-prescribing, which I admit is widespread. I have always said that it should be the doctor who should take the initiative in the matter by not prescribing expensive proprietary drugs when there is an equally effective equivalent in the National Formulary. Every doctor has this on his desk; but some are really—and I speak strongly—too lazy to consult it because it is so easy to remember the name of a proprietary drug.

The retrograde suggestion that a patient should pay according to the value of a proprietary drug prescribed, perhaps unnecessarily, by an uncooperative doctor will drive some patients from obtaining early treatment or, indeed, from visiting a doctor altogether. Every doctor in the country knows which member of the family will be the chief sufferer—and let no-one say, "This is the noble Lady's feminism". It will be the wife and mother who, despite rising prices, strives to balance the family budget, the woman who has a limited amount to spend over the week and who is always looking for somewhere to economise. The Minister of Agriculture is fond of addressing housewives and of telling them to "shop around" if they are not satisfied with prices. This is a piece of advice which indicates that the Minister is entirely ignorant of the lives of busy women, whether the poor woman in the home or the better-off woman doing a job outside the home. Where do the Government suggest that a woman with a pain, a lump or a discharge should "shop around" if she is to be charged heavily for a prescription? This is a practical question. The doctor has a monopoly of her. Moreover, my Lords, will she be prepared to obey instructions to return for further essential consultation if she is over-charged on the first visit?

Now we come to school meals. The noble Lord, Lord Boothby, dwelt on the importance of milk. I find it difficult to believe that there was not one member of the adequately fed Cabinet who knew that the regular supply of milk and school meals represents the difference between adequate nutrition and malnutrition; that is the point. That is just the difference to these children. The reason why so many children are half a head taller than their parents, and a head taller than their grandparents, is that they have been better fed. These changes have taken place slowly and gradually during the century. We shall not see any dramatic change because of this legislation, but we shall see a very slow change which will be recognised 25 years hence; just as we can look back over the century and think of the tiny, undernourished children with their crooked legs. It is not the genes that have made the change, it is the great improvement that there has been in the feeding.

Education itself can prove wasteful if it is directed to an inattentive, under-nourished child. This fact was established when the school medical inspectorate and the Provision of Meals Act were introduced. Then, and only then, did we see the beginning of a great change in the physique of schoolchildren. Are the Government prepared to ignore the very important contributions which have been made on this subject, particularly the survey by Dr. Benn Lynch, of the Social Nutritional Research Department of Queen Elizabeth College? It was not just a crank who made a survey. Dr. Lynch was helped by 21 education authorities and his Report was made just before the Government announced their proposals. He recommended that free school milk should be reintroduced immediately for children in secondary as well as primary schools. In his Report, The Feeding Habits of Schoolchildren, he urged the Government not to raise the price of school meals.

My Lords, the overall findings really cannot be refuted. Dr. Lynch found that the diet of only 32 per cent. could be regarded as satisfactory; 57 per cent. of the children had unsatisfactory diets and those of 11 per cent. were poor. Now we are told—we were told to-day—that it is proposed that the very poorest will be relieved. But there is no certainty that by fixing a wage below which no charges will be made, neglect and ignorance may be by-passed. As the noble Lord, Lord Platt, said, if a man spends too much on tobacco, beer or bingo—the noble Lord did not mention bingo—

LORD PLATT

Yes, my Lords, I said "bingo". I was thinking of the women as well as the men.

BARONESS SUMMERSKILL

My Lords, I will accept that. If the family spends too much on these things will the Government say, "That is bad luck, but the child must suffer"? Of course not. The noble Lord, Lord Boothby, said that we cannot go back fifty years. The Government have accepted the responsibility that children should be well cared for, well fed and well educated. Why now are they rejecting that responsibility? On the question of the limit below which there will be no charge, but above which it is considered that the family can afford to pay, if all parents in the higher income groups can be relied on to make adequate social provision for their children why do we provide free education? Why not say that now the time has come when those above a certain income group must pay for the education of their children? We provide free education because we realise that it is in the interest of the country that the workers should be educated, and nobody suggests there should be a means test. But they are going to suggest this miserable "means test", whereby the income of the family will be examined carefully by a host of officials—because this "means test" is going to be of a most complex character. My Lords, I believe that to save £20 million on school meals and milk and risk the physical deterioration of children is ruthless cheese-paring.

The Government are assuming that all the beneficiaries of this complex scheme will receive everything to which they are entitled. Are they unaware that poverty often heightens sensitivity? It has been difficult—and the noble Lord, Lord Drumalbyn, knows it as well as I do—to persuade old-age pensioners to apply for supplementary benefits, because they regard them as a form of State relief. Successive Ministers of National Insurance have done everything possible to persuade people to take supplementary reliefs, but they have been regarded as a form of State relief and people have been reluctant to apply for them.

These new "supplements", let us call them, will not be received by some people through ignorance; but others, including schoolchildren, will be reluctant to reveal that they belong to a category who are in need of State assistance. What does the Plowden Report say about this? It says that, despite the availability of school dinners for the very poor child, in poor areas fewer children have school dinners. My Lords, curiously enough, a child is always conscious of the relative poverty of its family and is reluctant to have this emphasised every day in school, where it is often general knowledge who are the recipients of free dinners. I agree that some compassionate head teachers try to keep it secret, but in many schools nobody worries, and the child knows it is going to have a free dinner while its friends are in a position to pay. Again, my Lords, are the Government prepared to ignore the recent warning by the National Union of Teachers? They tell us that when the cost of school dinners goes up to 2s. l0d. half a million children will stop taking them, no doubt for the reasons that I have given.

I wish to say something about the "lame duck" speech. I feel that the Secretary of State for Trade and Industry summed up the Government's philosophy in his "lame duck" speech of November 4 when he said: The vast majority lives and thrives in a bracing climate and not in a soft, sodden morass of subsidised incompetence."—[OFFICIAL REPORT, Commons, 4/11/70. col. 1212.] No doubt he will be supremely indifferent to anything which is said from these Benches, but I would remind him that it was Winston Churchill who said: There is no better investment than putting milk into babies. For my part, I should have thought that in the long term the country would benefit more by giving a subsidy to feeding children than by giving a subsidy to the Rolls Royce Company.

The Family Income Supplements Scheme, which has such a high sounding name, is to provide an extra £3 a week, devised ostensibly to help the poorest. But at the same time it will subsidise the incompetent employer who fails to pay adequate wages. This is a question I should like to have answered: could we know whether employers, who are bogged in this soft, sodden morass, are to have this substantial subsidy tacked on to their profits? No doubt the international financiers applaud this scheme, but the international financiers, like the Cabinet when deciding on milk for children, are far removed from the problems of the ordinary people of the country, which they consider much below their notice. I ask the Government at this stage to change their minds, and if they wish to save this money, to save it from some other source and not come to the children, the women and the housewives of the country, to those who are mute and inarticulate, to find this miserably small sum.

7.22 p.m.

VISCOUNT WATKINSON

My Lords, I hope that the noble Baroness will excuse me if I do not follow directly the argument which she put forward in her sincere speech. I think she will probably agree with me that, whatever the arguments about how society's money is disposed of, the nation has to earn it before it can spend it. That is why, quite properly, the question of industry has crept into many speeches this afternoon; and it seems to me, having listened to most of them, that the nub of the problem, so far as industry and economic management are concerned, lies in this difficult area of prices and wages and their relation to inflation.

What are the facts? Businessmen under the previous Government went through an interesting experience. I am certain that the previous Government were sincere in their view that a legally enacted prices and wages policy was the right solution for our economic problems. They said so in the White Paper In Place of Strife. This was set in the context of a tight over-all State control of the economy. Prices, I must say, were much more tightly controlled than wages; but there was an attempt to control those, the controls being executed either by direct Government action or by the exploitation of agencies such as the P.I.B., I.R.C. and all the rest.

I do not think that the noble Lord, Lord Beswick, who I thought made a good and straightforward speech, as he always does, would deny that businessmen did their best to support this policy. They did their best often to the detriment of their profits, as we see from statements made to-day by many of the big companies who have not been able to pass on their increased costs fast enough. I think it is fair to say that the policy had a pretty fair run. We know now that it failed to achieve its designed objectives. In fact, it played a contributory part in the immense rush for wages, in the record number of days lost this year by industrial action, mostly unofficial, and all the rest.

At the moment, industry is paying a very high price for the failure of that policy, however well-intentioned; and it is paying a particularly high price for the fact that the Government, in face of trade union pressure, retreated from the corner-stone of its economic policy. I did not want to go into the reasons why they did so, but it has encouraged this feeling that you can push the Government over, and the thing to do is to go for large wage demands and stick it out. I think that if we are to examine the position, it is fair to start by saying that one system was tried, backed up certainly by businessmen, failed to meet the challenge of the trade unions, and finally collapsed.

I do not doubt that the object of both sides of the House is fairly simple to define. We want a reasonable balance of payments, a fairly low level of unemployment and a reasonable balance between prices and wages. These things are common ground. We all support them and should like to see them achieved. I think it is perfectly right that the previous Government brought forward a concerted package of policies, hoping to achieve this end. But, though they gained reasonable support, they failed. It seems to me that everybody is now extremely surprised because the present Government have come forward with a different concept, which I think every noble Lord in this debate has agreed involves a complete change of course for the nation.

The noble Lord, Lord Beswick, said—and I am sure he sincerely meant it—that if the previous Administration had been returned, they would have tried again to implement their policy. I do not think that they would have had the wholehearted support they got before, because they so manifestly failed.

LORD BESWICK

My Lords, would the noble Viscount give me this one point? There would have been a difference between the conditions in which we tried at the beginning of the last Government and the conditions which existed at the beginning of the present Government's term. There was not the same devilish balance-of-payments problem.

VISCOUNT WATKINSON

I agree, my Lords; that is absolutely fair. The contribution which the previous Government made to getting the balance of payments at least temporarily right should be recognised. I am well aware, from my past experience in Government, that it was probably a painful and difficult policy to pursue. But I am trying to deal with the facts; and the facts are that from a business point of view a package policy, sincerely drawn up and, so far as it could be, practically put over, completely failed. In these circumstances, I do not think that the country should get too excited if, having a new Government, that Government should try to make a fundamentally different approach. It is implicit in that approach to place a greater burden on the people's own personal decision. If we do not make that approach, how do we break out of the spiral of cost inflation or the periodic need for devaluation, which is the inevitable end of completely uncontrolled cost-push inflation, or the steady erosion of initiative and all the rest, which is bedevilling British industry?

So, my Lords, in my view it is perfectly right that the new Government should seek to change the climate, and that the Government's initial budgetary proposals made an endeavour to stimulate those who create wealth rather than those who dissipate it. This may be one of the arguments that take place between us and which have to be carried through to their logical conclusion. I believe that it is right for the Government—and I support them in this—to try to do all they can to encourage the pacemakers, to encourage the leaders. And they are to be found in all ranks of society: they are not entirely among rich industrialists or the technicians and scientists, but are also among many of the people who do such a good job on the floor of the shop. If you accept that we must all be equal; that nobody must have the slightest advantage; that 6d. off income tax means more to a rich man than to a poor man, then you cannot take these risks. And if you do not take them, I do not see how we are ever going to get out of our present dilemma.

I should like to say here (and it is perhaps some answer to the noble Baroness) that it is not attacking the social services, for example, if one says that they are entirely vulnerable if the nation cannot earn enough money to support them. And it is not all the nation that is charged with that task: in fact, to-day it is only about 50 per cent. of the nation, because if you look at the gross domestic product to-day, some 50 per cent. of it, if you include the nationalised industries with Government, is still in Government hands. So you can say—and I think it is not unfair to say this—that half of the nation, by its effort and enterprise, has to support the other half, and to provide the large sums of money with which people to-day rightly expect the State to help them: although here again I think that the principle of selectivity, the principle of trying to help those who need it and not help those who do not, is a very sensible policy, which has been thought about by a large number of people for a great many years. I think it is high time that the Government tried to make the process of productivity work.

The point that I want to make here is that the country have to choose. If we are going to have levelling down, however moral this is; if we are going to accept that we can never run the slightest risk of doing rather better for a man who is richer, because he is richer, or because he is more energetic—or, if you like, because he is luckier—then I do not see how we are going to encourage the risk-takers, how we are going to encourage the initiative and the spirit that will increase our total national product, our exports and all the rest of it. This may be a fundamental change from the policy of the previous Government, but I think it is right that it should be tried, and I certainly support the present Government in trying it.

There is, I think, only one other major question with which I want to deal. It may be said that this changed approach would not be necessary if we had some kind of prices and incomes policy. It may also be said that even this new approach will fail if it is not based on some kind of prices and incomes policy. I must echo those who say (my noble friend Lord Amory, for example) that if you advocate a prices and incomes policy, even if you are a great expert like the Governor of the Bank of England, you must spell it out: you must say what it is, how it will operate, how it will be implemented and what success it will have in gaining the adherence of trade unionists and employers, who of course have to make it work or fail.

I happen to have seen, partly as a businessman and partly as a politician, most of these attempts since the war. I think it is right to say here that perhaps the only one that really achieved some temporary success was the one that Sir Stafford Cripps operated when he was Chancellor of the Exchequer. But at that time he had all the apparatus of rationing and State control, still largely a carry-over from the war years, and those v/ho remember those days will know that, while it held wages and prices for a strictly limited period, as soon as the dam broke—and it always does break—there was an enormous rush of people on both sides of industry trying to catch up, which extinguished most of the good that it had done. If one looks, as my noble friend Lord Amory did, at the "Three Wise Men", or the guiding light, or the voluntary pay pause, to say nothing of the measures taken recently by the last Administration, one sees that all these did was to dam up demand for a limited period. Some spills over the dam even then. Perhaps you dam a proportion, but in the end in a free society the dam has to break, and then very often you are worse off than you were before.

So I think one has to say at this stage that unless somebody can invent an entirely new prices and incomes policy of this type—what I call the model type—then it is not a workable or sensible proposition, and those who are advocating it as the panacea to our present troubles are doing themselves and the nation a very bad turn, unless they can show how it would work. I agree, as several noble Lords have said, that any Government policy must have within it some kind of prices and incomes policy—

LORD GEORGE-BROWN

My Lords, I am sure it must be unique for somebody who has not yet introduced himself to the House to interrupt a noble Lord, but there always has to be a precedent. I understand the point the noble Viscount is making: that if things are going along reasonably well and then you put in a dam, that holds it, but then the dam breaks and it is worse. But when the dam has already gone and the tidal waters are rushing past, do you not then do something, however temporary, to hold them back while you try to put something permanent in place?

VISCOUNT WATKINSON

History, of course, repeats itself. First of all, the noble Lord need make no excuses for interrupting me; he did it often enough in the other place for it to become quite common. Secondly, if I may venture to say this to him, he always used to do it in the other place—and no doubt will here, in just the same way—by anticipating the argument that I was just going to make. He had better wait a moment, if I may suggest that to him, because I am just coming to the problem. His dam, if I may venture to call it that, has broken and the flood waters are rushing out pretty fast. What I understand to be the policy of the Opposition is: build another dam and try to do it all over again. Well, that raises the question of whether you could build any kind of dam anywhere at this point. Therefore I think the Government are absolutely right to take a calculated risk—it is a calculated risk, and it may be a very considerable risk—to try to bring a new approach to this problem.

Where does the eventual solution lie?—and I do not think the noble Lord, Lord George-Brown, or the noble Lord, Lord Beswick, would disagree with me in this. It lies on the shop floor. It lies in the relations between me, as chairman of my company, and those who work with me—I hope not for me, but with me. It lies in some degree on the Government's relations with those whom they employ. As my noble friend Lord Thorneycroft said, in industry, where the Government are the banker for the paymaster, they, as the Government, have a direct action to take, and I do not see how they can do otherwise at this stage than follow the advice given to them by my noble friend Lord Thorneycroft and say: "Money will not be made available for inflationary settlements". I hope that the Government will say that, and go on saying it, loudly and clearly, and perhaps that will then encourage employers to take a similar line.

This is the only practical solution. It has to be worked out or fought out—I prefer worked out—on the floor of the shop in every industry in this country. It has to be backed by the Government's taking a fair but tough line where they have any control over the situation. If we can make this work, then we have a permanent solution, whereas even if we try to build another dam, who among noble Lords would really say that if it could be erected—and I do not think it can—it would last for any time? Then we should have it all over again.

LORD BESWICK

My Lords, I am obliged to the noble Viscount for giving way. I am following with great interest what he is saying from his great experience. But will he not try to accept the point that we have made from here, that this talking he is asking for between management and the shop floor cannot succeed while you have a Government with regressive taxation deliberately putting up food prices and cutting into the social services? They are not giving us the atmosphere in which the management and the men can get together.

VISCOUNT WATKINSON

I cannot help feeling, my Lords, that this House is getting more and more like the other place, and perhaps it ought not to. So I will not be drawn into much more debate, much as I should enjoy it. However, I will say this, if I may. I spend a lot of time, as I think any chairman should—and I wish more chairmen would—going round, not talking to people who work with me but letting them ask me questions. I do not find many of the people grumbling about 6d. off income tax. Although they may know that I make a bit more out of it than they do, I find that is reasonably accepted as a sign that at last we have a Government who are preparing what they hope is a long tranche of reduced taxation and increased incentive. I do not find much complaint about that.

