ECONOMIC POLICY AND SOCIAL JUSTICE

HL Deb 23 June 1971 vol 320 cc905-78

4.28 p.m.

Debate resumed:

VISCOUNT AMORY

My Lords, I am not going to follow the noble Lord, Lord Balogh, in his arguments in detail, because I find that when I try to do so I am apt to get tangled up—and some of my listeners, if any, also get tangled up. But I should like to support the noble Lord cordially in the tribute that he paid to the noble Baroness, Lady Seear, on her admirable maiden speech. She succeeded excellently in achieving what is a difficult feat in a maiden speech—that is, of being extremely interesting and appropriately non-controversial. We admired her eloquence, and I personally admired very much her capacity to speak without notes. I was touched by her saying that it was never too late to teach an old dog new tricks. I am an old dog, and I am very much in the mood when I want to learn some new tricks. Having paid tribute to the noble Baroness for speaking without notes, I turn to my own sheaf of notes.

I am sad, in a way, that I am not speaking later, because I should have liked to pay tribute to the maiden speech of my noble friend Lord Boyle of Handsworth, to which we are going to listen with interest later on. If, my Lords, he should say precisely the opposite to what I am going to say, it will be just one more proof of the many sidedness of truth.

My Lords, I listened with interest to the generally moderate and thoughtful speech of the noble Lord, Lord Beswick, and if I have anything hostile to say about it I should like to get that off straight away. If I understood his quarrels with the present Government's policies correctly, they were that these policies were in rather violent conflict with those of the last Government and that they did not seem to be producing good results. I should like to say a word or two under both headings. To start with, may I apologise to the noble Lord, Lord Beswick, and to my noble and learned friend the Lord Chancellor because an engagement which I should simply hate to cancel to-night will make it impossible for me to listen to the winding-up speeches. I shall, however, read them with great interest.

With great respect, Lord Beswick seemed to be advocating a return to the policies of the last Government; but these were really not successful. Under them we had to devalue for a second time under a Labour Government, the prices and incomes policy, which that Government told us was basic to their economic policy, collapsed in ruins, unofficial stoppages proliferated and the pressures of the present bout of inflation, the most serious that we have yet experienced, were mounting day by day. I think it was apparent to everyone in the country that the then Government had no more shots in their locker, and I believe that if Mr. Heath's Government were to pursue the same discredited policies they would be deserving of the censure of the nation.

What the present Government did was to look back over the past 25 years at the policies of both Labour Governments and Conservative Governments and, in the light of the relatively slow growth and severe rises in costs that Britain had experienced over those 25 years, try to see what mistakes had been made. One thing that I think was clear was that whenever we attempted to accelerate rapidly the rate of growth we ran into balance-of-payments troubles. Another thing which became clear—and this applied during the post-war period under both Governments—was that the remedies we applied for our economic ills turned out to be largely palliatives and seldom got down to the basic causes of our low productivity and poorish national performance. Government subsidies, subventions and interventions often concealed the real causes of rising prices. So I think it is not surprising that the present Government—and it is greatly to their credit—are trying to tackle our economic ills by getting down to basic causes.

It is unnecessary to remind ourselves that the kind of inflation from which we are suffering at present is what economists call the cost-push variety, and, unfortunately, both here and in other countries, Governments seem at a loss to deal with that type of inflation. But one thing that most economists here and in the United States agree on is that you cannot by expansion and demand spend your way out of a bout of cost inflation, so long as that cost inflation is running in full flood. The bout we are currently suffering from is so severe that there seems no doubt that, unless the current rise in costs can be moderated, we shall be in balance-of-payments difficulties again within the foreseeable future. Therefore the priority task of the Government is to try to bring about some abatement in the rate rises in wages and other money incomes, and thus break the vicious circle of rising costs and prices; and until some abatement can be achieved they dare not allow demand to be much expanded. It is difficult to see what alternative course the Government could pursue in present circumstances.

Fortunately, I believe—and I was interested to hear that my noble friend Lord Aberdare also believes this—that the exceptionally and disastrously rapid rise in incomes that we have experienced over the past 18 months is showing some signs now of moderating somewhat. One hears now of pay settlements of 8 to 10 per cent. as against those of 10 to 15 per cent. six months or a year ago. If, indeed, the fever has passed the peak, that is good news in itself, and it will open the way to a cautious re-expansion of demand before long. What I think would be absolute madness would be to Panic view into an irresponsible expan- sion of demand that would very soon put us back again into a situation worse than before, when incomes and prices would be rising still faster. The price of this austere anti-inflation policy in terms of unemployment and under-use of resources and stagnation in investment is high. It is high, too, in the United States and Canada, but in those countries also the current pressure of inflation seems to be showing some signs at last of dropping. if the disease can be eradicated, then the price, though high, will be worth it.

I may be asked, "Is the price worth it for those without jobs?" That is a serious question, for to be without a job is a heartbreaking experience for almost all people, and the highest level of employment that can be attained and maintained without serious inflation is a proper and necessary aim of any Government in this country, as it is of the present Government; and I hope it always will be. But the best service to those whose jobs are insecure or have disappeared is to create conditions in which a steady and sustainable rate of expansion can be secured. It is those, after all, with the lowest incomes who are hit hardest by the cruel pressures of inflation.

Does this mean that disinflationary measures must be pressed with full vigour until the last ounce of inflation has been squeezed out of the system? That would be desirable, but I believe it is neither practicable nor necessary to go so far as that. At some point when the fever is shown to be declining, the level of activity can safely begin to be restimulated. When and how much is the question, and past experience—and here I am not speaking only of a Labour Government—shows how easy it is to go wrong. If the controlling knobs of the economy are turned too violently or too soon, then we have the old familiar "Stop-Go " result—though in retrospect that much derided " Stop-Go" seems to have been a fairly mild swing of the pendulum as compared with what we have experienced in the last few years. My belief, which I put forward with great diffidence because ten years ago, when for two and a half years I was temporarily in charge of some of the controlling knobs, I did not by any means always get my timing judgments right—my noble friend Lord Boyle may say that was a masterly understatement—is that although at present the reflationary effects of the Budget have not yet had time to be felt and they will help considerably as they do become effective, there is a danger that they may be outweighed by declining business confidence and shrinking industrial investment. Neither of those things can be changed in a moment.

I should therefore like to see two things happen: first, a renewed attempt by the Government, the trade unions and the C.B.I. to work out some kind of voluntary incomes policy. You can call it by any name you like; I am going to call it an understanding, a framework—some understanding that would set the limits within which at any given time (I emphasise those words) free bargaining may take place and the maximum rate of improvement be effected without danger to the national economy. Not, my Lords, a wage freeze; I am not suggesting that. That is something very rigid which may be necessary in a real emergency, but which really does not help you by itself along the road. On the contrary, I should like to see an understanding that would, in its content, evolve as circumstances changed and be kept under continuous review by some joint body, such as the N.E.D.C. In its early days it would have to use a restraining influence, but I should think it a mistake if we looked on such a policy simply as being a policy of restraint, and I agree with what the noble Lord, Lord Beswick, said about that. I look upon it as a policy which has as its aim recommending to the nation what is the most rapid rate of improvement we can afford without damage to our national prospects.

The second thing I should like to see happen would be against the background of the first: some cautious move in the direction of reflation before long, unless the statistics, when they come along, show that the impression that some of us have that the peak of the fever has passed should turn out to be wrong. If the statistics showed that it was wrong, my argument collapses absolutely. I believe that if they show that the pressure of inflation is declining, then it may be that the time is coming when there could be a cautious move in the direction of reflation. This may have to be very modest at first, but it could be increased in proportion to the success of the tripartite incomes policy as it developed. The more positively that this policy was implemented, obviously the further the stimulation of the economy could safely go. Such a voluntary incomes policy, if it comes into existence, if it is to provide a solid basis for reflation must be more specific and effective than just a declaration of intent, and it would have to be backed by a large measure of public assent. Whether that measure of public assent exists at present I am not quite sure, but I think that every effort ought to be concentrated now on building up a public opinion which would think this sensible to do. Once you have a wide measure of assent I believe you are, with good will, half way towards your objective.

It may be said that a voluntary incomes policy has been tried and has broken down. Nevertheless, I believe that it is immensely in the real interests of all concerned—the unions, employers. the Government and everyone else—that a new attempt should be made; and in the light of recent experience it may well be that we shall be able to hammer out something better and more practical and enduring than the first effort. I agree with what was said: that because you fail once in a field like this, with something as difficult as this, there is no reason not to try again. Do not make the same mistakes again, but have a shot at it because this is something which, if it succeeds, will create new hope and prospects for the whole of the industrialised world.

What I would feel deeply about is if we have to acknowledge that there is no possible basis for national agreement about such a matter. If we have to fall back, as we should have to do then, on power bargaining, the future is indeed bleak. Any reflation ought, so far as possible, to be export and investment led. That is difficult. The difficulty is that industrial investment is very closely linked to the current level of demand. One encouraging factor in the present situation is (and again it is only my impression, because nowadays I am very bad at carrying statistics in my head) that statistics are beginning to show that our national rate of productivity is rising rather faster than it was. If that is so, it is very important, because here is something that will improve our national performance in a vitally important field.

My Lords, in conclusion, although the increases in costs that have been and still are taking place will inevitably cause prices to rise further, I believe there is some hope that the peak of inflationary pressure may, with luck, have passed. Everything depends on the level of wage and salary settlements in the short term continuing to moderate. If they do, then the way may soon be open for the encouragement of a cautious rate of re-expansion. When that can safely be done it will be precisely in line with the present Government's policies, and I know that no one will be more eager to take the necessary steps to implement it than the present Chancellor of the Exchequer.

LORD BALOGH

My Lords, before the noble Lord sits down may I ask him a question? What he said sounded like common sense and was also very moderate. Does he think that after the last Budget, which increased the take-home pay of top salaried people by anything up to 50 per cent., and after the Industrial Relations Bill—after all these measures which have been aggressively hostile to a large part of our population—one can then hope for a unilateral agreement on wages alone? How does he imagine that can be done? There are differences of opinion. On the point of consensus, you cannot mix up hard bargaining between monopolies and consensus. This is the real problem.

VISCOUNT AMORY

My Lords, I will, if your Lordships will allow me, try to answer Lord Balogh's question, but I must not make another speech. The short answer is that I believe just what I have said. The noble Lord, Lord Balogh, was good enough to say that it sounded common sense; I believe that it was common sense. I happen to think that the last Budget, for the needs of the nation, was absolutely right. I also happen to believe that the Industrial Relations Bill will give us exactly the legal framework that we need in order that people will know where they are and be able to pursue free negotiations within reasonable limits.

LORD SHACKLETON

Order, order!

VISCOUNT AMORY

What the ordinary man in the street wants to know is that the Government's policies are policies that are going to be effective in curing this inflationary disease and getting us on to the right lines as a nation again. If it is proved that they are, the man in the street will cordially support them, both in advance and in retrospect. Having said that I was not going to make another speech, I have done so. I apologise profoundly.

4.50 p.m.

LORD GARNSWORTHY

My Lords. the noble Viscount, Lord Amory, has said a number of things we are bound to agree with. Particularly may I say that I join with him in offering congratulations to the noble Baroness, Lady Seear, and in the welcome he extended to the noble Lord, Lord Boyle of Handsworth. However, the noble Viscount indulged in a number of strictures on the previous Labour Government. I would say this briefly in reply to him. I have no doubt that, had the people of this country appreciated in June of last year what they were in for, we should not have had this present Conservative Government but a Labour Government returned with a substantial majority.

To turn to one or two points which the noble Lord, Lord Aberdare. made when he spoke earlier in the debate. he criticised the Labour Government for their failure to secure acceptance of an incomes policy. At least the Labour Government tried as no Government had tried before, and if it was a tragedy that they were unable to obtain acceptance of a voluntary incomes policy, at least it was a noble failure and they ought to be given credit for having tried to find a way. Certainly this Government have little room to criticise them at the present time for they appear to have produced no incomes policy at all.

The noble Lord, Lord Aberdare, spoke of the rise in wages slowing down. Does he also claim that there is a slowing down in the rise of prices? He said that there had been a check so far as rises in the public sector were concerned, but he carefully avoided saving that there had been anything like the same check, or the same attempt to check, in rises in the private sector. If in point of fact prices continue to increase, is it any wonder that the worker is demanding increased wages to meet rising prices? And are those rising prices, if there has been no check, to an extent the cause of the continuing demand for increased wages?

The noble Lord also referred to the problem of unemployment and said that this Government had no intention of turning away from achieving full employment. It would be very meaningful if one of the newly unemployed in this country were in this House and able to rise and tell us this afternoon what he thought of the Government's success in working towards full employment. For I find the increase in unemployment that has taken place, and the indication that we can expect no early reduction, most disturbing. I speak as one who, early in his life, had a period of unemployment. Unemployment is not a matter of just statistics it is one of the most demoralising experiences a man can have. This afternoon, while thinking about this problem of unemployment, I am at least grateful to the extent that the Labour Government introduced redundancy payments and wage-regulated benefits. To that extent many people have been cushioned against the hardships which used to be endured in olden days.

The noble Lord, Lord Aberdare, claimed credit for an increase in the retirement pension. What he did not say was that the old age pensioner was going to have to wait 15 months after the Election of this Government before getting it, and when he gets it nearly all of it will have been eroded. If prices continue to rise at the present level, that increase certainly will be eroded by March of next year. So far as the increase is concerned, most pensioners feel that it is too little and too late.

The best way I know of giving a man a sense of dignity is to ensure that he has a job in which he can earn a wage which provides for the needs of his family. If that be accepted throughout this House, then this Motion this afternoon is fully justified. The Motion refers to unemployment, and in April unemployment was running at over 800,000. As I said a moment ago, there is at the present time no sign of a reduction in this connection. It ought to be noted that it is the less prosperous regions of Britain which have been hit hardest. As I understand it, unemployment in North-West England is up by 31 per cent. since the present Government took office; in Scotland it is up by 35 per cent., and in East Anglia it is up by 49 per cent.

The Motion also refers to prices, and in the past year there have been more than 8,000 increases in the prices of groceries. Milk has spiralled in price by 25 per cent., with more to come very soon. New Zealand butter has risen in price by 50 per cent.; margarine by 30 per cent., and tea by 26 per cent. As has been admitted, very substantial increases in the prices of other commodities and services have occurred also. One could continue in this connection, but most of us are agreed that somehow we must find the answers to these problems; somewhere the line must be held. There are those who say that wages must be held down. The Government's only policy, if it can be called a policy, seems to be one of holding increases to a fixed percentage. I doubt very much that this can succeed, if only because little is being done at the present time to narrow differentials, not only differentials within individual industries but also differentials as between industries and occupations.