My Lords, what I want to say is this. The policies, however sincerely meant, of control, of what I call the wages dam and all the rest, have demonstrably failed. One could argue that it is very sad they have failed; but they have done so. What can we do? Do we try again in an almost impossible situation to rebuild? Or do we change course, putting immense reliance on people's good will, on their capacity to be sensible and to try to see things in a sensible way, and let industry have a go? The Government must play their part, as I have said. If that would work, then, again as I have said, it is a much more permanent solution.

I do not like—and I say this quite frankly—the situation that is arising in which it looks to me as if there is no dialogue between the C.B.I., the T.U.C. and the Government—not the Government as a whole but Mr. Carr's Ministry. For the moment, perhaps this is impossible, and I think the Bill on Industrial Relations, which I think is necessary, must be introduced. People must see the good side of things in it, even for trade unionists. But at some point there has to be some dialogue if we are to succeed in this policy. The Government could use the N.E.D.C. or, if it still exists, something like the National Joint Advisory Council, which used to exist in the old Ministry of Labour. I entirely support the policies of the Government, and the only advice I would give them, if I may, is that they should seek to carry the policies through, but seek also—because we are all reasonable men—to leave some doors open where at some stage, at least, there can be some dialogue beginning again between the T.U.C, the C.B.I., in particular, and the Government—not the political Government, but the Government that exists in St. James's Square, which is well known to trade unionists and employers. We shall reach a final solution only if there is agreement between those three partners in the process.

My Lords, I am sorry that I have spoken for rather a long time, but I was a little provoked, particularly by my old friend opposite, if I may so call him. My advice to the Government is: go ahead; I think you have created support in the country behind you. I hope that employers will try as hard as I hope my company will to back them up. Bear in mind, also, that the day will come, if this new policy begins to succeed and solidify, when some bridges must be built and when some talk must go on so that we gradually draw the nation together again under these new and, I hope, more sensible and more permanent policies.

7.43 p.m.

LORD DONALDSONOF KINGS-BRIDGE

My Lords, the noble Viscount will forgive me if I do not follow him in his most interesting speech, to which I listened with fascination. I should have liked to discuss various points on it, but we have now reached the middle watches in the course of the debate through the Chamber, and this is the time when Back Benchers ought to come out and fill in details on the broad canvas which has been painted by their predecessors.

I want to deal with two particular points which have been raised. I was astonished and delighted to find that I agreed with nearly everything that the noble Lord, Lord Boothby, said, which is a surprise and an unusual experience. In particular he raised two points that I want to follow up. The first, on family poverty, was ably opened in detail by the maiden speech of my noble friend Lord Hamnett, who showed in his speech great knowledge of the subject. That was followed by various speakers, particularly by the noble Lord, Lord Boothby; and on this subject I want to give some evidence which comes from workers who are actually doing the job in this field.

The second point raised by the noble Lord, Lord Boothby, was the garrotting of the Consumer Council, which I will deal with first as it lies rather heavily on my chest at the present moment. Your Lordships may think that as the salaried Chairman of this body I must justify speaking about this matter at all. You may think that the Addison Rules are relevant, but I do not think many of your Lordships have read them, and I can assure you that they are not relevant. The Addison Rules are laid down to avoid the situation where a Chairman of a public body finds himself answering questions in this House for the responsible Minister who is in the other House, and thereby causing him embarrassment. I will answer no questions, but I may ask some. The noble Lord who has to reply is in a very embarrassing situation on any basis on this particular point. If anything I say adds to his embarrassment, I apologise.

I have received a modest salary from the Consumer Council, which is now coming to an end, so although I declare an interest, it is a minimal one. I have a further interest: that of a bitter resentment at the contempt with which this organisation has been treated. And I use my words carefully. I hope that the Government will treat the noble Lord, Lord Erroll of Hale, more politely than they have treated us. He it was who, before they strangled his baby in this Administration, set it up in the last Conservative Administration. He appointed the Council and he appointed the noble Baroness, Lady Elliot, as its Chairman. He appointed that very brilliant and energetic Director, Dame Elizabeth Ackroyd. And now the Council is going. He it was who, acting on the independent advice of the Molony Committee, thought that the Consumer Council should be formed, and the Government he then served agreed with him. But, this Government does not do so.

Sir Joseph Molony, in a letter to The Times last week, had this to say: I express firmly the opinion that in its seven years of life the Council has done all that its designers hoped it would do, and done it well. … Anyone who studies the evidence and arguments we examined before deciding that there ought to be a Consumer Council could not doubt that the need is as great in 1970 and henceforward as it was in 1962". Whether the evidence was studied I do not know, but the Government's conclusion on this occasion was different. I believe it was a doctrinaire decision and it depended not on whether or not the Council had done its work weil, but on the quasi moral issue of whether it is proper, according to the strict interpretation of the new style of government, for any Government to arrange for such functions to be done by anyone.

If we had been told that we were ineffective and were to be reorganised, or even replaced, we could hardly complain. What is intolerable is the suggestion that nothing more needs to be done. This seems to me to be simply ignorance. There is an enormous amount to be done. The consumer—particularly the poorer housewife—is constantly exploited by unscrupulous tradesmen, and it is only as a result of steady pressure from ourselves and other bodies that she has acquired the protection that she now has. If the Minister thinks our work was unnecessary, I should like him to attend one of our shopping conferences, where 300 or 400 housewives foregather to ask questions. I believe that as a pressure group we have done a great deal. The plain consumer is subject to every kind of pressure, ranging from the doorstep salesman to the dishonest advertisement. We provided an essential element in modern life and we also acted as a very necessary and ever-present irritant to the Government themselves. We did not expect them to love us, but we thought we had their respect. It is disappointing to find that we do not have their respect.

The outcry from the consumer movement as a whole, from the Consumers Association, with its 3½ million reader-ship of Which?, from 80 consumer groups in which they have 12,000 members or more, from the Weights and Measures inspectorate and from many influential individuals, suggests that our influence—whether or not it was as large as it should have been—will certainly be missed. This was really a doctrinaire decision by men with no coherent doctrine. Perhaps the only coherent doctrine which defends the decision is: "Up the smart Alecs, and the weakest to the wall."I will say no more on that matter to-day. We shall have a discussion next week when my predecessor, the noble Baroness, Lady Elliot of Harwood, has an Unstarred Question on the Order Paper. This is an item in the White Paper which is under discussion to-day, and I felt it impossible not to refer to it.

The second point is the question of family poverty. I think it is accepted by everybody that the Family Income supplement will do something. I am delighted that we are going to have it. I think that many parts of it are ill-conceived, but I certainly do not deny that the F.I.S. will do something for some people. Our complaint from this side is that the policy has been started the wrong way round. The Government seem to me to have started from the desire to reduce taxation and worked backwards from this conclusion to the premises of where they could find the money to do it. They found the money by a universal raising of various kinds of charge to people, treating those who send their children to Eton and Cheltenham Ladies' College as if they were as much affected by this as people who send their children to statutory education. It is like the old joke we used in the 'thirties about the grand impartiality of British law which forbade both rich and poor to sleep on doorsteps. It seems to me that it is of that order of approach.

Nobody has denied that the rich will benefit—and I certainly have no quarrel with that. A married man with two children, who earns £20,000 a year, we are told in the supplement to the White Paper will be better off by £450. If a man earns £10.000 a year he will be better off by £200; if £5,000, by £84. Then we reach the critical area. At £3,500 a man gains £60; at £3,000, £42; at £2,500, £32. This is the critical moment. At £32 or thereabouts he tends to break even, if we can accept the estimate of £27 made by my right honourable friend Mr. Roy Jenkins in a devastating speech in another place which figure I think has not been questioned. I can give the details but I do not think I need do so.

We can take it that the break-even point is about £2,500 a year. Of course, this is without the other consequences of the measures which are as yet unquantified. Clearly, the transfer of the agricultural subsidies to the housewife will make a difference to prices. Higher rents must follow the intention to save £100 million on housing subsidies, although of course we welcome the proposed help to tenants of private landlords; that is a thoroughly good thing. Also, there will be higher rates and higher commuting fares. If we accept this as a reasonable figure, it means that a husband and wife, with two children still at school, whose wages are £2.500 will balance. If they have more children they will be worse off; if they have fewer children they will be better off; but the line is firmly set at £2,500. All right. I am delighted that anybody in the range between £2,500 and £5,000 should receive a bit extra; certainly nobody minds that. I personally do not in the least object to the benefit being spread higher, although it seems rather unnecessary, particularly on an increasing scale. And, of course, it will have absolutely no incentive effect. The £450 to a man of £20,000 a year is not relevant in the way it would be to a man on £2.500 a year. So, if one may say so, this is all rather rot. There are incentives, but they are not at the £400 level on an income of that size.

What worries the Government, and rightly—it worries us—is the family be-low £2,500 which is getting towards the poverty line. The family income supplement (the F.I.S.) is aimed in the right direction and I, for one, welcome the Government's intention to help those who most need it. But aiming in the right direction is not enough. One has to pay some attention to what one is aiming with. This seems to be aiming with a pop-gun with a very short cord on the cork. It is going to do very little. The Government have allowed £8 million—this has to be seen against the estimated £68 million saving in National Health—but, even so, I think they have allowed much too much. Not much has been said to-day about the take-ups, but there is a great deal of evidence to show that means tested benefits are not fully taken up, and I think we must assume that this will happen now.

The truth is that this is really a token scheme, a red herring, I think, to divert attention from the main regressive effect of the package. If you agree with the right honourable gentleman the Chancellor of the Exchequer, who said in his much-disputed and much-disrupted speech in the other place that no family earning a £1,000 a year would be hit by these measures because of the F.I.S.—even accepting that, which many people on my side do not, it means that there is a straight transfer from those earning between £1,000 and £2,500, on the one hand, and those earning £2,500 and over, on the other. This is a regressive form of taxation of an extraordinarily blatant kind. Had it been stated in those terms, no Government would have brought it in.

My Lords, it does not end there. There is an absolute tendency in the present measures to drive the people who are about £1,000 a year down into it, and this is much the most serious aspect. I am not talking about something in the air, or from a doctrinaire point of view. The Child Poverty Action Group accused the late Administration, in my view rightly, for having let the gap widen between the very poor and those who were all right. This happened in consequence of our policies, but we did not do it deliberately and nobody ever thought we did. The action here, however, is deliberate and this is what seems to me unforgivable. The Family Service Units, which I have the honour to be closely associated with, have 17 outposts or 17 units all over the country. They have a hundred trained social workers and are looking after 11,000 families. This is what they say about this scheme: These measures will help to create a group of families with permanently depressed standards of life which will in turn create feelings of bitterness and anti-social attitudes. They also say: Employers already resent so many requests for means test: certificates. Applications will now have to be made about 12 times a year: twice for free school meals, twice for rent rebate, twice for rate rebate, once for school clothing, once for welfare foods and milk, and in addition four times for the family supplement. They think this will be a disincentive to employers to employ men because of the trouble involved. They know that families on a low income are already failing to obtain benefit because of the cumbersome administration of the means test. The income of these families often varies from week to week. The decision to end free school milk for children over 7 will certainly lead to a fall in calcium intake. They regret deeply the decision to cease the cheap milk scheme at school for children under 5. The lower working classes appear to have the worst dental health at present, and this can only be made worse by extra charges, even if some relief is given. On school meals, they fear that families on the edge will think they can provide a meal for less than 2s. l0d. and will therefore provide an inadequate meal.

I believe it was the noble Baroness, Lady Summerskill, who said that the traditions of working-class families are different and all these squeezes fall upon the housewife. I believe that the Government are quite genuinely trying to help, and I believe that in the most distressing way they have failed. My Lords, I believe this to be a very retrograde move indeed, and if it were only on this aspect I would support my noble friend Lord Beswick in his Motion of disagreement with the Government.

8.0 p.m.

LORD BALFOUR OF INCHRYE

My Lords, in their absence I should like to offer my congratulations to the two noble Lords and the noble Baroness who have made their maiden speeches to-day, and I would extend a particular welcome to the noble Baroness, Lady Lee of Asheridge. She and I entered another place more than 40 years ago on the same day. She was then the Member for North Lanark. My Lords, in those days she enlivened the House with contention in debate and delighted it in appearance. To-day we look forward again to the enjoyment of that duality, I trust for many years ahead.

I want to start my short remarks with a question for either the noble Lord, Lord Beswick, or the noble Lord, Lord Shackleton, both of whom I address in their absence. It is a question which has already been asked in this debate, but as this Motion is a serious Vote of Censure upon Her Majesty's Government, I think I am entitled to ask it again. It was indeed the noble Lord, Lord Beswick, who called for these things to be spelt out clearly. In what I call the"package deal" of Lord Shackleton's indictment of the Government, his Motion says: … will make more difficult the achievement of an acceptable prices and incomes policy … The question I repeat is: what is the acceptable incomes policy which the Opposition have as an alternative to what Her Majesty's Government are doing?

As we know, and as the noble Lord, Lord Beswick admitted, the last efforts of the previous Administrations, first for voluntary and then for statutory income limitation, failed—not completely but almost completely. So we can now ask: what is this new policy which would be acceptable in a free country and which the Opposition wishes to put forward? I think that when the Front Bench speaker for the Opposition replies to the debate on behalf of the Opposition he should be willing, as the noble Lord, Lord Beswick, said, to state in clear terms what is the alternative in the form of an acceptable policy: because if the Opposition condemn the Government for not having an acceptable policy it is quite logical to say that the Opposition must themselves have it.

As the noble Lord, Lord Beswick, again said, the main theme of the debate is the Government's approach to the danger of inflation. The noble Lord said, and I think quite rightly, that the approach is a dual one, moral and practical. Taking first the moral terms, it seems to me that the Government's approach was very well defined by the noble Earl, Lord Jellicoe. It is to alter our national outlook to one of greater independence by the individual, and on the individual, rather than reliance on the State, while at the same time helping and supporting the weakest in our community.

My Lords, as a Conservative I have often tried to get clear in my mind the limits of the Welfare State and what it should do in broad terms, and it seems to me that what the Government are doing to-day does not encroach at all upon the Welfare State, if noble Lords opposite will accept what I suggest are the broad terms.

The Welfare State should ensure that every child has the opportunity according to his or her abilities. The Welfare State should protect a man and his family from economic distress arising from circumstances outside the man's control—for instance, redundancy or change of occupation due to changing economic life. The Welfare State should ensure care in illness; it should safeguard the old and the infirm. But what it should not do is to relieve a man from the responsibility of providing for himself and his family, or protect him from the results of his own foolishness, improvidence or slothfulness. I was looking at some writings of Abraham Lincoln—a much wiser man than any of us here—and he put it so well when he said: You cannot help men permanently by doing for them what they could and should do for themselves". On the practical aspects of the approach I have listened carefully to two former Chancellors of the Exchequer, both of whom have given support to what I would describe as the long-term policy of Her Majesty's Government, but both have expressed warnings for the short-term. It is possible that storms may arise and that the ship may be blown off course. The Government believe that this will not happen. We hope that it will not. I am not competent to express any view as to whether or not there will be a short-term blowing off course, but of one thing I am sure: if the Government are confident, they should tell the people more than they are telling them at the present time. They should tell us in simple terms from an authoritative source. I should dearly like to see the Prime Minister go on television, not to make a Party speech but to explain to the people in simple terms—as the highest executive authority in the country—what is the long-term objective, and what are the dangers in the short term; and to reiterate the confidence of the Government that they can get through the short term without what the two ex-Chancellors of the Exchequer thought was the danger that lies ahead.

In practical terms the Government explain that an essential feature is to reduce Government expenditure and to channel resources to the individual rather than the public sector, while all the time concentrating State aid where it is needed and not spreading it indiscriminately irrespective of need. This policy is condemned by the noble Lord, Lord Beswick, who used harsh words in connection with Mr. Heath's outlook, saying that Mr. Heath was reactionary and selfish. I should like to put this to Her Majesty's Government—and I am only sorry that the noble Lord, Lord Shackleton, and the noble Lord, Lord Beswick, have both felt it necessary to be absent during a debate initiated on a Motion introduced by Lord Shackleton.

LORD CHAMPION

My Lords, of course I greatly regret the absence of my two noble friends. But both of them have sat here pretty well continuously since half past two, and I should have thought they were entitled to go out for a short time.

LORD BALFOUROF INCHRYE

My Lords, in my young days in another place, if one had a debate, always one of the leaders of the Opposition and one of the Ministers of the Government had the courtesy to be on the Front Benches. It is not for me to lecture the Opposition upon their practice, but I should be very reluctant to see my side ever without a Minister or, if they were in Opposition, one of the Opposition leaders, sitting on the Front Bench during a debate or a Vote of Censure. As I was saying, the Government policy was condemned by Lord Beswick, who used those words "selfish and reactionary". Let me put to Lord Beswick, in his absence, a few questions.

Is it selfish and reactionary to spend £75 million more on local health and welfare services than last year? Is it reactionary and selfish to plan a 6 per cent. overall increase, compared to 4.3 per cent. planned by the last Government for 1969–70? Is it reactionary and selfish to review housing subsidies and to introduce a rent support scheme for both council, and private tenants? To me, and I believe to many noble Lords in all parts of the House, it is intolerable to think that the burden should go on to taxpayers to subsidise rents in council houses of those who are in a high income bracket—and there are many such, subsidised by taxpayers who are in fact poorer than the tenant they are subsidising. I recently saw reported the case of a man with a four-figure income and two motor cars, who owned property outside the council house, and who said, "Why shouldn't I live in a council house as the Government allow me so to do?"I think it is absolutely intolerable that the subsidy should be spread indiscriminately, and that the burden should fall even upon those who are poorer than the beneficiary.

LORD WYNNE-JONES

My Lords, does the noble Lord object to the subsidy to purchasers of houses given at the present time?

LORD BALFOUROF INCHRYE

My Lords, is it wrong and reactionary to consider a system whereby taxpayers continue to finance the maintenance of strikers who have voluntarily withdrawn their labour? No one wishes to see any woman, any family, suffer or be in distress because of industrial disputes. But surely it is worth considering whether supplementary benefits should not be treated as loans in the long term from taxpayers, and at any rate partially repaid on an agreed scale over a period of time.

BARONESS PLUMMER

My Lords, may I ask the noble Lord a question? Does he consider that a council house tenant is a taxpayer or not?

LORD BALFOUROF INCHRYE

My Lords, that really does not enter into the case. We have something to think about, because we are now getting political strikes. This is a new and dangerous element. I see that the shop stewards in British Leyland are suggesting that there should be an industrial strike over the Government's proposed Bill on Industrial Relations. I hope we shall hear from authoritative trade union leaders and political leaders a condemnation of such behaviour, because that way lie all sorts of terrible things in the future; and if industrial strength were to be used for political purposes I do not think it would gain much support from the vast majority of people in this country. Supposing there is an industrial strike for political objectives, I believe that it would be wrong for the taxpayers to have to subsidise such a strike.

Finally, the noble Lord, Lord Shackleton, talked of widening the gap between the rich and the poor. I submit to your Lordships that there is no contradiction between tax reductions and improvement of social services. The basic truth is that, unpleasant as it may be for some to realise, a man will work harder for himself and for his family for material rewards than for the brotherhood of a shared-out egalitarian socialist State. It is sound to remember that you cannot strengthen the weak by weakening the strong, and that character and courage are not built by taking away initiative and independence. And it is these qualities which this Government aim to free in the country, getting away from what I think were the rather meaningless and bad habits into which we may all have drifted during the past six years.

8.15 p.m.

LORD HOY

My Lords, I do not want to be deflected from what I have to say by the speech your Lordships have just listened to, but when the noble Lord talks about municipal tenants as if they were not ratepayers, the same as any other section of the community, I find it difficult to understand. Indeed the noble Lord would not face the question put to him about people buying their homes to-day. I have no objection to their doing so, because I own my home, like most other people; but do not let us forget that those who do so also get considerable tax allowances. Indeed, home purchasers to-day are receiving tax allowances even greater than all the municipal tenants in Britain put together, and we do not have any tests as to whether their income is £10,000 a year or £2,000 a year. If in fact they are buying their home, they get tax allowance through the Inland Revenue. I hope we shall get this subject into its proper perspective.

I wanted to deal with one question raised by my noble friend Lord Beswick when he opened the debate to-day. He spoke of a part of the United Kingdom that was protesting against the change in Government policy in regard to allowances and investment grants. It was not my intention to raise the matter, but inasmuch as my noble friend did I am bound to add a word with regard to Scotland itself, and I certainly hope that the noble Lord, Lord Drumalbyn, who is to wind up for the Government, will make some reference to it. And as I see the noble Lady the Minister of State for Scotland here, I am sure she will want to make a note of it.

To-day's Scotsman describes what the effect is going to be on a considerable part of Scotland. That paper says: The Government's withdrawal of investment grants to industry has come as a severe blow at the Harris tweed weaver, the Western Isles Crofters Union claimed in a statement yesterday. The change means that crofter-weavers will lose the 40 per cent. Board of Trade investment grant under the recently introduced scheme operated by the Highlands and Islands Development Board for new Harris tweed looms. Instead, they will be able to claim depreciation allowance on new looms, but, the Union's statement said, 'as depreciation allowances on income tax are dependent on profits, the weaver whose profits are almost nil after living expenses will be back to square one—without assistance.' Indeed, I would suggest that this is the position that will face many of the industries and new industries, not only in the Highlands and Islands but in the development areas. I am certain Scotland would expect the noble Lord who is winding up to make clear the Government's policy in this respect.

I wanted this evening to say a few words about agriculture, and I find it a little extraordinary that in the whole course of this debate agriculture has hardly been mentioned. With my honourable friend the Member for Enfield, Mr. Mackie, I have an all-time record in length of service in that Department. I remember that your Lordships' House was not backward in putting questions to us when we were at the Ministry, and I am a little surprised that in all the changes forecast we have not had a single contribution with regard to agricultural problems. We should all agree that agriculture went through a very difficult time, not only pre-war but after the war and up to 1947, when the Agriculture Act was enacted. Many Members, not only of your Lordships' House but of another place, have paid tremendous tributes to Mr. Tom Williams of that day, the Minister of Agriculture who introduced the Act. Moreover, not long ago I attended a function which paid tribute to the noble Lord, Lord Netherthorpe, for his part in forming that policy at that time.

There is no doubt that as a result we have been boasting about the position of British agriculture vis-à-vis its competitors, either in Europe or elsewhere. We have argued from both sides of the House that as a result of that Act British agriculture has been better organised, is better mechanised and certainly has given a better return than has almost any other industry in this country. It has been argued that had the output from other industries been even half as good as the agricultural output we should not have been faced with these economic difficulties. All this was the result of the 1947 Act. No one will deny that that Act did for agriculture what nothing else has ever been able to achieve.

When, two or three weeks ago, the Government made their announcement, I asked the noble Earl opposite some questions, and I was interested to hear the questions on milk being repeated this afternoon by the noble Lord, Lord Balfour, and others. But I must once more express surprise that there have been so few, if any, comments either from the agricultural correspondents, from the N.F.U. itself, or from those who are supposed to take such a great interest in agriculture. Because what we are witnessing as the result of the Government's intimation is a complete breakaway from the present system which has put agriculture into the enviable position that all supporters of agriculture have claimed for it. In other words, we are saying, "Away with the policy of 1947".

What the Government propose to do is to replace the present agricultural system with a policy of import levies. Indeed, noble Lords who were present will remember that I raised questions on that subject on the day that the Government announcement was made. That announcement has provoked a strong reaction also from British Commonwealth countries. Nowhere have more outspoken comments been made than those we have had from both New Zealand and Australia. It is no use paying tribute to them for all the assistance they gave us when we required it and then economically harming them in the way that the Government propose to do. We all remember how that little country New Zealand harnessed her agricultural production to meet the needs of this country, and how loyally she has served us throughout all these years. Now, at this stage, this Government say, "We are going to impose an import levy on all you send us."I wonder whether the Government have thought what the reaction is going to be, not only from New Zealand but from Australia and other countries. Do the Government really think that they can impose these import levies without having a retaliation from the countries who upon whose goods they propose to impose this import levy?

What does all this mean? The Government have already announced that they propose to cut farming subsidies by something like £150 million per annum. I do not think that anyone on the Government Benches would dissent from that statement: that this is a proposed cut by the Government in agricultural subsidy. As I said a week or two ago, bad as that may be, the Government then say,"On top of that, we will impose import levies".

If the Government are going to make these cuts in subsidies and then, on top of that, impose import levies, obviously someone has to pay for them, and the only person who can pay for them is the housewife of this country. It means increased prices. Indeed, I thought that that was the best comment I had heard in the speech made by the noble Lord, Lord Thorneycroft, when he said that perhaps we ought not to make promises or speeches during Elections, because they are remembered. But we do not need to be reminded of the speech that the Prime Minister made. He was going to cut prices with one stroke of the pen; but this proposal is legislating for increased prices. This is bound to be the case; it cannot have any other effect. Moreover there is no guarantee that by introducing import levies the consumers of this country are going to buy the products of our own farmers, as they do at present, because inevitably there will be a price reaction. If there are increased prices, the amount that the housewife herself can buy will inevitably be limited.

If this is done, then the other problem which we have been discussing this afternoon must be faced. If prices are going to rise in this fashion, obviously the wage earner is again going to come on to the market and say, "All right. By their own decision the Government have decided to increase food costs in this country. They have imposed these increased charges on the nation. As a consequence, we must demand even higher wages to meet the new costs". That naturally follows. I wonder, then, what the reaction is going to be on our manufacturing industries. Indeed, anything that contributes to added prices or wages or costs will make us less competitive in the foreign market.

So I hope that before the Government decide to go ahead completely and take this step they will give a little further thought to it and to what they intend to do about agriculture. Agriculture has existed up till now on Government guarantees, without which agriculture could not have achieved the records that have been achieved. As I have already said, it is a record greater than that of any of the industrial industries even in our own country. So I should like to ask the Government these questions. What the Government have to do to-night is to tell us if these are the facts. Do they intend not only to cut the subsidies but also to impose import levies? If so, does it mean that the housewife has to pay for them both? Does it mean, if they do this, that they have faced up to the effect upon wage demands in this country?

Then, I think they have to say something about the effect that this policy will have on our Commonwealth partners. So far, despite their protests, the Government have not said anything about this matter. I hope that to-night, or certainly before this debate concludes, we shall have a reply about British agriculture. There is no use in having speeches throughout the year to the effect that this is the greatest industry we have in this country. The fact is that nobody has delivered a speech on it up till now, and I am certain that the country, if not this House, will want answers in regard to this problem.

8.29 p.m.

LORD MAELOR

My Lords, at this late hour I shall not detain the House for longer than a few moments. When the Chancellor's Statement was made some three weeks ago I was surprised to hear members of my Party, both in your Lordships' House and in another place, state that they were shocked and disappointed. I cannot claim to have been shocked or disappointed with the Statement. Had the Statement been different I should have proved myself to be a false prophet, because I took good care to tell all the audiences I addressed during the General Election that if we had a Tory Government, such a statement would be forthcoming.

I did my best to impress upon the electorate the fact that the Tory philosophy of politics is diametrically opposed to that of the Labour Party; that one is the very antithesis of the other. The Tory philosophy is based entirely on class distinction, and the Chancellor's Statement was commendable to the extent that it was true to Tory philosophy. Within a few weeks of gaining power the Government began to put into effect their peculiar philosophy, and this should be a lesson to my own Party. I can only hope that immediately we regain power, as we are bound to do, a Labour Government will be just as rapid in putting into effect the measures which would be in accord with our philosophy as this Government have been with theirs. The Tory Party is a class conscious party, and throughout the centuries has always legislated in the interests of its class.

A NOBLE LORD

No!

LORD MAELOR

You have not read your history. I am saying it, and repeating it; and I shall say more in a minute. I am afraid that thousands in our electorate, blind to the achievements of the last Labour Government, had come to believe that there was no difference between the Tory Party and the Labour Party. You will not hear much about that after next April. The electorate will come to realise that the depth of difference is deeper than any chasm in the wilds of Snowdonia.

I said that I was not disappointed with the Statement, but I must say that I was amazed. Listening to the Statement, as it was repeated in your Lordships' House, I could not but feel that it was a clever and subtle confidence trick. I felt that a clever conjuror was performing; we were promised a reduction of 6d. in the income tax, which was something we could all applaud; but before the end of the Statement it became obvious that the 6d. would be swallowed up by the new charges, and that the working man would be worse off than he was before he had the reduction in his tax. Of course this is an old confidence trick. Another "Baba" used to perform it with the aid of the forty thieves.

My Lords, let us face the situation fairly, honestly, and intelligently. What the Chancellor has proposed to do has been well expressed in the New Testament. Let me quote: for whosoever hath, to him shall be given; and whosoever hath not, from him shall be taken even that which he hath. There it is in a nutshell. The working man will seem to have had 6d., but he is going to lose it, and more as well. What frightens me is the thought of what will happen next spring, when the measures announced by the Chancellor come into effect: inevitably they will cause a soaring of prices. It will be inflation with a vengeance. I must say that I was very amused during Question Time to-day to hear this word "inflation" mentioned time and time again. The Prime Minister did not mention it once in his speech last night.

Let us see what will obviously happen. As a result of the cut in subsidies, councils all over the country will be compelled to raise the rents of their houses. In most areas, these rents are already extremely high and are currently taxing the householders' resources to their limits. We have already been warned by British Railways, particularly in the Southern Region, that fares will go up to the tune of 3s. in the pound. This increase in fares will fall fiercely on the commuters, thousands of whom travel to and from London daily. These very people, among others, will be the ones who will be paying also the increased rents.

But the meanest declaration, in my opinion, made by the Chancellor was the withdrawal of free milk to children over seven years of age in our junior schools. It was recently reported that the children of to-day in our country are the healthiest children ever known. This was attributed to the fact that they received free milk at school, and were also guaranteed at least one good meal a day; good in quantity and good in quality. And what a proud boast that is for any country to be able to make, that we have the healthiest children in the world! But it will not be true much longer. Small boys and girls are to be robbed of their milk, and I use the word "robbed" deliberately. If a person picks up a bottle of milk on someone's doorstep he or she is immediately prosecuted and charged with robbery. Now Mr. Barber does the same thing on a grand scale, and it is acclaimed by the Tories as a great advance. What about the guaranteed one square meal a day? Many parents will be unable to afford to pay the enhanced prices, or even to give a daily dinner at home. We shall soon be back to the days of the two sandwiches and a cup of tea. This attack on our young children is monstrous and unforgivable, and I am surprised to find Members opposite allowing it to be done in their names, and even with their assistance.

What is frightening, too, is the prospect of industrial strife in the spring as the result of these measures. As the cost of everything will be rising, we shall inevitably see new wage demands being made; and if these are denied we shall have strikes on an extensive scale, and our social and industrial structure will be grievously disrupted.

In conclusion, I would remind the House that on the day of its delivery the Chancellor's Statement had its repercussions even in distant lands. New Zealand said that the levy on lamb sent to Britain was "a slap in the face". Australia said that the barrier against food imports would "cut across its trade agreement with Britain". Those were the expressions made in those two countries. I have no doubt that when a Vote is taken at the end of this debate the Backwoodsmen will have been summoned from all parts of Britain to support the Government, but I am sure the Party opposite would be well advised to support this Motion and call upon the Chancellor to have second thoughts.

8.39 p.m.

VISCOUNT MASSEREENE AND FERRARD

My Lords, I should like to ask the noble Lord opposite what century he thinks he is living in? He is not living in the early part of the nineteenth century; he is now living in the middle of the twentieth century. When the noble Lord speaks about the Tory Party being the Party of class consciousness, on what is he basing his division of class? Is he basing it on incomes? If he is, then he must surely realise that you have only to drive around council housing estate at night to see the Jaguars and the Mercedes parked outside the council houses. I am an employer. I employ people in industry and in agriculture, and to say, as the noble Lord has said, that we are going back—I cannot remember his exact words—to the twopenny sandwich and the cup of tea as the daily meal for the worker (I will quote the words of the noble Lord, Lord Shinwell), is really "pie in the sky". That is what the noble Lord said about the policy of Her Majesty's Government.

I shall not pursue the subject any further, except to refer to the last part of the speech of the noble Lord, Lord Maelor, when he said that hundreds of backwoodsmen would come up from the country to support the Government. Those days are over. Surely the noble Lord has heard of leave of absence. There are about 280 hereditary Peers who cannot come here at all because of leave of absence, so the noble Lord really must get up to date.

LORD KILBRACKEN

My Lords, I do not know how many Members of the noble Viscount's Party there are who very seldom appear in this House and who have not applied for leave of absence. Are there not 300 or 400 of them?

VISCOUNT MASSEREENE AND FERRARD

No, my Lords; there are not 300 or 400, but I will not go into the figures. May I come on to the speech of the noble Lord, Lord Beswick?

LORD MAELOR

My Lords, I think I should be allowed to answer the noble Viscount. He asked me what century I am living in. I am the one who is living in the twentieth century. He is living in the days of Disraeli. He talked about class distinction. There is class distinction because of wealth. Who are the Lords Lieutenant throughout the length and breadth of the country? They have looked after their class right through the centuries and they are doing it now. The purpose of the Chancellor's statement was to assure that class that their interests will be looked after for the next four or five years.

VISCOUNT MASSEREENE AND FERRARD

But, my Lords, Lords Lieutenant have no power, and I am prepared to wager that there are plenty of Lords Lieutenant in this country who have far less income than members of the printers' union or of the dockers' union. This is an absurd argument. To come to the speech of the noble Lord, Lord Beswick, I understood him to say that the Government were largely responsible for the present inflation. The noble Lord, Lord Shackleton, knows perfectly well who is responsible for it. It is his own Party. During the Labour Government's six or seven years in office, they raised taxation by £3,000 million; during 1969 there was no growth in output per head of the population, and the growth from 1965 to 1968 was only 1½ per cent. per head per annum, which was the lowest in western Europe. We know who is the cause of the present crisis.