Overall percentage increases serve only to increase actual differences. It does not make sense when the man earning thousands gets the same percentage increase as the dustman; and it is unreasonable to expect the underpaid and underprivileged to accept a percentage that widens the gaps that are so often already too wide. We need an incomes policy which takes account of the social value of many jobs which are unattractive or relatively so; an incomes policy which ensures for all workers a sense of dignity, and an incomes policy which secures a rising standard of living, particularly for those at the lower levels.

I have no doubt that it will be said—and indeed I think it was implied earlier in the debate—that the new family income supplement will take care of the lowest paid workers. I have the feeling that this kind of exercise is taking us back into the last century. For what is this family income supplement business but a glorified system of subsidising low wages?—and the whole structure of so-called selective benefits fits in neatly with such a concept. It is a concept which takes the lowest level of wages below subsistence level, and the very operation of these means-tested benefits will militate against the people concerned in making an effort to rise above this level. The reason is not too difficult to find, for if, as the noble Lord, Lord Beswick, said when he opened this debate, their earnings rise, then their claim to family income supplement decreases and their entitlement to the other means-tested benefits dwindles; although how most of them will calculate just what they are entitled to claim for family income supplement—free prescriptions, free dental and optical treatment, free milk and welfare foods for the under-fives, rent rebates and rates rebates—is a matter for conjecture. for all these different schemes seem to have different scales for applying the means test. In fact, it seems to me that a person needing these benefits almost needs a chartered accountant to help him work the position out. and if he has the intelligence to work it out I should have thought he would apply his mind and efforts to endeavouring to secure decent wages so that he could maintain his family with dignity.

I believe that, so far as the lowest wage earners are concerned, the position is further complicated by liability to income tax, for I am told that there is a point at which a modest rise in wages increases liability to tax and at the same time brings the income above the levels of some of the means tests and can thereby result in the wage earner being worse off than he was on the lower wage. But we know that many who are entitled to benefits are not claiming them. If I understand correctly what was said in the other place on April 27, at that time something like three quarters of those entitled to claim free milk and welfare foods, prescription charges and the rest, had failed to apply. It may well be that some of those who failed to apply did not understand that they were entitled to benefits; and it may well be—and I think it is the case—that others have a sense of pride which prevents them applying.

On May 26 I asked a Question about the fall in the numbers of children taking school meals, and in his reply the noble Lord, Lord Belstead, referred to "free school meals". In connection with free school meals, there is a scale laid down (another means test here, too) which I think will not be easily understood by those who may be thought to be claimants. Indeed, if the Government want people to understand what they are entitled to, then I think that the advice they give will have to be a great deal clearer and the way in which they send the information out will have to be improved.

I have a feeling that we are in danger of becoming the most means-tested society in the world, largely because of a determination to make the rich richer and the poor relatively poorer, which in point of fact is what the reduction of 6d. in income tax, the cuts in the school meals and other services that have been mentioned, have achieved.

LORD BOOTHBY

My Lords, may I interrupt the noble Lord for one moment? Perhaps I may remind him that the free milk scheme for children was introduced by Lord Woolton as Minister of Food in the year 1940, and that in that year the position of this country was much more desperate than it is in the year 1971.

LORD GARNSWORTHY

My Lords, I am grateful to the noble Lord, Lord Boothby, for his intervention. My recollection also goes back to the days when, in order to get anything free at school, children needed to be certified by the medical officer as being so undernourished that they could not take advantage of the education offered them, and it needed a war to persuade many people who opposed the Labour Party's policies that the kind of policy that we had been advocating ought to be put into effect. Of course, many things were started during the war. Personally, I should like to get back to the concept on which school meals were started. It was intended that they, too, would be free, and I think it would be an excellent thing if we could get away from all these means-tested schemes. Many of the old schemes would be better if we could revert to them. I am not proud of some of the things that the Labour Government did in regard to them. I am not proud of the role that Labour played in introducing prescription charges. I wish they had not done so, and I think that as a Party we have to be big enough to say that. We wish they had not done it and we hope that the time will come when they will introduce once again a completely free Health Service.

When we pay, as most of us do, contributions to such things as the Health Service, whether by way of graduated contributions or tax, we ought not to have to pay again when we need that service, and I believe that increasingly the selective principle, so loved by the present Government, will be resented—and when I say "increasingly" I believe that the resentment will grow and grow. I think it will cause more people to turn against this Government and persuade more people not to support them, as has been indicated in the recent by-elections.

The Motion speaks of increasing unemployment and rising prices; it draws attention to the stagnation of the economy and the unfairness of the rewards as between one section of the community and the other. It is a Motion which is concerned with the quality of life of the British people and the prosperity of our nation. As I understand it, the Motion calls for a recognition that we are members of one community, with much the same basic needs, with entitlement to useful employment and wages that secure a sense of dignity. It calls for recognition that we are one nation and it would end the policies now being pursued, which are divisive because they offend against the principle of enlightened social justice.

5.5 p.m.

LORD BOYLE OF HANDSWORTH

My Lords, it is a great honour to address this House for the first time, and I should like to thank a number of noble Lords, on both sides of the House, who have kindly welcomed me personally in their speeches this afternoon. I have what I genuinely believe to be one of the most covetable jobs in the country. I cannot imagine either a more stimulating or a more friendly atmosphere in which to work than the University of Leeds. My sole regret is that for most of the year I shall have little opportunity for attending debates in your Lordships' House. The only thing I would add is that the fact that your Lordships have not seen more headlines in the Press during the last year about the University of Leeds will, I hope, he regarded as a good excuse for my absence.

With many of the remarks about the Government made by the noble Lord who introduced the Motion I could not, of course, associate myself. Nevertheless, this debate is timely, and it is no good anyone trying to conceal from himself the fact that virtually all the key indicators for Britain's economy are depressing at the present time. Unemployment stands at 720,000, and I think how that figure would have distressed the late Mr. Iain MacLeod, had he been Chancellor of the Exchequer to-day. Indeed, I look upon his death as one of the greatest tragedies to any Government and to British politics since the war.

The average level of wage settlements is still 12 per cent. and in fact I think the numbers of workers covered by those settlements is starting to move up again. Prices are still rising at an annual rate of nearly 10 per cent. Output almost certainly fell in the first quarter of this year, and I wonder whether upon that subject I might put one question to the noble and learned Lord, the Lord Chancellor, who is to reply to the debate. In the Budget speech the Chancellor of the Exchequer gave two forecasts. He forecast that between the first half of 1971 and the first half of 1972 the gross domestic product would rise by 3 per cent., and that personal consumption would rise by 5.3 per cent. Do the Government still stand by those forecasts?

THE LORD CHANCELLOR (LORD HAILSHAM OF ST. MARYLEBONE)

My Lords, if the noble Lord will allow me to say so, he is going faster than my pen will write.

LORD BOYLE OF HANDSWORTH

My Lords. I apologise to the noble and learned Lord; I habitually speak too fast. In the Budget speech the Chancellor of the Exchequer forecast that between the first half of 1971 and the first half of 1972 the gross domestic product would rise by 3 per cent. and personal consumption by 5.3 per cent. I wonder whether the Government still stand by those forecasts. I should have thought that, in retrospect, they would have to be seen as being too optimistic.

In addition. we know that the capital investment intentions of industry (and regard this as being extremely serious) have never been lower since our present system of forecasting was introduced, some sixteen years ago. Lastly, we have had no significant rise in the volume of exports since the second half of 1969. There is likely to be a considerable rise in the value of exports, but I think no one can feel altogether happy at the thought that our export prices are rising even faster than our domestic prices.

There is one other feature of the present situation—the postponement of the decision on entering the European Economic Community. I realise, as I am sure we all do, that this postponement was necessary, but it has added to the uncertainty which is helping to keep investment intentions at a low level. Of course it is equally true that the high rate of unemployment, coupled with the continuing severe inflation, will make it more difficult for the Government to convince the country of the rightness of the judgment that we should now enter the E.E.C. I think one should remember the fact of this uncertainty in adding to the economic difficulties of the present time, and also that the present economic situation is bound, in its turn, to make the Government's task of persuasion harder.

Before I go on to make one or two suggestions as to what should now be done, I would just say to the supporters of the Motion that I feel the present Government inherited a much more difficult situation than many commentators have always recognised. I would remind the House of this fact: that in the famous television broadcast to which reference has often been made, both the noble Earl, Lord Cromer, and the noble Lord, Lord Kearton, who said that he himself was politically sympathetic to the then Government, recognised the great difficulties that any Government returned in June last year would have to face. I think the Government did inherit a difficult situation, because one of the most serious events of the 'sixties was the disappointment of the expectations aroused by the National Plan.

The National Plan raised expectations about the growth of real wages which simply were not realised after 1966, and particularly were not realised after 1968. If anyone doubts that let me say that the most striking figures I have seen were in an article by Professor Hicks, who I think would generally be considered a pretty impartial economist, which appeared in September, 1970, and in which he showed the dramatic decline the increase of personal consumption which took place after 1968. And it was the disappointment of the expectations aroused by the National Plan which I believe has much to do with many of the most acute difficulties that we face to-day. The failure to realise those expectations has had a great deal to do with the exceptionally strong upward pressure of money wages attempting to recover the position. And, of course, another contributory factor was devaluation. Each time since the war that we have devalued the pound, in 1949 and in 1967, there has been exceptionally strong wage pressure in response. I mention this because I never cease to be amazed at those who believe that what is euphemistically called floating the pound "in the circumstances of Britain to-day could be a relatively painless way out of our difficulties. My Lords, there is no painless solution that way.

What should be done in the present circumstances? I must say I do not quite agree with those noble Lords who have spoken and suggested that they would be extremely cautious about reflation at the present time. I believe that some further measure of reflation is needed quickly if unemployment is to be held on a plateau, if confidence is to be maintained and not to become seriously eroded, and if the European policy is to carry conviction with a sufficiently large section of public opinion. Secondly—and here may I say I would endorse all that was said by the noble Viscount, Lord Amory—I am sure we cannot shirk the issue of trying to work out the elements of a new incomes policy. To any sceptics in your Lordships' House I would simply say this: we all agree inflation is continuing at far too high a rate, and we all know that at current levels of unemployment any further deflation of demand is really unthinkable. It was Mr. Maudling in a remarkable speech at Aylesbury some years ago who reminded us that it is possible to have acute wage pressure in one part of the economy and at the same time rising unemployment in other parts of the economy. I do not think Mr. Maudling in his more gloomy moments—and he is not particularly prone to gloomy moments —would have guessed then how much his words have been borne out in practice. What other alternative is there than a return to the admittedly stony path on which Mr. Selwyn Lloyd embarked ten years ago?

It must first of all be publicly recognised as Government policy, not just to" de-escalate" wage claims in the public sector irrespective of the merits or demerits, but also to use Government influence all the time to lower the average rate of wage increases right across the board, in the private sector no less than the public. Secondly—this is just as important—as soon as the Industrial Relations Bill has finally passed through Parliament I feel there must be détente, a perceptible shift towards a real attempt at greater mutual understanding between Government and the T.U.C. I do not take too pessimistic a view of the chances of this happening, and one reason is that whatever differences there are in this House or outside about policy, there is no Minister in the Government who rightly carries greater respect and popularity than Mr. Robert Carr, the Secretary of State for Employment.

When I speak of the elements of a new incomes policy I am thinking in particular of three things: first of all, a recognition of the special position of those groups of wage earners or professional workers who have fallen behind the big battalions; secondly, a recognition that the key to the situation lies, as I am sure it does, in some guarantee that an increase in national wealth will always be reflected in some increase in real wages. I do not meet a very large number of those on the trade union side concerned with wage negotiations, but whenever I do, and whenever we talk, it is always this issue of real wages which is understandably uppermost in their minds, and this seems to me the clue to any new policy we might hope would emerge. Thirdly, I believe we must have some permanent machinery for prices and incomes policy. I have never concealed my view that I regretted the rapid demise of the Prices and Incomes Board under the present Government. I am sure that before long we shall need to replace it with something similar.

I know that there are those who regard any attempt at an incomes policy as inconsistent with the desire to achieve a more thrusting and competitive economy. I think they are wrong, for this reason: it seems to me quite obvious—and if it was not obvious before, surely it is obvious now—that the labour market does not behave like the textbook model of perfect competition. In fact it has never done so. The labour market observed by that often maligned character Adam Smith in the 18th century—I have read The Wealth of Nations; and a very interesting book it is—was not the abstraction created in the minds of later writers. It was one, as Adam Smith himself realised, in which power was already of paramount importance: the power of the employer with his reserves of capital to fall back upon in bargaining with individual workers, which they could not meet on equal terms unless they developed their own countervailing power through collective action and the formation of trade unions.

What we have learned surely, and learned painfully, during the past ten years is that it is not the employers, on the whole, who have suffered most through the development of this countervailing power of the trade unions. The real sufferers have been those in our society who have no ready means of adding to their incomes quickly, or any leaf hedge against inflation, in response to the combined power which the great corporations and trade unions jointly possess to raise wages and prices. It is for those reasons that I feel most deeply that there is absolutely no alternative but to go back to this path of developing policies on the lines that a number of noble Lords on both sides of the House have mentioned this afternoon.

This is extremely difficult, but it is essential. I believe it is often those policies with regard to which no Government can succeed absolutely that are none the less most important to the nation. May I say that in advocating that this is the line we should take, I am trying to think this afternoon not of the interest of any one section of the community but of the public interest. I am also quite sure that if we can make even partial success along this road of an incomes policy it is the whole of our society, including organised labour, who will in fact benefit a great deal.

5.20 p.m.

LORD THOR NEYCROFT

My Lords, in thanking the noble Lord, Lord Beswick, for giving us the opportunity of having this debate, I think I should be meeting the wishes of your Lordships' House if I, too, were to pay tribute to the two remarkable maiden speeches: first, that of the noble Baroness, Lady Seear, who I thought approached the problem of an incomes policy in an original and extraordinarily interesting way (I should like to make some reference to it in a few moments) and, secondly, to my noble friend Lord Boyle. My noble friend Lord Boyle has always brought to public life quite remarkable qualities of intellect and character. Those of your Lordships who listened to that speech will realise the quality of debate which one can enjoy in any assembly of which he is a member. The intellectual capacity is matched by an attitude which I have always found extremely attractive, though no doubt it is sometimes regarded as a little naughty. It is an attitude which pays rather more attention to intellectual truth than Party dogma. It has earned him a few criticisms in life, but it has also earned him many friends in all Parties and in all walks of life. We wish him well. The other attractive feature is that he always assumes that one knows as much as he does. I find this extraordinarily comforting. I feel now that I really do have Adam Smith as a bedside book, and I feel that your Lordships are almost persuaded of that as well. I manage to embark on this difficult subject a little more happily than I would otherwise have done.