Noble Lords must give the Government a chance; they have been in office barely five months. Some noble Lords remind me of the amateur farmer who, in the evening, put a ram in a field with some ewes and expected a crop of lambs next morning. You have to wait six months for your lambs. I should have some sympathy with the noble Lord, Lord Beswick, if, say, in 12 or 18 months' time, he came back to this House and said, "We now have galloping inflation and the economy is in a terrible mess." But to say what he said this afternoon is absurd.

There are only two matters on which I want to speak to-night, and I shall be very brief. We all know the causes of our troubles, because they have been repeated ad infinitum; they are wages streaking ahead of productivity, vast Government expenditure and so on. There are only two ways of curing the problem. The noble Lord, Lord Shin-well, asked for common sense, but it is quite impossible to have a compulsory prices and incomes policy in a democracy. One can have it only in certain countries, such as Communist countries, where there is a closed economy.

Noble Lords who have been behind the Iron Curtain will know that in any of the big towns there you can walk across any street at the busiest time of the day and you will never be knocked over, because no workers have cars. The only people who have cars are the State bosses. If you are prepared to use bayonets you can have a compulsory prices and incomes policy, but it will result in a very low standard of living. In a democracy the policy of the Government is the only true answer, but it must be given time.

I think the noble Lord, Lord Beswick, said he thought that the Prime Minister was being selfish, and I presume he meant that he was being selfish by taking 6d. off income tax. I cannot follow his train of thought because, as I have already pointed out to the noble Lord, Lord Maelor, the vast majority of employees in this country—I prefer to talk of employees and management rather than workers, because that term conforms far more to the economic conditions of today—pay income tax. When the Prime Minister took off the 6d. he was not thinking of people earning £50,000 a year, whom you can count on your fingers. So for the noble Lord, Lord Beswick, to say that the Prime Minister was being selfish is a most extraordinary statement to make.

The noble Lord made another extraordinary statement when he said that the policies put forward by Her Majesty's Government would widen the gap between the rich and the poor. As I read the White Paper, they will do exactly the reverse. Any man with two children under the age of 11 and earning up to £1,000 a year is not going to have to pay any of these increased charges. Her Majesty's Government are going to spend an extra £110 million on alleviating the plight of the people in this country who are poor through misfortune, through illness, through mental handicap or who are elderly. So I cannot understand how the Opposition can say that Her Majesty's Government's policies are going to widen the gap between the rich and the poor.

I am particularly interested in housing, and some time ago in this House I asked how many people with incomes of over £2,000 a year were living in council houses. The Minister replied that there were over 500,000. I then asked how many people in council houses had incomes of £4,000 a year or over, but the Minister replied that he had no statistics for that. I then asked him whether the figure would be 10,000 and he replied that it might be that number. That is why I wholeheartedly endorse Her Majesty's Government's new policy regarding rent rebates and fair rents, because the object of building council houses was to help the poor, as the object of the Welfare State is to help the poor, the elderly and the mentally handicapped. It is not to help people earning a large income, and it is not to help scroungers; it is to help the poor. Therefore, the Prime Minister's policy regarding rent rebates is, I think, excellent. What could be fairer than to charge fair rents for council houses to those people who can afford to pay them? If a man is earning £2,000 or £3,000 a year, why should he get his council house at £2 a week rent?

LORD SLATER

My Lords, if the noble Viscount will give way on that particular point, perhaps I may say that if he found time to go into some of the debates—the Adjournment Debates; not debates addressed to the Minister of Housing and Local Government including the present one, but to his Department, and answered by Parliamentary Secretaries—in regard to increased rents, particularly in New Towns, then he would get his answer, because the rents in New Towns alone, apart from council houses, which are subsidised in every New Town, have gone up and up, until the two people within those homes have both had to go out to work; to meet the increase.

VISCOUNT MASSEREENE AND FERRARD

Of course, my Lords, as this policy statement says, the poorer families will get rent rebates for their council houses. They will get very generous rent rebates. Furthermore, poor families in non-council houses are also to get rent rebates; they will be able to pay fair rents for non-council houses. That, of course, to a certain extent, will prevent many of these houses that are not council houses from deteriorating into slums: because in the past the rents have been so low that many landlords have been unable to repair the houses sufficiently to keep them in a good condition. My Lords, I really cannot see anyone objecting to the Government's policy on housing.

I think it was the noble Lord, Lord Maelor, again, who complained about the taking away of free milk from children. Here again, anyone in need will continue to get it. Take a man in a printers' union. He is sitting in his chair by his machine—I have been in these places—and the machine is doing all the work. He is sitting down in his chair reading the Sporting Life, and is probably getting £50 or £60 a week. Surely he can spare the cost of three or four cigarettes a day to buy milk for his children. Two or three cigarettes a day; that is all it costs. It does not cost him any more. Really, we must make people in this country responsible for their children if they have the money. We must give them back their pride. Otherwise, if everybody is dependent on the State, the whole moral fibre of this nation will go.

SEVERAL NOBLE LORDS

Oh!

VISCOUNT MASSEREENE AND FERRARD

It is no laughing matter; it is completely true. You have to make people feel they are responsible. You have to do it.

My Lords, I should like to refer to the speech of the noble Lord, Lord Hoy, who spoke about agriculture. Of course he is quite right; and it rather surprised me that nobody has spoken in this debate about agriculture. That is odd, because the House of Lords is supposed to be composed of great experts on agriculture. The noble Lord, Lord Hoy, was rather concerned that if we went on to import levies the housewife would have to pay more for her food. Of course she will have to pay slightly more. But the point is that the money saved on subsidising the farmers, as the noble Lord will see if he reads the Policy Statement on spending (I think it is paragraph 29), will, again, go to those in need. So the food will not cost them any more.

We have to worry only about those in need: we need not worry about, as I say, persons earning good salaries or good wages. They can well afford to pay 8 per cent. or 10 per cent. more for their food. If you look at the average family budget to-day, you see that the amount spent on food, percentage-wise, compared with twenty years ago is infinitesimal. As we have had the cheapest food in Europe for years, then it is perfectly logical that well-off people ought to pay a fair price for it. The farmers have been the most downtrodden species in this country, economically, for far too long. The farm-worker has not been paid a wage anything near that of the industrial worker. Therefore I think it is perfectly fair that the public should pay more for their food. I can see nothing wrong in that, provided, again, that the genuinely poor are helped. The point of the Welfare State is to worry only about the genuinely poor, not to worry about, as I say, people earning £30, £40 or £50 a week. There is no need to worry about them.

LORD PLATT

My Lords, may I intervene for one moment? People earning £30 a week are much worse off, if they have two children, under these proposed measures.

VISCOUNT MASSEREENE AND FERRARD

Actually worse off since when?

LORD GEORGE-BROWN

Since the Government came into power.

LORD PLATT

If the noble Viscount will read my speech he will understand.

VISCOUNT MASSEREENE AND FERRARD

I cannot agree with the noble Lord, because I did not hear his speech.

My Lords, before I sit down—and I am going to by 9 o'clock—I should like to congratulate the noble Baroness, Lady Lee of Asheridge, on her maiden speech. I agree with her. I, too, should like the Government, if possible, not to impose these charges for public museums and galleries, because I think it a great pity that the art treasures of this country which are in public galleries should not be able to be seen completely freely by the public. The White Paper talks about granting an extra £1 million to the Arts, and at the same time it says that the charges for art galleries should bring in £1 million. Of course, if that £1 million brought in by the charges goes to support the Arts, there may perhaps be something to be said for it. But if that £1 million is to go to be spent elsewhere, I think it is a pity to charge for admission to public museums and art galleries.

The other thing I should like to say is that the noble Lord, Lord Shinwell apart from saying that the Government's policy was "pie in the sky" (and I did not agree with that) said: why cannot industry have a minimum wage and why should we not do away with all this charity? Agriculture has a minimum wage; and it might be a good thing if industry had a minimum wage. Up to date, of course, this has been a matter between employers and unions. But you cannot do away with charity (although I do not like that word, since it is not really charity) because there is bound always to be a certain amount of unemployment. Therefore, even if there is a minimum wage, there must also be all these other benefits. I have never objected to the strong supporting the genuinely weak, the genuinely unfortunate. Before the war I was stationed for a time at Maryhill Barracks, in the Gorbals. I have seen my share of poverty and it is not a pleasant thing. Anything that can be done to alleviate it ought to be done. I support the policy of Her Majesty's Government as set out in this White Paper because more money is to be spent on alleviating genuine poverty. I cannot understand why the Opposition appear to object to this. I would say that this is a most admirable White Paper.

I will merely repeat, before I sit down, that there are only two choices: either a compulsory wages and incomes policy—which probably means, if it is to be made effective that it will have to be enforced with bayonets—or the present policy of Her Majesty's Government, an appeal to the sense of responsibility of the people of this country, in combination with the Industrial Relations Bill. It is extraordinary that the Opposition Party did not object to a compulsory wages freeze and incomes policy yet do object to this mild measure for the unions. I fail to understand that. Opinion polls among trade unionists appear to favour this Bill. My Lords I feel sure that when the Industrial Relations Bill goes through Parliament and its provisions, including a secret ballot, become law the common sense of the British working man—and I know plenty of them—will prevail; and that when Lord Beswick stands up in this House in eighteen months' time, or perhaps sooner in an economic debate, he will have to eat his words.

9.5 p.m.

BARONESS BIRK

My Lords, the few remarks I want to make are concerned with the Government's policy on health, and here I must declare an interest as I am the Chairman of the Health Education Council. I welcome the Statement last week by the Secretary of State on the extra help which is going to be given to the old, the mentally ill, the chronic sick and alcoholics; and with others I await with interest his coming Statement on family planning, for I have been pressing for a comprehensive contraceptive service ever since I was appointed Chairman of the Council. In mentioning this at this stage, perhaps before the plans are finalised, I hope that the plans will not just be an extension of the present scattered and inadequate facilities turning them into a rather larger contraceptive patchwork quilt.

Since this debate is centred round the economic situation, I would remind the Government of the cost-effectiveness (which is a very important point to-day) that will result from having a comprehensive contraceptive service which will be a real investment not only in human and social terms but in economic and population terms too. Also, I feel it my duty to point out that any wide service of this sort, if it is to be successful, must enjoy the strong backing of health education. I was also pleased to note the Secretary of State's interest in health education as it was reported in the Press last week, and I am glad to see that from his answers to questions he appeared to recognise that many of our contemporary illnesses are caused by our own behaviour and attitudes. It is changing these which is the basis of modern health education. Therefore anything that deters people from maintaining and improving their health and well-being is, in my view, not only short-sighted but socially and economically bad.

This, I am afraid, applies to the proposed increases in dental charges. Last March there was published a Government social survey on adult dental health in England and Wales for the year 1968. It is very interesting to note, looking back at the papers, that the Press handout from the Department was headed: "We are winning the battle against tooth decay"; whereas the handout put out by the British Dental Association had the headline: "Battle against dental diseases has not been won." At that time the British Dental Association said To-day's national dental survey shows a great deal of untreated dental disease, particularly among the lower income groups where treatment charges act as a deterrent. Although there is a continuing improvement in dental health the community as a whole is not attending for the treatment it needs. This report also showed that 36 per cent. of the people of this country over the age of 16 have none of their natural teeth; and that when we get to the over 55s the percentage jumps up to 72.

Following this report the Health Education Council itself conducted a survey among mothers of very young children, primary schoolchildren and teenagers, and found that the only dental health rules that they were following generally were visits to the dentist. The other ones, such as brushing teeth regularly and not eating between meals, and things like that, were being ignored completely. It is also true that the dentists recently made representations to the Secretary of State asking that no further financial obstacles should be put in the way. When the White Paper appeared the British Dental Association said: We are convinced that the proposals as set out in the White Paper represent a serious threat to the dental health of the people of this country and that we have a duty to point this out. My Lords, all the evidence shows that initially the charges will depress the demand for dental care. It is true that in some instances they may favour those who are regular attenders at a dental surgery, but the great problem about dental health in this country is the need to encourage irregular attenders to become regular attenders before they get to the stage where all that can be done for them is an extraction job. According to the dentists, it will also discourage dentists from operating in areas where the attitude to visits to the dentist is less favourable. This applies mainly in the North-West and in South Wales. It will mean that there will be an increasing backlog of cases of dental disease and, as was pointed out by the noble Lord, Lord Boothby, a return, unfortunately, to the conditions which existed in the days when people said it was much better to take teeth out, and that it was easier for them; and in this instance it would probably be cheaper—

THE LORD CHANCELLOR

Taking them out is all you can do with"snappers".

BARONESS BIRK

My Lords, I wish that the noble and learned Lord on the Woolsack would make his asides louder; they are very amusing, but I just cannot hear them.

THE LORD CHANCELLOR

My Lords, I said to the noble Baroness that taking them out is all you can do with "snappers".

BARONESS BIRK

My Lords, all I am trying to do is decrease the number of people who have "snappers". We do not seem to be sufficiently aware that dental disease in this country is also a social problem. Though it may not account for long illnesses, like some other diseases do, it does account for a number of short-term illnesses. It affects other parts of the body, and a great many man-hours are lost as a result of it.

What I think is a very unfortunate proposal—I am hoping that these proposals will not end as final decisions—is the one to reduce the age for dental care free of charge from 21 to 18. Where this has been tried, in New Zealand, experience has shown that young people who are finishing their education or leaving home do not immediately get into the habit of going regularly to a dentist; and this may affect the pattern of their conduct all their lives. If free dental care were continued until they were 21 there would be a better chance that they might visit a dentist regularly. The views I am expressing are also the views of the dental representative on the Health Education Council, who is also the Chairman of my Dental Health Education Advisory Panel and a distinguished ex-President of the British Dental Association.

I hope from the point of view of health education that the Government will not insist on going on with these proposals but (as was said by my noble friend Lady Lee of Asheridge, whom I congratulate on her maiden speech) that they may look at the matter again and change their minds about their original decision. However, the only known scientific method of counteracting the inevitable deterioration of teeth is by the fluoridation of the public water supply. I suggest that this is a good economic proposition for the Government, but the only way that we shall ever achieve it—we have tried all sorts of other ways, through education and propaganda—is by legislation. The more we try to educate people in favour of fluoridation, the louder and more articulate becomes the 2 per cent. in the country which is against it. It is really a case of the dedicated barking up the wrong cause. There is very little that we seem able to do about it.

The question of increased charges for school meals and milk has been dealt with by a number of noble Lords, in particular by the noble Lord, Lord Platt. I should like to quote a sentence from a leader in last week's Lancet, which said: The Government has failed to grasp that these supplements represent for a large number of children the difference between adequate nutrition and malnutrition. What we arc concerned about in the field of health education is that where free milk is cut out, and children are given money to take to school to buy milk—which is presumably the way it will work out—the children are going to buy sweets and chocolate and sweet drinks, and then we shall have even more dental decay and increased obesity. One of the problems we have in this country is to get people to reduce the amount of sugar they eat.

May I suggest to the Government that there is another way of getting revenue, by increasing the taxation on sweets and chocolates, which at the moment is 22 per cent. and brings in £75 million a year? It does not seem to have reached the point of diminishing returns, because during the eight years this tax has been running consumption has gone up. The saving on dental charges is estimated at £14 million. I should have thought that this would be covered by increasing the tax so that dental charges would not need to be put up.

Without going into the political philosophy behind the scheme, one of the problems was illustrated by what the Prime Minister said on "Panorama" last week. He was asked whether people would not be worse off with 6d. off income tax and with the increased charges. He replied that this would only be so if it was assumed that the pattern of our spending remained the same. When he was pressed as to what should be given up, he said—and I am sure he meant what he was saying—that examinations were free of charge, and he found that most people accepted that they should pay a reasonable amount for such things. With great respect, I would say that visits to the dentist have a low priority in most budgets. Beer, bingo, betting and a better television set all come well above dental treatment. For all these reasons, I hope that the Government will look at this again and see what they can do about it.

I am aware that in the scheme set out by the Government exemptions are based on the same levels as under the Labour Government. But, as my noble friend Lady Summerskill pointed out, many people will not apply for exemptions or take up benefits due to them whatever they are called. Although we in this House, and Members of another place, may say that these exemptions are rights, to many people they appear not as rights but as charity, and the only remnant of human independence and dignity left to them is to refuse something to which they are entitled but which they still find humiliating to accept. We may think this is right or wrong; but the fact is that the people do not apply and therefore they are going to suffer. This is why my own view is one of greater universality, with more taxes on the better-off rather than selectivity in these fields, which means that a certain number of people—not necessarily the very poor but those on small incomes—will lose out. I do not think that as a country we can afford this, particularly when we are discussing children.

Finally, I would say that many people feel that the individual's health is his own concern. But this again is rather a debatable point when we live in a society and are not islands unto ourselves. What I think is absolutely true is that the health of the people is a matter of social concern, something with which all are concerned, and we must make as sure as we can that there are not too many losers in this field.

LORD PLATT

My Lords, before the noble Baroness sits down, as she has spent a good deal of her time on the important question of dental health, I should like to ask her this question. I personally believe that fluoridation of the water is perhaps the most important factor of this. Is there any law against fluoridation of the water? If not, why do we not do it?

BARONESS BIRK

The trouble is that it is necessary to get the water supplier to agree. There are often several local authorities that make up the water supplier, and out of over 200 local authorities in this country, 110 are in favour and the others are against. It is almost impossible. You have only to get one or two people on an authority disagreeing and the whole thing falls down. It is not democracy, in the sense that the majority makes the decision; it has to be an almost unanimous decision. It is clear that unless there is legislation—and this is not a Party point, as I am sure noble Lords opposite will agree—we shall not get fluoridation.

9.22 p.m.

LORD ROBERTHALL

My Lords, this is the first occasion or, which I have participated in a Censure debate in your Lordships' House. When I was a civil servant I had to listen to a good many debates of this kind in another place, and I always felt that there was a sort of ritual dance about it—the pots and the kettles calling one another black, In your Lordships' House, where a somewhat more detached view is taken, one could not feel that and, although I am a Cross-Bencher, I feel encouraged to participate in this debate.

On the measures of October 27, I think that, on the whole, I agree with the first part of the speech of the noble Earl, Lord Jellicoe. The measures were intended in two ways to shift the forces acting on the economy. The first was to place more reliance on competition and on incentives. Mr. Douglas Jay long ago enshrined the opposite doctrine in the well known phrase, "The man in Whitehall knows best." Long experience in Whitehall made me increasingly doubtful about that proposition. I think there are two reasons for that. First, the economic system is very complex, and it is doubtful whether the man in Whitehall knows as much about it, or can reach such good decisions, as the man who has the responsibility and the simple and straight-forward criterion of profit and loss. Secondly, there is the great problem of getting enough people with the ability to deal with the complexities of Governments. I must say, however, that I somewhat regret the demise of the I.R.C. I thought that on the whole they accelerated the reaching of the ends which ideally the competitive system is supposed to reach, and they did not try to interfere too much They found out where something was wrong, put in a man they could trust, and left it to him. Also, in passing, may I say that I share my noble friend Lord Boothby's regrets about the Consumer Council.

The second part of the new lock is the movement away from spreading social benefits too thinly and concentrating them more on those in real need. The arguments for doing this are familiar, and I will not rehearse them. Although many speakers to-night have argued that they do not go far enough, I must say that I think it is a move in the right direction, and I hope that the arrangements will be smoothed and extended. I was interested in one remark of the noble Baroness, Lady Birk, although most of her speech was too technical for me. When I read the debates which took place in another place last week, I was tremendously struck by the number of speakers who called attention to a point to which the noble Baroness referred; that is, the number of people who do not take up their entitlements because of ignorance or fear of bureaucracy. It seemed evident that an enormous increase in welfare could be secured if more entitlements could be taken up. We ought to welcome the statement of the Secretary of State for Social Services that the Government are launching a campaign to encourage people to take up their entitlements. He said also—and I think this is important—that he hoped that the family income supplement would act as a passport for other benefits so that people would not have to establish a case. At any rate, this is the direction in which one ought to go, and I hope that the Government will look at the idea of a negative income tax, which is supposed to deal with the whole matter in one lump. As the Leader of the House has said, the Conservative Party made it clear that they were going to move in these directions, and it is not surprising that they are moving, and something can be said for them.

But, my Lords, they agreed—and a number of speakers to-night have agreed—that it would take a long time before the effect of these measures was fully operative; they are only a start. Whether their results will be more or less "economically sound" and "socially just"—to use the words in the Motion of the Leader of the Opposition—we shall not know for an even longer time. My difficulties arise when I ask: "Have we all this time available?" The noble Viscount, Lord Massereene and Ferrard. used a homely agricultural simile about the sheep in the field. He did not ask himself whether they might be suffering from contagious abortion, which would have required more immediate measures. The difficulty is whether our present maladies will wait for us. Industrial relations are undoubtedly our trouble to-day. The Government have put forward a programme to deal with one part of this question, and your Lordships had a most constructive and responsible debate on November 4. It was generally agreed that there was something wrong; that we ought not to go on saying that our system is the best in the world and that it ought to be left alone.

However, there is another aspect of industrial relations, one that is referred to in the Motion, and has been dealt with by the noble Lord, Lord Shinwell, and many other speakers to-night. It is the problem of inflation. Clearly, it is now due to the wages explosion. Prices are rising, not because of profits, not because of import prices, but, as is generally recognised, because of the rapid increase in wages. Many countries are suffering from this, but we are nearly at the head of them.

The dangers of cost inflation under a policy of full employment have been recognised for a long time. They were first recognised in this country by the post-war Labour Government of the late Lord Attlee when (I think in 1948) they produced the first White Paper on the subject. Since then we have made many attempts to deal with this problem, of which the most drastic was the prices and incomes policy of the last Administration. I thought they began very well with that, and that the great misfortune occurred when it was abandoned. I agree with noble Lords who have said that that abandonment was largely the cause of the present wages explosion.

I think the cause goes back through several Administrations. The fact that the present Government have inherited the problem is not, I submit, a reason for not doing anything about it at this point. Here I part company from the noble Earl the Leader of the House. He said that we must avoid panic and that those who spoke about the present dangers of inflation were neurotic and unhealthy. If that is the result of being neurotic and unhealthy, then I am afraid I am approaching that sad state. I find myself much more in sympathy with two noble Lords under both of whom I had the privilege of serving at one time: the noble Viscount, Lord Amory, and the noble Lord, Lord Thorneycroft, who in different degrees expressed more anxiety about this matter.

We are only just waking up to the acceleration in the present rate of inflation. When there is a small rate of it there are what economists call "tradeoffs". There are some advantages of full employment, and many economists think (and I am not sure they are not right) that there is faster growth with some inflation. But as the rate of inflation becomes greater the dangers become greater and the compensations become less. Now we are experiencing the worst of all worlds: we have high unemployment, very little growth, and a very rapid rate of inflation. As is well known, there are grave objections to this. There are generally disruptive effects on the economy. People have to attend to price difficulties instead of getting on with their work, and serious social injustice is involved.

The benefits of inflation go to the strong, and at present the strong in our community are those workers who are, best organised and in the strongest strategic position. They are the ones who are on the whole, in the middle income range. The rich do not benefit from inflation at present. This may sound extraordinary, but if one looks into the position one can see that with present progressive rates of taxation, and a rate of inflation of about 7 per cent., it is almost impossible for them to benefit, except perhaps by speculation, which it is very difficult to keep up. Until 6d. was taken off income tax, a man on £20,000 a year, with a 6 per cent. rate of inflation, needed an increase of 28 per cent. in his salary to stay where he was.

Of course we do not weep too many tears for the rich, but it ought to be pointed out that they are losing from inflation. But the real sufferers are the poor: those on fixed incomes; workers who are badly organised or not in a strategic position; those on State benefits. And I think it is a sad reflection on the situation that the great trade union movement, which was once based on compassion and on sympathy for the weak, is now lending itself to a policy which I am quite sure is hitting the porest and the worst-off people in the community.

Besides this, the community suffers economically because of the stagnation and because of the bad inflationary effects on company liquidity. With prices rising at their present rate, for a company to keep its working capital intact it has to put aside a substantial part of its taxed profits, and we suffer always from a lack of growth. Sometimes we can catch up with it, but where we are suffering from the strong disincentives to investment we shall never catch up.

Also there are the well-known social and political dangers of inflation. Belief in the value of money dies hard, and that, no doubt, is why we have not had very serious disruptive effects so far. But the present rate of inflation of somewhere about 7 per cent. cannot be concealed from anybody. Everybody knows now that we are in the state of highest inflation and nobody—perhaps with the exception of the Government—feels much confidence that this rate will not accelerate. It is a fact of history and of experience that, once people become conscious of the rate of the inflationary situation, they act in a way which makes it worse. They get rid of their money faster and faster, so that the disease gets worse and the remedies more drastic. In many countries, as your Lordships well know, as a consequence of this people get so upset by the grave injustice that the result is grave disruption of the social and political system; and I do not think we ought to say that that cannot happen here.

We now come to the difficult problem of what can be done about it. I thought the noble Viscount, Lord Amory, gave a very good account of the alternatives. It can be allowed to go on—though I think there are strong reasons against that. Or one can try deflation. At one time it was thought that this was the easy way, and I believe that Mr. Jenkins tried it to some extent. But it did not work. It can be done: there must be some amount of deflation that will give price stability. But I was glad that the noble Earl the Leader of the House said that it was not the policy of the present Government to push unemployment to the point where we got price stability. The noble Lords, Lord Balogh, Lord Amory and Lord Thorneycroft, all emphasised the same point—that the economic and social stresses would be too severe. I can remember very well receiving lectures from central bankers when I was economic adviser to the Government, to the effect that all we needed was a bit more deflation, and that our attempts to combine full employment with price stability were bound to fail. But central bankers have now changed their tune, and it is not only the Governor of our own central bank but many others who are saying that it cannot be done by deflation; there must be an incomes policy.

Then there is the voluntary incomes policy. That has been tried here and elsewhere. At one time I was a strong believer in it. I very much agree with the noble Lord, Lord Balogh, and indeed with many other speakers, when they say that full employment is good in itself; it is something which adds dignity to human relations. I used to think that in order to have this great benefit we could persuade the workers to a voluntary incomes policy; that they would pay something. But it has been tried. The T.U.C. used to co-operate with the Government in their attempts to get a voluntary incomes policy, but it broke down because they could not carry their members with them.

So we come back to some form of incomes policy. People say, "What do you mean by that?" I know exactly what I mean by an incomes policy, but it would take all night to go into all the details, and I will not do that. But, first, there must be a norm, or guide-lines. Secondly, there must be some machinery for exceptions and for differentials. It is not often remembered that Mr. Selwyn Lloyd started off with a serious incomes policy, but it broke down because he started with the nurses and lost all public sympathy. There must be exceptions, just as there must be machinery. Finally, there must be in the end some form of sanctions. My own view is that the disease has now got so serious that we need a bit of all of these. We do not want over-full employment, but some deflation. With over-full employment I do not think any incomes policy is going to work. That has been found recently in Germany, in the Netherlands and in Japan, all countries that used to be held up as bright examples of how to combine growth and price stability.

You must have public opinion behind you; and here I agree very much with the noble Viscount, Lord Amory, when he says that if we take this seriously, as I am sure we must, there must be more education of public opinion. You must have some form of sanctions, and it was very much in accordance with my own thinking when Lord Amory, and, to my surprise, Lord Thorneycroft, who I do not think always felt this, both argued that we ought at least to keep something in the cupboard and not just get rid of the machinery for incomes and prices policy. I hope I am wrong in saying that I think we are in a dangerous position, but the inflation is very heavy, and it is a pity that the Government should be burning their boats in this matter. Finally, the most important thing is to take it seriously. It will cost us something, and if we have to face strikes and interruptions I am sure that the country can take it, if it is explained.

I have almost finished, but I should like to add a word or two about the present policy. I understand the policy of the Government to be, not to have an incomes policy, because it did not work, but to stand up to claims in the public sector, to encourage the private sector to stand up, and not to bail out those industries becoming bankrupt. I thought that this had in it the elements of a policy, particularly the determination to stand up to claims. But the disease is worse than it seemed to be even a few months back, and the toughness appears to be less than it was. We have not even a norm or a guiding light at present. The Prime Minister says that an incomes policy would be a contradiction of a free society. I have a great respect for the Prime Minister, whom I think to be a man of principle, but I wonder whether he is not being a little misled by the sound of the words "a free society". What is a free society? It is not a free-for-all. There have to be some constraints. Unemployment removes a lot of freedom, and inflation removes a lot of freedom. We have to look at the whole situation as it exists.

9.46 p.m.

LORD MOYNE

My Lords, my intervention, especially at this late hour, will not be unduly long because I am no economist, but I intend to speak entirely on the inflationary question, which I think is absolutely over-riding. I could wish indeed, being no economist myself, that the Government had paid more heed to the weight of expert opinion of so many economists or even of the Governor of the Bank of England; but that is another matter. In any case, when feeling critical enough of one's own Party to leave off silting on the fence, it is no joy to stay longer than necessary impaled on the horns of a dilemma. My dilemma has been how to look at the Motion, when I believe that the Government's long-term economic strategy is sound, but that they are showing themselves to be completely blind by their short-term tactics, or rather by the lack of any tactics other than pious exhortations, to the need to check the cruel flood of domestic inflation which is likely, if not checked quickly, to sweep away all their long-term planning and cause much human hardship besides. I think that the hatches should, in Lord Thorneycroft's phrase, be battened down at once before the waves beat in. It is too late afterwards.

The danger behind the self-defeating clamour for more pay comes not so much from the extremists who set it off and parade with placards saying: The only way To get more pay Is strike to-day. The real weight of the wage pressure comes not so much from the extremists as from the understandable attitude of moderate, sensible, unselfish people who see prices rising, and threatening to rise even more—such as the postage increase in January and so on—and who seek to force the pace of pay increases simply in order to stay where they are. If the Government could hold prices steady for the time being, and even bring some of them down, the internal pressure for illusory wage increases would be eased. This, I suggest, would be helped enormously by the immediate fulfilment of the Government's promise to abolish selective employment tax, combined with prices and incomes control of a temporary nature and, in places where prices were actually on record as having been put up on account of S.E.T.—this was an excuse that was widely used, and indeed usually it was necessary—they could be reduced by the same amount. We would do well to remember that the last Government's freeze began to break down in 1966 because of the rise in prices sparked off by S.E.T. which made the whole thing seem nothing but a cheat.

These considerations seemed obvious enough already last August, when I wrote them in a letter to The Times and received support from economists such as Sir Roy Harrod and others. Prices and incomes control they emphasised as an essential concomitant of such reductions in taxation. My point is that only a visible reduction of some prices can give confidence, just as the increases shook confidence when S.E.T. began to take effect.

The Government are pledged to abolish this tax. The Budget surplus is so vast that a comfortable margin would remain without S.E.T., especially since half the year's proceeds have already been collected. The Chancellor of the Exchequer has said, I understand, that the forthcoming reductions in income tax will be balanced by the savings being introduced—that the effect of the two will be neutral—so the margin for abolishing S.E.T. is unaffected, and indeed some other reductions in the taxation of consumer goods would clearly be helpful.

The Conservative position at the Election seemed to me perfectly logical. Their strategy had always been one of economic freedom, but at the time of the Election the present Prime Minister put forward, as a priority, the checking of the inflationary spiral. That, to me, implied a temporary control of prices to check the spiral of wage inflation, and a management of wages compatible with stable prices—but not, of course, any intensification of the credit squeeze, which would be disastrous. My interpretation was clearly far from justified.

Mr. Maurice Macmillan, on the wireless last Sunday, castigated those holding a different economic view from himself as proposing something criminal—which seemed to me somewhat intemperate language—and complained that a prices and incomes policy would involve compulsion. But, my Lords, as indeed the noble Lord, Lord Boothby, has already asked, when did the Conservative Party become the Party of laissez-faire? When did they cease to be the Party of discipline and order? Of course we believe in freedom, but unqualified free enterprise can become, with us, as much of a shiboleth as did nationalisation with the Labour Party. Free enterprise is a means to develop prosperity, not an end in itself. Freedom, my Lords, needs the protection of order in the economic as well as in other fields.

9.53 p.m.

LORD REAY

My Lords, the Chancellor of the Exchequer on a former occasion closed his speech with these words: This is a Budget for growth, …It is a Budget not just for today, but a Budget geared to the needs of the whole year ahead. and to the period beyond that, too."—[OFFICIAL REPORT. Commons, 14/4/70, col. 1253.] That Chancellor of the Exchequer was Mr. Roy Jenkins, and his speech the Budget Statement on April 14, 1970. That was seven months ago, and it is unarguable, as those words suggest, that the economic situation to-day, which this Motion of Censure gives us an opportunity to debate, reflects the consequences of that Budget's policies. It reflects also the consequences of earlier policies, including more structural and longer-term policies, of the last Government, as well as trends which those policies ignored or, for other reasons, failed to influence. What the present economic problem cannot reflect is the policies of the present Government. The policies of the present Government may have determined confidence; they cannot have determined the facts. I should like, therefore, to look a little more closely at some of the elements in the present economic situation.

I should like to start with the question of economic growth and its consequence for the increases in real incomes, perhaps the most obvious test of success of a modern Government's economic policies. The real rate of growth of this country's gross national product in the last decade has been outstandingly worse than that of all our major trading competitors. This is the point that I was pleased to hear the noble Earl the Leader of the House himself emphasise at the start of his speech. Moreover, it should be pointed out that this growth rate was worse during the last six years than during the previous six.