My Lords, the noble Lord, Lord Beswick, painted the shadows in the economy. Of course there is no question but that those shadows are there. My noble friend Lord Boyle is quite right; nobody can deny them. There is the slackness in investment; the rising prices; the levels of unemployment. All these things are there. If we are to approach them and ask what we should do about them, I think it is not a bad thing to start off by saying that we have all contributed to those shadows at one time or another. Although it is a long time ago since I had any great influence in these affairs, I am sure I made plenty of mistakes. I do not think there is anybody who has been in public life who has not done the wrong thing from time to time. The difference between Governments and business is that in business—if you look at the management of British industry—they do wrong things almost all the time; but then, the moment they find out it is wrong, they stop doing it and do something else. For some extraordinary reason, perhaps because we debate in public, it is remarkably difficult for Governments and political Parties to think through afresh what they ought to do, in order to assess the value of policies that they have pursued.

If one asks who put the shadows there, well, one can look back on the Budget. I thought it was rather a brave Budget. To be absolutely frank, it went a little further than I thought would be wise at that time. How wrong I was! It probably did not go far enough, or not far enough in the right direction. Though there may be reflationary benefits, as the noble Viscount, Lord Amory said, and other benefits, they have not yet quite come through the economy. But it is not enough just to look at one Budget; one has to look at other things that have happened. May I say in the kindest spirit to the noble Lord, Lord Beswick —because I think he recognised in what he said that this is a national rather than a Party problem—that I would hope that he would try to think again whether all the things that were done by the previous Government were quite as right as he supposed. The years of overtaxation really have done quite a lot of harm. The spirit and policy of trying to have universal benefits, irrespective of need, is no doubt one of the factors which we may still be suffering from. When the noble Lord, Lord Garnsworthy, said that we must get back as soon as we can to free prescriptions I ask, without being controversial about these things, that we all of us try to think again and try and see what the effect of our acts have been, admitting that all of us from time to time have pursued policies which, while they may have had some merits, have also had some defects and may need new thought.

Not only are Governments concerned here, but also outsiders. We are dependent upon management and trade unions. No one would say that management in this country was perfect; no one would say that the trade union movement, or its leadership, are perfect. We have spoken about wage demands, and the hope has been expressed that they may be decelerating a little. But there are plenty of factories in this country at the moment working about half time, or on a go-slow or a strike in favour of a 35 per cent. wage increase. Such wage increases are pitched at a level at which it is almost impossible to start discussions at all. One has to count not only the inflationary effect of settlements— when you get settlements— of around 10 per cent., but the general slowing up and inertia in British industry initiated by enormous wage demands. Then you have a slackness of work or a go-slow, or something of that kind, and factory after factory is faced with that kind of situation at this time.

What do we do? The noble Lord, Lord Beswick, says, "We get an agreed policy". If he and I had to agree a policy I like to think that we should probably get along quite well; but an agreed policy is a really difficult thing to achieve in this life, particularly on the subject to which he draws attention in this Motion. "material rewards". I hope no one will take my words as meaning more than I say. I am coming round rather to favour the approach of my noble friend Lord Boyle to an incomes policy; but let us recognise the problem. If anyone were to ask me what are the relative rights in the way of material rewards between a "pop" singer and a B.O.A.C. pilot—or me, if I wrote my memoir—I really would be very puzzled to give an answer. Frankly, I do not know, and I do not think that anybody else knows, either. Therefore, one is in a great initial difficulty when one is talking about organising some system of fair material rewards.

There is another form of agreement which he might be looking for; that is, agreement with the public. We all rather like agreement with the public—especially in the other House, because they are very dependent upon agreement with the public. But to judge from the current polls or the Press, or what is said by the trades unions, what would we get agreement on with the public at the moment? I doubt whether we should get agreement on going into Europe. We should probably get a broad measure of agreement that we should not do so at this moment, if the polls are right. What agreement would we get about wages? To print as many banknotes as we can persuade the Government to print would be the most popular. I am doubtful whether it is the role of Governments always to be seeking agreement with the public. I believe it is the role of Governments to lead the public. It is inevitable that Governments are unpopular; it is part of our system. When the noble Lord, Lord Balogh, was saying how can one get agreement if one does this or that, he was quite right; you cannot get agreement about these things. But a Government of either Party, which just set about doing only those things on which they could get agreement with the public, would make a sorry business of governing this country at this particular moment in our history.

I believe that this Government have led. They have certainly taken some very hard decisions—Rolls-Royce, Upper Clyde Shipbuilders. They were horribly difficult decisions, but I believe they were right decisions. I am not in the least impressed with stories about order books. Anybody who knows anything about business knows that you can collect an order book. The test is whether you can collect an order book which, at the end of the day, can be related in any sense to profits, not because profits are great things in themselves, but because they are the only measurement we yet know for deciding whether what you make is wanted, or whether you are making it as efficiently as anybody else. There is no other method known. So I think that in those cases the Government were right in the very harsh decisions that they made. But they were very hard decisions for the men engaged in those businesses, and I think that the management and those who, in the case of Upper Clyde Shipbuilders, organised that particular structure have a certain amount of blame upon their shoulders. Only at the last moment were the Government called in to pick up the bits.

I would say: Forget about seeking agreement and about having an inquest on the past and let us, if we can, face the complex of problems which involve—and I agree here with the noble Lord, Lord Boyle of Handsworth, and the noble Lord, Lord Balogh—the question of Europe. It is rather like Hamlet without the Prince if you entirely eliminate from the argument the biggest economic facts; that is, about Europe, about whether we should reflate, and about what, if anything, can be done about an incomes policy. Europe is central, but I am not going to make a speech about it because that would be inappropriate to-day. However, it is plain that we are reaching the moment of truth on Europe. It is my hope that the negotiators have managed to eliminate the butter and fish, to which at one moment it looked as if the argument would be reduced. We are going to have to face the issue of principle as to whether it is in our interest to go in or to stay out. The noble Lord, Lord Boyle, is right in saying that the timing is difficult. I make no claim now, but at one time I knew a great deal about that problem. I had worked very hard on it; I had read and re-read the Treaty of Rome. I had argued it in Delhi, in Peshawar, in Canada and in many other places, and I could answer cross-examination on it. But, at the end of the day, I should never have been able to demonstrate with figures whether we ought to go in or to stay out.

It is not a judgment about figures; it is a judgment about faith. It is a judgment about an attitude of mind, and my guess is that at the end of the summer those who now believe we should go in will still believe that we should go in, while most of those who now think we should stay out will still think that we should stay out. Though I am prepared to play even my modest part in trying to explain almost inexplicable complexities, I do not think you can really use statistics to argue about matters of that character. Like the noble Lord, Lord Boyle, I therefore regret the delay which we have to face. It is utterly wrong but, like many utterly wrong things, it is politically inevitable. We have to pretend somehow or other, with a month or two of stomping up and down the country, in which, I am afraid, an awful lot of nonsense will be talked and an awful lot of positions will be taken up which, afterwards, people will wish that they had not taken up. But I recognise that we have to do it.

But the longer this delay goes on, the longer the investment decisions are going to be delayed; and if this debate is about anything it is about investment decisions. Many noble Lords have said that what is required is an investment-led reflation, but one does not get an investment-led reflation unless there is confidence, unless businesses know what it is that they are going to face and which markets they are going into. That is the European scene, and I hope that we shall have a reasonably successful summer on it. If we got into a strong Europe, and it really was outward-looking and a great centre for culture and investment in the rest of the world, that would be a very great thing indeed. It is possible that if we go in we may not get that. But if we stay out we shall certainly never get it at all.

What do we do in the meantime? There is of course the question of wage inflation, and on that I want to make only one point. I want to say it slowly, or to say it twice in order to emphasise it. If wages go up and prices are held, that will mean large-scale unemployment. I want to say that as clearly as I possibly can. If wages go up and we try to hold prices down, the only effect will be to throw people out of work because businesses will no longer be able to afford to pay their wages. That elementary but not very revolutionary economic thought is not very fully understood. and it needs to be said. As the noble Lord, Lord Robbins, wrote in an article in to-day's Financial Times, even if you held cost inflation now and cut off the sources of it, it would still be running through in rising costs for many months ahead. That means that we are going to go on seeing these price increases, which in some degree are quite inevitable if we are going to keep at work the men whom many of us employ. That ought to be understood.

That brings me to what I want to say in conclusion. We must use every effort that we can to control this wage-pushed inflation. By "every effort that we can", I do not mean that I see an easy solution with a statutory incomes policy or anything of that kind. But I would ask, as I have asked earlier in your Lordships' House, that nobody in Government commits himself irrevocably against any of the possible measures into which the Government might be forced. There is no perfect answer. The noble Baroness, Lady Seear, produced one, which was no doubt an imperfect answer, but it may be that we shall have to accept an imperfect answer rather than have no answer at all. The Government may be driven into some method of holding wages. For example, the next round is already in the "hopper", so to speak. Before long, the dustmen will be coming along demanding another round. The local councils may be even more willing to settle than last time, and, if necessary, I think we have to be prepared to say—and to say it early—that they will not be rate supported; that we are not prepared to give rate grants from the central Exchequer to support wage inflation of that kind.

We have to use monetary controls. We have to use every method that is open to us—and the Government have used plenty of them already. If necessary, we may have to tax employers—that is one of the suggestions that has been put forward—who agree to inflationary wage settlements. I am an employer and I do not say that I welcome or advocate that course. All I say to the Government is: For Heaven's sake do not rule out any method that may be necessary really to control wage settlements below those under which we have recently been suffering. I say that with emphasis, because I share the view expressed by the noble Viscount, Lord Amory, and, I think, by the noble Lord, Lord Boyle, that it would be very much in the country's interest if a modest reflation could be got going before we have to jump this fence into the Common Market.

I say this from many points of view—some economic, some political. To try to take a great step forward in the economy with all the indicators set rather hard against you, with public opinion at all levels (whether it is management or the trade unions) suffering under a lethargic economy, with managers forced into more and more redundancies as the summer goes ahead, is going to be a damned awkward way of presenting this particular horse at this particular fence. I say, therefore, if it is possible, screw down your wage increases by any means available. As to reflation, I appreciate what Lord Aberdare said. I would have said the same in his position—" This is the time of the year when one is looking at a general review, and if action is necessary action will be taken ", et cetera, et cetera. That is quite the right answer; I do not ask for it to be amended in any way by the Lord Chancellor or by anybody else. We have all said it, I think, at one time or another. But I hope that, as a result of that thought, the noble Lord will bear in mind that we are on the verge of one of the biggest economic and political moves in history.

5.41 p.m.

LORD ARDWICK

My Lords, first I should like to congratulate the noble Baroness, Lady Seear, upon her maiden speech. I have had the pleasure of hearing her many times from the Press benches at Liberal Party Conferences, and I have always admired the combination of academic wisdom and the skill of an old campaigner that she brings to politics. I am quite sure that we have acquired not merely a fluent but a formidable debater, and we are delighted to have done so. I do not know what I could say which would not be presumptuous about the maiden speech of such a distinguished Parliamentarian as Lord Boyle of Handsworth. I would simply say that I hope that from time to time he can leave the turbulence of university politics to come and add his singular mixture of sweetness and light to our debates in this Chamber.

My Lords, this is a very happy day. This is the day they brought the good news from Luxembourg to London. I had hoped to see a row of radiant faces behind the Dispatch Box, but noble Lords give the appearance that this is just another black day in the life of the Government. It is not. I share in their happiness. I may say that if Government hospitality was as prodigal at Westminster as it quite appropriately has been at Luxembourg, I would gladly raise a glass of champagne and toast Mr. Rippon, coupling with his the name of M. Pompidou. So, on a day like this, I find it rather hard to look back in anger. The past twelve months of governmental failure, of government by an out-of-date ideology and a curious kind of stern and stale rhetoric, seem to be to-day, I think of only passing importance. What matters more is the future: whether Britain is going to take full advantage of the European opportunity or whether Britain is going to be the lame duck of a wider Europe.

I have always held that there has been a great inconsistency in recent Tory philosophy. On the one side, there has been an admirable and fervent desire to join the European Economic Community; and, on the other, a desire to revert to some of the rather harsh Tory principles of the pre-war period, which were years of economic and social failure, and of national humiliation. These two attitudes seem to me to be wholly incompatible. The Tory Party has given the impression over recent years—fortunately more by words than by deeds—that it is a Party which believes in minimum social security, of people being encouraged, or obliged, to stand on their own feet by individual effort, rather than by joining in a universal and collective system of social security.

This, my Lords, is remote from the European idea. Of course, in the field of European social security there are wide variations. Each nation has its own priorities and its own emphases. There is nothing perhaps so comprehensive and easily accessible in the whole of Europe as the British National Health Service; but when we come to pensions and family allowances we are, I think, outmatched. Yet these are vital to the protection of the average family and the average pensioner in a system which is dependent on value added tax and more realistic food prices than we are used to in this country. It is of course extremely difficult to compare the value of social services in different countries, to estimate exactly what the social wage is, and I have never been satisfied with those comparisons which are made by my pro-Common Market friends and which put us rather low in the table. Probably taking one thing with another, including our comparative generosity to university students, we come out quite creditably. An important thing is that we do not now fall behind, that we now abandon for all time those ideas beloved by the Right Wing of the Tory Party which would reduce social security to the succour of the very poor. That is not the European way; it is not compatible with the European system; and it is certainly not compatible with the European aspiration of the harmonisation of social security.

So the sad fact of to-day, as several noble Lords have said, is that after 12 months of Tory policies in Britain people are approaching the European opportunity with greater and greater trepida- tion. They are asking: can we really take the additional risk of entering Europe under a Government which stands helpless before inflation? A Government which believes that a negotiated or legislated incomes policy is impossible or undesirable? A Government which seems to tackle the problems of failing industries, on which the living of thousands of families depend, with a certain moral repugnance? And a Government which seems to enjoy its stultifying cold war with the unions and which has adopted (although not of course in this Chamber) a style of governing with minimal dependence on persuasion? I sometimes think that if this Government were to form a lifeboat crew they would blame the shipwrecked mariners for the storm in which they were caught. This Government seem sometimes to be in the grip of their own barren ideology.

In most countries, even in the Communist ones to-day, ideology is dead because to-day's problems can be met only by a flexible pragmatism. It took my own Party a decade of bitter dispute to come to terms with that hard fact. The Conservatives, with their impressive tradition of adaptations, were quicker to learn. Then a few years ago, out of power, and facing, as all Parties in all parts of the world face to-day, a disillusionment in their simple rank and file, they slipped back. They returned some way to the old-time religion and it was codified in the synod of Selsdon at the beginning of 1970. All that has been happening in the Government during the past year was inscribed on the Selsdon Tablets: the lightening of the taxation of the highest earners in the land while leaving the poorer-paid workers no better off; little meannesses about school milk, school dinners, museum charges; the abolition of such useful instruments as the Prices and Incomes Board and the Consumer Council.