Since 1968 the gross national product has increased by less than 2 per cent. per annum, compared with a rate of some 3T per cent. per annum over the previous decade, and an average of about 5 per cent. in the main O.E.C.D. countries, excluding Japan. Total output, forecast by Mr. Jenkins to rise during this period at an annual rate of 3½ per cent., does not seem to have expanded at all in the first six months of this year. The expectation by the people of this country that their standards of living should improve in line with those of other developed countries have been frustrated

It was one of the essential requirements given by Mr. Jenkins for the future health of our economy in his speech on April 14, that there should be an improved and sustained growth of industrial investment. It is such investment that is our provision for economic growth in the future. In the list of our major O.E.C.D. competitors this country has appeared sometimes one, sometimes two, from the bottom for its rate of industrial investment over the last ten years, and it has been estimated that in the first half of this year—the last period under the previous Government—fixed industrial investment was static.

It was another of Mr. Jenkins's requirements that we should maintain our competitive position, but this year, taken quarter by quarter, our current surplus has been declining. It is also estimated that wage costs per unit of output have risen more than those of Japan, the United States and France: which means that, given an equal inflationary experience for ourselves and for those other countries, our own export prices will rise faster and so our own competitive position will deteriorate.

These factors are the long-term factors which describe the depressed and unimproved position of this country, as a country with the task of surviving on equal strength with the other countries of Europe. Economic growth may be morally overrated as a philosophy, but not to grow when our economic and political competitors are growing (if the noble Lord, Lord Balogh, were in the Chamber I should address these remarks principally to him) is for us to decline in political power.

On top of that, there is the new problem of our age: which has produced inflation at the same time as there are underutilised resources of plant and manpower. Figures published by the Department of Employment and Productivity make it plain that from the end of 1966, for the first time, wages as a whole started to rise while unemployment was still rising; in other words, the periodic rise in wages proved for the first time impossible to stop by a policy of repressing demand. One of the consequences of this malignant combination has been the rise in prices. In the year 1967–68 prices began to move on to a higher level of annual increase than in the past. The level was higher still in the year 1968–69, and higher still—at a rate of about 7 per cent.—in the year to August, 1970. By August, 1970, average weekly earnings were some 13 per cent. higher than a year earlier. So that since the level of productivity increase is about 3 per cent., and output is expanding at under 2 per cent., prices must still be on a rising trend.

The problem., therefore, is twofold. On the one hand, there is the peculiarly low level of this country's economic activity, and, on the other, there is the inflationary problem of the age, where wage increases can continue to push up prices even though the economy is held depressed to prevent the process. Neither of these problems was solved by the last Government. Growth was minimal and deteriorated; the rise in real incomes was minimal. Consumption rose only a little over 1 per cent. between 1965 and 1969—proof of how little value wage increases have been to those who demanded them. Investment was minimal.

It was the last Government's proud boast that, on the basis of a single act of involuntary policy, they solved the balance-of-payments problem. But even on a continuation of their policies, it is doubtful whether this solution could have been permanent. To control wage increases they introduced an incomes policy. Indeed, they introduced a statutory incomes policy on two occasions: the first time, in July, 1966, to avoid having to impose on the country the effect of a devaluation; the second time, in March, 1968, to assist the effects of the devaluation which by then they had had to impose. For a short period, both these policies appear, together with the deflation that accompanied them, to have been successful in containing wages. They then abandoned an incomes policy in exchange for a reform of the trade unions before that policy was, in turn, abandoned; and after that wages were allowed to rise, with the consequences that we have seen.

This is a poor record, my Lords. The noble Lord, Lord Balogh, offered us a curious analogy, I thought, to American experience which seemed to suggest that, like the United States, we were about to move from the idyll of a Kennedy type era, with expansion, full employment and so forth, into the darkness. We may indeed be about to move into the darkness, but it will not be out of the light. I sympathise with the Labour Opposition for their political obligation to attack the Government on the question of the state of the economy, and I understand that they should wish to concentrate on the future possible effects of future possible policies. But in a debate on the economy I should not wish to be sitting in their place. And if they desire to introduce morality as an element of their criticism—and the noble Lord, Lord Beswick, talked about the Conservatives' elevation of selfishness into a moral principle—then I would only suggest that morality must belong first of all to those who have proved their capacity to discharge successfully the task of improving the economic welfare of the people of this country—a task, after all, which the last Government voluntarily, proudly and confidently assumed.

I should like to turn from how the present situation has been determined to how it may be alleviated. I propose to make some remarks about inflation only. I will simply extend a little further the precedent set by the noble Lord, Lord Beswick, in giving this question priority. It is the overriding problem, the problem which is causing an increasing measure of public alarm, and one which it is not clear yet the present Government are going to solve. If that problem was solved, then the rest of their measures would be readily accepted. The present phenomenon of inflation has been described as the first crisis in economic theory since the 1930s; the first time since then that the facts of economic experience have appeared in a conjunction considered impossible by the textbooks. Now if it is the case that the primary cause of inflation is the pressure of wage demands which industry has neither the strength nor the incentive to resist, then the problem is not an economic problem but a political one. And if it is a political problem then a solution does not depend on a new development in economic theory by professors in Chicago or elsewhere, but on political leadership.

It is a fact of our time that power belongs to the workers, if I may be permitted to use that naked Marxist term. It is a consequence of their recognition of this that each group of workers looks for new possibilities for the exercise of this power; and the complexities of our technological society give the opportunity for each group to discover and exploit the dependence of society on its own vital contribution. This process has clearly not been led by the trade unions.

The trade unions, in fact, have for the most part been led, albeit reluctantly, by their members. The trade unions have seemed in the process to occupy a lonely, almost a deserted, position, standing powerless and forlorn halfway between labour and the Government. They have been tentatively willing to collaborate with Government but have not always been supported by Government. When the Labour Government introduced its Bill for trade union reform, at last the trade unions found a role; but, from the point of view of the country, it was a negative role. They were enthusiastically reunited with the workers, with their membership, but in direct antagonism to the Government and to the welfare of the country. To-day it seems, as a consequence of this, that the unions are willing to support every demand for higher wages. Rejected by the Government, they are simply prepared to ignore the economic consequences to the country of their aggregate demands.

It is undeniable that the workers today are highly aggressive in their demands on society. Unlike in the 1930s, they have power. Yet the working class is excluded from the middle class by the houses they live in, by the conditions they work in and by the way in which they are approached and handled by management. Their sense of exclusion can only be reinforced by the way in which television is entirely directed towards the middle class. It is small wonder that they are aggressive. It is a tragedy—and in the long term could also be a disaster—that their demands for ever-increasing wages, the expression of their aggression, should produce, even for those who receive the increases, so little reward.

It seems to me that the satisfaction of this aggression will ultimately depend on the working class for the most part losing their sense of being an excluded class, of acquiring the same educational possibilities as the middle class, the same conditions of work as the middle class, the same ambitions and the same sense of individual responsibility within their jobs and within society. But it also depends on their acquiring a sense of a share of responsibility and a sense of control over the decisions taken by the firms for which they work and the Government by which they are led. Such goals are necessarily long term; and such satisfaction will have to be postponed. But the debate on industrial relations is in any case about how to postpone these satisfactions.

To get acceptance for such a postponement, to get acceptance both by the unions and their membership, but first by the unions, for a share of the responsibility for the future of this country as a whole, must be the task of political leadership. The last Government proved that there was such a possibility; but they failed to establish it on a correct, and therefore a lasting, basis. What in particular they failed to do was to give any sense of political responsibility, any actual sense of responsibility for the choice of the policies and the management of those policies, to labour and labour leaders.

And of course if such a co-operation, such an integration, of the divided leaderships of this country can be achieved, then economic growth as a policy can be resumed without excessive risk. Management and labour and society may then all learn to identify more closely with our country's economic competitive performance. It is too early to judge whether this Government can provide the necessary leadership. But anyone can be excused who is not yet convinced that they can.

10.8 p.m.

LORD WELLS-PESTELL

My Lords, it is inevitable, in a debate that has been going on for something like seven hours, that at this stage one cannot say anything new or something that has not been referred to before; but I want to deal with just one section of the community, the section which is depressed more than any other group in our society. I suppose that we on this side of the House should not be surprised, nor should we show any amazement, as some of my noble friends on this side have shown, at the Government's proposals for dealing with the plight of those living—if "living" is the right word—in poverty. Their problem was highlighted during the General Election by none other than the present Secretary of State for Social Services, Sir Keith Joseph, who complained then that there were between 7 million and 10 million people living on or below the poverty line in this country. He went on to say that this situation left no room for complacency.

Notwithstanding their awareness and their accurate assessment of the situation, the Conservative Government, in my view, have reacted in a manner which is in keeping with the true Tory tradition and philosophy. I hope your Lordships will forgive the expression, but they have acted in this way by giving to him that hath and taking away from him that hath not. In my view, the Chancellor's package deal is both dishonest and also dangerous. It is dishonest because it does nothing to improve the problems that the Government referred to during the Election. We have seen as recently as last night that the Prime Minister is silent about inflation and the worsening economic situation in this country. I say that the package deal is also dangerous because it adds to those inequalities which already exist in our society. It is stated that, in all, income tax concessions will cost the Exchequer about £350 million in a full year. But how much of this amount of money will go to help the poor, those who are living in real poverty? Most of it will go into the pockets of the 7 per cent. which owns 84 per cent. of the private wealth of this country.

The average industrial worker with a family of two children will benefit to the extent of 4s. 2d. a week. This amount, and larger amounts, will be eaten up several times over by the proposed increases in school meal, prescription and dental and spectacles charges, not to mention rising prices. Only two days before the Election the Prime Minister said that he would act directly to reduce prices, and, if my recollection is accurate, the Tory Party said much the same thing in their Election Manifesto.

I should like to ask the Minister who will try to defend the Government on this matter to give the reasons why over 3,000 food prices have risen since June 8. I should like to know what the Government have done, if anything, to prevent prices from rising. I should like to ask the Government how many price increases they have prevented. The Prime Minister is going to stake everything on competition. These are meaningless words; it is humbug. In to-day's papers we see that one large firm manufacturing bread decided to raise the price of its loaf last week. To-day another bread firm has followed suit and we are assured that by the end of the week all the bread firms will raise their prices. Within the last week or ten days we have seen this happen with petrol. One company puts a penny on the price of petrol and every petrol company follows suit. Where is the competition that is going to keep down prices? It is just meaningless.

I suggest to your Lordships, with great respect and quite sincerely, that the Government's measures are bound to make life harder for the poor. The Family Income Supplements Bill, which is parsimonious in the extreme, is designed to assist about 164.000 families whose incomes fall below the Supplementary Benefits level. It will make very little practical difference to those families. The Government are prepared, and are proposing, to set aside £8,600,000 a year for this purpose—but not until August of next year. It means that these families cannot expect any immediate relief. I ask the Minister: is it really beyond the ability of this Government to give financial relief sooner? Is it impossible to operate meanwhile an emergency scheme through Supplementary Benefits? In view of the ever-increasing rise in prices, it is going to be a very difficult and harsh winter for the poor, and I think it is reasonable to ask the Government to act more quickly in this matter.

I read the speech that the Prime Minister made at the Lord Mayor's Banquet last night, when he outlined the philosophy underlying his brand of the new Toryism. He said: As individuals, we have lost sight of our duty to accept responsibility. He went on to say: The freedom is yours, but yours to use aright". What freedom does he think these 164,000 families have, who have been living for years below the poverty level?

LORD ABERDARE

My Lords, would the noble Lord perhaps tell us what his Government did about it?

LORD WELLS-PESTELL

My Lords, if the Minister does not know of the increases the last Government gave in these fields immediately they took over, I suggest that he looks it up. There can be no freedom for people who are living in poverty. If the Prime Minister wants to give freedom, I suggest that he must see to it that all those living in poverty receive the amount which the Supplemental Benefits Commission lay down is essential for families of a particular size.

There are several objections to the Family Income Supplements scheme, not least among them that it requires poor families to parade their poverty (which I think is a humiliation) in order to get a little help. Would not increased family allowances reach a far great number of needy families?

During the Election the Conservative Party were convinced of the need for increased family allowances. In April of this year, Mr. Heath, the late Mr. Macleod, and other Tory leaders damned the then Labour Government for not providing a further £30 million for that purpose. The amount now being set aside under the Family Income Supplements Scheme is a derisory amount, a shamefully small amount in view of the Government's intention, if their Election Manifesto is to be believed, to restore at the same time in the tax system the provision for children's income to be taxed separately from the income of their parents.

Your Lordships will recall that the Labour Chancellor of the Exchequer, Mr. Jenkins, abolished the privilege which enabled children's incomes deriving from trusts, presumably to pay their public school fees, to be taxed separately from their parents' incomes. This egalitarian tax reform added no less a sum than £25 million to the Exchequer in a full year. The Government are prepared to set aside a mere £8 million for families living in poverty. In practice they are unlikely to get anything like that sum. And I suppose that next April we shall find the Government restoring the £25 million to families rich enough to afford a children's trust.

I suggest to the Government that if they are to retain the confidence of the people of this country which they received only a few months ago, they need to change their tune and they need to change their motto from, To him that hath it shall be given to, hath filled the hungry with good things and the rich he hath sent empty away. It is doubtful whether 50 per cent. of the families designed to benefit from the Family Income Supplements Scheme will benefit. As I have said, many will not want to parade their poverty or subject themselves to a means test. Others will not want what they feel is charity. We know this; every social worker knows it; the Ministry of Social Security know it. There has been a poor response in the past to various benefits. The take-up has always been low, as we have seen in school meals, supplementary benefits for the aged and in respect of other benefits.

In my view the family income supplements proposal will not lift out of poverty the majority of those families that it is supposed to assist. A married man with a wife and three children of school age paying a weekly rent of £4 10s. 0d. would be assessed by the Supplementary Benefits Commission as needing £20 a week. If his take-home pay is £15 10s. 0d. a week—and this applies to a large number of the 164,000 families living in poverty—plus family allowance of £1 18s. 0d., making a total income of £17 8s. 0d. a week, he will get no help under the Family Income Supplements. Yet they would be £2 12s. 0d. a week below the poverty line as assessed by the Supplementary Benefits Commission.

This is not an isolated example. Under Family Income Supplements only a minority of those living below the poverty line will benefit. The scheme is supposed to assist about 164,000 families who have between them 500,000 children, and it is possible, so the Bill says, to assist them up to a maximum of £3 a week. If one does some simple arithmetic it is quite clear that very few will receive anything like that amount, because if each of the families did, then we should need three times the amount of money that the Government have set aside. As it is, the £8,600,000 works out to about 3s. 6d. per person a week. That is hardly enough to give them the strength to climb out of poverty.

I said at the beginning, my Lords, that I believe the proposals of the Government, which have had so much publicity in recent days, are dishonest and dangerous. I believe: that the Government's proposals, because of their dishonesty and their dangerousness, make Fagin look like an honest man and Scrooge like a benevolent old gentleman.

10.25 p.m.

THE EARL OF LAUDERDALE

My Lords, it was disappointing to hear a noble Lord of the quality, if I may say so, of Lord Wells-Pestell affront an honourable Parliamentary tradition, that however much we may disagree and challenge one another's judgment, we at least give each other credit for honourable motives. The word "dishonesty" occurred, I should think, a good half a dozen times in the noble Lord's speech, and was applied at least once, and I think more than once, to the Prime Minister personally. I have no doubt that the Front Bench will reply to that particular point. All I would say on the general tenor of the noble Lord's speech is this. Custom does reconcile us to everything, and in this controversial debate we have found it moving on wholly predictable lines, indeed: The march of the human mind is slow", as we find, for history teaches that peoples and governments have never learned from history". This controversial debate has over and over again overlooked four simple, clear facts. The first is that since the direction of labour and the rationing of supplies were ended, no prices and incomes policy has been made to work. The second is that money borrowed is money sorrowed. The third is that when the growth of public expenditure outpaces the growth of the gross domestic product then inflation invariably follows, with all the catastrophic damage to the lower end of the scale that the noble Lord deplores so seriously and so sincerely. Lastly, there is what I would choose to call the "Barber medicine", and this is simply stage one of a programme, at any rate well-intentioned, to correct this.

The final phrase of the Motion before the House refers to "an economically sound …society", so, as many noble Lords have been quick to point out, the real issue in this debate is a strategy to combat inflation—something that is as menacing to this country as the battle of the Atlantic itself. Inflation is poverty, and as I think was said by a noble Lord in the 17th century: "Come away—poverty is catching."

Throughout this debate, by and large, all speakers have been agreed that there is a bafflement amongst economists that levels them down to the rest of us as mere insects of the hour. So, when the O.E.CD. in Paris positively clamours that to halt the infection every remedy should be brought into play, one is reminded of Sir Winston Churchill's own endeavours to rally every kind of device and resort, and to assemble these from every possible quarter, to master the battle of the Atlantic. Such indeed was the plea from the noble Lord, Lord Henley, when he opened from the Liberal Benches, quoting the Guardian's reference to the "Broad front"; and such was the plea raised in, I think, one or two points by the noble Viscount, Lord Watkinson, and others.

It behoves us as serious men and women, without repining, without losing time, energy and emotion on meaningless personal denunciation, to search our minds and memories to see whether there is anything we can suggest. It is on that basis that I beg leave to draw the attention of the Government, and that of noble Lords here, and persons elsewhere, to a most interesting article published by the Westminster Bank Review, in May, 1964. The Westminster Bank felt that it was worth while, even then, calling attention to the ideas, as part—and only part—of a strategy against inflation, of an Australian thinker who has latterly been less in fashion, Mr. St. Clare Grondona. He had an approach to the stabilisation of commodity prices, since much refined from those days, which seems to offer some prospect of useful international results.

These are not my ideas, my Lords: they are Grondona's ideas, and I would summarise them briefly in this way. He argues, first of all, that violent swings in commodity prices tend to push up manufacturing prices but never bring them down; and that in itself is an inflationary factor. Also, for example, of Britain's import bill of around £2,000 million or so, something like half goes on raw materials, on commodities of a durable character.^* Over the past decade these have swung and staggered in their price range like a drunken man in Glasgow going home. Copper has varied between £200 and £800 a ton—that is not a minor

^*See OFFICIAL REPORT, Vol. 313, 24/11/70, col. 1.

fluctuation—lead and zinc between £60 and £150; tin between £750 and more than £1,700; rubber between £130 and £380; sugar between £12 and more than £100; cocoa between less than £100 and more than £400; wool between £360 and £830 or thereabouts.

Grondona argues that these swings are not simply due to the fixity of demand as against an elasticity of supply, but have a strong psychological content; and he suggests that, at a cost of a relatively few millions of pounds sterling per durable commodity—say, half-a-dozen or fewer—chosen, it would be possible in this country, acting unilaterally, to establish a commodity bank as a custodian or buyer of last resort. He calls it a Price Stabilisation Corporation. It would be able to proclaim both a low and a high price at which we could take, or part with, selected durable commodities very much on the analogy of the gold standard as it worked within certain set limits over seventy years.

He argues—and I reproduce this only because the Westminster Bank thought it was worth drawing attention to it—that in such a set-up producers would gladly sell or deposit with such a buyer or guardian of last resort if they were denied better prices elsewhere, and buyers would gladly buy because they would be unwilling to pay more elsewhere if that was what they would have to do. In effect, this would set ceiling and floor prices within a band of about 20 per cent. which would in turn steady commodity prices in the primary producing countries of the Commonwealth and elsewhere, about which noble Lords on both sides of the House are anxious for aid and assistance, support and development. It would also have the effect of bringing some stability from a different quarter into the value of our own currency: it would provide a kind of anchor. And it would diminish at least certain inflationary pressures.

Such a system is now, I understand, being seriously examined in other quarters than the Westminster Bank, quarters with an international reputation being able to rally for the purpose students and scholars and economists of the highest repute. For there are those who do believe that this may offer one glint of light, one piece of hope at the end of the tunnel (if I may mix the metaphors), with regard to simply one of many possible components in a new strategy to deal with inflation. These people believe, and the argument is, that if such a thing were done in this country other countries would necessarily be affected by it to a stabilising degree.

My Lords, I beg our Government, in studying and framing an anti-inflation strategy for the future, to consider appointing a committee which can look at these ideas and indeed other proposals in stabilising commodity prices in public. These particular theories, so far as I am aware, have never been tested, and it is no use saying, as one has heard in the past, that all this has been looked at before. It has not been looked at technically in public. Therefore, all I would say is that, since all economists appear to be baffled, and certainly all Governments, it is well to remember Bacon's lines: If a man will begin with certainties, he shall end in doubts; but if he will be content to begin with doubts, he shall end in certainties.

Or, to put it in another way: Knowing what thou knowest not is, in a sense, omniscience.

10.35 p.m.

LORD RAGLAN

My Lords, since I am last to bat tonight I am tempted to say that it gives me the luxury of a long speech, and I hope your Lordships will not consider me too pointed if I say that if I were to follow the example of some of my betters earlier in the day it might be a very long speech indeed.

Ever since I can remember there has been an economic crisis. The Prime Minister is pretending that there is not one. If he is right then it is due to the good management of the last Government, so it is no credit to him. If there is a crisis—and I must say that it looks very much like it—then the Government are gravely at fault for not doing anything about it. To me, the most interesting speech today has been that of the noble Lord, Lord Thorneycroft. He is an old-style Conservative of the 'fifties. A bit pinkish in colour, he seems against his own Front Bench today. He recognised that the economy and the management of it is a very complex matter indeed. He says that the public are confused—and indeed they well might be.

So difficult are the problems which confront us that it is not surprising there is an attraction in trying to reduce them to simple terms. This appeals particularly to the logically minded type of person who looks for significant features and imagines that he has found the most salient one, and from it he derives his solution, his panacea. If these people preach and take care that their words do not fall on stony ground, the converted and the faithful roll up in their numbers, believing that here is the clue to the crock of gold at the end of the rainbow, because they, too, want the easy life and the instant solution. It is very attractive.

My Lords, if preachers are not actually stirring up civil strife we usually leave them alone, and large numbers of sects, believing in every sort of thing for their salvation, flourish all over the country, apparently with no great harm to anyone. It is their own life that they are concerned with, and it is not for us to interfere. But when a religious faith deriving from simplistic thought motivates those who are in charge of the economy, then I think it is time to argue and protest. The noble Lord, Lord Moyne, called it a shibboleth. I call it a religion; and the religion which the Government are urging us to believe in is called "private enterprise". The archpriest of the cult is Mr. Enoch Powell, in whom one detects signs that he believes he has a Messianic role in British politics. He has the answer for everything, and he has a great many disciples for his economic theory, particularly among rich and able men. Like all his theories it is very clear and simple, and it has this additional attraction when you are dealing with the economy: that you do not have to do anything; it is all done for you. "Look", he says, "No hands! The natural forces of supply and demand will look after it all". It is very clever, and for him and his followers it is very comfortable.

It would be very clever, my Lords, except that this philosophy (it is a philosophy and not a policy) was thought of years ago and has become discredited. Its height, as my noble friend Lord Balogh pointed out, was in the mid-Victorian era. For all that private enterprise made us rich and laid the basis of our wealth, we know how comfortable then were the great mass of the population. We also know what happened in 1929.

I think it is not surprising that Darwin's theory of the origin of the species by natural selection was a product of the mid-19th century. He afterwards, to his regret, simplified the theory to a friend as "the survival of the fittest". We know that he was not accurate, and we know that, in the light of later knowledge, his main theory was not correct in some respects. For instance, he knew nothing of genetics. But in outline his idea was that in the struggle for existence the able and the adaptable would rise deservedly to the top and the incapable and the inadaptable were left deservedly at the bottom. I say it is not surprising that it was a 19th century thesis, because that was the character of society in Darwin's time, and the reason I am on these Benches is because I believe that to far too great an extent it still is.

We know better now than the Victorians, or I thought we did. We know that private enterprise is like nature, red in tooth and claw. That is why there has grown up such a great stack of legislation, like company law, to control it, and consumer legislation like the Trade Descriptions Act. But in spite of the warnings which history teaches us, the Government are evidently so naïve as to continue to believe in the natural beneficence of competition. That is why, I believe, they destroyed the immensely valuable Consumer Council, which was shaking their otherwise comfortable faith.

They also believe in more money for those already at the top. One of their first aims, we have heard so often to-day, was to reward those who were already so successful that they would benefit from 6d. off their income tax in spite of more expensive social services. I agree that they guarded their flank by disbursing extra charity to the poor. How long that charity will maintain its value we do not know. We do not yet know either how it will work out, because the Government have not given the details. But, their cry being selectivity, the people they have naturally selected as being worth the most help are the rich and successful. This tax cut is intended to be psychologically stimulating, in that it will reward success, but I think that psychologically the effect may well be more damaging than stimulating. For one thing—and I put this to the noble Lord, Lord Balfour of Inchrye—I question whether the principal stimulus to hard work, or reward for it, is necessarily money. In fact I know that it is not. Some of the hardest working people in Britain to-day are Government Ministers. The noble Lord, Lord Denham, told me to-day that he does not do any work, but I know certain Government Ministers who do work a great deal. Yet the salaries they earn, compared with those in industry, bear no relation to the work they do and the responsibility they carry.

Neither is Government a private enterprise; it is very public. Besides being a public enterprise, it is also loss making. It takes about a third of everyone's income and distributes it in various ways, taking a cut to run itself. It makes no money at all, except for a few arms sales here and there, and other by-products. Yet we see Conservatives, who believe that the prime consideration for the promotion of wealth and efficiency is private enterprise and money reward, falling over themselves to join the Government, which can be nothing else but a social service making a heavy loss. They toil away for less money than they would get elsewhere for equivalent work and responsibility. So we see that in the most powerful and influential organ in the State profitability is not the first consideration. In fact, it is no consideration at all, and the people who run it with such zeal do not do so primarily for the monetary reward; they do it for honour, status and job satisfaction. Perhaps, then, we can learn something from that.

I say that the Government's philosophy may well be psychologically more damaging than stimulating for this reason: in the United States and Canada the class structure is more straight-forward than it is here, where, I am glad to say, it has become much confused. In that land of private enterprise status goes by income, and long after a person has reached a comfortable living wage what more often than not prompts him to continue to ask for more is that higher income means higher status. I think that the Government should consider very seriously the implications of that fact.

The Conservative philosophy lays emphasis on success, especially the equation of success with higher money income. But making money is a knack possessed by comparatively few. This is a fact which is not always realised. What has been happening in the United States for some time is that many of those who have been unsuccessful by conventional standards have either dropped out or are beginning to hit back, in whatever ways they can, at the system which has selected them as failures. They are not Darwin's animals; they are thinking human beings, and they feel with great intensity that they are deprived. I will not go any further into that aspect today because your Lordships have not the time; but it is a matter of much importance and very great social significance. It is so important that it is beginning to be one of the great problems of our time; and I hope that the Government will take notice of that, too.

My Lords, I end by saying that Britain has given the world many ideas and inventions—Parliamentary democracy, British justice, and even sport. We began the Industrial Revolution; we invented trade unions; and our health and social services, though not perfect, are the envy of the world. But one of our traditions is fair play. I do not believe that a people with such a tradition of inventiveness, such extraordinary inventiveness in the realm of social institutions and organisations based on fair play, can have run out of ideas. Yet for the moment it looks as if we have run out of them so far as this Government are concerned. They look back more than one hundred years, believing that what made Britain great then is good for her to-day. We heard that from the Prime Minister yesterday. In some respects it is a romantic idea. I know that bachelors over 40 can be romantic; but romanticism, certainly of that kind, is not enough. The simple panacea of private enterprise, the profit motive, monetary reward for success—these are the Government's tenets of faith, in spite of the fact that it has all been tried before and its cost in human misery has been enormous.

My Lords, we must have some better ideas than these. Perhaps the Government will pay some attention to some of their Back-Benchers to-day. I do not impute to the Government Front Bench in this House any harsh motives. I know them to be kindly men. Some of the Government measures have shown that they are not totally oblivious of the needy. They really do believe that their measures mean more freedom; but—and I think that the noble Lord, Lord Robert-hall, mentioned this—it is their kind of freedom. Looking back over 150 years I am sure that they can learn (although the noble Earl, Lord Lauderdale, said that Governments never learn from history) that when laissez-faire economics are equated with freedom by those who are comfortably off at the top, the lucky ones, it is a poor look-out for those who are least able to help themselves.

10.50 p.m.

THE MINISTER WITHOUT PORTFOLIO (LORD DRUMALBYN)

My Lords, we are coming to the end of the first day of this two-day debate. Many matters have been raised, and I am sure that noble Lords will not expect me, at this hour, to reply to all of them. If there is one very good example of our not all being inspired only by the profit motive, it is the number of noble Lords who are present here at this time. We all have mixed motives. What we are saying, and what I shall be arguing, is that financial incentives are an essential part of those motives. Fortunately, my noble friend Lord Aberdare will be speaking tomorrow, and he will deal more particularly with the social services to which the noble Lords, Lord Wells-Pestell, Lord Raglan, and Lord Platt referred. I think that the noble Lord, Lord Raglan, will find then that there are a great many more details than he thinks that have been decided so far as help to the less fortunate is concerned. May I also say at this point that I think he was perhaps a little less fair to my noble friend Lord Denham than he meant to be. A joke is a joke, but it does not look quite so well in cold print, and perhaps it is just as well to remember that.

LORD RAGLAN

My Lords, it was a joke. I was chatting with the noble Lord, Lord Denham, at lunch over what I was going to say, and I said how hard Ministers work, and he just said, "Well, some of them don't work as hard as you think", or something like that.

LORD DRUMALBYN

My Lords, I am much obliged to the noble Lord for having made that plain. I thought it was just as well to make it clear.

LORD SHACKLETON

My Lords, I am not sure that my noble friend has not made it a bit worse now, but I am quite sure that we all have it on record that we have the highest regard for the noble Lord, Lord Denham. He works as hard as any noble Lord in Waiting: they sit for hours having to listen to other people making speeches.

LORD DRUMALBYN

My Lords, and in the rest of the day he does some work as well, I can assure you. My noble friend Lord Aberdare will also have the advantage of being able to read in Hansard the points which noble Lords have made and the questions they have asked, and therefore he will be better able to deal with them tomorrow than I could tonight, even if I had his detailed knowledge of the subjects.

Before I do anything else, I should like to refer to three notable maiden speeches. First of all, there was the speech from the noble Lord, Lord Hamnett, to whom we all listened with the greatest of interest. I am afraid that again I have to say that my noble friend Lord Aberdare will be dealing with the subjects referred to by the noble Lord, which mainly concerned school milk, calcium deficiency, and the rest. Then we had a remarkable and most delightful speech from the noble Baroness, Lady Lee of Asheridge. She brings to this House a depth of humanity and an œsthetic vision that I am sure will be of the greatest benefit to all of us, and we are delighted to see her here. She, quite rightly, took the opportunity to make a plea to the Government to look again at the decision to impose charges on our museums and galleries, and asked who were to be exempted. It must be remembered that when charges are raised for prescriptions and school meals it is part of our strategy to do likewise for museums. Perhaps I ought also to mention that it is no novelty in this country for charges to be made for museums, because many municipal museums already make charges.

So far as is practicable and reasonable, people should make a modest direct contribution towards the services which they receive. Most museums and galleries in advanced countries charge for entrance. The noble Baroness said that perhaps we are leading in this way; but there does not seem to be any great following behind us. The amounts will be discussed with the institutions concerned, and administrative costs should form a reasonably low percentage of the income. I hope that the noble Baroness will not feel too aggrieved that we are not able to respond immediately to her plea.

We have also had a speech from the noble Lord, Lord Avebury. He has waited many years to make that speech, and I must say that, although we had a little difficulty in hearing it to start with, when we did hear it it was well worth listening to. We shall certainly look forward to hearing the noble Lord again, and I hope that he will not wait so long before he makes his next speech.

What we are really discussing to-day is whether the Government are right to adopt new measures, whether the measures which they are adopting are the right ones, and whether they will do what the Motion states they will do. First of all, it is right to ask: why should new measures be adopted? It is not only because the Conservative Party are pledged to introduce new measures but also because the events of the past six years have shown that it is imperative that there should be a change of course.

LORD BESWICK

My Lords, before the noble Lord pursues that theme, and since all his friends have emphasised that the Government are doing only what they pledged to do during the Election, will he be good enough to say at what period during the Election they pledged themselves to raise food prices?

LORD DRUMALBYN

My Lords, that, I think, is a logical fallacy, apart from anything else. I did not say that everything the Government were doing they were pledged to do. What I said was that, by and large, the measures which they are taking are those to which they are pledged. The Motion states that the measures proposed will impede progress towards a society which is both economically sound and socially just. We all want such a society. But, after all, social justice is a highly subjective concept. Take at random a dozen people, put them into a room, and you will probably find a dozen different concepts of social justice, a dozen different interpretations; and every one of those interpretations will have to be modified if you want not social justice alone, but a combination of economic soundness and social justice. Of course, you can have social justice at many levels and, indeed, economic soundess at many levels; but even that combination is not enough.

Noble Lords have made a little play—and here I think of the noble Lord, Lord Raglan—about freedom. But in this package we must also take into account man's aspiration to be free. That means freedom from excessive control, freedom to make our own decisions and freedom to live our own lives within the law. I need hardly remind noble Lords that there are countries which regard themselves as being much nearer to perfect social justice than we are but where freedom, as we know it, hardly exists at all. So that, so far as we are concerned, this is a vital element.

What we have to consider, first, is whether the policies which were originally adopted in the last war and which have continued ever since are ever likely to lead to a society that is economically sound, socially just and free; and, more particularly, whether the policies of the last Government, which the electorate rejected, were leading in that direction. At this point, I should like to give one or two figures, because they are very revealing.

The growth rate under the Labour Government (this is the one comparison I shall make here) fell from an average of 3.8 per cent. in the last five years of Conservative Government to about 2.3 per cent. Industrial production in the years 1965–69 rose by 13.3 per cent. over the whole period at constant prices. Wages—not at constant prices—rose by 38 per cent., and consumer prices by about 22½ per cent. The present wage explosion started in September, 1969. It started with the local authorities' manual workers' pay settlement, and in the following twelve months, to August, 1970, average wages: rose by 11 per cent. and earnings by 14 per cent. Unemployment has been high. In the last three years, unemployment fell below 500,000 in only one month, and then only marginally, in a summer month.