But far more important than the Government's misdeeds are the things they have not done because ideology forbids. They seem to believe that it would be a sin against the Holy Ghost to intervene in prices and incomes except to be stern towards the lower-paid workers in the public service, and to make price arrangements in the steel industry. They seems to stand helpless before the inflation which they blame wholly on the rapacity of the trade unions, particularly in the private sector. They have no policy for conspicuous growth because they fear to add to the inflation which they refuse to control. They will confront the unions on the ideological front of the Industrial Relations Bill but not on the practical front of prices and incomes. Government policies arc not in fact working, and never looked like working.

A year ago the Government believed that if they reduced taxes, if they stood up to the unions, if they put responsibility on the private citizen, somehow the energies of the nation would be released and we should enter a new to-morrow. Of course, the Prime Minister warned us not to expect a miracle overnight—and never did he speak a truer word. But if anyone had then predicted that after one year in power the pound would have fallen so sharply in internal value, that we should have 800,000 unemployed, that investment would be stagnant, that business confidence would be at an all-time low, the Government themselves would have been totally incredulous. Yet the prediction could have been made.

The Tory diagnosis of what people wanted of their Government, of what had to be done, was outdated and shallow; for by 1970 when the Government came to power, the idea that inflation could be kept at bay if demand was correct was no longer tenable. Most of the conventional wisdom about the effects of Governmental action on the economy was no longer true, or was highly suspect. It was never put better than by Raymond Fletcher, M.P., in an article in The Times. This was devoted to dissolving Labour myths; it is time that some good Conservative did the same for the Tory myths. But what Mr. Fletcher had to say had some general application. He said: Ministerial power is exercised to-day in a strange environment. No longer can a Chancellor correctly anticipate the result x from fiscal measure A. People spend more when according to past habits they should be spending less. That intangible thing called confidence comes and goes like spring showers. Human behaviour in fact seems to have gone random and this, while not making governmental planning impossible, makes it damnably difficult. To-day the random effects are even more marked. Wages increase fantastically, but not demand. Prices go up swiftly, but provide no encouragement to invest. People who have always spent wildly when prices are rising are causing embarrassment by their propensity to save. Unemployment, which used to be a check on wage demands, has no apparent effect either on the claims made or on the claims granted. The problems for a Chancellor to-day are great, and nobody will envy Mr. Barber his task. But he and his colleagues are handicapped by the naïve views they formed in Opposition. There was always a great hole in their policy. They had no macro-economic policy, no plan for induced growth, only a theory that if taxes were low and incentives were high, it was one of those nice things that would happen.

They need a plan for growth now, and not just because they are standing low in the opinion polls. We are all sceptical about the implications of opinion poll results to-day in electoral terms. But I cannot refrain from saying that the local government and recent by-election results were very good predictors of the latest opinion polls. But that is not the reason I would urge the Government to develop a strategy for growth to-day. If the Government were incurring electoral unpopularity because they were doing the right and hard things, I should not encourage them to change. But not only does the nation want a new policy; the economy needs it and demands it. It is time now that the Government reassured the nation that they have, first, a social plan to cushion the poor and weak against the impact of the Common Market, and that they have a growth plan to take advantage of the opportunities. Because, after all, the economic object of going into Europe is to put our economy on a sounder basis and to enable it to grow faster. How is it to be done? When is it to be done? We cannot leave it, as several noble Lords have pointed out, until January, 1973. Surely we must go into Europe on a rolling start, on a wave of developing growth. The Government have begun sadly. But now, with Europe ahead, they have the chance of a new beginning. With a European future they can bury the Selsdon tablets; they can plan in a new and encouraging context and put 1971 behind them as their annus horrendus.

5.56 p.m.

THE EARL OF DUDLEY

My Lords. although I cannot follow the last speaker. I have found this a most interesting and exciting debate. I avoid the word "stimulating" because it has its depressing aspects. There have been two outstanding maiden speeches and we have had other remarkable speeches from both sides of the House, including the speech of the noble Lord, Lord Thorneycroft, whose example I do not propose to follow since I intend to take advantage of the absence of Lord Shinwell and to speak with copious notes.

The noble Lord, Lord Beswick, has found the right formula for his Motion, although I do not agree with it. It scatters concepts like confetti. Had it originated on this side of the House and had he been here, the noble Lord, Lord Davies of Leek, would have called it a "mish-mash". To avoid plagiarism, I shall describe it as a bran-tub. It is well contrived with a little bit of what you fancy in it for everybody—and. indeed. they have taken advantage of it. In fact, the wording looks remarkably like an Election address with a call for the Government to seek a positive and agreed national policy ", echoing Mr. Wilson's cry for a General Election.

The Motion calls for a policy based on full employment, an expanding economy and maximum social justice ", and it is introduced by a noble Lord who was a member of the former Administration, under which unemployment rose by over 60 per cent. while the economy remained stagnant, and which extorted a higher percentage of the gross national product in taxation than ever before in British history. The concepts mixed together in the bran-tub comprise two distinct categories: the growth of real resources and the allocation of those resources. "The unfairness of material rewards as between one section of the community and another" and "a national policy based on maximum social justice" may be desirable subjects for debate; but they have no bearing upon the more urgent problems inherited by this Government, of inflation, of rising unemployment, of stagnation of the economy and of inadequate industrial investment. There is a connection between growth and resource allocation in that the achievement of real growth will result in a general rise in the standard of living.

But as the noble Lord, Lord Thorneycroft, said, in a free society there will always be grounds for arguing that material rewards are unfairly distributed. What are required to "maximise social justice" are more equal opportunities to earn better rewards.

But none of this is strictly relevant to the urgent problems of inflation and lack of growth which are at the heart of this Motion and about which I imagine the noble Lord must be mainly concerned to seek the views of the House.

My Lords, this is a very important debate, because inflation is posing a grave problem not only for the Government but for all the people. The noble Viscount, Lord Amory, raised the question of whether to sacrifice the policy of full employment to fight inflation. I am not sure what answer noble Lords opposite would give to this question were they in power; but I suspect that they would compromise, with fatal results. I am clear in my mind what course the present Government should pursue. The noble and learned Lord the Lord Chancellor pointed the way in his speech in answer to Lord Beswick's previous Motion in November last year.: I follow him in believing that inflation, if allowed to continue unchecked, will imperil the free and effective working of the kind of mixed economy, and the kind of free democracy and democratic society, to which we belong; and for which most of us have risked our lives at one time or another.

My Lords, since that debate we have seen the crash of Rolls-Royce, which can be attributed to the same cause as that which led to the overthrow of the great industrial concern of Hugo Stinnes in Germany in the 'twenties. The reason is that the pace of inflation outstripped the growth of their financial resources. No one can doubt that Rolls-Royce would still be viable in its old form if wages, costs and prices had remained constant. To save the concern in the national interest a Conservative Government have found themselves obliged to adopt a basically Marxist economic theory, and take over the ownership of the means of production, and to finance those means from public funds. The effects of inflation upon company liquidity in the 'sixties can be clearly seen on page VI of the current Economic Trends. Small wonder that the Government, who must have these considerations in mind, are reluctant to pursue reflationary policies. whether directed towards full employment or faster growth!

Noble Lords opposite are not alone in disliking unemployment or in being shocked at the thought of men and women on the dole. Nor is it enough to have comprehensive social services to cushion the effects of unemployment and to minimise hardship. The unemployed must be provided with the jobs which will not be forthcoming unless we contain inflation. The alternative is to accept a totalitarian system, as did Italy and Germany in similar circumstances 40 to 50 years ago, when unemployment accompanied inflation following the First World War. If any noble Lord doubts that the two evils are still closely interrelated he should consider the pattern of the last two inflationary periods; and, with all due deference to the noble Lord, Lord Boyle of Handsworth, and much as I admire and respect Mr. Maudling, there was no apple and no bathwater at Aylesbury.

In 1964–1967 prices and earnings rose by about 17 per cent. and unemployment by over 60 per cent., accentuated no doubt by the draconian measures taken by the Labour Government to postpone devaluation. In the latest period, from 1969 to date, prices and earnings have risen by about 20 per cent. and unemployment by nearly 50 per cent., and will rise still further if inflation continues. The percentage rate of inflation approximates to the difference between the percentage rise of average earnings of all employees and the percentage increase of the real gross domestic product over any specified period. So long as earnings go up by as much as 10 per cent. per annum and growth remains constant at from 2 per cent. to 3 per cent.—and with due deference to the noble Viscount, Lord Amory, I see no figure to suggest that the situation will be better than that—inflation must continue at the rate of about 7 per cent. to 8 per cent. per annum.

My Lords, the problem which successive Governments have had to face, and have failed to solve, is how to bridge the gap between the cost of living and of production and the rate of growth—or, at least, how to reduce the gap to a tolerable and historical rate of inflation of just under 2 per cent. per annum. There are, broadly, two schools of thought about the means to these ends, comprising the devotees of the prices and incomes policy and the disciples of faster growth. It is fair comment that the difference of opinion is beginning to harden along Party lines, with noble Lords opposite advocating an incomes policy against which Ministers have as yet set their faces; and my noble friends looking to the Common Market to provide them with a higher rate of growth. I regret to learn from Lord Balogh's apologia for the Election that he does not think much of our chances of improving growth when in the Common Market. I do not agree with him, but I do not think that the question is really relevant to to-day's debate since in my opinion we have to stand on our own feet.

Neither Party has succeeded, when in power, in bringing about faster growth as a result of their own policies. Investment remained static under the last Administration; it has fallen slightly under this Government and is forecast to fall still further, although I think Lord Aberdare's remarks revealed some difference of opinion between the Treasury and the C.B.I. about that prospect. There is no question of this situation being due to lack of confidence, because the figures show that the private sector is expanding by an amount equivalent to its surplus liquidity each year on new fixed capital formation. The alarming fact is that company sector liquidity has fallen by about 50 per cent., or, at current prices,£2,000 million, since 1960. This is the "depressing picture" to which the noble Lord, Lord Beswick, referred and to which I think the noble Viscount, Lord Amory, made reference. In the light of these figures it is not surprising that our capital goods industries, and particularly our machine tool industry, are in the doldrums and pessimistic about future prospects. Yet, my Lords, these are the industries upon which we rely for growth, and which should be working to capacity.

Additional investment is needed quickly, yet industry is in no position to provide further funds from its own resources. Nor are higher consumption and higher prices satisfactory solutions to the problems. The extra cash flow will take too long to work its way through to investment. It is dangerous to reflate before inflation has been brought under control and until investment results in more advanced and more profitable plant and equipment. And there could be harmful effects upon the balance of payments.

To cut this Gordian knot, and to provide industry with fresh incentive and resources to depreciate and replace obsolescent plant more rapidly, there is a strong case for adding to the provisions made by the Chancellor in his Budget. Grants to industry for research and development could also be increased. As the problem seems to be one of timing, this method would bring at least two advantages. There would be a time-lag, perhaps as much as a year, before the cash is spent by the wage-earner in consumption. And it would take anything up to two years before the full effects of new fixed capital formation were felt in increased production, by which time the demand should be there or able to be released to meet it—and at a time which my noble friends might look upon as appropriate for added growth and increased prosperity.

To achieve these aims while keeping prices down and to go some way to restoring company liquidity to the 1960 level, it seems a reasonable compromise that half the required amount, about £1,000 million, should be provided by direct contribution from the Treasury to be spread over two years. The reductions in company taxation already made this year, including investment allowances but less investment grants and the new national insurance contributions, amount to just under £400 million, of which £300 million will be credited in the current year. This could be increased by a further £600 million, £200 million this year and £400 million in 1972–73. Treasury contributions to the private sector would then total just under £1,000 million, half in this year and half in next.

It may be that Ministers will decide that social justice, or political expediency, demand the reflation of the economy by stimulating consumption. If this option is under review, I hope that Ministers will exercise restraint. With all due deference to the noble Lord, Lord Boyle of Handsworth, it was a relief to learn from the noble Lord, Lord Aberdare, that no pre- cipitate action will be taken. However, I accept that industry will look for an assurance that there will be market outlets for the increased investment. While the Budget changes in taxation are likely to add about £450 million to consumption this year, and £500 million in a full year, the effect upon retained profits can be only marginal. It may take anything from five to ten years before company liquidity is restored to a level which could be considered to be satisfactory. For these reasons, there is something to be said for adding about £150 million to consumption in the current year, and for Ministers making some commitment to the public and to industry about increased consumption over the next two or three years, along the lines suggested by the noble Viscount, Lord Amory, as conditions permit and if the pace of inflation abates.

Turning briefly to prices and incomes, I part company with my noble friends in believing that cost-push inflation cannot be contained in the private sector without Government intervention. There is some evidence that prices have risen rather faster than wages over the past year, and good grounds for believing that they must rise still further. Because of this, it seems to me desirable and feasible that the intervention should bear upon prices, in the interests of the consumer, rather than upon incomes, where I believe control to be more in line with the philosophy of noble Lords opposite. And it seems to me that an incomes policy places rather more responsibility upon Ministers and a prices policy upon management, where to my mind this responsibility properly belongs.

I should like to see a strong Consumer Board, incorporating the Monopolies Commission, and with a reviewing function over the price of essential and semi-essential goods. The Minister would have powers to limit price increases, but would only exercise them to remedy proved cases of abuse. But to pursue these ideas would take up an unreasonable amount of your Lordships' time, of which I have already been greedy.

Finally, I congratulate the Government on the success of their policy of restraint in the public sector, which is in marked contrast to the handling of expenditure in that sector by their predecessors. I oppose the Motion because of the record of noble Lords opposite in that respect, and because I believe that it betrays the muddled thinking on economic problems which characterised their tenure of office. My noble friends and their colleagues in another place have taken, and will continue to take, the measures appropriate to the hour. If they are concerned about what has been described as "that mysterious. independent variable of political calculation, public opinion," I echo the remarks of the noble Lord, Lord Thorneycroft, and remind them of the words of a great statesman: More important than winning the election is governing the nation. That is the test of a political Party—the acid, final test

6.13 p.m.

LORD RITCHIE-CALDER

My Lords, I shall be brief, but I feel that my intervention ought to extend some of the points made. I must thank my noble friend Lord Beswick for introducing this debate and for the terms of his Motion. in spite of what the noble Earl, Lord Dudley, had to say about mash-tub. This is what politics are all about. Of the terms of the Motion, I think the most important one is maximum social justice. I believe that the mechanics of politics and economics can find their justification only in maximum social justice, which of course has not been particularly manifest for some time. I should also like to congratulate the noble Baroness, Lady Seears, not just conventionally but because I think it was a remarkable maiden speech and I agree with so much of what she said. I was naturally delighted to hear the noble Lord, Lord Boyle of Handsworth, in his new incarnation. I have followed him with so much admiration in his many incarnations that to see him re-emerging from his university into his Parliamentary reincarnation was for me an experience.

The terms of the debate today are fundamental, including everything we ought to be considering in present-day politics. It is these fundamentals that brought me to these Benches. The Labour Party, to which I adhere and which I follow, not too slavishly, as some noble Lords may have noticed, stands for that social justice in which I believe. It is part of the habit of this House, and something which is respected by those who come from the outside world, that so many noble Lords speak not from the book but from living experience. I do not want to be prosy or to be recriminatory, but I should like to put a few doubts before your Lordships.

I was there on Red Clydeside in 1924, and it was Red because of the manifest social injustice, because of the unemployment, because of the closing of shipyards like Beardmore's, which had built battleships and had to go over to building metal houses. It was a period when, as usual, Scotland was Vulcan's forge in time of war and then when the war had gone, was allowed to die. In 1924, we had in Scotland all the manifestations that other people were to find in exaggerated form in 1929 and after. I was (I hate to remind your Lordships) at Invergordon during the mutiny. It is one of those things which are now conveniently forgotten, but the mutiny followed the gross injustices of the policies of the Government of that day. I went through the 1930s wrestling, through Committees, against malnutrition, and trying to see that the milk which was then being poured into the gutters was put instead into the stomachs of children. School milk for children came out of our campaign and it was the noble Lord, Lord Woolton in the War-time (not the Conservative) Government, who implemented the first school milk scheme. I was on the Jarrow Crusade, when a town marched to demand work.

My Lords, it is happening again. The ghosts of everything I am talking about are rising from the grave: the manifest abuses of the system, the demonstrations of resentment against' the system, against what is intolerable because it is no longer excusable. In Scotland last week-end the newspapers were running the headline, "The Clyde Crusade". It is the Jarrow Crusade again. They are marching; and the clergy with them. This is a great distress to me, because I am not a doctrinaire. I believe in progress, and one of the compensations of a progressive, as one gets older, is to realise from long experience that progress means taking two steps forward and one step back. We progressives believe strongly in going ahead, but then we have to retreat to "practical politics". But the present situation is not two steps forward and one back—it is two steps forward and three steps back. We are going back in time. The time machine has skidded, and we are talking again in terms of the 1930s and 1920s. This, to me, is not only contemplating the present situation in terms of the kind of thing which my noble friend Lord Balogh or Lady Seear, or any other noble Member of this House, can spell out to me in economic terms. The economics of every situation are relative only in terms of inhumanity of man to man—and I do not use that phrase piously: it is in fact demonstrated in everything that is happening to-day. I have gone back in attitude, and this is more serious than simply skidding in the statistics of the situation. This, to me, is something which emphatically has to be redeemed.

I am, as your Lordships will realise, concerned about the future. I want to take up, and to support, one point that the noble Baroness, Lady Seear, mentioned: and, indeed, I have some support from the noble Earl, Lord Dudley. At this time, whatever we have in terms of 800,000 unemployed, at least let us in this situation take care that people are being retrained for the kind of jobs which we hope we are going to create for them in the future. They will have to be forward looking jobs, not just retreating into our past. As the noble Earl, Lord Dudley, said, one of the serious things at the moment is that the whole machine tool industry, on which we are going to depend for any future prosperity, is falling off.

The other matter that I want to emphasise—it is a bad sign, because it has been a bad sign in every other situation in the last forty years—is the effect on the employment of graduates. I do not say that as one coming from academic life, but rather belatedly into and out of academic life. The fact is that in the past, as now, the victims of a situation of this kind are the people whom we have encouraged to go on to take high qualifications and whom we are now sacking. When I was in Scotland this week-end, the noble Lord, Lord Clydesmuir, was on television appealing to his friends to do far more to help Scotland—which has this over 50 per cent. increase in unemployment—to get going in terms of research and development; in fact, to employ the redundant graduates. I think the experience of every university this year is that the people who are coming out of this year's science and engineering courses are not being employed. This, to me, is one of the most serious indicators of the whole business. The fact is that we are, as it were, eating the seedcorn of our future.

6.24 p.m.

LORD HANKEY

My Lords, I want to begin by saying what remarkable maiden speeches we have heard to-day. I con gratulate the noble Baroness, Lady Seear. and the noble Lord, Lord Boyle of Handsworth, on their excellent contributions to this debate. I hope that we shall often hear from them again in the future.

I very much agree with the noble Lord, Lord Ritchie-Calder, about the seriousness of the present situation. I have not the advantage of knowing the Clyde, but in the 'twenties I used to go quite often to South Wales and I saw scenes there which I shall never forget. The unemployment and the deplorable desolation of the villages was quite appalling to travel through; and there was so much hardship. I believe that there is less physical hardship now, but the social and personal hardship of not being employed is very great, and the waste of resources to this country is appalling. As we have to pay for these people anyhow, it would be much better if we could find some means of using their qualities.

It seems to me, my Lords, that we want to take a new look at the situation in the light of yesterday's news, because I personally think that we probably are going to succeed in entering Europe, and that in about a year and a half there will begin to be much greater opportunities for an expansion for our trade and economy, provided—and I underline the word "provided"—we are in a position to take advantage of them. If we are not in a position to take advantage of them, presumably we shall not derive much advantage. Therefore we have to look at the situation in a completely new light. We have to look at our policies globally from now on and see how we are going to adapt them to face this new situation. I believe that there is a vast common interest on both sides of industry, and between the Government and the people, in seeing that we make the best of what is now going to happen.

Your Lordships may ask: "Where do we start?". Well, my Lords, I have a most unpopular thing to say. I think the first thing that we should do is to cut out the more abrasive side of our politics. Personally, I hope never to hear any more about the crisis in which the Conservatives "landed" Labour in 1964, or about the "handsome surplus" which Labour left to the Conservatives in 1970. I think that we should all start to look forward.

LORD SHACKLETON

My Lords. may I interrupt the noble Lord'? I hope he will take a balanced view and also suggest that the present Government should not talk about the inflationary prices that they have inherited: or perhaps the noble Lord only takes one side in politics.

LORD HANKEY

I could not agree more with the noble Lord. I should like our politicians and statesmen to look forward and to see what can be done together. Personally, I think it is not of great advantage that the B.B.C. should take the faces off our national leaders, one by one. I am fed up with the faceless individuals who criticise them on television. I do not think we derive great advantage from attempts to impugn the motives of our national leaders on either side. I say this with all humility from the Cross-Benches, because I must say that I am often amused to hear the quips and jokes from both sides of the House and in other places. However, I think that this should be carried on in future in a more moderate way, because there are bigger fish to fry.

Looking at the situation squarely, what we need is more investment. We must have it. The United Kingdom (I speak without the book) comes about sixteenth of all the nations of O.E.C.D. in the percentage of gross national product devoted to real investment. We cannot let this continue. We are slowly running down, and we are not likely to keep our place in world trade as we should unless we can improve that showing. There are, however, some encouraging features. Recently savings have started to look up. It is a mystery to anybody why this is so, but the fact is that it is happening, and although the sums are not so vast it ought to be possible for this to be a starting point for channelling more money into real investment. The loss of the new Ford investment in this country is really extremely sad, because we are short of capital for this purpose here and we can do with foreign capital to help us out. I believe that about 10 per cent. of our real investment is with foreign capital, and in my opinion we cannot afford to lose that. I am sure that Ford have good reasons, and I personally should be very discouraged if I were directing Ford's development in their various factories in this country. That is another thing that we must put right.

I have referred to the growth of savings. I recall also that there is a new Green Paper that has been issued by the Bank of England called Competition and Credit, which indicates that there is going to be greatly increased competition in the credit-giving world. The important thing is: will this competition lead to more real investment? I am suggesting to the Government that they cannot safely just leave it to the banks to channel these increased investments anywhere that they please. The Government must somehow see that we get a real increase of industrial investment out of this change of credit policy. It is essential to marry these two items of Government policy. This is one of the points I had in mind in saying that we need to take a global look at policies from now on. The Government really must somehow get the banks and the City to solve this problem in such a way that we get an improved construction of factories, new machines in existing factories and improved processes generally.

I agree with what the noble Viscount, Lord Amory, said: that we ought not at this moment to expand demand generally. I am especially rather alarmed when I read occasional statements in the newspapers that the Government are looking forward to some expansion of consumption. I do not believe that we want this. Consumption always leads to greater imports, and as our exports are none too strong at the moment, we cannot afford this at the present stage of the trade cycle. What we need is a reflation which is led by investment, and I seriously suggest that this should be one of the first priorities on the Government's list of policies to study, to see how this can be brought about. I do not know whether the investment grants or allowances, or the regional policies for development, could be improved in some way to bring this about, but I am sure that an improvement in this respect is vital.

I mentioned exports. It is true that we seem to have done very well in trade, but if you look at the extremely favourable terms of trade which we now enjoy, and at the indications which the noble Lord, Lord Aberdare, mentioned in his speech, you will see that we are not on too good a footing. If you analyse our balance of payments you will also find that a good deal of the surplus we enjoy has been due to an inflow of both long-term and short-term capital, some of which is liable to go away when the terms of trade change and the balance of trade is slightly less favourable. Therefore I believe it is important that the Government should pay great attention to this. I have said that it is very important to get an improvement of real investment. Of course, manufacturers will install new factories and new machines only if they think that there will be an increase of demand and if they can sell the production, or some of it, at home. I hope that manufacturers, when they realise that we are going into Europe, will see that there is going to be an expansion at home but that they will look forward to European exports for their main drive, and that when they put up factories or change production facilities they will give preference to those parts of their industry which arc likely to be export-led. All this sounds rather obvious, but I think it needs to be said.

Of course, nobody is going to invest in a great number of new factories unless we have an improvement of industrial relations. I make no apology for reverting to this subject because it is absolutely fundamental to any improvement of our economic situation. Manufacturers cannot go on getting good export figures unless they can fulfil export date commitments; and this is an area where we have been particularly deficient. Personally, I have great hopes of the Industrial Relations Bill. I know—and I sympathise very much with this attitude—that others, particularly on the Opposition side, would have liked a voluntary system. I myself feel that we have had a very good try at a voluntary system but that it has not led to very good results, and that it is high time to try a new frame- work such as is now being introduced. I believe that in the new circumstances it is important that that Bill should not be grossly misrepresented. It is quite easy to go round making cheap gibes, such as the suggestion of Mr. Clive Jenkins that a lot of people are going to find themselves in prison. They obviously are not.

We have had many enlightening debates in this House and I am suggesting that, in having an easier relationship in Party politics it would be very good if we could also try for a more objective approach towards this attempt to improve industrial relations. We must have better industrial relations and I believe that everybody in this House agrees on this. Therefore it would be a tremendous pity if some people were to go around, without discouragement from the Labour Front Benches, trying to make matters worse or misrepresenting them so that they become worse. If I may give a comparison, I do not think that the exclusion of certain fouls in football has led to reduced co-operation amongst football players. In fact, having played a good deal of hockey on the Continent, I would say that a fairly severe system of refereeing improves the game all round.

New investment requires new jobs. I should like to echo what has been said from all sides of the House, including the remarks of the noble Baroness, Lady Seear, on training. I believe that training is absolutely fundamental to raising productivity. We have left it very much in arrears in this country. Perhaps I may mention the system in Sweden, which I found to be very interesting when I was Ambassador there. The Swedish trade unions used to encourage workers to get out of industries which had low productivity and could not afford to pay high wages because they were declining. Workers were encouraged to be retrained and to go into industries which had obviously a brighter future, with more capital and industrial support. I should like to see our trade unions taking a similar attitude, because I believe they could have tremendous influence. The difficulty is that sometimes they lose members to another trade union. I know how difficult this matter is, but looked at in the national interest I believe it is one on which the T.U.C. could help and probably could exercise great influence.

I should also like to see—and now I am going to use a horrid phrase which the Government will not like—a certain measure of manpower planning. I know that manpower forecasting is indulged in, but I believe it is still in rather a primitive state in this country. If I am being unfair to the relevant Department, I apologise in advance. When I went to Russia some years ago with a Parliamentary delegation, we found ourselves introduced to Rector Petrovsky, of Lomonosov University, and when my turn came to ask a question I asked what the link was between his university and the national economy. He said that it was a rather close one. It had to be because it was the university which paid the students' allowances, and he was obliged to go on paying allowances to students until, at the end of their degree course, he had found them jobs. So he was in very close touch with all the great corporations and businesses, he had a tremendous placement department and took enormous trouble to get the students into jobs immediately. He said that every year he had to tell the Gosplan—that is the department which looks after the Five-year Plan—of the quantity of people he expected to produce at the end of the five-year degree course. He had to supply them with the statistics of the number of geologists, musicians, lawyers and so on. They usually came back with suggested changes and said, "We shall want 5 per cent. more geographers and 6 per cent. less economists" and so on. He had somehow to adjust it.

We cannot go into that sort of thing now, but I believe there ought to be some connection established between the universities, the educational system and industrial requirements, or the requirements of the economy. If we produce a lot of people who have no jobs available for them, obviously they are extremely disappointed; they become extremely disgruntled and create trouble wherever they go. On the other hand, if we can produce the sort of people that industry is going to require, we do not have the same inflationary pull on their salaries and wages to try to get people into jobs that they were not trained to do, and we also decrease our training requirements. I suggest that this requires much more study.

LORD POPPLEWELL

My Lords, the noble Lord will, I am sure, agree that the measure that was put forward by the Labour Government with a view to retraining people who lose their jobs is a very good step in that direction. I agree wholeheartedly with what he is saying about retraining. He should not overlook the retraining activity that takes place. I agree that it requires developing but at least the arrangements exist.

LORD HANKEY

I thank the noble Lord. I am fully aware of that. I should like to see even more successful development of that kind of thing. Although I realise that the Government do not want to interfere in industrial questions, they have to face the fact that it is for them to assess the national interest and see that the national interest is served. No-one else can do that. We cannot be sure that the bankers will do it; industries cannot possibly assess the national interest, they only know about the interests of their own industries. The Government need to retain in their hands the tools and instruments for giving a push here and a push there. They require more than bank rate changes and an occasional instruction on hire-purchase arrangements. I am very sorry that they have abolished the Industrial Reorganisation Corporation, the Consumer Council and the Prices and Incomes Board. No doubt those bodies could have been improved. I hope for the future that the Government will be prepared to give our economy a good push in the right direction; unless they are able to do that I am not sure that we shall go in the right direction, and I think it is essential that we should. It may go against the Government if they do not.

I am in favour of a very pragmatical policy; I am rather against "isms" by nature. If an "ism" works, let us have it; if it does not work, for goodness sake do not let us have it! If nationalisation will serve some part of our industry let us face the necessity. I do not like it, but let us face it. If it is necessary to let "lame ducks" sink, then let us do that. I do not like that much either, but certainly it is a lesson to people to manage their affairs properly. In the world in which we live we have to face the necessity for enabling and even forcing management to manage. Perhaps it is necessary to have some greater form of planning for the future. Businesses have to have plans; perhaps the Government should have plans too. I would not exclude that absolutely, and I would certainly hope that it would be nothing like the Russians do, for I should not like that, either. Let us be pragmatical about the way we face the great problems in the future.