LORD SHACKLETON

My Lords, may I interrupt the noble Lord? In the last Government I had a good deal to do with prices and incomes policy. It is really complete nonsense, if I may say so with respect (because I know that the noble Lord has to take his brief) to link what he calls the wage explosion with that particular local authority wage settlement. There was a whole chain: and, of course, a great number of increases in the public section were catching up on some in the private sector before that. I am trying only to correct the noble Lord. It ought not to go on record that, historically, the autumn of 1969 was the date when something dramatic happened. The matter is much more complex than that.

LORD DRUMALBYN

My Lords, when things start they need not necessarily be dramatic. It is from this point, at any rate, that it seems we can trace this higher level of wages—

LORD SHACKLETON

The noble Lord should do a bit more research.

LORD DRUMALBYN

I am very willing to do more research, but research has been done on this and this is what I am told.

My Lords, strikes also were running at a level not equalled since the General Strike in 1926. The expenditure of Central Government over those years—1964–65 to 1968–69—rose by 53 per cent., and of local authorities by 74 per cent. Between 1964–65 and 1968–69 the public sector took a little over 70 per cent. of the total increase in domestic output. At this time, over that period, gross trading profits of companies rose by only 7.8 per cent., which means, of course, that in real terms they fell quite considerably. In general, existing taxes were increased, and new taxes were invented. The tax burden on the community as a whole rose steeply from 28.3 per cent. of the gross national product in 1964 to 38.4 per cent. in 1969, excluding National Insurance contributions.

LORD SHACKLETON

My Lords, I am very sorry to interrupt the noble Lord, but since we shall not be getting tomorrow the Hansard Report of his speech would he mind giving these interesting figures again? I did not get the one about 70 per cent.

LORD DRUMALBYN

What I said there was that between 1964–65 and 1968–69 the public sector took a little over 70 per cent. of the total increase in domestic output.

My Lords, side by side with these figures one has to put the fact that the level of investment as a percentage of the gross domestic product rose by only one half of 1 per cent., or rather less, from 133 per cent. to 13.7 per cent.—and that at a time when investment was badly needed in the development areas to provide employment for those who had to leave declining industries. And, of course, at the same time liquidity was greatly reduced. Then, as my noble friend the Lord Privy Seal said, the average rate of growth in the O.E.C.D. countries was running at double that in our own. What is more, the projections for the United Kingdom are alone among those for the major European countries and Japan in failing to close the productivity gap over the next decade.

Most difficult of all, we inherited soaring inflation following on suspension of the wage freeze—an inevitable consequence of which we on this side had warned the Government when the wage freeze was put on. I say "suspension" because the Leader of the Opposition consistently declined to respond to the Prime Minister's challenge to deny that if Labour won the Election Mr. Wilson intended to reimpose it. The real task is to set the climate for economic expansion and to do so by individual incentives: by seeing that to a much greater extent people pay for what they get, fix their own priorities, whether in business or in their individual lives, and accept the consequences. Ideally, help should be given where it is needed, and only where it is needed.

My Lords, I have been asked to give an indication of the Government policy on inflation, and I should like now to give a summary, encapsulated in a few brief words, as follows. The Government policy towards inflation is as follows. First, the maintenance of firm monetary and fiscal policies. Secondly, progressive reduction of the excessive rate of wage settlement prevailing; first by encouraging employers to make fair and reasonable offers and then to stand firm on them even under duress; secondly, by not using the conciliation services of the Department of Employment to persuade employers to increase their offers; and, thirdly, by taking a firm but reasonable line in negotiations with their own employees and encouraging other public sector employers to do likewise. The third major aspect of policy is to take a firm grip of nationalised industry prices. Coal prices and Post Office charges both went up by less than the amount asked for. Lastly, to rely on competition as the best safeguard against unjustified price increases in the private sector.

I thought it right to set these out because of what has been said on these subjects this evening. This is the basis of Government policy. It means that the Government aim will be to reduce public expenditure and so to reduce taxation and leave people with more of their earnings; to help those who are least well off by working for the improvement of low wages relative to earnings as a whole, and this must mean that some people in the middle, while benefiting from reduced taxation, may have to pay more for what they get. The noble Lord, Lord Wells-Pestell, talked about this. One can never have major changes of a kind that do not have an adverse impact somewhere. One must accept this.

Perhaps I could remind the House of this point. In October, 1951, the average earnings of manual workers amounted to £8 6s. 0d. By October, 1969—and this is the latest figure available—they had reached £24 16s. 0d. Between 1951 and 1970, the value of the pound in terms of purchasing power fell to 10s. 7d.; so the average earnings trebled and the value of money fell by less than half. Surely it follows, therefore, that we can afford to be more independent of subsidy than we were in 1951. The more independent we are, the more money will be available for the improvement of the services.

What is likely to be the effect on household budgets? So far as families whose earnings are above the level of assistance are concerned, school meals, prescription and health charges and the levy scheme for agriculture will raise the cost of living between now and April, 1972, altogether—this is the estimate—by less than 1 per cent. The interim levy scheme would not in general increase prices above present market levels which have risen recently as a result of market forces. So far as poor households and pensioners are concerned, families up to and rather beyond the official poverty level, the level entitling people to supplement benefits, will be exempt from the new social service charges, or entitled to have them refunded. The income remission limit for school meals, welfare milk and dental and ophthalmic charges will be raised so that more people qualify. First, we have the incentive, and, secondly, we have the help for old people. By applying the principle of selectivity the Government have been able to give effective help to those who really need it, particularly families of low wage earners and one-parent families, and to make improvements in the basic fabric of the health and education services, and still reduce taxation.

My Lords, I have already drawn attention to the high growth in subsidies and the low growth—in fact, the reduction in real terms—of industrial profits, and to the lack of liquidity, coupled with inadequate growth of investment and the percentage of the gross national product. It is absurd to expect industry to invest unless it can see the prospect of a reasonable profit on its outlay. It is equally absurd to try to encourage industry to invest if it cannot see any such prospects. The noble Lord, Lord Hoy—I apologise for the fact that during his speech was the one period when I left the Chamber—raised the question of investment incentives with particular regard to Scotland. The Government's measures affecting industry are profit-oriented. In their view, profitability is the best indicator we have of efficiency in the allocation and use of resources; and we intend to provide a framework of requirements, incentives and restraints for industry which will first liberate energy and enterprise in industry, making the best use of our skills and resources, and secondly, make profitability an even better indicator of efficiency. Of course there can be abuse of market powers, and it is there that the restraints will lie. Our policies are designed to create a more favourable climate for investment than we have had in recent years. The cut in corporation tax, the first for so many years, will help to ease the immediate situation.

LORD HOY

My Lords, may I interrupt the noble Lord? What he has said will bring no solace at all to those concerned in the case I made about Harris tweed and the people engaged in the Highlands. Under the new proposal of the Government they will not benefit by a single penny. Indeed, the new proposal will put them back to square one, as they themselves said. If the logic of the statement the noble Lord has just made is such that it means that these firms will be wiped out, I hope that he will not look on that situation in as cold a light as the way in which he has put it.

LORD DRUMALBYN

My Lords, I hope that I have not put it in a cold light. The fact remains that there are some industries, obviously, that will be adversely affected by these moves, as is the case with any change. The firms to which the noble Lord, Lord Hoy, referred come well within the responsibility of the Highlands and Islands Development Board, and one would expect that the Board will look after them. The Party opposite, with our support, passed the Highlands and Islands Development Act because that is a very special part of the country, with special problems of its own. Special cases will always exist. I am sure that the noble Lord would not want to misrepresent what I am saying, but there can be no question whatsoever of our being hard-hearted in a matter of this kind. The noble Lord is quite right in raising a particular case but obviously one cannot give an answer to particular cases right away when one is considering setting a general economic climate.

Perhaps the noble Lord will allow me to go on, because I should like to explain to him how this system is going to work. The general level of profits has for a number of reasons been depressed in recent years. Capital liquidity has been very tight. No wonder investment has been sluggish, despite the substantial investment grants available! It is now clear that the previous Government failed to provide the right conditions for investment and growth overall, in spite of, perhaps even because of, their indiscriminate handouts. The investment scheme failed to meet the objectives set out in the 1966 White Paper. The rate of growth of manufacturing investment has been slower since 1966 than it had been in the previous five years. Output in terms of general domestic product has also grown more slowly in real terms. Overall, our investment performance has declined. This is unanswerable.

We are concerned not only to raise the level of new investment; we are equally concerned, if not more so, with the need to improve the quality of new investment, the need to improve the effectiveness with which existing assets are used. Investment incentives are one element in our strategy for improving investment performance. Incentives which are too generous and pay no regard to the profitability of investment can lead to uneconomic investment. The new system of capital allowances must be seen against the wider background, including the cut in corporation tax.

LORD DIAMOND

My Lords, I am sorry to interrupt the noble Lord; I only want to ask him a simple question. When he keeps on talking about profitability being the key to the incentive for investment, am I right in assuming that he means profitability as measured for the benefit of the shareholders and not profitability as measured for the benefit of the community?

LORD DRUMALBYN

My Lords, the noble Lord will remember that in the Local Employment Act there was always the proviso that money should be made available only to those firms likely to be able to become economic concerns. That is what we are saying now. What we are also saying is that the previous Government had been pouring out money to firms irrespective of whether they were ever likely to do any good or not; and if these were really incentives, they must have been encouraging some people to put money into projects which were not likely to make a go of it.

On the other hand, the new incentives—I apologise for detaining the House, but I attach great importance to making this absolutely clear—have four major advantages. First of all, they are profit-oriented, in that firms benefit from them only in so far as they are profitable, and there is no element of subsidy, either through indiscriminate handouts or by enabling firms to set off against tax more than they have actually spent. Secondly, they assist company cash flow in the early years after capital expenditure and enable more rapid write-off of equipment for tax purposes. This should encourage early replacement of existing assets with more advanced equipment, providing better performance at reduced cost, and should help to improve our technical competitiveness. Thirdly, the new national incentives apply to manufacturing and services alike, to public as well as to private enterprise, to assets used overseas as well as those used in the United Kingdom. There is no unjustified discrimination, as in the current investment grant scheme. Lastly, the new system is much more simple than the previous system. Firms will be saved the administrative burden of claiming grants and they will no longer have to distinguish between different categories of plant and machinery for tax accounting purposes. This will save a surprising amount of manpower, both in industry and in Government. In addition, the cut in corporation tax will improve the post-tax profitability and cash flow in both new and existing investment.

One point that emerged from the survey that was initiated by the Party opposite, done by the Ministry of Technology, was that a majority of the firms covered would welcome a system of incentives based on free depreciation as opposed to investment grants or investment allowances. This shows a complete turn round from the last time when some kind of investigation was carried out, which I think was in 1964. Free depreciation would be too expensive to introduce generally, but the new system shares many of the advantages of free depreciation, such as simplicity and quick write-off of capital expenditure.

Before I conclude, I want to say a word about regional development. Of course the Government are extremely conscious of the problems in those parts of the country suffering from high unemployment. We cannot afford the economic waste involved in letting the scarce resources of labour and skill stand idle. But behind the cold statistics of unemployment lie the human problems of men and women who have given loyal and often long service to an industry which no longer needs them. They are having to seek new employment in other industries, perhaps to acquire new skills and to adapt themselves to a new working environment. We have made it clear from the outset that we regard an effective regional policy as a vital part of our economic and social strategy.

We are particularly concerned about the older industrial areas which are suffering from structural changes and where the rundown of the traditional industries has been accentuated by the stagnation of the national economy. Unemployment in Scotland has risen over the last four years from under 3 per cent. to 4.3 per cent. Of the 96,000 unemployed in Scotland, over 54,000 are in West Central Scotland, where male unemployment currently averages 7 per cent. The problems are greatest in Glasgow itself, but the solutions must be sought over an area wide enough to make sense in physical planning terms and to provide the attractive sites for industry that are needed.

Unemployment has continued to be a major problem facing the Northern Region, particularly since 1966 when the effects of the accelerated programme of colliery closures began to show. As this has gathered momentum, unemployment has risen to the highest levels since the peak of the previous unemployment cycle in 1963, reaching 52 per cent. in January, 1969, and in January, 1970. Out of the 61,000 currently unemployed, 56,000 are in the North-East, and on Tyneside alone unemployment numbers 20,000, a rate of 51 per cent. The continuing rationalisation of basic industries is reflected in the high unemployment on Merseyside, where it is running at a rate of 45 per cent., and the same also in Wales.

It is particularly disquieting that previous regional policies have made so little impact on the heavy and persistent unemployment centred on these older industrial areas, which have in addition pressing problems of urban renewal and rehabilitation of the environment. The problem has been worsening over the past years, despite the lavish expenditures on regional policies of the previous Administration. It is because of the urgency of these problems that we are making significant changes in regional incentives. In particular, we are terminating the regional employment premium in 1974, and are replacing the indiscriminate 40 per cent. investment grant to manufacturing industry in development areas by free depreciation. We are increasing assistance under the Local Employment Acts to projects providing employment, and are also proposing to make greater use of our powers under these Acts to give assistance towards the cost of improving basic services and of clearing dereliction. We are confident that these measures will be more successful in stimulating industrial development in the areas of employment need than those adopted by the previous Administration. They will help to attract to the areas the efficient, competitive and profitable firms which can alone provide secure and continuing employment.

My Lords, I know that there has been criticism of our proposals, and it has been suggested that they will reduce the cash flow to firms in development areas. I should like to make it quite clear that the new incentives will provide a similar liquidity benefit if one compares them with the effect of the former 45 per cent. corporation tax—the only meaningful basis of comparison. The comparison will vary from case to case, depending on a variety of factors—the relation, for example, between investment and taxable profits in each company. There has also been criticism because the value of the development area differential in the investment incentive will be reduced by proportionately more than the reduction in the national incentive. But I do not accept this argument. The point is that the former differential involved substantial payments to assist capital intensive projects regardless either of what employment they provided, or were expected to provide, or whether they would be undertaken anyway. Moreover, since the grant was unrelated to profitability, its very magnitude carried the inherent misdirection of resources.

The new differential, together with a substantial body of additional assistance under the Local Employment Acts, will be broadly equivalent to the present cost of the regional differential in the investment grant. What we are doing is using the same volume of assistance to better effect. And other features of the policies we have announced should also be taken into account. First, a larger proportion of manufacturers' investment will attract free depreciation than under the former investment grant. Secondly, investment in industrial buildings will continue to attract the 40 per cent. initial allowance which was previously due to revert to 15 per cent. from April, 1972. More generally, account should also be taken of the higher capital allowance which will be received by services and commerce in the development areas.

In the meantime, we are continuing our review of regional policy to ensure that regional policies are more effective and yield better value for money. We have seen that indiscriminate measures of assistance in a climate of economic stagnation make little real impact on the regional problem. Effective management of the economy, coupled with vigorous regional policies, should enable us to narrow the existing regional disparities and to give the less prosperous areas a greater share in higher national prosperity.

My Lords, the basis of what we are trying to do (and I hope that in saying this I shall pick up what has been said by a great many people in this debate) is to draw the distinction between two things that can be done. On the one hand, it has been said that we could revert to an incomes policy and perhaps we should have kept on the National Board for Prices and Incomes in some form or another—in fact we are keeping it on in a form—or rely on voluntary effort. Noble Lords opposite have tried the prices and incomes procedure. They backed it up with sanctions; they applied sanctions for a period. They found that it was impossible to go on applying sanctions—the wage freeze at its most extreme—and they then proceeded to go on to the voluntary procedure. It is clear that the voluntary procedure has not worked. The Prime Minister has made it abundantly clear that we are saying in effect to all the people in this country: "The responsibility is with you; it cannot rest with the Government alone, unless you are prepared to accept the sanctions to go with it".

The Government are giving the leadership. What is important is that, as my noble friend Lord Watkinson said, at factory level in each case the lead should be taken by management; the responsibility should be taken by management. It is their duty to get the support of their workers locally. This is nothing whatever to do with politics. The purpose should be for each unit in the economy to pull its weight, to enter into the spirit of competition and, by sitting down and working out schemes together, make the economy work in that way. It is all very well for the noble Lord, Lord Shepherd, to shake his head, but the fact is that nobody has suggested any other viable alternative.

LORD BOOTHBY

I have, my Lords.

LORD DRUMALBYN

My Lords, with the greatest respect to the noble Lord, I did not think it was one. I know that other noble Lords have suggested the possibility of an economic council which followed perhaps much the same line as was put forward from the Front Opposition Bench by the noble Lord, Lord Brown, in our debate on industrial relations. I know that that is so. But there really is no alternative. And surely it is right that we should try to make this work. My Lords, I very much hope that with the lead that is being given, with the additional incentives that are being given and with the help that is being given to the poorer members of the community, we shall make it our duty to make this work.

LORD SHEPHERD

My Lords, I beg to move that this debate be now adjourned.

Moved, That the debate be now adjourned.—(Lord Shepherd.)

On Question, Motion agreed to, and debate adjourned accordingly.