My Lords, I have gone on for too long, and I apologise. To conclude, we have a new situation. I believe that the Government should give a good push to real investment in order to take advantage of these new opportunities and that we should face these problems in the most pragmatical spirit possible.

6.45 p.m.

LORD SLATER

My Lords, it so happens that I am the last speaker, so far as the Back Benchers are concerned, to speak in your Lordships' House to-night. It is incumbent upon me to add my congratulations to the noble Baroness, Lady Seear, for her wonderful speech and the way that she delivered it. It is something that many of us who were privileged to hear it will never forget. I should also like to refer to the maiden speech of the noble Lord, Lord Boyle of Hands-worth. I can well remember the time when he came as a new Member into the other place. No one has watched his career more than the noble and learned Lord the Lord Chancellor. He was privileged to serve with the noble and learned Lord within the then Ministry of Education and Science. The noble Lord, Lord Boyle of Handsworth, built up respect for himself not only from the Government side but from the Opposition side within that Chamber. I am very pleased that the noble Lord has just returned to his place, for it enables me to pass on to him my congratulations for that maiden speech.

My noble friend Lord Beswick, in introducing this Motion for consideration by your Lordships, did a wonderful job. He covered the ground very well without trying to be too critical in regard to its presentation. He placed the facts before the House as he saw them, and he is to be congratulated for the way in which he did it. My noble friend Lord Ritchie-Calder and the noble Lord, Lord Hankey, both took us back into the past, into the 1920s. I remember the 1920s very well. I was one of those little boys who had to go to the soup kitchens because of what was happening at that time, and I remember the devastating effect that it had upon our people.

I want to move on into another sphere and that is the sphere of full employment. I am convinced in my own mind that the maintenance of full employment ought to be the first objective of any Government. It must be remembered that full employment does not just happen. It requires planning and vigilance on the part of any Government. We know from past experience how the Tory Party and Tory Governments paid lip service to full employment but attacked the policies pursued by the Labour Government to make it possible. Between the wars, in Europe and North America persistent mass unemployment became the normal condition of economic life. No one at that time, or even to-day if we had such a set of circumstances prevailing, could measure the misery and suffering created by unemployment.

When unemployment raises its ugly head it wastes our economic resources, and the means of production are not fully utilised. For example, houses that are needed could be built but are not built. Food is not grown and goods are not turned out in the quantities that people need. And I believe it is important to remember that few people escape the effects of unemployment. When a factory or a pit closes down, everyone is affected. It can spread from one industry to another. It naturally follows that if a man is unemployed he cannot afford to buy many of those things which are essential. Hence the effect upon those sectors which are producing essentials.

While it may be correct to say that the average of unemployment during the period from 1929 to 1935 was around 2 million, most workers of that time suffered during the inter-war period, with the result that those unfortunates who had to sign on the dole lost their faith in democracy and many of them drifted into other movements. Thank God I never drifted into any other movement than the Labour movement! I would have us remember that for 17 years out of the 20 inter-war years the Conservative Party had full power to tackle unemployment in this country—I repeat, for 17 years out of the 20. Its record, as I have ascertained in the course of research, is bad. On February 16, 1933 (and the noble and learned Lord the 'Lord Chancellor, who reminded me that he had spent over forty years in Parliament, may remember this), as reported in Hansard of that date, it was the Chancellor of the Exchequer who said: Today we have to keep pegging away. Even though we may, from time to time, find that we are not getting on as fast as we should like, nevertheless, if we persist, we shall get there in time. The Chancellor of the Exchequer at that period was Mr. Neville Chamberlain. The number of unemployed was in the region of 3 million.

I often wonder what would have happened to my own area of the North-East, and to Wales and Scotland, following the last war, if a Labour Government had not been returned to power, bearing in mind that it was that Government who were responsible for passing the Distribution of Industry Act 1945, which gave new hope to our people. The introduction of new industries into the areas, the building of Government factories, the securing of orders for these factories through Government Departments, and the steering of new private enterprises into these new development areas, were a great achievement. We were able to see young people on leaving school no longer dependent on finding work in the basic industries into which their fathers were forced because no other means were available. The great desire of parents from my area, from the North-East, was that their children should not have to encounter the difficult times that they themselves had had to encounter in being deprived of the right to work and to take their proper place in society.

It is now stated that we are entering the first stage of a second industrial revolution. This may be true. Mechanical labour is now replacing hand labour. These changing methods demand what? They demand a rethinking and a new approach. We cannot stand aside and see these new methods responsible for throwing men out of work without doing something to reaccommodate them in employment. It is not so much a question of having to fight to exist as of having the right to live. I would claim that unemployment, created not by economic factors, or boom or slump. but by the introduction and use of these machines and the use of new materials, involves the workers in having a justified claim for protection and security. The first charge on industry should be the welfare of the worker who has brought about the progress of his industry.

I see that the noble Lord, Lord Aberdare, has now returned to his seat. He has sat through the whole of this debate with only one slight break and I think he ought to be commended for the patience he has shown during the course of our deliberations. The noble Lord said that the Government did not intend to be pushed off the course they had decided to follow. He also said (if my note is correct) that unemployment was due to sluggishness in output. I could argue the point about sluggishness of output. But he also said something which backs up my argument in regard to the employment position; namely, that the Government have no intention of running away from the objective of full employment for the people of this country. I compliment him on saying what he did on this question.

I have said outside this House that if the worst came to the worst and whole villages were affected through the closing down of the main industry in their area the responsibility must rest with the Government in power to bring alternative employment to the area and not to allow disruption of village life to take place. My Lords, I do not want to go back and I do not want to see the situation I have already referred to happen again. But I must ask the Minister, and the noble and learned Lord the Lord Chancellor, this question. What is to be the boundary of the locality in regard to the Government's policy? We must remember that the development areas were sited over a particular region which was affected. The noble and learned Lord the Lord Chancellor knows this as well as I do. He was the first one to come into the picture (if my memory serves me aright) in regard to unemployment in my own area, and we had talks with him. And what would the Government regard as a high rate of unemployment before action was taken?

To listen to many speeches from the other side and in another place in support of the Government, it would appear that they have all the answers to solve our economic problems. They would automatically achieve some sort of price stability. As a matter of fact, nobody in the country at this moment believes that he has a recipe at all to do this, except outright deflation to keep prices steady. We remember the years of Government from 1951 to 1964. In that period the cost of living rose by 51 per cent. From October, 1964, to October, 1965, the cost of living went up by 4 per cent. During their years of office, the Tory Government repeatedly increased indirect taxes in order to moderate what they regarded as inflationary forces. We know that they increased the tobacco tax in 1956; we know they raised it again in 1960; we know they raised it yet again in 1961. But they did not stop there, for they further taxed beer, spirits and petrol; and in 1962 they increased purchase tax on a whole range of items from 5½ per cent, to 10 per cent. in one fell swoop. This was Tory Government. Therefore, it ill becomes them to attack the Labour Government for what they were forced to do to get the economy right.

The noble Lord who preceded me did not want any of us to refer to the past in regard to this matter, following the legacy that they were left. If it is said that the timing was wrong, why did the Tory Government do nothing about it when they had full power? The one thing we must remember is that at that particular time the Tory Government had a backing in the other place of over a hundred majority. Whatever the charges laid against us by them, they cannot charge us with running away from our responsibilities in 1964, with a majority of three, and being in power for a period of only 17 months. We faced our responsibilities during those 17 months. We kept the nation informed, and it is well known that the economy of the country in 1964 had reached a critical stage. Because of what? Because of long years of stagnation which had resulted in a large trade deficit. Foreign confidence in our economy and our ability to recover had reached its lowest ebb. The economy was sick, our trade suffered and our share of the world export markets for manufactured goods had steadily declined. It is true that we were losing to our competitors. If we look back to 1950 we find that we were in a much better position, for at that time our share of world export markets was one quarter. But 12 years later, in 1962, it had dropped to less than one-sixth. The gap between exports and imports widened. Production fell and unemployment rose. What made matters worse was that the unemployment was concentrated in certain areas of the North East.

Under successive Governments, areas like that of my own and areas of Scotland and Wales have had the classification attached to them of "distressed areas". They have also been called "development areas" and development districts ", and so on. Action on certain lines has been taken to offset the rise in unemployment. The Labour Government took a positive line in the regions against the background in which thousands of jobs were being lost, owing to the closure of collieries in mining areas and also to the rundown of the railways. Both industries were basic to employment and both had been large employers of labour. As a result of that action, new factories were built, new industrial estates were set up and special incentives were offered by way of development grants, and we in the North East were most grateful for that help. But still we were well above the national average in unemployment.

The new policies introduced by this Government will not bring in new industries in the same way as the policies of the Labour Government did, for if it is the intention of the present Government to save at least £100 million at the expense of regions like that of the North East, unemployment is bound to rise. The national figure has already been quoted. Eight hundred thousand people are unemployed at the present moment, and this could well reach one million by the end of the year. Not so long ago it was two men to one job; now we find that it is four men to one job. Now that the special inducement policies are to be withdrawn, how can we expect employers from the Midlands or even from the South to come into the North East area or into Scotland, or even into Wales? The Chancellor of the Exchequer speaks about a value added tax, which I do not favour: but if it is to be pursued and is to give accommodation to 10,000 civil servants—10,000 new jobs—within the term of office of the present Government, I would suggest to the Government that they do not rule out the North East region for such a development I would ask the question, what has really happened to the new Inland Revenue centre? Where is it to be based? It was stated that the new centre would give employment to 3,000 workers. After all, when the Post Office was under a Government Ministry some of its employees travelled to the North-East. It was their desire that when we had to move part of the basic operations into a development area it should be in the North-East, and, in fact, in close proximity to the constituency that I then represented. Everything was more or less tabled for that to happen, but someone higher up took charge of the situation and it was moved into another industrial district. I could not complain about that, or even argue about it. It was transferred into Scotland. Scotland received that benefit and we lost it.

I have said that unemployment in the North East was well above the national average, but I was somewhat taken aback in my further researches when I found that for the month of April of this year the figures for unemployed persons were 72,300 in the northern region, and of that number 4,906 were people aged 18 years, many of them still looking for their first jobs. There were 7.2 per cent. unemployed males and 2.3 per cent. unemployed females, giving an average for the region of 5.5 per cent., a figure exceeded by Scotland with a rate of 7.5 per cent. This summer, in reply to a question asked in the other place regarding the number of school-leavers in our area, the figure was given as 24,000. We all know what a tremendous human problem arises when a youngster leaves school. The first thing he thinks about is finding a job. If a young man cannot get a job he often drifts into a pattern of life which makes it difficult for him to start work when the opportunity to do so presents itself.

The Government cannot escape from all the promises they made at the last Election. They were returned on a mandate to improve the economy and to restore full freedom of opportunity for everyone. I want that freedom of opportunity for the youngsters who will be leaving school. I want employment to be found for them and also for that large number of people in the development areas, or the distressed areas or whatever they may be termed under this Govern ment. After their first 12 months of office this Government are being con demned. They are being condemned from all quarters, not only by those of us who spend the greater part of our lives in politics but up and down the country for the policies that they have pursued, the policies that they are now presenting and which can only result in further hardship upon those who will be least able to bear it. I sincerely hope that the time will not be far distant when we shall have the opportunity of going on the hustings again—and I take great pleasure in that—and presenting Labour's case against that of the performance of the Tory Government while they have been in office.

VISCOUNT MASSEREENE AND FERRARD

My Lords, before the noble Lord sits down, may I just—

SEVERAL NOBLE LORDS

Order!

LORD STRABOLGI

No; sit down. You did not take part in the debate.

7.10 p.m.

LORD SHACKLETON

My Lords, it is sometimes questioned whether the House is able to make its will felt; it has on this occasion. I was rather doubtful whether I should take part in this debate at all, and noble Lords will be relieved to hear, if they believe me, that I shall not speak for very long. Quite apart from the fact that we have the noble and learned Lord the Lord Chancellor speaking, the noble Earl the Leader of the house had intended to take part in the debate, and I would only say that we are very sorry he is not going to be here. He was good enough, about a fortnight ago, when I was not so well to wish me a speedy recovery, and we certainly wish him one.

In particular, I wanted very much to hear the two maiden speakers and to congratulate them. I knew that we should have two outstanding speeches, and I am hound to say that we arc rather lucky in our Baronesses in this House. I think that the Liberal Party have really gained a great addition to their numbers in the noble Baroness, Lady Seear. I echo what my noble friend Lord Slater had to say about her, and I am sure that, now that this first ordeal is over—and making a maiden speech is always a little tricky —she will find that your Lordships are in fact a kindly lot and are appreciative, and particularly of speeches as well directed and, if I may say so, reasonably brief as was the noble Baroness's speech. She can be very pleased with her debut.

The same goes for the noble Lord, Lord Boyle of Handsworth. I must say that when I was in the House of Commons I always thought that there were two people who were likely to be Prime Minister in a Conservative Government. One was the late Lain Macleod, and the other Sir Edward Boyle. Alas! Mr. Macleod is no longer with us. Perhaps I ought to add that I had a sneaking idea that the noble and learned Lord on the Woolsack might become Prime Minister—and at least we should have had a very lively Government. But both he and the noble Lord, Lord Boyle, are ensconced; and unless we alter the law neither will have the opportunity, except in the unlikely event of there being a Prime Minister who sits in your Lordships' House. The noble Lord, Lord Boyle. was an outstanding figure and a great hope of his Party, and although I rather gather that his present position is somewhat located on the Cross-Benches, the wisdom and the clarity of his expression will always be popular here, and I congratulate him.

I said that I was going to speak briefly and I have nearly taken up my allotted time on congratulations. However, I want to say something about the debate. I knew that my noble friend Lord Beswick was determined to make a speech which would be statesmanlike, and it seems to me that he clearly succeeded. I think the noble Lord, Lord Aberdare (and although he said he had some notes tucked away, they seemed to feature very prominently in his brief), slightly misunderstood the purpose of this debate. Clearly, that is why we belong to the Party we do: we are critical of the Government and the Government's policies, and there is a difference in philosophy. But I rather echo and will try to follow what the noble Lord, Lord Hankey said. On the whole, we in this House do not spend time slanging one another, and I do not propose to go on any further about Mr. Heath's unfortunate statement, which can be explained away just like "the pound in your pocket". We might put a ban on both those, so far as your Lordships' House is concerned.

LORD ABERDARE

My Lords, if I may intervene, I did not mean in my reply to be in the least bit Party polemical. I do not think, if the noble Lord looks at the whole speech, he will find that it was. I did not intend to bring up this matter until the noble Lord, Lord Beswick, did so.

LORD SHACKLETON

My Lords, the noble Lord was very well briefed. We are both misunderstanding one another. I felt that he took up my noble friend a little more than his speech justified. He now thinks that I am taking him up more than his speech justified. We did not harass him any more because we were conscious that he moved in very sharply to fill the niche which would have been occupied by the noble Earl, Lord Jellicoe; and I acknowledge that it is very difficult for a Government spokesman to be as frank as other people can be, although the noble and learned Lord on the Woolsack is so very frank that I think he is perhaps one of the people who could manage to get away with admitting that the Governments of which they are members are not so successful as they arc compelled to maintain by the briefs put into their hands.

I am bound to say that talking about freedom with responsibility at this moment does not contribute very much to what is meant to be a serious discussion of a series of problems which I freely admit no Government have permanently and successfully solved. It is true that we have moved from a terribly restricted balance-of-payments situation, which inhibited all kinds of economic development, into a very free balance-of-payments situation, which does give the Government more freedom. My noble friend Lord Beswick was particularly clear in saying that it is no use just talking about reflation like that, saving "push the money in", and things will be all right. It is a much more complex and difficult problem. I want to talk about one or two points. The fact is that all the indicators are now pointing the wrong way. I must apologise here: the only speech I did not hear was that of the noble Lord, Lord Thorneycroft, who I gather spoke with his usual vigour. Unemployment is certainly higher than was expected, production much lower than expected. I do not want to argue about trends. Governments always try —so, let us face it, do Party headquarters—to get the maximum out of a set of figures. But there is no doubt that the position on production is disappointing and prices are rising faster than previously expected.

I am very nervous that, much as people may admire determination and obstinacy, and tenacity in Government, as my noble friend Lord Slater said, we have heard people saying that they refused to be blown off course and then, a little later, they are so off course that we find ourselves confronted with a much more acute crisis. It is an inherent fault of all Governments that members, in their speeches, always sound more complacent than I suspect they would in talking to one another in private. It is a strange thing in this context that, whereas the Government are seeking freedom in market forces (this is all I have to say on the subject of the Industrial Relations Bill), they want freedom for everything except industrial relations, which they want to regulate fully. It may well be that this is not the time to debate that point. Heaven knows! we have had the opportunity recently, and we have at least another three weeks of the Bill on Report, to debate it. However, it is a striking contrast in this freedom policy that in this area of human and personal relations the Government want to introduce regulations. There really is not that amount of consistency. I am being very careful. I am not doing anything of which the noble Lord, Lord Hankey, would not approve; I am just drawing attention to the contrast.

I want to say a few words on the most depressing aspect of the present situation; that is, the intolerable amount of unemployment, both general and structural. It is really rather miserable that we are once again having to talk about cases of structural unemployment, which was a term of so much sadness in relation to the basic industries of this country before the last War. I echo what my noble friend had to say in his Motion when he refers to "maximum social justice". We do not claim that it is possible to get a completely egalitarian society, but we think that it is possible to obtain a greater amount of equality.

If there is one major aspect of deprivation and injustice, it is the failure to provide employment. I say quite categorically that I would rather see a lower standard of living and full employment. I think we may have to make some of these choices. Every noble Lord who has spoken about unemployment has echoed how awful it is. Noble Lords like my noble friends Lord Garnsworthy and Lord Slater, have experienced it in its most bitter form. We have the figures. The fact is that there has been a large reduction in the number of jobs. To some extent that huge reduction in the number of jobs is masked by the fact, for one reason or another, that people have been falling out of employment—as my noble friend Lord Beswiek said—some because they were older, but some who would like to work under conditions of full employment.

The noble and learned Lord who sits on the Woolsack was deeply concerned with, and brought great energy to, the intractable problem of the North-East, which nobody has yet solved. As employment diminishes in those areas, the new employment that is being created tends to be in such fields as offices, and the office employment is concentrated not in the areas where there is this basic structural unemployment. In this last year we have seen an increase in unemployment. Whereas in the South-East of England the increase has gone up to 1.9 per cent., in Wales it is 4.4 per cent., and in Scotland there has been a 1.4 per cent. increase to 5.4 per cent. Although the noble Lord, Lord Aberdare, suggested that the rate of increase had been proportionate to the number, that does not absolutely fit my figures. But even if that is so, the numbers are vast. This is where ratio is a rather small piece of comfort in terms of the human reality of those thousands of people who are out of work.

There is the depressing situation that the period of time for which people are out of work is increasing. There was a theory a few years ago—and there is probably some truth in it—that people were taking more time between jobs, thanks to redundancy payments. In Scotland and Wales one in three of the unemployed have been out of work for more than six months; and in the Northern region 38 per cent.. and one in four for more than a year. This is what my noble friend Lord Slater was talking about. We must face these facts. This is a real tragedy. Although there may be those who admire the determination of the Government not to be "blown off course", and to give "freedom with responsibility" and "stick to their policy", it will be intolerable if this amount of unemployment continues very long. With this increase in unemployment, the period of unemployment of a number of people will rise from one of six months or a year to one of two or even three years, and it soon may become this tragic "semi-lifetime".

I do not propose to recapitulate a number of the proposals that have been discussed. There were valuable speeches from my noble friends Lord Balogh, Lord Ardwick and Lord Ritchie-Calder, who have talked about the broad economic policy, and I do not propose to follow this line any further beyond stressing again that we must think what our social priorities are; and that is why in this Motion we are talking about maximum social justice. There are some things that can be done. The noble Baroness, Lady Scear, and the noble Lord, Lord Hankey, and others referred to some of them. The Government talked about it and said that something was happening, and it may be that something is going on in the way of real manpower planning. This is not an easy thing. I remember that when I was Minister in charge of the Civil Service Department we gave some financial help and encouragement to setting up the Institute of Manpower Statistics. It is at a very primitive stage, and it is difficult work to carry out. In large spheres of industry it is not carried out and a lot of the facts are not available, but we do need to get the detailed facts if we are to achieve the matching between jobs and people.

I think it was the noble Lord, Lord Hankey, who referred to the way the Russians went about this task. If they have a graduate who is not found a job, he has to be kept by the university. This is quite a discipline. If we look at the amount of money we spend on labour exchanges and the employment services it may seem a lot—I think it is about £25 million—but it is minor in comparison to the economic as well as human gains achieved with an improved service of this kind. If we only cut one day off the time of all the unemployed who pass through the labour exchanges, their days of employment would increase the number of man-days worked in industry by three million—in fact, more than the level of all the days we lose through strikes. These impressive statistics may not always be relevant, but this is the measure of the importance of this matter.

Here again, on the re-training side, what has been done in Sweden in comparison with this country is quite striking. If we were to do what the Swedes are doing to-day we should have about ten times our present effort on training. Noble Lords have said that there is a great deal of training and that it is increasing in industry. I believe my noble friend Lord Popplewell had something to say about this. Again, this is a major priority, and it is going to call for a major Government initiative. There are things which can be done at the moment and for which funds ought to be made available, for dealing not necessarily with the underlying symptoms of the economy but with the actual facts of unemployment and seeking to improve the process of fitting people to jobs and providing the opportunities. This is without regard to the general economic question which we have discussed.

I do not want to go on any longer. I only wanted to make these particular points. I would only say this. I have several times in this House said that the last Government were not entirely successful with their incomes policy. That has generally raised a laugh on the other side of the House, as if the truth were rather funny; but I think we ought to recognise our failures, and the Government must recognise that we do not believe that they are successfully coping with the problem. What alarms us is that they are slow to move, but I think they are beginning to move on an incomes policy, we are just beginning to see the possibility of an advance towards a voluntary incomes policy. I am particularly sorry that, even if they did not agree with them, the Government, did not treat Vic Feather's earlier proposals a little more seriously, instead of dismissing them contemptuously as the Chancellor did. I ask the noble Lord. Lord Aberdare, whose personal integrity and general niceness we all respect, to recognise that we think that the trade unions and the Government must get together. The fact that the waters are so desperately muddied by the Industrial Relations Bill does not alter the fact that, sooner or later, there will have to be discussions and co-operation in economic matters.

Finally. if I may go back for one moment to the speech of my noble friend Lord Garnsworthy, I think we shall need to have a debate in the near future to discuss the effects of this extraordinary patchwork quilt of subsidies to individuals, the means testing and so on, and consider whether or not the Government's no doubt well-intentioned policies are going to work at all. I think they have fallen into a sort of doctrinaire trap which is going to lead to very heavy administration and to produce the most absurd results—which again is damaging to confidence. If we go on very much longer, all the progress that we have been making socially, all the advance towards understanding and about the need for higher productivity, is going to be lost. Therefore, although we certainly have no intention of taking our Motion to a Division—and I am sure that the noble and learned Lord will not provoke us into doing so—we think there are some very outdated concepts. So I have shortened my speech to allow my noble friend Lord Beswick, who so ably introduced this Motion, an extra few minutes to reply, if necessary, to the noble and learned Lord the Lord Chancellor.

7.33 p.m.

THE LORD CHANCELLOR

My Lords, those last words fall like balm upon my ear. I thought the noble Lord was leading up to it by the relatively genial tone of the earlier part of his speech, and I shall be as genial as I know how. I am sure that the House will desire me to begin by congratulating the two maidens, whose speeches have met with universal acclaim, and I think sincerely meant acclaim. My noble friend Lord Boyle of Handsworth is such an intimate and old friend—we have worked together in a single Ministry; we have served together in more than one Cabinet and in one Shadow Cabinet—that it is almost absurd for me to shower compliments upon him. But it is a pleasure to see him here. I most bitterly regret that by his own desire, and only by his own desire, he left us in the leadership of the Conservative Party for the groves of Academe; and although I respected his choice I did not agree with it.

He asked me a specific question about the figures announced, I think, in April by the Chancellor of the Exchequer. I made inquiries and he will not be surprised to hear, having served in Arcadia, too, that it is premature to alter our assessment of those figures at the present time. I shall also, quite deliberately, not pursue his comments upon the need to reflate. I feel that the very carefully chosen words of my noble friend Lord Aberdare, at the beginning of the debate, dealt adequately with that subject. Indeed, students of style will see an almost uncanny verbal resemblance between the words he chose to employ in your Lordships' House, and a speech made to-day at a luncheon by the Chancellor of the Exchequer. It is wonderful how great minds think alike! I have not previously had the pleasure of hearing the noble Baroness, Lady Seear, but I greatly enjoyed her speech. May I say, without pursuing the matters with which she so ably dealt, except as I shall do as my argument develops, that I hope she will enjoy her membership of this House as much as we enjoy hearing her.

That brings me to the Motion which my noble friend Lord Dudley described as "spreading concepts like confetti". He said that the speech of the noble Lord, Lord Beswick, sounded like an Election address. To my mind, it sounded more like a prospectus for Heaven. Real life is not like that, as I shall endeavour to show. There is a want of realism about this. But when the noble Lord, Lord Beswick, said that he was not making Party points, and then enumerated the Party points which he was not of course going to make, I was rather tempted to agree with the criticism of his speech by my noble friend Lord Amory. When the noble Lord, Lord Beswick. called for a positive policy, what he really meant was that he knows perfectly well that we have a positive policy, but he does not like it. And when he called for an agreed policy, he meant that he wants us to go all the way in agreeing with his policy, which we think has already proved a failure, and will go none of the way himself towards accepting any part of ours. My Lords, life is not like that. Let us face the fact that this is not going to happen.

The noble Lord, Lord Beswick, spoke of an agreed prices and incomes policy, and he will have noted that my noble friend Lord Aberdare, in measured but, quite clearly, friendly terms, made it clear that that is a policy which appeals also to us. He will also have noted that it met with response from the Back Benches by my noble friend Lord Amory, and from the Liberal Benches in the speech of the noble Baroness, Lady Seear. In that sense it must be that an agreement is desirable, but an agreement can come about only by way of discussion, rather than by way of negotiation. Bargaining counters are not acceptable on either side. What is desired is a discussion of what is best in the public interest, and I hope that that may very well take place.

Let me now come to some of the concepts in the Motion. The first point which we ought to get clear from the start—and I do not mean this in a polemical sense, although by implication it involves a criticism of two of the speeches that have been delivered—is that, so far as I can see, there is no question anywhere of going back to the 'thirties or the 'twenties. No argument has been presented which renders that even a remote possibility. I say that deliberately, because it seems important to stress it without seeming in the least complacent, for not to stress it would be foolish, cruel and irresponsible. It would be cruel because, for people who are unemployed or who may fear unemployment, to contemplate a return to the 'twenties or the 'thirties causes infinite distress. It is also foolish, because it overlooks the fact that the situation of the 'thirties was utterly different from the situation which obtains to-day.

The most obvious difference is that the situation of the 'thirties depended upon an international situation in which unemployment was rife in virtually every industrial centre in the world—in international economic situation that probably no unilateral action on the part of this country, pace the noble Lord, Lord Slater, could have retrieved. Whether, should that situation return, international economic statesmanship would be adequate to contain it is something which I hope we shall never know, because I sincerely trust that the situation will not recur. What I do know is that there is no sign of its having recurred: and one noble Lord at least, in another context, pointed out that world trade, so far from being in depression, is in fact on the increase. It is increasing faster this year, I think, than last.

The second reason why I think we must put that matter entirely out of our minds is that the public sector of Government action, as well as the international situation, is wholly different. When I was a boy and then a young man, when all this was going on—and I remember it very clearly, because even then I had a certain interest in politics—the national budget was something in the nature of £800 million a year. That was the size of the total budget. We are now living in a situation in which the public sector—a phrase which would have been unthinkable in the 'twenties and 'thirties—accounts for £23,000 million a year.

When we are talking about market forces not being the whole answer to the question—a concept which has been taken up by the Motion and by the speech of the noble Lord, Lord Beswick, and by other noble Lords—one has to recognise that whether one regards (as we do) the role of market forces as larger than the Labour Party regards it or not, even if you take the last few months or the last year of the present Administration, there have been remissions of taxation to the order of £1,000 million a year in a full year, and there has been an increase in the cost of social services of £1,000 million a year in a full year. The fact of the matter is that, whether we talk in terms of market forces or of Government intervention or not, we are living in a totally different world from the 'thirties and 'twenties. Therefore I say it is both cruel and irresponsible. even if we do not take a complacent view of the unemployment situation, to talk in those terms at all. The fact is that we are not living in that world, there is no sign of our returning to it, and there is no possibility of this Government, or so far as I can see any other conceivable Government, seeking to return to it.

By the like token, if I may just dot the i's of the first point that I want to make, it would be wholly false to suggest (and I am happy to say that, so far as I know, it was not suggested even by the noble Lord, Lord Balogh, although he was reported as making a speech out of doors to this effect) that this Government wish to use unemployment as in some way a bargaining counter or a weapon. The fact is that we intend to deal with it, and I will come in a moment to the various influences that one wishes to bring to bear. But something, at least, I think, which we can all agree about is that the only security of employment that can exist in this country in the long run is security of employment based upon a prosperous and viable industry properly managed and making a profit, whether one is talking about the public or the private sector. Our aim of policy is to create such an industry. That is the thing we mean to do, and we believe the way we mean to do it is correct.

The second point I want to make is that all the bad things which are listed in the Motion had appeared quite plainly prior to that magic date. June 18, 1970. The increase in unemployment had appeared, and in a most startling way. The rise in prices had commenced. May I say to the noble Lord, Lord Beswick, who directed a question to my noble friend Lord Aberdare. that in the six months from January to June, 1970, prices had risen by 5 per cent., which, I emphasise, over twelve months makes more than 10 per cent. because, of course, the compound interest effect takes place in the second half—and that is faster than they have risen in the year since. The startling rise in wage settlements had already appeared, and had played an important part in raising prices.

Our case—and the noble Lord has been so genial that I will put it as genially as I know how—is that the rise in prices and the inflationary nature of wage settlements in the months following October, 1969, were not unconnected with the desire of the Labour Government to win that General Election, and have caused most of the troubles from which we are now suffering, because that is when the rot set in. But they had arisen then. Again, if I may answer a question which I think the noble Lord, Lord Shackleton, put to my noble friend Lord Aberdare, my noble friend's figures were perfectly correct because the figures he gave were already seasonally adjusted.

The charge against us now is not that we brought these evils about; the charge is that we have not, in twelve months, arrested changes which were the fruits, as we think, rightly or wrongly, of six years of Labour Government. That is what makes the Motion and the speeches in support of it partly unacceptable to us. The question is whether you could have expected those tendencies to be arrested and reversed in twelve months. I did not, my Lords. What is more, we never led people to suppose that they would be.

At the invitation of the noble Lord I am not going into the question of what Mr. Heath did or did not say on June 16, 1970, because that has already been dealt with by my noble friend. But the fact is that we are entitled to he judged upon the total effects and impact of our Election speeches and our Election programme; not on one casual phrase, but the total impact. The fact is that we all agree that my right honourable friend Mr. Heath went around the country, that my then right honourable friend Mr. Iain Macleod went around the country, and in a much more modest way I went around the country, saying that our policy was a policy for a Parliament for four or five years. and that economic policies initiated by Governments—and these are almost the exact words I used in every Election speech in which I broached the subject—do not bite for a number of months, perhaps not even for years. We are still injoying the consequences of devaluation, good and bad.

These economic policies which Governments initiate are not to be judged on twelve months, my Lords. We think ours will be successful, but only a long enough period for their consequences to be seen is a just period on which to judge them. We never said, and we never led people to believe, that in twelve months a new era would have dawned in prices or in wage settlements. What we did not know was quite how serious the situation was, and that was largely because, as we say. the Labour Party had rather underplayed the seriousness of the situation in their General Election campaign. From all one could gather that sunny June a year ago, everything was all right as long as Mr. Wilson was in his heaven; but no positive policy to deal with any of the matters which the Labour Party is now setting at the door of the Conservative Government. and all of which had emerged before June, 1970, as positive evils, was suggested by the Labour Party in their Election campaign. If noble Lords want to know why they lost the General Election, it was because their leadership never produced a positive policy to deal with prices, unemployment and wage inflation. That is why I think they lost.

However, we are now seeking a breakthrough, not only from the limitations of the policy of the Labour Government but also from the limitations of policies over the last 25 years. I think we shall succeed. But again we have to recognise that they are intractable problems, and have been found intractable not only in this country, and not only by a Conservative Government but by Governments of all complexions. But let us look for a moment at the policy which we have pursued. First, there have been remissions of taxation to the tune of £1,000 million in a full year. Most of that has not yet bitten. The tax remissions began as from April, but one of the most important ones, at least, is the £200 million in a full year to be expected from child allowances. They have not yet gone through the coding of the P.A.Y.E. The halving of the selective employment tax does not begin to apply until July. The increases in retirement pensions and other benefits do not begin until September. These are positive acts of policy, designed—I will not say to reflate; but the effect of which must inevitably be to create a more buoyant economy. They have not been given time to have their full effect, or even perhaps a significant effect. It is perhaps for that reason that my right honourable friend the Chancellor to-day was wise to avoid precipitate action.

The second thing I want to say is that we really must get away—and I made this point in November—from the idea of indiscriminate subsidies. It is all very well for the noble Lord, Lord Garns-worthy, to make a speech in which he talked about. a pattern of means tests for free school meals, free welfare milk, free dental treatment and free prescription charges. We did not invent those means tests. They were invented by the Labour Government. What we have done is to raise the limits, so that in the case of school meals and welfare milk something like another 150,000 new recipients under the means test will get them free. What we have done in the case of prescription charges and in dental treatment is not to introduce the means test—that was the introduction of the Labour Government; that is the policy they were pursuing. The difference now is that half the recipients of medical prescriptions, about 22 million, will get them for nothing. That is the change that we introduced. Really the point made against those so-called means tests is not a valid one.

And I must say to the noble Lord that the other argument he made was equally invalid. He said—and rightly; and I deplore it—that there are probably people who do not wish to take advantage of these free allowances, either out of pride or because they are unaware of them. They are much more likely to be aware of them and much more likely to have the knowledge that the community at large regards this not as an element of charity but as an element of right, when more people arc entitled to take it, when, being a larger minority, they do not feel isolated. The point works in exactly the opposite way.

Of course, our remissions of taxation were criticised as doing an injustice. But where is the social justice of this? We are still in the brackets—they happen to be precisely the type of people in whom the noble Lord, Lord Beswick, described himself as interested—of the £2,000-a-year group: the skilled workers, the scientists, the graduates. We are still among the highest direct-taxed nation in the world, even after the Budget remissions are allowed. I gave some figures in November. The change is not all that startling. A man with two children with £2,000 earned income in this country after the Budget remission is paying 15 per cent. of that in direct taxation. In France, the figure is 4 per cent. In America, it is 4 per cent. In Germany, it is 9 per cent. At £5,000 the figure would be a quarter in the United Kingdom; 11 per cent. in France; 12 per cent. in the U.S.A., and 19 per cent. in Germany. We believe that direct taxation under the previous Administration had become a social injustice, and that is why we are remedying it. Much more important, we thought, and still think, that too heavy direct taxation is an inhibition on effective management and enterprise, because the cost of direct taxation inevitably reflects itself as a cost to companies that want to employ first-class executives.

If we are right in that diagnosis—and we believe that we are—it is meaningless for noble Lords in the Labour Party to say that we are benefiting the so-called rich at the expense of those less well off. The interest of those less well off is to have a viable economy, profitable enterprises and secure employment. And this is exactly what we arc about. We want to increase competition. If the noble Lord, Lord Beswick, wants an agreed policy, I should have thought that there is one. He speaks with contempt of our obsession with market forces. I think he is like one of those strange alchemists trying to exorcise non-existent ghosts with ineffective imprecations; because we never thought that market forces could solve all our problems. But here would have been an agreed policy.

I had thought it was the Coalition Government of 1944 which first drew attention to the fact that one of the troubles of modern industry was that we were not living in a state of perfect competition. I had thought that that was in the White Paper of 1944. I had thought it was Sir Stafford Cripps who, in the first Labour Government, introduced the first Monopolies and Restrictive Practices Act based on the same hypothesis. It was my noble friend Lord Thorneycroft, whose speech I enjoyed and agreed with, who introduced in 1956 the existing restrictive practices legislation. When we say that we are going for increased competition we are in fact pursuing a policy which, whether it has been successful or unsuccessful, whether it is right or wrong, has been the successive policies of successive Governments. Is that not a positive policy?

My Lords, we can pursue this even further. We have introduced the Industrial Relations Bill. Well, the noble Lord, Lord Beswick, says that I must not talk about the Industrial Relations Bill: so I will not. But is not that a positive policy? He says that it is no substitute for voluntary agreement. My Lords, it was never intended to be a substitute for voluntary agreement. It is intended to he, to coin a phrase. "in place of strife". It is the alternative to industrial unrest. We all recognise, and hope that the unions will recognise, that once it is on the Statute Book they will continue in the way they have gone when they claim that voluntary agreement and voluntary negotiation is the best way to industrial peace.

And, last, I cannot avoid, on this day, all reference to the Common Market. Is that not an economic policy material to this debate? Is it not a positive policy? can anyone doubt that entry into the Community would be part of an economic policy? It is of the essence of such a policy that it will conform to the prescription in the Motion "to bring about an expanding economy". But is it an agreed policy? If the Opposition have not been able to produce any other policy on any other subject, which I think is the net result of the situation of to-day's debate, what is in fact their attitude to this, the burning topic of the day? Did they not themselves initiate the current series of negotiations? Did not the present Leader of the Opposition, when Prime Minister—

LORD SHACKLETON

My Lords, may I interrupt the noble and learned Lord? Since he was wise enough to take the advice of my noble friend and not talk about the Industrial Relations Bill, I hope that he will not now start talking about a recent development which came to fruition only long after this Motion went on the Order Paper. We will discuss it; but I think it is unfair to introduce it at this moment.

THE LORD CHANCELLOR

My Lords, I do not want to be unchivalrous in this matter, but when we are being censured for not having a positive and agreed policy, and we have a positive and agreed policy for almost every other scheme including this, I think we should ask whether this ought not also to be an agreed policy. I am not going to talk about the events of to-day, or last night; I am talking about the matter about which the Labour Party has had 12 months to reflect. We were told in another place—I well remember the dramatic phrase when they initiated the negotiations—that "We are going places!". Exactly what place does the Leader of the Opposition in another place think he is going to? Where is this thing? Where is his sense of honour and purpose? Where is all the "gritty determination" in Government which he promised?

SEVERAL NOBLE LORDS

Oh!

THE LORD CHANCELLOR

Grittily and resolutely on the fence! My Lords, I can see that this is causing distress and pain to noble Lords on the Front Opposition Bench. I will not pursue this painful subject. I only say that if they really want to carry conviction anywhere, with anybody, they must first think up a policy of their own which shows some signs of success, and stop giving negative criticism to ours.

8.2 p.m.

LORD BESWICK

My Lords, it will not be a surprise, possibly, if I say that personally I should like to get away with the least delay. I should like to thank all those who have spoken in the debate, even those who, I am convinced, did not actually listen to what I had to say. With others, I should like again to offer my congratulations to the two notable maiden speakers. The noble Baroness, Lady Seear, made, if I may be allowed to say so, what I thought was an impressively authoritative speech on these social and economic problems. I thought the way in which she dealt with them showed clearly that she had an immense experience about which, I confess, I was ignorant as to detail until my noble friend who followed her made his speech. But I am absolutely certain that we shall look forward to the noble Baroness speaking again. I was moved by her plea for re-training, especially of the older persons; and this, I thought, illustrated the dual character of her approach: the social character on the one hand and the economic on the other.

I also humbly offer my congratulations to the noble Lord, Lord Boyle of Handsworth, whose speech clearly commanded great respect. The noble Lord started by saying that he would not he expected to agree with the Opposition. I do not know why it should be expected that he could not agree with the Opposition. I thought academics searched for the truth wherever they might find it. Having said that he could not agree with what I had said, the noble Lord went on to say that reflation was not enough, which was exactly what I had said. He advocated, and made an outstandingly good case for, a wages policy, which is what I tried to do. He said, also, that we must replace the Prices and Incomes Board with something similar; again it was something which I had tried to say. He added that the labour market tends not to work in the way in which some modern economists hold in theory that it should. This, again, was a point with which I dealt. So, my Lords, I can say quite sincerely that I shall look forward to hearing the noble Lord again.

To some extent I think I owe an apology to speakers from the Benches opposite. They thought I was going to move this Motion as a piece of Party propaganda; and some of the speeches which were made—including Lord Aberdare's speech—were rather geared to that proposition. They were in some difficulty when they found that that was not the type of speech I intended to deliver. My Lords. we are not simply asking for a re-run of the Labour Government's policies. We are asking that the alternatives to the present position, the present policy, ought to be looked at now together; and that it would be a good thing if the T.U.C., the C.B.I. and the Government could endeavour to come to some agreement.

May I say one or two words about what was said by the noble and learned Lord the Lord Chancellor. He did his best to be agreeable. I cannot quite remember now how many years ago it is since I first heard him speak. He was kind enough to say that I am his oldest political opponent in this House. and I have heard him through many different phases. All I will say about this evening is that at least the noble and learned Lord did not bring his bell with him. He criticised our Motion for its lack of realism. Is unemployment unreal? Are rising prices unreal? I am not going to bandy words with the noble and learned Lord about the rate of increase. It can be shown that whereas he spoke of our 5 per cent., in the last three months the figure was 14 per cent. But I do not believe that this is something which we ought to go into. The fact of the matter is, my Lords, that prices are rising and we have to do something about it.

The argument about market forces, is that unreal? I should have thought it something very real indeed. When I hear the noble Lord, Lord Aberdare, say that despite everything—and this I think the noble Viscount, Lord Amory, said when challenged by my noble friend Lord Balogh—they would rely on market forces, I think the best answer is something said in that most interesting column which appears on the back page of the Financial Times: ' The Government believes ', said a recent newspaper report explaining and applauding the demise of the Prices and Incomes Board, ' that natural forces, if they are allowed to operate, will deal with all such diseases as wages and price inflation and effect, in their own inscrutable way, a recovery '. It goes on to say: In these cynical days such sublime faith in the capacity of a political formula to perform its magic in a manner so mysterious as to defy coherent explanation may seem touching. Or is one to say, irreverently, that anyone who is foolish enough to believe that will believe anything? My Lords, the noble and learned Lord who sits on the Woolsack did, at any rate, make one step forward from that position of the crude natural forces formula. He said that there had been some response to what I had said about a Prices and Incomes Board. He also indicated that he, or the Government, were prepared to consider this—

THE LORD CHANCELLOR

My Lords, the noble Lord, Lord Beswick, referred to a Prices and Incomes Board. I think he means an agreement.

LORD BESWICK

My Lords, what was actually said was a "wages and incomes policy". But I earnestly say to noble Lords opposite, if that is what they are prepared to do, and no more, it is they who want to re-run old and failed policies. They just will not get success for another prices and incomes policy unless they try to operate it within the context of the sort of thing I was talking about.

My Lords, I simply end by saying that we have spoken of the way in which wages have exploded in this country; and it was said that they exploded in the last few months of the last Government as well as in the first year of this one. But it is also true that there has been a wages explosion in every country in the Western world. There must be some truth here which we have to identify and which we have to take into account when we come to build up the new policies of the future.

For myself, I am content that my speech be read as well as that of the noble and learned Lord who sits upon the Woolsack. I hope that when I come to read his again I shall get some profit from it, and that the noble and learned Lord will perhaps feel, if he can exercise a little more sympathy when he comes to read what I have said, that it is not so bad as lie tried to make out. Meanwhile. I ask leave to withdraw my Motion.

Motion, by leave, withdrawn.